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Covenant Transportation Group Inc  (NASDAQ:CVTI)
Q4 2018 Earnings Conference Call
Jan. 24, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Excuse me, everyone, we now have all of our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question.

I would now like to turn the conference over to Richard Cribbs. Sir, you may begin.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

All right. Thank you. Good morning. Welcome to our fourth quarter conference call. Joining me on the call this morning are David Parker and Joey Hogan. As a reminder, this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures and filings with the SEC, including, without limitation, the Risk Factors section in our most recent Form 10-K. We undertake no obligation to update or revise any forward-looking statement to reflect subsequent events or circumstances.

A copy of our prepared comments and additional financial information is available on our website at the Investors tab to have on our covenanttransport.com website. Our prepared comments will be brief and then we will open up the call for questions. In summary, the key highlights for the quarter included our truckload segment's revenue, excluding fuel, increased 21.9% to $176.5 million due primarily to a 562 or 22% average truck increase and a 1.7% increase in average freight revenue per truck in the 2018 period as compared to the 2017 period, partially offset by a $1.7 million year-over-year reduction in intermodal revenues. Of the 562 increased average trucks, 430 average trucks were contributed by the Landair acquisition as Landair contributed $19.2 million of freight revenue to combined truckload operations in the fourth quarter of 2018.

Versus the year-ago period, average freight revenue per total mile was up $0.252 or 13.4% and our average miles per tractor were down 10.4%. Truckload rates were impacted favorably and utilization was impacted unfavorably by the impact of the Landair operations on the combined Truckload segment. Landair's shorter average length of haul and dedicated contract, solo-driven truck operations generally produce higher revenue per total mile and fewer miles per tractor than our other truckload business units as a whole. Versus the prior year quarter, freight revenue per tractor at our Covenant Transport subsidiary experienced an increase of 2.4%, our SRT subsidiary experienced an increase of 15.7%, and our Star Transportation subsidiary experienced an increase of 5.4%.

The truckload segment's operating costs per mile, net of surcharge revenue, were up approximately $0.177 per mile compared to the year-ago period. This was mainly attributable to higher employee wages, casualty insurance claims costs, and the impact of the Landair truckload operations' higher cost per mile model. These increases were partially offset by lower net fuel cost and net depreciation expense as we recognized a small gain on disposal of equipment totaling $100,000 in the fourth quarter of 2018 versus a loss of $0.8 million in the fourth quarter of 2017. The truckload segment's adjusted operating ratio was 90.5% in the fourth quarter of 2018 compared with 91.9% in the fourth quarter of 2017. Our Managed Freight segment's total revenue increased 83.6% versus the year-ago quarter to $67.5 million from $36.8 million.

Of the $30.7 million of increased total revenue, Landair contributed $21.4 million of revenue to combined Managed Freight operations in the fourth quarter of 2018. The Managed Freight segment's adjusted operating ratio was 90.6% in the fourth quarter of 2018 compared with 91.5% in the fourth quarter of 2017. The result was an increase of Managed Freight operating income contribution to $6 million in the current year quarter from $3.1 million in the prior year quarter. Our minority investment in Transport Enterprise Leasing contributed $2.3 million to pre-tax earnings or $0.09 per diluted share in the fourth quarter of 2018 compared with a $0.8 million contribution to pre-tax earnings or $0.03 per diluted share in the prior year quarter. The average age of our tractor fleet continues to be young at 2.2 years as of the end of the quarter, slightly up from 2.1 years a year ago.

In connection with the July 3rd, 2018 acquisition of Landair, we invested approximately $106.5 million, including an $8.2 million tax gross up payment in connection with a post-closing Internal Revenue Code Section 338(h)(10) election for which we expect to receive a future net cash benefit in excess of the tax gross up payment. Between December 31st, 2017 and December 31st, 2018 total balance sheet indebtedness, net of cash, increased by only $14.3 million to $212.7 million. At December 31st, 2018 our stockholders' equity was $343.1 million for a ratio of net debt to total balance sheet capitalization of 38.3%, which compares favorably to the 40.2% ratio as of December 31st, 2017 even with the cash expended for the Landair acquisition. In addition, our leverage ratio has improved to 1.4 times as of December 31st, 2018 from 1.9 times as of December 31st, 2017.

The main positives in the fourth quarter were successful integration steps completed related to Landair, improvement in the operating income at each of our Truckload segment and Managed Freight segment subsidiaries, an approximate 5% increase in average freight revenue per truck for our Truckload segment excluding Landair's truckload operations versus the same quarter of 2017, improved year-over-year earnings contributed from our investment in Transport Enterprise Leasing, and five, reducing our leverage ratio to 1.4 times. The main negative in the quarter was the increased Truckload operating costs on a per mile basis, most notably the unfavorable employee wages and casualty insurance claims costs, partially offset by lower net fuel and improved net depreciation expense.

Our fleet experienced an increase to 3,154 trucks by the end of December, a 77 truck increase from our reported fleet size of 3,077 trucks at the end of September. A portion of this growth was a 15-truck or 5% increase of independent contractor trucks to 315 by the end of December from 300 at the end of September. Our fleet of team-driven trucks averaged 866 teams in the fourth quarter of 2018, a 1.6% decrease from 880 average team-driven trucks in the third quarter of 2018. Our earnings outlook for 2019 is positive. We expect to deliver adjusted earnings per share improvement for the first quarter of 2019 as compared to the first quarter of 2018. For the full year, we expect adjusted earnings per share to increase modestly over 2018 based on the favorable impact of a full year of contribution from Landair's service offering, partially offset by investment in growing the Managed Freight segment.

From a balance sheet perspective, with net capital expenditures scheduled at normal replacement cycle along with positive operating cash flows, we expect to reduce combined balance sheet and off-balance sheet debt over the course of fiscal 2019. Our outlook is based on our expectation of a relatively balanced freight environment measured over the entire 2019 year with the potential for an intra-period volatility in response to national and global events. We believe these conditions are consistent with US economic growth of 2% to 2.5%, modestly growing industrial production, balanced inventories, and mid-single digit percentage increases in revenue per total mile across our truckload business. The freight market in January has thus far been consistent with our expectations, but not as strong as January 2018 nor the majority of 2018.

Beyond the general freight environment, we believe company-specific improvement opportunities exist as we continue to execute on our strategic direction to grow our contract logistics service offerings, including dedicated contract truckload, warehousing,, and transportation management services. We expect that the growth of our dedicated contract truckload service offering will come somewhat from reallocation of capital from our transactional over-the-road or OTR truckload service offering, most specifically from the less profitable solo-driven refrigerated OTR service. In addition, we expect to continue to invest in the organic growth of our freight brokerage services, which could pressure Managed Freight profit margins until revenue growth catches up with the investments.

Even with these changes, attracting and retaining highly qualified professional truck drivers will remain a significant challenge and we will continue to work actively with our customers to improve driver comp, efficiency, and working conditions while providing a high level of service. In the aggregate, the goals of our capital allocation strategy are to become increasingly embedded in our customers' supply chains, to reduce the cyclicality and seasonality of our business and financial results, and to enhance our long-term earnings power and return on invested capital.

Thank you for your time. We will now open the call for any questions.

Questions and Answers:

Operator

Thank you. At this time, we will open the floor for questions. (Operator Instructions) Our first question comes from David Ross of Stifel.

David Ross -- Stifel Nicolaus -- Analyst

Yes. Good morning, gentlemen.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Hey, Dave.

David R. Parker -- Chairman and Chief Executive Officer

Hey, David.

David Ross -- Stifel Nicolaus -- Analyst

Happy to see that unseeded truck count come down, certainly a positive sign in this difficult labor market.

David R. Parker -- Chairman and Chief Executive Officer

Yes.

David Ross -- Stifel Nicolaus -- Analyst

If we can just start off by talking about Landair a little bit and now that it's been with the Company for six months or so, what's surprised you to the upside? What's been better than expected about Landair and what might have been some issues that you didn't see before the acquisition that's been a little harder than you thought they would be at Landair?

David R. Parker -- Chairman and Chief Executive Officer

We all three can probably make some statements there, David. I'm going to tell you that we've done a few acquisitions in the past, but by far this is the best acquisition that we've ever had and it is because of the people. And it's been one of those transactions that the surprises have been 9 out 10 to the good side versus anything that's negative. And the people up there, the cultures fit so wonderfully between our organization and the folks up there really have made the acquisition a lot more easier than the acquisitions that we've done in the past. They've been with open arms ready to go and anything that -- it's not something that you've had to say here's CTG, let's bring the value and somebody -- some company may think they already got the value. They are saying yes, we want to do that. Bring the value, if it helps us, we're all for it.

And so, it's just been a wonderful acquisition from that standpoint and so my number one would be the people. The customer side of it has been exactly the way that we thought. A lot of times you get into something when you're buying a company, whether you're buying a car for yourself or a buying a company like we buy, is that you think it's a lot better there in the selling standpoint when you're negotiating than when you buy it and this has not been the case. It's been exactly the way we thought it was when we were doing due diligence and the customers have not missed a beat. Matter of fact because they realize you fit with CTG, there's been more opportunities. And so, we're going to be able to expand upon their existing customer base because of the CTG side of the equation. So from a business standpoint, I'm -- I just could not be anymore pleased. Joey and Richard, is there anything you want to add?

Joey Hogan -- President and Chief Operating Officer

I would add regarding David's first point on people. In due diligence, your exposure to the management team is usually limited to let's call it the executive staff within a company and so you have questions in your mind of the strength and the depth below that group and until you kind of get closed, you'd start to get a feel for that. And I would say that's been one of the very pleasant surprises for me is that the overall quality and depth for a smaller organization relative to CTG as a total has been very, very good. And the flexibility at which we've been able to move folks around to capitalize on the growth that we're asking that operations to do over the next three to five years. And so that's been, I would say, a pleasant surprise that gives us confidence and continues to allow them to grow. And so it's kind of in that first one, but that's been a big part to contribute to our confidence of the operation.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

And Dave, this is Richard. I think they've also added what they went through over the last six, seven years of really changing their company to grow into a lighter asset base and reduced capital intensity of their business. They've been through that over the six or seven years to grow that managed freight side of their business and they offer us a lot of experience and know-how of handling that that we're trying to accomplish with our overall business. And the group here is humble enough to receive that and utilize all of their knowledge to help us do what we are trying to accomplish that they've already accomplished. So, that's been a big plus.

Two, the integration efforts on the cost side have gone a little probably faster and a little stronger than we expected going into the acquisition. We've been able to work through some things around fuel and workers' comp insurance. Our risk group has done a really good job of employing some things there that we have in place for the CTG Group. And it's just kind of greater and faster than we expected and so some of that is already in the fourth quarter results, but there's still some cost synergies to come into the full 2019 year as well.

David Ross -- Stifel Nicolaus -- Analyst

And then just looking out to 2019, in the guidance you just said that the EPS is supposed to be up only modestly year-over-year partially due to the investment in growing the asset light Managed Transportation segment. Can you give any numbers around what the investment should be or talk about it in terms of is it just hiring staff ahead of the revenue, is it investing in a new IT system, is it new offices, or maybe a combination of the three?

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

You've got all three, you nailed it. It is -- most of it's higher investment in people. And on that TMS space you think about, that's a little bit longer sales cycle and so as you add high-level employees -- high-level sales employees there, the expectation is that you're going to recover that and sell really more 12 to 15 months down the line and not immediately like you would for a transactional business. In addition, we are investing in some real estate space as well as some system. So, you nailed all three of those. From a standpoint of the modest statement, we're historically cautious. We are cautiously optimistic about this year and we have more visibility of course into these next three to six months than we do into those last six months. And so that -- I think that's really the reason we would state that as a modest improvement at this point and we'll see where the year goes. But we're excited about the opportunities that we have before us in 2019, mostly around the internal initiatives as well as -- as an OK economy.

David Ross -- Stifel Nicolaus -- Analyst

And then just to follow up lastly on that IT bit. Do you have a TMS either at legacy Landair or Covenant that you like and are going to expand upon or are you either getting a whole new TMS in there for the Managed Transportation or are you developing something internally?

Joey Hogan -- President and Chief Operating Officer

No. David, I think that as it relates to Landair in particular, their truck operation is on a different platform than the truck operation from CTG. So, I think that that's a part of the system development for 2020, maybe 2021 that we've got to work through. On the Managed Freight side, I think we're in a pretty good spot except for possibly we're taking a hard look at our brokerage operations across the enterprise. Right now it's linked up with our asset side or our truck side as far as the operating system and we've got some questions, is that the best platform for that business to be on? That's not a '19 event, at earliest that's a '20 event, but we think that will be fairly seamless as far as the options that are out there that we're considering. But you've got a large customer on the asset side you got to think about, you've got a large customer on the TMS side that you support also, and so you've got to be able to talk to both of those customers. And so we're doing a lot of study investigation, investing in some people on the IT side to kind of help us with these questions that we need to work through over the next three years basically.

David Ross -- Stifel Nicolaus -- Analyst

Thank you very much for the time.

Operator

(Operator Instructions) Our next question comes from Scott Group of Wolfe Research.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Morning, guys.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Hey, Scott

Joey Hogan -- President and Chief Operating Officer

Hey, Scott.

Scott Group -- Wolfe Research -- Analyst

David, maybe can you give us a little bit more color on your comments around January and the environment?

David R. Parker -- Chairman and Chief Executive Officer

Yes. I think a couple of things. As I look at our Company as a whole, we're up to about 50% of our trucks now are dedicated and the dedicated side of the business has not missed a beat, I mean, besides the holiday and the things when they shut down. Other than that, those trucks run exactly the way they're supposed to run. So, then it becomes the other 50% of the fleet of trucks. And I would say that the first two weeks of January, as we said in the release, they were above our expectations and then last week, the weather was horrendous and basically killed a day-and -a-half of operating performance last week. But it was not as strong as the first two weeks of January. And I would say that this week has started off with -- similar to last week.

But then I started seeing yesterday and by the time yesterday rolled around for the first three days, I was starting to get encouraged last night with the final numbers that I was looking at throughout the enterprise and I was starting to get pretty encouraged about the freight environment and where we left it at last night. So, I'm thinking that maybe it started to pick back up. But keep in mind, I really think what is happening is that we're going from a 4% GDP to 2.5%. And is 2.5% bad? Let me tell you for eight years, give me the 2.5% and we'd all been thrilled and the business environment would have been very strong for eight years. But when you get to a 4% and you go to a 2.5%, it's going to see it's a slowdown. But that said, the business environment is not bad. I'm pretty satisfied with what I'm feeling. So to me, it's slower than 2018 and it really feels like -- I was thinking about this the other day just a couple of days ago, Scott.

I really think that's how I feel. I feel like it is we saw something happening August 2017 that said wow, I think something is starting to turn around from '15 to '16. I think something is turning around. We started then looking at when people came out with second quarter numbers, it was kind of a June effect. But in August is when I would say that we felt that things are turning around and it just got stronger from August, September, October, November, December; I was extremely happy. And then it just rocketed starting in January throughout 2018, it was just like a rocket ship as we all know about. And I would say that we're in that August 2017 to the end of the year '17 and we were very excited about that time. And there's been many opportunities out there. Freight is not bad, I'm happy about the freight environment and we're bringing on new freight, we're getting rate increases, and I'm still a pretty happy camper.

Joey Hogan -- President and Chief Operating Officer

I think, Scott, let me bring a little perspective to what David was saying as far as the model and the plan that Richard mentioned in his comments. These numbers are rough, but it's pretty close. For the fourth quarter of '17, our expedited and reefer, let's call it one-way business of the consolidated total was about 60% of the revenue. Fourth quarter of 2018 is about 40%. So, the combination of the growth of the dedicated inside the legacy CTG business and then the addition of the Landair dedicated business, the addition of the Landair managed freight business moved significantly the exposure to the day in- day out, week in-week out balance issues that we -- all the folks that are in the one way truckload space have.

And so, that's been our mission for several years is to continue to push through that. Our brokerage business grew greatly throughout 2018 as well. Again, that was the stated goal. So I think as it relates to the overall consolidated results, we feel the plan moving, the plan is working, and the balance and addressing the volatility of our own expectations as well as our shareholders' expectations should begin moving. Obviously the results will prove that out. But I think that that's a very significant number and movement to consider when you think about CVTI earnings and mix and things of that nature. So we've only had two quarters, we know that. But as it relates to kind of what's going on right now, it's something to keep in mind.

Scott Group -- Wolfe Research -- Analyst

So that makes sense, Joey. Do you have any perspective or thoughts on what's the range of like through a cycle of peak to trough margins for your over-the-road business versus your dedicated business? So right as to your point, dedicated gets a lot bigger is, I think you're trying to say the margin cyclicality should be less. But how do you think about the peak to trough margin differential on OTR versus dedicated?

Joey Hogan -- President and Chief Operating Officer

Well, I think from a historic standpoint, you can see about what it did for us. If you look at what happens from different trough periods and peak periods of '15 to '16, I think it -- I still feel like it's interesting that 2014 was the stronger economic year than 2015, but there were better results in '15 as you saw the full-year impact of rate increases obtained in '14 and even decent rate increases in early '15, which I think were kind of in the same kind of mode of looking at '18 and '19. However, I don't feel like '20 is going to drop off to the same level that we saw in '16, not even close, and a lot of that is based on our business model that we've built. So, you've got some numbers you can go back and look at for what I would say would be related to transactional business as what's happened in the past.

And I think you've noted it fairly strongly that we generally dropped off deeper than our peer group, but we've also increased greater in the good times. We believe that we're starting to balance that out now and so that -- on the dedicated side instead of maybe dropping back 500 basis points to 600 basis points, maybe the dedicated is 200 basis points, 300 basis points and that's assuming that you can't get equal rate increases, the driver pay increases, or other cost increases, which maybe you can in this new environment and the way the new contracts are built. So I think we're still learning on that side what that would be, but we feel much more comfortable with that than what we would with the additional transactional business.

Scott Group -- Wolfe Research -- Analyst

Right. Okay. That makes sense and is helpful. And then just lastly, obviously there's -- we can all see the spot rates that are down year-over-year. As -- is this impacting bid discussions like do you see risk that new contracts get renewed at lower rates and that will start showing up in the model by the sort of the end of the year?

David R. Parker -- Chairman and Chief Executive Officer

What we believe, Scott, is a couple of things. Number one, as we have said, we're in that 5% to 7% kind of rate increase environment. When we go and talk to a customer and excluding -- as we continue to grow from a mix standpoint, as you know, the dedicated might be a little bit smaller rate increase, but you're getting consistency on the dedicated side. But excluding that, I'm talking about just sitting down in front of a customer, I think that the rates are in that 5% to 7% kind of numbers and that's the same place I've been for six months and I believe that that's where it's going to be at. And as we look at talking with all the customers, we've got some contracts that are in place that go by certain metrics that are already established in the contract that will help us in a lot of those areas.

But the customer is really doing two things. They've always allowed a portion of their business to be in that spot market and they are shouting Hallelujah as we speak right now with it down 40% to 35%, 30%, 40% kind of numbers. They have taken a very dramatic decrease in their costs and they're very aware of what capacity did to them 12 months -- for 12 months there in the year of 2018 and they're very cautious on that. And so if they have a portion of their business, whether it's 5% or 40% then it's down 30% or 40%, they are not beating us up. I mean, we have already had a couple of major account transactions that have already happened as we speak and I'm very pleased with the results that we have been able to get from our customers.

And I think that, that continues throughout 2019 if in fact we're in that 2.5% GDP. I mean if we go into a recession, like some people might -- that I see on TV, the state they believe we are if we go into recession, that's a different world, we all know that. But we're not -- that's not part of our plan that we think the economy's going into a recession. So, I think that we're in that 5% to 7% number.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Scott, what David was referencing on the metric-based rate increases is there's several customers that agree to in their contracts allowing some of the indices of, for example, this year's rate increases; maybe a public truckload index or DAT index or whatever that is that would be utilized and those generally have collars around that upside and downside. But there still should be fairly attractive rate increases at least from our standpoint and still give those customers the capacity that they need and the service that they need, A. B, from a standpoint of -- we are seeing 5% to 7% or greater kind of numbers from customers currently. However, as you see that mix change into a heavier dedicated market, our dedicated average rate is approximately $0.15 to $0.20 lower than our average rate for the entire group. And so as we build that dedicated mix, of course it also has a lower cost associated with that so they're good ORs, sub-90 OR type freight that we're adding in that dedicated space. But the rate itself is $0.15 to $0.20 lower than the average. So as you see that mix change, I think we will see our numbers are going to be more in that lower side of the mid-single digit, call it 3% to 5% instead of the 5% to 7% that we're getting in an actual rate increase, if that makes sense.

Scott Group -- Wolfe Research -- Analyst

It does. Thank you for the time, guys. Appreciate it.

Operator

Our next question comes from Kevin Sterling of Seaport Global.

Kevin Sterling -- Seaport Global Securities -- Analyst

Thank you. Good morning, gentlemen.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Hey, Kevin.

David R. Parker -- Chairman and Chief Executive Officer

Hey, Kevin.

Kevin Sterling -- Seaport Global Securities -- Analyst

Yes. I jumped on late so I apologize if I ask questions that you've answered so please jump in. But can I take that last question that Scott was asking and that you guys were talking about, maybe take it with a different direction. As we think about last year and the just incredible rate environment and how many shippers were kind of caught blindsided, if you will, and pretty much every shipper you talked to blew through their transportation budget early in 2018 and were really beaten up so to speak. And as we think about 2019 and yes, spot rates are negative year-over-year, but shippers still have those scars from 2018. Are they willing to maybe pay up a little bit more in the contractual market just of blocking capacity and not have to deal with the headaches of oh my gosh, can I get caught again on the wrong side of the equation. So, maybe you could talk a little bit about the shipper mindset, how they were scarred last year and how they're thinking about this year? Does that make sense?

David R. Parker -- Chairman and Chief Executive Officer

Well, yes, and that's where I really believe that it is, Kevin. Now do I think that in 2018, were you were able to get 12% and 14% rate increases? Do I think that the market is still at 12% and 14%? No, it's not. It's not at that kind of number. But these -- we don't have a customer. I don't know of one customer that we've got that was not impacted in 2018 and that were hurt tremendously. And the meetings that I've been in, which is a lot of them, they are not sitting there telling me that we got to reduce pricing or we're going to get kicked out. We're not having those kind of conversations. And that's why and evident by the fact that we've already received some decent increases from two or three customers I'm very happy with and I think if that is the attitude of the customers that they cannot -- their job will be gone. A transportation manager's job will be gone if he has another 2018 out there and can't move his freight, much less what the rates are going to do in 2018, they could not move their freight. And they will allow a portion -- if you are considered important to their business, they are going to allow you to have some form of a rate increase. And I think that it's the 5% to 7% kind of number on those existing customers non-dedicated. So, I really believe that's worth that.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Kevin. I think you're seeing that answer in the growth of dedicated and we know it's not just us. We've done a very good job with that and our sales group we've built around being able to handle those dedicated accounts and understand them better. I think that that goes to show how strongly we've gotten closer to the customer that we talk about. We have gotten closer to the customer and that gives us more opportunities to show them that there is a way that they could actually potentially save money through working with us to tighten their network into a dedicated contract where the lower overall rate per mile is there yet our costs are also lower by being able to have a higher quality of life for our drivers around home time and those type things as well as better utilization of our trucks and trailers. So, that the overall cost for us is lower and the rate's lower for them as well so it's a win-win situation. And our pipeline for dedicated is well beyond what trucks we could ever offer. And so the dedicated pipeline is still very strong and I think that's part of the evidence of the shippers' understanding of what the new market is and the new supply chain looks like.

Kevin Sterling -- Seaport Global Securities -- Analyst

Yes. And with dedicated, obviously shippers can see they can lock in capacity for a couple years and get that guaranteed capacity and I imagine that's part of their mindset too. Because as you talk to your customers, I'm sure they understand the driver problem as it continues today because I haven't heard a single carrier say I've got plenty of drivers, I don't need anymore. And I mean is that the mindset from shippers too, they really understand the driver challenges persist today?

David R. Parker -- Chairman and Chief Executive Officer

Yes, they do. They do. To answer your question, Kevin. The customers do understand that there's a driver issue out there and that it's going to be multiple years before it is -- that is straightened out. And this is -- any of us carriers that have relationship with the customers, those customers understand it. Now do my Number 100 and 101 and 102 customer understand? They probably don't care because I'm not in a relationship with them. I do 10 loads a week et cetera, they probably don't care. But I'm sure that they care with whoever their partners are. And so yes, to answer your question, they do understand it.

Kevin Sterling -- Seaport Global Securities -- Analyst

Yes, OK. And then last question from me and I really appreciate your time today and if you've already touched on this, no need to answer. But do you guys talk about some of the insurance headwinds you saw particularly in the back half of the year and the impact there and some of the things you're doing to maybe help correct the higher insurance and claims as we approach 2019?

Joey Hogan -- President and Chief Operating Officer

Yes. I think, Kevin, there's a couple of things. That is an area Rich mentioned in his comments about our insurance cost per mile, couple of things. It was a severity issue and if you -- we track a group of accidents that we call critical accidents. It's DOTs plus a few other things that can turn into large accidents and so we call those critical accidents and actually for the fourth quarter, they were down 7% versus the fourth quarter of last year, but our DOT rate was up 20% to 25%. And so the severity in accidents with third parties was up a little bit versus a year ago. So, (inaudible) to say we're not happy with how 2018 did. We had a few large unfortunate accidents that I had somebody, a competitor of 20 years ago tell me as we're standing up our high deductible program and we were benchmarking all of them as we're standing up.

And he said Joey, the unfortunate thing of our industry is you're going to have a bad accident and there's going to be some things that you'll see in that there's no way that you could have probably prevented it. And then someone, the next one -- the next bad accident, you're going to see some things and he said don't get worked up too much about beating yourself up over you didn't see something because it's going to happen. And as I reflect over the last 20 years as it relates to our industry and its more severe accidents; they're horrible, we take a great accountability in those, it's unfortunate. I don't like going into a mediation and apologizing to somebody about losing a loved one on something that wasn't our fault and we do that.

And so I think as it relates to his year, we're spending a lot of time on that issue. I don't think that I'm very proud of our safety program, our CSA scores continue to improve for the enterprise and especially in the fleets that have more incidences. And so I see some really positive things throughout our safety program. But nevertheless, we did have some severe accidents that did impact our results. And so I'm encouraged about our journey long term, but we had a tough second half of the year, there's no question about it from a severity standpoint.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Kevin, one note. Out of our 3,150 trucks or so, about almost 1,900 of those are automatic transmissions at this point, which is about 60%. We're adding about 1,150 new tractors, that's our plan anyway, for next year. That'll get us very close to being 100% automatic transmission. We think that that helps with safety. In addition, all of those trucks will have all of the latest technology around safety, whether that's lane departure, lane keep assist if Freightliner gets that in there soon enough at the end of the year, all the stability control, front collision mitigation, adaptive cruise control, all those type thing. And one of the things that's happened even though adaptive cruise control, front collision mitigation is improving,. They're doing a lot of good work on the technology side, that being the OEM, around looking at how they can improve that, where it slows the truck down quicker especially around stationary objects in front of you, a stopped vehicle, those type things that have been more difficult than in the past where it was a slow moving vehicle it could recognize better than a stopped vehicle and there's good reasons for that.

But we're seeing improvements in that technology and as we continue to upgrade our equipment and replace our equipment, we should see some improvement there. In addition, our safety staff has -- is recognizing that certain behaviors and those type things. And at least at one of our subsidiary, we're changing some hiring standards around some things we've seen and some analysis that's been done that can allow us to see predictive analytics that help us see what drivers might have the best opportunity to have crashes in a near term. And so we're adjusting our hiring standards at least at one of our larger subsidiaries to help with that.

Kevin Sterling -- Seaport Global Securities -- Analyst

Okay. Got you. David, Joey, and Richard, thank you so much for your time this morning and I appreciate all the details, very helpful. You guys have a great rest of the week.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Thank you, Kevin.

Operator

Your next question comes from Jason Seidl of Cowen & Co.

Adam Kramer -- Cowen & Co. -- Analyst

Hey, guys. This is Adam on for Jason. Thank you for taking the question. I guess I'll ask a couple of kind of follow-up style questions here and apologies if any of them kind of overlap a little bit too much with the earlier question. But I guess the first one is a little bit about so your EPS outlook kind of said a modest increase and that was kind of with some positives from Landair and then offset by the reinvestment in the Managed Freight business. I guess I kind of wanted to ask a little bit about what that means for your legacy CVTI business? I think the earlier question kind of asked what that means in terms of the reinvestment so maybe I'll ask it the other way in what does that mean kind of on the other side for your dedicated and for your legacy business?

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Yes. I think on the trucking side, we've talked a little bit about expectations around rate increases. I think you have some cost, probably headwinds definitely around driver pay and a little headwind for us should be in the fuel area where we had a fuel hedge in place that earned us about $1.6 million fuel hedge gain in the 2018 year. We have no hedges in place going forward in '19 or any future years. And so, there's a headwind there with the fuel. So, we think we can -- we're hoping we can hold margins in the general trucking business. And then one of the legacy businesses is still the solutions brokerage. That group is getting a heavy amount of investment in additional people and resources to drive that business to grow faster, which we believe is a good ROI as well.

Adam Kramer -- Cowen & Co. -- Analyst

Got it. Okay. Thank you for that color. And I guess a second kind of follow-up style one, a little bit more on bid season. And so I know you kind of gave that 5% to 7% rate increase number. Is that kind of more about contracts that you've already resigned or is that kind of your outlook going forward? And maybe just a little bit more broadly about bid season, how has it been so far? When does it usually end for you guys? Is it something that kind of carries on for a few more months or that it's mostly wrapped up by now? And I think we've heard pretty good results from our channel checks early on. But with spot rate falling obviously, kind of what have you guys been seeing on your end in terms of bids? Thanks.

David R. Parker -- Chairman and Chief Executive Officer

Yes. Adam, the ones that we have done so far, which is a couple of large accounts, again we're very satisfied, very happy with those that we have received and they all have been in that number that we've been talking about, 5% to 7% kind of numbers. And most of our bids are in the first say six months of the year with the second quarter being our largest more impactful processes that we go through. But we are having, as we speak, three or four large accounts that we're in the process of communicating and actually doing bids as we speak and again we feel good about it. We don't see anything yet that any of our customers are saying we want you at zero. We're not sensing that or feeling that. And so, that's why we're encouraged and feel like that we will get to the numbers that we've been talking about.

Adam Kramer -- Cowen & Co. -- Analyst

Got it.

David R. Parker -- Chairman and Chief Executive Officer

There is no -- I would say about the ones of our customers that do bids every year, they're still doing bids. I would say that we have received more bids this year and actually I saw a number and I can't remember it, but there's no doubt that the customers are in general doing more bids this year than they did last year, which makes common sense, and we're sensing that and we see that as an opportunity and we have received some opportunities in the last 30 days through bids that we weren't doing business with these customers before. So, that's a benefit.

Another thing that I think that we all need to remember as it relates to freight and relates to the shipping patterns in January and et cetera. One of things that we have been on the sidelines watching and I think that we're getting ready to see it, but it is the impact of ELDs to small carriers. And I don't think that last year when they went into effect, quote April, and the things that we know and we saw within our own brokerage, which is now getting to -- at least last year they did over $100 million so it's a good sized company that we deal with carriers out there. The spot market rates were so high, the ELD's less miles without a doubt. We all know it's whatever number you believe it is, negative 5%, negative 9%, negative 12%, whatever the miles are, it's definitely a negative number on ELDs.

But when you got spot rates going up 30% and 40%, it covers the multitude of fans and that's what happened last year and those -- the small guys were absolutely able to make it last year because of the spot rates. Spot rates are down now and the miles are still the same. and we are already starting to see capacity leave our brokerage side of our business. And so I think over the next upcoming months that the ELD deal that we all have been talking about for two or three years, I think you will start to see it come into play in this economy.

Adam Kramer -- Cowen & Co. -- Analyst

Got it. Well, thank you guys so much for the time.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Thanks, Adam.

Operator

Our next question comes from Brad Delco of Stephens.

Brad Delco -- Stephens -- Analyst

Hey, guys. Good morning.

David R. Parker -- Chairman and Chief Executive Officer

Hey, Brad.

Brad Delco -- Stephens -- Analyst

I apologize I jumped on late as well and so if you answered this already, I'll just go back to the transcript. But can you just talk about the ORs you're seeing across your asset base divisions, SRT and Star and Covenant, and kind of where those were in fourth quarter and what you think the opportunity is for those segments in 2019?

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

We don't usually talk about all of those. Brad. We've kind of talked a little bit more about SRT because of the need for improvement there. We're very happy with the improvement they had this year. They didn't have the record OR, operating ratio year, but they actually did have a record operating income year in dollar amount. So, really strong improvement even through the fourth quarter. They still -- we still believe they have some room for improvement. They're kind of in the low to mid 90s ORs right now. That's significant improvement from well above 100 in 2016 and kind of breakeven for 2017 and I still think there's a path for them especially as we convert their OTR solo-driven trucks into dedicated trucks where there's already a strong path for that early in 2019 to move some of those trucks and we pointed that out in the outlook section as well. So, I think that's probably all I'm comfortable to discuss at the moment.

David R. Parker -- Chairman and Chief Executive Officer

I think, Brad, one thing I'd add to that is again the other side of the change -- the involvement of the model, a lower percentage in the -- let's call it, the one-way side, expedited reefers as well is that the managed freight side, as we all know, OR-wise isn't historically as strong as the asset side in a good market. So as that Managed Freight side grows on a consolidated basis, you got some mix movement around to our consolidated OR. Now we know the return on invested capital in that segment is extremely strong -- extremely, extremely strong. And so I think a brokerage -- you run a brokerage at a 94 OR, you're at well in the double-digit return on invested capital. And so I say that to say that's one thing to think about as our model continues to move and as we continue to grow aggressively that Managed Freight side, whether it be warehousing or brokerage or TMS, it will put pressure on the consolidated OR just mix-wise all things else equal.

And so I think with the cost pressure that you saw for the truckload piece as we disclosed, we have the two kind of segments that we're setting up that Richard disclosed in the release as well as his comments. It did improve 130 basis points, 150 basis points over the fourth quarter of '17. And I think a lot of that, all three of the divisions, all three of the companies that run trucks, Landair included, so we call it four; but we didn't have them in '17; but all four of them improved their operating ratio in the fourth quarter on the truck side even despite an increase in accident cost. And so that's extremely encouraging, it's not one pull on the wagon for the whole truckload piece. All of them moved nicely. I think we're encouraged about all of them. All of them dedicated to all four of the companies that run trucks and I think all of them are very focused on continuing to move that piece.

And I want to make sure I want to provide a clarify -- another clarifying comments Dedicated is not just to -- the growth of dedicated is not only to minimize volatility in the earning strength. That's the result of why we're growing dedicated aggressively. The reason we're growing dedicated aggressively because of the dynamics in the marketplace. Our drivers need more consistency of paychecks. Our drivers need more consistency of home time, work-life balance, things of that nature. So, it's a response to the change in demographics in the marketplace over the last four or five years, really longer than that, but really greatly. And so, that's why we're doing that. Yes, a benefit if it does have volatility of earnings, but I just want to make sure that's clear. We're not doing that just to minimize the volatility of our earnings historically.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

And in general if it probably gets replaced, it's more profitable business as well.

David R. Parker -- Chairman and Chief Executive Officer

We were very happy. And it does have a better return on invested capital because it's -- lots of times there's enough trailers involved, it's probably our only top opportunities. So, we do have a lot of trailers and so you've got to balance that. But generally speaking, the dynamics or the financial results from that segment we're really pleased with. But it's really to offer something in the marketplace that are -- the driving workforce wants so we got to participate in that.

Brad Delco -- Stephens -- Analyst

Great. Well, thanks for the color. And I think, Richard, you were kind of getting to the point. I know you didn't provide specific details on each of the segments. But the point being that SRT was still challenged a little bit as we started '18 and I guess saw improvement throughout '18 and so coming into '19 as I try to -- and I think the rest of us try to bridge '18 to '19 in the comments about modest earnings improvement. You got a little bit of a tailwind with SRT. We should probably think about or hopefully insurance and claims costs coming down relative to what we saw in '18. I know you mentioned you have a little bit of a fuel headwind and then of course you have seven additional months of accretion from Landair. Am I missing anything on the sort of puts and takes of how to bridge '18 and '19?

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

I think that's pretty fair. I just...

David R. Parker -- Chairman and Chief Executive Officer

I think that one other item is the model of -- getting back to the dedicated question is the models evolving inside even within truckload. There's more dedicated opportunities on the drive side than there are on the reefer side. They are there and so I think one of the things that we're seeing as we complete our planning for 2019, but which peaks into '20 also, but 2019, we needed less reefers in 2019 going forward. So, we are going through a pretty meaningful kind of transition year for trained reefers and drivers within the consolidated fleet. And that's a pretty sizable -- that's a sizable seven-figure type of depreciation and interest move or capital move on every year. It's an annualized savings of a pretty good sized number. So that's another positive, but I'll let Richard kind of handle that.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Yes. I think there's a small -- I think this year we ended up with -- I think we still ended up with a small loss on disposal of about $300,000 for the full year '18. In '19 we expect that to be somewhat positive, call it, in the $1 million to $2 million range. That should help. We are still replacing a good bit of equipment. So on the just net depreciation side, I think it's going to be fairly similar to what we saw although with more trucks with Landair and so, but I still think we'll kind of keep it in that $18.5 million to $19. 5 million per quarter depreciation number as we roll forward. Net CapEx, we said it's kind of a replacement year -- general replacement year so to me that means that net CapEx fairly similar to depreciation kind of in that $75 million to $85 million range, which should allow us to continue to pay down debt barring any significant investment that we feel is necessary.

But right now, I'd like -- I think we have a good opportunity to continue to pay down debt and deleverage and we still have a goal which we have -- even in a year that we made a large acquisition, we still have a goal to get our leverage ratio down to 1 times or lower and feel like that's a really strong number for a cyclical company and industrial type company. And so, we've got it down to 1.4 times from 1.9 times. We still have a goal of 1.0 times. I don't know that I'd say we would achieve that in '19, but we still should work down the path and improve on that in '19 versus '18.

Brad Delco -- Stephens -- Analyst

Great. Well, guys, thanks for the detail.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

All right. Thanks, Brad.

Operator

Our last question comes from Nick Farwell of Arbor Group.

Nick Farwell -- The Arbor Group -- Analyst

Good morning. David, assuming...

David R. Parker -- Chairman and Chief Executive Officer

Hey, Nick.

Nick Farwell -- The Arbor Group -- Analyst

Hi. Assuming your integration of Landair continues to proceed apparently smoothly, are you still considering adding additional capacity to your dedicated through acquisitions or to try to enhance the mix or balance the mix even further?

David R. Parker -- Chairman and Chief Executive Officer

Good question, Nick. Our definition of where we're taking our Company to and our goal and our desire is to continue to get deeper in the supply chain, whatever that means and to us so far, that has meant the Landair acquisition along with what we've done over the last year-and-a-half or so on the dedicated side. And so we're going to continue adding dedicated trucks, we're going to continue to get deeper in the supply chain from TMS contract logistics, and we're going to do that definitely internally through internal growth that we're looking at that. We have not -- there's nothing on the pipeline that sit there today that says hey, let's go do that on the acquisition front, but we're not closed to that either. And if we were to see the right -- another Landair come available, we would be very interested in that transaction. And so, that's what we're going to continue to do. So the dedicated, TMS, contract logistics along with brokerage is also part of that, that's where we're headed and to get deeper in the supply chain.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

And I think, Nick, you've seen us be very disciplined and selective in what we look at and what we went through with Landair, first large acquisition we've had since 2006. And so I think we'll continue to be disciplined in that manner and would only make such an acquisition if it really had a strong ROI potential for us and really fit the needs to get deeper in the supply chain.

Nick Farwell -- The Arbor Group -- Analyst

So very simplistically, you're managing down the reefer side, you're building the dedicated side, and the long haul is attriting (ph) over time. Is that...

David R. Parker -- Chairman and Chief Executive Officer

The long haul -- yes, I don't disagree with that. We're very happy with the long haul, but it will probably stay where it's at.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Hoping the expedited stays kind of -- able to maintain that level of fleet size and things.

Nick Farwell -- The Arbor Group -- Analyst

In terms of looking at long haul, David, would you say over the last several years you've lost sort of -- if you could measure market share by truck, have you intentionally so lost share or is long haul in general shrinking?

David R. Parker -- Chairman and Chief Executive Officer

No, it's basically stayed pretty flat. I mean if you go back 10 years, yes, but the last four or five years has basically been kind of a flat kind of number. The long haul has changed from a standpoint that as ELDs have came into play in the last year-and-a-half, that 700 mile, 800 mile trips are considered long haul today. So, we have seen our average length of haul decrease over the last three or four years and that's just where the supply chain is located at. They're paying us for those teams, but it's not like you're picking up a load in Chattanooga and going to Los Angeles on every one of them. We do that, but it's not like it used to be 10 years ago. And so those expedited teams are doing that, but they're growing into the shorter length of haul that a solo can't do in 24 hours.

Nick Farwell -- The Arbor Group -- Analyst

Okay. And then one other quick question and that is if you look at insurance claims between simplistically long haul and dedicated, do you find last year in particular was different than the prior years of mix or does it tend to be repetitive every year? I realize it's random. But in general, do you find that long haul has higher insurance claims? I realize they have more miles, but they have higher insurance claims than dedicated?

Joey Hogan -- President and Chief Operating Officer

I mean typically, Nick, a dedicated fleet's safer because you -- for all the reasons, you get the same driver, they get to know the route, they get to know the traffic congestion, fuel stops, truck stops, where can I rest and so it's just -- you typically have a less incident rate there's no question in a dedicated versus a non-dedicated environment. The severity is such is -- I don't -- I'm not willing to say that something to the large accidents this year, those have been pretty much all non-dedicated on the severity side. And so I think that -- but I don't have anything that says that our dedicated cost per miles is less. But the problem with that is that you run less miles and so you still have exposure so your fixed cost absorption of a dedicated insurance is not as good as the one-way side. And so, you have to kind of manage through that. But as I think through our offices that have dedicated fleets, I mean we've got -- our national location has a cost per mile that's unbelievable on the insurance side. And I mean, it's just phenomenal and it's half almost. 60% of the consolidated number as far as insurance cost in that office. And so dedicated is cheaper on the insurance side.

David R. Parker -- Chairman and Chief Executive Officer

I would also say even on the dedicated side is that word that we all know is exposure. And as I think about the dedicated -- East Coast dedicated trucks, weather -- I mean if you're running, which we do. We have dedicated in Florida, we got like our Nashville that predominately is a Southeastern United States even though they do get up into Michigan, but where the weather is great, the exposure is less even in those good models.

Joey Hogan -- President and Chief Operating Officer

And one thing too, Nick, to kind of follow up on Richard's comment about profitability and you call it the one-way long haul side, we'll call it expedited, is one of the things we've been intentionally doing is that the returns on that piece of business needs and has to be very, very, very, very good because of the capital investment in that business; you trade your equipment sooner, it's usually higher turnover because it's tough to get folks to team together. And so there's a lot of work you'd have to go through to support that business. So I think our team has done a phenomenal job of improving the profitability of that segment to a point that makes more sense relative to the capital employed, the work involved in managing that service.

And so I'm extremely -- even though total revenue has shrunk in that service offering, there's no question it has, the profitability has improved to a point of much comfort of being able to continue to obviously support it. First of all, because it's our heritage but then second, grow it. If we can find those opportunities to grow and able to get two folks to want to team together. And so I just want to make sure that we're very -- everybody here is extremely supportive of that service offering and the profitability has gotten to the point where we would be open to growing it if we can work our turnover down and get folks convinced to continue to team together, which is basically what we do every day, and it's extremely challenging.

Nick Farwell -- The Arbor Group -- Analyst

I say that, Joey, because what you guys are facing presumably is faced by anyone else in expedited long haul. And it's -- my impression is it's a very important part of the supply chain. There are some attributes about it that you know way more than I would that make it an integral part of the supply chain. And if in fact the long haul has been flattish over some period of time even during a period of expedited or substantially increased in rates and the movement of goods and goods, it would seem to me at some point in time this segment of the marketplace is going to generate higher rates of return just by the nature of where it fits into the supply chain in the contraction of capacity in this ongoing effort over the last, I don't know, 10 years or 15 years at least. So it's taking resources out of -- I'm sorry, out of long haul expedited and going into dedicated. At some point in time returns are going to presumably increase to the point where it's going to be a very attractive business again notwithstanding all the work you're doing internally to enhance profitability.

Joey Hogan -- President and Chief Operating Officer

That it is, Nick, 100% it's there now and the challenge is getting it again. 20 years ago people paired up were common place. We've talked about 8 out of 10 coming into an orientation were already paired up with a team partner. Today, it's 2 out of 10. And so just because the generational changes, demographic changes, work-life balance; all of that is impacting that expedited model greatly. So convincing -- now you're convincing people to team and I'll help you find a partner. And so I feel that the returns are at where we won't view -- where we like them and where we would be interested in growing, we just haven't been able to because of the dynamics of what the drivers in that marketplace demand in order to do that.

Now the answer maybe, we've talked about it forever, is wages. And so our wages have moved greatly, it's the highest paid service offering we have in the fleet. But as we've been growing dedicated in different parts of the marketplace in the country. to get those drivers it's pushing our team pay and so it's going to provide -- there's just going to be some challenges to grow that service offering. We're trying to do it when we can, but there's just challenges to grow that service offering.

Nick Farwell -- The Arbor Group -- Analyst

I have one last little technical question and that is with your auto -- you're shifting further and further and hopefully going to be a 100% auto transmission. If you're a long haul driver and you're going through the Midwest; especially say Nevada, Colorado, New Mexico, et cetera. -- Nebraska, et cetera; are there -- do they have the right -- the ability to override that and be able to go 70 or 80 as opposed to constrained at 60?

David R. Parker -- Chairman and Chief Executive Officer

Well, there are -- right now the answer is no. All our trucks are governed and we don't really have -- some of it is -- our trucks are government at 65. So, that's the first thing. Second, there is technology that we're testing that is really neat that can allow trucks to go the speed limit wherever that might be.

Nick Farwell -- The Arbor Group -- Analyst

Right.

David R. Parker -- Chairman and Chief Executive Officer

So if the speed limit is 35, it only allow you to go 35. If the speed limit is 70, it will allow you go 70 and you could still put caps. So if you're in Montana and you're sitting ready to go 80, OK, we're not going to go that fast.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

72.

David R. Parker -- Chairman and Chief Executive Officer

So, it's some technology that we're testing right now to potentially allow some of the longer lengths to stretch out a little bit, make out a little bit more time, but we're still early in that test.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

Well, let's finish the ROI analysis on that before we make a decision on whether to go deeper with that.

Nick Farwell -- The Arbor Group -- Analyst

And -- I'm sorry to take time, but the last question is we're all sort of looking at this driverless truck and it's increasingly in the public press that there are trucks out there, people are working with them. To what degree have you looked at that and when might you expect to start incorporating some driverless capability maybe with a driver in the cab, one as opposed to two? But when do you start seeing that coming into your fleet? Is that a '20, '21, '22 or is it further out?

David R. Parker -- Chairman and Chief Executive Officer

It is further out. Yes, we continuously look at it, we continuously meet with our vendors, our manufacturers to make sure that we're staying on top of it. And even though the access maybe there sooner than later, I just think there's so many issues that it is not going to be a major provider. First of all when it does happen, it's going be a driver in the truck. I can tell you, as you know, we -- on that expedited side, we get a lot of high value freight and until they invent something that sits there and says we all know that if a car slows down in front of it and there's no driver in the truck or if a driver is not -- he's not behind the wheel of the truck and a car slows down, the truck will slow down. Well, what happens when a driver -- a car is in front of you and you've got a $5 million load on and they start slowing down to get the truck to slow down and they get it down to zero, the truck will stop. And so what do we do? Just hand our freight over to whatever robber wants to determined to get it. So I think there's insurance, there is safety. It is not just the safety of the truck going to wreck, but it's those kind of issues that -- here's what I know, I'm 61, I'll be gone before I -- before we see all of it. Then I'll probably work till I'm 80.

Joey Hogan -- President and Chief Operating Officer

And Nick, it took about seven -- five to seven years to move from having front collision mitigation, adaptive cruise control to -- I think it's the 2020 truck that Freightliner is including lane keep assist, which takes it into kind of Level 2 automation, Level 3. So to go from Level 1 to Level 2, it took five to seven years. Is it going to take another five to seven years to go to even Level 3, which is still not autonomous truck, fully autonomous, and it is. It seems like it's a good ways away before you even consider that there might not be drivers in the truck.

Nick Farwell -- The Arbor Group -- Analyst

Okay. Thank you. I appreciate you taking the time. Appreciate it.

Operator

At this time, we have no further questions in queue.

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

All right. Thank you, Cassie. Thank you, everyone, for calling in. We'll talk to you again next quarter. Bye.

Joey Hogan -- President and Chief Operating Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.

Duration: 72 minutes

Call participants:

Richard B. Cribbs -- Executive Vice President and Chief Financial Officer

David Ross -- Stifel Nicolaus -- Analyst

David R. Parker -- Chairman and Chief Executive Officer

Joey Hogan -- President and Chief Operating Officer

Scott Group -- Wolfe Research -- Analyst

Kevin Sterling -- Seaport Global Securities -- Analyst

Adam Kramer -- Cowen & Co. -- Analyst

Brad Delco -- Stephens -- Analyst

Nick Farwell -- The Arbor Group -- Analyst

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