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Daseke, Inc. (DSKE)
Q3 2019 Earnings Call
Nov 12, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, everyone, and thank you for participating in today's conference call to discuss Daseke's Financial Results for the Third Quarter ended September 30, 2019. Delivering today's prepared remarks are Chris Easter, COO and Interim CEO; Brian Bonner, Executive Chairman; and John Michell, Vice President of Operations Strategy.
After their prepared remarks, the management team will take your questions. As a reminder, you may now download a PDF of the presentation slides that will accompany their remarks made on today's conference call as indicated in the press release we issued earlier today. You may access these slides in the Investor Relations section of our website.
Before we go further, I would like to turn the call over to Brooks Hamilton with the Alpha IR Group, who will read the Company's Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.
Brooks, please go ahead.
Brooks Hamilton -- Investor Relations
Thanks, Nora. Please turn to Slide 2 for a review of our Safe Harbor and non-GAAP statements. Today's presentation contains forward-looking statements as within the meaning of the Private Securities Litigation Reform Act of 1995. Projected financial information, including our guidance outlook are forward-looking statements. Forward-looking statements, including those with respect to revenues, earnings, performance, strategies, prospects and other aspects of Daseke's business are based on management's current estimates, projections and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.
I encourage you to read our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business and to not place undue reliance on any forward-looking statements. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
During the call, there will also be a discussion of some items that do not conform to US generally accepted accounting principles or GAAP, including adjusted EBITDA, adjusted operating ratio, adjusted net income or loss, and free cash flow. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this morning, both of which are available on the Investors tab of the Daseke website, www.daseke.com.
Now, I would like to turn the call over to Daseke's COO and Interim CEO, Mr. Chris Easter. Chris?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thank you, Brooks, and good morning, everyone. Starting on Slide 3. Today, we will cover several topics. First, I will start our call by providing a detailed overview of the significant operational and strategic actions taken at Daseke over the last few months. This will include an update to the first phase of our operational improvement and rightsizing plan that was launched during the third quarter. Then, Daseke's Executive Chairman, Brian Bonner, will provide some commentary on a few Board and strategic developments, followed by John Michell, our Vice President of Operations Strategy, who will give a more detailed discussion of our third quarter financial results. I'll close our prepared remarks with a few big picture thoughts before we take your questions.
Turning to Slide 4. I'd like to start out with a recap of the last 100 days. This has been a period of decisive action for the Company. We embraced change, mobilized our team and came together as an organization to reposition the business. We have a tremendous platform to leverage as the industry leader in the flatbed and specialized transportation markets in North America. The strategic actions we are taking today will allow us to capitalize on this leadership position as we drive enhanced profitability and reposition Daseke for future growth.
Let's take a step back and review how we got here. In our last earnings call, you heard us outline our shift in focus as we pivoted away from concentrating on acquisitions and made a commitment to operations excellence, which included intelligent integration and building better organizational efficiencies. As a reminder, that plan had two key components. The first involve integrating three of our lower-performing operating companies into three other high-performing sister companies. We are merging these units for the purpose of capturing operational synergies and driving improved efficiencies through better asset utilization and the use of shared services.
Additionally, these integrations will allow us to better leverage the deep talent, institutional know-how and functional support teams of some of our strongest performers across our portfolio.
Second, we initiated a broader business improvement plan across our operating companies. Simply put, we identified specific underperforming operating units where we must drive improved performance. These business improvement plans are targeting areas such as yield management, capacity allocations, rightsizing trailer to truck ratios, and maintenance execution to name a few. Later in August, the Company announced the retirement of Founder and CEO, Don Daseke. Don remains a member of our Board of Directors as well as our largest individual shareholder. Given our pivot from an acquisition-based strategy focused on building size, to a platform rooted in operations excellence and capturing value through our scale, the transition of Don's responsibilities to me made sense.
In conjunction with Don's retirement, we named Brian Bonner to the role of Executive Chairman as he has similarly taken the reins of leadership at the Board of Directors level. A few weeks later, as we started to execute against our operational and cost improvement plan, we quickly sharpened our line of sight to our ability to drive value and accelerated the pace of our original plan. Then in September, we enhanced that plan to include corporate cost reduction. Effectively, we went from a $20 million to $25 million net improvement goal over 2.5 years to a $30 million goal in roughly eight months.
For clarity, that goal is based on our first half 2019 revenue and operating cost run rate on an annualized basis and the large majority of the drivers of the $30 million will be cost savings.
And today, I'd like to share some changes within our operations team. These changes will allow us to better leverage the capabilities of our Company's deep industry experience and talent through the creation of new leadership roles, including a new Leadership Council, Transformation Office and Operating Segment Leaders. These Phase 1 strategic actions from our accelerated plan are summarized on Slide 5. There are three core components to this accelerated plan. First, with regards to our operational integrations. Our leaders and associates were on-board from the start. Their willingness to embrace change allowed us to accelerate the timeline and goal for this initiative to $19 million in operating income improvement on a run rate basis by the end of first quarter 2020.
Second, turning to our business improvement plans, we again saw an opportunity to move with a greater sense of urgency. Our new goal raised our original outlook to $7 million by the end of the first quarter next year. Lastly, in early September, we announced the rightsizing of our executive management and Board and a substantial corporate cost reduction plan. This is expected to yield an additional $4 million decrease in our operating costs by the end of the first quarter of 2020 as well. These savings come after evaluating and subsequently eliminating several management positions and other meaningful cost within our corporate office, as we look to hone our focus and consolidate certain duties at the executive management level.
That's a quick strategic summary of what was obviously a very important quarter for Daseke. We took decisive action and drove significant but necessary change across the business. Our team is maintaining a sharp focus on actions that drive immediate value, but are also clearly prioritizing initiatives that are appropriate and required to sustain long-term improved performance. And note the title of this slide, this is just Phase 1. These actions represent only the first steps in an evolving strategy. We are rebuilding a culture centered around operational excellence, continuous improvement and accountability.
We look forward to updating you as our strategy evolves in the coming months. With that review of the last 100 days complete, please turn to Slide 6, so I can walk you through a number of other important changes that we've made to better leverage the tremendous talent we have across the Company. The heads of our operating companies have decades of experience and are true thought leaders in the flatbed and specialized transportation and logistics industry, but they have been a largely untapped resource to-date outside of their operating company responsibilities.
Therefore we have formed a new leadership structure that mobilizes these talented individuals to help drive our much-needed performance improvement across the entire organization. First, we created a Leadership Council comprised of several Daseke operational company leaders, which will be headed by Phil Byrd. Phil is the current CEO, Bulldog Hiway Express, was previously the Chairman of the American Trucking Associations, and has received several distinguished industry awards. The goal of the new council will be to promote and champion organizational improvement and best practice initiatives as we move forward.
Second, we're pleased to announce the creation of a new Transformation Office, which will be headed by John Wilbur. John is currently the CEO of our Roadmaster Group. John's background includes experience in private equity and banking, and he was responsible for the integration of our R&R acquisition in 2018. But he's a perfect fit to head up this new important office. The Transformation Office will be responsible for ensuring the successful completion of the previously announced operational integrations and business improvement plans across the Daseke organization.
As we complete Phase 1 of this important work in late Q1 2020, this office will work hand-in-hand with our Leadership Council to take its initiatives and drive them across the Company by tracking execution and ensuring accountability.
And third, we created a new Segment Head roles to oversee operations for each of our divisions. This is expected to improve our reporting and management structure by streamlining decision making within our two segments through these talented individuals. Tex Robbins, CEO of Lone Star Transportation, heads up our Specialized segment, while Rick Williams, CEO of Central Oregon Truck Company, heads up our Flatbed segment. Tex and Rick have decades of experience in our business and collectively, they will be responsible for overseeing and implementing best practices across our segment operating companies.
These four leaders have over a 100 years of collective trucking experience and institutional knowledge, and each has been instrumental in helping me drive positive change over the last several months. Further, each has run -- each run high-performing operating companies within Daseke, delivering industry-leading return and profitability metrics. Thus, we believe they have a lot more to contribute to our organization. I look forward to their expanded contributions.
Now moving on to third quarter results and key themes that are highlighted on Slide 7. Our third quarter revenue was $450 million, which was flat versus the second quarter and down slightly year-over-year. From a big picture perspective, we continue to see softness in our flatbed markets, although we are starting to see some signs that the rate environment may be bottomed. Our Specialized segment saw a 1.4% increase in revenue, driven by ongoing strength in our wind and -- wind end markets that offset a weak oil and gas sector.
Third quarter adjusted EBITDA was $43 million, which was down versus $53 million in the prior-year quarter. Third quarter net loss was $273.3 million. We took decisive action which resulted in extraordinary costs, and we will deliver exceptional results in the future. Furthermore, our team is aligned behind a simple -- simplified disciplined focus. We are excited to demonstrate our ability to execute and deliver profit.
With that, I will now turn the call over to Brian Bonner, our Executive Chairman, to provide a number of corporate and Board-related updates. Brian?
Brian Bonner -- Executive Chairman
Thank you, Chris, and good morning, everyone. I'd like to take a few minutes to update all of you on a few corporate developments.
Please turn to Slide 8. First on observation. Under Chris' leadership, I want to say how proud I am of everyone at Daseke and how hard they work to drive significant change across the Company in a short period of time. Additionally, our operating company leaders have stepped up and embraced our integrations and business improvement plans. I'm most proud of the commitment by all of our leaders to drive measurable financial improvements.
Next, you will see detailed in our press release that we've taken a non-cash impairment charge this quarter of $306.8 million. The recent decline in our stock price and an updated look at our historical acquisitions given today's market conditions, prompted an impairment review. We do not expect these charges to impact our ability to generate cash flow or have any impact on our ongoing operations or our debt covenants.
Next, I want to update our investors on the closing process of the Aveda Transportation and Energy Services acquisition we completed in June 2018. As a reminder, this acquisition had a potential earn-out associated with it. Daseke takes a conservative approach with respect to reserving for earn-outs related to acquisitions. Upfront, we reserved the full amount of any earn-out until the final earn-out obligations are determined. So we have and will continue to reserve the full charge of $21 million in our financial statements until our discussions with the Aveda shareholders' representative are finalized.
It is important to note that this does not mean that in our opinion that we will be obligated to pay the full $21 million, but rather simply a testament to our conservative treatment of this potential payment until the discussions are concluded. In accordance with this agreement, we have submitted our earn-out calculation to the Aveda shareholder representative and are in an active communication related to earn-out calculations. We will not comment any further on the Aveda earn-out until we have completed our discussions with the Aveda shareholder representative.
Lastly, I want to update the Daseke investors and stakeholders on our status of our ongoing CEO search. The Board remains focused on fulfilling its fiduciary responsibility to secure the best individual for this critical leadership role. Chris, remains a high-quality candidate for the job. I thank him for his commitment to the organization as both Chief Operating Officer and Interim CEO as well as an impressive amount of heavy lifting he and the whole team have undertaken on the operational improvement efforts.
I will now turn the call over to John Michell to review our financial performance last quarter. John?
John P. Michell -- Vice President of Operations Strategy
Thank you, Brian. Our Q3 financial details are presented on Slide 9. Revenue was $450.4 million compared to $461.6 million in the year-ago quarter. The decline was driven primarily by the softer freight rate environment in our Flatbed segment, which was partially offset by 1.4% revenue increase in our Specialized segment. As Brian mentioned, the integrations resulted in a triggering event, which required us to perform an impairment test of our goodwill. As part of the process, there was a review of affected assets. You evaluate each asset and perform an analysis and determine if you have the economic support and the [Phonetic] carrying values.
The total amount of the impairment was $306.8 million. The reduction in the deferred tax liability was $57.7 million for a total tax-adjusted net impact to earnings of approximately $272 million. Net loss for Q3 was $273.5 million or $4.25 per share, which includes non-cash impairment charge. Adjusted EBITDA was $43.2 million compared to $52.8 million in the year-ago quarter. The year-over-year decline in adjusted EBITDA was driven by softness in freight rates and higher driver pay.
Now let's talk through some of these one-time costs we incurred during the quarter. Moving to Slide 10, we've tried to make the impact of some of these cost easier to understand. We had an impairment of goodwill of $112.8 million. We had an impairment of intangibles of $85.7 million. We had an impairment of PP&E, right-of-use and other assets of $108.3 million for a total impairment of $306.8 million. This resulted in a reduction of the deferred tax liability of $57.7 million or an approximately $35 million tax impact of the impairment.
The impairment is expected to reduce depreciation and amortization by approximately $7.4 million per quarter. There were a number of one-time cost expense during the quarter as a result of the ongoing operational improvement plan and corporate rightsizing. In total, there were $13.7 million in costs that don't impact adjusted EBITDA. Broadly speaking, these were $6.5 million for employee-related costs, $2.8 million related to fixed asset write-offs, $2.6 million of legal and consulting, and $1.8 million for other related expenses. Finally, we had $2 million attributed to the write-off of unamortized financing fees.
Moving on to a more detailed look at our segment results on Slide 11. Specialized revenue in Q3 increased 1.4% to $288 million, driven by strong wind-energy related end markets, which outpaced broad weakness in our oil and gas related end markets. The team moved very quickly in responding to market conditions. That said, at this time, we are maintaining our infrastructure that supports oil and gas transportation such that we can take advantage of our market position when conditions improve.
Adjusted EBITDA decreased 15% to $34.3 million. Our operating ratio was 97.4% compared to 95.8% in the third quarter of 2018. Specialized rate per mile was relatively flat versus the year-ago quarter at $3.54 and revenue per tractor increased approximately 1%, but this was offset by $3 million of cost headwinds related to higher driver pay versus the year prior.
Slide 12, shows our Flatbed segment. Flatbed revenue in Q3 decreased 6.4% to $169.8 million and adjusted EBITDA decreased 4.6% to $20.7 million, driven by the softness in manufacturing and construction markets, coupled with truck downsizing across the segment. Weaker flatbed rates versus the prior-year period represented a $3.7 million headwind to our EBITDA results. Flatbed had an operating ratio in Q3 of 96.9% compared to 93.3% in the year-ago quarter.
The Flatbed rate per mile in Q3 decreased 7% to $1.90 and Flatbed revenue per tractor decreased 7% to $42,600, which highlights the soft freight rate environment.
Now, turning to our balance sheet and free cash flow. As Slide 13 indicates, at September 30, we had $79.6 million, zero outstanding and $84.6 million available under our revolving credit facility for total available liquidity of $164.2 million. Net debt was $633.6 million and leverage in accordance with our debt agreements was at 3.25 times, which remains well below our 4.0 times covenant. Out credit agreements removed many of these one-time items we've discussed today, so we maintain a healthy cushion against our covenants.
For the nine months ending September 30, cash provided by operating activities was $89.4 million, cash CapEx was $17.4 million and cash proceeds from the sale of capital property and equipment was $23.8 million, resulting in free cash flow of $95.8 million for that nine-month period. We financed $65.6 million in PP&E during the nine months. Overall, we reduced our net debt by $16.5 million versus the second quarter, even in the phase of softer industry conditions, and before the full benefits of our operational and cost improvement plan.
I will close my prepared remarks with a quick reminder that our fourth quarter is historically our slowest quarter of the year from a seasonal perspective. For example, our last three fourth quarter saw operating ratios of 100% or greater as volumes tend to slow with the holiday season. We still believe you'll see some solid signs of progress based on the decisive actions we've taken to control costs and streamline the organization. They will likely be more impactful as we move past the fourth quarter and into fiscal 2020.
With that, I'll hand the call back to Chris.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thank you, John. Moving to Slide 14. We are reaffirming our outlook for 2019, although we expect to be at the lower end of the range. Let's end on Slide 15, where I'll summarize. I'm even more confident that we will achieve our $30 million target. We have a sharp, simple focus. And our team is aligned and mobilized as we build a culture based on empowerment and accountability.
That concludes our prepared remarks, and I'm excited to turn the call over for your questions.
Questions and Answers:
Operator
[Operator Instructions] Your first question comes from the line of Jason Seidl of Cowen and Company. Your line is open.
Jason Seidl -- Cowen and Company -- Analyst
Thank you, operator. And Chris and team, thank you for taking the time today. Bunch of different questions that sort of circle different areas here. Brian, you mentioned the CEO search is ongoing. One, any hint on timing? And two, what about your search for a CFO?
Brian Bonner -- Executive Chairman
Yes. Our timing still remains the same as we previously discussed, which was three months to six months from the start. So, we are still looking at a first quarter completion of that effort. And then regarding the CFO search, we are doing that as we conclude the CEO search with the understanding that both individuals would like to understand who they're reporting to or have reporting to them.
Jason Seidl -- Cowen and Company -- Analyst
Okay. That makes sense. In relationship to some of the impairments that you guys took out there, I understand what triggered it. On the acquisition front was there any one particular acquisition that you guys made that triggered most of this or was it spread out evenly over some of the ones you made? And then also on the reorganizational charges, where a lot of them put in -- when you look at your income statement, where a lot of the numbers put already in salaries, wages and benefits. Is that why it jumped up as a percent of revenue?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. I'll take the first part of it. Regarding the trigger, we had two triggers there. It was the restructuring effort as well as the stock price that triggered in evaluation of the impairments. And we're also following FASB ASC 350 methodology to calculate the impairments, so that was what the overall trigger was. There wasn't one specific opco that was driving that.
Jason Seidl -- Cowen and Company -- Analyst
Okay. So it was more spread across specific opcos in terms of the impairment?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Correct.
John P. Michell -- Vice President of Operations Strategy
Yeah, Jason. And then to your last question, a big part of those costs were [Indecipherable] out there, obviously, the severance related to the headcount reduction. And so that's the big increase in the SWB's line item.
Jason Seidl -- Cowen and Company -- Analyst
Okay. That's what I thought. I just wanted to ask just some quick modeling one. On the operations front, can you talk about some of your end markets a little bit more? I know you mentioned wind a little bit. You made the comment that you sort of see the rates improving a little bit on the flatbed side. I'd like some more meat on the bones there. And then I want to talk a little bit about brokerage?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yes. I'd say from a kind of a segment perspective or industry vertical perspective, we're seeing some strength in some, it's kind of a mix, especially on the Specialized side with things like wind-energy being very strong, but oil and gas is down. But -- so there is offsets in there. We're seeing some other lift sequentially on -- like high security cargo and some of our other segments, and we're seeing some softness though on steel and manufacturing. But it's all a mix. I mean, we're seeing things I think kind of level-off. And I think even more importantly though, we're seeing the capacity is where we're seeing things tighten. And I think that's helping offset to some extent rate pressures and it's giving us optimism -- more optimism as we're moving forward.
And what was the last part of your question again?
Jason Seidl -- Cowen and Company -- Analyst
I was going to jump to brokerage. But on the capacity tightening, is this because you've seen some bankruptcies or what's going on there on the capacity side?
John P. Michell -- Vice President of Operations Strategy
I think that's clear evidence for part of it. I think the truck orders and new orders are down. When you see the bankruptcies out there, there's a lot of smaller companies, in particular, that had been struggling.
Jason Seidl -- Cowen and Company -- Analyst
Okay. I appreciate that. And now last one, and I'll turn it over to somebody else. On the brokerage front, obviously you went from very strong growth in 2Q to negative growth. We've been hearing brokerage has gotten a lot more competitive over the last few months. How should we look at that going forward, especially in 4Q?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah, I think it is -- it's a tough market out there in brokerage and for us it's, reps, obviously able to execute well on brokerage, it's a large chunk of our business. But it also gives us installation. So right now, you know in a tighter market, we tend to do -- more of those loads tend to end up on our trucks, because we're wanting to make sure we're splitting those assets and using those as best we can. And I just think long term for us that brokerage is certainly an avenue of growth, we love the non-asset component and we already have got such great relationships and strength with our customers. We think, I'd say, it's clearly a path for us in the future for growth.
Jason Seidl -- Cowen and Company -- Analyst
Okay. So in 4Q, you would expect it to be down again, do you think it's going to be any worse than it was in 3Q?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
No, I don't think. I'm not seeing anything that would proportionately -- I think, take a look at the seasonality forward, take a look at where we are, I don't expect anything beyond those normal seasonal type shifts that you would see.
Jason Seidl -- Cowen and Company -- Analyst
All right. Perfect. I appreciate the time as always gentlemen.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thank you.
Operator
Your next question comes from the line of Matt Brooklier of Buckingham Research. Your line is open.
Matt Brooklier -- Buckingham Research -- Analyst
Hey thanks. Good morning. So kind of a follow-on question. You did talk to the seasonality that you have embedded in your business as we're kind of thinking about fourth quarter. The message there is, right, it's weaker on a sequential basis. If I'm looking at the midpoint of your guidance, it implies that, that decline this year, maybe a little bit less worse than that's been in years past. So, maybe if you could just talk to some of the benefits that you're expecting, I'm assuming some of the corporate restructuring, right, the full run rate of that hitting in third quarter, that provides a little bit of a lift, but is there A, I'd like to confirm that and then, B, is there anything else from the programs that you've initiated that could start to benefit the fourth quarter here from a cost perspective?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. I'll go ahead and take that Matt. Yeah, I think the -- looking at the fourth quarter, and, again, I made a quick note of the slide where we're confirming guidance, but, yeah, we absolutely are confirming that we feel confident comfortable with where we're headed on our trajectory for the balance of the year. And yes, we are seeing some of the lift from some of the actions we're taking that are already -- that will start to come through in the fourth quarter, but of course, we won't see the full lift until we get into next year.
Brian Bonner -- Executive Chairman
Yeah. I'll just -- Matt, because I know one part of this modeling question. When you think about EBITDA, there's a lot of noise below that, rather than depreciation, amortization. And so my comment was around -- hey look, Chris has just simplified, we're focused on in OR, and just note that Q4 has a bigger impact on OR that it does EBITDA which you highlighted.
Matt Brooklier -- Buckingham Research -- Analyst
Okay. That's helpful. And then could you talk of contract rates, where do we think rates are resetting? I know, you're feeling a little bit better in your Specialized business versus Flatbed, but all in, where do we think contract rates are trending right now?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
I'd say we're seeing slight declines. I don't want to go out there with a number right now. But -- and our contract renewals, they are kind of spread out during the course of the year depending upon the industry segment. But we certainly -- I think they have plateaued on the low side and we're seeing stability I think in our end markets.
Matt Brooklier -- Buckingham Research -- Analyst
Okay. And then last one and then I'll pass it along. If we think about the fleet moving into next year, you think about the integrations that you have going on, your thinking about kind of the market, probably more headwinds than tailwinds until things turn around, how should we think about the fleet is with the expectation to keep that the consolidated fleet flat, could the fleet be down next year, what are your kind of your initial thoughts here?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. We're -- we definitely are taking advantage of this entire integration in operational focus process to skinny down where it's appropriate on trucks and trailers. And I think as we come out of the fourth quarter, you will -- we'll be able to show those numbers more clearly. The market has been a little tough from a disposition perspective on the trucks, but the trailers have been solid for us.
But we're deep in exercising those as we speak, so I would look at the macro level, I would expect our count to start next year down some from the start of this year. And we're going to stay lean, as you said, there -- is not a blue sky outlook for next year. So we're not going to go out there with blue sky optimism, we're staying lean and be prepared to far earlier point on brokerage, be prepared to lever up quickly with brokerage as we need to.
John P. Michell -- Vice President of Operations Strategy
And the idea there, Chris made, reduce the truck count, but increase the utilization, so it don't impact volumes.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah, absolutely.
Matt Brooklier -- Buckingham Research -- Analyst
Got it. Okay. That's very helpful. I appreciate the time guys.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thank you.
Operator
Your next question comes from the line of Steve Dyer of Craig-Hallum Capital. Your line is open.
Ryan Sigdahl -- Craig-Hallum Capital -- Analyst
Hi guys. Ryan Sigdahl on for Steve. So given the recent business unit consolidations, have you seen any impact to customer contracts or revenue? And then secondly, what has been the feedback, I guess, if any, are you hearing from customers in those regions?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. I'd say that we were proactive in our discussions with key customers for sure and that the fact is that we've seen no real material impact, if anything, we've been --in some cases, we may have taken some action ourself, as we're looking at yield management in the process. But yeah, no real impact from a customer perspective. And I think our team did a fantastic job of proactively communicating. And the strong brand names of those that the companies -- the parent company that others integrated into, I think positioned us to come out of that just fine.
Ryan Sigdahl -- Craig-Hallum Capital -- Analyst
Great. Then switching over, within the impairment charge, I want to dig in, I guess, into one specific part of that related to the PP&E impairment. I believe it was $108 million if I caught that right. That seems rather high I guess, given these assets were recorded at fair value and acquired. So I guess, what happened over the past year or two that these assets have deteriorated more than what the depreciation was?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
It's a complex model. I'd say that because I spent many, many hours -- I feel like a closet accountant at this point digging in on the numbers. And obviously, our current market value has a lot to do with that, but I'm not going to get into all the details, but John, if you wanted to add any comments over in terms of that from an overlay?
John P. Michell -- Vice President of Operations Strategy
Yeah. Ryan, we have talked about this for a bit. We've -- I've just got two things going on here. One, when we acquire assets as part of an acquisition, we've talked about the step-up in basis and we have that step-up in depreciation, that's one. And then two, you're looking at the current market values and given where used truck prices are, you've got some impact there so...
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. John is right. That's the key I think. I missed that point at first, but yes, that used truck market impact certainly came through as we were not getting current appraisals.
Ryan Sigdahl -- Craig-Hallum Capital -- Analyst
I'll leave it there. Thanks guys. Good luck.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thank you.
Operator
[Operator Instructions] Your next question comes from the line of Greg Gibas of Northland Securities. Your line is open.
Greg Gibas -- Northland Securities -- Analyst
Good morning, Chris, Brian and John. Thanks for taking the questions and congrats on the quarter.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Thanks, Greg.
Greg Gibas -- Northland Securities -- Analyst
I guess first, you've already identified these $30 million of operational improvements that have been broken out. Just wondering if you could talk about, is there any room for additional cost savings that you think there'll be after that, I mean, considering fuel cost and driver compensation is a bit beyond your control? I mean, I know it's early to talk about numbers, but are you still seeing additional opportunities?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Absolutely. Absolutely I feel there are additional opportunities again, when -- as we talked about this at the very start of the last quarter where we were sitting at 99% OR for the last many quarters, the opportunity is certainly there, our operators know how to run the business, and that's what they're engaged in now. So they are excited as they have been kind of empowered and enable to drive for results. And so they're definitely in. We'll be talking about that more in the future, so don't -- I'm not saying cook a bunch of numbers into your model, other than the fact that we're confident, we can do more and we will do more.
Greg Gibas -- Northland Securities -- Analyst
That's good to hear. And then you talked a little bit about the end markets you're seeing strength and then weakness in. I was just wondering if you can call out some of the regional markets that you're seeing better-than-expected performance or even perhaps weaker performance in some of them?
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. Greg, It's less regional or more in that end markets that we're seeing that. Obviously, I believe we kind of called out Flatbed and we have such density in the Southeast and there is so much of the -- in the Flatbed, so that's kind of regionally Southeast, it's difficult, but it's much more a function of the end market in the geographic specific.
Greg Gibas -- Northland Securities -- Analyst
Got it. Okay. And then in the past, you did talk about moving some of the operating companies that were pretty heavy in spot market toward more contracted rates. Just wondering if you could provide maybe an update on the progress here. I imagine that would kind of help you become a little less dependent on where spot rates move.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Yeah. So there is in fact, in particular, one of our integrations with builders transport. They had been heavy in the spot market and they are in the midst of that transition now, where Hornady is much more contract based, so that is kind of a in process as we transition if you don't do that on a dime. And so we're working our way there, but it's back to I think -- it's not like you want to get out of the spot market. The spot market, it certainly can be an attractive component as well, and we're going to maintain our feet in there as we're moving forward.
Greg Gibas -- Northland Securities -- Analyst
Makes sense. Thanks guys.
Operator
Thank you. I'd like to turn the call back over to speaker Chris Michell[Phonetic]. Please go ahead, sir.
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
All right. Thank you, Nora, and thanks again, everyone, for joining us today. Our strategic focus and execution continued to build momentum. We have taken swift decisive action to address the areas of our business that need our attention. I am very excited about the path we are on in the future of Daseke. Thanks again.
Operator
[Operator Closing Remarks].
Duration: 39 minutes
Call participants:
Brooks Hamilton -- Investor Relations
Chris Easter -- Interim Chief Executive Officer and Chief Operating Officer
Brian Bonner -- Executive Chairman
John P. Michell -- Vice President of Operations Strategy
Jason Seidl -- Cowen and Company -- Analyst
Matt Brooklier -- Buckingham Research -- Analyst
Ryan Sigdahl -- Craig-Hallum Capital -- Analyst
Greg Gibas -- Northland Securities -- Analyst
