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Saia Inc (NASDAQ:SAIA)
Q4 2019 Earnings Call
Feb 3, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Saia Incorporated hosted Fourth Quarter and Full Year 2019 Earnings Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Doug Col. Please go ahead, sir.

Douglas Col -- Vice President and Chief Financial Officer

Thank you, Brittany. Good morning, everyone. Welcome to Saia's fourth quarter 2019 conference call. With me for today's call are Rick O'Dell, Saia's Chief Executive Officer; and Fritz Holzgrefe, our President and Chief Operating Officer.

Before we begin, you should know that during the call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call, that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ.

Now, I would like to turn the call over to Rick O'Dell.

Richard D. O'Dell -- Chief Executive Officer

Well, good morning, and thank you for joining us. I'm pleased to report that we closed out 2019 with record full year results, despite a fourth quarter that was somewhat disappointing. Our revenue in 2019 was a record $1.8 billion, surpassing last year's record by 8%. Operating income also grew by 8% to a record $153 million. Our fourth quarter revenue was a record $443 million. The quarter's results were negatively impacted by terminal opening and relocation costs, as well as accident severity, which Doug will cover in more detail in a financial review. Despite the challenges to the fourth quarter results associated with opening three new terminals and relocating three others in the period, productivity for the full year actually improved modestly in both the dock and city operations.

And our linehaul operation declining weight per shipment throughout the year led to a slight decline in load average. But we were able to reduce our linehaul cost, as a percent of revenue by 2.2% and purchase transportation miles, as a percent of total linehaul miles dropped to 10.3% from 10.6% last year. I'm pleased to report that both on-time pickup and on-time delivery metrics improved year-over-year, despite all the terminal activity and the growth of our workforce. Our cargo claims ratio for the full year of 0.76% was slightly improved from 0.77% last year despite, again, all the new terminals and all the new employees.

As 2020 began, Saia operates 168 terminals across 43 states, having opened nine new locations in 2019. Since May of 2017, we've opened 18 new terminals across new markets in the Northeastern US. Our expanded service offering has quickly resonated with our customer base and exiting the fourth quarter were on an annualized run rate of over $280 million into and out of these new markets. We've enhanced geographic service offering and our consistent quality and reliability, we're raising our value proposition to customers. Our yield rose 3.7% in the fourth quarter making our 38th consecutive year-over-year improvement.

I will now turn the call over to Doug for a review of key fourth quarter and full year financial highlights.

Douglas Col -- Vice President and Chief Financial Officer

Thanks, Rick. I'll start with a review of the fourth quarter. Revenue rose 8.9% to $443 million. Along with the yield improvement Rick mentioned, revenue also benefited from shipment and tonnage growth of 6.3% and 4.3%, respectively in the quarter. Fuel surcharge revenue was up 2.2% year-over-year and was 13% of total revenue. Despite a 1.9% decline in weight per shipment, our revenue per shipment rose 1.8% to $238, benefiting from the yield growth and also from a 1.1% increase in our length of haul. Operating income of $27 million in the fourth quarter was down 18% year-over-year with much of the decline stemming from costs associated with three new terminal openings and three major terminal relocations, which occurred in the quarter, along with increased insurance reserves, associated with accident severity.

Additionally, on the cost front, I can offer a little bit more color on the quarter as follows. Salaries, wages, and benefits rose by 10.7%, reflecting our average employee count being approximately 5% higher than the prior year. Our July wage increase for approximately 3.5% and continued inflationary healthcare costs. Purchased transportation costs increased 10.1% year-over-year from a combination of 7.1% growth in PT miles and 10.6% growth in purchase rail miles. Our overall PT miles were 9.8% of total miles, compared to 9.6% of total miles in the fourth quarter last year. Fuel expenses fell by 0.8% in the quarter as national average diesel prices were 5% to 6% lower throughout the quarter, compared to last year. Our miles per gallon across the fleet continues to improve as well and helped to offset the fuel costs associated with our mileage growth of approximately 6%.

Claims and insurance expense spiked by 50% in the quarter, due primarily to accident severity. Our cargo claims ratio of 0.83% was also up from 0.75% a year ago, but improved through the quarter as continuous training efforts began to produce a benefit with our newest dock associates. Depreciation expense of $31.9 million in the quarter was 17% higher than last year, matching the trend we saw throughout the year and reflects our investments in revenue equipment, properties and technology. The average age of our tractors is now less than five years.

Overall, operating expenses grew by 11.3% in the quarter, outpacing our 8.9% revenue growth and fourth quarter operating ratio deteriorated to 93.8% compared to 91.8% a year ago. Our tax rate for the fourth quarter was 18.1% compared to 19.9% last year. The tax rate was positively impacted by the enactment of an alternative fuel tax credit in the fourth quarter that covered 2018 and 2019 reporting periods. Fourth quarter diluted earnings per share were $0.81 compared to $0.97 the prior year. The previously mentioned fuel tax credit benefited fourth quarter EPS by $0.07.

Moving onto the financial highlights for our full year 2019. Revenue was a record $1.8 billion and operating income of $153 million was also an annual record. Our operating ratio held flat in 2019 at 91.5%. For the full year 2019, our diluted earnings per share were $4.30 versus $3.99 in 2018. And again the reported 2019 EPS benefited by $0.07 as a result of the previously mentioned enactment of the alternative fuel tax credit.

At December 31 2019, our total debt was $136 million and net debt to capital was 14.3%. This compares to total debt of $123 million and net debt to total capital of 14.8% at December 31, 2018. Net capital expenditures in 2019 were $287 million, including equipment we acquired with capital leases. This compares to $252 million of net capital expenditures in 2018. In 2020, net capital expenditures are forecast we approximately $250 million, including investments in real estate, terminal infrastructure improvement projects, our fleet, and continued investments in technology.

Before we open the line up for questions, I'd like to turn the call over to Fritz Holzgrefe for some closing remarks.

Frederick Holzgrefe -- President and Chief Operating Officer

Thanks, Doug. While, we all would certainly like to closed out the year with stronger operating margins, I'm pleased with the company's growth trajectory and how our company is positioned as we move into 2020. Rick mentioned, the nine new terminal openings we completed in 2019, but I also like to highlight some major terminal relocations that position us for long-term share gains and better service across our network.

In January, the past year, we've moved into a new owned facility in Harrisburg, Pennsylvania, more than doubling the size of our former lease terminal in that market. The new locational service for years to come as a major break facility in Northeastern US. Other major terminal upgrades occurred in Indianapolis and Phoenix, where we relocated to new own terminals in both markets, essentially doubling our door counts at both locations. In Philadelphia, Newburgh, New York, we relocated the larger terminals and we are growing the terminals opened in those markets within the last two years.

Our total door count the Northeast grew by 112% in 2019. In 2020, our current plan calls for one new terminal opening in the first quarter and then we have a handful relocation slated for the balance of the year. The line share of our capital expenditures in 2020 will once again be directed toward our fleet. As Doug mentioned, the average age of our tractor fleet is now less than five years and should dip below four years in 2020 based on our planned purchases. Improved fuel mileage greater reliability at a full suite of In-Cab safety technology that comes with new tractors are all benefits of lowering the fleet age with new buyers.

And finally, with respect to the current freight environment, we continue to view freight activity is somewhat muted. In fairness, January is one of the softest months seasonally in our business, so I don't want to read too much into one month. Against the easing comps, January shipments per day grew 8%, while tonnage per day grew 7.7%. The most encouraging trend over the last couple of months is the weight per shipment trend seems to be in the bottoming process. Weight per shipment in January was 1,304 pounds, in line with what we saw in November and December. We're excited about the investments to-date, as we feel they position us for share and margin improvement in 2020 and beyond.

With that said, I'd like to go ahead and open the call for questions. Operator?

Questions and Answers:

Operator

Yes, sir. Thank you. [Operator Instructions] Our first question comes from Jack Atkins with Stephens Incorporated.

Jack Atkins -- Stephens Inc -- Analyst

Good morning. Thanks so much for taking my questions.

Richard D. O'Dell -- Chief Executive Officer

Good morning, Jack.

Jack Atkins -- Stephens Inc -- Analyst

So I guess, just to start off -- Fritz, going back to your last comment on -- on just sort of the underlying freight market. Could you update us on what the December tonnage and shipment metrics were? And then it seems like there's been a step up in demand and in tonnage here over the last couple of months judging by December and January. And just sort of curious, what do you think is driving that? Is that just purely a function of easier comps or do you feel like in the last maybe six to eight weeks things have begun to maybe stabilize to improve a bit out there?

Frederick Holzgrefe -- President and Chief Operating Officer

I'll take that first part of that, Jack. I'll take you guys through the shipments and tonnage growth throughout the quarter. And we'll start with October, shipments were up 6.9% and tonnage was up 3.5%. In November, shipments were up 2.7% and tonnage up 1.4%. And then as you mentioned, December things picked up a little bit, our shipments were up 10% and our tonnage was up 9%. And the December comparison was up against negative shipments and tonnage a year ago. Shipments, a year ago in November -- October-November have been positive, so the comps did get easier.

Jack Atkins -- Stephens Inc -- Analyst

Got you.

Frederick Holzgrefe -- President and Chief Operating Officer

In terms of the environment, we're seeing I mean it's the same number as you're seeing. I mean, industrial production was down in December, I think that was the fourth out of the last six months where it was down. The PMI trends have been negative for five or six months now, once they turn negative. So it's tough to say now any more than that because January seasonally the weakest month of the quarter anyway, so it's kind of hard to call out any kind of difference in pace with the environment when it's our seasonally softest month.

Jack Atkins -- Stephens Inc -- Analyst

Okay. Got you. The good news is, we just saw our PMI above 50 here in January just spread it, so that's encouraging. So I guess, just shifting gears up to the margin front for a moment, could you update us on your outlook for OR improvement in 2020? I think on the third quarter call, you were saying 100 basis points to 150 basis points of improvement from margin perspective, year-over-year in 2020 versus 2019, is that still the plan? And then can you help us sort of bridge to that number, whether it's productivity improvements from having a younger fleet age? And then just sort of the leverage that you expect to get on these investments, I think just helping to bridge to that number would be very helpful for folks.

Richard D. O'Dell -- Chief Executive Officer

Okay. I'll start, and then maybe Fritz probably add some comments as well or Doug will. Historically, -- historical seasonality 4Q to 1Q would have a modest deterioration in OR about 20 basis points. And -- but kind of given our current outlook January performance, we would expect at this point a modest improvement up to a 100 basis points. And again, we don't know what the weather is going to be like the rest of the quarter. We always have some self-insurance, volatility exposure, but our outlook would be in that range at this point in time. And again, there are some carry forward costs from the 3Q and 4Q terminal openings. And -- but we're confident, I think, in our ability over time to apply top line revenue to that and get the OR improvements that we've talked about historically as well. You want to add something else, Fritz?

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah. The only thing I would add to that, Jack, is that as we know the fleet improvements that we've made last year and actually last several years into this year, that creates a pretty big step up in depreciation over year -- year-over-year that we're going to have to cover. We're obviously going to have inflationary costs in all the areas that you typically would see is going to be some market-based wage, inflation, benefit costs, all that sort of thing. But with that said, we're tracking early on and we're not quite ready to give the highlights of it.

But investments in technology across not only the fleet but then also our operations in planning systems where we think we can look for ways to drive productivity improvement on our dock, city and linehaul operations. And those investments that we have made in the last several quarters that we would hope to see help drive that margin improvement in 2020 and frankly, beyond. As we sort -- as we have moved into these Northeast markets, those are, as we know, high-cost markets and the benefits of productivity certainly will help us drive those margin improvements into the coming year.

Jack Atkins -- Stephens Inc -- Analyst

Got you. So the plan is still 100 basis points to 150 basis points of margin improvement in 2020?

Richard D. O'Dell -- Chief Executive Officer

I think that's fair.

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah.

Jack Atkins -- Stephens Inc -- Analyst

Okay.

Richard D. O'Dell -- Chief Executive Officer

I mean it won't be linear across the quarters, right? But I mean I think that's -- that would be our expectation. I mean, we clearly realize this is a show-me year. I mean, we've made the decision that, I think, is strategically correct to open some incremental terminals. But we've made a lot of investments and we expect to get an adequate return on it.

Jack Atkins -- Stephens Inc -- Analyst

Okay. Great. Thank you again for the time.

Richard D. O'Dell -- Chief Executive Officer

Thanks, Jack.

Operator

Our next question comes from Todd Fowler with KeyBanc Capital Markets.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Thanks and good morning.

Richard D. O'Dell -- Chief Executive Officer

Good morning, Todd.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

And Doug, congratulations officially on a new role. Maybe just to start, Fritz, some comments were attributed to you in the release about the pricing environment remaining rational. I was just hoping you could maybe expand on that, and if you've seen any changes in behavior in the fourth quarter from the third quarter, and maybe some comments about where contract renewals are right now?

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah. So we've seen '20 or the end of the year and the next year to be kind of competitive, rational environment around pricing. I mean everybody has got a deal with the inflationary costs, so I think people are -- have that backdrop. And I think that as we continue to see in the marketplace, we see people be competitive, but at the same time, you see them performing rationally. So that's -- continues to be a good thing, a good part of our market and our strategy right now. Our contractual renewals in the quarter were...

Douglas Col -- Vice President and Chief Financial Officer

5.4%.

Frederick Holzgrefe -- President and Chief Operating Officer

5.4%.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Okay. So that's pretty consistent. I think, they were around 5.5% in the third quarter. So...

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

I guess just to maybe put a little bit of a bowline it, [Phonetic] it sounds like that with where we're at in the cycle, pricing behavior is kind of what you would expect, but you're still seeing those mid-single digit contract renewals?

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah, so far.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Okay. Good. And then just to shift gears and talk about the expansion, it sounds like that there's going to be one terminal opening in 2020. I think that, that brings you to about 19 in total. You'd previously talked about 20 to 25. Is there a change in the number of terminals that you need in the Northeast or is it just a timing where you've pulled forward some of the growth into '19, you take a breather in '20 and then accelerates again in '21? Can you just help us think about kind of the number of terminals and where you're at from a geographic expansion standpoint?

Richard D. O'Dell -- Chief Executive Officer

I think the way I would characterize it, Todd, is if you go back to when we launched our Northeast plan, we talked about 20 to 25 terminals probably gives us pretty good coverage over time. And the great thing about an organic expansion is it allows us to speed up or slow down as we see the opportunities. So we saw opportunities last year, so we accelerated our pace. And the timing Q3 and Q4 that had -- obviously, had an impact on our results, but we're looking at this as a long-term sort of investment, so the quarter-to-quarter nature of it, that's part of the investment profile.

I think as we look longer-term in the Northeast, I mean, I think that sort of 20 to 25 number is probably reasonable. But at the same time, you could -- as that business evolves, we may see other opportunities to provide incremental coverage in that market as the market develops for us. So I don't know that I would say that we're at the end, but I think those continue to be opportunistic in that market. But this year in 2020 as we look at where we are, it's an opportunity to really to generate a return on all those investments we've made to-date in the market, particularly in the last six months of 2019.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Okay. Got it. That makes sense. And maybe just the last question for me and it's kind of along those lines. But the $280 million of run rate par [Phonetic] revenue in the Northeast, do you care to share kind of a sense of what the margin profile on that is relative to the business? And the genesis for the question is obviously, thinking about the drag that's happening and the opportunity of where that can go as you leverage the investment that you've made. Thanks.

Richard D. O'Dell -- Chief Executive Officer

Yeah. So I think the way I would characterize that is that -- in a network business, the impact of growth in the Northeast kind of touches all corners of our company. If I looked at specifically at those, the full all-in OR for those that Northeast in the fourth quarter, it was over 100%, but that -- we also know that was an investment period. We know that over time, I think what this does it's going to drive our overall -- we'll be able to drive the overall OR in that region. It's something more in line with the rest of the company. But at the same time, the benefits of that incremental growth will impact the balance of the company as well. So I think that -- that's still intact, the value, the -- what we can drive out of that area, that doesn't change. It's just the expenses were pretty heavy in the last half of the year.

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Got it. No, that makes sense, especially with the halo impact on the other regions. So I'll jump back in the queue. Thanks for the time.

Richard D. O'Dell -- Chief Executive Officer

Yeah.

Operator

Our next question comes from Scott Group with Wolfe Research.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Good morning, guys.

Richard D. O'Dell -- Chief Executive Officer

Good morning.

Frederick Holzgrefe -- President and Chief Operating Officer

Good morning.

Scott Group -- Wolfe Research -- Analyst

So I wanted to follow up on the full year OR commentary. So first quarter doesn't imply and placed flattish margins. Second quarter has got the toughest comp of the year. So the OR improvement sort of back-end loaded. Is that just the comps are a lot easier or is there anything about costs or anything that, that builds throughout the year? I just want to understand the trajectory.

Douglas Col -- Vice President and Chief Financial Officer

I think it's a combination of comps and some of our targeted cost improvements. But it's primarily kind of driven by the comps, right. The set back half of the year [Indecipherable] first quarter wasn't great either, but the back half of the year was -- margins weren't -- we were making some investments, we had some self-insurance volatility. The combination of things I think are just -- are easier in the back half. And as we have commented, we weren't particularly pleased with our fourth quarter performance. I mean it was an investment quarter but with the revenue growth that we're having, we would expect to operate better than we did and certainly, do going forward as well.

Scott Group -- Wolfe Research -- Analyst

Okay. And then on the -- can you give us any sort of either the revenue per day or yield trends to start the year? I just want to understand them is the -- the tonnage, obviously, picking up, but is there any sort of offset there in terms of yield slowing or anything?

Richard D. O'Dell -- Chief Executive Officer

I just -- still it's one month, right. But our yield trends were similar going into the first -- in the first quarter as we had in the fourth quarter from an improvement perspective. And then so you can take the tonnage we quoted and assume a similar number, you're going to get to the revenue.

Scott Group -- Wolfe Research -- Analyst

Okay. And then my last question on the pickup in weight per shipment, can you tell what if anything is driving that? Is there any sort of pickup in the TL rated freight or is it just economy? What do you think is driving the weight per shipment higher?

Richard D. O'Dell -- Chief Executive Officer

So, Scott, I would say that it's just kind of a broad base. There's not really a call out there, for a specific market or vertical or something like that. As always, we're going to be focused on driving or identifying that freight that's going to have the best characteristics to drive the incremental margin in our business that -- maybe there's some efforts there that are helping to drive that. But I think overall, it's pretty broad-based.

Scott Group -- Wolfe Research -- Analyst

But you're not making a push to try and fill up the network with some TL business or anything?

Frederick Holzgrefe -- President and Chief Operating Officer

No. Not any more than we normally take advantage of that.

Scott Group -- Wolfe Research -- Analyst

All right. Thank you, guys.

Richard D. O'Dell -- Chief Executive Officer

Okay.

Operator

Our next question comes from Amit Mehrotra with Deutsche Bank.

Amit Mehrotra -- Deutsche Bank -- Analyst

Thanks, operator. Hi, everybody. Congrats Doug as well. Fritz, just a quick follow-up. The depreciation expense that obviously stepped up quite a bit in '19, what's the run rate quarterly? I assume it's flat, so tab. I know you got one additional in 2020 in terms of a new service center opening up or terminal opening up, but any help there?

Douglas Col -- Vice President and Chief Financial Officer

Yeah. I would just say -- I mean, in 2019, I guess for the full year, I mean, depreciation was up almost 17%, and the total capex number was projected to come down in 2020. But with the heavy -- over 50% of it being on revenue equipment, I'd say, depreciation in 2020 is probably likely to be up another 19% or 20% year-over-year.

Amit Mehrotra -- Deutsche Bank -- Analyst

From '19 to '20, 20% up year-over-year?

Douglas Col -- Vice President and Chief Financial Officer

Yes.

Amit Mehrotra -- Deutsche Bank -- Analyst

Okay.

Richard D. O'Dell -- Chief Executive Officer

Yes. So you're going to have the lapping effect of what we added last year plus the new equipment that comes online in 2020.

Amit Mehrotra -- Deutsche Bank -- Analyst

Okay, interesting. Okay. That's just a lot higher than I would have expected, but maybe I did something wrong there. Okay. And then, one question -- yeah, go ahead.

Richard D. O'Dell -- Chief Executive Officer

Amit, I don't think anything is wrong, but I mean we opened -- since mid-September, we opened six new terminals and relocated four other ones into new facilities, so -- I mean a lot of investment there plus the equipment that goes in all those facilities. So like Fritz said, I mean, it's just -- it's the run rate coming out...

Amit Mehrotra -- Deutsche Bank -- Analyst

Yeah. It just looks like I modeled that wrong. Yeah. I just modeled that wrong. It's really my fault. And then, I just wanted to ask a question on the decline in weight per shipment in the quarter. I just want to -- I know it's a little bit backward-looking, but it's a little bit of an outlier, especially when you think about Northeast not being as dilutive to weight per shipment. I think you said that before in the past. So were there any I guess mix headwinds in the quarter? I know you talked about maybe November being a particularly weak month in and out of the Houston market, o-patch market, just talk about that? And what is -- did that revert at all or has that reverted at all as you started the year? So, obviously, that was a pretty big drag I guess in the month of November, at very least?

Douglas Col -- Vice President and Chief Financial Officer

No. I mean year-over-year, throughout the quarter, the weight per shipment, call it declines from the prior year actually lessen, right? So October weight per shipment was down 3.2%. November weight per shipment was down 1.2%. And then December weight per shipment was down less than 1%. So, I mean year-over-year, the quarter actually saw things get a little stronger. And like Rick mentioned earlier, I mean we seem to be or Fritz mentioned, we seem to be bouncing along the bottom here. I mean, November and December weight per shipment was pretty much right where it that here in January.

Amit Mehrotra -- Deutsche Bank -- Analyst

Okay, right. Yeah. And then one may be bigger picture question from me. I guess this is for Rick or Fritz. Just given the -- I guess the margin opportunity in 2020, it's kind of -- I guess, it's kind of a unique year in terms of your ability to realize margin improvement and structural cost absorption relative to past years. I guess, what are you guys doing from -- if anything from an operational or execution oversight perspective that's different in the past? I mean, is there anything that you're doing in terms of higher operational intensity, oversight perspective that just gives you a little bit more confidence or more confidence that the opportunity that you guys see over the next 12 months, that's should going to be realized? You guys doing precision scheduled, rail broadening or something like that.

Richard D. O'Dell -- Chief Executive Officer

Well, I think, I mean we've got a couple of elements that we're building momentum around that we're pretty -- we're excited about. I mentioned earlier that we have made investments in technology across all the major cost drivers in our operating -- in our network, which we feel like over the course of the year will help us drive the sort of incremental margins. I think the -- there is clearly, we've invested a lot in our industrial engineering group and our operations and analytics group that relative to the past where I think we start to see some of the benefits of that into this year.

I also think quite frankly that part of the New England or -- sorry, the new East -- Northeast benefit that we should see as we continue to execute our strategy there. We'll be in a position to leverage those assets into 2020 and beyond where I think that that will help. Those -- that will be at an accelerated pace compared to what we dealt with in the third and fourth quarters, simply as they mature. So I think that it's a combination of technology investment and people will help us drive those sort of incremental returns over time.

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah. I would just comment to that the same engine -- Amit, the same kind of engineering and some of our operations leadership, that was responsible for opening the terminals and training people and do it all those things, you don't have some of those costs and then the focus of those -- of that team of people is more on executing throughout our geography as opposed to traveling to the Northeast and doing training and opening terminals.

Amit Mehrotra -- Deutsche Bank -- Analyst

Yeah. Now, that's a good point. And then just following back one very quickly on the D&A. Does it step-up from the current run rate in the first half and then kind of normalize in the back half? Is that the right cadence or does it just continue to step up through the course of 2020?

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah. I'd say those are my options. It's going to trend up throughout the year a little bit.

Amit Mehrotra -- Deutsche Bank -- Analyst

Yeah.

Frederick Holzgrefe -- President and Chief Operating Officer

As we'll make -- as we take delivery of equipment and we've got a few real estate projects going on, just shop -- opening a couple of new shops, we've got a couple more relocations this year. So I'd say it will trend up through the year to that number.

Amit Mehrotra -- Deutsche Bank -- Analyst

Okay. That's helpful. Thanks, everybody. Appreciate the time.

Operator

Our next question comes from David Ross with Stifel.

David Ross -- Stifel -- Analyst

Yes. Good morning, gentlemen.

Richard D. O'Dell -- Chief Executive Officer

Good morning.

David Ross -- Stifel -- Analyst

Wanted to touch on insurance. It's been thorn in your side for a while of and on, and it's getting a lot of attention on the truckload side of things these days. When you look at 2020, do you have a decent renewal coming up at any point? I can't imagine these accidents are helping any potential premium increase. So how do you think about insurance costs as we move into the New Year?

Douglas Col -- Vice President and Chief Financial Officer

Hi, David. I mean, obviously, I mean you mentioned -- I mean, we're in a very tight markets in terms of truckers looking for insurance on the auto liability side. That's been the case for the last two or three years though. I'd say from RC, while we did have an accident that you're referring to in Q4, that's high on the severity list. Our claims experienced over the last few years has been as good as any I would imagine. I've been on the road, a lot meeting with some of the prospective insurance companies. And I really think after sitting a lot of these meetings that we've got a best-in-class kind of approach to safety in terms of the technology what we put in our tractors these days.

Our new buyers, as Fritz mentioned, they come in loaded with the full suite of everything from forward and inward-facing cameras to blind spot detection. This year for the first time, we'll be buying tractors, that have what they call level two autonomy. So nobody is doing more on that front I don't think than we are, so our renewal -- we're a March one renewal. The process is well under way. We'll continue to hold our deductible or retention at $2 million. I don't see that changing. But building out the tower is inflationary. But again, I think we're better positioned than most and we look for a successful renew it, although with some inflation as you get up into the tower.

David Ross -- Stifel -- Analyst

So if you have better accident experience in terms of frequency and severity this year, even with the insurance increase you think you could hold insurance and claims expense flat year-over-year?

Richard D. O'Dell -- Chief Executive Officer

No, it will be going up. I mean, we had a -- we didn't have an abnormal year in terms of severity.

David Ross -- Stifel -- Analyst

Okay.

Richard D. O'Dell -- Chief Executive Officer

I mean, the good thing for us so is down and the lower part of the tower, we're in a structured program, so we've got some rate consistency in the most expensive part of the tower. So the inflation we're seeing is higher up the tower that, where there's less premium dollars at risk.

David Ross -- Stifel -- Analyst

Thanks. And then just turning back to the business, for Rick and Fritz, you talked about expanding, I guess the Indiana and Phoenix facilities. As you look across the rest of your business outside of the Northeast expansion, which is consumed a lot of time, what is the growth looking like there where are you seeing opportunities? What parts of the country are stronger or weaker? How do you think about the rest of the portfolio?

Richard D. O'Dell -- Chief Executive Officer

Yeah. So, David, what we typically try to do is, we monitor pretty closely our -- sort of operational door pressure, where we might need either expand our footprint or replace our footprint. So that's kind of an ongoing process. We also have pointed out over time that in key markets, we probably don't have the appropriate level of coverage. So Atlanta would be an example. We have one terminal in Atlanta. It's on the Southside. We'll add a terminal on Northside. It's not going to be a 2020 opening, and most likely, we'll add, it will start into 2021 and most likely.

We'll be replacing our Memphis facility this year and that's kind of a normal course. We see an opportunity to expand that footprint, drive some efficiency, particularly around break operation there. So ongoing, I mean we -- the Northeast, if you look at size grows, certainly that's something to highlight. But we also think that if you look at our legacy geography, there are areas in which we can add incremental capacity in the market, we can better service our customers. And that's kind of throughout the geography.

David Ross -- Stifel -- Analyst

Excellent. Thank you.

Operator

Our next question comes from Jason Seidl with Cowen and Company.

Jason Seidl -- Cowen and Company -- Analyst

Thanks, operator. Good morning, everybody. I wanted to circle back to your January trends, obviously, pretty good numbers. You mentioned, they were up against easier comps. Could you remind us how the comps are looking versus '19 for both tonnage and shipments, please?

Douglas Col -- Vice President and Chief Financial Officer

Sure. So to walk through the quarter, I mean, shipments in the first quarter last year were just about flat, down 0.1%, and tonnage on the weight per shipment declines was down 3.5% in the first quarter. And moving into Q2, ship -- yeah.

Jason Seidl -- Cowen and Company -- Analyst

Doug, on a monthly basis, though?

Douglas Col -- Vice President and Chief Financial Officer

Okay. January shipments a year ago were down 0.1%, February shipments were down 1.5%, and March shipments were up 1.5%. And if we're talking about tonnage, tonnage was down 2.9% last January, down 3.2% in February, and down 4.4% in March.

Jason Seidl -- Cowen and Company -- Analyst

Okay. That gives us -- that gives me a good sense of what to expect. As I look at the model here, obviously, your tax rates moved around. You had some good news at the end of the year in both '19 and '20 for some tax credits. What should we be modeling for 2020 and beyond?

Douglas Col -- Vice President and Chief Financial Officer

Yeah. I mean, I think we'll walk into 2020 kind of expecting what we did in 2019. I think we're using about a 23.5% rate this year. Last year with the fuel tax credit, the full year ended up coming in at 22.5%. But I think it's right to model at 23.5%.

Richard D. O'Dell -- Chief Executive Officer

For the full year.

Jason Seidl -- Cowen and Company -- Analyst

Okay. For the full year? Okay. That's what I had already. Also, a little bit more conceptually looking at sort of the bigger picture. Obviously, your expansion has been going very well within the Northeast, big credit to you guys on that. But it has been a drag on the earnings. Is it right to sort of look at that and as we assume it to continue to grow at above normal market paces that you're going to get a swing in earnings potentially of upwards to a $1 a share from the money that you lost, the money that you could get out of the Northeast?

Douglas Col -- Vice President and Chief Financial Officer

I'm not sure of all your -- the EPS math there. But I mean you'll remember beginning 2Q, we've just gotten to a little bit better than breakeven in the Northeast, and then we went in late in a bunch of new terminals in the second half. So I'm not sure the starting point that you're using to build up the potential accretion. But we certainly made all these investments with a long term horizon in mind. We're trying to optimize not 2019 or the first half of 2020 earnings, we would open six terminals since the middle of last September. But maybe offline we can go through the cadence a little bit or I'm not sure if that is...

Jason Seidl -- Cowen and Company -- Analyst

Sure. Yeah. And I was just assuming a modest loss on the $280 million and then sort of get growing that a little bit in the out years and then coming to an OR more in line of what you're looking forward for the whole company and then looking at the differential. But we can go offline, we don't need to do that now. I appreciate the time, as always, guys.

Douglas Col -- Vice President and Chief Financial Officer

I would just add there, Jason. What we do know about the Northeast is we don't see an impediment that couldn't get to the OR trend that you see for the entire -- the balance of the business, right. So that -- we think that continues to be a great opportunity for us. So we get our representative share in that market, then I think you put that OR on it, I think it's pretty interesting for us.

Jason Seidl -- Cowen and Company -- Analyst

Yeah. I would agree. Gentlemen, thank you very much.

Richard D. O'Dell -- Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Stephanie Benjamin with SunTrust.

Stephanie Benjamin -- SunTrust -- Analyst

Hi. Good morning. Thanks for the question.

Richard D. O'Dell -- Chief Executive Officer

Hi. Sorry.

Stephanie Benjamin -- SunTrust -- Analyst

I would -- good morning. I wanted to talk a little bit on the pricing side, maybe you can talk a little bit about what you've been doing internally, and just from you not only a data analytics side, but also pricing's really continue to focus on that. So just so conversations that you're having go forward, you can continue to see nice yields and improvement. So any kind of color there that we can kind of -- we can receive would be helpful. Thanks.

Richard D. O'Dell -- Chief Executive Officer

Sure. Thanks, Stephanie. I mean our cadence or drive in this area is really about continuing to refine our analytics around understanding what the cost drivers in the business are with the inflation is related to that. What the -- as we expand the company, our linehaul network evolves into being a -- in time a 48-state linehaul network. We got to understand exactly how those -- what the cost drivers are in that network. And if you do that, then you got an opportunity to really effectively price to get the returns that we'd like to get, identifying that. It's a further refinement of what we always do, which is identifying that freight within a customer's book of business that makes sense in our network. And as we continue to refine and drive our analytics, we have the opportunity to balance that as we evolve our cost structure around being a national carrier and then we price accordingly.

And quite frankly is our quality has continued to evolve, improve over time, both on time and our claims ratio being very, very competitive, that gives us the opportunity to continue to drive those pricing decisions. That national footprint also allows us to be in a position where we can bid on more freight or have the opportunity to pursue more of it. We're not leveraged out because we don't have to service the customer might want. So it's a combination of all those things. And I know those are things that we've highlighted over time, but quite frankly, in this -- at this stage, it's really about continuing to drive the sort of incremental analytics to get that -- find that freight the world's best in our network.

Stephanie Benjamin -- SunTrust -- Analyst

And I guess just a follow-up on that, and specifically focusing on the analytics. Is that something that has been more of a recent initiative or a big step up in the last year in 2019 or how could we frame maybe what innings we're at in terms of that it really starts to see some returns? Thanks.

Frederick Holzgrefe -- President and Chief Operating Officer

Yeah. I think it's been an ongoing process for us over several years. I think one of the things that I highlighted earlier, which I think is pretty exciting is that as we've invested in technology around our cost if you will, our operational cost around better planning and dock operation and linehaul planning, those are opportunities for us to better grasp what the cost drivers are and optimize that cost, so we can be pricing most competitively and with the best margins. So I think, as we continue to enhance those sort of data analytics over time, that gives us the opportunity to drive margins.

Stephanie Benjamin -- SunTrust -- Analyst

All right. Well, thanks again for the time.

Frederick Holzgrefe -- President and Chief Operating Officer

Thank you.

Operator

Our next question comes from Tyler Brown with Raymond James.

Tyler Brown -- Raymond James -- Analyst

Hey. Good morning, guys.

Richard D. O'Dell -- Chief Executive Officer

Hi, Tyler.

Tyler Brown -- Raymond James -- Analyst

Hey, Rick. I think you mentioned your dock and P&D productivity was up in '19. Can you quantify that? And just to be clear, are you speaking to the entire network or is that just the legacy piece?

Richard D. O'Dell -- Chief Executive Officer

No. The entire network was up year-over-year just modestly, but it's in the 1% to 2% range.

Tyler Brown -- Raymond James -- Analyst

Okay. If you were to parse out say, those 18 Northeastern facilities, how far behind are they in terms of labor productivity? Where you would maybe want them to get steady state?

Richard D. O'Dell -- Chief Executive Officer

The -- it's more than 10% below the company average, yeah.

Tyler Brown -- Raymond James -- Analyst

Okay. So a lot of opportunity there. So maybe kind of putting that together, maybe for Doug or Fritz. But I think you mentioned Q4 headcount was up, say, 5% in -- here in Q4. But as you saturate those facilities, you roll technology in, and I know it's going to be a bit volume dependent, but do you feel that there is latent labor capacity across the network? Do you think you can grow headcount at a lower rate than say shipments?

Douglas Col -- Vice President and Chief Financial Officer

Yeah. I would think so, particularly in the Northeast, right. So in a -- in those markets, in many cases, we're staffed to provide service rather than be most productive, if that makes sense, right. So in our P&D operations aren't at capacity, so I think, if there is -- as we grow into that market, particularly the newest terminals, there is a real opportunity there for us to drive some incremental improvements. And If you think about, in total, we've mentioned that the Northeast is a fully allocated OR, that's a drag. And if you just compare that to the rest of the company for full year, you'd say, there is an opportunity to really drive some productivity there, around those operations.

Frederick Holzgrefe -- President and Chief Operating Officer

And I would just comment, it's not just in the city and the dock because we're running linehaul schedules with parcels for service soon. As you build density then you run -- your parcels are smaller percentage to the whole.

Tyler Brown -- Raymond James -- Analyst

Okay. That makes sense. But do you feel that even in the legacy piece that there is still call it that latent labor opportunity as well?

Frederick Holzgrefe -- President and Chief Operating Officer

Yes.

Tyler Brown -- Raymond James -- Analyst

Call it dock, all three aspects, I guess.

Frederick Holzgrefe -- President and Chief Operating Officer

I would agree, yes.

Douglas Col -- Vice President and Chief Financial Officer

Correct.

Tyler Brown -- Raymond James -- Analyst

Okay. Thank you, guys.

Douglas Col -- Vice President and Chief Financial Officer

Sure.

Operator

That will conclude our question-and-answer session. I will now turn the conference back over to Mr. Doug Col for closing remarks.

Douglas Col -- Vice President and Chief Financial Officer

Well, thank you, everybody, for joining us on the call. And we'll get through winter and into the stronger month of the year, we look forward to chatting again after Q1. Thank you.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Douglas Col -- Vice President and Chief Financial Officer

Richard D. O'Dell -- Chief Executive Officer

Frederick Holzgrefe -- President and Chief Operating Officer

Jack Atkins -- Stephens Inc -- Analyst

Todd Fowler -- KeyBanc Capital Markets -- Analyst

Scott Group -- Wolfe Research -- Analyst

Amit Mehrotra -- Deutsche Bank -- Analyst

David Ross -- Stifel -- Analyst

Jason Seidl -- Cowen and Company -- Analyst

Stephanie Benjamin -- SunTrust -- Analyst

Tyler Brown -- Raymond James -- Analyst

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