Covenant Logistics Group, Inc. (CVLG) Q4 2020 Earnings Call Transcript

Covenant Logistics Group, Inc. (NASDAQ: CVLG)
Q4 2020 Earnings Call
Jan 26, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Everyone. We now have our speakers in conference. [Operator instructions]. I would now like to turn the conference over to Paul Bunn.

Sir, please go ahead.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Thank you, Katie. Welcome to the Covenant Logistics Group fourth-quarter conference call. As a reminder, this 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, and actual results could differ materially from those contemplated in the forward-looking statements.

Please review our disclosures and bonds with the SEC including, without limitation, the Risk Factors section in our most recent Form 10-K and 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements or subsequent events -- for subsequent events or circumstances that may occur. A copy of our prepared comments and additional financial information is available on our website at covenanttransport.com on the investors tab. I'm joined this morning by our chairman and CEO, David Parker; and co-presidents, John Tweed and Joey Hogan.

In summary, the key highlights from the quarter were: the strong freight market continued across all segments and markets of our business attributable to expanding economic activity, inventory restocking and ongoing shortage of qualified professional truck drivers. Against this backdrop, our strategic plan showed significant progress, resulting in better adjusted margins, improved capital efficiency and a deleveraged balance sheet that affords significant flexibility going forward. Our revenue was approximately the same on a fleet that is nearly 18% smaller than the same quarter last year. We have paid down over $200 million in debt and lease obligations versus December 31, 2020, and $51 million since the end of our third quarter.

The ability to attract and retain drivers was very difficult as any market in recent history, encountered complicated driver availability due to downtime of drivers and our shop technicians. Our mix was impacted in terms of revenue and profit as a result of shifting freight to our managed freight segment when expedited and dedicated did not have a driver available. Our 49% equity investment in Transport Enterprise Leasing returned to its historical profitability levels generating a pre-tax income truck -- in tax contribution of $3 million compared to a loss of $500,000 in the 2019 quarter. And we reported a $44 million noncash charge in relation to discontinued factoring operations that could become a cash item in future periods.

This is nearly our entire exposure of the $45 million indemnification obligation. Together with other adjustments related to our restructuring, the total adjusted adjustments were $47.8 million for the quarter. Turning to our detailed results, notable financial results for the quarter included: our expedited truckload segment's revenue, excluding fuel surcharge, decreased by 13.9%, primarily related to a 27 and half percent decrease in our average operating fleet compared to the 2019 period. Versus the year ago period, average freight revenue per total mile was down $0.10 or 5.1%, while average miles per tractor was up 25.2%, resulting in an 18.8% increase in average freight revenue per tracker.

The significant fluctuations in the operating profile are the result of, first, a change in the mix to a more focused expedited model using a higher percentage of team driven tractors and eliminating the majority of our solo refrigerated fleet and related cost in the second quarter of 2020. The expedited adjusted operating ratio for the quarter was 91.2%. Our Dedicated Truckload segment's revenue, excluding full fuel surcharge, decreased 14.2% to $62 million due primarily to a 10 and a half percent average operating fleet reduction compared to the 2019 period. Another key driver of the reduction was utilization.

Compared to the fourth quarter of 2019, total miles per unit declined 10.2% as a result of driver shortages in 2020. This and utilization was partially offset by a $0.13 or 6.9% increase in rate per mile. Dedicated adjusting operating ratio for the quarter was 99.9%. The as we -- Joey will explain in detail, this is really a tale of two cities, as half of our dedicated fleet operated an acceptable margins and the other half operated under contracts that need to be replaced or repriced.

Excluding the impact of the truckload related fourth-quarter adjustments, total operating expenses decreased $0.13 per mile compared with the year-ago period. This decrease is a direct result of our strategic plan initiatives of downsizing our terminal network and solo-driver fleet, short-term cost reductions to improve liquidity in response to COVID-19, and additional miles-per-tractor that more effectively spread our fixed cost. Our managed freight segment's operating revenue increased 51.3% versus the year ago quarter to $64.9 million. This significant improvement in revenue is primarily attributable to the robust freight market, executing various spot rate opportunities, cost structure improvements that were implement as part of our strategic plan and handling overflow freight from both expedited and dedicated truckload operations when they did not have a driver available.

Managed freight's adjusted operating ratio for the quarter was 91.5%. Our warehousing segment's operating revenue increased 25.8% versus the year ago quarter to $14.6 million, primarily as a result of new customer business that began operation in the third quarter of 2020. The adjusted operating income for this segment decreased 3.9% to $1.5 million from the prior-year quarter. Warehousing's adjusted operating ratio for the quarter was 89.6%.

The decline in the adjusted operating ratio was primarily due to labor inefficiencies that spiked in the fourth quarter as a result of the COVID-19 pandemic. At this time, I will turn the call over to Joey to recap a few additional items.

Joey Hogan -- Co-President

Thanks, Paul. The main positives in the second quarter were a robust freight market across all our service offerings. No. 2, a significant reduction in our net indebtedness.

No. 3, a reduction in our fixed costs and better cost absorption, given increased asset utilization. No. 4, TEL's improvement in earnings.

No. 5, flexibility and customer service provided by the efficient use of our managed freight segment to cover customer needs when expedited and dedicated lacked a driver. The main negatives in the quarter were: No. 1, one of the toughest driver recruiting -- recruitment and retention markets in 20 years.

No. 2, COVID'S negative impact on drive availability. No. 3, less excess capacity for capitalization on the spot market.

No. 4, the increase in casualty insurance costs versus both the prior year and prior quarter, resulting from several severe accidents in the third quarter and fourth quarter of 2020. And then No. 5, the loss contingency accrued related to the TBK indemnification.

Going forward, our focus will continue -- will be to continued execution of our strategic plan, which consists of steadily and intentionally growing the percentage of our business generated by our dedicated, managed freight and warehousing segments. Reducing unnecessary overhead improving our safety, service and productivity. This will be a gradual process of diversifying our customer base with less cyclical -- with less seasonal and cyclical exposure. Improving legacy contracts and investing in systems, technology and people to support the growth of this previously underinvested areas.

Approximately one half of our dedicated fleet operates under contracts that generate insufficient returns and require replacement or renegotiation. Freight environment and our new business pipeline are both currently robust, which we believe will support our commercial plan. While this will take time, we believe our existing pipeline will reduce ongoing sequential progress during 2021. Going into '21, we are facing cost increases from the end of our short-term COVID-19 programs, increased wages and higher insurance and claims expense.

Effective January 4 of '21, we implemented the largest pay increase in the company's 35-year history for our expedite driving force in effort to increase our team count to targeted levels. In addition, we have replaced our former $9 million in excess of $1 million layer of auto liability insurance with a new $7 million in excess of $3 million policy that will run from February 1, '21 through March 31, 2024. While the combination of increased retention and premiums is forecasted to increase our insurance and claims cost, eliminating the gap in coverage created in the third quarter of 2020 that resulted in a self-insured retention layer of $10 million per claim has been a focus area to minimize our forward-looking volatility. Additionally, yesterday, we announced a share repurchase program, which affords us significant flexibility to allocate capital toward the expected most favorable results for our shareholders.

Our stock has traded around book value for the last several months, and we believe flexibility resulting from the reduction in debt over the last nine months, may create an opportunity or has created an opportunity for us to invest in ourselves. Given doing so is less disruptive than an acquisition or alternative use of cash flow. Now, I'll turn it over to John for a few comments.

John Tweed -- Co-President

Thank you, Joey. I want to take just a few minutes and address my transition into a consultant role later this year. So first of all, I think I have to point out that, believe it or not, we're two and half years from the sale of Landair to Covenant, and integration has gone phenomenally well. We've done a phenomenal job at taking advantage of the strengths of both organizations to create the highest amount of value for the company and its stockholders.

Also, I want to point out that one of the things that brought me to this decision was the fact that the team has come a long way in a short period of time. If you look at the plan we laid out almost just one year ago, I would tell you, we're about eight to 10 months ahead of plan, and it's due to the fact that we've got a phenomenal team, they work well together. They're embracing this management process and system that we put into place. And it's created phenomenal results, as you could see where we ended up at the end of the year with both our earnings as well as our balance sheet.

So the other piece of this is really given where I'm at in life and if you turn the clock back to 2018, the reason that we entertain selling the company to Covenant there are some things that boxes that haven't been checked in my career that I'd like to get some opportunity to do so. My life reminds me of that daily. And quite frankly, part of it is about this season in my life. There are some elements of the job that I really enjoy spending time with and some that I feel like I've done, and I'm not necessarily looking forward to doing a whole lot more of that.

So my goal is to continue to support Covenant with a committed amount of time. I can't say enough about the blessing of this team we've been left with to lead this company into the future. And I'm excited about having the opportunity of being a part of helping that team in any way I possibly can, whether it be with building customer relationships, continuing to fine-tune our management and FP&A process, being the voice of accountability. As Joey says, sometimes maybe the direct voice, that is, maybe directed too well, right? And just overall, helping the organization stay focused on items like cost, utilization, overhead, and pricing.

So I'm looking forward to that. I'm grateful to this team for being at a point. I don't mind saying if you go back and look before David and I discussed this and this year. I went -- made a big investment in the stock while the window was open.

So I did that so that not only you, the stockholders, but this phenomenal team that we've been able to put together would seem my confidence and being able to make this decision, but also having my money invested in their prosperity. So that's -- I'm looking forward to it. I have all the confidence in the world and this group of people, and I'm going to be here to support them any way I can. Is not going to be a five days a week.

David Parker -- Chairman and Chief Executive Officer

This is David. I appreciate everything that John has done. He's been a great partner in this. He's been a great friend in this, and he's done a fabulous job.

And this consulting role is not one of pick up the phone and say, I want to consult. This role is going to be -- john is going to be in a couple of days a week. And assisting and helping in areas, and in particular, on what we bought from Landair, in particular, the warehousing and the dedicated and the TMS and those areas is where we're going to be -- absolutely is going to be brainstorm with John and continue to. But there is no doubt that John is going to be hanging around with us.

John Tweed -- Co-President

Yes, one other thing. So this management process and this focus on stability. I know Paul was mentioning a number of things around rates and those type of things. But our goal was to take this management process and build an organization that's going to be more consistent and it's output of income through multiple cycles.

And that's something I really enjoy. So yes, I'll be here a lot of time in August, September when we're doing budgets and building plants for the next year, but also through the course of year helping with customer relationships and anything else I can do. So I'm looking forward to that, and I'm grateful to have the time. And for David and Joey and Paul and the rest of the team, allowing me the opportunity to still be involved, but it will be able to take some time for the family.

David Parker -- Chairman and Chief Executive Officer

Thank you, John. So Katie, we're going to open it up for questions now.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Jason Seidl with Cowen.

Jason Seidl -- Cowen and Company -- Analyst

Thank you, operator. Good morning, gentlemen. I wanted to touch a little bit on the dedicated side. I think the comment was made that about half of the contracts are operating under insufficient terms is that purely price? Or what are the terms that are in there that need to be changed going forward? And then if you could remind us what percentage of your contracts roll over on a quarterly basis in 2021, that would be helpful.

David Parker -- Chairman and Chief Executive Officer

John is going to answer that.

John Tweed -- Co-President

So Jason, a couple of things. First of all, we've got about 1,600 trucks running in what we call dedicated today. I would also point to the fact that about 300 of those trucks, we transitioned from one account to another in 2020. And that's part of the mix that you're seeing in some of the KPIs, like yield and those type of things, we've got a lot of trucks today that we're operating that don't have trailers compared to last year.

And we've got more trucks where the fuel is passed through. So that's affecting how you look at it yield for mile of those, but about 300 trucks were transitioned through the pandemic, which we're very proud of. And the other thing I would add to that is we did cut some deals for the first year of those trucks operations that if we didn't know we're going to be where we are today, we probably would have been a little more aggressive but we are in a position as we go into 2022 to materially change the pricing on those agreements and still have the stability of those customers are committed to three to five years. So if go through another cycle we'll be enjoy the decisions we made.

Our goal in 2021 is to transition another 300 to 350 trucks, and we are looking for business not only it will give us a good return on capital, but also give us years of stability through a down cycle. So when you look at what our strategy is around dedicated, we're not just going out and saying, hey, customer, we'll run trucks around trip for a big price, while demand is really high. We're talking to those customers where we can engineer solutions and get them to commit the revenue stream on those assets for three to five years.

Jason Seidl -- Cowen and Company -- Analyst

And as you move these 300 to 350 trucks over, how far below market do you think these things are right now?

John Tweed -- Co-President

How far below? You talking about on the pricing?

Jason Seidl -- Cowen and Company -- Analyst

Yes, on the pricing side, yes.

John Tweed -- Co-President

Yes. The ones from last year are 4% to 5%, the ones going forward, none.

David Parker -- Chairman and Chief Executive Officer

You know what, Jason, when automotive shut down, we had about 300 trucks running in automotive last March, April, May. And as the automotive shut down, not knowing if there's going to be one week or six months or one year there's no doubt that we took about a bunch of trucks, 200, 300 trucks and make the special deals with folks that we can't go back and talk to them until the second quarter this year. On dedicated. And so that's one of the issues.

John Tweed -- Co-President

So the other thing you saw in fourth quarter around dedicated, Jason, was the fact that in anticipating moving some truck in 2021. One of the other things that we're doing is hiring what we call Flex drivers to put in the trucks driving for those accounts that we know we're going to be exiting. So that when we move those to a new customer, the driver will go with us, because they're required to being in that flex status. Instead of just having a driver that we've hired for that truck that when we go away from that account because of where they live or what their job description is, they won't move with the truck.

So it will give us a more seamless transition from one account to the other through 2021. And then as we get those trucks placed at the right customer over about a 90-day period, we'll put a more permanent driver in that truck and the salary cost for operation of that truck will start to become more efficient.

Joey Hogan -- Co-President

And Jason, that's part of why you saw about a $0.05 per mile increase in driver pay-per-mile on the dedicated fleet, which was about half of the deterioration OR from Q3 to Q4 and because those flex drivers are our highest cost driver then the dedicated operations. To John's point, once those drive -- once the new business gets seated, the flex drivers will then move over and do it again on another account.

John Tweed -- Co-President

And It's helping us to be more responsive to that new customer with having the truck seated up and running, replacing the incumbent if there is one to get the result.

David Parker -- Chairman and Chief Executive Officer

And Jason, another statement on that to think through is that both on the expedited on the dedicated side, I mean, we all know that freight management is not going to operate at an annual OR there is no doubt about that. I mean there was -- on both those buckets, we went out to the market and grabbed trucks and grab trusts on the dedicated side because we didn't have the drivers. And so we had to go for fill at a market rate, and you can do the math, we're charging the dedicated rate at a market rate, just to make sure that we're fulfilling the obligation on both dedicated and expedited. So there's some of that margin of freight management that they got rewarded for, which is great that came out of the profits of the expedited dedicated.

John Tweed -- Co-President

But we've also been able to take dedicated assets that didn't make sense for our assets.

David Parker -- Chairman and Chief Executive Officer

Yeah, permanent. That's right.

John Tweed -- Co-President

May become a permanent customer of our Solutions group, we think is going to be a real win for us as well.

David Parker -- Chairman and Chief Executive Officer

Yup.

Jason Seidl -- Cowen and Company -- Analyst

OK. I appreciate those responses. My other question here, when you look at your trouble seating the fleet, how much of it do you think is driver availability? And how much of it would you sort of put on COVID right now?

John Tweed -- Co-President

Wow. If I knew the answer to that I would probably be doing a lot less work and make a lot more money. I mean it's -- the availability of drivers is unlike I've seen in the 30-years I've been in this business. And part of that, Jason, is I can tell you a different story dependent on the geographic area.

So it's just tough all over for different reasons. But the more we pay people to stay home, tougher that's going to get. And the sickness has taken an impact on our population from the standpoint of -- Monday, I was talking with our Sunoco Group, and we had 10 drivers out, and they were sick. So we're having to find ways to fill those trucks.

So I wish I move that number.

David Parker -- Chairman and Chief Executive Officer

Here's one data point that I think could at least illustrate the point. I know on our expedited fleet throughout the, let's call it, the second, third, fourth -- early part of the fourth quarter, our student hires, which is important for our expedited segment, let's call it, half of our hires are students ish half are experienced drivers. That was cut in half just because of school capacity was limited greatly as far as how many they can get in the classroom, how many they can put up on the truck with the trainer at the school, it really slowed down for everybody, not just us. And so that ended up in impacting our system as far as the driver availability on our student side very significantly.

Now our team has worked extremely hard to add additional capacity on the student side through additional relationships, this cost money, frankly, to get that count back up to where it needs to be, more schools probably costing us a little bit more money, but we are seeing the results of that starting to pay off and in our expedited fleet, which in this market, we think, is very important. And is in a market that, if we will -- if you will, we can pass some of that on to our customers because, again, at the end of the day, freight has got to move, they got to have a driver to get it done. So that's one data point that I know it's real. It impacted our expedited side pretty significantly, but we have it covered through cost as well as adding additional relationships.

Jason Seidl -- Cowen and Company -- Analyst

Well, gentlemen, thank you for the responses. And as always, thank you for the time. Be safe out there.

David Parker -- Chairman and Chief Executive Officer

Thank you, Jason.

Operator

Thank you. Our next question comes from Jack Atkins with Stephens, Inc.

Jack Atkins -- Stephens Inc. -- Analyst

Hey, guys. Good morning. Thank you for the time. So I guess, David, this one's for you, but I'd love to hear John or Joey's thoughts on this as well.

But with all these limitations around capacity out there, that's -- as tough as it is to find drivers that's got to be good for rates. So can we maybe kind of talk about -- if we go back three months ago, David, you were kind of talking about 6% to 8% type rate increases on the expedited side, 3% to 4% type rate increases on the dedicated side. Has anything changed in terms of your rate outlook for 2021, just based on how the market is developing early this year?

David Parker -- Chairman and Chief Executive Officer

Yeah. There's no doubt that it's been a very strong -- it's a strong market. And as I look at things or now is to make sure that we're -- there are still many moving parts that you're really not going to see, the results of what the numbers are going to be, in my mind, until about the second quarter. Jack, as you know, we've got -- as I think of it, we usually call it top 3, it's really top four major accounts or a second-quarter event for us.

And most of those -- three out of those top four accounts or two out of those top four accounts took rate decreases last year. And all four of them will get very nice increases this year. So it's really a second quarter. The second thing, as I look here is that it's critical to make sure that we're looking and examining the revenue per truck per week.

I mean it's up very, very dramatically. I mean utilization is up very strongly, but there are just so many moving parts. So when you look at 6% to 8%, by getting 6% to 8% today, absolutely, we are, even out of some of the major customers, even though they won't go into effect until the second quarter. But there's also, when you look at decreasing the -- on the Highway Services or expedited side of it in the second quarter last year.

I mean, there's 450 less trucks than there was 12 months ago, and a lot of those were running in a solo operation. At a lower length of haul and a higher rate per mile. And so all that ad is part of the mix. So the thing to look at is the revenue per truck, and it's up dramatically.

And I think that again, it will start showing itself in the second quarter because here's kind of the way in which I'm looking on the rate side is that, as we all know, we did an event in the second quarter that just revolutionized our company and put our company on the path of which we are on today, and we will continue on, and it's been just such a tremendous blessing, evident by the fact of what we've done on the debt side. There's a lot of things that are going all right, but the plan is working. And as we did that in the second quarter, and then as I look at the third quarter, you got a glimpse of it. In the third quarter was outstanding -- a good quarter.

And then we saw another good quarter in the fourth quarter, and we got a lot of runway that is there. Another thing on the expedited side, it goes under the bucket because 99% of the dedicated, that we classify dedicated, is off solo. And actually, if there was any dedicated that is running under dedicated, it goes over to the expedited side. And that has also grown very nicely.

And I mean, we got a team -- yes, I'm sorry it's the team is going on the expedited side, excuse me the team side -- if there's any dedicated team that goes on the expedited of which that has grown very nicely. And we got dedicated trucks that are producing over $9,000 a week of revenue on those trucks, so you can just do your own math that says what the rates and what's the miles, a high level of miles at a lower rate per mile as the things are operating in the low 80s OR from that standpoint. And we'll bring all that on that if we can. And actually, we've got another deal that's getting ready to start with another 50 of those kind of truck.

So there's a lot of mix that is going on. And so the thing I'm looking at is strictly the revenue per truck per week. And in the second quarter, you'll start getting a sense for what it really means, as all these trucks that have been taken out in a solo operation is evaporated and the length of haul has increased. And I hope I helped you there a little bit, Jack.

Jack Atkins -- Stephens Inc. -- Analyst

Yeah. David, no doubt about it. I mean there's -- you've transformed the business over the last 12-plus months. And I think we're going to really start seeing that as we move through this year.

But just trying to get a feel for the market is so tight, and it's got to be supportive of what you're trying to do on the rate side. And I know there's a lot of mix issues there. So -- OK. That makes sense.

I mean, when we kind of think about the balance sheet and cash flow for a moment. If Paul -- it kind of bring you into the conversation for a minute. How are you thinking about free cash flow this year. And going back to the prepared comments, the stock is trading just above tangible -- just above book value, that new $40 million buyback, how should we think about the plans around that, given where the stock is trading and you're not getting credit for the changes you made in this business?

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Yeah. So let me start with absent any cash that goes out the door for the TBK indemnification or the share repurchase. We're probably going to spend off $50-plus million of free cash flow this year. So you start with around $100 million of net indebtedness.

And I think that number is probably $50 million to $60 million of free cash flow. So absent those two events, you'd be down in that $30 million, $40 million of net debt range. We don't know the timing of anything relative to the TBK indemnification, Triumph and Covenant are working hard every day to minimize that. But as discussed, we put the accrual up for GAAP accounting purposes.

But for argument sake, let's assume we have to fully fund the $40 million for the Triumph indemnification, you're still only sitting at $75 million, $80 million of debt at the end of the year. Which then leads into kind of the share repurchase you talked about. We're not bothered at all by trying to fully fulfill the $40 million share repurchase. It's a serious repurchase, the largest repurchase that I believe Covenant has ever announced.

And so the market will dictate how much of that gets filled versus how much of it doesn't. We're fine to fill the full $40 million depending on how the stock trades. So that's kind of where we're at. Even with that, you're still sitting at a probably just a hair over for 1x leverage at that point.

Jack Atkins -- Stephens Inc. -- Analyst

Yeah. No, absolutely. It's a totally different place from a balance sheet perspective. So that's great to hear.

Maybe last question for me is just on tractor count in fleet, as we think about this year. Relative to the fourth-quarter levels can you maybe update us on the progress you've been able to make in terms of seating tractors in January, given the driver wage increases gone through. And how should we think about fleet count in general over the balance of this year, relative to year-end levels?

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Yeah. Let me start on fleet count. I think for the balance of the year, I think you just assume a flat fleet count. You may see a tick up just a hair, as John was talking about in a minute as we go to replacing some dedicated accounts and using flex drivers to do it.

We may have to flex up on a few fleets before a few of the dedicated fleets we're exiting come back down in the end of the second quarter. So I wouldn't be surprised at the end of the first quarter to see the truck count grow a little bit, but not a lot. For the balance of the year, though, I think you're going to see a fleet count that's around about what you saw at the end of the fourth quarter. We announced the largest driver pay increase on expedited that the company has ever had.

I will tell you, it has been successful thus far in seating teams. We're hopeful and careful that, that continues, both in terms of new entrants coming into the company and starting some turnover. I'll let John kind of speak to the details, dedicated, especially in a couple of geographic markets. It's really hard to keep trucks seated right now.

And in summary, I would tell you, some of the things you're seeing around getting trucks seated and shock issues around down trucks around the country from the fourth quarter or persistent into the early part of the first quarter.

John Tweed -- Co-President

So when I came back from the New Year holiday, I started at to my child around two facts. One is we had a lot of unseated trucks and a lot of trucks in the shop that were down and were costing us revenue. Those numbers -- those two numbers alone on the first day of the year represented about 16% of our fleet. And this morning when I came in, we've worked that down to about 9%.

So I think we're making good progress there. We are committed to becoming the place for a driver to want to work. And we continue to refine our recruiting campaign around building density of drivers in certain geographic pockets and for those drivers being able to offer for them whatever job fits the needs of their life based on the season they're in. And we're starting to see, as we get on into January, we're starting to see productivity from that.

So if you'd have been in Chattanooga or Greenville, the first two weeks of January, you would have heard me yelling a lot about revenue and concerns. But as we got through last week and we're getting into this week, our daily revenue numbers are starting to show us recovery. We do have a couple of pockets, some driver jobs at high touch are a little more difficult that we're still trying to figure out exactly what's the strategy to seating those trucks. But for all in all, we're in much better shape than we were at the end of December or when we started out when we entered this year.

Joey Hogan -- Co-President

OK, Jack. I think I'd add to that, Jack. As Paul said, it's both on the recruit -- the pay increase on the expedited side has impacted both the recruiting side and the retention side. And so the net-net of those sets, early December, our team counts up very, very, very nicely.

And so we're excited. I don't see what the number is yet, but we'll wait until the end of the quarter. But it's -- we're excited about where that is right now.

Jack Atkins -- Stephens Inc. -- Analyst

OK, that's helpful. Thank you for the time guys.

Joey Hogan -- Co-President

Thanks, Jack.

David Parker -- Chairman and Chief Executive Officer

Thanks, Jack.

Operator

Thank you. Our next question comes from Scott Group with Wolfe Research.

Scott Group -- Wolfe Research -- Analyst

Hey, thanks. Good morning, guys.

David Parker -- Chairman and Chief Executive Officer

Hey, Scott.

Scott Group -- Wolfe Research -- Analyst

Hey, we would take the driver pay increase the insurance or so some of those COVID cost comes back. Is there a way to -- when you add all up, how much cost is that? And then when you balance how good the pricing environment is going to be with some of these costs, what's a realistic level of margin improvement on the trucking side this year?

David Parker -- Chairman and Chief Executive Officer

Scott, I think you're going to see -- I think you're going to see margins improve. As you know, we don't give guidance, but I think the rate increases are definitely going to outpace the driver pay increases and other cost inflation items we talked about before. I think you're probably closer to a margin that's back closer to kind of where we were in Q3, Q4 averaging amount as opposed to kind of what you saw for Q4. So I think we will continue to get better in 2021 and that the revenue increases will outpace the cost increases on a full-year basis.

Scott Group -- Wolfe Research -- Analyst

So you think you could give a way, give or take, if I take an average of Q3, Q4, would you use it like in the -- on the trucking side? Do you think you can do that in full-year '21?

David Parker -- Chairman and Chief Executive Officer

In Q1? OK, your phone is cutting off.

Joey Hogan -- Co-President

Your phone is really horrible, Scott.

Scott Group -- Wolfe Research -- Analyst

Is that any better or? Is this any better, guys?

David Parker -- Chairman and Chief Executive Officer

A little.

Joey Hogan -- Co-President

Go, you're bad every three -- third word we can't hear. But did you say first quarter or what quarter did you ask?

Scott Group -- Wolfe Research -- Analyst

No. I can't work about the year. I was just saying, if you look at -- you're seeing similar to third and fourth quarter. So what was that a 94 in trucks...

David Parker -- Chairman and Chief Executive Officer

About 94 OR.

Joey Hogan -- Co-President

Yes. I think on the trucking side, that's a -- it's in a reasonable range, really depending on the outcome of getting trucks seated and we're pricing shakes out and insurance claims for the year.

Scott Group -- Wolfe Research -- Analyst

OK. So that's meaningfully better than I think what you guys were trying to communicate a quarter ago. Is that just the pricing environment's gotten a lot better?

Joey Hogan -- Co-President

The pricing environment, yes Scott, is a lot better. The pricing environment is very good. It was a lot better than where we were back in October when we visited.

John Tweed -- Co-President

It's really about the pipeline and what we're anticipating the change in the mix of our dedicated business looking like between now and to June. I mean our dedicated pipeline is very robust. To the points that we're not only getting a good rate. We're being able to get some real good commitments on the contract terms and the time, so that if the cycle does turn.

We've got some good cash flow consistent. So that would be what I'd be speaking to. The expedited business and our freight management business and our warehousing business today is hitting off all cylinders and if we can continue to grow our team count, that's just going to get better.

Joey Hogan -- Co-President

Scott, where the real opportunity is transitioning these 300 trucks, that quite frankly, are least performing legacy business that we asked.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

So Scott, I think you heard John and Joey just speak to the revenue side, and we've got more visibility I would say the other thing that's changed is we've got more visibility into cost. I mean, you saw where we firmed up our insurance deal for our primary layer we didn't know what that looked like the last time we spent time with you. We didn't know what our driver pay increases were going to look like, the last time we talked to you, we've got more visibility into that. And then some of the items where we expect the cost to come back, a big one was group insurance because of the pandemic.

We saw a lot of that costs go ahead and come back in the fourth quarter. So we've kind of gotten a feel -- kind of got a little more solid footing on what we think our cost structure is going to look like. And so maybe what you're hearing is, we've got a little more visibility into revenue and a little more visibility into cost. And so yes, we're probably incrementally more positive than we were at the end of the third quarter, looking into 2021.

Joey Hogan -- Co-President

I think the pipeline is probably, if you say freight, freight was good in October, really good. It's really good today. I think pricing was really good in October, and it's really good today. I think the visibility on the cost side that Paul mentioned, has been significant as far as our picture.

I think the one piece that has moved meaningfully is the pipeline And it's not that it wasn't good in October. I mean it is firmed up and is really strong across all the segments right now. So that would be the piece that I would look to. And where you'll see evidence is it either in pricing or utilization or new awards things of that nature.

So -- and hopefully, those that affect drivers. As David has already mentioned, it should show itself in the revenue-per-truck as we move into the late set first quarter into the second quarter. But the pipeline is very robust across all the segments right now.

John Tweed -- Co-President

And it's not just demand, it's partnerships.

Joey Hogan -- Co-President

That's right. Yeah.

John Tweed -- Co-President

Which is what we were concerned about in the third quarter. We knew there'd be a lot of demand. We just didn't know if there will be a lot of partners out there looking for a real service provider.

David Parker -- Chairman and Chief Executive Officer

Scott, do you have any question?

Scott Group -- Wolfe Research -- Analyst

That was helpful. Thank you guys.

David Parker -- Chairman and Chief Executive Officer

All right. Thanks, Scott.

Operator

Thank you. Our next question comes from David Ross with Stifel.

David Ross -- Stifel Financial Corp. -- Analyst

Yeah. Good morning, gentlemen.

Joey Hogan -- Co-President

Hey.

David Parker -- Chairman and Chief Executive Officer

Good morning, David.

David Ross -- Stifel Financial Corp. -- Analyst

I start with a couple of clarification questions. First, on the insurance, you talked about having a $10 million deductible, was that, just for a brief period of time is you didn't have that $9 million in excess of $1 million covered and now that you've got $7 million in excess of $3 million, your deductible basically went from $1 million to $10 million and back to $3 million?

Joey Hogan -- Co-President

Yeah. It went to $10 million in August and effective February 1, and it's going to go back to $3 million and before that, it was $1 million. So yes, we kind of had -- correct.

David Ross -- Stifel Financial Corp. -- Analyst

OK. And then during that five, six months of exposure, how many accidents pierce through that a $3 million to $10 million layer, do you have any in that range?

Joey Hogan -- Co-President

None pierce the $3 million to $10 million layer. We did -- you'll see our insurance cost was higher in the fourth quarter. I mean, it ran $0.18 a mile, truckers can't make good money at $0.18 mile insurance. We did have a couple of accidents that pierce the excess of $1 million where we had to -- where we didn't have any coverage.

So there were a couple that were above the $1 million, but less than the $3 million in that intervening period. But we also didn't have the premiums during that period. Because we wrote those off at the end of Q3. So it was probably about a wash.

But we're looking forward to having some more solid coverage to minimize volatility in the next few days.

David Ross -- Stifel Financial Corp. -- Analyst

And then on the TFS sale, I know there's been a lot of puts and takes on that as you're trying to get it done. How should we think about that $45 million indemnification or hold back is it effectively going to be a $63 million sale price rather than $108 million or what's your view? How much?

Joey Hogan -- Co-President

I think it's a fair way to look at it. Yes, I don't think you'll see anything else coming forward out of that. The full potential was $45 million and I think we put up $44.2 million. And so if happy to sell earlier, we're working with Triumph to minimize the exposure on that number.

But where we stand today, the estimate on it was $44 million.

David Ross -- Stifel Financial Corp. -- Analyst

OK. And then on dedicated -- a lot of demand for dedicated right now given the capacity issues. You've got about 1,600 trucks running and dedicated, and you said about half are acceptable and half are not. That about 800 trucks running at probably a 110 OR, which you said that the pricing is only 4% to 5% below market.

I guess help me square that because it sounds like pricing is 15% to 20% below market or the costs are just way too high?

John Tweed -- Co-President

Well, of those 800 trucks you're referencing, I don't know if it's quite that many. Remember, part of those, we cut deals, as we mentioned, it's a transition business, but the other part of it is the business we're looking to transition over the next six months. So I think again that's kind of what where up against. And there is some cost that's really high and that the drivers we put in those 300 or 400 trucks we're going to try to move out this year.

We've got flex drivers in, which are about $150, $200 a week more expensive than if they had a permanent drive rental.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Yeah. Dave, when you're comparing you're -- the math you just did, you're bouncing off the fourth-quarter number. Which did have a little bit of that kind of some of that excess insurance in there for some larger clients. And it did have this ex driver deal John talked about in there.

If you look back to Q3, it was -- it ran a 94 OR and so I think when you do your math, kind of average amount or using something in the mid-90s as opposed to the high 90s,taking out some anomalies in the fourth quarter that number of trucks and 5% under market, I think it gets closer to reconcile.

David Ross -- Stifel Financial Corp. -- Analyst

So once you get through this period of adjusting the contracts past 2Q and changing out some of the business. So you look at 2022 or 2023, what's the targeted OR for the dedicated segment?

Joey Hogan -- Co-President

I would say, given the number of trucks we're operating today where we don't provide trailers or fuel. It's probably going to be in that 90 area. And the return on invested capital is really good at a 90. But like I said, we don't have a -- we're not investing in the fuel, we don't have try our bucket list.

John Tweed -- Co-President

Yes. We said, to refresh kind of the last quarter's call, we went through a little discussion about that. Long term, dedicated, the high mark is at 92. On the expedited side, the high mark is in 86.

So that's what we're pushing both of the asset divisions, too. So -- and that's where we're headed and we're confident we've got a good plan to get there. A lot of it is that driver situation, but that's where we're heading.

David Ross -- Stifel Financial Corp. -- Analyst

90 would be traffic. Thank you.

Operator

[Operator instructions] Our next question comes from Roger Bradenburg with Private Investor.

Unknown speaker

Hey, good morning. Just wanted to congratulate you on being able to pay down so much debt for the last little several years. And my question is basically on cash flow. Going forward, it's really exciting to see the share repurchase program that you've put in place.

But going forward, I just want to ask about your methodology about your cash flow. Is there a certain amount of leverage that you feel comfortable with that you're probably going to maintain? And going forward in the next year or more what do you expect to be able to use your excess cash flow for? Thank you.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Yeah. So Roger, thanks for the question. A couple of things. In the next year, I would say the excess cash flow would probably be used for some combination of the share repurchase and any of the indemnification payment that's due to Triumph.

After that, it will probably be to continue to delever or potentially look at acquisitions when and if they made sense, and we're accretive to the business. From a leverage standpoint, we probably target staying below one and half. But two is probably where we don't want to get below or get above.

John Tweed -- Co-President

Yeah. I think, Roger, what you would see what we did with our Landair acquisition. As you may see it tick over that two or up to it or around it, possibly up, but our target will be to get it back down below that two, heading it back down to that 1.5 kind of long-term target as quick as we can.

Unknown speaker

OK, great. Thank you.

David Parker -- Chairman and Chief Executive Officer

OK, thank you.

Operator

Thank you. Our next question comes from Nick Farwell with Arbor Group.

Nick Farwell -- Arbor Group -- Analyst

David, I'm curious what your expedited rate increase was in January. Can you give us an approximation of what that number was?

David Parker -- Chairman and Chief Executive Officer

We've averaged -- to give you an idea, the big four, again, don't happen Nick, until second quarter. And we are at about a 7% increase. If you would just go down and look at all the other ones that have been done since August. That's including since August, September, October, and we're actually going back in for another round on those that make us average 6.7%.

So you got some that are 5% that were done in September before you really saw what was going on in the marketplace, and we will go and we're speaking to those customers again. But the big four is such a large portion of the business, a big portion of the business, over 50% of the business. So what you get out of those is going to be very nice. And we already know that those numbers are -- have got an A plus kind of number on the we feel confident.

Two of the four are done, and we're negotiating with the other ones as we speak, and we feel like that we will get there. We don't have it done yet. It's a second quarter event before it does. So if that gives you any idea.

Nick Farwell -- Arbor Group -- Analyst

Yeah. Would you expect an additional -- who knows, because the economy is fragile the best, but would you expect another dedicated price increase either this spring, maybe late -- early spring, late spring? Given what you're seeing in the market today.

David Parker -- Chairman and Chief Executive Officer

Yeah. We've really done the way in which we're doing the dedicated side. And again, there's a couple of moving parts there, and that is one that need to be addressed as we speak. There was those 300 trucks or so that need to be addressed and we will be addressing them, period, as we speak in the next -- anyway, that's happening.

And then you've got about another 300 trucks on top of that, where one, that when the automotive shut down in April, we just went to the customers, and we gave them long-term contracts, but we can talk rates after a year, and that year doesn't happen until the second quarter that we'll be able to go into those customers and ask for a -- to make those right. But we were very grateful in April when they were staying here it is, and we were sitting there saying if it's in the black. If I'm in the black, I'm happy, and that's where we were as automotive was shutting down. And so there's 600 of the trucks, the rest of them are ones that we talk about on a yearly basis.

and what we give on that is not to take advantage of the marketplace, it is the long-term contracts that we get with those customers on three, four, five-year contract agreement, that allows us to go through ups and downs of the cycle. And so that's the way it was in the dedicated.

Joey Hogan -- Co-President

Let me add also more and more of our dedicated contracts since we went to a more committed model of dedicated. Have drivers surcharges or indexes in there. So if we see this driver pay situation go for another round, we will absolutely go back to get the customers to reimburse us for that.

Nick Farwell -- Arbor Group -- Analyst

So I was curious more about the long-haul expedited business. I understand the dedicated because you've addressed that before. I'm just curious about the pricing environment for long haul.

David Parker -- Chairman and Chief Executive Officer

Yeah. It's -- the pricing environment for long haul, I would say, on the on the low end is in that 7%, 8%. And what I mean by that is account that you're operating at 85 OR, 7%, 8% is a good number. It's a good number.

And so I think on the low end, is that still that 7%, 8% last quarter was 6% to 8% but 6% to 8%, 7% to 8% somewhere in there on great accounts that have been windy forever. I'm not going to know what they will say say, just because I can get 12% out of them. I am going to go get a 12% because believe me, they don't -- a year from now, it may be going negative 12%, and we're not going to do that. And so -- but for an existing piece of business, that would be a better question, Nick, would be to bring on a new account today, those rates are basically 10% higher than our existing rates.

Nick Farwell -- Arbor Group -- Analyst

Would you expect, given the current environment that you might be able to affect another rate increase on long haul?

David Parker -- Chairman and Chief Executive Officer

Yeah.

Nick Farwell -- Arbor Group -- Analyst

Sometime this spring-ish or so given the...

David Parker -- Chairman and Chief Executive Officer

I do own the -- if you were to take the top four that is 50%. Top four, I'm not going to do that. We've been there for 20-years for those -- as you know, we've been there for 20 years with those accounts. So we won't go back in asking for another one after we get it negotiated.

But anything underneath there, most of those are open to, hey, it's time to talk.

John Tweed -- Co-President

Especially the ones you raised back in the last call.

David Parker -- Chairman and Chief Executive Officer

We're doing that now.

Nick Farwell -- Arbor Group -- Analyst

I'm curious if someone could comment have any sort of notion about the impact on your inventory replenishment post the holiday, given the dramatic shift from bricks-and-mortar to online e-commerce. Has that muted your -- what you normally would see as a better retail replenishment cycle?

David Parker -- Chairman and Chief Executive Officer

Oh, wow, that's a great question. What we are seeing out there is there's still a lot of have and have not. As I think about the big box retailers, their inventory levels in the last couple of weeks, I've been speaking to some of them, their inventory levels are still extremely low. And then, very interesting a lot of as I'm talking to some of their suppliers that some of the large box retailers have gone to this -- to their suppliers just-in-time delivery.

We brought on -- we had brought on about John 60 dedicated trucks. I think it's Mississippi and Ohio. We brought on about 60 dedicated trucks in the last 45 days, we're in the process of bringing them home. In the last 45 days, strictly because of the service requirements that the big box retailers are making.

So you can see a couple of things happening. I'm seeing a big box guys that are saying, I got very low inventory, and I'm seeing some of their vendors that are increasing inventory levels to be able to make sure they hit on-time performance that the big box guys are now regulated -- that's just happened, John, in the last five, six months.

John Tweed -- Co-President

Maybe the last 60 days. Our consumer products companies that we do business with, especially those when we do business with on the warehousing side, we're seeing them build what I would call enormous inventories. And products not moving on, we're out, all over the country finding outside or flex space for companies that are -- the inventories are exploding.

Joey Hogan -- Co-President

So there's something going on between the retailers and the consumer product companies that those finished goods aren't moved right now, so I don't know the answer.

Nick Farwell -- Arbor Group -- Analyst

Or they're moving quickly off the shelf. I mean, some of that stuff TG comments that's going off-the-shelf quickly. They just can't replenish it fast enough.

David Parker -- Chairman and Chief Executive Officer

That is correct. But -- but we're also finding it interesting that the big box are making some of the suppliers increase levels of inventory because it's the only way that the suppliers can hit the on-time performance that the big retailers are making because we're growing the warehouse side of our business because of that, and we're growing the dedicated. So I don't know, it's just an interesting deal, but overall, inventory levels are low.

Nick Farwell -- Arbor Group -- Analyst

Yeah. And then my last question. Could -- Joey, could you just easily break down between dedicated revenues, not operating profit. Revenues between dedicated, expedited and I'll call freight management, warehousing, the third sector.

And where they are today and where you might think they would be as a goal, you commented about OR goals, just that same sort of mindset that where do you think the revenue mix would be whenever your OR, say, in dedicated achieves the 92 or the 86 on long haul? Just a rough feel.

Joey Hogan -- Co-President

Yeah. If you go to the four pieces, warehouse and freight management, our target -- our goal is to double that business in three years. So on those two pieces. And today, I have to do the math, Paul, what's the?

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

About $200 million,

Joey Hogan -- Co-President

Yes. Between both of them...

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

And today as a percentage, they were at 35%, 36% in the fourth quarter, but that was a big spike maintenance freight.

Joey Hogan -- Co-President

So we want to double both of those pieces. I would say, long term, our warehousing business should be sub 92 depending on start up, start-up expenses for an account and things of that nature. And then freight management, frankly, we jerk your arm off for a long-term rate of 95, but 95, 96 on that business. Our dedicated business, we've already said that you've heard John say, its targets 90.

I've said, 92 to 90 on the top end. We are open to growing our dedicated business in total. You heard a lot of weed and feed. We call it mix changes this year.

So you kind of put that off and you say, OK, they might go up a little bit, down a little bit, but Paul has already said they want to keep it flat. But long term, we're open to growing dedicated, right time, right place, right industry and kind of that sub 90, 92 OR. So little capital addition and dedicated, we're fine with. Expedite on the other hand, our mission long-term is we're trying to hold the fleet, let's call it, around 900 to 1,000 trucks.

That's where we're happy. And so the long-term over the next three-ish years is to drive the margin better and really focused on margin, return, industry mix, which is going to be hard to move that because historically, the LTL swallow up a lot of the expedited trucks, but hold that. So no more capital really weed and feed inside that book of business, produce more profits, more consistent. If we can, which all of the revolves around the driver product that we're able to put together for the drivers that are willing to team up.

That's kind of the four buckets. Now the end result of all that, let's say, if we achieve all of that, our return on invested capital should be 12% or higher. Pretty -- I don't say easily it's not easy to get all that happens. But we should be north of 12% return on invested capital around $1 billion plus or minus, a little bit of revenue and producing very good returns on the OR, EBIT, gross margin and earnings per share.

I'm not going to tell you it's going to be in a couple of years.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Over the next three years. If you look at the $1 billion plan, it's $100 million of warehousing, $300 million of freight management, $300 million of dedicated, $300 million of expedited. And we're getting there pretty quick. And in some cases, weak.

Joey Hogan -- Co-President

That's right. So what it does, though, is what you're seeing with the announcement that we made around the stock buyback, that is playing out. Yes, we had a lot of decisions that we made this year to kind of quote, survive the virus, if you will, because we didn't know. Now a lot of those decisions were already in play.

We had already -- we're started in, let's call it, terminal rationalization program. But when that hit, we started accelerating those. And so I think that the -- as you play that out, as John said, it's accelerating and moving quickly, the cash flow production is significant. And the reduction of leverage is meaningful or another way to say it, the flexibility around the capital around the enterprise is significant.

John Tweed -- Co-President

So I clearly know our model only requires replacement capex.

Joey Hogan -- Co-President

That's right. Exactly.

John Tweed -- Co-President

So we get to $1 billion in gross revenue with the placement capex.

Nick Farwell -- Arbor Group -- Analyst

Which means just in a conceptual sense, you should be generating very substantial amounts of free cash flow.

John Tweed -- Co-President

Yes, sir. It's going to be...

Nick Farwell -- Arbor Group -- Analyst

That's what we identified earlier. Right. OK, thank you very much. I appreciate it.

Joey Hogan -- Co-President

Thank you, Nick.

David Parker -- Chairman and Chief Executive Officer

Thanks, Nick.

Operator

Thank you. Our next question comes from Daniel Moore with Scopus.

Daniel Moore -- Scopus Asset Management -- Analyst

Gentlemen, how are we doing?

Joey Hogan -- Co-President

Thank you Dan.

David Parker -- Chairman and Chief Executive Officer

Hey, Dan.

Daniel Moore -- Scopus Asset Management -- Analyst

Always good to be in company with Nick Farwell. I'm going to dovetail in on some of the questions he was asking, specifically around cash flow because it seems to me that's a very important narrative for the company going forward. Love what you guys are doing. I can't remember the last time I heard a story like this, and the stock was trading at 8.1 times forward PE.

So here's the question I want to ask, $35 million to $45 million worth of capex. Let's break that down, if we could? Just so we have a really good understanding what the buckets are this year. So we can start building things up from there.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

So on the $35 million, Dan, that's pretty much all tractors this year, no trailers. Do you want to break it down between expedited and dedicated?

Daniel Moore -- Scopus Asset Management -- Analyst

I just like some granularity, so we can understand how that money is being spent, so we can start thinking about free cash flow going forward. So you're welcome to do it however you'd like, whatever is easiest.

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Yeah. So I mean, basically, it is all revenue, very minimal non-revenue equipment capex. So it's pretty much all replacement of replacement of trucks that are near end of cycle.

Joey Hogan -- Co-President

I think probably maybe, Dan, left unturned, but what is maintenance capex for our size fleet?

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Maintenance capex is probably going to run-up to $50 million, $55 million a year.

Joey Hogan -- Co-President

So this year, as far as the plan is because of all the huge reduction that we had this year, down 20%, almost 600 trucks, if you go look at where we were at the end of '19. So the result of that big rationalization has left us with and what we chose to dispose of has left us was another low capex year. So it's -- Paul said, 35-ish plus or minus, and that's $20 million-ish under normal maintenance capex for the 2,600 trucks, plus or minus. So you're going to have a...

David Parker -- Chairman and Chief Executive Officer

22 and 23.

Joey Hogan -- Co-President

You have to grow back another, let's call it, $20 million or so. Trailers will be small again in '22 just because, again, where our trailer fleet is because we reduced our trailer fleet signal. Also plus it's a much longer life asset. So -- but you move into '22, depending on where your view is on EBITDA.

Being able to swallow another $20 million, and we're confident of that. So you put -- you kind of look through the leverage ratio. That's kind of what I would draw people to kind of -- and I think Paul said it earlier, even with TBK, even with the buyback, we're going to be under -- we're going to be at or under $1 billion for this year -- for this year we're going to be at or under $1 billion this year. And so that -- as we lead into '22 with the growth that John's mentioned and I talked about are the non asset-based businesses as we move -- and we continue to grow that as well as move the margin and couple of them are already at those type margins.

It gives us a lot of flexibility around what the cash flow picture and leverage picture looks like over the next couple of years.

Daniel Moore -- Scopus Asset Management -- Analyst

So if we could maybe just as a follow-up transition into the dedicated discussion one more time. We're talking about 1,000 basis points of margin improvement potential. That's what you're targeting 800 to 1,000. Timing, now I know we -- second quarter, we're going to see a lot, third quarter, I would imagine, as much as well.

Could you give us -- can you talk to us about obviously, we don't have a good sense of whether or not everything is on a one-year contract. But in terms of your ability to progress, are you going to need two years, 18 months, 12 months, could we talk to just a little bit about glide path on achieving that opportunity set? And that's it. Thanks.

John Tweed -- Co-President

I am not sure I understand your question.

Joey Hogan -- Co-President

He's -- we said we were at a, let's call it, 100 -- 99, 100 OR in the fourth quarter. We have a target to get down to 90-ish, 1,000 points of difference. What do we feel as doubles from a margin -- from an improvement standpoint from 100 to 90 is it two years to get there? Is it three years to get there? Is it one year to get there?

John Tweed -- Co-President

Yeah. I think it's between four and six quarters.

Joey Hogan -- Co-President

So we're confident, Dan, that we're going to make some very meaningful improvement this year.

John Tweed -- Co-President

I think you'll see improvement every quarter. It takes four to six quarters to get there. And the wildcard is simply not concerned about pricing. I am concerned about some of our cost objectives just because we got to go do the work and then the driver environment.

One of the things about the dedicated is it takes a little bit longer. Our philosophy has always been figuring out what it takes to get the truck seated, then go get the money. And sometimes that just takes a little longer. I mean, it took us longest I've seen in some of our Northeast operations.

It took us eight weeks to figure out the right pay package to keep some of our operations seated, and then we went to confront the customer with it. So I would say between four and six quarters, we should be in that range.

Daniel Moore -- Scopus Asset Management -- Analyst

Right. It strikes me that we are definitely in a structurally impaired driver market, the likes of which is unique you've got FedEx, UPS, Amazon, which created a huge pull in terms of driver availability away from over-the-road to milk runs in cities and the like. Obviously, a drug and alcohol clearinghouse and then just schools being shut down. So yeah, I think you're going to have to flip the script on that.

When you talk to dedicated customer, you've got to have the ability to go back in there. But I appreciate the time gentlemen. Thank you. Have a good day.

David Parker -- Chairman and Chief Executive Officer

Thank you, Dan.

Operator

Thank you. At this time, I'm showing no further questions. I'll now turn it back over to management for closing remarks.

David Parker -- Chairman and Chief Executive Officer

We appreciate everybody's time today. And Katie, thank you for your assistance.

Joey Hogan -- Co-President

Thanks, everybody.

Operator

[Operator signoff]

Duration: 70 minutes

Call participants:

Paul Bunn -- Chief Financial Officer, Secretary, and Executive Vice President

Joey Hogan -- Co-President

John Tweed -- Co-President

David Parker -- Chairman and Chief Executive Officer

Jason Seidl -- Cowen and Company -- Analyst

Jack Atkins -- Stephens Inc. -- Analyst

Scott Group -- Wolfe Research -- Analyst

David Ross -- Stifel Financial Corp. -- Analyst

Unknown speaker

Nick Farwell -- Arbor Group -- Analyst

Daniel Moore -- Scopus Asset Management -- Analyst

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