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Operator
Good day, ladies and gentlemen, and welcome to the first quarter 2005 Overnite Corporation Earnings conference call. My name is Jackie and I will be your coordinator for today.
[Operator Instructions]
I would now like to turn the presentation over to your host for today's call Mr. Mike Mahan, VP, Treasury and Planning. You may proceed, sir.
Mike Mahan - VP, Treasury and Planning
Thank you. Good morning and welcome to Overnite's first quarter earnings call. With us today are Leo Suggs, Chairman, CEO and President and Pat Hanley, our SVP and CFO.
Our comments today contain forward-looking statements including projections of future results and are made only as of today's date. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. Please refer to the safe harbor provisions at the end of our press release for a view of some of the factors that could cause our actual results to differ materially from our projections.
Leo Suggs and Pat Hanley will provide our comments this morning, followed by a Q&A session.
With that I will turn the call over to our Chairman, Leo Suggs.
Leo Suggs - Chairman, CEO and President
Thank you, Mike. Good morning, folks. We had another strong quarter. Net income increased 51%. We improved our margins by another 120 basis points versus the first quarter of 2004.
Our revenues were up over 10% while daily tonnage increased by over 4%.
The quarter started off very strong in January and remained firm in February. However we did see volumes taper off a bit toward the end of March, which had us a little concerned heading into the second quarter. But fortunately, our April volumes have rebounded nicely.
I'm pleased by the progress we continue to make and improve in our overall freight mix. Our ability to grow to small to mid-size accounts faster than the large national accounts has been a key to our overall strategy.
As a percent of total revenue, we improved our mix by little over 200 basis points versus last year, which is better than we had expected and better than we have forecast. We also continue to generate a strong free cash flow while further strengthening on our balance sheet. During the quarter we contributed $30 million to our pension plan versus the 45 million we, were budgeted for full year.
We paid down our long-term debt by 10 million. Our cash balance at the end of the quarter was 41 million versus 21 million at the year-end. We also reduced our long-term debt by another 10 million in April leaving us with about 76 million in long-term debt as off today.
Finally, I would like to take note that we improved our transit times from Southern California to the South East in both directions. It was a 4 to 5 day product. And it's now down to 3 days, for many of our services centers operating in those regions. As we continue to grow our timings in lane density and we'll be able to create more direct line haul schedules and not only improve our transit times, but lower our cost and improve our margins. And his is a huge opportunity going forward.
With that said, I'll turn it over to Pat Hanley, our CFO. Pat will take you through the financial results and provide second quarter guidance.
Pat?
Pat Hanley - SVP and CFO
Thank you Leo. Good morning folks. Hopefully most of you had a chance to read our press release. I'll assume you have the numbers and I will focus on providing some color. The copy of the press release is available on our corporate website at overnite.com.
Now for the highlights. We had one fewer business days during the quarter versus last year. 63 versus 64. And that's how I'll be quoting daily variances. Daily revenues were 12% with fuel surcharge and up 8% without fuel surcharge. Daily tonnage increased by over 4%, which is laughing (ph) a quarter in which we saw over 11% growth last year. We saw the biggest tonnage growth in the long haul segment closely followed by growth in regional segment.
From a geographic point of view, the biggest growth was in the North East, the Central and the Western region. As Leo mentioned earlier, our daily April tonnage has been running a little higher than we expected. And so we are very, very pleased as we start the second quarter. One month doesn't necessarily constitute a trend but we are optimistic about what it's telling us for the rest of the quarter and hopefully the rest of the year.
Our operating ratio was 95:1 versus 96:3 last year. An improvement of 120 basis points. We're pleased by the continuous improvement margins and attribute a lot of that improvement to improving our customer mix and yield management, as Leo mentioned earlier.
Our LTL rate factor excluding fuel was up 2.3% during the quarter. Our average overall revenue for shipment excluding fuel is up 4%.
Our mix adjusted base -- on a mix adjusted base, our rates were up 3%. The overall pricing environment has remained stable in April. As Leo mentioned earlier, we contributed 30 million to our pension funds during the quarter. And we will likely contribute another 15 during or the end of the year.
Our balance sheet is very strong. And net debt to book capitalization including pensions (ph) was just over 21% at the end of the quarter. In the 18 months since the IPO has completed, we've reduced our long-term debt from a 128 million to 76 million as of today. And still have a cash balance of over $40 million.
Now I would like to talk about capital expenditures. Net capital expenditures were 4.4 million during the quarter compared to 5.3 million last year. Most of our capital has historically has been spent after the first quarter as we typically time the purchase and delivery of our revenue equipment with surges in freight volumes that occur in the second half of the year.
We opened a new 92-door Denver service center in April, which nearly doubled our capacity in that city. Our Newburg New York service center is now scheduled to open by the end of the second quarter and will have 166 doors.
We're also still looking to build or purchase a couple of service centers in California to handle the growth we've experienced there in recent years. That's a very challenging market to find the right parcel of land or facility. We still intend to spend 90 million to 100 million in capital this year.
After funding our pension in capital investments, we still expect our free cash flow to be over 50 million for the year.
Our tax rate was 40% in the quarter. And we expect our tax rate to be 40% for the remainder of the year.
Now the guidance. We are projecting our earnings per share on a fully diluted basis to be between $0.71 and $0.76 in the second quarter. We are maintaining our full year guidance at 2.60 to 2.70 per share. We'll update the full year guidance after the second quarter close.
That concludes our comments. With that, we'll open it up to any questions you may have.
Operator
[Operator Instructions]
And the first question comes from Brandon Cook (ph) from J.P. Morgan. You may proceed, sir.
Brandon Cook - Analyst
Good morning gentlemen.
Leo Suggs - Chairman, CEO and President
Good morning.
Brandon Cook - Analyst
You mentioned that the volumes tapered off a little bit in March and it rebounded in April. Could you give us a little bit more sense on how the quarter progressed in terms of January over January, February over February? And then kind of what happened in March?
Leo Suggs - Chairman, CEO and President
Well, our January was extremely strong. And we did sort of -- it was unusually strong. February was a, certainly exceeded our projection as far as tonnage growth. And it's, but it's difficult to say how much of the plan of the quarter had to do with. As an example, February had one less day this year. The quarter had one less day. And one thing that was a big impact was the fact that the Easter holiday which actually turns out to be 2 days, part of the country takes Good Friday and part of the country takes Easter Monday. So that fell in the first quarter as opposed to the second quarter of last year. I think probably an indication of the trends is better illustrated by the fact that our tonnage and revenue performance of April is very encouraging.
Brandon Cook - Analyst
OK. And you mentioned there was a 200 basis points mix shift from larger to smaller customers, where you get a better yield in helping drive the (inaudible) improvement that you are seeing. Maybe sacrificing some tonnage growth to get that done.
Could you give us a sense on an absolute basis what the current mix is between the larger and smaller customers? And where you see that going longer term? Or what is your target mix?
Leo Suggs - Chairman, CEO and President
Well, I think you probably have the numbers. I will comment on -- we had ever since we began the holding, became a public company and began our releases and so forth, we have stated an objective to change our mix by about 50 basis points a year. Most of you will recall that we took some very definitive actions about midyear in 2004 where we in effect, got very aggressive with some of the low yield in accounts. And ended up purging business. But we thought over the long-term we could better utilize the capacity and accommodate our growth with improved yield. And that's worked out just the way we had ended it.
I think there was a lot of negative response from some of the analyst community over what we had done. But hopefully you're now beginning to see that we did have a plan. In long-term, we think it was a solid plan. The percentages in effect...
Pat Hanley - SVP and CFO
I've got them -- Brandon, the answers were around 52% right now. And as Leo pointed out, our goal has been sort of half a point a year. And we're certainly exceeding that. If you ask us, our long-term goal, we'd like to get to a level of 60%. But that's not something we expect to get to this year. It's a goal as we go over the years.
And we're not, the other thing is, we had a major, as Leo mentioned, purging of some low margin accounts we started in the beginning of the second half of last year. We do not anticipate having a similar purge this year. We'll have a normal process we go through every month looking at low margin accounts. But that sort of in the range of 2 to 3 maybe 4 accounts you're looking at, not the magnitude we did last year. We don't envision any of that size this year.
Brandon Cook - Analyst
OK. Thanks, guys.
Operator
And the next question comes from Ken Hoexter from Merrill Lynch. You may proceed sir.
Ken Hoexter - Analyst
Hi, Pat and Leo. It's a quick question. You've talked about a bit about capacity being up at about 90% and such over the last couple of quarters. You've also noted that you purged a bunch of low margin accounts. So does that mean we're at, kind of as good as it gets, as far as the operating ratio? Or is there room for continued improvement?
Leo Suggs - Chairman, CEO and President
Ken, I think this does not in any way mean that it is as good as it gets. I think that the single greatest opportunity we have at this point in time is to grow the lane density. And we think there's great opportunities to do that. Because that's probably the single most important factor in profitability in our whole industry, is how much lane density you have which converts to your capacity utilization and your load factor on your over-the-road schedules. And determines how many times you have to re-handle the freight to get to marching to destination.
So I think that we have some great opportunities. And we always talk about the capacity in terms of where we are at any given time. This is really an elastic business. You heard about our improve, our new facility in Denver and our brand new facility that is a total addition up in the North East. And our -- the plans that are moving forward to increase capacity in the West. So we're going to be positioned to handle growth and certainly, we think that our service can provide a greater value to the customers.
And so, I think that as you look forward, we have a lot of capacity to continue to expand our system, which will be a part of our plan. And that result should be compounded by the fact that you improve lane density as you grow.
Ken Hoexter - Analyst
Great. One quick follow up on the Yellow-USF merger. Have you seen some spill off from that merger? Is that kind of, what's been driving some of the April volumes?
And then secondly, how is the Overnite trend versus the longer haul products trending?
Leo Suggs - Chairman, CEO and President
I'll answer the second part first, Ken. Our regional business, which is probably the fastest growing natural markets in the country has been performing very well. But also our long haul business has. Long haul and our regional in the first quarter, both had good growth. And I guess if you rank them 1, 2, 3, it would be regional, long haul and then inter-regional.
So far as fall out from the USF-Yellow situation. I think the answer is kind of like it was from the Yellow Roadway. I think that unless service problems or issues emerge as a result of this, I think I would expect that the customers will wait, see. I don't, I think they've seen enough experience now that I would be surprised if they changed carriers just based on a press release that Carrier A had bought Carrier B.
So I really don't attribute our success at this point in time to the Yellow acquisition of USF.
Ken Hoexter - Analyst
Thanks, Leo.
Operator
And your next call question comes from Edward Wolfe from Bear Stearns. You may proceed sir.
Edward Wolfe - Analyst
Good morning, guys.
Leo Suggs - Chairman, CEO and President
Good morning Ed.
Edward Wolfe - Analyst
Hey, Leo, as somebody who was skeptical about the culling. And now it seems to be paying off. Where are you in that process? I mean, I think Pat said you're 52% with goal of 60. So obviously it's ongoing. But the major listing that you did second half of last year. Is that behind you at this point or is there still some of that going on too?
Leo Suggs - Chairman, CEO and President
No. It's behind us, Ed. What we did is, we look at every, we look at our profitability from every angle possible including the profitability of traffic lanes, the profitability of specific customers, the profitability of regions and the profitability of terminals, every month. So every month you'll have -- and this is just a normal course of business. And I would assume most companies do something similar to this.
You will have a process where a very few, maybe as Pat mentioned earlier, 3 or 4 accounts will pop up that for some reason don't need our margin thresholds. And then we drill down on those accounts to try to figure out what happened.
And, and so that's an ongoing process, and that has been going on for a long time and will -- it will be a permanent, permanent process.
The action that we took in mid year 2004 involved about a 180 customers that we said we're going to raise the bar so far as our minimal minimum acceptable contribution based on the fact that we do have a strategy to focus not on diminishing our national accounts. We want to grow that business too. That's very important.
But we want to grow the mid size to small accounts at a faster pace. We have said that we hoped to grow it around 50 basis points per year. But as you see, we've certainly got a -- we're way ahead of that pace.
Pat mentioned the fact that we would like to see it at 60%. There are a very few carriers out there that enjoy that kind of a mix. And when you look at those carriers support revenue per shipment, revenue per 100 weight and so forth, they really have a superior yield.
And that's our game plan. I think in some cases the market not only looks at you in terms of how much revenue growth you have and certainly that's important. But we look at it in terms of how much money we put in the bank. And I think that if you look at our record up to this point of time you'd have to agree it's worked pretty well.
Edward Wolfe - Analyst
When you look at and you talk about large mid size and small customers how do you define those?
Leo Suggs - Chairman, CEO and President
Well it's a, we actually segment our customers but I think most carriers do it the same way. A national account is a company that usually has central traffic control but multiple shipping and receiving locations throughout the country.
And local accounts could be a very large account. They could be an account that gives you $200,000 worth a month business. But they're concentrated in a single location. Sort of, a stand-alone sort of a customer, as compared to a national account customer.
So when we talk about changing the mix to local customers or smaller to mid size customers, it's really searching out the business that has the best yield. And so that's pretty much the game plan and it turns out, to categorize it you national accounts or non-national accounts. But it's really high yielding business compared to the more marginal business.
Edward Wolfe - Analyst
Can you talk about the GRI (ph) -- your plan, again if you know the amount and the timing of when you're going to initiate that? And does it change how you can go about obtaining that given the change in the mix. I'm guessing the more local accounts are more likely to take a rate increase sooner than a national account. You might have to wait for the contract to come up.
Can you talk about that?
Leo Suggs - Chairman, CEO and President
Pat, why don't you comment on that?
Pat Hanley - SVP and CFO
Our GRI ad is schedule this coming Monday, 5.6%. And what we've been doing over time, and it affects about 40% of our customers.
And if you looked over time that 40% has been increasing. And you are correct that with that increase on Monday those accounts immediately get that increase. As opposed to contracts come up throughout the year whenever -- on an annual basis.
So those you have to negotiate every year as they come up.
Edward Wolfe - Analyst
And so that 40% number wasn't materially different a year ago it sounds like?
Pat Hanley - SVP and CFO
Well, it's up probably a half a point or more -- more than what ...
Edward Wolfe - Analyst
And Pat, can you talk about -- you talked about paying 30 million into the pension. What were the pension expenses in the quarter and what do you see going forward?
Pat Hanley - SVP and CFO
Pension expenses, remember for the full year were 55 million. So you were looking little less than 15 million per quarter is actual expenses versus that 30 million we put in.
We had told you back in January that we had 30 million is what we thought we'd put in. And I talked about at the time we might put another 15 in. And what we're probably going to do is we'll put the rest of that 15 in, given our cash flow.
So that's our game plan for the full year. We'll probably put another 10 in. I would suggest we probably put it in within the next month to get it behind us.
Edward Wolfe - Analyst
OK.
Pat Hanley - SVP and CFO
And part of the reason for that is because of the capital expenditures. Our capital expenditures are in the way we do that over the year, the cash for the capital will come in more in the third and the fourth quarter than it does in the first and second. So just managing your dollars.
Edward Wolfe - Analyst
Sure. I saw the working capital kind of swing your way and I'm guessing that's seasonal as well in the quarter?
Pat Hanley - SVP and CFO
That's correct.
Edward Wolfe - Analyst
OK. Thanks a lot guys.
Operator
And your next question comes from Mark Rosa from Thompson Davis and Company. You may proceed sir.
Mark Rosa - Analyst
Good morning guys.
Pat Hanley - SVP and CFO
Good morning.
Leo Suggs - Chairman, CEO and President
Good morning.
Mark Rosa - Analyst
Could you comment on the effect that the change in mix to having more regional accounts has on operating statistics? I realize that's helped the yields? But does it have any effect on the rate for shipment or any variables?
Leo Suggs - Chairman, CEO and President
Yes, little bit. As an example, if you're dealing with a large national account you might take a pick up of the whole truckload of LTL shipments or certainly multiple LTL shipments.
So you do get some efficiencies in that situation compared to a smaller account where it's likely that the shipments per stock will be less. So there are some trade-offs and efficiency for yield.
But it's a very good trade off. The additional expense to handle to handle that freight is substantially less than the normal differential in rates that you would see.
So the, as a group as an example the rates on those smaller accounts are probably somewhere in the neighborhood of 20% higher than the band of the business that you classify as national accounts.
Mark Rosa - Analyst
OK. Thanks. My other questions have been answered.
Leo Suggs - Chairman, CEO and President
Thank you.
Operator
And your next question comes from Chad Bruso from Morgan Stanley. You may proceed sir.
Chad Bruso - Analyst
Great. Thanks. I just want to make sure I understand your comments about April. You said that potentially the timing of Easter might have hurt March's results.
Is that a potential that the strength you're seeing in April here is just the timing of that Easter holiday? Or is there something more that you're seeing that gives you something of an (ph) optimism?
Leo Suggs - Chairman, CEO and President
Well, if you looked at it on a weekly basis, certainly there was some impact on the last week of March compared to the first week of April. But we look at it in a number of different ways, Chad.
So I think that our optimism with regard to April takes into consideration the last week of March versus the first week of April.
So now to answer your question, I think that so far we're seeing a solid April.
Pat Hanley - SVP and CFO
And Chad, to be a little more bullish, if you will. We look at it -- we look at revenue in kind of, on a daily basis. What Leo is really saying is after adjusting for Easter; April still looks very strong to us. Stronger than we would have anticipated when we were coming out of March.
That's why our comment suggests that we're bullish.
Chad Bruso - Analyst
OK. No, it's helpful. In terms of some of the comments on the pricing environment and I believe I wrote down here that you said your mix adjusted pricing was up 3.6% in the first quarter, which again is still pretty firm. But I believe that was something like 5% late last year.
Have you seen a change in the competitive landscape? Maybe some of your competitors lost some volumes here and haven't seen some of the strength. Have you seen them come at some of your business and get a little bit more aggressive with pricing recently?
Leo Suggs - Chairman, CEO and President
No we haven't. I know that you have anticipated that will happen but we haven't seen it yet, Chad. And when you look at year over year comparisons, we're lapping a strong first quarter of last year. So we do not think that we're seeing a downturn in pricing.
And so I have to disagree with your predictions in that area.
Chad Bruso - Analyst
OK. Well, time will tell. Thanks a lot, guys.
Leo Suggs - Chairman, CEO and President
Thank you.
Operator
[Operator Instructions]
And your next question comes from Paul Carter (ph) from Evergreen Investments. You may proceed sir.
Paul Carter - Analyst
Yes. Hi, guys. Early in the commentary you just talked about huge opportunities on the line haul side. Or specifically I think you said, you intend to create more line haul opportunities.
Can you just kind of expand on those points, please?
Leo Suggs - Chairman, CEO and President
Yes. When you look at our overall network, the most efficient operation that you can have and oftentimes when you look at most profitable carriers in the industry, you will find that they have great lane density between specific points.
So if you have the ability to load -- to originate freight in Richmond, Virginia, as an example and you have enough business on a daily basis to make a direct schedule to St. Louis, Missouri, you eliminate any intermediate handling and you eliminate any security in the routes.
So the growth in business is how you continue to add direct schedule. That's an another reason that you can say that I'm at 90% capacity but you can add much more than 10% more business because as you add business, your network gets more efficient because you make more direct schedules.
So that's the, as I said probably the, in my opinion the greatest single factor in comparing operating efficiencies is how much lane density you have.
Paul Carter - Analyst
OK. OK. That's simple enough.
Leo Suggs - Chairman, CEO and President
Maybe you can kind of compare it to the airlines. If they can fill up an airplane from point A to point B, they can grow their business and be very efficient. But if you have to change planes twice to get from where you had started and where you're going to, it's inefficient. And the chances are, the planes won't be filled either.
Paul Carter - Analyst
Thanks. Just one other thing. Is there any update in terms of your push on value added services?
Leo Suggs - Chairman, CEO and President
Well it continues to be a major priority for us and we're continuing to see a very good growth in the value added services area.
So, as an example I think our Expedited business is up about 40 some percent. So and that is high margin business. So we think there is still a lot of opportunities, and we're going to continue to focus on growing and expanding value-added. Because I think the more you have to offer the more likely you are to be able to increase the value to your customer.
Pat Hanley - SVP and CFO
Well our goal there was to grow 20% plus. And Leo pointed the Expedited, but we've also seeing a strong growth in our cross border, in our trade show; and government, where we had a problem last year has turned around.
So they are all doing pretty darned well.
Paul Carter - Analyst
OK. Thanks guys. And a great quarter.
Leo Suggs - Chairman, CEO and President
Thank you.
Operator
And at this time you have no further questions. So I'll turn the call over to Leo for closing comments.
Thank you.
Leo Suggs - Chairman, CEO and President
OK. Well, I really would only tell you that we're happy with the quarter. And we are optimistic about the future. And I just hope that the economy does stay strong. And I think we have a bright outlook.
And thank you for joining us.
Operator
Thank you for you participation in today's conference. That concludes the presentation. And you may now disconnect.
Have a great day, ladies and gentlemen.