Executives
Rick Gaetz - President and CEO
Sean Washchuk - VP Finance and CFO
Analysts
Arthur Hatfield - Morgan Keegan
Jack Waldo - Stephens Inc
David Ross - Stifel, Nicolaus & Co
Jason Seidel - Dahlman Rose
Jim Larson - Neil Deaton Davenport & Company
Thomas Albrecht - BB&T Capital Markets
Neal Deaton - BB&T Capital Markets
Vitran Corporation, Inc. (VTNC) Q3 2010 Earnings Call October 26, 2010 10:00 AM ET
Operator
Welcome to the third quarter of Vitran Corporation conference. Our speakers today are Mr. Rick Gaetz and Mr. Sean Washchuk. Please go ahead
Rick Gaetz
As always I'm joined this morning by Sean Washchuk, Vitran's Chief Financial Officer. I'm sure by now you've all read the press release from earlier this morning regarding the results of our most recent quarter.
We continued to make progress and it seems like I have stated that for the past eight or nine quarters we have long way to go but the progress is real. I believe it is sustainable and we are finally heading in the right direction. We once again have reported our best result in the past couple of years. I think there is a reason to be cautiously optimistic going forward. However, before I talk more about the Q3 issues and our outlook for the rest of the year, I would like Sean to read the Safe Harbor clause and give you a brief financial overview of the quarter.
Sean Washchuk
Thanks Rick. This call contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian Securities laws. Forward-looking statements may be generally identifiable by the use of the words; believe, anticipate, intend, estimate, expect, project, may, plan, continue, will, focus, should, endeavor or the negative of these words or other variations of these words or comparable terminologies.
These forward-looking statements are based on current expectations and are naturally subject to uncertainty and changes in circumstances that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause Vitran's actual results, performance or achievements to differ materially from those projected in the forward-looking statements.
Factors that may cause such differences include, but are not limited to; technological change, increasing fuel costs, regulatory change, the general health of the economy, seasonal fluctuations, unanticipated changes in railroad capacity, exposure to credit risks, change in labor relations, geographic expansion, capital requirements, availability of financing, claims and insurance costs, environmental hazards and competitive factors.
More detailed information about these and other factors are included in the annual form 10-K under “Item 1A - Risk Factors.” Many of these factors are beyond the company's control. Therefore, future events may vary substantially from what the company currently perceives. You should not place undue reliance on such forward-looking statements. Vitran Corporation, Inc. does not assume the obligation to revise or update these forward-looking statements after the date of this call or to revise them to reflect the occurrence of future, unanticipated events.
For the third quarter of 2010, Vitran significantly improved net income by 600% to $2 million compared to $0.3 million in the third quarter of 2009 These results were achieved on revenues that increased 10.2% to $183 million resulting in an 76% improvement in income from operations to $4.1 million for the third quarter of 2010, This compared to revenues of $166 million in income from operations of $2.4 million in the year ago third quarter. As a result, the company recorded diluted earnings per share of $0.12 in the third quarter of 2010 compared to diluted earnings per share $0.02 in the third quarter of 2009.
The company's consolidated operating ratio improved to 97.7% for the third quarter of 2010 compared to [78.6%] for the third quarter of 2009. Improvements in LTL shipment and tonnage measures as well as sequential improvement in LTL yield as well as record financial quarter for the supply chain segment generated the improvement in 2010 third quarter
Interest expense for the 2010 third quarter was $1.8 million compared to interest expense of $2.6 million for the same quarter a year ago. The company's interest rate spread on its indicating revolving interim debt was a 150 basis points less than the third quarter of 2009 and interest-bearing debt at September 30, 2010 was $82.4 million, $13.8 million less than September 30, 2009, this resulted in an $800,000 decline in interest expense for the comparable quarters.
For the third quarter of 2010 the company generated income tax expense of $400,000 compared to an income tax recovery of $500,000 in the third quarter of 2009.
For the nine month period ended September 30, 2010 consolidated revenue was $528 million compared to $464 million for the nine months of 2009. Income from operations was $8.5 million compared to income from operation $1.5 million in the 2009 nine month period.
Earnings per share improved to $0.29 or $0.17 per diluted share for the 2010 nine month period compared to a loss of $0.12 a year ago.
Cash flow from operations for the 2010 nine months period generated $11.5 million compared to $1.1 million in 2009. Non-cash working capital changes consumed $6.4 million compared to a consumption of $8.3 million a year ago.
Average day sales outstanding for the quarter was 42.7 days at September 30, 2010 compared to 44.4 days at June 30, 2010. The monthly average for DSO for month of September 2010 was 39.8 days, reflecting strong working capital improvements during the quarter. We expect this continue to improve the company’s DSO through the end of 2010.
Capital expenditures during the quarter and nine months period ended September 30, 2010 was $800,000 and $4.7 million respectively. The majority of these expenditures were for the acquisition of an LTL facility in Grand Rapids, Michigan of $1.4 million and rolling stock addition of $1.7 million. We anticipate that capital expenditures for the remainder of 2010 will be between $4 million and $5 million.
Vitran concluded the third quarter with interest-bearing debt at $82.4 million, down $7.8 million from December 2009, reflecting $6.1 million of draw downs on the revolving credit facility, which included a $1 million contingent acquisition payment related to the 2007 acquisition of L.V/L.A. Express. The company made payments of $10.4 million on term debt facilities and $3.4 million on capital leases.
As for the specific business segments, the LTL operation posted revenues of a $151 million in the third quarter of 2010, an improvement of 9.6% compared to a $137 million in the prior year third quarter. Income from operations improved to $3 million and the operating ratio came in at 98% compared to 98.9% in the 2009 third quarter.
These results for the sales quarter 2010 improved significantly from the 2009 third quarter and the operating loss was posted in the first quarter of 2010. Rick will expand on the operating metrics momentarily.
Revenues in the supply chain operation increased 8.5% for the third quarter of 2010 compared to the same period in 2009. Income from operations were directed at $2 million for the third quarter of 2010 compared to $1.7 million in the 2009 third quarter.
The operating ratio for the comparable third quarters of 2010 and 2009 was flat at a very solid 91.5%. For the third quarter of 2010 revenue in the truckload segment was $8.7 million compared to $8.6 million in the third quarter of 2009.
Income from operations was $70,000 in the current quarter compared to $175,000 in the 2009 third quarter. The truckload segment was impacted by higher than expected accident cost in the third quarter of 2010. Rick?
Rick Gaetz
Thanks Sean. Sean just said, the quarter was highlighted by continued improvements in many of our key areas. Just a quick summary. revenue was up 10% EBIT was up $1.8 million to $4.1 million, EPS was $0.12 a share significantly better than it was a year ago and we were seeing year-over-year improvement in many of the key segments of our business and I will talk about that.
Our balance sheet and its an important item. We feel our balance sheet continuously get’s stronger, our interest rate continue to fall and our bowering costs continue to fall as a result of the improved results. Sean just indicated for small truckload operation we had continuously challenged by higher than expected accident cost as I indicated last quarter and one action that business can significantly impact the results.
And we have been challenged in this owner operator environment of the little truck load business in the past couple of quarters and it’s impacted of our earning while it continues to reduce cash. Most importantly we continue to see improvements and growth in our LTL and supply chain segment as Sean indicated.
Our supply chain operations performed exceedingly well. I think we had another very solid quarter. You heard Sean mention that we had record revenue at $23.5 million and very solid and record earnings worth $2 million, operating income. The efficiency in our supply chain operation remains strong. We are clearly benefiting a little bit from what we would call a retailer, bit of a consumer recovery and as most of you are aware our supply chain business is absolutely retail focused.
We had hurdle of cup of startup operations in Albuquerque, New Mexico and Salt Lake City that impacted the results early in the quarter but signs of improved results towards the end of the quarter. They are both up and running and performing well now and we remain optimistic about future expansion in that supply chain business both through leveraging existing clients and attracting new customers into our fold. The number of centers that we have now I believe is up to 22 across North America and we continue to be on look for small retail based acquisitions in our supply chain business.
So our outlook for the supply chain operation in the fourth quarter is quite strong, we would expect to see very similar to those results generated in Q3.
Our core LTL business continues to progress, again as Sean indicated the operating ratio was 98 clearly a long way, from where we wanted in our LTL business. But significantly better than it was year ago full operating point better.
Daily tonnage was up 4.6%, our dealer shipment count was up 5.1% our US LTL operations. These numbers should have been slightly better if were not for our continued efforts and we make apology about it. Our continued efforts based on decisions and in the past agreed to move yield to more appropriate acceptable levels.
We are committed to achieve the necessary returns to enable acceptable levels of capital reinvestment in our business and I am pleased to say that yield continues to move forward. In fact we have moved yield in a positive direction every month from February through September in our US LTL group. I think the pretty important achievement. Our yield improved 2.6% in our US LTL group in the second quarter as compared to 2.3% in quarter two.
Our October yield continues to improve and we should expect similar yield results in the fourth quarter of this year to that of the third quarter, somewhere in the 2.5% to 3% range. We do have the benefit this quarter of the GRI, which we took on October 4, which should account for 1% at Q4 yield improvement.
And we continue to have the opportunity within our LTL group to manage it or run it better and our view is we got another one the 1.5 operating points to squeeze out of our core LTL business in the US and we will get that through small productivity gains in many areas, better loading practices, by increase to our line haul operations and clearly a better balance between purchase transportation versus company activity we made progress in the third quarter and we expect to make more in the fourth quarter.
But there are gains to be had in our core operation, but make no mistake about it the bulk of the improvement going forward is going to come from price. And the outlook for the balance for the year and early in ’11, I think its encouraging because in our view the pricing environment should continue to improve for a couple of reasons. Firstly, quiet frankly we have to continue the move it if we want to make a material difference in our ability to generate the returns you would all expect this to achieve.
Secondly its our view that capacity and when I say capacity, I am talking both people and trucks. Our view is that capacity remains tight and I don’t think there is a quick fix that relates to that issue and finally the driver market is tight. I think its going to remain tight for the perceivable future certainly in some key markets. I think that the industry has not produced new drivers to deal with the attrition that we had in the last three years and I think its kind of consensus view that year 2010 will have a small tightening impact or negative impact on driver availability, which is quite frankly good news.
Its important if we are going to continue to move price at levels that are appropriate to allow the necessary degree of reinvestment in our business that ultimately allows us to service our customers the way they expect to be serviced to continue to service in that way and more and equally is important I guess here to achieve appropriate levels for our shareholders, we have to keep moving the pricing bar.
So in short I kind of summarize where we are , we are pleased with the continued progress in the quarter. I think we took another step forward in quarter three. We believe that we will continue to run our business, we can continue to run our business a littler better in the coming quarters positively impacting earnings and finally we believed for a handful of reasons that I just mentioned that the pricing bar can move in the right directions, the necessary direction.
So, with that short overview, I would like to turn it back to David and receive your questions.
Question-and-Answer Session
Operator
(Operator Instructions). Our First question comes from Arthur Hatfield.
Arthur Hatfield - Morgan Keegan
Just a few questions here and I appreciate your commentary this morning, but in the third quarter I am thinking my numbers are right here but just a slight sequential uptick in the operating ratio at the LTL unit 98 in Q3 my math has it was a [97.4 in Q4]. Can you talk a little bit about that, if there was anything in the US in the quarter?
Rick Gaetz
Yes the second quarter is generally marked by pretty solid months and of course the third quarter has received this seasonally softer summer months of July and August. So we made a bit of progress in those months on a year-over-year basis but we obviously wont include the early month of the second quarter. And then September I can say was pretty solid here, very happy to say of the positive levels in September. the month was a progress and we had a pretty solid month of September. So it’s more of the fact that is marked by time of six good business weeks and six weaker weeks seasonally as compared to the second quarter.
Art Hatfield - Morgan Keegan
And now you don’t want to get into to month-to-month stuff but just broadly speaking those summer months you mentioned are those six weaker weeks. Will you run above a 100 or were you able to keep that kind of breakeven or slightly below.
Rick Gaetz
July and August were around break even and September was obsessively the best month of the quarter.
Art Hatfield - Morgan Keegan
Got it. As you talk about pricing you made a couple comments about growth rates and I did not have a chance to listen up but were commenting the Q2 growth rate is in core yield than Q3 growth rate, that you got which is reflecting sequential growth rate or ?
Rick Gaetz
Yes. Sequential. So, our sequential improvement in quarter two was 2.3%, our sequential improvement in quarter three was 2.6%.
Art Hatfield - Morgan Keegan
And you said that kind of level you would expect to be going forward to Q2 sequential growth rate to be in that 2% area roughly.
Rick Gaetz
Through quarter Q4, you mean?
Art Hatfield - Morgan Keegan
Yes.
Rick Gaetz
Yes. That’s right.
Art Hatfield - Morgan Keegan
Okay. And then, finally, other guys have questions but you know, as you push yield and push pricing with customers, you can’t get too aggressive and lose good business. How do you balance kind of going after yield and not pushing away too much business?
Rick Gaetz
Well. It’s a great question. And it’s the balancing act everyday. But, our view is that, we have a very season and solid sales force. But that group has to understand that you are prepared walk away from business to start to change in the price parameters. And the industry was, I can’t comment on the industry.
Vitran, nothing gets fixed for us with the 2% price increase across the board. We don’t get any of the level that are shareholders or quite frankly at the end of their customers would expect us to achieve if they want to receive or continue to receive the service they get.
So, the bottom line, we review account by account by every account and we have to make hauls on them. But at the end of the day, if you want to make a meaningful difference in our view we have to be prepared to walk away from this business.
Now we are not causal about that, we want to continue to grow but we go account by account and the larger account the more senior involvement it has in the organization and we are just plugging away at it and I am very proud, from February when we started this through to September we moved yield 4.5% and through October it’s going to be much better than that. So, we are going to continue to move the bar and I think generally there is an appetite. Customers know that had beaten us pretty good in the last few years and the trends aren’t good enough.
So I think you just there, it’s a hard question to answer. It’s a great question but there has to be a level of commitment and you got to be prepared to walk sometimes.
Operator
Next question is form Jack Waldo.
Jack Waldo - Stephens Inc
Congrats on the quarter. A few questions here. Is your rate per shipment down 3.1% sequentially?
Rick Gaetz
Yes.
Jack Waldo - Stephens Inc
How much of that is indicative in those times, six slow weeks that you talked about. And how much of that is indicative of may be some moderation in the economy that we saw?
Rick Gaetz
Yes, I don’t know it’s a good question I can tell you that the rate per shipment did kind of bottom out in July and it recovered just a hair from July to September but it’s been fairly stable as well it’s off a little bit but fairly stable and our average month at haul has been fairly stable and its just few miles. So this service also has been fairly stable. So there is no big driver, there is no big outside influence that would impact the yield but there all little pieces and the biggest issue is regarding price increases.
Jack Waldo - Stephens Inc
I will stick on the economy for a second, I would have thought there was a material slow down in retail that you have seen that in your supply chain management but third quarter is a great quarter in my opinion, but did you guys add any customers and what caused that improvement?
Rick Gaetz
No we added few facilities but they were meaningful they are not huge, but they are meaningful service but the impact of those facilities in this quarter was only marginally beneficial because of the startup initiatives in both the cases. So they should be more solid in quarter four , if we did get the slight benefit from them in the third quarter but the balance was kind of seasonality, retails moving pretty solidly, the retail inventory is flowing through the facilities so there’s not a time going into replenishment in the facilities that does add. So all in all it was just another quarter, we have another good quarter building on momentum of recent quarters.
Jack Waldo - Stephens Inc
All right and quick. I guess your commentary on the pricing environment here in the fourth quarter, how has your tonnage run so far in the fourth quarter?
Rick Gaetz
Our tonnage is, in October as tonnage is up almost 4% as compared to the prior year. So, kind of similar numbers again and our yield, our shipping count is up about 5%.
Jack Waldo - Stephens Inc
Okay.
Rick Gaetz
So, it’s a very-very similar numbers to that, to that you’ve seen in the third quarter.
Jack Waldo - Stephens Inc
Got it. And on that, I mean I’m just looking at the 4% tonnage. I would think that pricing, or I would think that volumes will be down on a sequential basis in the third quarter. I mean in the fourth quarter relatively to the third quarter, pricing is going to be, is what you are alluding to.
What about on the margin side. I mean, I’m just looking to consensus expectations for fourth quarter to be $0.13 or it would be higher than what we saw on the third quarter. Is this the type of environment that you could have in fourth quarter that’s better than the third quarter?
Rick Gaetz
Yes. I don’t know. I haven’t looked at the fourth quarter consensus honestly. But no, I think obviously, the quarter, the success of the quarter will be determined between now and Thanksgiving.
So, I mean, we’ll just watch it closely but I like the fact that we continue to grow here and I like the fact that our yield continues to move in the right direction and we believe throughout the fourth quarter.
So, I’m kind of slipping the answer a little bit only because I haven’t looked at consensus but typically, the fourth quarter is weaker that the third quarter typically. We will see when we go there.
Jack Waldo - Stephens Inc
Got it. And then, on that piece, if I look for 2011, you are expected to triple earnings on about 10% revenue growth. And, that s different than your historical norms, I’m just wondering what type of environment would you guys need to triple earnings on a year-over-year basis?
Rick Gaetz
Well. I just don’t know how you measured it but from an EPS perspective, one operating point on our consolidated, if you want consolidated operating point, our business represent $0.28 of share of EPS.
So, when we talk about growing our business a little bit, I think here better and most importantly continuing to drive price. I think we can make a meaningful, make a significant improvement over 10, if we achieve those things.
Jack Waldo - Stephens Inc
Understood. And then the last question I have are on, just kind a housekeeping items. One thing, Sean, the tax rate came pretty significantly below our expectations, at 16%. What would you expect for the fourth quarter in tax rate?
Sean Washchuk
You know, if the operating ratio is similar to what we posted in the third quarter, you could expect a similar tax rate. If we improved the operating ratio, the tax rate should grow a bit. When we get down to around to 95, I would expect 20 to 25% tax rate, if its sub 95 will stop pushing towards 30.
Jack Waldo - Stephens Inc
Got it. And then, what about interest expense and G&A.
Sean Washchuk
I would expect them to be quite similar to the third quarter. However, we are taking a 50 basis point reduction in our interest rate on a syndicated debt. So that should drop our interest expense may be $150,000 in the fourth quarter.
Operator
Next question comes from David Ross.
David Ross - Stifel, Nicolaus & Co
Just want to dive-in a little bit more into the sequential difference in the margin. If you have more revenue, more tonnage improving yields from one quarter to the next quarter with the same number of working days. I just want to figure on how these operating ratios go up 60 basis points?
Rick Gaetz
It’s all on July and August. July is a soft month and it’s hard to have success in that soft month during the vacation period. And you have the same impact that went through the first half of August. So, as good as in our view and our view, as good as September was July this week.
I don’t know how I should response to it, David, other than the quarter bill as it went forth but there’s no month in the second quarter that is similar to July in the third quarter.
David Ross - Stifel, Nicolaus & Co
That means that it’s a density issue in July and you make up for some of that in September, but not all of it?
Rick Gaetz
Exactly. Yes.
David Ross - Stifel, Nicolaus & Co
And then, I didn’t know if there were any wage increase is granted during the quarter or more on quick on operating leases are anything else that’s impacting you or..?
Rick Gaetz
No. I mean, there were lots of little things. But nothing is that is with a collar if you will. Healthcare costs were little high our comp costs were little high. But nothing that would warrant the collar, they are just business. So, I wouldn’t say we had anything terribly favorable go our way but there was nothing significant that pushed us the other way either.
David Ross - Stifel, Nicolaus & Co
It’s helpful. On the CapEx side most of the fleet industries is been extending the average age of traction trailers. How much longer do you think you can go with your really below replacement CapEx. Can you go all the way through next year before you really need to refreshing the fleets.
Rick Gaetz
I think we had brought in this year in 2010 from November. Through in the last ten months you brought in close to a 1000 pieces of equipment tractors and trailers. Now I believe we haven’t done anything, I think we have been probably more aggressively than a handful of players quiet frankly but your point is well taken I think that our trailing fleet, I think we can manage our trailing fleet quite well for the next couple of years I think it relates the power we would probably have to be a little more aggressive, represent more capital budgeting 2011 than we did in 2010.
David Ross - Stifel, Nicolaus & Co
And then turns to the truckload segment you talked about lack of hauls or operators being an issue in the quarter did that hurt the results from the perspective you had for your trucks and service.
Rick Gaetz
There are two thinks that it’s a very unique, it’s such a unique little truckload business it is very short haul in nature. Which is attractive to some owner/operators and not so attractive to other owner/operators. Who like to run longer distances before they get out of their trucks. So there is no question about the tightness of the market hurt just a little bit, biggest rival in that little business if you have a little non operator fleet is not as stabilize as company fleet like our LTL business. We all know that. There is more exposure from an owner/operator fleet and we a just had rash of I would call severity accident that have because we if have a 350000 FIRs in our US business it impacts that little company so much when we have those situations so, I don’t want to say it continues to produce cash David but I think you have sense of where our priorities lie.
David Ross - Stifel, Nicolaus & Co
Yes I think does it make sense to continue downsizing that for your operating operations in terms of may be increasing safety standards or how are you going to about kind of limit the accidents.
Rick Gaetz
Yeah we have got a several issues there under review because it remains a piece we have got to manage right. So we got several areas that are under a review there with our management team and we will kind of determine the course there and go forward.
Operator
Thank you, you have another question from Jason Seidel.
Jason Seidel - Dahlman Rose
Rick a couple of quick questions, you have talked about US LTL yields improving since February can you give us the break out on a quarterly basis September on?
Rick Gaetz
Ask your question again Jason, I couldn’t hear it.
Jason Seidel - Dahlman Rose
US LTL yields you said improved basically mostly since February. Can you give a September and October compared to August before.
Rick Gaetz
September was 30 basis points and October will be in 1.5, 150 basis point ranged.
Jason Seidel - Dahlman Rose
Okay. That’s correct. You mentioned obviously the rise and I know its early, It seems to be speaking of your outlook for the sequential improvement yield. Could you talk a little bit about the negotiations on the contract basis, because that’s really where the interest is going to recovered going forward.
Rick Gaetz
That’s right.
Jason Seidel - Dahlman Rose
Could you give us some color?
Rick Gaetz
Yes. We continue to, we are not going backward on price not gone with it anywhere. So, we’re moving the bar forward in every situation on renewals, a 3% increase for us would be an extremely small increase. It would be with the clients, that was very stable with us through the downturn, very responsible for the downturn.
Anyone that we move pricing on during the recession, we are looking for high single digits, best price increases and in some cases double digit price increases. So we’re taking advance that we feel is fair in the market place, fair to our customers based on how we dealt with them through the down turn.
So, we’re going cash-by-cash, but I can tell you we’re not moving anything in the wrong direction. We are moving everything in the right direction and its generally mid high single and double-digit increases in some cases.
Jason Seidel - Dahlman Rose
That’s very helpful, Rick. When you talked about your prior gains here in early 4Q, the comps gets more difficult year-over-year, if I’m not mistaken, don’t they?
Rick Gaetz
Yes. We started in mid-last year from economic perspective and we started moving the bar more materially. But, one of the points I made in my little preamble there was, you know, we are very happy right now, growing at 4% or 5%. We would like it to be 7% or 8%.
But, its going to come at the expensive deals if its not high. And again, I want to irritates like we are not casual with these things. Our customers expect and deserved wonderful service and we want to give them that. And, the only way we can give them that is through generate returns that are much better than the returns that we had generated for the last three years.
So, I think generally there is an understanding there but we don’t take it for granted. We’re managing and negotiating every single renewal but there is no question that we could have tonnage further if it went for our focus on combining that growth with yields activity.
Jason Seidel - Dahlman Rose
And, Rick. Can I assume that your commentary. Since that comparisons are getting more difficult, you are pushing pricing but yet your growth rate in 4Q that you have seen be following off in tonnage. Can I assume now that more of the industry you’re starting to push price thus enabling you to maintain that growth rate?
Rick Gaetz
Yes. As you know, I can’t speak individually for any of the periods but it feels like there is more of a willingness to move price that’s feels like that the players are tired of operating that’s the level they can operating.
And, I think everyone just come to an understanding, it just feels to me that people comes and understand that we can contemplate.
Jason Seidel - Dahlman Rose
Okay. One more and then I’ll take the rest offline. Well, Sean, talk a little bit about the new facility brought on the quarter, net on net on an operating basis, would they kind a you think was start up cost? And, now they’re going to add to 4Q now?
Rick Gaetz
Yes. They were just steadily beneficial, very steadily beneficial. First half of the quarter, probably a little bit hurt than the back half of the quarter a little bit benefit. On balance slightly beneficial, should be better in Q4.
Operator
Thank you. Our next question is from Jim Larson.
Jim Larson - Neil Deaton Davenport & Company
Yes. Just wondered if you could just give some color on what are the big things going on, with your LTL operations now whether it’s across regional selling, what going with the line houses, just give some color on how the system is working and what are the big things you’re working on right now?
Rick Gaetz
I mean, the system, Jim, the system is fluent. I think our sales force has bigger doubt, the new sale, with the focus remains on regional activity with in the regional or for a lack of better term or I called super regional opportunities.
So our link with whole should continue to grow but not at the expensive losing regional business, much of our new business will be longer hold only because our territory is rich further now but still with primary regional focus.
The line hole model is working bettered not optimal yet. Our routing metrics can still improve and we’re working on that. We have no, there’s no compartmentalization left in our business. All the regions have managed regionally but with a single company focus so we have all the issues down, all the separate line haul groups had been put together. So we have got all our management teams in every part of our business whether it is stock, operations, finance HR everything has been brought under central, personal single umbrellas you will so all those very usage down and the completely fallen where in the last quarter so continue progress there we are still having that significant focus on purchase transportation which may progress in the last couple of months but we can to continue to bring that down.
Our lower in quality is I would categorized is good it’s not exceptional our desires to make it exceptional so we have got opportunity there and that’s getting significant focus now. Many areas in our business I said earlier finished another point, point and a half just enough running our business better so we were chasing after that really hard Jim but the rest of the big games will come from price and your earlier comment our ability to grow the business.
Jim Larson - Neil Deaton Davenport & Company
Great and then just detail could you give out words your own tight words for the quarter.
Rick Gaetz
No we have not given out the detail but the few, few recovery was constant this quarter three I am sorry quarter two. So there was no shift in surcharge and this few recovery level was helpful.
Operator
The last question comes from Thomas Albrecht of BB&T Capital Markets please go ahead
Thomas Albrecht - BB&T Capital Markets
Hey guys, I missed the first few minutes right and you may have covered this I heard you. I wanted to get a little bit more of specific feel for the purchase transportation and the Jill was up 27% year over year little over 28 million and I know that figure will be in 10Q but what was in proximately absolute number that was after September quarter.
Rick Gaetz
Hold on. Sean that is for you the question
Sean Washchuk
It is about 29.9 million.
Thomas Albrecht - BB&T Capital Markets
And maybe you have talked about this part of it overturns get’s better you are not going to invest that much in equipment or hire whole lot more people but it seems to be one of the major imperilments to getting returns better can you talk about how quickly you might be able to bring that figure down let’s say over the next four or five quarters.
Rick Gaetz
It’s a big number obsessively in our organization it’s a big number and it’s that a highest levels now some of the, some of it, some of the purchases there for all the right reasons it’s there and in balance lanes and it’s there in some of the longer hall range from US to Canada and we have purchase transportation our Canadian business through the railways and our business from growing there so. Some of it dissolve very good but what we would call the question you really asking is disco unary purchase transportation purchase where we had situations this is why I feel that past the so type but we had situations where we’re purchasing in both directions which is absurd. So, its just a matter of managing the growth and replacing that purchase transportation with company drivers and that added peek and we still do a little bit of that.
So, there is an opportunity for us to drive it down for just transportation above 50% more expensive than it is than running our own equipments, our own drivers in balance main, so we’ve got a big focus, trying to hire in the right markets. The market was – the labor market remains pretty tight which on balance is very good news.
We think as we bring in on more tractors would be, be satisfied. Slowly but surely with additional drivers.
Thomas Albrecht - BB&T Capital Markets
Okay. I think, let me just double check some item. That’s all I had so, thanks for your time.
Operator
Thank you. We will have one more question here from Jack Waldo. Please go ahead.
Jack Waldo - Stephens Inc
Hi, guys. I couldn’t let the conference call go without addressing this that have you given the pending vote from one of your bigger competitors. Have you seen any changed in shippers activity associated without any concerns, any freight diversions from concerns or anything like that?
Rick Gaetz
No. Nothing that would be a worthy of calling those numbers.
Jack Waldo - Stephens Inc
How much excess capacity do you guys have in your network right now? I’m not talking about employees, I’m just talking about infrastructure?
Rick Gaetz
Facility capacity?
Jack Waldo - Stephens Inc
Yes, sir.
Rick Gaetz
Yes, We can grow our business in another 20%, 25% in our existing facility network now. It might run into a pinch in one city or another but that’s very easy to managed. We do that all the time. So, there is lots of ability to handle with additional freak in our network subject to bringing on the equipment and bringing on the drivers and we’re going to do that under the appropriate return model.
Jack Waldo - Stephens Inc
If the teams to vote doesn’t go in the favor of the company and can simply start to surface about the long term liability. My two questions are, how you would you guys, what would be your operating philosophy in that environment? And two, how quickly could you ramp up the capacity and I am guessing you’re pretty close to 100% capacity utilization is the potential employees?
Rick Gaetz
Yes. From an employee and equipment perspective, which actually we can grow a little bit and we’ll take. If there were any big events I think every one would struggle out of the gate and would clearly kind of level out over a period or one or two quarters but there is not a magic one way with 25% search in activity. Obviously would have a positive impact from the pricing prospective but really Jack, we’re managing our business to tried to deal with what we think, how we think we can go out organically and where we concrete, where we think we have to move the price to the managing prospect.
Jack Waldo - Stephens Inc
And I’m guessing that’s the type of environment that could allow you to triple earnings in a year?
Rick Gaetz
For sure. Ay big surgeon activity will have, more importantly will have a corresponding impact on pricing. I hate to be so repetitive on the pricing issue but that’s where the magic is. That the magic you know where else other than there.
Operator
We have another question from Neal Deaton.
Neal Deaton - BB&T Capital Markets
Two quick questions. How many billings dates did you have in the quarter, this quarter and a year ago just for our model?
Rick Gaetz
I can’t just around 64, 64 but
Neal Deaton - BB&T Capital Markets
64, 64?
Rick Gaetz
Yes.
Neal Deaton - BB&T Capital Markets
Okay. And then, I don’t believe you all gave the tonnage breakdown by a month if you did. I apologies to ask you to repeat it. For July, August and September and the year-over-year tonnage?
Rick Gaetz
No. We didn’t and I don’t have that, my figure keeps like you can get shown offline and give it to you.
Operator
There are no further question.
Rick Gaetz
Again, everybody we appreciate your interest today, we’re happy to report continued progress and we look forward to speaking to you at the end of the year. Take care.
Operator
Thank you. The conference is now over. You may disconnect your lines.
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