Swift's (SWFT) CEO Jerry Moyes on Q2 2014 Results - Earnings Call Transcript

Jul.25.14 | About: Swift Transportation (SWFT)

Swift Transportation Company (NYSE:SWFT)

Q2 2014 Results Earnings Conference Call

July 25, 2014 11:00 AM ET

Executives

Jason Bates - Vice President, Finance and Investor Relations Officer

Jerry Moyes - Founder and CEO

Richard Stocking - President and COO

Ginnie Henkels - Executive Vice President and CFO

Analysts

Operator

Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Swift Transportation Second Quarter 2014 Question-and-Answer Session. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

Thank you. Mr. Jason Bates, you may begin your conference.

Jason Bates

Thank you, Lisa. We would like to thank you all for joining us here this morning. As a reminder, we have posted a comprehensive letter to stockholders, which summarizes our results and it’s found on the front page of our Investor Relations website.

We’ll start the call today, as has been the practice with our forward-looking statement disclosure. This call contains statements that may constitute forward-looking statements, which are based on information currently available, usually identified by words such as anticipates, believes, estimates, plans, projects, expects, hopes, intends, will, could, may or similar expressions which speak only as of the date the statement was made. Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are inherently uncertain, are based upon the current beliefs, assumptions and expectations of company management and current market conditions, which are subject to significant risks and uncertainties as set forth in the Risk Factor section of our annual report Form 10-K for the year ended December 31, 2013.

As to the company’s business and financial performance, there are many factors that could cause actual results to differ materially from those in any forward-looking statements. You should understand that there are many important factors in addition to those discussed and in our filings with the SEC that could impact us financially.

As a result of these and other factors, actual results may differ from those set forth in the forward-looking statements, and the prices of the company’s securities may fluctuate dramatically.

The company makes no commitment and disclaims any duty to update or revise any forward-looking statements to reflect future events, new information, or changes in these expectations.

In addition to our GAAP results, this call also includes certain non-GAAP financial measures as defined by the SEC. The calculation of each measure, including a reconciliation to the most closely related GAAP measure, and the reasons management believe each non-GAAP measure is useful are included in the schedules attached to our letter to stockholders.

So with that out of the way, I would like to recognize the members of Swift’s management team on the line today. We have Jerry Moyes, our Founder and Chief Executive Officer; Richard Stocking, our President and Chief Operating Officer; and Ginnie Henkels, our Executive Vice President and Chief Financial Officer. Again, my name is Jason Bates, Swift’s Vice President of Finance and Investor Relations Officer and I will be moderating today's Q&A session.

We appreciate all the questions that were submitted prior to the dead line last night. Similar to quarters passed, we have categorized them and we’ll do our best to provide detailed responses to each. To the extent you have additional follow-up questions, please feel free to reach out to me after the call.

So, with that, we will start the Q&A portion of the call today with a couple of questions on EPS and guidance.

Question-and-Answer Session

Jason Bates

What caused your outlook to deteriorate so quickly relative to guidance provided in the first quarter? How confident can we be that the guidance provided today will not need to be revised downward again?

Jerry Moyes

All right. Good morning, everyone and thanks, Jason. I will answer the first part of that question. This is a great question. Last quarter we gave guidance for the second quarter of $0.30 to $0.35 and for the year of $1.31 to $1.41. As you know now, we have met our guidance in the second quarter, but since Q1 we have weighed factors currently transpiring in the industry with regard to capacity, demand, our customers and our competitors.

We have also analyzed Big Data relative or related to our fleet. Our turnover trends, our safety trends, driver surveys, et cetera. And as we discussed in the letter, we have decided that best investment at this time for the future of Swift is to invest in our drivers.

We are very excited about this because we want Swift to be the carrier of choice for drivers across this industry. We want drivers to start with Swift in our schools and remain was swift until they retire.

We want to deliver better life to our drivers because they deserve it and by taking care of our drivers, they will take care of our customers who need us now more than ever. And by taking care of our customers, they should take care of you, our shareholders.

We’re in the process of rolling out something larger than we have ever done in our line-haul fleets and this was not contemplated when we gave our guidance last quarter. But we expect that this will help improve our retention, our recruiting, our utilization, as we have fewer unseated trucks. Our safety and our other customer service, as we have more tenure drivers, they should help fuel our growth and profitability into the future.

Ginnie Henkels

Yeah. Question regarding the level of confidence you can place in our guidance is a fair one. I will tell you that there are many variables that go into our numbers each quarter as you know. We try to be conservative and these assumptions when providing numbers to you as we prefer not to set ourselves up to disappoint.

The second half guidance we have given is our best estimate of how we believe things will play out. We have a same significant driver wage increases and have assumed that this will help fill some trucks going forward. But the assumptions relative to the growth are conservative.

We also have assumed conservatism with regard to insurance as we guided in the better. But as we’ve discussed in the past, this can be volatile. We will look to all areas of our business to drive our results, similar to what we did in the second quarter when we utilize our new truck retail department to take advantage of the strengthening used truck market. This is a long answer to say, we’ve obviously cannot guarantee the guidance but we are doing everything in our power to deliver on the numbers and more.

Jason Bates

With respect to your guidance, is the sequential increase primarily related to implementing new contractual rates?

Ginnie Henkels

We have been and expected too continue to realize rate increases with our customers. Although, a portion of those increases are going to be used to pass on to drivers in a form of meaningful wage increases at this quarter, we expect to see growth in earnings in the second half of this year associated with the improving margins and the dedicated intermodal segments, as well as realizing year-over-year revenue growth in each of those areas. The quarter will also be aided by improvements of Central combined with the gain on sale at Central facility and interest expense reduction.

Jason Bates

Can you discuses why the third quarter of ‘14 guidance is so light? While I recognize you provided color around the driver situation, this issue is a know issue for the entire -- that the entire industry is dealing with?

Ginnie Henkels

Yeah. Q3 guidance is lighter than what you may have anticipated given that the driver increases we are talking about are more like a step function and will increase immediately while the rate increases from customer and other operational improvements that are expected to help compensate for this increase will occur over time. Therefore the bigger cost impact is in Q3.

Jason Bates

How much of a benefit are you getting in the second half from lower interest expense?

Ginnie Henkels

It should be about $0.04 to $0.05 of EPS weighted more heavily towards the fourth quarter as the notes will not be call until November.

Jason Bates

What makes you so confident in the 4Q ‘14 guidance range? It looks really aggressive on the surface even with strong project work associated with the holiday season. Have you left any room for winter storm or two and an adjustment to insurance accruals based on adverse development of prior period claims?

Jerry Moyes

Yeah, we are confident in the fourth quarter for many reasons. The first is as you mentioned the seasonal business. We’ve all ready contracted from more project business this year than last. In Truckload, we are anticipating additional rate increases, utilization improvements and some small fleet growth.

In Dedicated, we’re expecting the new business brought on in the first three quarters of the year to move through the start-up phase, which will drive better margins on a larger base in Q4. In Intermodal, we had significant new business starting in the third quarter that will drive volumes and profitability.

In Central, we have been making improvements each month and are excited about the progress we're making with plus 1 and other initiatives. The driver wage changes should help to stabilize and grow their fleet as well and will also have the benefit of the interest expense reductions associated with the call of the notes in November as Ginnie mentioned earlier.

We have left some room in the guidance range based on conservative assumptions with insurance and volumes and other items that many variables are in play, rest assured the entire organization is working to achieve these numbers.

Jason Bates

There were a couple of questions on volume and rate trends. The first was how would you describe the health of the big box retailers, which have always been your core customers. They seem to be struggling as middle America struggles with rising food costs and healthcare cost and local taxes on top of decline in real incomes.

Jerry Moyes

While we've seen some of these reports, citing pressure on the big boxes retailers. To be honest we haven’t felt that pressure. Out of our top 20 customers, 8 of them are what we call big box retailers and we have seen growth in 5 out of the 8. Overtime, our top 20 customers have migrated from being predominantly big box retailers through a more diversified group including consumer products, food and beverage.

Jason Bates

Can you describe how the bid season unfolded and specifically discuss the level of rate increases achieved? Further can you discuss whether you're -- whether you experienced any changes in shipper behavior during the bid season? For example, did you see shippers holding back certain lanes or entire books of business from the bid process, any pushbacks on surcharges versus rate increase et cetera?

Jerry Moyes

It depends on customer and lane. In some cases, we’ve received north of 20%, but in others, cases, we’ve received much less. However as we disclosed in our letter for the second quarter our average increase in revenue per loaded mile was 3.7% in the Truckload segment. And we expect that to increase in the latter half of the year to 4% to 5%. As we’ve discussed previously, our bid season is here around, and it has been strong.

It is no secret that capacity is extremely tight in the market right now. And our customers know it cost more to secure capacity today. We were successful in getting rate increases on a number of our lanes while keeping them out of the bid process.

Jason Bates

There were several questions about the Dedicated segment. Over the dollar amount of the impacted Dedicated start up contracts hurt your results by in the second quarter, both at Van and in the big CRS deal? The margin deterioration suggest the amount at Dedicated, excluding CRS was $10 million to $11 million. Is that in the ballpark?

Ginnie Henkels

The dollar amount of the impact on our Dedicated recordable segment for a new Dedicated business that begin this year with approximately $4 million to $5million in the second quarter. The large Dedicated account in our CRS segment did not startup this year. It actually began last summer, but given the unique operating characteristics of that fleet, it has taken longer than normal to achieve appropriate profitability level, which we will talk about more in a minute.

Jason Bates

Of the new business contracts wins this year in the Dedicated segment, what is the average contract length? If startup cost were and remain material headwinds to operating results, why not include a startup surcharge to the business in this tight trucking environment?

Jerry Moyes

Yeah, the contract length in our Dedicated segment generally ranges between three and five years. Historically, we have focused our attention on the overall three or five year return of the deal rather than excessively focusing on the first quarter or two. Our customers prefer consistent, predictable expense, and we're okay with absorbing some of the upfront cost knowing that we will make it up, and then some of the duration of the contract.

However, over the past couple of years. We have seen increased demand for our Dedicated business as well as increased startup requirements and expectations from the customer. The combination of these two items has resulted in the short-term deterioration in our Dedicated segment margins these past couple of quarters.

I would point out that even though the OR is depressed in the startup phase, the overall contribution margin dollars are increasing which means this the growth is EPS accretive. That fact combined with the driver friendly nature of the business makes it an attractive growth engine even if it is temporarily at expense of the OTR fleet, which is less driver friendly.

Having said all that, your point about startups surcharge is a great one, and is something that we have been discussing with our customers this year and something we will continue to address. We have long-term strategic partnerships with our Dedicated customers. And I'm confident that if the demand continues at the current pace, we will strike a happy medium in this regard. They understand and appreciate that we and our shareholders would also like to have predictability in the cost side of this business.

Jason Bates

What was the magnitude of the Dedicated start-up cost in the quarter and how much is expected in the third quarter and fourth quarter?

Jerry Moyes

As mentioned previously, the cost in the second quarter was approximately $4 million to $5 million. We have two large Dedicated opportunities starting at this month. So we would expect some additional startup cost for those two accounts this quarter although we don't expect them to be as significant as what we experienced in the first two quarters this year.

It is difficult to predict the total cost for Q3 and Q4, given the fact that this -- at this point in time although we have several opportunities in the pipeline, we don't know exactly how much new Dedicated business we will be awarded.

Jason Bates

Assuming the normalize level of contract renewals in the Dedicated segment, what are management’s targets for sustainable profit margins in the business. When should investors expect the segment to achieve this level of profitability?

Jerry Moyes

As we pointed out on our Q2 letter for our shareholders, our Dedicated segment has been operating in the 86% to 87% range for last three years in which we experienced a more normalized level of contract renewals. As such, assuming normalized contract levels, award from here on out, we should expect to return to these levels of profitability in the fourth quarter of this year. We’re very confident and committed to our Dedicated fleets and expect this to be a growth engine going forward.

Jason Bates

Dedicated margin continue to miss expectations. Why are you still aggressively adding trucks. What is your plan to fix Dedicated? Please discuss the rationale for taking drivers out of Truckload and placing them into Dedicated given the margin differential both currently and relative to the normalized Dedicated range? Is this a necessity given the requirements of fulfilling Dedicated contracts? Is there an ability to reprice Dedicated contracts to recover higher driver costs?

Jerry Moyes

Yeah. Historically, the adjusted operating ratio of our Dedicated business has been equal to or better than that of our Truckload business. And when you take into account that in several of our Dedicated contracts, we don't own the trailing equipment, the ROIC can be better and Dedicated than in Truckload.

We agree that there have been a lot of short-term startup costs, which has cost some people to question the growth in our Dedicated segment. However, we believe the majority of those are behind us. So we will now focus our attention on improving the operating statistics of each fleet and actively work with sales and operations on any underperforming accounts.

Above all as we touched on previously, the Dedicated business is much more driver friendly. It's more consistent, predictable and generally allows for more regular home time, all of which are desirable in a difficult driver retention market like that which we are facing today.

Regarding the latter part of the question about repricing, the answer is yes. We are currently talking to our customers about the need to get more in the hands of our drivers.

Jason Bates

There was a question for, related to the Intermodal segment. Box turns in Intermodal showed nice improvement and pricing across the Intermodal industry seems to have been pretty solid. But the segment was still unprofitable. What do we need to see for the Intermodal segment to reach consistent profitability and how long will it take?

Jerry Moyes

Yeah. The Intermodal team made significant process in increasing their efficiencies and utilization of its core dry COFC network in Q2. Overall TOFC and COFC volumes in the dry side of the business increased 13.8% over Q2 of 2013. In our primary Intermodal growth area dry COFC, we experienced 15.7% increase in volumes over Q2 of 2013.

The Central acquisition included a relatively small refrigerated TOC division. As this business has become fully integrated with the Intermodal division, it has better or it has become clear that there were significant profitability challenges with this segment. As a result, the refrigerated TOC network has been redesigned and simplified along with taking price increases and culling unprofitable freight.

These efforts substantially reduced refrigerated volumes and had an impact upon overall -- the overall division profitability and growth in Q2 of ‘14. Profitability was also impacted by the trailing aspect of severe winter weather which included increased ramp storage, claims and dray cost.

We will improve the overall profitability of our Intermodal segment by increasing container turns, which will improve as recent significant bid awards began in Q3. Additionally, increasing the percentage of drays performed by Swift power will reduce dray cost and improve service. We have grown our internal dray fleets drivers and owner operators by 46% over Q2 of 2013.

This has resulted in the division starting to exceed 70% of dray’s performed with Swift power. Notwithstanding the increased recruiting cost, this investment has delivered a substantial improvement in the quality of drivers and will create the infrastructure necessary for future revenue and profitability growth. To cut straight to the point, the answer is that we expect to be profitable for the second half of this year.

Jason Bates

You stated in the press release that your best potential investment is in your drivers. At what stock price does your best investment become share repurchase?

Ginnie Henkels

That number is moving target which depends on what our other options are. We weigh this against several factors including potential acquisitions, internal investments, debt reduction et cetera. However, we currently do not have a share repurchase plan approved by the board and do not have immediate plans to repurchase shares at this time. Although depending on what happens with the stock today, we may change our thinking.

Jason Bates

There is another similar question. We believe that Swift can now buy back stock as a part of its new credit agreement. If the stock is down materially, do you plan to start buying back stock? Do you have a buyback authorized?

Ginnie Henkels

Right. So as I just mentioned, it is permitted by our new credit agreement to buy back stock but we currently do not have a plan approved by the Board.

Jason Bates

Where do you stand with the experimental uses of natural gas engines? Are we closer to a broader deployment across larger sections of your fleet?

Richard Stocking

As we’ve previously discussed, we’ve began adding trucks towards the end of 2013 and through the first half of 2014. So we’re close to 100 trucks in operations today and another 100 on the way. We’ve had to work through some issues but we’re very encouraged by our recent trends. Our customers are also expecting us to use these natural gas engines. So the long-term outlook is very encouraging.

The primary limitation today is that natural gas industry’s infrastructure, which limits us to creating fleets only in a few select areas. So as the infrastructure grows, we will be able to expand natural gas to more locations. But in the next few months, we will have seven natural gas stations at or on facilities or very close and should allow us to strongly evaluate future purchases in 2015. We are very bullish on our natural gas projects.

Jason Bates

Have the Teamtsers endeavored to unionize your drayage drivers in Southern California?

Jerry Moyes

We really don’t have a dray fleet at the port anymore, but no, there has not been any effort from the Teamtsers on this front.

Jason Bates

Can you give us an update on your trans-border operation into and out of Mexico? How about the trans-border into and out of Canada? Has it been expanding even with the troubles experienced by Target in entering that market?

Richard Stocking

Well, Jerry and I were just in Mexico visiting with our customers and we’re very pleased and encouraged with the growth and progress of our operation in infrastructure in Mexico as well as the talented team that we have there. The volumes are strong and growing.

Regarding Canada, we have three fleets running into and out of Canada today. We are early in the process but are looking for growth opportunities. Just because certain retailers are having issues, it doesn’t mean the whole country is struggling. Our long-term goal is to strive to replicate what we have in Mexico and do that up in Canada.

Jason Bates

There were several questions about our CRS segment. The first is, Central has missed expectations for the past several quarters. In retrospect, was the Central acquisition a mistake? How can it be fixed? How much time is management spending on Central?

Richard Stocking

The Central acquisition was the right thing to do for this company. It enhanced our suite of services and filled the gap in our service offerings that was requested from our customers. Admittedly the acquisition and integration has been more difficult than we originally anticipated. However, we as well as the CRS team are excited about the improvements we are beginning to realize and the potential additional upside this segment will contribute to our earnings in the future. I am currently here with the CRS team in Salt Lake City and all of our management team is committed to and invested in ensuring that the Central team and management are successful.

Jason Bates

The acquisition of Central has been a bit bumpy for the company. While we have seen sequential margin gains in the second quarter, you have fairly easy comparisons. When should we expect year-over-year improvement?

Richard Stocking

We expect to realize year-over-year margin improvement each quarter for the remainder of this year.

Jason Bates

Did Jon Isaacson have a non-compete at Central? Does he have a non-solicitation clause? Are you worried about Jon Cherry picking talent from Central as cool trends ramp up? Why didn’t you keep him? Who is running Central Refrigerated today and were there severance costs in the quarter?

Richard Stocking

Yeah, Jon did not have a non-compete or a non-solicitation clause. He chose to leave Swift because he felt Swift was not a good cultural fit. We are very excited about the entire management team we have in place and we have the utmost confidence in our new leader, Tork Fulton, who has been an executive at CRS for many years. He is a capable and qualified leader and we are excited about the recent direction and the progress this whole team is making under his leadership. There is no severance related to Jon’s departure.

Jason Bates

I understand the CRS showed operating ratio improvement relative to Q1’s weather impacted results. Why did the segment experience year-over-year margin degradation? How much and how quickly can margins improve in this segment?

Richard Stocking

Primary reasons include the reduced truck count utilization and an increase in unseated trucks stemming from the acquisition, systems conversion and the difficult driver market. The other headwind in the quarter was the unique dedicated operation, which Central began last summer. This dedicated customer was a private fleet conversion that was very different from the typical CRS business which we will address shortly.

Finally, although we do not disclose specific OR expectations by segment, over the long term we believe the CRS operating ratio has the potential to rival our other trucking segments.

Jason Bates

It appears profitability of the Central Refrigerated segment continues to lag expectations following last year’s purchase. What steps are being taken to improve results in the segment? Further management stated Swift customers had pushed for the company to provide refrigerated services implying significant growth potential for the combined entity. What steps are being taken to ensure the company adequately addresses the market opportunities presented last year?

Richard Stocking

With the systems integration now behind us and the leadership transition complete, we feel equipped to drive year-over-year margin improvements starting this quarter and it is a trend we would expect to see continue for the foreseeable future. We have completed the training of the sales staff and will begin to be more aggressively cross selling our suite of services going forward. We recently implemented the Plus 1 initiative, which has driven increased utilization across this fleet. Finally, we expect to further realize the previously outlined cost synergies, including the sale of several duplicate facilities this quarter.

Jason Bates

Please elaborate on continued challenges with a large unique dedicated customer in the CRS segment. What does this mean implications cost, etcetera, timing to fix, etcetera?

Richard Stocking

Okay. This account is the one we have referenced a couple of times now. It was a private fleet conversion with the unique operating characteristics different from any other business that Central has ever previously participated in. CRS signed a contract with this customer last summer and has been working with them since that time to improve the operational efficiencies and profitability. In fact, Jerry and I were just up there meeting with this customer this past week to discuss next steps, and I can tell you that the entire CRS leadership team has spent a good amount of time and energy this past couple of months on this account. We are working on a plan with the customer which we hope to have in place before the end of the third quarter, which will allow us to achieve the appropriate levels of profitability on an ongoing basis.

Jason Bates

There were couple of questions related to debt and compliance certificates. Can you walk us through the expected EPS benefits from refinancing that we can expect to see in the remainder of 2014 and in full year 2015? Presumably, these 2014 benefits are included in your revised guidance. Also, please provide an update on your anticipated refinancing plans and potential earnings.

Ginnie Henkels

As far as our anticipated refinancing plans, we expect to expand our AR facility by $50 million by exercising an accordion feature in September timeframe and then we expect to call the remaining 10% note on November 15th of this year. The refinancing activity should drive roughly $0.04 to $0.05 of accretion in EPS in the second half of 2014, and additional $0.18 to $0.19 for the full year of 2015, assuming no significant increases in LIBOR.

Jason Bates

And what was the consolidated interest coverage ratio at June 30th and March 31st?

Ginnie Henkels

At March 31st, it was 6.3 times versus a minimum covenant of 3.25 and on June 30, it was 6.4 times versus a minimum of 3.25.

Jason Bates

As would be expected, there were several questions about drivers. The first, what percentages of price increases are currently going to maintain attract new drivers? And do you expect this percentage to increase in the coming quarters?

Richard Stocking

Yes. As we’ve mentioned earlier, we are instituting a large driver pay increase in the third quarter. If current driver shortages continued, driver wages may continue to increase, but probably not to the extent of the increase we are giving this year to our drivers.

Jason Bates

Why haven’t the driver schools and the new incentive-based compensation approach enable you to do a better job of recruiting and retaining drivers?

Richard Stocking

Keep in mind our driver retention numbers are better than the industry averages. So I believe our driver schools and incentive-based compensations have been a contributing factor to our ability to attract and retain drivers. However, these are not the only factors. We also have to ensure that our pay is attractive to the market if we want to meet our growth expectations.

Jason Bates

What was your average driver cost inflation over the past few quarters? What wage increase are you giving your drivers?

Richard Stocking

For competitive reasons, we are not disclosing exact amounts, but driver wage increases have been limited over the past several years aside from increases in select dedicated fleets in various incentive programs.

Jason Bates

We have heard from several public truckload companies that competition for drivers is getting more and more intense. Some truckload carriers started to compete so aggressively that they offer sign-on bonuses to student drivers with no strings attached. Could you comment on the current level of competition for drivers in the industry and your expectation going forward?

Richard Stocking

Yes, the driver market is tight and not trending favorably. Driving is a tough job where you spend a lot of time away from home and family and it deters a lot of people. However, we are hyper-focused on making sure we can deliver the best life possible to our drivers. We believe we are better positioned than most companies to provide our drivers with the wide variety of opportunities, competitive pay packages, industry-leading miles and predictability in their lives. These factors enable the drivers to choose the path that works the best for them and have a long and successful career here at Swift.

Jason Bates

Our industry contacts expect that roughly a third to a half of truckload rate increases will likely be passed along to the drivers through wage increases or bonuses. Is that in line with your expectation for Swift?

Richard Stocking

As we previously mentioned for competitive reasons, we’re not qualifying the exact driver wage increase at this time, other than to say it is the largest increase we’ve ever taken -- we’ve ever given.

Jason Bates

Is M&A a potential way to deal with the driver shortage? What are the parameters, size, leverage, tolerance, use of equity, etcetera surrounding potential M&A?

Richard Stocking

There is a number of factors we look at when considering potential acquisitions, but there is typically driver turnover resulting from these acquisitions. So the driver component is not the key when focusing on M&A. The parameters of many potential acquisitions will vary depending on the scope and the nature of the target.

Jason Bates

There were a couple last questions related to insurance. Workers comp has been an issue recently. Are these fresh accidents or adverse developments on prior claims?

Ginnie Henkels

In the quarter, with the combination of both, we did have one specific incidence this year that was significant, but in total, as I mentioned, it was the combination of both current year trends as well as some development on prior year.

Jason Bates

And what drove the lower insurance expense in the quarter? And is there a specific reason it reverts back in the second half of ’14? Or is this based more on historical experience?

Ginnie Henkels

In the quarter, the actuarial experience was as we anticipated, but as we mentioned in the letter, we’re modeling the full year to be consistent with the performance for the full year last year roughly 4.3% of net revenue.

Jason Bates

And with that, in summary or conclusion, we thank you for being on the call today. We want each of you to know that we’re not satisfied with our results this quarter and we're actively working on improving the operating results in our central, dedicated and intermodal segments as we’ve shared with you on the call today.

We’re excited about improvements we have achieved in our truckload segment, which constitutes the majority of our business. We have been very successful in obtaining rate increases with our customers and we expect that to continue. We're using those increases to invest in the most important members of our Swift family, our drivers. And we appreciate your continued support of Swift Transportation. Thank you and have a great day.

Operator

This concludes today’s conference call. You may now disconnect

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