Roadrunner Transportation Systems' (RRTS) CEO Mark DiBlasi on Q4 2015 Results - Earnings Call Transcript

Roadrunner Transportation Systems Inc. (NYSE:RRTS)

Q4 2015 Earnings Conference Call

February 3, 2016 4:30 PM ET

Executives

Mark DiBlasi – President and Chief Executive Officer

Peter Armbruster – Vice President, Chief Financial Officer, Secretary and Treasurer

Analysts

Rob Salmon – Deutsche Bank

Ben Hartford – Baird

Art Hatfield – Raymond James

Thom Albrecht – BB&T

Scott Group – Wolfe Research

David Ross – Stifel

Operator

Greetings and welcome to the Roadrunner Transportation Systems 2015 Fourth Quarter Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to CEO, Mark DiBlasi. Please go ahead, sir.

Mark DiBlasi

Thank you very much. Good afternoon, everyone. Thanks for joining us today for our fourth quarter 2015 earnings conference call. With me today is Peter Armbruster, our CFO; and Curtis Stoelting, our new President and Chief Operating Officer. After some comments from Peter and myself, we will open up the call to questions. But before I begin, I’ll turn it over to Peter to discuss the Safe Harbor Act.

Peter Armbruster

Thanks, Mark. Before we begin, I’d like to remind everyone that a number of statements made today will be forward-looking statements that relate to future events or performance including our annual 2016 guidance. These statements reflect our current expectations and we do not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in these or other statements will not be realized. Please be cautioned that these statements involve risk and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from the forward-looking statements.

These risks and uncertainties include but are not limited to, risk related to one or more significant claims in the cost of maintaining insurance. Including increased premiums and insurance in excess of prior experience levels. The cost of compliance with liability for violations of or modifications to existing or future governmental regulations. The effect of environmental regulations, our ability to execute our acquisition strategy and integrate acquired companies, competition in the transportation industry, the impact of the current economic environment, our reliance on independent contractors to provide transportation services to our customers, the unpredictability of and potential fluctuation in the price and availability of fuel and other risk factors set forth in our SEC filings.

Our commentary today will include non-GAAP financial measures, reconciliations between GAAP and non-GAAP financial measures for our reported results can be found in our earnings press release, which we have posted to our website at rrts.com.

Mark DiBlasi

Okay. Thanks, Peter. I’m going to take a few minutes to briefly discuss the strategic composition of the company for those of you who are not familiar with us, which we believe drives long-term performance and I will also provide some color on the quarter current trends and strategic initiatives in the business. Over the course of the past few years, we have significantly diversified our transportation service offering. What was once a one-dimensional long-haul LTL-only service has transformed into a multi-dimensional fully diversified business providing multiple services that are strategically aligned for cross utilization of assets and cross-selling of services.

We now offer a full complement of solutions including customized and expedited less than truckload, truckload logistics, freight consolidation, inventory management, transportation management solutions, intermodal solutions, on-demand expedited services, international freight forwarding, customs brokerage, and comprehensive global supply chain solutions. We utilize proprietary web-enabled technology systems in a broad network of transportation providers comprised of independent contractors, employee drivers and purchase power, serving a diverse customer base.

Although we service large national accounts, we primarily focus on small-to-mid size shippers. Our business model is scalable and flexible and our cost structure is largely variable and requires minimal investment in transportation equipment and facilities as compared to an asset-based company, which this enhances our free cash flow and returns on our invested capital. We report three business segments, truckload logistics less than truckload and global solutions. These segments complement each other by allowing us to offer all services to our broad customer base. By cross-selling each segment services we have the ability to build density at a more rapid rate, which increases the opportunity for organic growth and enhances the customer relationship.

We control a significant amount of capacity in our network by utilizing independent contractors and smaller carriers where we represent a substantial portion of their business. We believe this provides us with a strategic advantage over other asset like providers as we expect capacity to continue to tighten in the future. We currently have over 4,500 independent contractors and drivers in our fleet.

I am going to start with some overall business comments for our fourth quarter performance. Truckload logistics our largest segment again achieved record operating income and EBITDA levels during the fourth quarter of 2015 despite soft demand in certain end markets and a significant decline in spot market pricing. Operating income expanded 12.5% from $19.7 million in the fourth quarter of 2014 to $22.1 million in the fourth quarter of 2015. EBITDA increased 14.5% from $25.5 million in the fourth quarter of 2014 to $29.2 million in the fourth quarter of 2015.

The truckload segment operating ratio improved from 93.7 in the fourth quarter of 2014 to 92.7 in the fourth quarter of 2015. Our LTL business was impacted the most by the weak freight demand in the general industrial markets that we serve and lower fuel surcharge revenue resulting in decline in both revenues and operating income. While we are implementing sales and productivity initiatives to mitigate the weak economic environment in our LTL business, we expect these initiatives to take several quarters to achieve their full impact.

Our global solutions business generally performed well despite lower global demand with the exception of a major decline in a significant customer’s volumes. This volume decline resulted in a reduction in operating income during the quarter. For the quarter ended December 31, 2015 consolidated revenue decreased 7.8% to $490.9 million from $532.5 million in the fourth quarter of 2014. Primarily due to the decline in freight volumes across most end markets net of new business and the decrease in fuel surcharge revenue, which impacted revenues by $33.3 million quarter-over-quarter.

Despite economic headwinds our operating ratio improved from 95.5 in the fourth quarter of 2014 to 95.1 in the fourth quarter of 2015, which resulted in a slight increase in operating income quarter over quarter. Furthermore, EBITDA increased $1.2 million to $33.7 million in the fourth quarter of 2015. For the year ended December 31, 2015, consolidated revenues increased 6.5% or $122.2 million, primarily due to organic growth in excess of weakened demand in many end markets and a decrease in fuel surcharge revenue.

Operating income improved $1 million over the prior-year. Our EBITDA increased $8.2 million from $120.8 million in 2014 to $129 million in 2015. Including the impact of $1.2 million in severance expense to $5 million charge associated with the termination of certain IC lease program - or purchase guarantee programs and $0.6 million acquisition transaction related expenses. EBITDA was $135.8 million for the year ended December 31, 2015 compared to $123.1 million for the year ended in 2014. When adjusted for $2.3 million in acquisition transaction expenses in 2014. In our Truckload Logistics segment, as previously mentioned volume declines and lower fuel surcharges negatively impacted truckload organic revenue growth.

Besides the overall truckload financial results for the quarter, I wanted to provide a bit more clarity to our truckload segment since many of you are more familiar with our LTL segment. Overall, our truckload segment revenues of $305 million in Q4 are comprised of the following business units. OEM services, which includes ground and air expedite, truckload warehouse and consolidation services for our major OEMs accounted for approximately 48% of the Truckload revenue for the quarter.

Refrigerated truckload accounted for approximately 23% of Truckload revenues for the quarter. Brokerage accounted for approximately 14% of Truckload revenues for the quarter. Intermodal accounted for approximately 10% of Truckload revenues for the quarter. And warehousing consolidation and inventory management accounted for approximately 7% of Truckload revenue for the fourth quarter.

Our Truckload segment operates approximately 2,700 tractors under Roadrunner operating authorities, about 1,000 tractors operated in our refrigerated unit, 900 tractors in our intermodal and 800 tractors and 11 aircraft operate in our OEM services.

Our OEM services group experienced solid customer demand and more new business wins in the quarter resulting in pro forma revenue growth of over 7% year-over-year. Although expedite pricing was weaker, consistent with spot market pricing.

Margins expanded in Q4, as we successfully captured more air and ground expedite trips on our own fleets with substantial awards for new ground expedite business for 2016. We expect to continue the ability to capture more expedites business within our broad network.

Our refrigerated units is heavily weighted towards refrigerated food items as described last quarter continued spot market weakness and fuel price declines contributed to a revenue decline of approximately 18% from the prior year quarter. Although operating margins stay fairly steady, our focus remains on improving truck productivity and targeting contracted business to continue to decrease the dependents on spot market in backhaul lanes.

In our brokerage unit, revenue stayed steady from Q3 levels and operating margins again we’re slightly up. Transportation cost continued to decline in Q4 helping us to improve the margins. Our intermodal business declined by 13% in Q4 reflecting continued soft demands in most regions and declining fuel prices. Good cost management and improved yield allowed our intermodal segment to continue to expand margins in Q4. While we anticipate demand to remain soft in the near term, we have aggressively added new business building into Q1 to offset declines in the broader market.

Our warehousing freight consolidation and inventory management business, which typically begins it peak season in September, for distribution of customers products to large retailers showed similar softness, but we were able to sustain operating margins through improved efficiencies and new customer additions. In our LTL segment, the LTL freight environment continues to be weak. Our industrial market based shippers continue to language in the current economic environment. The following quarterly metrics for our LTL segment reflect the current environment. Tonnage was down 16.4%, weight per shipment was down 6%, shipments were down 11.1%, revenue per hundredweight, excluding fuel, was up 5.7%, with fuel was down 0.2%.

Contract renewal pricing was in the 3% to 4% range. And our linehaul cost per mile was $1.24 which was down $0.05 from last year. In response to the current LTL environment we have implemented strategic initiatives across the LTL network with a focus on productivity and new business growth as well as improved operational productivity and service consistency. We expect these initiatives to positively impact LTL performance over the course of several quarters to achieve their full impact.

With regard to global solutions, global solutions is comprised of our domestic transportation management solutions and all of our international services. We’ve had revenue decline of $9.5 million year-over-year. The decline was due to a number of factors including lower volumes across all customers, including a major decline in volume for significant single customer. Fewer exports as a result of the dollar – was impacted by fewer exports as a result of the stronger dollar in overall weakness in the international markets.

Overall, we do not currently foresee a significant rebound in demand characteristics or spot market pricing in the first half of 2016. Accordingly, we intend to aggressively balance cost with current and anticipated business levels including new business awards. We do continue to see growth and expansion of our cross-selling initiatives. 58% of our total revenues are generated by customers using multiple services in our network. This is up from 54% last quarter and up from 53% last year in the fourth quarter.

In summary, we were pleased with the rebound in operating performance due to the initiatives we undertook in the quarter as compared to our poor third quarter. And our improved operating ratio year-over-year, especially when you consider the revenue headwinds experienced this year in the fourth quarter versus last year. We expect to carry this momentum into 2016.

Additionally, we’re moving to annual guidance instead of the quarterly guidance we have given historically. With fewer acquisitions planned for the future it makes sense to give guidance over a longer-term basis consistent with our strategic goals. As well as if you know our past focus has been on strategic growth objectives to position the company for the long-term. As Peter will discuss more fully, our focus for 2016 will be on organic growth since we now have our desired breadth of services and cash flow generation.

At this time, I'll turn the call over to Peter.

Peter Armbruster

Thank you, Mark. Given that Mark has already provided color around operating results. I’ll walk through some of our other financial metrics. Starting on a positive note, cash provided by operating activities increased over 80% from $40.6 million for the year-ended December 31, 2014 to a record $73.4 million for the year-ended December 31, 2015. This was accomplished due to strong operating cash flow and effective working capital management. Cash used in investing activities in 2015 included $32.8 million for acquisitions and $48.8 million for net capital expenditures primarily for growth and productivity initiatives.

At December 31, 2015, our total debt was $439.4 million and our cash and cash equivalents were $8.7 million. Total availability under our credit facility at December 31, 2015 was $234.4 million. Our long-standing relationship with our middle-market bank group was reinforced with our recent credit facility increase in late September. Additionally, we are in compliance with all bank covenants as of December 31, 2015. While our focus over the past several years has been on strategic growth and acquisition initiatives to position us for the long-term, our focus in 2016 will be an enhancing cash flow from operations and reducing our leverage ratio towards, our long term goal of less than 2.5 times EBITDA.

We believe, we will increase our 2016 cash provided by operating activities beyond our record 2015 levels. With reduced CapEx requirements in 2016, we expect to significantly increase free cash flow in 2016 compared to 2015. Depreciation increased $8.3 million in the fourth quarter of 2014 to $9.5 million in the fourth quarter of 2015 reflecting increases in equipment for growth and productivity initiatives.

Amortization expense in 2015 was $8.4 million, which translates into a $0.14 reduction in diluted earnings per share for the full year of 2015 compared to $5.8 million or $0.10 reduction in diluted earnings per share in 2014. Our projected amortization expense for 2016 is $8.7 million.

Our non-cash compensation expense in 2015 was $2.5 million compared to $2.3 million in 2014. Due to year-end tax through up’s, our effective tax was 35.2% for the fourth quarter of 2015 compared to 37.4% for the fourth quarter of 2014. We expect our 2016 tax rate to be approximately 38.7%. In addition interest expense increased $1.1 million to $5.5 million of fourth quarter 2015, primarily due to the acquisition of Stagecoach, an increase in interest rates compared to the prior-year.

2016 guidance, we expect to achieve EBITDA in the range of $140 million to $150 million in 2016. And we anticipate diluted earnings per share available to common stockholders in the range of $1.30 to $1.45 for 2016.

Our guidance assumes that the weak freight environment will begin to recover during the second half of 2016. That recent new business awards will build throughout the year. And then we will not consummate any new acquisitions. And finally, we expect net capital expenditure requirements to be in the range of $20 million to $30 million.

That concludes our prepared remarks. And we will begin our question-and-answer part of our call.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from line of Rob Salmon from Deutsche Bank. Your question, please.

Rob Salmon

Hey. Good afternoon. And thanks guys. I guess Mark, the last quarter you called out a bunch of initiatives that you guys were implementing with a new LTL network. Could you give us an update in terms of the cost savings that you guys realized in the fourth quarter? And as well as the new initiatives that you’ve put in place more recently.

Mark DiBlasi

Yes. The – we put in the significant amount of initiatives with regard to sales and operational concerns for the quarter, those were initiated at the tail end of the third quarter. We did see some value come out of those through the fourth quarter. The fourth quarter in general the revenues were very low. And but we did start to see improved tonnage numbers as the quarter played out from November through December through January, due to those initiatives we are starting – we went in and revamped the sales alignment.

We re-incented our sales people. We implemented the specific metrics and productivity measures, target accounts. We’ve seen those come to fruition as the quarter played out from a productivity and operational efficiency perspective. We significantly impacted our linehaul cost. We’re able to drive our linehaul cost per mile down another $0.05 over what we did last year in the same quarter. So we started to see a lot of those initiatives play out and start to positively impact the performance of LTL.

However, that being said as I said a couple times in my prepared remarks, we still believe it’s going to take a few quarters to get the full impact of those initiatives to get LTL back into a acceptable range of where we believe it can operate.

Rob Salmon

Appreciate that color. I guess Peter shifting over to the guidance, can you give us a sense of the how much recovery you guys have built into the full year range and the magnitude of the new business wins that you guys have one at the tail end of the fourth quarter and year-to-date. And what sort of contracted growth is baked into guidance at the high and low-end.

Peter Armbruster

Sure. So I’ll start may be just sort of on the revenue side, because of some of those wins we’re projecting mid-to-high single digits revenue growth percentage wise. And then just walking through by segment just to give you a little bit color. First of all, for truckload, we see our OR increasing or getting worse sequentially compared to Q4 2015 just due to the seasonal freight mix that we have in the first quarter. But then we see that OR improving throughout the year. Then with our LTL segments comparing Q1 2016 to Q1 2015, we’ll see a drop in OR. We had a very good first quarter last year within LTL. So sequentially we see LTL, the OR similar to fourth quarter and then that improving throughout the year. And then finally, the global solutions segment we see that OR is similar to Q4 2015 and then that improving throughout the year also. So you can just see that just was talking through some of the ORs that we see first quarter little bit slower on the OR level and then just improving throughout the year.

Rob Salmon

And in terms of the underlying freight environment, how much is at the low end, are you guys baking in sequential improvement as you move throughout the year? Any color that would be helpful. Thank you.

Peter Armbruster

Yes. So just on a revenue basis, Q1 sequentially similar to Q4 and then that just growing, that revenue level growing off of the Q4 – Q1 levels throughout the year.

Rob Salmon

Okay. Thanks for the time.

Operator

Thank you. Our next question comes from the line of Ben Hartford from Baird. Your question please.

Ben Hartford

Hey, good afternoon, guys. Mark, the IT rollout that you talked last quarter or quarter before last, you’re about halfway through that, expected that to be done over a three-year period. Is that on schedule to finish by the end of 2016, one? And then two, should we expect any step-up in productivity in 2017 or whenever the IT rollout is finalized, a little bit of context there would with helpful.

Mark DiBlasi

Yes. The IT rollout is on schedule. It’s scheduled to finish in the first quarter of 2017. So it will be ongoing throughout this year. Obviously whenever you invest in technology you’re expecting efficiencies and productivities to improve significantly once all of those systems are up and running. We should gain some opportunities to do that throughout the year as different segments of those efficiencies come online. But we’re very pleased with the rollout we’ve done it very strategically from the perception that we’re going to not create any lack of opportunity for our customers or impact our operation negatively that’s why it’s a three-year rollout instead of something shorter than that.

Ben Hartford

Okay, good. And then a couple specifics on the segment. On the TL side specifically on the refrigerated side, what are the expectations in that market? You had called that out like you said last quarter, looks like early forecasts for 2016 shows some growth improvement in meat production. What are your expectations in the refrigerated market in 2016? And then any context to LTL pricing expectations for 2016 as well.

Mark DiBlasi

Yes. On the refrigerated side of the business, we expect, first quarter to start out relatively slow due to seasonality. Then it will ramp up from there. We are seeing some nice activity with our account base. Obviously pricing and truckload is fairly minimal, 1% to 2%. But we do see that ramping up as the year goes on. We're pretty pleased with how truckload and the truckload operation performed in the fourth quarter. We would expect that to improve as the year goes on.

In LTL pricing, we did a GRI in November. We've been able to secure right at just under 4%, I think I gave a range of 3% to 4%, but right under 4% in terms of pricing in LTL. We have seen disciplined pricing in the fourth quarter. We did see and I reported at the end of the third quarter that in our 3PL business there were some aggressive pricing taking place. We were able to deal with that and maintain our market position with those accounts in the third quarter and we did not see that type of pricing or any undisciplined pricing in LTL in the fourth quarter.

So hopefully that will continue. We expect it to continue and given our initiatives with regard to sales in LTL, we would expect some new wins and of course it would be nice if the economy would tick up, but we're not anticipating that in the first half of the year.

Ben Hartford

Okay. And then last one if I could. Peter, how are you thinking about – how should we think about working capital requirements in 2016? Thanks for the context on some of the items as it relates to cash flow but working capital, anything that we can think about for 2016?

Peter Armbruster

Yes, we would think the change in working capital would be very small, similar to what we experienced – the change would be similar to what we experience between at 12/31/2016 and 12/31/2015.

Ben Hartford

Okay. So still a slight contribution but not material?

Peter Armbruster

Yes, I mean, conservatively a slight a addition but, again, as we talked about it's going to be an area of focus to improve on the cash flow from operations above the $73 million that we generated in 2015.

Ben Hartford

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Art Hatfield from Raymond James. Your question please.

Art Hatfield

Hey, thank you. Hey, Mark, did you comment on how business trends had occurred in January?

Mark DiBlasi

From a truckload or LTL?

Art Hatfield

Yes. From an LTL perspective.

Mark DiBlasi

I gave those numbers with regard to how we performed in the quarter.

Art Hatfield

Yes.

Mark DiBlasi

And it should – down 16.4%. In January that was tracking at about negative 13%.

Art Hatfield

Okay.

Mark DiBlasi

Weight per shipment down 6%, in January down 5%.

Art Hatfield

Okay.

Mark DiBlasi

Shipments were down 11.1%, in January down 8%. So we're seeing not significant change but change – the trend is all positive, so we're pleased with that and we believe that's due to our initiatives.

Art Hatfield

Okay. And then just I want to – on your expedite business, what percent of your expedite is auto related?

Mark DiBlasi

We don't break that out, Ray – Art.

Art Hatfield

That being said, I mean, when you look at kind of what you did in the fourth quarter, was there an impact from e-commerce business or is that an area where you're not doing anything at the moment?

Mark DiBlasi

No, our OEM is – our expedited business is about 98% all OEM, original equipment manufacturers. Given the automotive business as well as heavy equipment as well as other manufacturers like snowmobiles and people of that nature. So it's all OEM business, but it's not retail business.

Art Hatfield

Okay, great. That's all I've got today. Thanks for the time.

Operator

Thank you. Our next question comes from the line of Thom Albrecht from BB&T. Your question please.

Thom Albrecht

Hey, guys, good afternoon. I just wanted to go over a couple of other things. So Peter, I know you said you're in compliant with your covenant but could you refresh our memory. I forgot if your debt to EBITDA is 4.0 or 3.75 for the maximum.

Peter Armbruster

Yes. So right now through March 31, 2016, its 3.75 then it drops to 3.5 through September 30 and then at year-end its 3.25, so at December 31, 2016, 3.25. If you look just at our net bank debt and our EBITDA that we present on the financials, that ratio is about 3.3 which is similar to our bank calculation. Bank calculation you have add-backs. But if we would just continue with the EBITDA levels that we're at this year in 2015, and the CapEx guidance that we're providing, we would be below – we'd be in that 2 to 2.7, 2.8 range at December 31, 2016, just at that minimal levels and then achieving our guidance that would even drop that even more. So getting – again, getting us closer to that under the 2.5 which is our long-term goal for the debt to EBITDA range.

Thom Albrecht

And I'm sorry, I'm processing a whole bunch of numbers and earnings today but did you give a 2015 CapEx figure?

Peter Armbruster

Yes, yes. So our total CapEx in 2015 was $48.8 million. It's in the release.

Thom Albrecht

Okay.

Peter Armbruster

That's net CapEx, correct.

Thom Albrecht

All right. And what did you calculate your free cash flow to be in 2015?

Peter Armbruster

If you just take the cash flow from operations, the $73.4 million, subtracting off the – yes, the 48.8 CapEx, that would be about a $21 million to $22 million free cash flow or $24 – between $24 million and $25 million free cash flow. So again, going forward increasing the EBITDA, our range for this year was – for 2016 is $140 million to $150 million while we achieved $129 million. That will add to the cash flow from operations. And then we're reducing our cash – our CapEx requirements are quite a bit less in 2016. We gave a range there of $20 million to $30 million. So you can just see the amount of free cash flow that we can generate in 2016 and then pay down debt.

Thom Albrecht

Okay. Let me see if I had anything else here. And so if you're able to hit your numbers and that it would seem to me that you could be under that 2.5 by call it Q2 of 2017. And then let's just say you are able to do that and you're also able to drive margin improvement at all three businesses and more of a mindset to be acquisitive, what would we think about as maximum leverage once you executed the recovery and the macro environment's better?

Peter Armbruster

Again, we'll just have to evaluate it as that comes out about. Again, our focus right now for 2016 is the current year initiatives that we sent out, just set out here in our call.

Thom Albrecht

Right. And then I guess the last thing. I just want to make sure. I was looking at a couple things. As you were talking about the change from Q4 to Q1 across your three business segments and allowing for the normal seasonal change that occurs, would you expect your LTL, OR to deteriorate in Q1 since it's already at 99% or are there enough initiatives to kind of offset some of that normal seasonal deterioration?

Peter Armbruster

Yes. We would expect a slight improvement in Q1 over Q4 and then ongoing from there.

Thom Albrecht

Okay, okay. And Mark, why do you think the LTL environment – I don't know if stable is the right word, but is maybe a little less worrisome than it seemed to be two months and three months ago when there started to be a lot of cracks at the edge.

Mark DiBlasi

Well. Just speaking from our perspective, what we see in industrial accounts that we service, keep in mind we don't do very much retail in our LTL segment, it's primarily industrial durable, non-durable goods, chemicals, things of that nature, so that's been fairly stable. If you're talking about pricing, as I said we did see some pricing activity in the third quarter. We've not seen it in the fourth quarter which is encouraging. I believe that other carriers have implemented a certain amount of pricing discipline. I've not seen any other carriers' numbers released for the fourth quarter. I don't know how anyone else has performed. But I'm assuming that their LTL segments will be similar to our performance in terms of what they're seeing in terms of activity. Obviously the hope is for 2016 that as the year plays out, the second half will be much better than the first half. We'll see how that plays out.

Thom Albrecht

Okay. That's helpful. Thank you very much.

Operator

Thank you. Our next question comes from the line of Scott Group from Wolfe Research. Your question please.

Scott Group

Hey, thanks. Good afternoon, guys. So in terms of that tonnage trend getting better, Mark, how do you separate the underlying demand getting better versus some of your initiatives, what do you think is driving the improvement.

Mark DiBlasi

I think there's a combination of things. Some of it is some of our accounts have stabilized and they're not churning business, in other words an account that used to ship 10 skids a week might be shipping five skids a week now but maybe in November they were shipping three skids a week. We have seen significant activity in terms of bringing on new business.

So we're seeing more positive business come on board versus lost business. Of course you could lose business to other competitors or just the example I just gave you where your existing shipper base, their business levels have dropped. If what occurs, if what we hope occurs in the second half of this year where the economy picks up somewhat, then those shippers that are still doing and shipping all their product with us, as they ramp up their business they'll ramp up their activity with us and we'll see that tonnage levels improve. As I said, I think through the initiatives that we implemented in the fourth quarter and carry it through in the first quarter, that's why our numbers throughout the fourth quarter improved and continue to improve through January.

Scott Group

Okay. And did you give a number of what you expect for LTL pricing this year?

Mark DiBlasi

I gave a number what we're seeing, it’s in the 3% to 4% range. I stated a few moments ago that its right at 4% of our new contractual pricing is what's sticking.

Scott Group

Okay, good. Last couple things for Peter. Why did the share count fall about 1 million shares quarter-over-quarter? And what should we use for going forward share count?

Peter Armbruster

Yes. This is primarily due to stock price as you do some calculations with warrants and things like that, caused the drop in the share count. Again, we see that count, share count, we expect that to increase here as we go forward in 2016 with the increase in the stock price.

Scott Group

That will be based on an increase in the stock price.

Peter Armbruster

Yes.

Scott Group

Okay. And then just last thing. On the cash flow from operations, what was the change in working capital in 2015?

Peter Armbruster

I mean just if you look at the balance sheets, excluding cash and short-term debt, it was relatively consistent at year-end 12/31/2015 compared to 12/31/2014. So again as I mentioned earlier the goal is to keep that working capital at the current range. We won't expect to have quite the increase that we had in 2013 and 2014 due to the growth in our brokerage businesses and then just some of our acquisitions in the OEM and the international businesses contributed to increased working capital back in those years. So again, the goal is to maintain or improve the working capital levels that we're at right now.

Scott Group

Okay. So you did not see an improvement in working capital in 2015.

Peter Armbruster

When you just compare the calculated – it is based upon that calculation, correct.

Scott Group

Okay, prefect.

Peter Armbruster

But again, yes, level off.

Scott Group

Okay, all right. Thank you, guys.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of David Ross from Stifel. Your question please.

David Ross

Yes, good afternoon, gentlemen.

Mark DiBlasi

Hey, Dave.

David Ross

So Mark, after the disappointment in the third quarter with earnings and the big drop in the stock price, what changed internally? My sense is you don't have something that gets shaken up that much in the market without causing some significant change internally. What are the few things you guys are doing much differently now than you might have been three months ago.

Mark DiBlasi

Well. We went through great explanation on the performance of the third quarter. Big portion of that had to do with some very high insurance costs and claims, the lease purchase charge that we took, those had significant impact on our performance. The other thing that occurred in the third quarter is we were expecting the third quarter to be a traditional peak and we expected September to – although July started out slow and August was as slow, we still expected September to be a strong month for us and by the time we realized that was never going to materialize it was too late to react.

So we reacted in September and we were able to significantly change the trajectory of our performance in the fourth quarter, which is bore out in the numbers we just presented to you guys. We’re pretty confident in our ability to have reacted and implemented change internally to get us to the performance levels that we thought were acceptable for the fourth quarter. Obviously, we said back in the third quarter that that performance was totally unacceptable. We made the appropriate changes and got the Company back in line with where it needs to be.

Again, the third quarter was an anomaly that significantly hurt us. I believe the market reacted very negatively to that which resulted in a huge reduction in our stock. Our multiples dropped to all-time lows and are still trading at significant discounts from where we think they should be at. So obviously, we need to execute and perform like we did in the fourth quarter to build that confidence and credibility back up but that’s exact what we’re doing.

David Ross

Did you guys receive any unsolicited buyout offers from maybe some strategies or others over the last quarter?

Mark DiBlasi

No, none.

David Ross

Peter, did I hear you right where you said you expect mid-to-high single digit tonnage growth in LTL in 2016?

Peter Armbruster

No, that comment was just overall for the overall revenue. The general goal based our guidance on for consolidated revenue for the Company and that’s considering some of the large wins we’ve just recently had.

David Ross

Okay. So for LTL are you thinking based on your comments earlier, Mark, maybe negative growth the first half of the year, getting back to flattish or some growth by the end of the year?

Mark DiBlasi

Yes. Obviously that remains to be seen based on the economy because we do anticipate and we’re heavily weighted towards the second half of the year, but we would expect that our initiatives will still be negative in the first quarter, maybe through the second quarter and then turn positive in the second half in LTL. In truckload we expect that to be barring the seasonality that we’re currently experiencing, we’ve seen a significant amount of new business wins in several of our other operating segments and of course keep in mind today LTL is less than 25% of my business although it’s still an important part of our business, our truckload segment and our global solutions segments where we are seeing significant wins with customers is carrying the ball for us and we expect it to continue to.

We will over time as I said, it’s going to take us several quarters, but over time we fully expect LTL to get back to the high levels of performance we’ve experienced in years past. We’ve gone through tough times in LTL before. The benefit that our Company has now is that we’re not dependent upon LTL like we were five years ago when it was 80% of our business. So by diversifying our Company, we’ve enabled ourselves to be in a position to where if one segment is significantly down based on economic conditions, we’re not totally dependent upon that and we have significant opportunities and options with other operating segments.

David Ross

And then you said the forwarding business within the global solutions segment was hurt by the strong dollar and weak exports. Is it more exposed to exports than imports because my thought would be that imports would have been helped by the strong dollar?

Mark DiBlasi

We have more exports than imports but it’s not 50/50, but it’s not significantly weighed one way or the other.

David Ross

Okay. Thank you very much.

Operator

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Mark DiBlasi for any further remarks.

Mark DiBlasi

Okay, thank you. Just in closing, as I stated to Dave just a few moments ago, third quarter is now behind us. The events of that and the poor performance has been rectified. The initiatives we put in place are working and will pay off going forward. We built significant amount of momentum within the operating segments in the Company in the fourth quarter.

We expect those to carry through. We’ve gone to annual guidance which is new for us because we’re taking a much longer term view and strategic planning for our Company. We feel that we’ve built the services in the Company. Now we’re adding density. Doesn’t mean we won’t make an acquisition or two along the way but that’s not the clear focus of our Company going forward.

Our focus now is to grow organically, build density and scalability within our three operating segments, continue to cross utilize and cross sell those segments with 58% that’s pretty significant growth. Two years ago, it was in about 29%. So we’ve seen significant growth in terms of our ability to cross sell our services. We would expect to drive that into the 60s almost to the 70% tile range over time over the course of the next year or so. So we feel very good about where we are today and where we stand and the momentum we’ve built through the fourth quarter and looking forward to 2016.

With that, I will close the call. Thank you for your time. We’ll talk to you all later.

Operator

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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