Greetings, and welcome to the ArcBest Fourth Quarter 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded Friday, January 31, 2020. I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead.

Welcome to the ArcBest fourth quarter 2019 earnings conference call. A presentation this morning will be done by Judy McReynolds, Chairman, President and Chief Executive Officer of ArcBest; and David Cobb, Chief Financial Officer of ArcBest. Today, following Judy and David’s opening remarks about the fourth quarter results; I will conduct a question-and-answer period with them by reading submitted questions that we received last night following our earnings release. We appreciate the questions that we received. We will try to answer as many as we can during the remaining time of this call. We thank you for joining us today. In order to help you better understand ArcBest and its results, some forward-looking statements could be made during this call. As we all know, forward-looking statements by their very nature are subject to uncertainties and risks. For a more complete discussion of factors that could affect the Company’s future results, please refer to the forward-looking statements section of the Company’s earnings press release and the Company’s most recent SEC public filing. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outline and described in the tables in our earnings press release. We will now begin with Judy.

Thank you, David, and good morning, everyone. I’m pleased to talk with you today about our fourth quarter and 2019 performance particularly as it marks the end of my 10th year as CEO which provides an opportunity to reflect on how far we have come as an organization. While the fourth quarter was the most challenging of the year, our overall performance for 2019 was the second best in the last 10 years. We didn’t see the same record setting conditions last year as those in 2018, but it was still a year full of accomplishments for ArcBest. We achieved good progress on our effort across the company to provide an excellent customer experience, to develop our people and to deliver solid financial results. When I began my role as CEO in 2010, it was a far different situation as we navigated the effects of the financial crisis, which hit everyone in our industry including us, very hard. That year we reported $1.7 billion in revenue coming also exclusively from our LTL business and a $55 million consolidated operating loss. Fast forward to 2019 when we reached nearly $3 billion in revenue with roughly a third of that generated by our Asset-Light business and $109 million in non-GAAP operating income. Our balance sheet is solid and our cash flow generation is strong. We know we have more work to do on the Asset-Light slide, but I’m proud of our teams evolution and our ability to give customers the breadth of solutions they require across the supply chain. Our expansion and diversification have not been without their challenges and [indiscernible] to market condition. But I’m confident we’re firmly on the right path for the next decade ahead by serving and spending time with our customers and by investing in innovative technologies…

Thank you, Judy and good morning everyone. Let me begin with some consolidated information. Both quarter 2019 consolidated revenues were $717 million compared to $774 million in last year’s fourth quarter. A per day decrease of 7%. On a GAAP basis, we had a fourth quarter 2019 net loss of $0.22 per diluted share due to previously announced non-cash impairment charge related to Asset-Light. This compared to a $0.57 per share profit last year. As detailed in the GAAP to non-GAAP reconciliation table in yesterday afternoon’s earnings press release adjusted fourth quarter 2019 net income was $0.56 per diluted share compared to $1.06 per share in the same period last year. ArcBest fourth quarter 2019 effective GAAP tax rate was a benefit of 53.9% primarily due to the non-cash asset impairment charge and tax credits which were related to use of alternative fuels and a related a research and development activities. For the full year of 2019, consolidated revenues totaled $3 billion compared to $3.1 billion in 2018, a per day decrease of 3.2%. Full year earnings per share were $1.51 compared to $2.51 in 2018. On a non-GAAP adjusted basis, as outlined in earnings press release, 2019 earnings were $2.88 per share compared to $4.02 in 2018. In 2019, total net capital expenditures including equipment finance equal to $147 million which is below previous expectations reflecting shifts in the timing of some expenditures into 2020 as well as higher sale proceed. 2019 expenditures for revenue equipment totaled $86 million the majority of which was for replacement of units in ArcBest asset based operation. Depreciation and amortization cost on property, plant and equipment were $108 million. In addition, amortization of intangible assets was $4.4 million in 2019. The 2020 total net capital expenditures are estimated to range from $135 million…

To change things up a little bit this quarter. I would like to take a few minutes to talk about our technology innovation so that you can get a little more color on what’s going on there. First, however I will mention just one recent company highlight in which we remain to the 2020 Top 500 List of the Best Employers for Diversity, we came in at number 340 on the list published by Forbes in partnership with Statisa. This is the second consecutive year that ArcBest has appeared on the list. In 2019, we ranked number 484. We’re honored to be named to and moving up on the Top 500 List. ArcBest history is marked by innovation and we further advanced our capabilities in the last few years in order to respond to accelerating change in our industry. One area where we see a lot of potential is in cognitive technology. We have deployed these kinds of solutions to help shippers submit pick up request to ABS without an agent, to process and categorize inbound customer emails automatically for a quicker response and to check the capacity of the trailer by auto scanning and CCTV feed and then alerting a dock employee of a potential problem. We are in early stage with many of these technologies so we’re enthusiastic about their early success so far. Another aspect of cognitive technology is machine learning. We have developed a number of algorithms that are embedded in the applications our employees use and to help them to simplify and drive better decision making. We have developed and are utilizing these kinds of solutions in yield management and in our Asset-Light operations where we launched the capacity sourcing tool to optimize the utilization of internal equipment capacity while reducing the time it takes to secure external equipment capacity in meeting customer requirements. Recently ArcBest launched an innovation accelerator to encourage new transformative ideas. This accelerator combines employees from across the organization who work closely with executive leadership to identify opportunities for disruptive innovation within our company as well as evaluate potential external innovation partner. We favor smart and pragmatic investment at ArcBest and I’m pleased with the progress in this area and look forward to what’s next. To conclude our prepared remarks, I’d like to underscore how excited I and our team remain about the market opportunities and growth potential ahead. I attend various meetings throughout the year and I’m always encouraged by the can do attitude I witness in our people and a strong testimonial I received from customers about them and the solutions we provide. As we move into 2020 and beyond, we will strive to achieve a best in class experience for our customers. Utilizing the right balance of human and digital interaction that makes their businesses easier to do and now I’ll turn it over to David Humphrey to conduct our question-and-answer session.

Okay, we’ll now begin the question-and-answer period with Judy and David. To start off we had several questions about the tonnage trends that we experienced in late fourth quarter 2019 and the improvement as we moved into January. What were the primary drivers behind the improvement that we’re seeing both similar questions on this topic came from Chris Wetherbee with Citi, Jack Atkins of Stephens, Todd Fowler with KeyBanc, Ken Hoexter with Bank of America, Ravi Shankar of Morgan Stanley, Stephanie Benjamin at SunTrust.

Thank you and I appreciate everyone’s interest in the questions on our Asset-Based tonnage trend. It’s our normal practice to use transactional shipments to better utilize fixed resources and seasonally weaker period and these shipments improved our December sequential comparisons and resulted in a favorable year-over-year comparison in January. And as Judy mentioned earlier, we’ve had recent success in adding heavier transaction LTL rated shipment that are utilized, [indiscernible] space that would otherwise be moving empty. This success is resulted in improving our shipment trends that are utilizing some new systems that offer more timely information in existing opportunity. These actions really reflect continuation of our focus on customer level profitability while utilizing the transactional market to opportunistically fill empty capacity in our asset network. So we don’t believe the improvement we experience is from demand, but more about an intentional action to fill empty capacity in the network.

Chris Wetherbee asked about what drove the change in billed revenue per hundredweight from a 2.1% year-over-year increase in fourth quarter 2019 to decline of 3.5% in January. He also wanted to understand the impact of mix and pricing on this change. Then Ken Hoexter wanted to know how we’re thinking about the trade-off between pricing and volume in LTL. He pointed out that in fourth quarter 2019 pricing was up despite volume being down pretty significantly and he wanted to know, if we’re losing market share.

Yes and that’s related to what I just mentioned and that we strategically added more heavier weighted transactional shipments in December and January that help fill empty capacity in the network. So the change in revenue per hundredweight is more a reflection of that mixed shift year-over-year core LTL prices in the mid-single digits is on top of multi-year solid price increases. So our objective is to offer superior services of the LTL market place and in return, we’ll continue to focus on securing corresponding pricing for each of our customers. Our approach is to manage customer level profitability while utilizing the transactional market to fill that empty capacity in our asset network. [Indiscernible] as we believe we’re maintaining the market share.

We had another question about how long we can sustain elevated growth in truckload rated spot shipments moving in the Asset-Based network.

Yes, it’s really about just – us trying to optimize our network with the right balance of truckload rated business and price. And during the extremely tight capacity market in 2018, we had historically low levels of truckload rated spot shipments in the network about the second half of the year through early 2019. So in comparisons of our truckload rated business volumes become tougher as the year progresses. It really comes down to contribution to the network being the driving decision behind truckload rated business levels.

Dave Ross of Stifel asked, are 3PLs a way for ABS to get back some volume back into the system, why or why not?

Yes, we have numerous and strategic relationships with 3PLs today and those provide us access to business opportunities and we utilize those opportunities to optimize our network resources like we’ve been talking and we actively pursue business with 3PLs when the opportunity makes sense from a business standpoint.

We had several people ask about the current pricing environment for LTL and our pricing outlook for 2020. Pricing continues to moderate on a year-over-year basis, how much of that is driven by comps, more aggressive competition or other factors. And finally, what are your expectations from a potential GRI.

David, I’ll take that. In our view the pricing environment remains comparable with recent quarters and we expect that the pricing environment will remain competitive, but rational for 2020. Beginning with our space-based pricing initiative that we launched in August of 2017, we really had 2.5-year period very solid pricing success that included year-over-year increases of 8% to 10% in 2018 and continued solid increases in 2019 especially on our LTL rated freight and with this strong base of increases during this past period, we would expect that our 2020 price increase level will return to more normal rates of year-over-year increases. As I just mentioned, our core LTL business continued to be priced solidly. But the addition of some transactional shipment that both I talked about earlier and David also did, has really impacted our yield metric. In addition to improving our business levels those transactional shipments are contributing to improve operational metrics including higher trailer load averages and some reductions in empty miles. And at this point, we’re evaluating the potential for 2020 GRI for ABS but we haven’t made any final decision. There are number of factors that go into our decision every year about whether to implement GRI including the market and competitive environment and some solid input from our sales group regarding their discussions with our customers.

Okay, Ravi Shankar stated that our weight per shipment was showing signs of stabilizing on a sequential basis. With [indiscernible] comps, do you expect weight can begin to be up on a year-over-year basis in 2020? What do you think is a normal weight per shipment?

In our supplemental exhibit to the earnings release, total weight per shipment in January increased 6.5% compared to January 2019 with the weight per shipment in our LTL rated shipments increasing 2.5%. We would say our normal weight per shipment it runs around 1,000 pounds per shipment.

Okay, next to Jason Seidl of Cowen asked, what are the monthly contract pricing trends and renewals for the quarter? What are your expectations for pricing in the rest of the quarter and for the full year 2020?

Yes although we don’t provide monthly information for the fourth quarter, we secured a 4.2% increase with our contract in deferred pricing renewal. January is running at historical of first quarter average rates of around 3% to 4%. We expected the pricing environment will remain competitive, but rational this year.

And Ken pointed out regarding the press release that Judy said returning the asset base business to historic levels has been a stated long-term goal given that there’s been a bit of fluctuation in historical margin, could you clarify what marginal level she means and is there a timeline to get there?

David, I appreciate Ken’s question and I think what he was referring was some discussion we had about our historic margins that in relationship to paying the union incentive, the contract provisions for paying our union incentives specified a minimum full year 96 operating ratio for making the payment. We were really pleased that our 95.2%, 2019 allowed us to pay 1% of union wages to our employees. But when I talk about historic levels of profitability, I’m really referring to annual Asset-Based operating ratios in the low 90s and we certainly more work to do to consistently attain those profitability levels. But our payment at the union incentive represents a significant step in moving in that direction. As for when we get to those OR’s I don’t really have a specific timeframe to give you and part of that’s because of the cyclical nature of our business, but we’re certainly working to get there as fast as possible and we do see opportunities for further efficiency gain in our operation. And then with respect to our Asset-Light business we’re targeting consistent 5% operating margins there.

Okay, we had a question about the current demand environment. What are you seeing out there? Are you seeing any signs of normal seasonality coming back? Along on those lines how is January trending for you?

Well the current trends from the normal fall off after peak have continued in January. Our customers remain somewhat optimistic that seasonality will provide a lift as we move into March. The customers continue to be cautious about their businesses regarding the uncertainty around inventory levels, trade concerns and this year’s US Presidential election. But I do believe it’s helpful to have trade deals with China and the USMCA approved by the United States. Excess capacity in the market has encouraged our customer base to seek opportunities to optimize their current supply chain models and that has benefited us because many of our largest accounts are working with us to become more efficient both from a cost and compliance perspective. This is providing opportunities for ArcBest to help solve these complex supply chain needs of our customers. Yesterday in the 8-K that accompanied our earnings release we provided an update on January business level and our January trends have improved due to some initiative to fill available capacity in our Asset-Based network as we’ve been discussing. Our Asset-Light business so far this year is more challenged as compared to a stronger January in 2019. We’re currently experiencing a 3% reduction in revenue while our purchase transportation cost have actually increased about 2%, a portion of this margin compression is market related and the other part of it really relates to our mix of business.

Okay we had questions about the typical sequential change in Asset-Based operating ratio from fourth quarter to first quarter. Are there any items that you believe will impact typical sequential change? I’ll just take that one and I’ll point out, that in our supplemental 8-K yesterday afternoon we mentioned that our first quarter OR has historically increased by approximately 400 basis points versus the first quarter. At this point there really are no significant puts or takes to mention that what impact what we would expect in the OR change relative to history. There could be some items moving each way and some of these were unpredictable especially weather events in the first quarter and property sales and as you saw in the fourth quarter, we benefitted from a gain on asset sales. Ken had several questions about employee resources and headcount. Given volumes declines in the Asset-Based segment could you discuss ArcBest thinking with regard to headcount and resource need? Is it possible we could see headcount declines commensurate with volume declines? How much available capacity do you currently have given volume declines? Assuming resource cuts are needed and appropriate could you achieve it through normal employee attrition?

We consistently work to match our labor needs to business levels with the combination of attrition and layoffs when necessary. However during the seasonally weaker period we have a challenge and we have to address that challenge by balancing headcount reductions with service levels because our customers expect a good service from us. In our dock and city operations we currently have about 150 people on layoff and in addition, we have 60 fewer road drivers in the ABS network this month versus last year in January, so January 2019 level. We are being very strategic with our headcount as it relates to our business level and from a linehaul perspective attrition in the fourth quarter really position us well for our current business levels as we start in 2020. We’ve made notable reductions in other areas variable costs so just [indiscernible] purchased transportation and because we have the flexibility to manage modes we have initiative to optimize our headcounts while also using our rail and purchase transportation partners and with this flexibility, we’re able to provide our best in class customer experience while keeping headcount more in line with our business level. Another bright spot I’ll mention is our deployment of a number of tech and analytics management tools that really allows better visibility of needed manpower adjustments and we’re looking forward to having the benefit of those in 2020.

The next question was about the level of core cost inflation we should expect for ArcBest Asset-Based segment in 2020?

The majority of our Asset-Based labor costs are impacted by the union labor agreement which includes total annual cost increases that average about 2% per year for the life of the contract and that is a very manageable cost increase and we appreciate having known labor cost stability for the remainder of the contract through mid-2023 [ph]. So we’re very pleased to pay the union operating ratio incentive at the 1% level since ABF achieved 95.2 OR in 2019 as Judy mentioned. That amounted to $5.1 million of expense accrued in 2019. I’ll also mention our revenue equipment has cost more in recent years and impacts are estimated 2020 depreciation expense that we discussed in our supplement 8-K. and largely due to the safety features for technologies lane departure, warning systems, collision mitigations and cameras. And as we’ve mentioned with our long-term perspective, we continue to make technology and process investments in many areas targeted for growth opportunities including efforts to improve the customer experience and also to optimize cost like Judy just mentioned those actions in costs may perceive the timing we expect to benefit.

With weight per shipment trend stabilizing and LTL tonnage now flat year-over-year in the Asset-Based business. Do you see an opportunity to outperform normal OR seasonality in the first quarter or would you expect to be roughly breakeven in that segment in the first quarter?

We don’t provide guidance on our expectations for the first quarter, but as noted in the supplement earnings release. We typically see the 400 basis point deterioration from fourth quarter to first quarter. We’re experiencing improvements in weight per shipment and generally larger shipments are beneficial to it that are also encouraged with additional business which is filling available capacity in our systems like we talked about. But we did have a property gain in the fourth quarter and those events can be lumpy.

We had a question about how much of a margin headwind is represented by the union profit sharing agreement as we move toward our long-term margin goals.

We provided some additional information about the union operating ratio incentive in our supplement exhibit. The ABF OR 95.2 as we mentioned was a bonus expense with $5.1 million it’s 1% payout on union wages, but if the profit sharing bonus would increase to 2% in employee wages for an operating ratio between 93.1% to 95% and the bonus would increase to 3% of employee wages for an operating ratio of better than 93%.

Considering the fact that insurance is currently a big truckload cost factor is this headwind for ABF in 2020?

While we’ve seen a modest increase for 2020, it is a major headwind for ABF. As it was pointed out by the question the insurance market has tightened this year on the hills of some very large verdicts against transportation carriers. Our understanding is that many carriers have had difficulty placing their coverage needs with insurance companies that are still willing to be in this market. ABF has a long history of being a safe carrier and we’ve made a substantial investment in technology in our tractors and safety programs like I just mentioned but as a result of our safety focus and work of our employees, we’ve had a very good loss history, so that helps us with insurance renewals. Nevertheless because of the market pricing increase we will have some incremental cost headwinds somewhere around $2 million.

We received several questions about our recently announced technology investments from several analyst including Jack, Todd, Ravi, Chris and Stephanie. Could you give us an update on the technology investments within your Asset-Based operations? Can you provide an update on the pilot break testing program, fright handling program? And how many locations is it currently being tested?

David, thanks for the question. Currently the primary testing is occurring in two locations in Indiana. The test results of these initial pilots have been positive and we’re working to open a facility in Kansas City where our distribution center test is expected to begin in late summer of this year. Testing the process in a distribution center setting will give us a better understanding of challenges of conducting the operation in a larger, more active service center environment will also help us to determine the proof of concept that will ultimately help us decide if we go forward with implementing it throughout the entire ABF network. There really isn’t much more detail to provide at this time until we do this testing and have some time to analyze the result. But we are pleased with the technologies and processes that are being evaluated in the pilot and their potential to provide a better experience for our employees and our customers, reducing the amount of time that freight is idle, improving transit performance, to reducing cargo planes and injuries and accelerating employee training time.

Okay, regarding the pilot freight handling program. They asked, at what point could this move from a pilot to an actual application and what impact did that have on your financials? Is there an endpoint to spending or should we assume it persists for the foreseeable future? Can you give us a sense of what the spending level in 2020, will look like?

In the third and fourth quarter of 2019, we reported this additional technology spend in the Asset-Based segment and it was approximately $4.5 million in each quarter or a total of $9 million in the second half of 2019. We also expected these related costs in the first quarter of this year that will be approximately $5 million and that’s versus $2 million in the first quarter of 2019 in the Asset-Based segment. At this early stage of the pilot, we aren’t providing projects beyond the first quarter as there are number of factors that are being evaluated that would also impact future cost and moving along during the year, we will provide our expected costs for the next quarter and when we report each quarter’s earnings. The transition of the pilot to Kansas City in a distribution center environment later December will lead to some incremental testing cost. Our modeling shows though that this project should produce return that meet our internal benchmark and these pilot tests are being conducted to further improve this concept and the associated result.

Okay, are you seeing real estate opportunities from large competitor downsizing?

I reference to the various LTL company closures that occurred throughout 2019, we’re always aware what properties and locations become available. But there really weren’t properties of interest and we didn’t add any as a result of those closures.

Could you provide additional color on the asset sale gain reported in fourth quarter? Do you expect additional asset sales in 2020?

The gain that was reported was related to the sale of unused service center at ABF. This regularly happens this where we relocated into new facility and we were able to sell our former service center. This happens periodically as we buy and sell real estate, but the timing is always it’s typically unpredictable. We will likely have similar real estate gains at some point during the year, but like I said the timing and the financial impacts are unknown at this time.

Okay, Chris Wetherbee asked about what steps can be taken from a cost reduction standpoint to improve profitability in ArcBest [ph] segment. Should we expect to see revenue per day trends improve further in the remainder of first quarter? And Jack Atkins wondered if there are levers, we can pull on the cost side to support or even improve profitability in that segment in 2020? And that business seeing improvement and profitability this year absent recovery in the freight market?

We recognize the need to improve our Asset-Light operating performance and we’re focused onto deployment of technologies and cognitive engagement strategies to automate and optimize processes which should help us increase employee productivity and improve the customer experience. Some examples of automation that we’re beginning to utilize are shipment tracking and email management as well as digital freight matching. And so that the advancements that we’ve made in our Asset-Light business in 2019 should provide greater operating cost efficiency in 2020 although we do continue to see expectation to invest. We feel like there’s even further improvements that we could make that should positively impact our performance in 2021 and beyond. But to look at the overall cause for our Asset-Light segment some of those are fixed in nature and really could be better leveraged with greater revenue growth. So we remain focused on gaining that growth due to our cross selling strategy and that’s both within our existing customer base where there is a large opportunity, but we can also focus on selling multiple solution for overall solution to new customers. But we have to keep in mind, that in order to aggressively grow our Asset-Light service offering we have to maintain a high level of service because that’s what our customers expect. So we’re balancing all of these things to gain an improvement into growth and the overall result. But if the freight market remains in recession and customer and carrier rates remain at current level. It will be difficult to materially improve our margins and operating results in the near term. The cost that we previously discussed they’re associated with the building of ArcBest owner, operator and contractor carrier capacity should normalize in 2020, so that should help. But as always, we continue to manage headcount in our Asset-Light operations to our shipment volumes and we’re continuously looking to further improve the efficiencies of our workforce.

So your Asset-Light, expedite solution [ph] business get back to the prior margin levels absent of the capacity tonnage?

In 2018, we experienced a strong demand environment and tight capacity which generated tremendous value for customers through their utilization of our ground expedite solution or service offering. In 2019, we had something different. We experienced a freight recession, excess truckload capacity which reduced the demand for some ground expedite solution. And as we began this year, we aren’t experiencing much of a change from 2019. But we believe that as the demand environment improves and capacity stabilizes, we would expect the trends for ground expedite volumes and pricing to improve consistent with our past history.

Ravi pointed out that comps in the Asset-Light business began to get easier in the first quarter of this year. Do you anticipate year-over-year growth in that business? Are you seeing any heightened competition in any particular pocket of the Asset-Light business?

I’d say that the Asset-Light results really a reflection of the recessionary freight environment in excess of capacity. As Judy mentioned so far in this year, we aren’t seeing much of a change from that and as we probably talked about before, a large portion of our businesses transactional in nature and with weaker spot market it’s negatively impacted our results. We don’t really point to certain regions or customers or lanes that are experiencing unusual amount of competition that Judy mentioned this earlier, our managed solutions and supply chain optimization work with customers particularly responsive in this environment and we’re encouraged by the pipeline of opportunities that we have there. As noted throughout 2019, our expedite businesses has been impacted by that excess market capacity in the as a result there have been lower tender rejection rates.

Again on the Asset-Light side, you discussed various market driven pressures. Could you elaborate? How much of the margin deterioration is reflection of competitive pressure from brokers undercutting pricing and thereby squeezing margins? How much is normal cyclicality?

Well I would just say, that the margin compression in the fourth quarter was really more about tightening capacity and less about other brokers cutting prices. Specifically we saw this happen between Thanksgiving and Christmas.

Okay, what is your appetite for Asset-Light M&A in 2020? Do you have any interest in the assets and XBL [ph] has announced is looking to sell, are there any segments, geographies or deal sizes that are more attractive to you? How do you view current valuation multiples?

Well we want to comment on specific target, we continue to review M&A opportunity. We’re more interested in Asset-Light opportunities that could benefit us in terms of scale and or technology and advancement and that’s really been our focus for some time. More recently, we’ve been less interest in small tuck-in deals unless there is a potential for some significant outside tech or other strategic advancement. We also see tremendous opportunity through organic growth for our company and as well as some operational efficiencies that could improve our overall result. When we step back and look at valuation multiples, they still seem a little bit high to us.

Is there a way to help us quantify the progress you’re making cross-selling your services? Could you share the percentage and revenue tied to customers that utilize two or more services?

Based on the needs of our customers cross-selling continues to be an important component of our strategy with 80% of our customers needing two or more of the solutions that we provide. Currently approximately 38% of our customer base uses us for multiple services. These customers comprise more than 80% of our total revenue, but we know we still have a significant amount of their wallet share available to us and that’s within the customers that are already using us for multiple services. So we’re encouraged by that opportunity. For customers that are cross-sold. We see significant jump in revenue per customer, profit per customer and retention versus those customers that are no cross-sold, all of those benefits us and so we’re really still aggressively pursuing this cross-selling strategy.

Okay, Todd Fowler asked please discuss your e-commerce initiatives, what percentage of your business do you think is e-commerce? How did the margins on this break [ph] compare to overall margins and what are your expectations for growth in this area going forward?

Well I appreciate Todd’s question and while it’s difficult to quantify the overall percentage of our revenue or margin [indiscernible] e-commerce our current point of view is that, we continue to benefit from e-commerce opportunities within our customers. Our e-commerce customers have shown increasing interest in the solutions we provide and a great example is Retail+ which is a compliant solution for vendors to help them better meet large retailers, stringent shipping and delivery requirement. We created Retail+ in collaboration with our customers and our tech folks, these customers that participate are really suppliers to major retailers and we’re seeing the demand for our Retail+ services accelerate. This ongoing co-creation program really provides robust compliance management solutions that enhance ArcBest’s existing retail logistic services by combining innovative software solutions with enhanced operating process. This is the type of solution that relies on our logistics expertise, our assets and our relationships to improve these customers outcome. We also see e-commerce driving the demand for our managed solutions especially with the increased complexity and need for flexibility and supply chain to be more responsive for the consumer. Final-Mile is another area where we see the impact of e-commerce and within uniquely positioned to provide value in this area for over a decade and more broadly our focus on digital connectivity and information flow with our customers as well as our emphasis on customer experience have really positioned us well in our conversations around e-commerce business. We see e-commerce as a continuing secular growth story. As e-commerce only represents percentage in the low teens of total retail sales according to the Federal Reserve. So overall, we see continued growth opportunity for our business that relates to e-commerce in the first mile, middle mile and Final-Mile transportation and then providing managed solutions in these other tailored solutions like I mentioned with Retail+.

Stephanie and Ken asked about the macro environment and its impact on our ability to reach our long-term margin goals. What is your outlook for manufacturing in industrial activity in 2020? Do you believe we’ve seen the bottom in 2019?

I’ll first point to the industrial production index which has continued to trend downward throughout 2019 and really ever since September 2019 this metric has been lower than in the prior year. The PMI steadily declined throughout 2019 and was 47.2 in December and that’s the lowest level since the June 2009 when it was about 46.3, I think. All that indicates contraction in the manufacturing sector and this is compared to PMI that was 54.2 in January of 2019, last year. PMI is considered a leading indicator in LTL business so it’s kind of hard to determine if we reached the bottom of this downturn [indiscernible]. The current economic environment as well as excess truckload capacity presents the challenges to our growth and operating performance. But as Judy mentioned to lot opportunities, we’re focused on managing our resources to the level of business we have, while keeping in mind that our customers expect that high level of service. Now I’d just reiterate that we’re better positioned today than the last time the freight environment was [indiscernible] at this weak level. Our logistics solutions provide optimized options for customers and sophistication level of the average customers increase we’ve seen that just time and time again and there’s desire to evaluate the options to reduce cost out of their supply chain. As we mentioned, our managed solutions growth reflects the value that we provide our customers and our asset base segment also benefits from that managed solution growth.

How the recent tariff and trade resolutions with Mexico and China impact business, if at all?

Yes, we expect those resolutions to have a positive impact, but it may be a while before we see the effects of that?

[Indiscernible] and then finally for our last question, we had a question about our strategy for offering a suite of transportation services beyond LTL and about the progress we’ve made during 2019 in doing that. Judy, you want to wrap up call with an answer to that one?

And I’d like to say how much I appreciate all of the questions that we received; it really has been beneficial. So with respect to that question, when I took over leadership of ArcBest 10 years ago, our focus was primarily on the LTL services offered by ABF. We really were not fully equipped to address the complete needs of our customers and we struggle during one of the worst economic periods in our country’s history, but since that time we have embarked on a strategy based on listening to the needs of our customer and have developed logistic service capabilities that have allowed us to really partner with them to optimize their supply chain. And now we’re a logistics company that offers most any service our customer requires and we focus on meeting their need by offering an array of these integrated solutions. And as I described in my introductory comments on the call. We’ve developed many innovative technologies that make us more efficient and allow our customers to interact with us in the way that they prefer. During 2019, we continued to have solid success as we mentioned several times about our managed transportation solution to our customers. We’re excited that our pipeline remains and the managed transportation deals we’re seeing continues to grow as we see new business flowing in. but because of the transformation that we’ve gone through in the last decade, we’re really bullish about the future and we believe we’re equipped to be successful in any economic environment, we encounter. Thank you, David.

Okay, we appreciate everybody taking their time to sending questions last night. We thank you for joining us this morning and we appreciate your interest in ArcBest. This concludes our call.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.