Greetings, and welcome to the ArcBest First Quarter 2020 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct the question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded Tuesday, May 5, 2020. I would now like to turn the conference over to David Humphrey, Vice President of Investor Relations. Please go ahead sir.

Welcome to the ArcBest first quarter 2020 earnings conference call. Our 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. 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 filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. We will now begin with Judy.

Thank you David and good morning everyone. The COVID-19 pandemic has without a doubt presented our country and our industry with extraordinary challenges that have affected how we do business both on a professional and personal level. The impact of the coronavirus pandemic has been swift and there is still much unknown particularly about the severity and recovery across the globe. It is during these times that I feel ArcBest is especially well positioned, because we have a strong foundation of long-term relationships with our customers and because our balance sheet has kept us in a position of strength with financial liquidity, and we have established a culture here that strives every day to generate creative solutions for the challenges of the times. As you will hear in more detail later, over the last month we have taken actions that further strengthen our financial position and provided for cost reductions throughout the company that helped preserve our cash resources. While cautious due to the uncertainty of the pandemic severity or duration, we believe these were prudent steps to take. Throughout this crisis, our top priority remains the health, safety and well-being of our employees. We began enacting safety measures back in February and we continue to follow CDC recommendations and the directives of our federal and state leaders regarding the implementation of safety and health precautions. Over a two-week period at our campuses and locations around the country, we successfully transitioned nearly 90% of our employees to work from home. Those workplace changes have impacted about 2,100 of our employees, including our union billers all of whom have been working remotely for the last five weeks. The strength of our technology and innovations team continues to be a major asset in making this happen in a secure manner with very few issues. The productivity level of our employees has remained high through this transition and our workforce has adapted very well to this new normal. Only a few of our service centers were directly impacted by the virus. And while those facilities were closed for deep cleaning, we were able to make quick operational modifications in order to continue serving customers without interruption. Each of those facilities are back up and running. And I appreciate the hard work of our team to get these locations back online as soon as possible while taking the necessary precautions to…

Pardon me. This is the operator. It appears that we have lost audio for the speaker. Mr. Humphrey, are you still on the line?

Yes, I'm here.

Yes. Okay. Are we online?

I think so.

Okay. Sorry, about that everyone. I think we lost our audio for a minute. I'll go back and talk about our service centers. Only a few of our service centers were directly impacted by the virus. And while those facilities were closed for deep cleaning, we were able to make quick operational modifications in order to continue serving our customers without interruption. Each of those facilities are back up and running and I appreciate the hard work of our team to get those locations back online as soon as possible while taking the necessary precautions to ensure the safety and well-being of our personnel equipment and cargo. As a global logistics provider, ArcBest is considered an essential business and we continue to support our customers, who are providing the food and product needs of our citizens throughout the country. Our trucks have been involved in the delivery of all types of essential goods, including virus testing kits, ventilators and hand sanitizer. For one shipper in particular, we have delivered nearly 800,000 protective masks. We've supplied government agencies, including the CDC, with equipment and drivers and we continue to work with the state governments to stage needed shipments to help their citizens. We take great pride in being a part of our nation's response efforts and our employees have responded in amazing ways during these challenging times. Throughout April, the full force of the pandemic has hit our nation and many of our customers. As we reported earlier this morning in an 8-K that we filed along with our earnings press release, we are experiencing large reductions in our business over a very short period of time which required us to take difficult actions in order to reduce costs that included reductions in hours worked, salaries, wages, and benefits for many…

Thank you, Judy, and good morning everyone. Let me begin with some consolidated information. First quarter 2020 consolidated revenues were $701 million compared to $712 million in last year's first quarter, a per day decrease of 3%. On a GAAP basis, we had first quarter 2020 net income of $0.07 per diluted share. This compared to $0.18 per share last year. Changes in cash surrender value of life insurance policies, which we have consistently identified as a reconciling item to our non-GAAP results contributed $0.20 of this year-over-year difference in GAAP EPS. Excluding the life insurance impact and other items as detailed on the GAAP to non-GAAP reconciliation table in this morning's earnings press release, our adjusted first quarter 2020 net income was $0.36 per diluted share compared to $0.25 per share in the same period last year. ArcBest's first quarter 2020 effective GAAP tax rate was 20.3%. The tax rate was lower than prior year reflecting the recognition of tax credits for alternative fuel and research and development. In accordance with accounting guidance, ArcBest's first quarter 2020 tax provision was based on the actual statutory tax rates as opposed to using an annual effective tax rate because of the inability to provide a reliable estimate of ordinary income for the full year within a reasonable range. Prior to the effects of the COVID-19 pandemic on our pretax income, our tax rate for the full year of 2020 was estimated to be 25% to 26%, while the effective rate in any quarter may be impacted by items discrete to that period. Asset-based first quarter revenue was $516 million, which was $10 million above last year, but because of an additional business day was relatively consistent with last year on a per day basis. Asset-based quarterly total tonnage per day increased…

I believe we have lost audio. Mr. Humphrey, are you on the line? This is the operator. I am unable to hear any of the speakers at this time.

Hello, can you hear me now?

I can hear you loud and clear. Thank you.

Okay. Yes. Apologies for that. Let me pick up with receivable discussion. Regarding our accounts receivable and the impact of the pandemic on our customers' payment schedules, we have reached out to customers to confirm their plans for payment of outstanding invoices. As needed, we are working on an individual basis to ensure payment based on our agreed upon terms. The pandemic will have some impact on the timing of customer payments, but we are actively managing that process relative to its impact on our cash flow. We are focused on our financial position and are closely monitoring collections along with our total cash flow which was positive for the month of April. Combined with our cash balances, we ended the first quarter with net debt of just $3 million. ArcBest preliminary April 30, 2020 consolidated cash and short-term investments net of debt increased to approximately $12 million of net cash compared to the $3 million net debt position at the end of the quarter, reflecting positive EBITDA for the month of April. Full details of our GAAP cash flow for the first quarter are included in our earnings press release. We have continued to take actions to enhance shareholder value with our quarterly dividend payments and treasury stock purchases. The capital allocated to these programs has been at reasonable levels. However these programs will be monitored in consideration of cash requirements for our operations that might occur from further economic weakness and uncertainty. Now, I'll turn it over to Judy for some closing comments.

Thank you, David. Along with the steps that we've taken over the last several years to develop a full array of logistic services for our customers in the transportation marketplace as a whole have put us in a good place. The pandemic has caused changes in our customer supply chains, which has created opportunities for ArcBest to do what I believe it does better than anyone else and that's providing innovative solutions for our customers' most challenging needs. ArcBest is well positioned to help our customers when they experience supply chain disruptions and we are working with both customers and capacity providers to make sure we can effectively respond as quickly as possible. During this period of uncertainty and continuing once things return to normal, the solutions we offer our customers will be responsive to their needs. We are committed to growing ArcBest regardless of the economic environment or any tests that we face. Our people and our capabilities are our strongest asset and a blessing to us and to our customers. COVID-19 has presented our company with a number of challenges, but also a tremendous opportunity to test our ability to effectively manage through a crisis. I believe that one very important factor in surviving any crisis is a strong foundation. The investments we've made in our people, customers and carriers, combined with our technology and innovation advancements have further strengthened our foundation. In times like these, we must work to improve what we can control. I'm proud of this organization and of what we are accomplishing together we have a tenacious group of employees who have the skill and the will to get the hard work done. Throughout our nearly 100 years in business, we have faced significant challenges and responded well to each one of them. And now, I'll turn it over to David Humphrey to conduct our question-and-answer session.

Operator, I think we're ready for some questions now.

Thank you. [Operator Instructions] The first question is coming from the line of David Ross from Stifel. Your line is open. Please go ahead.

Yes, good morning Judy. Good mooring, David.

Hi, how are you?

Hi Dave.

Doing well, doing well. Just wanted to see about April a little bit more color whether there's a big difference between the first week of the month and the last week of the month? And what your customers are saying about May?

We really haven't seen much of a difference as we've gone through the month. Again, we commented about the signal that we saw toward the end of March, really began seeing the effects I think probably on Wednesday or Thursday of that week of March. And what we've seen is just continued through the month of April and we're not hearing anything other than just some news about companies reopening. I think, recently we had a conversation with a good number of our service center managers in the asset-based business across the country and just hearing a lot of discussion about customers reopening and some of the details there. But there still are a lot of companies I think that are shut down or certainly working at lower levels and we've continued to understand that and make sure that we're adjusting our workforce accordingly.

Okay. And in an environment where they seem to just be printing money and the bailout fad is back if you will. Are you hearing anything on the pension relief side that might give you guys some relief on the orphan liabilities that you have?

Well, certainly we work on that always. And we've looked as well as, I know, other groups that are seeking that relief are looking for opportunities for some legislation to address that issue. So far there hasn't been any included in any of the phases or the bills that we've seen approved and signed by the President. But we are looking forward to perhaps an opportunity in the infrastructure bill that could be coming. But we don't have any idea about the timing of that, and the likelihood of it. But just know that, we work diligently on that issue and many, many others do as well. And so I share your sentiment and that there's an opportunity for it, but I wish I had more clarity for you than I do, but we'll certainly let you know, if we see or hear something.

And related to that lastly, if you could just remind us what the annual expenses related to those orphan liabilities, I don't know if you have that off the top of your head, Dave?

Well, David probably does. I think the total pension is around $150 million for those union plans. And about 50% of that is for central states and that's where the larger part of this issue is. But I think on an overall basis 50% of overall dollars are paid for people who have never worked for our company. And so there's a lot of opportunity for something better there.

Thank you. Appreciate it. Good to hear from you.

The next question is coming from the line of Chris Wetherbee from Citi. Your line is open. Please go ahead.

Great. Thanks. Good morning, guys.

Good morning, Chris.

Good morning, Chris.

Good morning. Maybe can we talk a little bit about expense variability, Dave, you laid out some of the cost saving efforts and I think you've even mentioned April was EBITDA positive. But could you sort of more broadly maybe beyond 2Q I talk about sort of the portion of the business maybe on the asset-based side, which is variable and then maybe also on the asset-light side how much is variable? How much can you really attack here during the downturn on the cost side?

Yeah. I think it's we saw some improved productivity measures in the first quarter. And even with these lower business levels that we're seeing into April, we're seeing those productivity measures generally improve versus last year. And so I think what that indicates to us is that we're able to scale with these lower business levels to that certain extent. Now, I think it's fair to say that, as business levels decline you tend to have more costs that kind of proportionately get into sort of a more so not variable to fixed – more fixed sort of nature just by the virtue of those business levels. So it does become more challenging at lower business levels, but I'm really impressed with the way the operations team has aligned with business levels. Certainly, that's our road drivers. We talked about that being down in our service center touch labor being down 14%. And so that along with we've addressed cartage, we've addressed purchased transportation. We've addressed rentals. We've addressed maintenance and parking some units. And so the things you would normally do, we're doing. And so – and it's good. So it's good to see I think the – those metrics like I said improved in April.

Okay. Okay. That's helpful. I appreciate that. And then maybe just a question on pricing side, so it sounds like as you've rolled through into April the conversations around contractual pricing negotiations are relatively similar to what you're doing and getting in the first quarter. I guess, when you sort of think about just that general process is it – do you think just due to sort of just general capacity and dynamics within LTL, do you think that there's the potential for some deceleration of maybe pricing as we go forward assuming tonnage is down at a relatively steep pace for most of the second quarter. I guess I just want to understand maybe sort of this new pricing dynamic that we're in within LTL and sort of how solid it is and how you guys feel about sort of variability around pricing?

Yeah. I'll start with that. I mean, we're seeing the pricing environment continue to be solid and rational. I mean, as you pointed out our deferred pricing agreements were comparable to the first quarter that we've been seeing in April in the midst of this lower business level. So that's really encouraging. And the way we're able to price on some of this transactional business, and we've talked about this in the past is that, we look at those shipments on an individual basis to ensure that they are profitable for our business and our enterprise. I think, if tonnage levels were the prolonged nature of a downturn that does – that could present some pressure on pricing.

Well, one thing, I'd add David is just by virtue of the fact that there are customers that are not at their normal workplaces, we've seen somewhat of a delay in our normal pricing discussions, nothing dramatic. But there is some additional effort I think, to get those deferred negotiations and some other increases across the finish line. So, but we were encouraged by the April results. Contract and deferred pricing increase level was comparable to that that we saw in the first quarter, which was good and decent. One of the better in the company's history I think, and that's encouraging. And I do think that there is an understanding by customers of the value that we're providing during this time, because it is a difficult job. And I think the knowledge and understanding of that is heightened right now. And so, we'll continue to watch it. I think we've shown our efforts toward discipline having that space-based pricing mechanism in place really helps us make sure that the shipments that we're handling are, we understand what they are and that we're able to price those well. And so, all of that plays in, I think, to the result that we saw in the first quarter, and we'll continue to and we appreciate that we have that mechanism in place.

Thanks very much for the time this morning. All right guys, take care.

Thank you.

The next question is coming from the line of Scott Group from Wolfe Research. Your line is open. Please go ahead.

Hey, thanks. Good morning, guys. Nice to be back at all with you.

Hi, Scott.

So the positive EBITDA in April, can you comment was LTL -- did LTL positive operating income in April? And do you think LTL stays profitable in the quarter?

Scott, I appreciate your inquiring mind. But that's really the level of detail. And I hope you would give us credit for reaching and giving you that much but that's -- and on a consolidated basis, we're -- we haven't closed the month yet either. But our view is that we do have positive EBITDA for the -- on a consolidated basis, for the month of April, which is encouraging. And so again, our net -- what we're in a net cash position at the end of the month as well coming from a net debt position, so that was good to see also. So anyway, thank you, Scott.

Well, and David, I think it's safe to say that that was -- I mean that positive EBIT would be contributed to by segments of our business. I feel like that is fair to say. But David's right, we haven't finally closed the books. We're in this period where we know some things about April, but we don't have the final numbers. And so we're trying to help you with what we know.

No, that -- I appreciate that. That's helpful. And then, can you help me think about this transactional LTL business? So when -- I guess I'm struggling a little bit if pricing is up 4%, but yields are down mid-single-digits. Where is the transactional LTL business coming from? Is this you taking LTL from another LTL carrier? And then -- so what are the net -- is this a good thing or a bad thing for margins profitability, if it's -- I'm a little just confused with the transactional LTL versus tradition.

Yeah. I appreciate the question. What's interesting about these shipments is there are opportunities that we were getting. We were -- these are customers that were quoting us before and that we're able to have greater visibility into where they can work well for us in creating operational efficiencies. The largest driver on adding these shipments is empty capacity. And we've improved our network visibility and gained some better information and that really allows us to make more intelligent decisions about each of these shipments. So in some cases, we can make lane based day of the week decisions on adding these shipments to our network. And we feel good about our ability to meet the customer and transact with them where they are. Perhaps, they've got a TMS system or something that they're utilizing. But to the point of profitability, we judge these shipments based on their own individual profitability merits, if you think about each one. And we feel like this freight is incrementally profitable for us. And so, I think what's different or what's an advantage I think for us is just our greater visibility of being able to place these shipments in areas where we know they can be beneficial to us from a cost standpoint. And for instance, if you looked at the first quarter, our empty miles were down 15%. And that's an indication that the kind of the sum total of the different decisions that we've made based on published business, based on quoted -- spot quoted business, both including BPQ and the transactional business, really worked well for us. And so I hope that helps you.

Yeah. Just one just to make sure I understand if I can David. Just -- so is this coming from another LTL do you think? And then is your history that this transactional LTL tends to be sticky and you'll have it again next year, or it's transaction and who knows? I just want to…

Certainly, because the market really isn't growing that much. I mean, I'm assuming that it would be coming -- but not necessarily from one, but just from a number of different places. And we feel like if we're appropriately addressing this business with the customer that that creates a good experience for them. And we feel like that over a period of time as we get more experience with this that it will help us grow our active account base.

Appreciate you being here. Thanks.

The next question is coming from the line of Todd Fowler from KeyBanc Capital Markets. Your line is open. Please go ahead.

Great. Thanks and good morning. And David Humphrey adjusted the stopwatch I guess. Can you guys hear me?

I just hit start. You got…

I wanted to ask David Cobb you made some comments in your prepared remarks, I think we're outside of the 8-K about some headcount reductions. Can you go over, I think you said about 12%? And is that a headcount reduction, or is that a furlough? And then would that cost takeout be in addition to the $15 million to $20 million that you quantified within the 8-K and then the release?

Yeah, very good. Yeah, I appreciate the clarifying question. The $15 million to $20 million does not include the operational reductions, cost reductions that would happen at ABF Freight network and system. The 12% was -- it's about 270 fewer road drivers that are laid off. And then on the service center, it's about 14%. It's about 700 or so on our dock and city operations, so a substantial percent.

And then David, are those -- are you keeping any benefit costs related to those individuals? Is it more of a furlough, or is it a true layoff where 100% of the cost would come out?

Right. For us it's 100% of the cost. And to the extent that they have benefits that a planned, a multiemployer plan may provide those are provided by those plans.

Yeah. And that's contractual in nature the contract that we have with the IBT for those employees.

Got it. That helps. And then Judy just on the mix shift maybe into April, it doesn't seem like there was a big increase in weight per shipment even though you've got more truckload weighted freight coming into the network. Can you talk about any changes in characteristic or shipment that you're seeing with your customers? And maybe a sense of what percent of your customers have been considered essential versus non-essential? Any impact on kind of the freight dynamics that you're seeing right now from a network balance standpoint would be helpful.

Yes. One thing that's interesting I think as we moved into April compared to the first quarter was we saw an increase in residential shipments. And part of that I think is related to our e-commerce relationships that we have with customers. That we have some customers that are really in total e-commerce companies and they do a lot of this. There was a greater interest if you can imagine in having home delivery of things like treadmills and sheds and those kinds of items. And so we've had the benefit of participating in those. And we feel good about those -- in terms of the impact that they have on the company. We've adjusted I think over the years our understanding of the cost elements of that and the pricing that is attached to it. And what's been interesting is some of the flexibility that we've gained. And what I mean by that is we've had some relief of the tighter appointment windows, and of course no one wants you to come home into their home and so they're satisfied with you delivering at the curb side. So some of those things have helped us from an operational standpoint. But back to your question about the weight per shipment, those tend to be lighter. And because they had a greater influence in April we're seeing the impact of that on weight per shipment for example. The other thing that I'll mention is as we go into the second quarter, U-Pack, our household goods moving business those tend to be heavier shipments. And because of the nature of this pandemic, not a lot is moving. And so that will tend to have a negative effect on weight per shipment as well as we go into the second quarter. I hope that gives you a little bit more color.

Yeah. No, that’s very helpful. Thanks for the time this morning.

Thanks, Todd.

The next question is coming from the line of Jack Atkins from Stephens. Your line is open. Please go ahead.

Hey, good morning, Judy. Hey, David. Hey, David.

Hi, Jack.

Hey, Jack.

Hi, Jack, good morning.

Well, so, let me, I guess go back to if I could, the commentary around what you're hearing from your customers about their plans for May as the economy begins to slowly reopen here. Could you maybe just provide a little bit more color either on what your service center folks are telling you, what you -- what you're getting directly from your customers, or just if you could help us think about what portion of that 14% tonnage decline in April is related to customers that are shut down? Just trying to get a feel for as the economy gets open back up how should we think about that tonnage decline mitigating versus just what's related to the slower underlying economic activity?

Well, we don't have a lot of, I think, general comments that could be made that really are helpful there. We've got a lot of different anecdotes and stories. But one area that we've seen some weakness in that I think is meaningful is the auto dealers and what we're -- or not the dealers, but the auto manufacturers. And what we're hearing from them is that in mid-May a number of them are going to be coming back online. And that has been a weakness, I think, for the better part of this year and certainly in the last five weeks or six weeks for our ground expedite business. One of the things that we've been able to do, which has been nice is that we've redeployed some of the resources that typically handle that business into a business that we've done with the CDC and other kind of health care and life sciences, public administration kind of efforts. So we feel better than you might think about how things have gone for our ground expedite team, but it will help a lot to have these auto manufacturers back open. If you look at our overall weakness in business, it's come largely from retailers and manufacturers. And other than in this auto area, I'm not hearing a lot of specifics from manufacturers, yet hoping to. And then on the retail side, I think, it's just really very localized. And so again it's hard for us to make generalized comments that are really very helpful here. But I am glad to hear that there's some chatter about reopening, but just don't have a lot of detail to offer you.

No. That's helpful, Judy. And I guess for my follow-up as you think about the $15 million to $20 million in cost that you guys have taken out in the second quarter relative to the first quarter, how should we think about that coming back in over the balance of this year as tonnage as the tonnage declines hopefully begin to moderate. At what point will you start layering on some of those non-union related costs and benefits?

Well, Jack first of all, I just want to clarify that that $15 million to $20 million is a year-over-year comparison. So compared to second quarter of 2019 that's the reduction calculation. But we would -- we really just need to evaluate as the business comes back and appreciate the optimism. And we have that as well. Our expectation for it to come back. But I would just say we just need to evaluate where this goes. I don't have a definite time period at this point in time, but only just to say that it will be constantly evaluated.

Well, and the other part of that that David mentioned earlier that is naturally adjusted is the asset-based business as we see things change there of having folks in layoff status it just -- that's a pool or a population of the workforce that we want to get back to work and we have that to tap into. It's a good lever for us as business levels change in that part of the business. So I think we have to be very cautious about these things and we're on that side of the argument let's just say.

Okay. That makes sense. Thank you.

Thanks.

Jack, thanks a lot. And I'll just say --we've got four more people in the queue. We're going to get to all of you. We may go a little bit over but I want to get everybody a chance to ask questions.

Thank you. The next question is coming from the line of Ken Hoexter from Bank of America. Please go ahead. Your line is open.

Hey. Great. Judy Dave and Dave, thanks for getting on live call. Appreciate it.

Good morning, Ken.

Thank you.

Good morning.

Hope you're all well and safe. A few questions on the variability of cost David. It's something not really normally thought of with a unionized carrier and you've gone through a lot of the adjustments. But do you see any chance to make any structural changes given the volume shift here now that you've got rid of some of the -- you talked about some of the line haul reductions in some of the office staff and at the service centers. Do you look at this and say, hey these are is there a chance to make some of those structural changes we need to make to keep the competitive status?

Ken, an insightful question. And it is -- it does present a unique opportunity really to reexamine the network design. And so I think we will take this opportunity. And we're -- we say this and we do this all the time that we're examining our network to make sure it meets our customer service levels and is this cost-efficient as possible. But this is a little more unique time to do that. And so I agree. Yes. So we -- it does present an opportunity to optimize the network even further. And so we achieved some pretty, I think, good productivity metrics in the quarter. Some of that's through some of the software that we've implemented and network optimization that we've done. So I think just ongoing looking at that enhancing, our software and our technologies we'll continue to serve us well in this time.

And then, just a quick follow-up. Judy, your focused kind of over time in terms of the to move toward non-asset. Any change to that strategy? You like how that's heading, as you move into this new environment? Maybe, talk a bit just, given the impact of COVID shifting the business around and your kind of commentary before about the transactional shift within the core?

Well, Ken, great thought and I appreciate the question. One of the things that we've thought about a lot is, when you compare back to the Great Recession, although, there's a lot of differences in the company; one of those that stands out to us is, the logistics company that we are today. And that gives us so much benefit from the standpoint of being able to serve customers, particularly when their supply chains are disrupted. If you look at the increase that we have, I know it's a smaller base, but the managed solutions increase is 55% in terms of revenue growth. And that's a sign of that. That tells you that we, as a logistics company, can step back, work with the customer, really develop the best solution and it oftentimes is a combination of full load, perhaps utilization of an LTL network for the final delivery. And then, also in this period of unique disruption, the ground expedite and time-critical solutions that we have really, really work well and they've shown up for us in a number of different instances. And so, we feel great about that. And then, again, we talked earlier about our customers shifting more to e-commerce, those needs that have changed there. We have some good capabilities that we've really, I think, just further strengthened over the years, that really started over 20 years ago with our U-Pack home delivery business, and that's serving us well during this time. And I think that, the sum total of that tells me that we're better positioned, regardless of the need or the kind of the difficulty. And I appreciate being in that position. And then also, really appreciate the fact that our asset-based business is performing better in the first quarter and that we've got some good visibility into the costs and adjustments that needed to be made there.

Okay, great. Appreciate the insights. Thanks guys.

Thanks.

Thanks, Ken.

The next question is coming from the line of Jeff Kauffman from Loop Capital Markets. Your line is open. Please go ahead.

Thank you very much.

Hi, Jeff.

Hello, everyone.

Jeff.

Thank you for that very detailed 8-K this morning. That was very, very helpful.

Good.

Just a couple of detailed questions. When you said $100 million in D&A, does that include the $5 million in intangible amortization or $4 million? Is it $115 million, or is it $110 million?

That is just depreciation and amortization on assets. It does not include the software amortization or intangible amortization, that would be that additional $5 million.

Okay. And you gave a little guidance on interest expense, but can I ask you to repeat it, because I don't think that I 100% understood. What should I be thinking about on a run rate interest expense quarterly, with the draw down on some of the credit lines?

Yes. So we talked about the incremental piece being about $120,000 a month, the net between the interest income and the interest expense on the additional elevated cash level. And so that -- again, we're investing -- keeping that cash safe and that's -- I guess you have a spread on the rates. Let's see. I think we gave a -- give an interest number. David, do you have that handy? We could –

David, here we go.

It was $2 million in the quarter versus $1 million in second quarter of last year. So that's our estimate for the second quarter of 2020, will be at $2 million versus $1 million last year's second quarter.

And that's net of interest income.

That’s right. Yes.

Yes. That's important, more so than it was.

That’s right.

Yes.

That’s right. And then, Jeff, he mentioned $120,000 a month, which is the incremental interest expense on the drawdown.

I got you. Thank you. That was helpful. You gave a number for tonnage in April, you gave a number for Asset-Light revenue per day. Can I ask you to breakup that 17% Asset-Light number and differentiate what FleetNet is doing in April versus the other Asset-Light operations? I'm just trying to get a read of road traffic here.

Yes. That 17% is just our best Asset-Light, excluding FleetNet. We didn’t provide the guidance update on FleetNet.

FleetNet, I think, has been running down about 10%. That's what I want to say. But we can follow-up with you on that and give you that detail. It's -- they've been down as well, mostly because of the roadside events or the lack of roadside events in that business.

Okay. And one last question. Thank you. The spot rate market for truckload has gone down pretty meaningfully during the month of April. Is that changing the attractiveness of any of this fill in freight that you've been using to kind of plug gaps in the network in the last couple of quarters?

We have seen some impact of what you're saying on our BPQ success so to speak. And again as we've talked about a couple of times that we just – we evaluate those opportunities. We look at what will attract them. We look at the need that we have in the asset-based network to fill and make the best combination or just decision with all of that information involved. And so it's just – I think of this a little bit more like levers that we can pull and that full load business is one of those. And so we have that. We've also talked about some of the other things that are going on in the business. We've got the transactional LTL and we – then we have the – the kind of this increase that we were experiencing with the e-commerce residential delivery business in April. So I think what I step back and see there is it's helpful to have those levers. And to have the greater visibility to be able to see what's going to work best for us. And then I think what's been better than it has it's just operational execution and response to that. And all of that seems to be coordinating well at this point.

Okay. Judy, David, thank you and congratulations in a difficult environment.

Thanks a lot, Jeff.

Thank you, Jeff. We've got one more in the queue. And so we'll take our last question. Operator?

Thank you. The next question is coming from Stephanie Benjamin from SunTrust. Your line is open. Please go ahead, ma’am

Hi, good morning, everybody.

Hi.

Hi, Stephanie.

This is just a quick question really a follow-up. David I know you walked through a lot of just the productivity improvement and noted that you saw on the asset base side some productivity improvements year-over-year in the first quarter and those continued in April. Is there a way for you to kind of bucket the main categories where you're seeing those improvements? We did call out some software. Maybe just for us just to kind of bucket some of those main improvements just so we can kind of wrap our heads around those. So that would be great. Thank you.

Yes. I think we had a number of things just the team really just pulled together I think and just had a remarkable result combined with the work of yield and kind of management to drive business into the network. But on the asset-based network I mean, I think using that network optimization software that I've alluded to earlier is paid dividends that was developed kind of in 2019. And there several other projects in the pipeline I think that will help us and continue to see improvements there like dispatch point planning and equipment optimization and some driver utilization software. The other thing is on the – on the dock and street productivity that improves. It's interesting during this time recently I guess in April with the closures and people being shut in. There's less traffic on the road. That does help your street operations somewhat. But and then Judy mentioned earlier, I think around the appointments and the residential deliveries and those are more efficient in this time period as well. But really on the dock in the street just improve the tighter management of labor hours to those levels of business, we're seeing some of our new labor management tools like a new mobile dispatch system that was implemented in late 2019 is also helping us there. So it's kind of a combination of many things I would say. It has contributed to all that.

Well, and then we mentioned earlier the empty miles. improvement in load average has been helpful.

Got it. I won’t pick up anymore at this time. I really appreciate it. Thank you.

Thank you, Stephanie.

Thanks a lot, Stephanie. Well, I think that ends our Q&A time and it ends our call. We thank you for joining us this morning and we appreciate your interest in ArcBest. And this concludes our call and thanks for joining us.

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