Tom Wadewitz: So, I guess, is the primary driver of the more moderate growth in revenue per hundred weight versus peers. Is that really just the emphasis on — or the greater growth with national accounts? And then, I guess, just from kind of a forward look, would you think that your revenue per hundred weight would accelerate a bit as you look forward? Or would you think it remains kind of low single digit given that mix effect with the national account tonnage?
Mario Harik: So, it’s a combination of all the things I mentioned earlier on. So, the mix of channels is one component. And obviously, the local being down on weight, but shipments being up, that’s going to become a tailwind. But it’s also the other items that our GRI and on bank deposit as well. And a lot of these things would recover as the macro — as the trade demand environment recovers through the course of 2023. Now going back to the local channel, the fact that shipments are up as the macro recovers, you would see that wafer shipments start to go up and then the overall tonnage we’re getting in that channel would go up, which would be a lift for yield. And for our national accounts, we’re looking at this as longer term strategic relationship.
Just to give you an example, the average tenure of our top 10 customer today is 60 years. So, these are customers that we’re going to be fine-tuning the business we do with them over time. So, again, overall, we expect yield to remain positive, and we expect our strategy to pay dividends as the macro recovered and the freight environment gets stronger. And we like our positioning.
Tom Wadewitz: So, it’s probably cyclical in terms of seeing that acceleration in revenue per hundred weight.
Mario Harik: Yes.
Tom Wadewitz: Right. Okay. Thanks for the time.
Mario Harik: Thanks Tom.
Operator: Thank you. Our next question comes from the line of Ken Hoexter with Bank of America. Please proceed with your question.
Ken Hoexter: Hey, good morning Mario and team. I’ll just throw it out there. I think a lot of discussion here. I think I’ve rebuilt this model four times this year alone and it sounds like with another reallocation and other ones coming next year. So, looking forward to the consistency there going forward. But just the base level understand this, you’re now at a 90% OR in the fourth quarter at LTL, I think full year just about 87%. You were at, what, 93% at Con-way before you bought it and you’re talking about another 600 basis points in a few years. Maybe talk about how you get there? And it sounds like the strategy is shifting a little bit to now readding national accounts, which I know you’ve talked a little bit about, but it sounded like that was a key move to get away from because that was a key driver of improving OR.
So, maybe to start with that. And then, Carl, just a clarification on EBITDA. I know you’ve included the — in the adjustments to the $20 million and $15 million on OR. But did you leave the $15 million out of EBITDA? Is that the way we should think about that to get to that $185 million?
Carl Anderson: Yeah. On the $20 million, I kind of walked you through that, Ken. On the $15 million, I guess, I’m not understanding the question.
Ken Hoexter: Well, I guess, to get to the adjusted operating income, you take out both the $20 million and readd the $15 million of income — pension income, but you don’t do that on EBITDA, right? You just take out the $20 million of corporate costs?
Carl Anderson: Well, no. I mean, as we go forward pension — as we think about income, pension will be excluded. Overall EBITDA, though, has pension income. So — and as we said in the planning assumptions, we kind of showed you what the expectations were for 2023 as far as pension income being approximately $20 million for the full year.
Ken Hoexter: Okay.
Mario Harik: And Ken, going back to your question on OR definition. So, we closed last year with an OR of 83.9%, which obviously Con-way had more than one line of business, and they had a corporate structure as well. So, they had the warehousing business, which was the former Menlo business. They had the truckload business and they had LTL business. Now what do you think on a — and we haven’t changed that definition since we acquired the business back in 2015. And on that reporting basis, the OR was 80.9% at year-end 2022. Now moving forward, and we just substituting our Investor Day, as we become a standalone LTL company, we are taking back the corporate cost and putting them in LTL effectively. What Carl mentioned earlier on, there are the $5 million to $10 million of unallocated costs that would be in the third quarter that we find down for the course of the year as we rationalize the corporate structure.
And this is where that new definition kicks into place. Now with the new definition in 2022 with 86.8% from an OR perspective and obviously, as we move forward, I would go to improve by at least 600 basis points by the time we get through 2027.
Ken Hoexter: Yeah. Just to clarify, I was talking about just the LTL section of Con-way, which had all the allocations. So, it was like-to-like I believe having followed Con-way for 15 years before that. So, just maybe then can you follow up, Mario, on that strategic mix. I know you’ve talked a little bit about going the national accounts. Maybe I just want to understand now with your focus is on returning to more national accounts, doesn’t that serve as a detriment to — I believe Matt Fassler used to talk a lot about moving more toward local accounts because that’s where you needed to get better pricing and thus better margins and not just chase density. When we listen to other LTLs, it sounds like it’s not a desire just to fill the network and fill density, but to do so with a profitable focus, it sounds like — again, help us understand because I think a lot of the questions are coming at you because we’re all really struggling to understand how just chasing that density at a lower price, optically — maybe it’s just optics, but that typically historically has been at a detriment to the OR.
So, maybe just fill us in because I think that’s where some of the misunderstanding from the markets you are thinking.
