Excuse me, everyone, we now have all of our speakers in conference. As a reminder, this is the Covenant Transport Group First Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Richard Cribbs. Mr. Cribbs, you may begin.

Thank you, Noelle. Good morning. Welcome to our first quarter conference call. Joining me on the call this morning are David Parker and Joey Hogan, along with various members of our management team. As a reminder, this conference call will contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures and filings with the SEC. A copy of our prepared comments and additional financial information is available on our website at ctgcompanies.com, under the Investor Relations tab. Our prepared comments will be brief and then we will open up the call for questions. In summary, the key highlights of the quarter were as follows. Our asset-based division's revenue, excluding fuel, decreased 4.5% to $115.6 million due to a 6.8% decrease in average tractors, partially offset by a 1.6% increase in average freight revenue per truck and an increase in our refrigerated intermodal freight revenue. Versus the year ago period, average freight revenue per total mile was up $0.046 per mile or 3.2%, while our miles per truck were down 1.5%. Freight revenue per tractor at our Covenant Transport subsidiary was up 3.9% over the prior year quarter, while our Star Transportation subsidiary experienced an increase of 1.8% and our refrigerated subsidiary, SRT, experienced a year-over-year decline of 2.2%, primarily due to the enterprise management system conversion on February 1. Compared to the year ago period, the asset-based division's operating cost per mile, net of surcharge revenue, were up approximately $0.057 per mile mainly due to higher driver wages and capital costs as well as operations and maintenance expense. These increases were partially…

[Operator Instructions] Our first question comes from Brad Delco with Stephens.

This is actually Ben on for Brad. So I guess, first, it'd be good if you guys could kind of talk through maybe the broader industry trends you're seeing within each of your businesses, maybe as it pertains to your one-way truckload business and refrigerated and then expedited, as well?

Ben, the environment is still very, very strong. I mean, I think we all know that, in the first quarter, from a freight standpoint, it was absolutely overwhelming. Some of that was brought on because of the weather. Whatever amount that is, we think, it's somewhere around 2% to 3% of everybody's trucks probably were not trucking during the first quarter because they couldn't because of the weather. And that exactly came back into the business, that 2% to 3%, in my opinion, that is still out there. But freight is very strong throughout the United States, whether it's dry van or whether it's refrigerated side of the business. California is in its typical first quarter, kind of up-and-down, starts and stops. But it is now starting to get into its season. I think that, that will remain strong for the remainder of the year. The Northwest has also, again like California, has been up-and-down. But that's typical Northwest part of the country. Other than that, the rest of the United States has been in great shape. The expedited side of the business, on the Covenant, very strong. Many opportunities. We continue to look at everything that's available to us from a customer standpoint. And quite honestly, there's more freight that's available than there is trucks to be able to handle it. So we're having to make decisions based upon relationships and commitments that we have with customers. So we're having to really value each and every account that is coming on because there's quite a bit of business that's available out there. On the reefer side, refrigerated side, the business is also very strong. There's been some -- not enough freight, but typically it has just been a strong 4 months on the reefer side of the business. If I had any area of the country that -- and it's not negative at all, that I've seen any type of plateau or maybe down just a little bit from the first quarter, it'd be the Ohio Valley. Ohio, Michigan, that part of the country. But it's not bad. But it's just not roaring as what it was in the first quarter. But the East Coast is strong, the Southeast. I just have no complaints at all about the business environment that refrigerated and dedicated -- excuse me, refrigerated and expedited is under. And of course, the dedicated, on the Star side has been -- continues to be very, very strong also.

That's great. It sounds like things are generally pretty strong. And I guess, how does that affect the rate environment going forward? Your rates were up 3.3% this quarter. And if you factor in the higher length of haul, they were actually probably even better. Based on everything you just said about demand, how do you see rates playing out for the rest of the year?

First of all, that's a great point that you brought up there, the length of haul. You're exactly right because then [indiscernible] the length of haul has increased for us. Rates are going to continue to go up. They're going to continue to expand. We're up 3% in the first quarter and I'm not sure where that number is going to be, but I think that 4%, 5% is not a bad number for the entire industry to be shooting at. And I think it's very, very possible and probably a low there [indiscernible] is very expectable. I just think that rates have a chance to be strong. And the dedicated side of our business would be the only thing -- a lot, a lot of that is dedicated is a fourth quarter kind of contract that we've got because if we change the Star model to that 80% dedicated, we brought on such amount, a big volume of business in that September to December time frame and so those rates won't be adjusted until that time. But on the expedited and on the SRT refrigerated side, it's every month. And I expect that those numbers are going to be some good numbers that we can live with.

And then looking at your insurance and claims expense, it was the lowest on a "cost per total mile" basis that we've seen, really in several years. Obviously the initiatives that you put in place there are working. What's kind of sustainable level [indiscernible] going forward for that line?

Yes, we're real happy with the $0.08 per mile number compared to where we have been. We would love to continue to improve safety. We're investing a lot of technology, as well as human resources, into ensuring that we are as safe as we possibly can be. And so we hope to continue to drive that number down. From a sustainable look at it, though, we're probably running more $0.085 to $0.095 per mile kind of numbers based on our safety and our history. And I think that we pretty much are kind of in that range now. We shouldn't see as much volatility in that number as we have had in past as we set our deductible lower and got our safety standards on a good trend line.

Okay. And then one last one for me. When you think about the capital requirements for the business, your unseated truck count's coming up and you're selling off some trucks to kind of level that number out. Does this change your capital requirements and maybe allow for some more debt paydown? Or how do you guys think about that?

Yes, I think from the start of the year to now, I would have improved my forecast for the amount of debt that we're going to be able to pay down. And we should be -- our CapEx should still be probably anywhere from $10 million to $25 million below depreciation and allow us to pay down additional debt for the year.

Our next question comes from Reena Krishnan with Wolfe Research.

So I actually wanted to -- I guess it's a follow up on the cost side, but going along with your comments about seeing the average fleet size decrease 2% to 3% this year. So if I'm looking at that correctly, that would mean that you guys should be adding some tractors or expect your fleet to -- your average fleet to increase from where it is currently. Am I thinking about that correctly?

Yes, I think that we'll see in the second quarter a further small decrease from where we were in the first quarter. And then with expectations of some things that we're doing with driver pay, compensation and some other quality-of-life issues for the drivers, we at least hope to be able to increase the fleet size a little bit by the end of the year from that point.

And is that more with the owner-operators or are you guys looking at company drivers?

Yes, both. We're back on track on our owner-operator program. We kind of delayed it for a little while, delayed its growth for a little while, while we made sure that we had the best products available for the professional drivers to lease from the captive program [ph] that we have through Transport Enterprise Leasing. And we're back on track with that and feel really strong about the program we have and feel like we'll be able to grow the owner-operators again from this point forward, but also including the company drivers.

Okay. So looking at that happening in the second half, is that coinciding with, hopefully, some of the -- just the temporary issues you saw from transferring or from putting forth a new system like an SRT, kind of that being done? And just, I guess, like what I'm trying to understand is, in terms of the costs that you experienced -- like, you saw a $0.9 million impact from the system implementation. How does that maybe improve in second quarter? And then if you guys are trying to bring on drivers or expand the fleet a little bit in the second half, how should we think about how that is going to impact some of the cost items that we have seen some pressure over the last couple of quarters, salaries and wages, purchased transportation costs and maintenance expense as it relates to recruiting?

Reena, this is Joey. Let me try to take that one. I think what we said and what Richard said was that the items that affected SRT, most of those gaps have been closed. So that $900,000 doesn't continue and actually reverses, the majority of that, from revenue, increasing utilization all means. So that's one. That's revenue side. And on the cost side, constant turnover, which it had. Actually SRT's had a real good week this week. So they're going to be approaching pretty much full this week, maybe next week depending on how retention does. So that, the extra payments, layover you're making or you're having, you let outcome [indiscernible] grow a little bit because your drivers are pushing you because they're a little concerned. So the SRT conversion, $900,000 number, kind of comes back as it gets more efficient. As we move into the second half of the year, pretty much what we're looking to grow are the things that are doing well. Our Star subsidiary, we'd like it to grow. It stabilized at some consistent profitability for several quarters now. So it's just kind of the right place, right time, right contract, dedicated contracts for a long-time sale. But if they get the contract, we'll get them the drivers somewhere inside of CTG because those are high-desired jobs. If the contracts come and it's profitable, we'll get the drivers. And then on the rest of the company, right now, our expedited fleet is where we're spending a lot of money. Now where will that show up? Yes, it will show up in that operations, maintenance line, on the recruiting side, as well as in driver wages. But we feel with that growth on the expedited side, the returns are there, especially in this market, what we've seen for the last several quarters, as well as we anticipate in the future, the margin is there to get if we can get the drivers. And that's -- actually, we think we can improve the margin because that obviously allows to -- it will fix costs more. So expedited and dedicated are the 2 areas we're looking to grow. And I think we're investing in those. Yes, it will show in driver wages. But I do think on the operations and maintenance, you may not see it much because the average fleet size -- the average age of the fleet is going to continue to slowly drop as go to [indiscernible]. So maintenance expense will come down, continue to come down to offset that recruiting expense. You're going to continue to see fuel expense and fuel economy improve. So you're going to get the pick up on the fuel side. So net-net, we think we have some savings coming through this fleet investment that we're doing to help offset some of the recruiting and driver-wage investment that we're making. Each of them [indiscernible] we're doing right now.

Okay. Is there any way for you guys to quantify the impact of weather during the quarter? Do you have a sense? No?

We've tried to take a look at that and the best we had was, basically, the hours of shutdown time, and the hours of shutdown time officially from the state entities that produce the shutdowns was about an extra 180 hours or up about 15% over last year. And then a lot of those hours were on the Eastern United States, east of I-35 [indiscernible], which is where probably 2/3 of our trucks are running at any given time. And so we don't have an exact number on that. We couldn't quantify that. I did a little back of the napkin accounting and it was -- I would say it's easily a minimum of $0.5 million of profitability difference from last year. But I couldn't put an exact number on that.

We've got the tools to do that. We track the number of incidents such as shutdowns that we put into fleet. We track the number of hours each of those shutdowns are involved in. We haven't been tracking the number of trucks absorbed in each shutdown. So we will do that going forward. I could tell you it was a whole lot more -- so that 180 hours, you seem to think that sounds like a lot, but we [indiscernible] 7% and the number of trucks absorbed in those shutdowns was a whole lot more, it's just, as Richard said, nailing it down to a number we can't do. We will have that next year.

Okay, all right. And then just one last thing I wanted to clarify. So gains on sales were down year over year? It was down $1.2 million?

That's correct, yes.

You can see it in a few -- last year, we had gains of about $700,000. And this year, we had losses, on disposal, of about $500,000.

Okay. But you had net proceeds for the quarter in terms of CapEx?

That's correct.

Our next question comes from Barry Haimes with Sage Asset Management.

I had a question. Just trying to -- David, I think you mentioned before pieces of the puzzle. And I'm just trying to get a little bit better sense of your objectives for the year of how you're trying to fit them together. And what I mean by that is obviously, it's still tough finding drivers and I'm presuming that the 2% to 3% shrinkage in the fleet size this year is a function of, in large part, that. And -- but still, to get the drivers, you still need -- you're having to pay more. And obviously that's still an issue because your open trucks are up year-over-year, as you pointed out. At the same time, you're mentioning that you having productive conversations on rate with customers. So when you look at that year as a whole and you're putting together, "Okay, here's my increase in cost for drivers and recruitment and so on, but here's how much I think I can get in rate." Could you give us a little feel or a little quantification or some ranges around how to think about those things?

Yes, I think, there is a way -- right now, our rates, on a consolidated basis, were up almost $0.05 a mile for the quarter. We feel that versus the year ago period, it will be at least that and we feel that it will accelerate. And you're going to kind of have to [indiscernible] plateau it out, those rate increases or the movement of rates will kind of hit a peak sometime early summary because the majority of our contractual business comes up in the first half of the year. So you'll work it hard, it'll rise in the summer and then it'll kind of sit there, it might move a little bit in September with a few other contracts that you have and then you've got your peak business that comes back behind that. Our driver wages, let's say that our target is for that to be up no more than $0.03 a mile from kind of where we are now. So if rates were up $0.05, driver wages were up $0.03, and that's only on -- that's on their miles is that, obviously, you had a net $0.02 to go to other things. And that's kind of what we're hoping for, is that the investment in the fleet, because I want to make sure everybody understands that's been a significant investment for us over the last 15 months. As you know, we added a lot of debt last year with -- the objective was to improve the drivers' experience, improve our service experience, to improve our fuel economy and improve our maintenance. And so all of those, yes, the debt size was bad, but we thought the return was significant from that and we're starting to see those. So if we're able to take those savings there…

[indiscernible] we're 3 months of the equipment that we recorded losses on disposal and I expect that to turn each of the quarters going forward with the positive numbers for gain on disposal.

Our next question comes from Tom Albrecht with BB&T.

I just wanted to explore a couple of elements here. So, David and Joey, I know you both had talked about pricing but I wonder if you can give us, at least ballpark, of the 3.3% increase in your reported rate per loaded mile, how much of that was influenced by spot, special projects, et cetera, versus more traditional contract renewals that are true rate increases?

Tom, the first couple of weeks of January had the peak -- "peak season hangover," that you can get more, you can kind of get peak pricing for the first couple of weeks of January. But after that, it just becomes the rates are the rates on your customer. So the vast majority of that 3.3% increase is -- real numbers, if I was going to throw a number at it, it's 3%. That 2 weeks' money, it helped us by $0.003 or so, but not a dramatic amount of money. So it is. It's just across the board. And there's really not one sector that is better than the other. I would say that, to the customers that we negotiated rates for early part of the year, they got a nice benefit versus what the industry and we have done starting around February and increased our internal projections of what we think that we were going to need. So I would say that the customers who got increases in January definitely offset what the peak environment hangover was. So I think that's, the rate of 3.2 or so is a real number there and it's across whether it's dry or whether it's expedited.

Hey, Tom, one of the things to keep in mind is the Star model change, [indiscernible] quarter to first quarter -- I'll just go ahead and say, our Star subsidiary's rates are down about 5%, about $0.08 a mile. So that's buried inside of that overall 3% increase. Now it's a small subsidiary, but then we went through significant change last year, in the first half of the year, to get it to kind of where it is today. So you're -- CTG as a whole is kind of fighting that headwind until we get closer to the second half of the year. So that tells you, obviously, that the expedite and the reefer business was up, obviously more than the 3%. And I agree with David, there was that little bit of that January spillover for the peak business. But contractual, customer to customer, the same rates last year where they are this year, contractual business, I'm very proud of CTG's sales efforts. They've done a wonderful job. And I think some of that's because of service and -- that we're providing but they're doing a great job.

And kind of what I've seen from analysts out there, Tom, on expectations, I don't disagree with them. I mean, you take what Joey just said there on the Star and kind of take that piece out of the equation on 300 trucks and rates are down $0.08 a mile, it all drops to fuel. That's what happened, is that we had a couple of customers that ended up taking about $0.10 a mile out of rate and putting it into fuel, which is fine. It doesn't change our profitability at all but it does change that metric on rate. So if you were to take that 300 trucks, with rates being down $0.08 a mile, it'll give you an idea of what Covenant and SRT's rate are up. And, that said, excluding the Star side, what I've kind of seen on the analyst side has been that 4% to 6%. And I think that, that is -- I think that's the numbers. I think that's what's going to happen.

Okay, that's helpful. And then, David, you're length of haul, I realized there's a lot in that as well. But that was the first time -- you only had 1 quarter since 2006 where it was over 900 miles. Can we assume a lot of that is because of the weather, the rail service issues, et cetera, there was an inordinate amount of demand for team service?

Tom, that's a great thought process but I don't think so. I mean, I continue to see opportunities on this expedited side on a daily basis. I mean, we -- in the last 2 months, and it hasn't gone away yet. The weather has gotten better. No other causes [indiscernible] that we're talking about in my mind here, it's not like it was a 2 month deal. I mean, we contractually came into some pricing and commitments on a lot of freight [indiscernible] that is not long-haul. That doesn't mean every one is [indiscernible] going to California, but not long-haul freight. And as well, keep in mind, that we continue to focus, even though it's a little small piece, but it does help, we continue to focus on the Mexico, Canada operation. And as you know, there's a lot of miles from Chicago to Mexico. So that's part of it. But I can't sit here and tell you, even though there was the benefit, that we all know, on rail during the first quarter, but I can't sit here and tell you that our length of haul is up because of what happened to the rail because this freight is still there today as we're speaking.

And the growth of e-commerce is continuing, and that sits real well with our expedited business. And then as our expedited business continues to be a little bigger percentage again of our overall freight, that's helping the length of haul, as well as the Star dedicated business changing from more of a regional, that increased their length of haul by, frankly, about 25%, which is small as a number, but at about 600 miles length of haul versus 470 last year. So that's also helping that number stay where it's going to be.

Okay, that's good color. And then on the miles per truck, again, I know a lot of that was impacted by weather, down 1.5%. But we have not yet anniversary-ed hours-of-service, would you expect that mileage utilization would still be down, maybe 0.5% or so?

I definitely think it's going to be down. I don't -- I'll leave that up to Richard on where he's at with calculations. But the hours-of-service with those 1,000 trucks down there at SRT has taken the biggest of hit of it. Because you think about the Star business, a lot of it is dedicated, tough environment. And even if it's a 7-day dedicated, they're able to swap those drivers out. So they're just not having that major of a issue. If they were [indiscernible] happy with their utilization, the utilization is up. It's not a driver hours-of-service. Then on the Covenant side, a lot of team, it's not a major portion. But then on the SRT side, it's definitely taken a hit on the new hours-of-service that, quite honestly, is something that we started off in July when it went into effect, and it took us about 5 or 6 months, it took us until the first of the year to really realize what kind of impact the hours-of-service -- and I do believe, on a high utilization because, keep in mind, SRT's model was high miles, a lot of utilization at average rates. And that's okay. I mean, that produced low-90 ORs [ph] for a lot, a lot of years. And as the hours-of-service happened, those miles were hit pretty dramatically in that 5%, 6% kind of range. So that is definitely a headwind. So now, on the SRT side, we are absolutely throttling up the rate increase side of the world to make up the difference. So that was a [indiscernible] could happen to anybody that's got a lot of high-utilization singles. Now, the guys that we're including are single. The guys who are running 1,800, 1,900 miles a week, 1,750, 1,850, those guys are not affected much, but those guys that were running 2,250 to 2,450 miles a week, they are affected.

And then my last question is, I missed the first 2 or 3 minutes. So I -- and I've heard a couple of question about driver pay. Are you giving across the board? Or is this just going to be handled kind of different regions, the state of Georgia needs this, drivers domiciled there, California this. How are you going to handle these wage increases?

Tom, it's going to be very targeted. I mean, right now, just across CTG, the only fleet that right now -- it's called raised wages, would be the Covenant subsidiary, with most of that focused in the expedited fleet. Our dedicated business with Star is kind of hanging in there right now. Turnover is dropping. It needs more drivers. SRT is okay. So it's really focused on where you get the margin, where you believe you can make a difference. But at the end of the day, if the market is moving, you're going to move somewhat with the market, somehow. Because that's just -- it's extremely -- it's the most difficult driving market the industry's ever seen. And I'm not saying it's all wages but it's a large part of it. People are working their deals. And so I think that's how you get the wage [indiscernible] -- the industry's talking more and more about [indiscernible] wages, not rate per mile. Because there's a whole bunch of different ways that you can affect their wage. And I think that's why. Well, I would say target is not across the board.

Our next question comes from Nick Farwell with Arbor Group.

Richard or Joey, could you comment on the experience of conversion in the dedicated and, say, long-haul? And how that may apply, if it does at all, with SRT and sort of the timeline for improved metrics?

Nick, you mean tough -- if we -- as we convert customers from one way to dedicated? Is that what you're talking about?

No, I'm talking about the new implementation of your, of spreading your IS, your conversion to SRT, or maybe I'm confusing some. But basically, the system conversion, now that you've completed that or at least you're in the final phases of completing it at SRT, you've had experience in implementing that in the dedicated and the long-haul. And I'm curious if that experience is applicable in any way with the SRT implementation?

Oh, my goodness. Yes, absolutely. I mean...

I don't know why it wouldn't be, so I would assume, given you're down the learning curve, you move a little more efficiently in that SRT [indiscernible].

I'm sorry, I didn't follow the question. Just real quick, we started to go through the conversion was in the first quarter of 2010. So we've had 4 years of transitioning from enterprise to one platform. SRT, it was 2 years after -- 2.5 since the previous company converted. So we had a lot of time between that one and SRT. Overall, relative to the prior ones, it's gone exceptionally well, exceptionally well. And we can go from different metrics, from driver turnover to utilization to service, and you got to focus on those 3 in any conversion, and those 3 are kind of what you're benchmarking on. By the, I would say, the middle of March, it's utilization, we're back to where it was prior to conversion. And so that's good. I mean, if you were struggling with service and things of that nature, you wouldn't get that back. I'm not saying there wasn't heartburn through that change. But so I think that what Richard said is we're through the major items to affect utilization, service and retention. So now the question is things that we identified 6 years ago are the things that we can begin working on in the future, which is any piece of freight that comes through any system, through any means, e-mail, EDI, phone call, whatever, what's the best truck to put on that asset? Any driver call, any driver application, anything whatsoever, what's the best opportunity for that driver? When you're over capacity in certain markets, are you looking across the entire enterprise to service that freight or to help that company? And so the visibility and the collaboration, if you will, goes up dramatically. And that's going to be the thing that we're going to have fun working on going forward now that we've got everybody on one system. Haven't developed -- we know what those items are but, as far as putting timelines in on those, we haven't started that yet. Let's get -- make sure SRT's calm and feeling good. But I would anticipate, in my opinion, late second quarter, early third quarter, we're going to start to develop some pretty aggressive list of items to start talking about to further make the enterprise more efficient on the asset side. And the other thing, too, remember, is the nonasset business is on the same platform, as well. So as -- if the capacity is as tight as it is, which it is, if it's going to continue to be strong, which we believe it will be, the systems to be able to support and throw freight and service freight for your customers transparently goes up exponentially. And I think that helps our nonasset business greatly. Greatly, greatly. And I believe [indiscernible] 6 months is that, that collaboration and that servicing of that freight is going up nicely. So again, the system helps that, be able to take advantage of those things.

Recently built -- we built additional business intelligence tools around this platform over the last 3 years that we've been running it for Star and for Covenant. And so those same business intelligence tools will be employed and best practices and policies will be employed at SRT, even that same business intelligence. It gives us better decision-making availability and quicker decision-making ability.

Richard, have you already implemented a CRM system or were you waiting to complete the system conversion for SRT?

No, we have one in place. It's -- the Transport subsidiary uses it. SRT and Star subsidiaries are on it, Solutions, but it's not being used. That's one of our opportunities on -- as I mentioned on the freight capturing collaboration side, we'll drive that usage higher, and the tools inside of that tool greater on the collaboration and lead generation and things of that nature. But we already have a system, already have a product that's up and running and being used, just not to the full extent.

I had another quick question. David, could you comment on the long-haul -- sort of the industry dynamics in long-haul as manifested, say, in capacity and pricing? Just a general feel for that. The reason I say that is, it is an impression that I'm hopeful you'll critique that the long-haul side of the business has been consolidating for a long period of time. And if you get some kind of sustainable economic recovery, there may be significant pricing leverage available in your long-haul business.

I don't think there's any doubt about that. I think as the long-haul, for kind of the decade of the 2000s up until the last couple of years, in my opinion, you had everybody running away from the long-haul and just giving it over to rail. And rail -- freight's going to go the way freight is going to go whether I like it or not. And most of that has gone to where it's supposed to go to. That led to, as people gave us a go for running the long-haul, there was competitive pressure during that period of time because there was less of it, as the rail was taking some of the long-haul. But as the shipper determined which part of their freight could go rail and which part of it had to be there in 48 and 72 hours and those kind of things, it gravitated back to us that we're still in the business of doing it. And on top of that, you've got the severe driver issue and the guys that used to play in it just do not play in it anymore. And then you've got this wash out of small carriers that did run 20, and definitely without a shadow of a doubt us, that have been in it for the multiple years that we've been in it, it's been part of our heritage, we are definitely benefiting from it and we will continue to benefit from it. And pricing in that market is going to -- has and will continue to go up very, very nicely, if they are needing that because they don't -- those decisions, of it can this go rail or can it not, those have already been made. And whether -- there was one today that we were talking about, last night and today, on an account that I used to do 80 loads a week. And I'm going back into the early '90s. So 25 years ago, 80, 90 loads a week off the West Coast. And over the years, I've lost every bit of that to rail. And it should have gone rail. And I haven't had a relationship with the customer in 7 or 8 years that we're starting back now, at about 15 loads a week, that's all expedited because they determined they got about 15 loads a week that are hot. And they are paying me a very good amount of money to be that expedited carrier. Well, multiply that times 1,000, and that's what's happening on the expedited, long-haul part of it. And I do expect pricing to be a major, major tailwind, not -- whatever, strong part of it.

And there have been other complications, I'm sure you're far more aware than I am, with rail, given their shift in mix. Energy being a perfect example, oil, and the availability and the challenge that's provided. And I would expect you're going to start seeing, if you haven't already, some incremental traffic, just as you described these 15 hot loads.

Yes, yes. I don't...

Assuming that's probably a direct response to what's going on in rail now.

I don't disagree. I don't disagree. I mean, at the end of the day, you've got 2 things happening. You've got the truck side less capacity, driver hangover, driver problem. Truckers can't stay in business. They're exiting the market in the last 4 or 5 years. So you've got a hours-of-service computer, you got something that is hurting growth on anybody and their brother able to go and add capacity. And then the other side of it, you've got so many tracks in the United States. There's so many trains that can run and they have been doing a great job, as we all know, in the last 10 years. We're just about at [indiscernible] maximum capacity. They can only put so many trains on the rail between Chicago and L.A. or they're going to be bumping into each other. Well, they kind of -- that's where they're at. So that's the market that we exist in today. In my opinion, the only thing that we needed was an economy that was going to be above 1%, that none of us on the phone have been able to participate in for the last 7 years and maybe we're starting to get to 2.5% kind of numbers. And if we do, we're going to see what we all been preaching for the trucking industry for the last 4 or 5 years because 2 plus 2 does equal 4. And it will happen. And it's just a matter of, as these dynamics come about. And did I start -- I think that we're at first base as these things started to happen. I truly believe the next 5 years are going to be the most exciting times that I've ever been in trucking. I've been in it for a long time.

Does the delay in the Panama Canal have any significant influence on this year's outlook?

No. I mean, I don't think so. I mean, I'm on -- it's interesting. I'm on the Federal Reserve Board for Transportation in the Southeast region, and I've been on there for about 2 years. And a major -- 2 or 3 representatives on this board, Port of Miami, Port of New Orleans, Port of Jacksonville because it's the Southeast, and Port of -- Charleston [indiscernible], Savannah. And it's very interesting listening to those guys, which are the experts, and if the economy does grow, their opinion is, is that Panama Canal is not going to do nothing to Long Beach in L.A. That Long Beach in L.A. is not going to go down. They may not grow 20% a year. But L.A. and Long Beach are not going to go down to 2 just because of the amount of time that it takes to get to the port versus the other port, as well as its multiple years away just because we get the Panama Canal, we still got Savannah and Charleston [indiscernible] that are trying to decide if they can dig a ditch deep enough to haul a boat. So it's not something that is going to happen next year magically that's going to take away a bunch of freight.

Right. And one just conceptual comment, Richard, and that is, very simplistically, if you make a growth assumption that winter might have cost you $0.5 million, and SRT conversion cost you $900,000, and I realize these are soft numbers. That would suggest that you guys were roughly operating at breakeven despite the challenges of the winter and SRT, et cetera?

Yes, I think you can add in there the loss on disposal this year versus last year and expectations for that to improve, as well.

Our next question comes from Tom Albrecht again with BB&T.

Just a question for Richard. So Richard, 2 things. Given that you've got a lot of equipment coming in, should we model modest gains going forward? Or are we likely to still see some losses? And then, secondly, as we start to anniversary some pretty nice quarterly numbers from EFS [ph], do you have any thoughts on what to model quarterly? Should it be around $1 million or whatever you've got that can help us?

One, I think -- are you talking about TFS or TEL for the leasing...

Yes, yes, I'm sorry, TEL. I've got 3 different things in my brain here this morning. So the thing that was $800,000 in the quarter.

Yes. And I think we're seeing that continue to grow. It's not growing as rapidly as it did over the last 18 months but we expect that to continue to grow on the leasing side in the second half of the year. And so I think we'll still see some positive numbers there year-over-year. And on the first question, on gains, yes, I've got it. I think we're past getting out of some equipment that we had to record losses on. And the equipment that we will be disposing of in the last 3 quarters of the year should show some modest gains.

So Richard, I guess all I was saying on the TEL is -- I mean, you had still big growth year over year, $800,000 versus $480,000. And you've got a quarter or 2 coming up, I think, with over $1 million. But you're kind of saying from that point on, the growth is more moderate?

That's correct.

They had some changeover in a couple of accounts, Tom, in early part of the first quarter that kind of slowed the growth a little bit as he kind of trades out that equipment or replaces that equipment or moves that equipment to other clients. So the second quarter will be a good quarter. But the growth versus the [indiscernible] year, those kind of moderate until some new things that he's working on, or that we're working on, will kind of start showing itself again in the second half of the year.

There are no further questions in the queue.

All right. Well, thank you, everybody, for your interest in the company. And we will talk to you again next quarter.