Saia, Inc. (SAIA) Q1 2012 Earnings Report, Transcript and Summary

Good day everyone and welcome to the SAIA Incorporated, First Quarter 2012 Results Conference Call. Today’s call is being recorded. And at this time I’d like to turn it over to Renée McKenzie. Please go ahead. Renée McKenzie: Thank you, Vicki. Welcome to SAIA’s First Quarter 2012 Conference Call. Hosting today’s call are Rick O’Dell, SAIA’s President and Chief Executive Officer and Jim Darby, our Vice President, Finance and Chief Financial Officer. Before we begin, you should note during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risk and uncertainties and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. Now, I'd like to turn the call over to Rick O’Dell. Richard D. O’Dell: Well, good morning and thank you for joining us for a review of SAIA’s first quarter. I’m pleased to report solid first quarter results that are due to the combined effort of SAIA’s 8,000 employees. Progress was made on the number of fronts including increases in revenues, yield and tonnage segments are achieving solid cost execution across our network. Revenue was $269 million, up 11% compared to the first quarter of last year and our operating income was $11 million. As I’m sure everyone is aware, we benefited from the mild winter weather this year. Meaningful margin improvement was achieved in the quarter in spite of the expected higher wage and benefit costs and depreciation expense as we continue to reinvest in the company. Saia's excellent service quality, efficiencies in our network and continued progress with yield provided the foundation for a 240-basis-point improvement in the operating ratio. Some highlights from the quarter compared to the first quarter of last year include earnings per share of $0.34 versus $0.04, our operating ratio was 95.9 versus 98.3, LTL tonnage per workday was up 2.6% and LTL weight per shipment was up 3.3% and our LTL yield was up 7.9% due to pricing actions and increased fuel surcharges. Saia’s service was 98% on-time and we saw improvements in essentially every quality metric that we measure. I believe that our fundamental execution of quality, yield management and efficiency initiatives has never been better and the stage is set for further progress. On the operational front, load quality inspectors are now in place across our network with the single purpose of ensuring that we execute in accordance with our established standards. Our new quality assurance department was created to work with our operations team to meet objectives and quality goals. Both of these programs, as well as others, are a reflection of our company-wide Quality Matters initiative that’s been adopted enthusiastically by SAIA employees. We're very proud of the fact that our exception-free service and our appointment efficiencies also show significant improvement. We continue to progress our engineered initiative which are designed to improve safety, advance customer service and increased efficiency. We're seeing improvements in these areas through both the system-wide use of our City Driver handheld units as well as our electronic onboard recording devices, now in over 75% of our tractors. The completion of installation of this technology in all tractors will provide further safety and efficiency benefits. The meantime, we're achieving a 6% improvements in miles per gallon with the installation of these devices, which reinforce optimal progressive shifting. This represents a major savings in fuel costs. Our sales group also contributed to our first quarter success. Our inside sales department continues to show solid results with our selective small shipper segment while assisting in lane density and strategic markets. We're now managing about 4% of our revenue with our inside sales team, and we achieved a 20% growth from this profitable segment during the quarter. Our entire sales team is supporting our results through their successful focus on yield improvement, customer retention and targeted growth. I’m also pleased to announce that we’ll implement an annual wage and salary increase of 3% effective July 1. The step is important to reward performance as well as to continue to attract and retain quality employees that will allow us to continue to deliver best-in-class service. Saia remains committed to market-based wage program, and we have a number of initiatives underway that we believe will continue to provide a substantial offset to inflationary wage pressures. Saia’s balance sheet's strong and we’re making major investments in our people, equipment and technology that are contributing to the enhancement of our value proposition and support our operational efficiencies. I believe that Saia’s target marketing, strong service offering, focused pricing discipline and consistent cost execution provide a solid foundation for long-term profitable growth and increased shareholder value going forward. Now, I'd like to have Jim Darby to review our first quarter.

Thanks, Rick and good morning, everyone. As Rick mentioned, the first quarter 2012 earnings per share were $0.34 compared to $0.04 in the first quarter 2011. For the quarter revenues, were $269 million with operating income of $11 million, this compares to 2011 first quarter revenues of $243 million and a reported operating income of $4.1 million. The LTL yield for the first quarter 2012 increased by 7.9% and was favorably impacted by continued pricing actions and increased fuel surcharge. Continuing our trend from the past quarters, yield showed steady improvement as we continue to achieve price increases, and target quarterly operating accounts. First quarter results were again adversely impacted by higher costs from healthcare and maintenance. As you know, inflation in health service costs and increases in maximum spending limits have continued to increase healthcare costs. While we are investing heavily in new tractors and have reduced the age of fleet, maintenance costs were impacted by more costly routine maintenance, higher parts cost and more miles driven. These factors increase maintenance expense by $1.1 million, compared to the first quarter 2011. Depreciation and amortization ran at $11.4 million during the quarter versus $8.6 million in the prior quarter, which reflect significant capital expenditures in late 2011 and throughout the first quarter of 2012. As Rick mentioned, we announced a 3% wage and salary increase effective on July 1; this increase will have approximately $13 million in expense on an annualized basis. We anticipate the impact of this wage increase to be partially offset by further productivity and efficiency gains. Our effective tax rate was 39.7% in the first quarter. For modeling purposes, we expect our 2012 effective tax rate to be approximately 39.5%. At March 31, 2012, total debt was $86.5 million, this compares to total debt of $90 million at March 31, 2011. Net debt to total capital was 27.7% at the end of this quarter. Net capital expenditures for the quarter were $39 million, this compares to $6 million of capital expenditures during the first quarter of 2011. As we mentioned previously, the company is planning net capital expenditures in 2012 of approximately $80 million. This level reflects the purchase of replacement tractors and trailers. The company anticipates that the increased capital investments will favorably impact maintenance expenses in the future and reduce the age of fleets. Also 2012 planned capital expenditures include Saia's continued investment in technology. Now I’d like to turn the call back to Rick.

Thanks, Jim. I’m encouraged with our significant margin and profit progress in the quarter which was achieve through solid cost execution across our network. I believe our ongoing investments and recent progress has set the stage for us to build on the momentum from these demonstrated results. In 2012, we remain committed to our core strategies of improving yield, building density, enhancing customer satisfaction and reducing cost through engineered process improvements and continuous employee training. This strategy provide the foundation for long-term profitable growth and increased shareholder and customer value going forward. With these comments, we're now ready to answer your questions. Operator?

Thank you. [Operator instructions] We’ll take our first question today from John Godyn with Morgan Stanley.

The OR improvement was really strong this quarter, so just had a couple follow-ups on that. First of all, do guys have anyway of quantifying the weather impact there?

We don’t have any specific way to quantify that. Obviously, last year was far more severe than normal and this year was certainly less severe. I mean if we had to put our number on it, maybe in the 0.5 point range. I think last year was probably – I think last year we said about a 0.5 point worse. So the year-year swing was probably pretty significant.

Okay, great and so what I’m getting at here is adjusting for that 0.5 point or so I mean is the first quarter a pretty good base to use for the second quarter just from the perspective of applying kind of a normal seasonal change? Or are there other moving parts that we should be aware of that you would point out?

Sure. Yes, there's always a lot of moving parts and obviously, the first quarter probably tends to be the most volatile just probably because of the weather and it’s a lower seasonal period, but if you look history probably first quarter to second quarter. Second quarter gets better from anywhere between a 1.5 points and 2.5 points-type operating points. And I would suggest, given the strength of the first quarter maybe to model something in the lower end of that range.

Okay. That’s really helpful. And just last one really quick, could give an update on tonnage trends and yield trends quarter-to-date?

We don’t comment on tonnage trends. Although not -- I guess I’ll make some comments on yield just in terms of when we discuss pricing and yield where we kind of came out of the quarter a little bit. But Jim will give some tonnage numbers.

Okay. Yes, John, I mean you can see the impact of the weather in the tonnage numbers as we walk through quarter by individual months because they were fairly easy comps in January and February. So LTL tonnage in January was up 4.2%, it was up in February 6.2% and in March it was actually down 1.3%. Month-to-date so far what we’ve seen in April on LTL tonnage, we’re running up about 1.4%.

Yes. And I would just comment on last year during the first quarter, obviously, we had some extreme weather in January and February. And then we actually had a very strong March last year, and I think it was a little bit of bounce back from the weather disruptions, plus last year we had a major competitor, who was doing an integration in March. And I think there was some temporary diversion of business, some of which we kept and some of which we didn’t. So what I would say is our, particularly our revenue trends going from absence of positive weather in February, the March numbers I thought we were pretty satisfied with from an absolute basis and from March to April we’re kind of seeing, what I would call normal seasonality. So while the percentage numbers look a little odd, we’re not dissatisfied or seeing any signs of what we would call a major problem or something that would appear to be alarming.

And the next question comes from Art Hatfield with Raymond James.

Can you talk a little bit about, Rick, you had mentioned the -- how the FedEx integration, FedEx freight impacted you last year in March. Can you talk a little bit about how we can think about that from a comp standpoint as we get deeper into Q2?

Yes, I think probably the best way to look at is, the disruption was fairly small, the competitor, which you named and I didn’t, obviously has a strong brand in the marketplace and the impact was somewhat temporary. And I guess I would say in terms of where we’re running for the second quarter more up in the 1.5% to – call it 1.5% to 2% tonnage level was probably more appropriate comp than just the March levels because that’s been what we’re running month-to-date.

Okay. And then just one other question today on the expenses. You talked about the wage increase. Just this is really a refresher because -- but during the downturn obviously you’d cut back on several areas and took wage concessions or cut back wages with your employees and then you’ve been working that back. Are you back to par on that at this point in time, so what we think about going on in July is incremental to where they were at before the downturn?

Yes, really the wages have been restored if you look at the reductions that took place in 2009 with the last – the increase that we did in December plus this one. And I guess we’ve done, obviously, do analysis from a market perspective to see where we stand and we think our total compensation package is basically back to market. And I think the comments that we made was this is an annual wage increase and we did it last year in December and a number of years ago we’ve done in December and we’ve kind of just moved it up to the July time period. So you should really look at it more of a 5-month acceleration as opposed to a material increase in costs or restoration. At this point in time, I think we’re back to more annual normal increases. I mean the other thing I just would comment on is we -- obviously we quantify the impacts of the total wage increase but as Jim had commented as we’ve, I think we demonstrated in the first quarter I mean we expect to offset some of these costs from efficiency and quality initiatives from that perspective as well.

Yes. You obviously proved that out after the December increase that you had, so good work on that.

And we’ll now go to Jack Waldo with Stephens Inc. [Technical Difficulty]

I wanted to ask 2 things. Rich, it kind of feels like this type of momentum has been building throughout at least the second half of last year and you'd probably argue either part of the first half too and then we're starting to see things manifest themselves this quarter. And it sounds like, with your commentary on the second quarter that you expect continued momentum. The 2 questions I had, one, on your pricing, how much of the pricing initiatives have you – that you've taken on have already had a full quarter of representation and how much do you expect to bleed into the second quarter?

Yes, well, I guess few comments on pricing. Obviously, over the last several quarters in Saia we've really been working on our pricing sophistication just to make sure we're properly compensated for our quality, for specialized services, as well as for lane imbalances. And the combination of this increased analysis and sophistication, as well as our pricing discipline in an improved environment, really is allowing us to have materially improved margins that we believe are sustainable. And we think we're a percentage of the way to where we want to be from that perspective. So if you look at our -- we have this theoretical model that looks at yield, which is adjusted for length of haul and weight per shipments and it shows about 5%, 5.5% improvement in yield through yields year-over-year, excluding fuel surcharge, okay. Our contract renewals in the quarter averaged about 6%, and I think there was some concern, maybe that increases would decline after a good year last year and we’ve been able to continue to advance contract renewals at Saia. And while we don’t give don’t give specific numbers, I guess, what I would comment on is that we're coming out of the quarter and into April with a higher yield than we averaged during the quarter. So we continue to make progress there and I think we have additional opportunity to capitalize on pricing sophistication and analysis. And, by frankly an improved value proposition at Saia with some of the quality initiatives that we have going forward.

So I mean, if you’re going to bucket it, have we seen 80% or 90% or 50% in the price improvements that have -- that you guys already have contractually in the first quarter? Or do they come mid-first quarter?

I mean, they really come ratably through the quarter. So I don’t know how you look at that. I mean, if -- you just have to do the math on it, right. I mean, if 40% of our business is tariff or 30% is tariff and 70% is contract and we got a 6% increase on, basically, we're talking 15%, 18% of our business, I think is the math on that. Just have to do the math and say, well, a portion of it was in the quarter and a portion of it's coming out.

Okay, okay. And then, Rick, the 2 line items that kind of surprised us relative to the model, one was on insurance and claims and the other item was on purchase transportation. But when I looked back particularly on insurance and claims and I compared it to historical results, it's really not too far off from historical. Could you talk a little bit, was 2011 an odd year in terms of insurance and claims expense? I mean should there be a positive delta as we enter ‘12?

Jack, I'll answer that one. For the first quarter, claims and insurance improved by about $1.1 million, and I think that’s the change you're looking at. And that was really due to improved severity, our frequency has been good the last several quarters. We had a bubble in fourth quarter, as you're aware, with severity, but we had very good frequency and severity in the first quarter better, than a year ago and that's where that improvement came from.

Because I mean it looks like that fourth quarter number was about $3 million above your historical norm. Am I looking at that right? I mean...

No, you're exactly right and that was the average quarter, was fourth quarter, because we had some very severe accidents in the fourth quarter that we -- aren’t historically based and we don’t expect us to see that in every quarter.

And is my math right that, that’s like $0.20 in EPS?

You're talking about in the fourth quarter impact?

Yes, of a year ago.

About $0.12.

Yes, about $0.12.

[indiscernible] Got you, okay. And then anything on that operating supplies expense line item?

Well, you asked about purchase transportation as well and that's down about $1.8 million, I believe from fourth quarter. And what you'll see is and you'll see in our third and fourth quarter that was down year-over-year as well. As we're running more of those miles in house and we're cutting down the purchase transportation miles, so even though the cost per mile of purchase transportation is up year-over-year, we’ve managed to reduce the miles much more than that. And that trend we would expect to continue.

And I guess I'll make 2 comments on that. One is, it's due to a couple things. One is our load quality and our load average is improving. And then I think you’re also looking at some of the pricing discipline and initiatives that we have, making sure we're properly concentrated in head haul lanes, et cetera, is allowing us to better balance the network and reflect that we're being properly compensated for the imbalances in our network. So it’s a combination of yield, business mix, management and efficiency from a line haul network optimization.

Yes, I mean I guess my overall, what I’m trying to get at is, you guys just posted a first quarter result that frankly met the second quarter consensus, which you don’t see in LTL land very much. And I just wanted to understand how sustainable it is and it sounds to me like there's nothing that would lead you to believe it’s not sustainable at this point.

Yes, I mean, I think we had a pretty solid, I mean absent the accident severity in the fourth quarter, we had a pretty solid quarter. And those were from results that we’ve been working on for over a year here at Saia, making some investments in quality, reinvesting in the company and really managing our business mix and yield from an optimization perspective. And I think things have started to come together and they got derailed, I wouldn't say derailed, but we got surprised a little bit in the fourth quarter with the worst accident severity that we’d ever experienced at Saia, and we were able to continue to kind of progress those and demonstrate some solid results this quarter. We look forward to further demonstrating that we can sustain this.

Next is Tom Albrecht with BB&T.

I wanted to just follow up a little bit on Jack’s question for the insurance because as I reflect on my notes from the fourth quarter, I think you talked about kind of a normal run rate being $7 million to $7.5 million. So $6.2 million is very good. We know what happened in Q4. Is $7 million to $7.5 million kind of a good thing to model or is it now going to potentially be lower if your safety continues to be at these levels?

Yes, couple things I would comment from a safety perspective. Obviously, we’ve made progress in frequencies last year. This year our frequency, accident frequency was improved in Linehaul City and our loss-time injuries actually improved as well. There's a lot of emphasis in our company for professional drivers on defensive driving and I’m also very excited about some of the increased in-cab technology that’s available to help achieve safety, both with the Vnomics installations that we’re making and making data available and then we put a lot of new tractors in the company over the last year that have some enhanced technology available to them as well. And so I think the combination of those things and our internal efforts we would hope to see some improvement there. But the reality of it is in this business we have $2 million deductible per accident, per incident from an accident perspective. The insurance component of that line is low and the claim expense is fairly high, okay. So as Jim commented, I mean we could do $1 million better by having a good quarter and you could do $1 million worse or even worse than that if you have a really bad quarter. So there's going to be some volatility there. What our objective is, is to have the best performance that we can first of all and then secondarily is to get the absolute earnings for the company up so the volatility of self-insurance for accident expense is less material than in the past. Does that answer your question?

Yes, well, it does. And obviously you're only as good safety-wise as about 5 seconds ago. So I understand that process as well.

Well, I hope -- I really don’t believe that’s the case, right. I mean you're only as good as you can institutionalize your safety and your standards within your company and we're always working on that and accidents are generally preventable. But as – the reality of it is, there's going to be some volatility in this business. So you're kind of right.

Yes, I think we feel really good about where we are with the frequency of it. The volatility comes from -- you can have severity with one accident. So we feel pretty good about where we are and we did have a good first quarter. I think you're not far off if you're saying on average, it may be 7. But I think that we did have favorable severity but we feel really good about where we are in our safety programs that we have in place and the emphasis that we're placing on it.

The other thing that’s in that line, Tom, obviously, is our cargo claims and again the quality initiative at the company are paying off and we’ve had some volatility in that line in the past. And I would expect it, to me with the training and the investments that we’ve made, I would expect the volatility from that perspective to come down and the absolute number to improve and we're seeing that.

Okay. I know historically you’ve not wanted to share your cargo, but as you start to improve that, are you willing to share that figure?

It’s about 1% this quarter, 1.1%.

Okay. And Jim, on the depreciation, you kind of got to where I was modeling by the second and third quarter. So from the $11.4 million would we continue to grow modestly or kind of flat line from that level?

I think it would continue to grow modestly. You're right, we did -- it came on a little bit faster. We front-ended, as you can see, our CapEx this year. We still expect to spend about the same amount, the $80 million, but we’ve already spent almost half of it in the first quarter. So we were bringing on our tractors earlier than what we had originally anticipated. But I still think overall for the year, we are probably going to run in the range of being $48 million or so. So it'll continue to grow as we bring on more, but it'll start -- it won’t grow at that clip.

Okay. That’s helpful. And length of haul, and then I’ll jump back in the queue.

Length of haul actually was lower for this quarter, it was 728 versus 745 for first quarter of '11.

And we'll now go to Jason Seidl with Dahlman Rose.

When I look at, Rick, the number you did in 1Q which is extremely impressive and then sort of what your guiding us to on your OR improvements, I mean you guys are going to basically, in the first half of this year probably exceed which you did in all of last year. So my question's going to be more of a sort of longer term, at the rate you guys are sort of growing your tonnage and the price increases that you're pushing through and these technology improvements that you're implementing at Saia coupled with the fact that it seems like you guys are just getting smarter about the way you're pricing your business, how soon do you think we can see sort of a low 90s OR for a full year for you guys? Barring any unforeseeable accidents, mind you, Jim, before you step in on that?

Yes. I mean obviously the -- I mean the executives there, again, as I said from the accident volatility perspective is to have enough profit that you can tolerate some accident volatility without it having – first you want to avoid it. But it's kind of part of the business and so you're going to have some of that. What we need to do is obviously make it less material to our earnings so we can take the volatility out. And that being said, right, it kind of points to your other question, is well how much progress can we make from a margin perspective. And I guess what I would tell you is I would expect maybe our yield improvement, the pace of yield improvement over time, I’m talking next year and beyond to may -- will probably slow. But yet you'll probably see a bigger increase in tonnage. Okay, so we've got a lot of very good marketing initiatives going at the company to grow inside sales. We launched the customer relationship management program in February; it’s been well received by our sales force and our customers. And that technology supports improved data integrity, customer responsiveness quality presentations, promotions and targeted marketing and we expect that to come forward. And if you look at kind of what’s going on today from a segmentation standpoint due to both our targeted marketing and our pricing discipline, our field of business and revenue is growing more than national accounts, it's obviously contributing to yield and profitability. So while company revenue's up 11%, field's up 15% and national account revenue's only up 6%. So what I would think is after we go through what I would call somewhat of a transition and repricing with customers, some of our larger customers, it'll be more sophisticated from a lane perspective than I would think with those customers you would probably -- that segment we'd probably get back into a higher growth perspective, then the tonnage we would be able to contribute to -- tonnage increases we will be able to contribute to incremental profitability, I don't know as much as yield but continuously with yield as well. So we're kind of getting past some of these cost hurdles that we have and I think our value proposition has improved. And I think there's – we're not where we need to be from a -- either as a company or an industry from a margin perspective. So we’re going to continue to advance initiatives on a number of fronts and I would expect -- I would tell you I mean, wherever we come out of this year, I mean the following year we certainly would target more than 1 point OR improvement into the coming years as well. And we need to be in the low 90s as you commented. If you give me an OR, yes I'll tell you what year I might try to be at it. The low 90s, I don’t know Jim and Renée might fall over in their chairs.

If I hear a thud I'll know who it is.

Right.

Well, talking about growth, I mean at what point do you guys start to look to expand the footprint again? Or are we still far too early to even look at that; there's too much low-hanging fruit within your existing network?

Our priority is to improve the margins within our existing footprint and then secondarily to that once that's achieved, then we could look at some further geographic expansion strategies whether it be acquisition or organic expansion. There's a number of different alternatives there that we would certain look at. But in terms of within LTL, I mean there's too much opportunity here from a operating leverage perspective and with a focus on quality and yield, I mean, the last thing we need is a diversion or some disruption that would come from an integration, even if there were small, right. So this opportunity is too significant and it’s paying significant dividends and there's further opportunity available there. So it’s not -- in terms of geographic expansion within LTL, it's not really on the plate right now.

And we’ll now go to Dave Ross with Stifel Nicolaus.

It’s actually Bruce Chan on for Dave Ross. Just a quick one on weight per shipment, you’ve got -- you had another year-over-year increase. I’m wondering if that’s from customer shipping more or is there a mix change going on, if you can maybe give us some color on what’s going on there.

We have such a diverse customer base that it’s hard to tell, and then, again some of our targeted marketing and our pricing is pretty -- probably going to drive weight per shipment up a little bit. We’re making sure that we’re being properly compensated for minimums. I mean you get this environment, fuel cost is high and revenue and equipment costs are going up. I mean, you can’t be running around, running miles to pick up and deliver single shipments unless you're properly compensated for those, particularly if those are minimum. So we have a lot of confidence in our profitability model, and we’re working on that, and I think that’s had an impact. And if you look at, it’s also working from a profit improvement standpoint with a pretty significant increase in our revenue per bill. So while our tonnage wasn’t all that positive, and our shipments were actually flattish to a little bit negative, our revenue per shipment was up pretty dramatically. And our cost per shipment, we're managing our cost per shipment well and it's working. So we’ll continue to focus on the segments that are profitable there.

And we’ll now go to Scott Group with Wolfe Trahan.

So I think – I know you mentioned that going forward that we’re going to have to start to see a little bit more incrementally from the tonnage and the little bit less from the yields. When do we start to see that shift happen? And then maybe can you talk about that in the context of the broader pricing environment, and what you’re seeing out there? Are you seeing things get a little bit more competitive, maybe now that some of the other carriers are really through culling out a lot of that really low-priced stuff?

Well, first of all, I mean that comment was in response to a multi-year outlook, okay. So I mean obviously -- I think we’re going through at Saia and the industry is going through a big pricing correction that I think is impacting tonnage to the -- and amongst companies, the varying levels depend upon what their strategies are and their pricing discipline. So my comment was more with respect to Saia, and on a multi-year outlook. So I think at some point obviously the pricing increase will temper from today’s levels and at some point they won’t need to continue to go up, because our margins as a company, as an industry would be improved, right. It’s happening today because of the necessity and the marketplace is recognizing that. So we’ve been successful with it. So I guess my comments are more on a long-term – on more of a longer term basis that you would see that. And the segments that we’re targeting from a marketing perspective, we’re growing. So I would expect as we get through this kind of repricing of national accounts, I think they would -- our tonnage trends will change, vis-à-vis history. And then, I mean the second comment I guess in terms of what’s going on in the marketplace? Again, I guess we can speak to how we’ve done. I mean we saw a 6% increase in the quarter on contract renewals. And appears to us to be a pretty rational marketplace.

So do you...

But [indiscernible] understand, it’s pretty easy to explain. I mean a tractor that, a few years ago cost $65,000, now costs $92,000 and has a ton more electronics hanging off the side that cost you more money to maintain it. Everybody knows there's demand for quality drivers, and it’s a skill set that people are looking for out there. And I think we’re -- whether there's capacity, there's obviously capacity, some capacity available in LTL. But we’re rationalizing, I mean you can’t afford to buy a new tractor and go out and recruit and hire train a new employee on an incremental basis for business that’s not contributing. And most of the industry is still isn't operating where they need to.

That makes sense. Do you think that the industry can sustain or do you expect the GRI this year and when would you expect one?

We did it in August of last year. Several people were ahead of us. We tend to follow the market, market-based pricing from that perspective, based on when the market kind of goes so that we can stay in line with the market. But I would expect there would be a general rate increase given where the industry is operating and some continued inflationary costs and I wouldn’t be surprised if it happens a little sooner than it did last year.

Okay. That's helpful. And then just going back to, I mean people have been trying to ask questions about where the margins are going. And if I look back to kind of past peak, the past decade or so, I think is it '06 you got to a 93.8 and first quarter '06 you had a 95.8 OR, so very similar when you had this first quarter. Why can’t we get to a 93.8 for the full year this year? What -- is the environment good enough and – to see the similar progression as we've seen in the past?

Well, I think there's some inflationary pressure that we need to offset and I think when – while directionally, certainly our yield is good and we have a lot of confidence in our ability to progress both volumes and yields with the quality product that we have in the marketplace, I think this quarter was -- the first quarter was benefited from weather. And I think the going-forward basis needs to be probably a little bit tempered from the best quarter that ever happened out there. But I think if you ask me if it's possible that we could progress more rapidly than a normal quarter, I mean normal sequential, I mean we could come in line with that or do that as well. I mean I think there's some upside, I think, I just think that it needs to be a little bit tempered. Because it's an imprecise game managing yield and volume and profitability from that perspective. So it's working and we're disciplined with it, we're going to continue with it, but it's no guarantee that'll be straight line either, right.

No, that makes a lot of sense. And just last quick thing on the weather. Am I understanding right that this year kind of felt 50 basis points better than normal and last year was 50 basis points worse? So on a year-over-year it’s kind of like a 100 basis points swing because of weather. Is that the way you described it?

It's difficult to quantify, but I think if you made us try to quantify that’s probably what we said. I think we said that last year was about 0.5 point and about $0.05. And I would tell you that obviously this year was better and probably to a similar magnitude, but better than normal right.

And we’ll now go back to Tom Albrecht with BB&T. So while we have no additional questions at this time. So I’ll turn it back to Rick O’Dell for any additional or closing remarks.

All right. Great, thanks for your interest in Saia. We appreciate it and we look forward to talking to you soon.

Thank you very much. And that does conclude our conference for today. Thank you.