Saia, Inc.
Q3 2009 Earnings Call Transcript

Published: 23 Oct 2009

[Operator:]

Good morning. My name is Natasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Saia’s third quarter 2009 earnings conference call. (Operator Instructions). Thank you. Saia’s Treasurer, Ms. McKenzie you may begin your conference.

[Renee McKenzie:]

Thank you. Good morning. Welcome to Saia’s third quarter 2009 earnings call. Hosting this morning’s call are Rick O’Dell, our President and Chief Executive Officer; and Jim Darby, Vice President, Finance and Chief Financial Officer. Before we begin, you should know that 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 risks 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 would like to turn the call over to Rick O’Dell.

[Rick O’Dell:]

Good morning. We obviously continue to be challenged by our rescissionary shipping environment and lower yields driven by continued pricing pressure. Our quarter results include favorable effects from change in vacation policy, and numerous aggressive cost control measures that we’ve taken this year to offset the environment. We also continue to advance our engineering cost initiatives that are outlined at the beginning of the year. From an overall standpoint, Saia’s third quarter revenue was $222 million, which was a decrease of 19% compared to the third quarter of last year. Our operating income was $7.8 million with net income of $3.3 million. Our results included non-recurring $8.4 million expense reduction due to a change in our vacation policy. Just for clarity purposes, all comparisons of the same quarter of the prior year results from continuing operations. A few key points, we would like to highlight our operating ratio was 96.5 versus 97.3. LTL returns was down 4.4% with total tonnage down 6.3%. Our LTL shipments decreased by 2.3%, our LTL weight per shipment decreased by 2.2% and our LTL yield was down 14.2%, primarily due to the impact of lower fuel surcharges and a competitive pricing environment. Floating this back to the change in our vacation policy, our margins deteriorated compared to the prior year, primarily due to these tonnage declines and yield declines. The continued economic weakness combined with over capacity in our industry and our customer’s needs to reduce cost has resulted in continued pricing pressure, which has a cumulative effect on our margins. We are constantly seeking to counter these adverse environment by matching our variable costs with volumes and by executing size specific initiatives to control costs, while maintaining our commitment to provide outstanding service to our customers. These initiatives included implementing new operational processes rolled out by our industrial engineering team and moving new technology into production. At the same time, we are increasing our marketing efforts to achieve growth in our synergy revenue lanes. Additionally, we are working with accounts that don’t need our targeted return goals to increase profitability by working collaboratively with these customers to achieve efficiencies or by seeking necessary rate increases. If you exclude the effect of our change in our vacation policy, our operating ratio was relatively flat compared to the second of this year, and this was primarily due to gains from our cost initiatives with efficiencies achieved across the board, that’s provided a significant offset to the cumulative effect of our yield deterioration. Again, strong execution resulted in improvement in our key productivity metrics while continuing to deliver a 97% on time service to our customers. Despite lower tonnage, notable performance and productivity metrics for the quarter include our docked productivity improved 10%, our pick up and delivery productivity was flat despite seeing fewer pickups bills per stop, our load average improved 1%, our office productivity improved 35%, we achieved a 9% reduction in total terminal cost per bill, which partially offset decreases in revenue per bill. Our variable cost management and our efficiency gains resulted in a 10% reduction in our headcount compared to the prior year. I believe it’s also noteworthy that these gains were achieved while exceeding our 97% on time service metrics and improving our exception free deliveries by 29%. We’ve not compromised our commitment to quality in order to achieve these significant cost improvements. Also we’ve gained good traction on achieving targeted savings from our engineered process improvements, our current run rate for 2009 savings from project is now at $6 million annually and our target was $8 to $10 million. We’ve achieved success with our large terminal optimization projects and our fuel management programs. Our timelines have slipped on a couple of projects, our city route optimization and real time productivity this has pushed these implementations into the fourth quarter and the first quarter of next year, which will delay the benefits into next year. While our results remain affected by the economy and over capacity in the industry, we continue to demonstrate our ability to improve core execution on a number of fronts and provide a significant offset to the negative circumstances. These actions are to improve our service offering, invest in technology, enhance efficiency and take prudent balance sheet management actions to successfully navigate through was a very different environment. We believe that we are taking the appropriate steps and we are well positioned to take advantage of any future industry consolidations or improvements in the economy. I would also like to add that our dedicated employees are to be commended for achieving numerous cost efficiencies while continuing to provide outstanding service to our customer. Now I would like to turn it over to CFO, Jim Darby.

[Jim Darby:]

Thanks Rick and good morning everyone. For clarity all comments reflect results from continuing operations. For the third quarter 2009, our earnings per share was $0.24 compared to earnings of $0.21 per share last year. From the quarter, revenues were $222.29 million with operating income of $7.8 million. As Rick mentioned results included $8.4 million in reduced expenses due to a change in vacation policy. For modeling purposes, there will be an additional $3 million reduction in the fourth quarter and we will be back to our normal run rate again in 2010. As we saw last quarter, third quarter margins declined primarily due to the continued reduction in tonnage and increasing pricing pressure, which more than offset the declining fuel cost and benefits from expense reduction initiatives. The LTL yield for the third quarter was impacted by fuel surcharge, which was significantly below that of third quarter 2008. Fuel expense was impacted in the quarter by declining cost per gallon and fewer miles. Continuing higher cost of healthcare and workers compensation increased expenses by $1.1 million versus the prior yield quarter. The company continues to focus on safety and driver training to reduce frequency of accidents and injuries. As I’ve mentioned in prior calls, the company implemented a reduction in compensation equal to 10% of salary for the leadership team and a 5% wage reduction for hourly line on salary employees and operations maintenance and administration. This reduction and the suspension of the 401K match resulted in approximately $6 million in savings in the third quarter. Depreciation and amortization were at $9.8 million during the quarter versus prior year of $10.3 million. Our effective tax rate from continuing operations for the quarter was 31.5%, for modeling purposes we project our consolidated effective tax rate to be approximately 40% for the full year of 2009. Year-to-date revenues were $646.7 million compared to $799.6 million in the prior year. Operating loss was $100,000 with net loss of $4.7 million, compared to operating income of $20.4 million with net income of $8.3 million from continuing operations in the prior year period. Losses per share from continuing operations were $0.36 compared to earnings per share of $0.61 in the prior year period. At September 30, 2009 debt was a $116.3 million, and net to company’s $18.2 million cash balance at the quarter end, net debt to capital was 35.2%. Total debt has been reduced by $20.1 million during the year from a $136.4 million at December 31, 2008. Net capital expenditures for the first nine months of 2009 were $6.2 million compared to $20.5 million in the prior year period. Anticipated capital expenditures for the year are approximately $10million as we have mentioned before, this reduced level is due to the uncertain economic environment. Now I would like to turn the call back to Rick

[Rick O’Dell:]

Thank you Jim. Well clearly Saia’s results for the third quarter were impacted by the unprecedented economic climate, and I would like to say that I’m proud of the way that our team has pulled together to counter the difficulties faced by Saia, the entire industry and business across America. We believe our strong commitment to service excellence and our improvements in productivity will pay dividends when the environment improves. Again, Saia remains committed to managing through difficult economy with a relentless focus on our strategy of increasing density on our network, customer satisfaction, engineered process improvements and prudent balance sheet management to achieve long term benefits for our customers and our shareholders. Now we would like to open it up to questions. Operator.

[Operator:]

(Operator Instructions). Your first question comes from David Ross - Stifel Nicolaus.

[David Ross:]

First could you talk a little bit about tonnage strengths, how they developed through the quarter and what you are seeing here in October? Has it gotten any better worse either sequentially or year-over-year?

[Jim Darby:]

Sure I will take that, Dave when we look at through the quarter July, August and September. July was down 5.9% August was down 3.1%, September was down 4.2% and that’s how we get to the LTL tonnage being down to 4.4% for the quarter. At the end of September, LTL tonnage stepped down a little bit again, and what we are seeing in October is we are running down about 8.4% around that from a year ago. When we compare on consecutive months, it’s a long test compared to last year because of the changes that were going on during third and fourth of last year, but when we look September over October, it looked like we are down about an additional 5% on the LTL tonnage normally September to October we do expect to be down about two.

[Rick O’Dell:]

This is Rick, I would also comment about we also have about 2% that would be due to a handful of specific customers worry their pricing action was taken or we had some different lane awards in a bid reselection process.

[David Ross:]

That is a function that if you guys holding your line on pricing and saying, listen if you want to get somebody out in the hall for that price go ahead but this doesn’t pay how to do it.

[Jim Darby:]

Primarily, yes.

[David Ross:]

Then have you gone back to customers and asked for any rate increases yet, I’d imagine this is probably not the right time to do it, but if have had any success in doing that have you even tried?

[Jim Darby:]

Yes obviously, we are looking at account by account making those types of decisions and we have got some customers where we brought some business on and it’s not – we are not getting business that’s contributing the way that it should we are going back to those customers and addressing that on a customer by customer basis.

[David Ross:]

And then can you talk a little about the synergy revenue and any regions that may have the strength or weakness more so than others?

[Rick O’Dell:]

The upper Midwest we call it the Cincinnati region which is really the connections geography, and actually the adjacent upper Midwest geography we are actually seeing year-over-year increases in shipment counts and again, I think that’s due to our service offering up there and our continued strengthen of the Saia brand as we’ve spend some additional time in the market place up there. I would say, the west coast is the weak particularly, California’s economy is obviously significantly struggling, and then we are also seeing in south Texas where we have a large market share with the oil patch down there, because having grown up in Louisiana and Texas area, as a company they are also, they are down significantly there due to that oil patch business being off with the prices having come down from where they were last year.

[David Ross:]

Given the weakness in the LTL market right now, Rick have you looked at any other potential revenue sources for Saia, I know historically you just been pure play LTL kind of do LTL, do it well. Does it make sense to try to add a broker’s division or use some of your ability to warehousing or are you just stay in the course?

[Rick O’Dell:]

Primarily stay in the course we do get some calls for truck load that we have relationship to take care of that, so we have some of that but it’s pretty minimal.

[David Ross:]

Then just one question on the covenants, you recently extended your, I guess agreement with the bank and you’ve got some more relief on the leverage ratios, am I correct it was 4.25 is that EBITDA covenant that you are working under for 2010.

[Rick O’Dell:]

Correct.

[Jim Darby:]

That’s correct.

[Operator:]

Your next question comes from Edward Wolfe - Wolfe Research.

[Edward Wolfe:]

What’s going on with the share count is there something about the way the dilutive impacts are calculated or some share’s granted, it seems like the count went up?

[Jim Darby:]

It is slightly, and what I would tell you ed is that’s just the accounting rules, when you are in a loss situation you use your basic share count, and so we are in a loss situation year-to-date, but when you look at actually having income for the quarter you have to use your fully diluted share count.

[Edward Wolfe:]

Okay, so that will come back down once you get profitable for the year? Am I thinking about that right?

[Jim Darby:]

Now we would use fully diluted in a profit situation, in a loss situation it’s the basic shares.

[Edward Wolfe:]

So I’m wrong, the basic was 13.3 and the fully diluted give or take is 13.9.

[Rick O’Dell:]

Right.

[Jim Darby:]

Right.

[Edward Wolfe:]

Okay and the vacation accruals, what’s the impact in fourth quarter?

[Jim Darby:]

It’s approximately $3 million with less expense.

[Edward Wolfe:]

And how does that go into 2010.

[Jim Darby:]

We’d be back to our more normal run rates in 2010.

[Edward Wolfe:]

Okay, so there is no impact or no material impact in the first quarter.

[Jim Darby:]

That’s correct, that correct. We go back to the more normal run rate in first quarter.

[Edward Wolfe:]

Okay, I know it’s a little bit early but what are your thinking right now in terms of CapEx for 2010?

[Jim Darby:]

In the current environment and with the downturn that we are seeing, I would expect capital expenditures to be low, but we would evaluate that if there is a significant change.

[Edward Wolfe:]

Is 10 million kind of maintenance number, a below maintenance number I mean could you just sustain that again or is that low is really 15 or 20?

[Jim Darby:]

10 million is very low, and it really doesn’t have any revenue equipment being brought on, if we went in to 2010, we may add a small amount of revenue equipment so it will be slightly higher than that.

[Rick O’Dell:]

We could stay at minimal level for another year if the circumstances stay extremely difficult.

[Edward Wolfe:]

Yes, back to the tonnage trends that seem like they have deteriorated a little bit in October. Can you give us what the comp in our October was relative to September?

[Jim Darby:]

Well it looks like we dropped about 5% on a per day basis, September to October.

[Edward Wolfe:]

I got what you said sequentially, but back to 2008 the end of September and October numbers for that, the year-over-year back in ‘08.

[Jim Darby:]

If I recall, no I don’t.

[Rick O’Dell:]

I know that covers down 8.4% from October a year ago, but I can get you that number for September.

[Edward Wolfe:]

Okay, I appreciate that, I mean if I were, because as I remember you guys weren’t down that much last October.

[Jim Darby:]

That’s correct, and what we saw last October, if I remember Ed was we were down I think about 2.7% year-over-year on October and then in November, December it dropped to about 5 down, and we finished the year about 5 down on run rate.

[Edward Wolfe:]

Yes, that’s kind of how I remember it. What is your sense in the marketplace of why, the tonnage instead of improving. We are hearing a lot of positive things around the edges on the economy not negative generally, I mean not off the charts but certainly directionally, is it a large competitor to clearly gotten more aggressive in the market place and you are not playing that game or what do you see in the marketplace.

[Rick O’Dell:]

Obviously the pricing environment continues to be challenging, and then we do select the little business through pricing actions as well as probably had an impact on that as well. So probably both those two things.

[Edward Wolfe:]

So kind of the equal part market, part your own way you are managing your business?

[Rick O’Dell:]

Correct.

[Edward Wolfe:]

How much extra capacity do you feel like you have in the network and how much do you feel like you have in the equipment and driver side right now?

[Rick O’Dell:]

Probably 10% plus on the driver and equipment side, and more on the network and obviously we made some pretty significant real estate investments over the last three years to eliminate choke points in our network, and obviously volumes are pretty soft at this point from where they were and where we would have anticipated them to be, when we made those investments. So we probably have 15% to 20% in the network.

[Edward Wolfe:]

I know you are not spending much capital by plan, but are there any opportunities on terminals to go by, the Yellows got so many terminals for sale right now in some places.

[Rick O’Dell:]

We are actually in pretty good shape, I mean with the type of capacity that we have we are not really actively pursuing any of those.

[Operator:]

Your next question comes from Jason Seidl - Dahlman Rose.

[Jason Seidl:]

Couple of quick question, Jim when you look at the $8.10 million in the quarter, and I apologize if I missed the explanation on this. Was that for just the quarter or was that truing up some of the vacation policy changes for the year?

[Jim Darby:]

That really reversed accruals that went beyond the quarter.

[Rick O’Dell:]

The year to date adjustment.

[Jim Darby:]

That’s why fourth quarter run rate is around 3, but the full adjustment that we took in third was 8.4.

[Jason Seidl:]

So for the quarter itself would you call the adjustment more or like at 3, like you would for 4Q, if you weren’t truing up year to date, if you were truing up the quarter itself, what it will look like?

[Jim Darby:]

It would have been closer to 3.

[Jason Seidl:]

Closer to three, that’s very helpful, thank you. When you guys look at the competitive landscape, and I ask this question one of your competitors yesterday, we hear so much about YRCW potentially giving out of business, it’s almost become like a weekly thing, but if YRCW were to stay in business, do you think pricing would actually tick up and some of these people who have been really harping on trying to put them out with stop.

[Rick O’Dell:]

At some point obviously the pricing we are going to have to change because it’s not compensatory for what’s going and the cost that we have in the service that we provide. So, we cant necessarily I guess speculate on what other actions our competitors might take, but obviously at some point something is going to have to change. The status quo is not sustainable for the industry.

[Jason Seidl:]

No, it’s not sustainable now; to you all it doesn’t appear to be sustainable in truck load at these rates that we are seeing out there in the market place Rick. You mentioned, obviously everyone is saying pricing has got a little bit weaker, without naming the players, has there been certain people that have been more aggressive than others lately since 2Q?

[Rick O’Dell:]

Yes, I guess you could say that things have kind of stuffed up in recent time periods from certain competitive pressures.

[Jason Seidl:]

Okay, it’s fair enough. On the wage benefits that you guys have been receiving from both the senior and those sort of the call that you are ranking workforce.

[Rick O’Dell:]

Right.

[Jason Seidl:]

At what levels does, is the get back kicking at, could you remind us?

[Rick O’Dell:]

I guess the commitment that we made our employees, obviously we need to restore the company margins level that kind of cash flow of the company allows us to move forward and see that sustained for a couple of quarters prior to us reinstating some wages and benefits, and what we have kind of committed is that 95 operating ratio for a couple of quarters, 95 or better and then we would begin to restore the wages. Obviously, depending on how we are operating right we may or may not be able to do it in one fell swoop.

[Jason Seidl:]

Right. So this isn’t necessarily a hard target, it’s more like a general rule of thumb.

[Rick O’Dell:]

Correct.

[Jason Seidl:]

Okay, that’s very helpful. I’ll let somebody else have at it. Guys I appreciate the time as always.

[Operator:]

Your next question comes from Tom Albrecht - BB&T.

[Tom Albrecht:]

First off, what was your length of hall and what was it a year ago?

[Jim Darby:]

Length of hall is up a little bit. For the quarter it was 719 mile, and that’s up 4% from a year ago when it was 691.

[Tom Albrecht:]

Okay.

[Rick O’Dell:]

One thing noteworthy there Tom is sequentially though is really flat 718 to 719.

[Tom Albrecht:]

Yes, I was going to say I think it was 724 in the June quarter.

[Rick O’Dell:]

That’s right. Yes, so we they can [inaudible] out this year.

[Tom Albrecht:]

Then in terms of excluding the vacation pay impact on the quarter, this is where I get a little rusty in the transition between two firms. You mentioned a 401K match being suspended and something else totaling $6 million, I wasn’t sure if that was the impact on the quarter or year-to-date.

[Jim Darby:]

That’s the impact on the quarter Tom. And in February we suspended a 401K match and on a quarterly basis that impacts about a $1.5 million, and the 5% wage give back, 10% for leadership is about $4.5 million a quarter, so that’s where we get specific.

[Tom Albrecht:]

Then, all right, did you off of David’s question earlier on the October turnings discussion, there is kind of some static in my phone, did you mention some other metrics on October being down 8.4%?

[Jim Darby:]

Just the fact that when we look at sequentially September to October we are down about 5% on LTL tonnage and normally you would drop off a month-over-month about two, so it’s little bit more of a drop little more pronounced. That’s where Rick clarified that some of that was due to de-selection and changes to the contract negotiation.

[Tom Albrecht:]

Right, okay. And then so year-to-date you had counted down about 10%, is that right?

[Jim Darby:]

That’s correct.

[Tom Albrecht:]

Then on your interest expense I know it was going to be higher in light of the restated credit agreement, in that figure that was a little over $3 million, were there any fees or was that all interest expense?

[Jim Darby:]

Interest expense plus the amortization is based to do the amendment.

[Tom Albrecht:]

So I am just going to kind of model that as going, figure and although I know you have been reducing down a little bit. So, I guess last question, just philosophically Rick, as we head into, what’s going to be assumed fairly slow seasonal period after Thanksgiving and through winter, what’s your stand is going to be in general regarding the balance between pricing discipline and doing what you need to do to get tonnage through your network?

[Rick O’Dell:]

I would say that’s a constant balance that we are dealing with. And we will have to see what the market brings and what the market will bear from that perspective, and then we look at our own individual account basis to see what makes sense for us. We obviously have some aggressive marketing programs targeting businesses that will operate well for us. We know what that profile businesses is and we are our there seeking that where it makes sense, and where it doesn’t make sense, then you make those decisions to let business go.

[Tom Albrecht:]

Okay, so.

[Rick O’Dell:]

And I guess what I would say is obviously, we also have some very aggressive and effective cost management on the variable cost side, and we know when it’s time to take a stand on business. If it doesn’t make sense for us then we need to go out and adjust the cost accordingly with it.

[Tom Albrecht:]

Right, right. Okay. I think that’s all I had, I appreciate your commentary.

[Operator:]

Your next question comes from Jack Waldo - Stephens Inc.

[Jack Waldo:]

I wanted to ask, Rick, and this is relative to normal times. When you have conversations with customers at this point, how much is the trade off between service and price swayed? Do you have more customers concentrating on price and service, and how has that changed over this year and then how does that change relative to a normal time?

[Rick O’Dell:]

Quite frankly customers are looking for a low cost solution, but I don’t see them laying the back off for the service requirements that they have for their customers. So we continue to see a very high demand for service and they are not willing to let you change trains at times and do things like that. So, I think people are looking for opportunities to lower their cost, but they haven’t really lowered their expectations.

[Jack Waldo:]

I was kind of surprised, if I look at sequentially you had a 1% increase in LTL tonnage in the last three quarters that’s been down, so I was intuitively thinking that you guys were gaining market share, and then the commentary you have on tonnage in October surprised me that it’s down as much as it is, maybe we are reading too much into some early science and stuff. I’m just wondering, I would have expected that to extrapolate it at the same level and it just doesn’t appear that’s doing that. Do you think that’s more a function of you guys getting more hitting a hard line of price or where is that freight growing I guess is my main question and why doesn’t it seem to be leaving you guys?

[Rick O’Dell:]

Yes, I mean, again there is a couple of customer impacts that impacts about 2% of that. So let’s just say if we are down 5 and normally we would expect to be down 2, 2% of that has to do with the handful of customers that we have made some de-selection on.

[Jack Waldo:]

So I am guessing those are just big customers that wouldn’t match or that you wouldn’t match the price that we are getting from another bid is that accurate?

[Rick O’Dell:]

A majority of that is correct.

[Jack Waldo:]

Okay. And then one more thing on just philosophical way customers are handling things right now. How important do you think balance sheets are to customers at this point, and has that changed over the last like three months, I guess? We have conversations with customers where they are looking at your balance sheet saying, okay, well, you are healthy, looking at your stock price and things of that nature.

[Rick O’Dell:]

Yes, I think you get in a difficult environment like this, people are obviously looking at the company’s financial strength, your ability to manage through an environment like this, but I think as you could see from some of our competitors that have been going through difficult times for a prolonged period of time usually it has to get pretty extreme for customers really are willing to move, and look at that in transportation companies, have a lot of assets and ability to stay in business for quite a long time as we have seen. And customers know that too.

[Jack Waldo:]

Two more questions. One on just your freight network, if you slice the map of the US up into different territories, how would your business break up into those territories? Is 60% done in the south and 20% done in the north or how exactly does that run.

[Rick O’Dell:]

Yes, I mean, it’s in our investor relations presentation, we show our relative market share in different areas. Obviously the south and south-east is our strongest area where we have been the longest for maturity, and then it kind of goes to the west and the upper mid-west we have smaller share. Again that’s I guess we have a small share that’s growing and the rest of it where we have a larger market presence and we are seeing some weakness in those areas as well.

[Jack Waldo:]

And then last question. You mentioned these $6 million in savings due to the 401K, the reduction in wages, does any of that come back next year?

[Rick O’Dell:]

Yes, we hope so, right, but I mean, but I guess the comment that we made to our employees is when we operate at 95 OR for a couple of quarters we will begin to reinstate those.

[Jack Waldo:]

So on an apples-to-apples basis the only thing as we look at our 2010 model that should change, at least that you can foresee at this point is, are the cost saving you are getting from the change in vacation?

[Rick O’Dell:]

That’s correct.

[Jim Darby:]

Right.

[Jack Waldo:]

The very last question. You mentioned that the tax rate for the year is going to wind up like a 40%?

[Jim Darby:]

Yes.

[Jack Waldo:]

Am I right to think that’s implying a pretty high tax rate here in the fourth quarter?

[Jim Darby:]

Knitting out, we had a fair amount of credits that came through this quarter and we made it low. We expect it to be around 40 for the year.

[Jack Waldo:]

Yes, I am just getting to like a 47%, 48% tax rate for the fourth quarter that’s being tied to me.

[Jim Darby:]

Well, why don’t you call us and we will walk you through it Jack, but, its right, that’s based on our projections but I really don’t want to go into those on the call.

[Operator:]

Your next question comes from Art Hatfield - Morgan Keegan.

[Art Hatfield:]

I want to clarify and make sure I understand this right, the numbers that you gave Jim for the total quarterly cost savings on the so-called temporary changes to your expenses is $6 million.

[Jim Darby:]

That’s correct.

[Art Hatfield:]

Theoretically you get to a 95 OR, if you were to throw those all back in one lung if we are talking somewhere 200, 250 basis points in OR?

[Rick O’Dell:]

Depending on where the revenue levels is that could potentially be correct, but I mean again, it would be below a 95 would have to be or we may do a partial restore that, right? We are really going to have to see how the company is operating and that we are achieving level of cash flow that is adequate for the company, and we have made a commitment to employees and they understand that, but it may not be one fell of swoop.

[Art Hatfield:]

I don’t know if you talked about this. But can you talk about how yield transpired through the quarter, were there any meaningful changes on a month-to-month basis?

[Rick O’Dell:]

I would say it was pretty choppy, overall we expected not all the different than what we have seen in second. And since the mix changes we are down about 5% year-over-year, I think, I mean, I guess the issue we have right is that deteriorated through the second quarter, so we came in with the lower run rate.

[Art Hatfield:]

Right.

[Rick O’Dell:]

I mean it deteriorated through the third quarter, so the big challenge you have obviously is the cumulative impact of the yield deterioration.

[Art Hatfield:]

Correct, correct. But it just kind of continued to deteriorate throughout the quarter is what you are saying.

[Rick O’Dell:]

I think that’s right.

[Operator:]

(Operator Instructions) There are no further questions at this time.

[Rick O’Dell:]

Thank you very much for your interest in Saia, we appreciate you joining our call and we will talk to you next quarter.