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Saia Inc.

Q3 2008 Earnings Call

October 24, 2008 10:00 am ET

Executives

McKenzie - Treasurer

Rick O'Dell - President and CEO

Jim Darby - VP of Finance and CFO

Analysts

David Ross - Stifel Nicolaus

Art Hatfield - Morgan Keegan

Thom Albrecht - Stephens Incorporated

Ed Wolfe - Wolfe Research

John Barnes - BB&T Capital Markets

Jason Seidl - Dahlman Rose

Operator

Good morning. My name is [Bobby Joe] and I will be your conference operator today. At this time I would like to welcome everyone to the Saia’s third quarter 208 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Ms. McKenzie, you may begin your conference.

McKenzie

Good morning. Welcome to Saia's third quarter 2008 earnings call. Hosting the call this morning are Rick O'Dell, our President and Chief Executive Officer and Jim Darby, Vice President of Finance and Chief Financial Officer. Before we begin, you should note 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 have been 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

Thank you, Renee. Good morning everyone and thank you for joining us. Saia's third quarter revenue was $274 million, an increase of 11% from last year. Our operating income was $7.5 million with net income of $2.9 million. I would like to provide a few comparisons that are from continuing operations and results compared to the third quarter of last year.

Our operating ratio was 97.3 versus 94.9. On a per-day basis, our LTL tonnage was down 1.1% with total tonnage down 0.6%. LTL shipments decreased by 2.3%, while LTL weight per shipment increased by 1.2%. LTL yield was up 9.4% primarily due to the impact of higher fuel surcharge and a longer length of haul.

Our third quarter revenue was negatively impacted by a weak economy, the competitive pricing environment and disruptions from two hurricanes in cities, where Saia has significant share. Cost increases resulted from fuel volatility, inflationary pressure, healthcare and bad debt expense. Excluding the unfavorable variance in equity-based compensation and gain on the sale of real estate in the prior year, I would like to note that the operating ratio for the quarter would have been flat with the previous year.

We continue to achieve growth in our synergy revenue lanes. Our synergy revenue from the Clark Bros. acquisition which was completed in 2004 continues to grow and now exceed the $167 million on an annualized run rate. And the synergy revenue from The Connection and Madison Freight acquisitions is now at an annualized run rate of approximately $105million, which is up 50% compared to last year.

As I have noted in paste calls, we believe that planning and implementation of Saia specific initiatives are central to our success. I would like to provide a few updates on those items. Our linehaul routing and optimization project is fully implemented and yielding targeted improvements. As we grow in our customers freight needs change, tonnage and routings will be constantly reoptimized.

Our partnership with Georgia Tech is now moving into the next phase to develop a true dynamic planning tool. Some other successes are that our revenue from our enhanced weight and inspection program and targeted savings and purchase transportations have exceeded our expectations, the rollout of our wireless cross-dock system is now complete and resulting in solid operating efficiencies. Consistent training and focus has helped us to post a reduction in accident severity and resulted in overall improvement in our safety performance.

Our industry leading Xtreme Guarantee product remains unmatched in the industry and continues to be a part of our success. In this difficult environment, we have utilized our wireless technology to allow us to centralize functions that reduce administrative costs, while continuing to provide customers outstanding service.

While I'm disappointed in this quarter’s absolute results, our strategy is solid and we have demonstrated improvements in our operations initiatives and our engineered process enhancement. Saia's 8,200 employees continue to provide customers outstanding service with an on time record of 97% in the quarter. These efforts continue to position Saia well to manage through a difficult environment and to capitalize, when industry fundamentals do recover.

As an update on our corporate campaign, Saia on the road with Susan G. Komen for the cure, our pink trailer has traveled through 16 states. It's currently in St. Louis, Missouri, and is headed to Little Rock, Arkansas, next week. We have over 28,000 hits on our website. So a lot of people are tracking the pink trailers progress to learn about our campaign.

Now, I would like to have Jim Darby review our financial results. Jim?

Jim Darby

Thanks, Rick and good morning everyone. For clarity, all comments reflect results from continuing operations. For the third quarter 2008, earnings per share were $0.21 compared to $0.43 per share last year. For the quarter, revenues were $274 million and operating income was $7.5 million with one additional workday. Fuel prices remained high during the third quarter, averaging 52% higher than a year ago. The cost-per-gallon increases were offset by the fuel surcharge during the third quarter.

Claims and insurance expense was $2.2 million lower than the prior year period due to reduced accident severity. The company continues to show favorable accident frequency trend reflecting our ongoing emphasis on safety and driver training. Due to the increase in the share price during the quarter the company had an equity-based compensation expense of 600,000 or $0.03 per share versus the prior-year benefit of $3.4 million or $0.15 per share. As a reminder for future modeling was about 160,000 shares in the plan, each dollar movement and stock price results in $160,000 in expense or benefits.

Depreciation and amortization [were] $10.3 million during the quarter versus prior year of $9.8 million. Our effective tax rate from continuing operations for the quarter was 35.5%. For modeling purposes, we project our consolidated effective tax rate to be around 38% for the full year of 2008 excluding the impact of the alternative fuel tax credit related to prior periods. Additionally the prior year quarter included a pre-tax gain of $1.7 million from the sale of real estate or $0.07 per share.

Year-to-date revenues were $800 million compared to $732 million in the prior-year period. Operating income was $20.4 million with net income of $8.3 million compared to operating income of $34.3 million with net income of $16.4 million in the prior-year period. Earnings per share from continuing operations were $0.61 cents compared to $1.15 in the prior-year.

As of September 30, 2008, debt was $138 million net the company's $21 million cash balance at quarter end. Net debt to total capital was 35.7%. This compares to total debt of $173 million with net debt to total capital up 45.3% at December 31, 2007. Our consolidated net capital expenditures for the first nine months of 2008 were $20.5 million compared to $54.5 million in the prior-year period from continuing operations.

Revised anticipated capital expenditures for the year are approximately $25 million. As we have previously mentioned, we are managing for cash flow and have curtailed discretionary capital expenditures to ensure a solid balance sheet and maintain financial flexible.

Subsequent to the end of the quarter, Saia implemented a reduction in force to bring the company's salaries and wages in line with current business levels. This action was taken as the industry is experiencing lower than normal seasonal volumes and an uncertain economic environment. The workforce reduction was approximately 5% across field operations and the corporate office.

A quick comment on discontinued operations. In the quarter, the company entered into a final settlement with the debtors of a former subsidiary. This resulted in net expenses of $123,000 or $0.01 per share as discontinued operations for the adjustment of liabilities from indemnification obligations related to the 2006 sale of that subsidiary.

Now, I would like to turn the call back to Rick

Rick O'Dell

Thank you, Jim. As Jim mentioned, we focused on prudent balance sheet management and reduced our debt to preserve our strong financial position. I'm pleased that we further increased our financial flexibility to weather the downturn and make appropriate strategic investments.

We continue to pursue our tactic of building density in our network, while simultaneously pursuing engineered process improvements and other cost reduction initiatives. I'm confident that our strategy is sound and Saia remains well positioned to enhance margins, when industry fundamentals do improve.

Now, I would like to open it up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of David Ross of Stifel Nicolaus.

David Ross - Stifel Nicolaus

Gentlemen…

Rick O'Dell

Good morning, David.

Jim Darby

Good morning, David.

David Ross - Stifel Nicolaus

Rick you talked a little bit I guess just how the quarter developed and what you're seeing in October from both a tonnage and a pricing perspective? I mean, a lot of people are saying that it's really upside down this year with the beginning of the third quarter being the strongest and the end of the third quarter being the weakest?

Rick O'Dell

Yeah, sure. I'll let Jim go through the tonnage numbers and I'll make some comments on pricing.

Jim Darby

Okay. David, I'll walk you through what we experienced and then I'd like to give you a little bit of flavor for the impact of the hurricanes in the month of September. The LTL tonnage as we went through the quarter, July was up .seven tenths of a 1% over prior year, and then August was actually down 1% from a year ago and September was down 3.2% from a year ago.

And so that's how the quarter gets to minus 1.1 per day. So you're right, July was running ahead and then August and September were down. If we adjust for the hurricane impact as we see it, Septembers LTL tonnage would be down just about like August was which was down 1% from a year ago, if you takeout the impact of the hurricanes. And as we roll into October, we're seeing about that same trend. We're trending down about 1% from a year ago so far this month.

David Ross - Stifel Nicolaus

Okay. And then the pricing trends, Rick?

Rick O'Dell

I mean, David, honestly we're in the same business as lot of the other people have already announced and made comments and the net of mix changes. I mean, our pricing is negative from last year and it actually got worse quarter-to-quarter. And we said that in last quarter we were coming out of the quarter with lower yields than we went in.

And I've said this in the past. I think the longer the downturn goes on, it impacts both the as well as our customers. The more difficult the pricing environment becomes. So, I guess I'm confident that Saia has a good costing model and we use that with discipline to make good pricing decisions for the company as well as for our customers, but certainly a challenging environment.

David Ross - Stifel Nicolaus

Has it got any worse here in October from September even?

Rick O'Dell

I wouldn't say that necessarily.

David Ross - Stifel Nicolaus

Okay. And then with fuel having declined so rapidly and fuel prices falling significantly as well, are you at the point yet where you can get better base rate increases from customers or how is that working out?

Rick O'Dell

Yeah. I mean, I think the drop's been so quick and I don't think it doesn't happen, I don't think that quickly. I mean, I think overall, the fuel surcharge mechanism works, we went from going through a process, we were addressing fuel surcharge caps and inadequate mechanisms. We resolved a bunch of those and then the prices went down to where it basically made it somewhat irrelevant at least in the near term.

So, you spend a bunch of time working on those things and it doesn't seem to matter I guess, obviously when you have a 50% decline in prices after the big run up. You have to think overtime, obviously that improves the net costs for customers and makes the situation better from them on an absolute cost basis.

David Ross - Stifel Nicolaus

But did you have to give up any base rates to get those caps removed earlier this year that might be hurting you now?

Rick O'Dell

Yeah, not really, not specifically. I mean, each ones is kind of done on a customer-by-customer basis and you look at the combination of the base rate and the fuel to see if it's adequate or not. So specifically, I can't say it didn't happen in certain circumstances. But generally that's not the way that [it works].

David Ross - Stifel Nicolaus

Okay. And then can you also talk a little bit about interregional business versus the regional business? I know your length of haul continues to go up that seems to be growing faster. How much faster is it growing than the typical regional business? Is there a specific reason for that just because of the new lanes refocused sales effort, market share gains?

Jim Darby

Yeah. I mean, I think part of it is you're in an environment where our traditional business is obviously being challenged where we have a lot of market share more in the regional business is being challenged bay the environment. And then some of the areas, where we're growing to and from the upper Midwest happened to have attractive lanes and a little bit longer length of haul.

And overtime as we've expanded our map, we tend to see some increase in average length of haul, that's the trend that has been happening. But I don't think there's not a real significant change in the mix. I mean, it's kind of happening more over a period of time.

And I think is largely like I said because while we're growing in some of our newer areas and more of a longer length of haul where we haven't had a lot of share and, again while we're maintaining share I think in the overnight regional markets. We had a larger share to start with. So we're more impacted by the economic environment.

David Ross - Stifel Nicolaus

Okay. And then last question, you talked about spending, I guess lowering your CapEx a little bit. What's the average age of the fleet right now? And where is that normally, and where do you want it to be?

Jim Darby

Yeah. Our average age of fleet right now is about for tractors it's just under six years and for trailers, it's between 7.5 and 8 and it's very slightly up from where we were a year ago that's about the range that we will be in.

Rick O'Dell

Yeah. A couple of comments there. On the age of fleet we really look at our fleet on a tractor basis. We separate linehaul and the city, a couple of things. One is, in the last couple of years; we've had some significant capital expenditures and tonnage being as soft as it is, we probably were in a situation, we had some excess fleet and we didn't put the miles on it. We haven't needed to add which has kind of caused us to, which normally would bring your fleet down if you're growing, which is what we've done historically.

Secondarily as we really look at our tractors in particular very differently and that, when our linehaul units, we want to keep them five years or newer. But in the city operation with some limited use, I mean, that's why you kind of see the average age up like it is. But we are in a situation where and we would expect to continue to plan for a linehaul fleet all to be under five years and we average about three, which is kind of more in line with what you expect with the fleet that's having a bunch of miles put on it.

David Ross - Stifel Nicolaus

Thank you very much.

Rick O'Dell

Sure.

Operator

Your next question comes from the line of Art Hatfield of Morgan Keegan.

Art Hatfield - Morgan Keegan

How you are doing this morning?

Jim Darby

Good. Good morning, Art.

Art Hatfield - Morgan Keegan

Good morning, Jim. Sorry, I didn't mean to purposely forget you. Hey, just real quick. We know the environment is a little bit tougher right now. But if I look at, I was just playing with some numbers here and looking at your [OR] this quarter and kind of trying to look at your company operationally year-over-year, if you look at some of the things you mentioned on the first page of the release about the real estate gain last year and if I back out that then the equity-based comp. I basically get a flat OR year-over--year.

Could you talk a little bit about that? That seems to me that given the environment we're in and the little bit more difficult pricing environment that you seem to be making some real progress on the cost initiatives that you've had in place for this year. And can you say if that is the case and what you kind of expect to see things going forward?

Jim Darby

Yeah. I guess a couple of things. On the cost side, we outlined the initiatives at the beginning of the year took a while to get us some traction in those. And I think we got some good traction in the second quarter and we sustained those results as we came into the third quarter.

So we're pleased with that. We combined kind of engineering and technology resources with some effective field organization, execution to achieve those results. And as we look into next year we continue to invest in resources to advance technology as well as our engineering efforts. And we continue to believe those things will payoff over a period of time. We're kind of going through our list of prioritizing those initiatives and trying to establish some good targets for that as we go forward.

I guess the other thing in terms of the outlook is obviously we can't control the external environment. We can only control what we do. I’m from that perspective really pleased in some of the execution. I would comment too, we made this 5% staffing reduction. If we got normal seasonality from our volumes and hit our targeted cost execution that would also have about actually more than one point favorable impact on our margins going forward.

And we're kind of executing in line with our target with that right now. But again, we don't know how much of that gets offset with the volume environment and the pricing. So near term we're about three weeks into it. We're pleased with the execution results, which are actually a little better than the run rate we had in the third quarter. But again, obviously, it's kind of uncertain in terms of what's going to happen from a volume standpoint.

Art Hatfield - Morgan Keegan

Can you address the 5% cut issue? Because after you had announced that, we started hearing from some people in industry questioning that because they were seeing some of the terminals that they competed against locally were seeing larger layoffs than the 5%. And can you address kind of how that flowed throughout the network.

Jim Darby

Yeah. Well obviously, regionally, you looked at it from a volume standpoint to see where we were from a volume standpoint and the 5% is the average. I mean, we got markets obviously that generating growth. And we didn't make adjustments in some of those and some other areas, where we had some softer volume and we saw some opportunities from an execution standpoint. We have worked on that.

And one of the comments I would make, too is, we've made a lot of investments in technology in the last couple of years in wireless-dock operations. We have a wireless P&D dispatch and we centralize some dispatch functions maybe between three small terminals to eliminate some overhead costs. But, yeah, it varied actually fairly significantly across locations and some terminals had zero.

Art Hatfield - Morgan Keegan

Okay.

Jim Darby

So obviously, they average five you had to do more in other locations.

Art Hatfield - Morgan Keegan

Sure. No, I understand. I just wanted you to address that. Thanks. That's all I had. Congratulations on really a good quarter in a difficult environment.

Jim Darby

Thanks, Art.

Operator

Your next question comes from the line of Thom Albrecht with Stephens Incorporated.

Thom Albrecht - Stephens Incorporated

Maybe Rick, Jim, Renee how's everybody doing?

Rick O'Dell

Good.

McKenzie

Good thanks.

Thom Albrecht - Stephens Incorporated

Let me just get a couple of factual questions out of the way and then ask something else. Jim, what was the length of haul?

Jim Darby

Length of haul for the quarter, Thom, was 691 and it's up 8% over a year ago.

Thom Albrecht - Stephens Incorporated

Okay. All right. And then on your CapEx, I know you said it would be about $25 million. Given that the environment for '09 promises to be as equally challenging as '08 if not more, do you have any thoughts on where the '09 CapEx might be?

And do you have any thoughts on sort of what your maintenance CapEx is? I mean, I would almost guess it would be a little higher than $25 million. But I would like to hear your thoughts?

Jim Darby

Thom, right now, we're just in the middle of our planning process for next year. And we normally would disclose the CapEx for the following year in the January call.

Thom Albrecht - Stephens Incorporated

Sure.

Jim Darby

So I expect to do it then. And really, you're right; our CapEx for next year will really be driven by our outlook for '09.

Thom Albrecht - Stephens Incorporated

Do you have that apart from whatever you would settle on sort of an assessment of what your normal maintenance CapEx would be regardless of the environment?

Jim Darby

I think, you say regardless of the environment and the maintenance CapEx would probably approach our depreciation levels which are about $40 million.

Thom Albrecht - Stephens Incorporated

Okay.

Jim Darby

But I mean one of the things you can fairly easily do as we said just kind of look at your linehaul fleet and keep that up to-date in terms of your trade out process and let some of your city fleet age a little bit.

I mean this is the flexibility that you have and obviously with trailers, take a look at some of the newer trailers we're buying have high durability rates and you can look at those things in terms of, if you are looking for some near term cash management as well.

Thom Albrecht - Stephens Incorporated

Okay.

Jim Darby

We've got some flexibility there.

Thom Albrecht - Stephens Incorporated

I understand…

Jim Darby

Would be my point. Just like with this year and again quite frankly part of that was driven from -- we've been buying equipment. We acquired some companies that had an older average age of fleet. We invested a lot for a few years and that allows you to kind of defer for a little bit.

Thom Albrecht - Stephens Incorporated

Okay. One of your competitors suggested that over the last four to six weeks the weight per shipment has started to come back in. It's still up year-over-year, but the dramatic numbers that had been such a part of things for the last few quarters seems to be coming in now. And I'm wondering if that's your trend over the last four, five weeks.

Rick O'Dell

Yeah. I don't know that we tracked it on a weekly basis. We can get with you outside of the call and get an answer for that. I would tell you that the daily fluctuations and weekly fluctuations have been fairly volatile and we had weeks that were pretty strong. We've had some weeks and/or days that were you just think (inaudible) and we‘ve had some that were like we had one week that was surprisingly strong. So I don't know what to read about.

Thom Albrecht - Stephens Incorporated

Okay.

Rick O'Dell

That’s the short-term trends like that.

Thom Albrecht - Stephens Incorporated

Sure.

Rick O'Dell

I can't give you any more insight than I probably can't give you the insight that you'd like to have [let alone] the insight I'd like to have either.

Thom Albrecht - Stephens Incorporated

Right. Right. And I just want to double check, you said Clark sort of the run rate is 160 and MFS 105, were those the figures I heard?

Rick O'Dell

Yes.

Thom Albrecht - Stephens Incorporated

Okay. And obviously one of your competitors is going to be looking to rid themselves of a lot of terminals. What’s your latest thoughts on the sufficiency of your network as is I think the 37 states? Do you have some obvious needs there or is that set and if you were to look to acquire terminals then will they be into new territories?

Rick O'Dell

We're really focused on improving our margins and building density within the networks that we have. So, we've been looking within our geography. I guess in terms of the capacity you can see in the last several years, we've made some significant investments in some facilities and some major markets.

So we're in good shape with our great book operations. But there are some areas, particularly in some of the acquired geographies over the last several years and even when we merged with WestEx and they didn't really own any facilities or Action Express and we've made some investment in the West, but we would kind of look for some of those opportunities as well as they come about.

Thom Albrecht - Stephens Incorporated

Okay. I think that's all I had. Thanks for the commentary.

Rick O'Dell

All right. Thanks, Thom.

Operator

Your next question comes from the line of Ed Wolfe with Wolfe Research.

Rick O'Dell

Good morning, Ed.

Ed Wolfe - Wolfe Research

Just to get at something that maybe there's no answer for. Thom was asking about the weight per shipment that we've seen at other go up dramatically more than their tonnage. Your weight per shipment hasn't really been tracking more than your tonnage. Why do you think yours would be so different from Old Dominion and Conway, where they have been seeing a big per shipment increase and you haven't until very recently anyway?

Rick O'Dell

Yeah. I don't know. Especially last year, we saw some of that. And I know the only thing that I would say on a year-to-year comps, which are getting more comparable because we obviously went through some transition business with the post Connection acquisition and that could have some impact obviously because we were growing in entirely new and/or unrelated customers a lot in that market.

And we lost some of their traditional business up there, which could have probably the biggest impact. But now we're kind of getting to more where that transition was pretty much behind us this quarter, where you're looking at some more normalized I would say comps or some of that noises out anyway.

Ed Wolfe - Wolfe Research

Yes. I guess, there is…

Rick O'Dell

But I don't know, quite frankly I'm a little bit baffled by the magnitude of some of those weight per shipment changes as well, unless they participate more in some segment than we do or something. I don't know what it would be.

Ed Wolfe - Wolfe Research

Well that's…

Rick O'Dell

Obviously we all have very diverse customer groups.

Ed Wolfe - Wolfe Research

Yeah and that's what I was getting at. But it sounds like it might be the mix from the acquisitions that offset some of that.

Rick O'Dell

I would think so, Ed.

Ed Wolfe - Wolfe Research

All right. Do you have a revenue for 100 weight net of fuel?

Rick O'Dell

No. We don't break that out anymore.

Ed Wolfe - Wolfe Research

Okay. But is it safe to say that that number including mix changes is a negative number?

Rick O'Dell

It is. And I know several of the competitors have announced kind of more in the 1% to 2% range and we'd be in that range as well in our estimates. I mean, we use modeling that looks at the length of haul, the weight per shipment and mix and ours I would say absent the mix it would be in that range as well.

Ed Wolfe - Wolfe Research

Okay. Jim is there any more risk of more indemnification kinds of things coming in the future or is this behind you at this point?

Jim Darby

Well we think this is it. In second quarter we booked what we thought was the amount that we took on for the indemnification related to some old claims and we really saw a small adjustment in that and then we did a final settlement in the third quarter that allowed us to true up those claims and draw on the letters of credit that support them. So we think we're done. We think we have resolved all the claims, [we told].

Ed Wolfe - Wolfe Research

Okay. What's the maintenance CapEx kind of number? I mean, obviously it's more than 25 on ongoing we want to stay at this level of size that we're at and run our business kind of thing over the long period of time. What's the right number without growing new terminals?

Jim Darby

Yeah. We think it would approach kind of your depreciation levels, about $40 million.

Ed Wolfe - Wolfe Research

Okay. What are you seeing from your large competitor who feels to be under a lot of duress? Are they the only one in the markets kind of putting massive price pressure or is it pretty much everybody at this point?

Rick O'Dell

We don't comment on specific competitors. But it's a very competitive market out there. I don't think there's any one player that's the only one that's responding to the volume challenges and quite frankly, it's driven by the customers more than, we're not just out there trying to cut rates. Obviously, you got customers put things out for bid and you can put in a defensive position. So…

Ed Wolfe - Wolfe Research

Fair enough.

Rick O'Dell

I would say it's probably not just one. There are, but you do see more pricing pressure from some weaker players obviously.

Ed Wolfe - Wolfe Research

Okay. Somebody asked you the question of kind of there's going to be a lot of real estate for sale, what do you want and go get. But I was under the impression you have been selling some real estate recently…

Rick O'Dell

No.

Ed Wolfe - Wolfe Research

Did you have terminals that are up right now?

Rick O'Dell

No. And the only thing, if you're referring to the gains that we had in the third quarter a year ago, that's because we built a new terminal and sold the old one.

Jim Darby

Yeah. We built the new terminal last year in Houston and sold our old terminal.

Rick O'Dell

No. We're not selling our terminal.

Ed Wolfe - Wolfe Research

You then close five in May?

Rick O'Dell

Very small lease terminals.

Ed Wolfe - Wolfe Research

Okay. Those weren't yours to own?

Rick O'Dell

No.

Jim Darby

No.

Ed Wolfe - Wolfe Research

Okay. All right. So you're not worried about the pressure on the real estate values from that in other words?

Rick O'Dell

No.

Jim Darby

No.

Ed Wolfe - Wolfe Research

It sounds like you're not looking to buy them and you're not worried about them coming on the market in general?

Rick O'Dell

In strategic markets in a place, where you might be leasing or you'd like to own and control your own destiny there. In a place, where we don't have it, we would look for those as opportunistic purchases. But other than that we're not out on a shopping spree or anything.

Ed Wolfe - Wolfe Research

Okay. And based on what you said before about October tonnage down 1%, year over year, it feels like no real change getting worse in October relative to September.

Jim Darby

That's right. And we're seeing pretty much that same trend.

Ed Wolfe - Wolfe Research

Okay. That's what we're hearing across the board. Thanks a lot. I really appreciate the time.

Jim Darby

Thanks.

Rick O'Dell

Thanks, Ed.

Operator

Your next question comes from the line of John Barnes with BB&T Capital Markets.

John Barnes - BB&T Capital Markets

Hey, good morning, guys. I got on a couple of minutes late. So, I apologize if you already commented on this. But I know there is some concerns as far as cleaning up the balance sheet and paying off some debt. But at eight bucks or sub eight bucks are you looking at repurchasing shares?

Jim Darby

No.

Rick O'Dell

No, we haven't.

Jim Darby

We don't have a plan out there approved and we're not looking for it right now.

Rick O'Dell

Obviously with our tangible book value at 12.60 it is tempting as you said.

John Barnes - BB&T Capital Markets

Right. Okay. And then my other questions are about market share, but I think most of those have been answered. So, thanks for the time and great quarter.

Jim Darby

All right. Thanks.

Rick O'Dell

Thanks.

Operator

(Operator Instructions) Your next question comes from the line of Jason Seidl of Dahlman Rose.

Jason Seidl - Dahlman Rose

Good morning, guys.

Rick O'Dell

Good morning, Jason.

Jason Seidl - Dahlman Rose

Rick, we talked a while back and I think it was early in the spring and you were starting to sign some contracts that were for more than one year, so you could lock in the price then. Could you give us a flavor sort of what percentage of your overall business did you lock in back then because it's going to look like a pretty good move come '09 here I think.

Rick O'Dell

Yeah. Well, I guess a couple of things. First of all, I'd say locking in is the relative term with our contracts there's no volume commitments to it. So to the extent the pricing dramatically changes and you have a customer that looks at his situation and says, hey, due to their results, do they're getting increased pressure. I mean it's not uncommon for them to come back to you.

So at the same time, as we've commented we do have some long-term relationships with customers and we like to kind of lock in that relationship and then sit down and work with them, honing operating efficiencies and service between the two organizations. So that's kind of a strategy that we have. But it's not a lot of customers. We have got some large customers that we have a couple of two year contracts with. I can look at the number and give it to you but I would guess it's less than 10%.

Jason Seidl - Dahlman Rose

Less than, I'm sorry, 2%?

Rick O'Dell

Less than 10 and might be less than five.

Jason Seidl - Dahlman Rose

So you don't know? All right. You…

Rick O'Dell

I can get it for you.

Jason Seidl - Dahlman Rose

You can come to me offline on that. That's fine. Also, Jim, I apologize. I missed the average age of your tractors; I was kind of muffled when you say that?

Jim Darby

It's between 7.5 and 8.

Jason Seidl - Dahlman Rose

For the tractors. You said that on the trailers right?

Rick O'Dell

Right. And then we're just about 5.5.

Jim Darby

Yeah. About 5.

Jason Seidl - Dahlman Rose

5.5 years?

Jim Darby

Yeah.

Jason Seidl - Dahlman Rose

All right.

Rick O'Dell

It is the actual number, Jason.

Jason Seidl - Dahlman Rose

Okay. 5.8 is the actual, okay. So I mean and that's the blend of both the linehaul and the P&D?

Rick O'Dell

Right.

Jim Darby

That's correct. And again in the line we basically run them for five years in the line. So we'd be somewhere around 2.5 to 3.

Jason Seidl - Dahlman Rose

Okay. All right. So you could forego any purchases I guess in the near term?

Jim Darby

We could.

Jason Seidl - Dahlman Rose

It would be okay, if you're certainly, okay perfect. Listen, guys, I appreciate the time as always.

Jim Darby

All right. Thanks.

Rick O'Dell

Thanks, Jason.

Operator

At this time sir, there are no further questions.

Rick O'Dell

All right. Great. Well thanks for your interest. And if anyone has some follow-up or something, be sure to give us a call. Thanks.

Operator

This does conclude today's conference call. You may now disconnect.

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Source: Saia Inc. Q3 2008 Earnings Call Transcript

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