Good day ladies and gentlemen and welcome to the Saia Inc. Fourth Quarter 2014 Results Conference Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Mr. Doug Col. Please go ahead, sir.

Thanks, [Greg]. Good morning. Welcome to Saia’s fourth quarter 2014 conference call. Hosting today’s call are Rick O’Dell, Saia’s President and Chief Executive Officer; and Fred Holzgrefe, our 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’d like to turn the call over to Rick O’Dell. Rick O’Dell: Well, thank you for joining us to discuss Saia's result. I am pleased to report that Saia finished off a record year in 2014 with solid fourth quarter results. To produce both record revenue and earnings in our 90th year of operation is a testament to the hard work and talent of the entire Saia team. Some highlights from the quarter compared to the fourth quarter of last year include the following. Total revenue increased 10.7% to $310 million, our LTL revenue increased 10.6%, LTL tonnage rose 4.3%. Purchase transportation as a percentage of total line miles decreased for the second quarter in a row to 12.5%. Our operating ratio of 93.4 improved by a 130 basis points. Our operating income grew 40% and our earnings per share $0.53 compared to $0.32 a year ago. In the fourth quarter, we continue to focus on providing best in class service to our customers as demonstrated by our consistent 98% on time service performance.…

Thanks Rick and good morning everyone. As Rick mentioned the fourth quarter 2014 earnings per share were $0.53 and a include $0.04 related to tax credits for the full year that were not enacted until the fourth quarter. For the quarter, revenues were $310 million with operating income of $20.6 million this compares to 2013 fourth quarter of $280 million and operating income of $14.7 million, both periods included 62 work days. As Rick mentioned LTL yield for the fourth quarter of 2014 increased by 6% which primarily reflects the favorable impact of continued pricing actions consistent with the trend of the past several years. Our industrial engineering initiatives are driving productivity improvements an our incremental margin improved with added density in our network. Now I would like to mention a few other key expense items from the fourth quarter results. Salaries, wages and benefits rose 13% to $153 million in the fourth quarter, reflecting additional headcount, wages associated with maintaining service levels and higher tonnage trends and also a midyear wage increase of approximately 3% as well as ongoing benefit cost inflation. Purchase transportation expense for the quarter rose $4.3 million compared to last year; but as mentioned earlier purchase transportation miles is a percent of total line haul miles was down sequentially from the third quarter. Depreciation and amortization of $14.8 million compared to $13.8 million in the prior year quarter due to continued investment in tractors and trailers resulting in a newer fleet. Claim and insurance expense was 6.9 million in the quarter compared to 7.4 million in the quarter last year. For the full year revenues were up 11.7% to $1.3 billion while operating income of 85.7 million was 15.2% higher than the 74.4 million posted in 2013. In 2014 net income rose 19.2% to 52…

[Operator Instructions]. First from Wolfe Research, we will take Scott Group.

So, Rick, you talked about -- you feel like positioned well for margin improvement and earnings growth. And obviously there's a concern about the impact of lower fuel, and what it means for LTL profitability and earnings. Can you talk to that, and what kind of potential earnings headwind that is, and what you are doing to offset that? And I guess we'll go from there. Rick O’Dell: Sure. Well, obviously we have a large variety of fuel surcharge programs within our customer base and firstly I really don’t care whether I get yield out of a fuel surcharge or base rate as long as the account makes money. These programs vary price would fluctuating fuel prices so it’s generally fair to customers and the company over a period of time. But when you kind of have a macro change in fuel prices or a material change its which has happened recently some of the programs or accounts really have to be reevaluated to ensure that the combination of base rate and the so larger revenue that you’re currently generating versus your costs are generating adequate margin. So, it really kind of forces us to look at kind of what the impact is on account by account basis, what’s going on and what changes we need to make in base or changes surcharge function to make sure that we didn’t -- now the combination of base rates is too low because we potentially had some margin in the surcharge. So the positive side of that is the customer’s fuel surcharge is down 4% he’s seeing a reduced cost so sometime it’s easier to go and get bigger base rate increase let’s say you go then for 7% it’s really net-net for budgetary purposes that’s only a 3% increase from a cost standpoint and sometimes that’s tolerable for them. And furthermore they’ll forget that most customer’s LTL spend is dwarf to LTL spend and those surcharges have come down even more than that. So to the extent they have a transportation budget they have a way favorable variance that we can if we need to make some adjustments because the account is no longer profitable because of some change or isn’t generating appropriate margins we’re in a position to go do that and sometimes they have a better budget tolerance. So, it’s the pros and cons of this I think when you it’s fair and generally it works particularly at the increment but when you see a backward shift with this sometimes you have to go back and look at these mechanisms they’re all little different.

So, is we’re saying it’s an issue but the pricing is good enough right now where we can actually put in more pricing than we were thinking and make ourselves whole? Rick O’Dell: We kind of changed our targeted pricing philosophy in the second half of last year because we felt margins weren’t adequate given some of the capacity constraint costs that we’re seeing so we’ve been getting some substantial increase yields during that time period and we would expect to continue that. And if that needs to step up a little bit because an account doesn’t operate because of the fuel surcharge function and we’ll change the target again.

Okay. So maybe just the last question for me. I think you guys have talked about trying to get to a low 90s, maybe even a high 80s operating ratio over the next couple of years, year or two. Does this lower fuel environment change, any of that, and make it tougher, easier? Is that still the goal? Rick O’Dell: I don’t ever remember this business being easier or anything about it necessarily but maybe that part I’ve just forgotten or something but it’s always you always have your challenges and I think what I would say is we’re familiar with the pricing fundamentals of our accounts. We have a good profitably management model and we’ve a history of managing for yield effectively and we’re going to continue to do that. I haven’t changed my opinion on that opportunity. And fuel prices declined in the fourth quarter and I thought our margins were pretty good in the fourth quarter.

Next we have Brad Delco from Stephens.

Rick I wanted to ask you one of the data points that came out in the results was the rate for shipment it was down 2.7% year-over-year but looks like it was roughly flat sequentially. Can you talk about the drivers of that and is there any concern that you’re seeing less shipments from your customers that they’re signs of the slowing economy? Rick O’Dell: I don’t know to be honest with you we’ve been pushing so much on the yield over the second half of the year and I could tell you that I personally think it’s more business mix but until you saw everyone’s results you might be able to get something out of the marketplace. Obviously I think we’re the first LTL companies to announce but I would tell you specifically in the middle of the second quarter when we were really having some pretty serious capacity constraints and incurring a lot of high cost for just transportation we changed our spot quoting for pricing dramatically and that volume for us was down pretty significant and there is a lot of those shipments they average about 8,000 pounds and they’re a lot of shipments in that 5,000 to 10,000 pound category that impacted our weight for shipment when we changed our pricing philosophy on that it was about 1% of our revenue but it was a much higher percentage of our tonnage. And my philosophy was there is no reason to discount my LTL rates in a time when your capacity down. So we cannot quit doing that spot quoting to the degree that we were, we actually dramatically changed our pricing and revenue in that segment got cut in half. And then secondarily I think we are repricing very aggressively to have this material shipment, and those chemical shippers and people tend to be much higher industrial shipments tend to be your higher weighted shipments. And we have seen some decline in our shipment count due to repricing, and obviously challenged driver market, truck load, plasma capacity is more challenging to get them what it used to be. And we think those guys have to pay their fair share for us handling those hazardous materials. So I think that has some impact on some of those heavy weighted shipments as well.

That’s good color. And then maybe just one more quickly on the yield. Yields up 6%, I think well above, they were well above our expectation. Can you kind of quantify us what the impacts were, maybe mixed length of haul and then also fuel, so I imagine fuel coming down with the pressure that so could make the deals even better? Rick O’Dell: I mean -- again we have that theoretical model that adjust for length of haul and weight per shipment and fuel surcharge. And we feel that our yields were up over 5% just per way per shipment length of haul. While both our length of haul and weight per shipment went up. And I think that same comparable number from the third quarter was 4%. So our true yield trend went up 1% and contract renewals were very favorable in the quarter and we would expect that yield momentum to continue, if not to continue to accelerate.

Next we have Bill Greene from Morgan Stanley.

Rick, I wanted to ask you a little bit for some color on how to think about what all these moving parts -- the efforts on yield, the fuel surcharges, and how those are changing, and of course the mix effects -- typically we think about the OR in the first quarter would be a little bit worse than the fourth quarter. But can you offer any color there about how to think about these moving pieces and how it could affect it? Rick O’Dell : We think because of our yield momentum we would expect our OR to improve, from 4Q to 1Q, even though 4Q was pretty good. Historically it tends to have a lot of swings between first quarter and fourth quarter and it depends on certain dynamics in the quarter particularly impacted by weather. I mean we were fortunate that kind of avoid a lot of weather issues in the fourth quarter and had good, shipments counts were up 7% range it’s pretty favorable quarter for us, but due to yield momentum that we have you know there is a general rate increase in the 1st of January and favorable contract renewals that we have and our outlook is to improve the OR from that in the first quarter.

How does the tonnage growth. I might have missed that you might have said how January tonnage was? Rick O’Dell: If you look at sort of year-to-date January shipments were up modestly, but we trend we do see so far in January we see weight per shipment down. So overall tonnage is down modestly year-over-year, but I think we going to keep that in context what Rick described around all of our emphasis on yield and the January GRI.

Now let me just clarify one thing. So Rick in your comments you said, hey look we are willing to forgo some tonnage in so far as we are coming more profitable in the tonnage that we keep and what not because of the yield focus. So is there a level where we would worry about demand. Is there -- operating leverages of business start to kick in at down two tonnage or three tonnage or something like that, are we so far from this because of the yield environment we have to yet worry? Rick O’Dell: To me flat shipments to down a couple of percent, if you can get mid or high single-digit rate increases would have a meaningful improvement on our operating ratio particularly with some of the efficiency initiatives that we have with the company. So I think it’s -- we are pretty focused on getting to 80s, 80s operating ratio I supposed to just growing and we grew significantly last year and I wasn’t very happy with our margin. So we have changed our focus to a pricing and yield management story, and this point the demand environment seems solid enough that we have been able to be pretty successful getting rate increases. And what we tend to see we go to customers for a meaningful increase, there was a segment of their business that operates okay and there is a segment of their business that operates very poorly. I mean we don’t just take 5% on the account overall we are taking 5% in one and then some it might 15%, 20% and then we are going to find out whether get that business reprised or an audit comes out its operating in head haul lane out of Chicago then the cost come out. It’s a part of what we are seeing a combination of effective yield management and effective line on that work optimization that some of the sub-optimal costs that we saw last year get re-optimized and the business gets re-optimized as well.

And next we have Art Hatfield from Raymond James.

As I think about the big picture and I think about this being I looked back to past couple of years I go back to '13 you had modest growth no tonnage growth but you had good yield improvement and you had good improvement in [the OR] and '14 you had great top-line growth but the OR didn't move that much. Can you help -- you have kind of talked over around this but can you talk more specifically about how you think about that balance in '15 and beyond for the company?

Well there was always a balance. I mean we wouldn't be well down 7% to 8% in tonnage and you will see obviously we are investing in sales resources particularly in field sales. But there is a segment in our national account business that we see a big opportunity and were we still don't have the pricing right particularly in today’s higher cost environment. And I think we're going to some inflationary cost pressure from driver wages and we all know add some fuel the truck load market is increasing cost and I think there is another sign that the rails are going to back off the intermodal service a portion of our line haul cost. So we see that we need to be properly compensated for what we do and I am not very satisfied with where our margins are, so I mean it's always a balance. But we are working diligently on business mix management in conjunction with our cost initiatives and I think the environment is pretty good for that I mean with the wage increases are people are good, with some of these other external factors that are going to be inflationary I think the rates are going to have to go up. And we think our rates compared to our value proposition as a segment of our customer mix needs to be re-priced, we're prepared to do that and we think the environment is good for that.

That's helpful. Just one other question obviously the term of the day is energy or term of the day is energy exposure I know that's two words but is energy exposure. So can you talk about a little bit about what maybe your exposure is to the energy industry, one. And two if we do see a reduction in production environment is there anything in there that could you help on the cost side i.e little bit pressure on the labor side? Rick O’Dell: Obviously some of the oilfield markets have driven up the demand for drivers when we were in some of those places like Odessa, Texas and paying signing bonuses and things like that, that should kind of mitigate some of those types of things from a driver availability standpoint. And then just from an exposure standpoint if you just look at it off of Sipco has figured out kind of what the customer mix is -- we have about 8% exposure to energy overall. And I think the other comment that we all have to look at when you talk about the economy is with the fuel prices coming down lot of disposable income is going up dramatically I guess no one wants to talk about that?

Apparently not but I think you are on the right track with that and I appreciate the time for that Rick. Rick O’Dell : Alright, thanks.

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[indiscernible] just kind of sticking with that on the exposure side what's the breakdown for you guys between industrial manufacturing and retail right now? Rick O’Dell : It's about 40 -- retail 40% industrial and kind of 20% is distribution I don't know where which category you have put the distribution side into but that's kind of a mix that we have had for some time.

Alright. And the decline into January on the weight of the shipment do you think are you seeing a drop off in sort of on the industrial shipment side because of the strong dollar I know I have had a couple of clients asking me about that? Rick O’Dell: I don’t know I mean the majority of our decline in weight per shipment is purely in this 5,000 to 10,000 pounds segment. So again I don’t know how much of that is ..

Any chance that’s from the hazardous materials? Rick O’Dell : It's because of our haz mat pricing and or because of our and or because of the spot quote pricing changes that we made.

Okay. That's fair enough. And I guess my next question is on the dimensioners equipment you said I think you said 30% by the end of the year is where you guys are going to be, I am just looking for some clarification on that? Rick O’Dell : We went from 27 at the end in the fourth quarter of last year to 30, they have actually all been installed. Additional three have been installed in January and we were just looking are there some lanes that freight travels through and didn't have the opportunity to put through a dimensioner. But your other number is actually right as well -- we currently run about 30% of our shipments go through the dimensioner.

And you so just probably had a positive impact on your revenue per 100 weight that was just hard to pull up, correct? Rick O’Dell: It does I mean obviously as we get the more accurate class over a period of time in the density in some cases you can change the bill depending upon the customer’s pricing program and in another cases we have a more accurate measurement of the density to apply to their profitability model and we go to them and say we’ve historically thought your density was 9 pounds per cubic foot and it’s really 11 therefore there is a 20% change in our line haul cost and we need to be compensated for that.

Next we have Tom Albrecht with BB&T Capital.

Can you walk through the LTL tons per day October, November, December and then I wanted to follow up on purchase January comment.

Sure. If you look at our LTL tonnage year-over-year October through November-December, you would see up 6.4% in October, 3.9% November, 2.7% in December. So for the quarter those are the elements. Rick O’Dell: And just for clarity if we -- everyone remembers it was a year ago when the VIATrans/Central Transport merger took place in December, and we saw significant step up in tonnage in from mid-December into January of last year so the comps get more difficult but I don’t know that what we kind of sell through the quarter was actually I thought December was stronger than I would have thought that it would have been given kind of where we were in 2Q.

Okay, and then just to make sure I understood what you were saying earlier Fred were you saying that tons were down about 2% in January and shipments were up like 1%?

Shipments were up a little north of 1% and adjusted for the January 2nd sort of quasi-holiday there and then you look at the tonnage were down sort of right around 1%-1.5%. So net-net kind of shipments up tons down so weight per shipment is down.

And then what was your fuel surcharge as a percentage of revenues I know you give that every quarter in the quarterly filings? Rick O’Dell : No, we don’t break out fuel surcharge separately.

Okay, and then where did healthcare finish 2014?

Total healthcare cost that would have been right around $20 million for the quarter, full year would have been little north of 80 million.

All right, and then what about Rick on the contract renewals I know you said that they were favorable and strong and all that what about can you talk a little bit about specifically what kind of contract renewal rates you’re experiencing?

They’re high single digits so 8% to 9% range. and again we started that in the third quarter of last quarter and it continued to gain some momentum through those contract renewals we kind of raised our standards from a profitability management standpoint by lane.

And I guess the other question I had is your sales force increased at I would expect though that you would still have expectations of tonnage growth if you’re bringing on 8% more field sales agents. What is your outlook after we get passed maybe this unusual first quarter comparison would you expect tonnage to grow given the increase in the sales force?

I think it just depends I think we should grow field business which operates well and has a better yield component but we may trade off national account business and lanes that are in their way.

Okay, and I guess the last question on the fuel surcharge I asked but in the third quarter your 10-Q said that it was 16.7% of revenues if we just look at the change in diesel fuel prices from the beginning to end or maybe from the third quarter to the fourth quarter down about 7%. Would that an appropriate way to try to think about what may have happened to your surcharge revenues?

I think that’s probably right.

All right, that’s all I had. Thank you.

I think during the quarter the surcharge has come down a little more slowly [multiple speakers] it has a lag effect. And I am sorry I just didn’t -- we only report those numbers in the Q and so I didn’t bring them with me I apologize.

Next we will go to David Ross from Stifel Nicolaus.

Rick, can you talk a little bit about any impact you guys saw, positive or negative, from the West Coast for congestion issues over the past quarter? Rick O’Dell: I think there is been some higher at times truckload rates out there, particularly on the expedited site. I don’t know any other specific items, our West Coast shipment count growth has probably been similar to our company. So I don’t know that we seen a specific dynamic with respect to the LTL volume growth out there other than some of sporadic spikes spot market out there.

And then you talked about intermodal rates still going higher from the rails for some of your line haul miles. Can you comment on service levels? Has service gotten better in the intermodal lanes? Rick O’Dell : I think service is a little better and availability is obviously clearly better than it was last year when they had disruptions but there is a couple of lanes where we are still being limited on trailer availability.

And next we will move back to Scott Group with Wolfe Research.

Hey guys sorry about that, I was on mute. So, I'm not sure if this came up, so just wanted just follow up. In terms of the tonnage trend, do you think that this is some of the LTL spillover from truckload starting to reverse at all? Are you seeing any signs of that? Rick O’Dell: I mean our way per shipment decline really happened after -- at the end of the first half of 2014. Right, so if you really look at when our weight per shipment declined, was middle of last year. And then since then there have been some slightly declines in it since then, but no major move. In other words, so we are don what 30 pounds year-over-year but it really happened at the end of 2Q of last year which was a time when the truckload market was starting to get back to normal and the rail service availability was improved and then you combine that with our pricing actions on the spot side and with some of these major industrial customers. I mean I think that probably has happened, but I think it’s been going on for seven months. It’s not something that just happened in December.

Next from BB&T we will move back to Tom Albrecht.

Rick, now you know why they call analysts; so just want to explore something. So, on the 6% yield in improvement, when I look at the positive inputs to that -- pounds per shipment and length of haul -- they both tally a little over 6%. Now, I realize it's not one-for-one, so those two would offset. And then the surcharge -- or they would be aged to yield. And then the surcharge as a percentage of revenues may have dropped 5% to 7% sequentially. And then the base renewals, upper-single-digit, that's ultimately how you settle on what you think is a mix-adjusted 5% increase? Rick O’Dell: That’s correct.

All right, so -- okay. I just wanted to make sure I was looking at it correctly. Rick O’Dell: That’s right. Rick O’Dell : This is an end of the question. So we certainly like to express our appreciation for your interest in SAIA. Thanks for joining us.

Once again ladies and gentlemen, that does conclude today’s conference. Thank you for your participation.