Please stand-by, we’re about to begin. Good day and welcome to the Saia Incorporated First Quarter 2015 Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Doug Col. Please go ahead, sir.

Thank you. Good morning. Welcome to Saia’s first quarter 2015 earnings conference call. Hosting today’s call are Richard 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 the call we may make certain 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. I would now like to turn the call over to Richard O’Dell. Richard O’Dell: Well, good morning and thank you for joining us to discuss Saia’s results. I’m pleased to report record first-quarter earnings for Saia, positive pricing actions and strong execution by the entire Saia team, enabled us to achieve solid results despite what I would categorize as a seasonally sluggish freight trends. Our continued success in network optimization positioned us to handle the seasonal service challenges created by adverse weather enabling our team to deliver 98% on-time service. Our first quarter financial results reflect our 19th consecutive quarter of year-over-year yield improvement. A few highlights from this year’s first quarter results compared to the first quarter of last year are: our LTL yield rose 4.6% despite significantly lower contribution from fuel surcharge; our operating income of was $21.2 million compared to $15.2 million; our operating ratio improved by 210 basis points to 92.8; diluted earnings per share of $0.49 compared to $0.34 last year. I was pleased to see company performance improve and to achieve a record best first quarter operating ratio. We executed particularly well in the pricing, network optimization, safety and claim prevention areas, which contributed to materially to the results and should set the stage for solid performance for the remainder of this year. Now, I’d like to have Fred Holzgrefe review our first quarter results in more detail.

Thanks, Rick, good morning, everyone. As Rick mentioned, the first quarter 2015 earnings per share were a record $0.49. Total revenue of $293 million compares to $300 million in the first quarter last year. Operating income of $21.2 million compares favorably with operating income of $15.2 million in the last year’s first quarter. Both periods included 63 workdays. As Rick mentioned, first quarter LTL yield rose 4.6%, reflecting the positive impact of our continued pricing actions, offset by markedly lower fuel surcharge contribution. I’d like to mention a few key expense items and how they impacted first quarter results. Salaries, wages and benefits rose 5% to $158 million in the first quarter, reflecting salary increases and investments we have made to support safety, claims prevention, employee relations, and field sales resources. Costs were also impacted year-over-year by a general wage increase last July which averaged 3% across our employee base. Purchased transportation expense in the first quarter dropped by $4.3 million compared to last year or 6.1% of revenue versus 7.3% last year, this comparison was aided by network improvements, lower volumes and a slightly less capacity constrained environment than in the first quarter a year ago. Purchased transportation miles as a percentage of our total line haul miles declined for the third quarter in a row. Depreciation and amortization of $15.2 million compares to $13.8 million in the prior year quarter due to continued investments in tractors and trailers resulting in a newer fleet. Fuel-efficiency improved by 0.5% to 6.43 miles per gallon in the quarter. Claims and insurance expense was $4.8 million in the quarter compared to $9.5 million in the first quarter last year, a quarter which saw unusual accident severity. Our effective tax rate was 37.8% for the first quarter 2015 and we believe that is…

Thank you. [Operator Instructions] And we’ll take our first question from David Ross with Stifel.

Yes, good morning, gentlemen. Richard O’Dell: Good morning, David.

Rick, could you talk a little bit about, I guess, how the year-over-year tonnage or shipment trends progressed through the quarter into April? You mentioned that demand trends in April improved sequentially, but if you can provide us any color around that, that’d be great. Richard O’Dell: Sure. Fred?

Yes, so if you take the first quarter tonnage and disaggregate it by month, you would look at January year-over-year minus 3.6%; February a difficult month, minus 9.3%; March minus 7.4% versus the last year. These are the tonnage numbers. Now, what’s I think important to highlight in light of the mix and the truckload are, truckload spillover issues that Rick described, we also need to look at the shipments number that kind of go along with that. So January shipments were down 0.6% versus last year, February was minus 4.4% versus last year, March was down 3.8% versus last year. Those last three numbers, shipment counts year-over-year. Richard O’Dell: And then, into April?

Yes, into April you would see tonnage into April down 5.2% versus last year and then shipments down 2.3%.

That’s very helpful. And then balancing that with the yield side, Rick, you come in a little bit on the overall pricing environment, when contracts are coming up for renewal which you’re generally seeing. Is it kind of in that 3% to 4% range still or is it better than that? Richard O’Dell: Now, our pricing, our contract renewals during the quarter were again an excess of 5%. They actually were about 5.6% for the quarter. Our GRI retention has been good and our theoretical yield model which shows true yield adjusted for lengthen of haul weight per shipment and fuel surcharge improved about 7%.

Excellent. Thank you very much.

And we’ll take our next question from our Art Hatfield with Raymond James.

Hey, morning, everybody. Rick, when do you start to lap the effect of the heavier weight truckload shipments in your business from last year? Richard O’Dell: Very few, and basically kind of that truckload spillover thing, I mean, it was more normalized from a capacity and availability standpoint in 3Q. I mean, 1Q and the beginning of 2Q with the rail disruptions at some point you can even get trucks even if you are willing to pay ridiculous price form, right. So people will break shipments up and given - to give them to us. And if I look at year-over-year, our shipment count - the shipments under 1,000 pounds, remember, our LTL shipment average weight is about 1,100 pounds. The shipments under 1,000 pounds were flat year-over-year and all the shipment count declines were in shipments in the 2,000 to 10,000 pounds, which obviously that’s what impacted the tonnage so much.

That’s very helpful. And then on the - your pricing actions, I know that you want to remain discipline on price. But how much of your, I guess, is it fair to think about how much of your book you’ve been through, so that most of those, at least, in the near-term pricing actions are behind you? And also how do you balance that with getting yourself to the point where may be you start to price yourself out of the market relative to where a reasonable price should be? Richard O’Dell: All right. Well, first of all, all of my analysis and competitive data shows we’re too cheap. So we’re already charging below the market. So we have room to move up just in the segment and our value proposition with where we’re operating. So we see that opportunity as being very meaningful. It may be a multi-year effort to kind of change your revenue mix and get customers that that appropriately value the service and quality that we’re providing. And we’re kind of willing to work through that time balancing tonnage and shipment count, and how we’re operating during that time period. But the opportunity based on our analysis is so significant, but I think we’re going to - we continue to work through that, and it’s probably a multi-year opportunity that should really drive a material improvement in our operating ratio, okay? Now, that been said, I wanted to just comment on this. At Saia, our field shipments were really down about 1%, okay? And our filed shipments, if you took out the softness in the oil patch, our field business would actually be up. And so national account and 3PL shipments, which collectively represent about 50% of our business were down 7%. And these are the accounts that we’re addressing with pricing action. So this, as an example, we took increases on all our blanket 3PL business on January 1, and that was the third increase in 12 months on this segment. So, it’s not surprising to me that this business is down, and I would also comment that blanket 3PL business never has operated better than it did during the first quarter of this year. But it’s just something that needed to be done. And once we work through this and get our business at a price that’s reasonable then, you’re going to see, you’ll see the shipment count and tonnage grow, because we believe in our value proposition, the marketplace is just something we needed to do.

Are you doing this incrementally, or do you go to customers, as an example, if you believe you are underpriced - I’m just throwing numbers out 15%, are you trying to get a portion of that in one moment of time, or do you try and get all of that, or is it really incident-dependent on those conversations with individual customers? Richard O’Dell: Well, you try to get it all fixed, corrected at once and then you decide what your tolerance is, that’s kind of the way it works. I mean, and sometimes depending on how we’re operating and what lanes the business are in, we will understand the customer up, let them make their decision if they - if we decide to retain the business or not. And other times, we’ll take a phased approach and say, well, we’ve got 60% of what we needed. So we’ll continue to haul it at that rate. We’ll move on and see in a year when we go work on a bigger opportunity. So there’s a balance as you work through that. But I mean, generally what happens, Art is, we’re not generally putting the whole account at risk, we’re putting segments that don’t operate well. And you just see that it works, I mean, I don’t want to handle business. If the overall account operates well, still it doesn’t mean, I want to handle business from Chicago to Florida in a dead head haul lane at an operating loss, this doesn’t make sense. And so we’ve made the decision to work through this to have another aggressive pass-through this business mix opportunity, and it works.

Got it. I’ll stop there. I’ll let other people have at it. Thanks for your time, Rick. Richard O’Dell: Great. Thanks.

And we’ll take our next question from Jason Seidl with Cowen & Company.

Hey, thank you. Hey, Rick, hey, guys [indiscernible] Richard O’Dell: Good.

Rick, just to clarify, you said this retail increase January 1st was your third increase in the last - did you say six months or last year? Richard O’Dell: 12 months.

Last 12 months, okay. And what was the size of that rate increase overall compared to the other increases that you took, were they all similar, or was this one outsized? Richard O’Dell: We took a little bit of smaller increase. But I think one of the things you’ve got people that are going to these blanket 3PLs and their pricing for seasonal business. So, January and February and December weeks, you’ve got people that actually lower their price for three months. Here - the other people are lowering their price and we went to them with a price increase. So probably had a bigger near-term impact during the first quarter than what would have normally happened. And then what happens is in March some of these people that do seasonal pricing, they will raise their prices again then the shipments just get redistributed again. So we’ve seen in March and April this 3PL segment has - had a pretty material bounce back.

Okay. Well, that’s good to know. And at least for now, do you feel that the rates that you are giving the 3PL’s are compensatory enough for Saia? Richard O’Dell: Yes.

Okay. Richard O’Dell: Yes. I mean, there is always some opportunities to look at some lanes in maximum adjustments based on the business that you’re getting if it’s not operating [Multiple Speakers]…

Right, right, right. Of course. Richard O’Dell: And that’s - we’re more looking at tweaks at this point, because the overall account for most of my 3PLs, the overall accounts are now kind of operating in the low- to mid-90s, it’s not great, but considering the company operated at 90.8 [ph] in the first quarter, it’s nothing wrong with that right?

No, nothing wrong with it. And your national account business, what type of price increases did you hit them with? I mean, you talked about the average one that you guys got. But presumably, they probably got a little bit more than they were used to, which is why you probably lost a little bit of that business? Richard O’Dell: No, most of those renewals during the quarter that 56, that’s pretty much national account pricing.

That’s pretty much, okay. Richard O’Dell: And some smaller increases on the 3PL business that would have brought the average down. So it’s mid single-digit. And again, generally what you’re doing is, your taking up whatever 4% across-the-board or whatever the number would be and then you - that you’d kind of need to do to get the base business and then you’re adjusting particular lanes and locations that operate poorly for sometimes materially larger increases.

Okay. And just shifting to the economy really quickly, because I think that’s most investors’ concerns with a lot of the trucking names, especially on the LTL being a little bit more outsized exposed to the industrial economy. Could you talk a little bit about your weight per shipment in just your sort of LTL business? If you’re looking at that, do you have any concerns that it did dip down a little bit, even excluding some of that heavy haul business, or do you think that the underlying economy out there feels pretty decent? Richard O’Dell: Yes, I think it feels decent. You’ve got to remember the oil patch is down a little bit and those tend to be heavier weighted shipments. We’ve done some pretty material repricing among some of our hazmat customers, which tend to be, chemicals, heavy totes and things like that to try to get those price properly, and I think that had some impact. I mean, overall, I don’t think the economy is great, but it doesn’t seem like it’s bad. And we - if you look at it and say, hey, we’re growing field business and all of our negative shipment counts happened in national account and 3PL, and that tells you something right?

Right, right, right. Richard O’Dell: More than anything.

Okay. Well, listen, I’ll let somebody else have at it. And I appreciate the time as always, guys.

And we’ll take our next question from Scott Group with Wolfe Research.

Hey, thanks. Good morning. Richard O’Dell: Good morning, Scott.

So, Rick, I know you don’t always give this to us. But can you maybe share what the revenue per hundredweight and what the renewals are doing in April, or maybe if you have that by month, it would be helpful. Richard O’Dell: I would just tell you this absent volatility and fuel surcharge, our yield sequentially has gone up every month, including into April.

And are you saying on a year-over-year basis the increase has accelerated, or you are saying that just sequentially from January to February, the absolute number just has gone up? Richard O’Dell: The absolute number has gone up in a similar range is the progress that we’ve been making.

Okay. Richard O’Dell: Right, and part of it is, one month you might have a big contract that renews, that needn’t much of an inquiry. So I think getting into one particular month, but I think on average we continue to see progress on the yield side. And what we are seeing with customers and contract renewals, is to me seems conducive for that to continue. The only kind of maybe challenging area, right, are some of the oil field business, some of that segment those guys are particularly concerned about price increases. But most of that business operates pretty well for us, so it’s not like we have to go to them for big corrective action.

Right. So I mean, I guess you think that the pricing is sustainable, because, right, history says that when tonnage turns negative for LTLs that it’s tough to keep pricing. Are you seeing any change in pricing strategies for many of the other LTLs and are you in any way contemplating changing the way you think about pricing at all or is the answer a firm no? Richard O’Dell: I mean, I think the environment is still conducive. I mean, you still have driver challenges. You’ve got a pretty material wage inflation in the current driver market. I think you got all us aren’t operating or most of except one aren’t operating where we’d like to be operating. And so I think, that everyone kind of have to continue to push on the rates. And it will be interesting to see when the other LTLs announced whether our tonnage trends or shipment count trends are probably more influenced by pricing than not. We’ll see that. I know FedEx announced in FedEx Freight, I mean, their tonnage was up and their shipment count was up in LTL. They’re the biggest player out there in the marketplace. So I mean we’ll just have to see when everybody else announces what the trends are. But I’m not dissatisfied with the current volumes or we had a very difficult February from a weather and an OR standpoint, in spite of that we had a good quarter. March was particularly strong and I feel good about kind of where we’re headed into the next quarter.

Okay. That’s helpful. And just last thing, just to that last point about the next quarter. You typically share with us some thoughts about sequential operating ratio, it’s typically two to three points better second quarter versus first quarter, you have some thoughts on that? Richard O’Dell: Yes, I think that’s reasonable, you got - one thing is the general rate increase last year, for instance, was in 2Q and this year it accelerated, so you don’t have that. But given our positive pricing on contract renewals and kind of our current outlook, I think the midpoint of that 2% to 3% range is probably reasonable.

Okay, great. Thank you.

And we’ll take our next question from Bill Greene with Morgan Stanley.

Yes. Hi, there, good morning. Hey, Rick, I want to ask your thoughts on costs. So obviously PT was good, as was the claims. How sustainable are the improvements that you’re seeing on the cost side particularly in those two categories. Richard O’Dell: Yes. And we believe it’s very sustainable, and we re-optimized our network and this pricing actions, that we’re doing sometimes causes lanes to get rebalanced where you’re handling non-profitable business in a head-haul lane and that tends to work too. So the combination of operational execution and improvement on some of the self-insurance thing I think is sustainable. We had a very good quarter from a safety standpoint after bad first-half of last year. In January, we trained every driver in the company in our Smith System training and normally we did that on an anniversary date so that would have been - the cost of that and the training time would have been spread out across the quarters. And so where we spend about $1 million in safety training in January and that would have normally been a $0.25 million, so those are about $700,000 of incremental cost there. I think it contributed to us kind of getting off to good start for the year from a safety standpoint. And then we’ve also added regional safety resources, additional terminal management over the last year or so, regional HR resources, regional claim prevention resources to kind of further our goals in safety claims as well as employee relations. And these resource additions, they’re supported by engineered programs and execution practices and it’s working. We’re seeing - we had a decent cargo claims ratio in the first quarter of like 0.89 and we’re seeing improve trends there as well, which helps our value proposition in the marketplace. And we’ve targeted to try to get that cargo claims ratio by the end of this year to the 0.5 range. That’s a big improvement for our customer and we are spending some additional resources and money in wages and salaries, but it’s paying - we know it will pay big dividends.

Yes. And so when we think about the overall cost structure, right, as you can tell from all the questions here, there’s a lot of nervousness about the broader transport environment, obviously. Trucking has been showing some slowing, and then of course all this focus on your tonnage. So when you think about your cost structure if we end up that the back half of the year as much weaker than we think for whatever reason due to the macro. Then how much your cost structure can you get at, how variable is it do you think, how you think about that? Richard O’Dell: I think we demonstrated pretty well this quarter, what our abilities are on negative tonnage and shipments, that PT is pretty fluid, plus we’d be able take our purchased transportation and re-optimize our costs. We have a very effective productivity targets at terminals and can manage based on where we’re growing and take cost out in areas where volumes are down. I mean, today we are seeing growth in Southern California out of the ports and South Texas is really weak. And we’re making adjustments in our - the hours we’re working in those markets and the operating ratio in both - if I look at my West Coast region and my Texas region, the operating ratio in both regions are improving. So we’re demonstrating that we can adjust our costs in conjunction with some changes in the market and then we can effectively take price risk where it if something is not working and then we can adjust our cost there.

Yes. Okay, all right, I appreciate the time. Thank you.

[Operator Instructions] And we’ll go next to Willard Milby with BB&T Capital Markets.

Hey, guys. It’s actually Thomas Albrecht. He was having phone problem. So Will transferred me in. So want to explore couple of these expenses again. So on the insurance, I know you had the big quarters in Q1 and Q2 of last year, but I can look at $7 million a quarter is a more normal level. I know you’ve talked about all these improvements in that, it seems hard to believe that $4.85 million would be kind of the new run rate so could you just talk about that a little bit more? Richard O’Dell: Yes, I think I looked at five year average, right. And it’s a couple of hundred thousand less than your number. So I mean, I think the pure delta against our historical average is 19. I think with the investments that we’re making and the technology that we have, over time we will have less poor quarters, right. And maybe our best quarters will be a little better. This was a record good strong first quarter for us from a self-insurance perspective, so was pleased to be able to accomplish that. But we know we could potentially see some volatility around that over time. I do think that cargo claims ratio is going to come down, but that’s not the biggest part of that expense in that line either.

Sure. And was part of the lower I&C because you’ve had favorable closure to a lot of open claims and you might have been over-reserved? Richard O’Dell: No.

Okay. Richard O’Dell: No, it’s just severity with - I mean, both frequency and severity were improved during the quarter. And it was one of best quarters we ever had, I would just comment too, year-over-year there some other expenses that are up in other lines where you saw some favorable results from a safety standpoint for instance. Last year, we didn’t have a good first quarter we did meet our plan, so there was bonus accruals worth zero last year, where this year we’re incurring those, because we are in a run rate or hitting some targeted OR numbers. See what I’m saying? So you can’t necessarily just take the delta and calculate an EPS on that.

Sure. No, I get it. Richard O’Dell: Right? All right.

And Fritz, when you were given the monthly tonnage figures was that the LTL tons per day, or total tons? I’m assuming it was LTL. Richard O’Dell: That was LTL.

Okay. In, say, both… Richard O’Dell: Both tons and in shipments.

And just kind of reviewing depreciation, we were thinking about $64 million to $65 million on the year. The Q1 run rate would be a little below that. Do you have any updated thoughts? And then I’ve got one more kind of big-picture question. Richard O’Dell: I think it will end up, we’ll return to sort of those higher run rate numbers as we bring on the equipment. And lot of that’s driven by timing of delivery and so forth. So that, I think it’s a little bit late due to timing, but I think you’ll see it kind of expand during the balance of the year.

Okay. And then the whole yield world is always confusing. But one of your competitors had talked about the impact to their reported yield was almost 500 basis points with fuel having come down so dramatic. I’m wondering if that’s about the magnitude for you guys. In other words, if we saw, I mean, that your yields were really up more, like 9.5%, if fuel hadn’t been such a factor, is that in the ballpark? Richard O’Dell: I calculated 10.1%.

Okay. All right, well. We’re in the ballpark, right. Richard O’Dell: So, yes, ballpark is right. Yes, that’s right.

And I don’t mean… Richard O’Dell: Again, our wait per shipment came down and length of haul went up. So that had, that’s why I kind of got that set 3% impact, which shows kind of our true yield adjusted for mix was about 7%.

Correct, right. We were kind of making that adjustment as well. And I don’t mean to be snarky with this last question, but you grew sales at the end of 2013, and I think a little bit at the end of 2014. Why grow the sales effort if you are going to be in an environment of flat to slightly down tonnage? Richard O’Dell: Because, my analysis shows that the competition has 60 more sales resources in the market than I do. And if I want to participate in field grow share and get good customers the value or value proposition in the marketplace, I need to match the other people’s capabilities in the market.

Okay. I guess one thing, I was just looking at that didn’t quite jive. I think you said your 3PL and national accounts was about 50% of the business, down about 7%. But your LTL tonnage was down 6.6%, so it seems like the other half had to be down as well. Richard O’Dell: I’m kind of doing that, I said shipments.

Okay, okay. Richard O’Dell: So they are down 7% shipments and the other ones are flattish to down 1%.

Okay. Richard O’Dell: And net we were down, shipment count for the quarter was about 3%. So, basically my whole decline is in the - the whole decline is in national and 3PL.

All right. Okay. That’s helpful. Thank you for the comments. Richard O’Dell: All right. Great. Thanks.

And we will take our next question from David Ross with Stifel.

Yes. Hello, again. I just wanted to follow-up on the Linkex acquisition. You guys completed this midway through the quarter. You talked about it being accretive by about $0.02 a quarter when you bought it. I just wanted to see if that had the accretive impact you expected in the first quarter and if it’s still on plan? Richard O’Dell: It’s kind of weak seasonal period for them, and they didn’t quite make that number. So we really didn’t have any impact in the quarter.

But you would still expect it to be $0.02 accretive to 2Q? Richard O’Dell: I do in that range. Yes, I mean, it’s a good little company, good management team. We think they’re going to bring something to the table for us and allow us to continue to seek opportunities in that marketplace. But despite, say, it’s kind of a weak seasonal period for them, but I think the $0.02 number is a good one to use going forward.

Excellent. Thank you very much. Richard O’Dell: All right. Great.

And we will take our next question from Brad Delco with Stephens.

Hey, good morning, Rick. Richard O’Dell: Good morning, Brad.

Sorry for hopping on late, had two calls going on. But following up to Tom’s question before, with the investment in the sales force, can you talk about where your national 3PL and field business is today, and maybe where that was a year ago, and what your goal is for that mix to be, down the road? Richard O’Dell: Yes, I don’t have a targeted goal for it. I mean, I love - we like our national accounts, right? We just need them to be compensatory. So I wouldn’t care if I had 70% national accounts if they all operate it at 88, or 90. I mean, the thing we look at is I just can’t - I’m not going to get my operating ratio in the 80s handle a national account business with lanes at a 105 and 110, so - or fields accounts, they just don’t generally operate like that. But we’re going through a re-pricing initiative to make sure that the accounts are compensatory. And I think there are opportunities to grow national accounts. I mean, there is accounts that we don’t participate with that value service and a low claims ratio that I think we always continue to seek opportunities with that. And today we’re going through a re-balancing of some pricing that we don’t pay in its in today’s market. We had some inflation in costs. And I think it’s - I mean, it’s just business. It’s what we have to do. But I’d like to see all the segments growing once they get operating well.

Got it. So maybe then following onto that, would it be fair to say that this margin improvement that we are seeing in your business - would you rank it that the greatest improvement you are seeing is in the national account, 3PL, and field, sort of in that order, then? Richard O’Dell: Yes, yes, you’re saying the improvement?

Yes, in terms of the greatest improvement of your margins is primarily in national. Richard O’Dell: Yes.

Okay. Got you. Rick, I think that’s all for me. That’s for the time.

And this concludes the question-and-answer session. And I would now like to turn the conference back over to our host, Richard O’Dell, for any additional or closing remarks. Richard O’Dell: Great. Thank you for your interest in Saia. We look forward to updating you at upcoming conferences, investor meetings, and if not, then on our next conference call. Thank you.

And this concludes today’s conference. Thank you for participation. You may now disconnect.