Covenant Logistics Group Inc (CVLG) 2003 Q1 法說會逐字稿

Good morning. My name is Tamara and I will be your conference facilitator today. At this time, I would like to welcome to everyone to Covenant Transport first quarter 2003 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number 1 on your telephone key pad. If you would like to withdraw your question, press the pound key. Thank you.

Mr. Hogan, you may now begin your conference.

Thanks, Tamara. Good morning, everybody. We would like to begin with some financial statistics for the quarter and our current expectations regarding the remainder of the year. And David will follow up with his perspective of the quarter, as well as the current freight environment.

I’ll state in advance that this call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This information is in accordance with the company’s current expectations and is subject to certain risks and uncertainties and we would encourage you to review those risks in the company’s latest 10K and other securities filings.

I would like to begin with some miscellaneous financial information that was not covered in our press release.

First of all, fuel surcharge revenue was $7.5m versus $1.3 last year.

Other accessorial revenue was $2.4m versus $1.9m last year.

While we ended the quarter with 363 owner operators, which was about 10 percent of the fleet, they accounted for 10 percent of the miles this year, as well as last year.

Regarding capital expenditures. Due to us getting paid or some fourth quarter 2002 trade trucks during the first quarter and not purchasing any new equipment during the quarter, proceeds exceeded purchases by $6m for the quarter, reducing our debt to total capitalization ratio to 28 percent as of March 31, though we ended the quarter with about 1200 teams of which were about 150 less than the first quarter of 2002.

Regarding expenses, excluding the impairment and early extinguishment charges during the first quarter of last year, our after-tax cost per mile increased 1.6 cents per mile to $1.126 per mile. These three main areas contributed to the increase.

First, diesel prices averaged 43 cents per gallon higher than the first quarter a year ago, resulting in fuel expense increasing $6.7m versus a year ago after a $1.3m favorable swings in our purchase commitment and hedge program. We were able to offset that increase with $6.2m more fuel surcharge revenue. This produced a net cost of fuel per company mile of 20.9 cents versus 20 cents last year and impacted our earnings for the quarter by about 3 cents per share.

Operations and maintenance expense increased by a penny a mile as a result of operating an older tractor and trailer fleet.

The company’s insurance and claims expense was unusually high the first quarter of 2003 due to the combination of increased claims and increased costs per claim. The results increased our costs by $009. per mile during the quarter.

Our expectations for the remainder of 2003 are the following. We assume a continued sluggish economy and no major capacity additions to the industry. We expect the following chance for the rest of the year.

Number one, our utilization will be down 2 to 3 percent in the second quarter on approximately 100 fewer teams versus a year ago. We expect the utilization to be flat flat in the third quarter and up 1 to 2 percent in the fourth quarter. [indiscernible] percentage approximately the same as in the third and fourth quarters of last year.

Our rate per total mile will be up 2 to 3 percent in each of the remaining quarters.

Truck additions will be small in the second quarter, if any, and possibly up 100 trucks in the second half.

On the cost side, due to higher truck acquisition costs, higher than anticipated insurance claims expense, diesel prices planned at the current levels, we expect our after-tax cost per mile to be up about 1.5 cents per mile in the second quarter and closer to 2 cents per mile in the second half.

These assumptions produce earnings in the 28 to 32 cent per share range for each of the remaining quarters.

Now, I’ll turn it over to David.

Thanks, Joey. Hopefully, everybody can hear me okay. I’m not in the office. I’m actually up in Baltimore, Maryland, and had a difficult time this morning trying to find a private place that I could talk. And I’m literally outside on a bench and so you may hear the wind whistle from time to time. But, I’m on my cell phone and hopefully got a full charge and will stay with you. So that’s what’s going on with me.

A little bit on the first quarter before I get into prepared statements. I mean, there’s no doubt that the first quarter was a tough operating environment. And, as I look at it as compared to what’s happened in the last 12 months, first quarter last year, I mean, it’s really just the opposite of the first quarter last year.

As I look back to last year, you know, January, we started off the quarter with a very good January. The Christmas season last year -- or year before last, was very good, and so we came into last January year ago with our customers actually building inventories. And we felt that in the month of January. And this year, at best, Christmas was okay. But, there’s no doubt that starting in the month of January that we saw that our customers were working off inventory, so therefore, they weren’t shipping a whole lot of freight.

And then we got into February and March and just had absolutely terrible weather. Six major snowstorms compared to two major snowstorms the previous year. As I look at other economic data, I mean, ISM was below 50, which is about the first time in about a year starting in February. And, you know, did even worse in the month of March. You know [indiscernible] basically, we see no economic data out there to me that looks promising. And so far, in the month of April, I see really a continuation of the month of March. I mean, it wasn’t pitiful, but it wasn’t nothing to write home about. It’s just kind of the economy in which we’re existing out there.

But, you know, there is a couple of things that I find very, very interesting, something that we started looking at maybe a month or so ago and wondering how it was going to unfold and it was actually out on the street with Wall Street folks for a couple of weeks in the first quarter. Joey and I told them our opinions because if in fact this is true, and it looks to me that it has become true, then it is something that is interesting that we need to take note. And that is that you’ll see in most of the pairs that have recorded thus far, I’m seeing utilization down to flat at best. One of the things that’s very hopeful there is that I’m seeing rates up. And, you know, the question we’ve got to ask ourself is why. Why are rates going up when it ought to be, you would think, been flat or down [indiscernible] having utilization problems out there, therefore, no enough freight.

But, I’m going to tell you, I think there’s something happening within the customer base that has some great concerns. I mean, I think the customers truly have been involved with carriers that have gone broke in the last couple of years. I don’t know of a customer out there that has not lost a carrier to their fleet of operating -- of moving their freight.

And so I think customers are concerned. We’ve had more visits with customers in the last five to six weeks [indiscernible] the corporate office that we probably did all of last year. We have had quite a few customers coming in wanting to make sure that capacity was going to be available to them. So they’ve got great concerns.

At the same time, they’re telling me that their business is not that good. I run into very few customers that are telling me that business is great. Most of them are saying that it’s down and that they’ve got their own concerns. But, they’ve got concerns about making sure they have enough capacity out there. And because of that, I think, is the reason why you’re seeing the carrier’s ability to be able to get up [indiscernible].

Now, when you look at that and you say they’re in a tough economic time, not enough freight, and you’ve got the carriers raising rates, what truly is going to happen when the supply and demand, or the economy just picks up a little bit. I’m here to tell you that there’s no doubt in my mind that there is a big pen up demand that’s out there. I mean, it’s not going to take a whole lot for people start re-stocking from inventory levels out here that you are going to see a very tight capacity situation exist. And if you’re getting 2 percent tight numbers right now on late, I expect you to be able to get, you know, possibly double those kind of numbers if, in fact, when it happens -- when this capacity situation starts [indiscernible] and people start rebuilding inventory.

So that is something -- even though I don’t see a whole lot in the economical standpoint [indiscernible], I do see some fundamentals that I have never seen before in the trucking industry in all my career that’s starting to take place, which I think posts some good days ahead.

A little bit on utilization. Due to the soft economic environment, of course, and the difficult winter weather, our utilization and non-revenue miles [indiscernible]. Our utilization, or miles per tractor for the quarter, decreased 2 percent. And regarding the weather situation, again, we had six major snowstorms this year compared to 2 of last year, which in our opinion, and I’ve been a lot of studying on it, it resulted in almost two lost days of revenue and impacted our utilization during the quarter versus a year ago by somewhere between one half and three quarters of a percentage point. Although, the size of our [indiscernible] fleet has remained constant for the last three quarters, our utilization decrease was not as dramatic when you consider that we operated the first quarter with 150 fewer teams than we had in the first quarter a year ago.

Adjusted for the percentage of teams on an apple-to-apple basis and the impact of worse weather in the winter, we view that our utilization was probably up about 1.5 to 2 percent for the quarter. This led to a result of diligently working to serve our customers, you know, through the tough operating environment as well as the economy slowing down and [indiscernible]. Our deadhead non-revenue miles were up about 70 basis points.

For the quarter, our top 100 accounts represented 74 percent of our total volume and they grew at about 16 percent. We have 21 new accounts in the top 100, excluding the new account. The remaining top 100 were down 1 percent.

To give you an idea how the business breaks down, transportation is 36 instead of our revenue. Retail, 17 percent. Consumer goods, 8 percent. Floor coverings, 5 percent. Food and beverage, 8 percent. Housing and paper products packaging, 4 percent. Auto, 3 percent. And electronics, 2 percent. And if I continue to add new business and holding the size of our tractor fleet, we have been able to reduce our dependence on broker freight in the first quarter of 7 percent compared to 11 percent last year. And we’ve been able to also pass on some rate increases through our customers. After two years of sequential declines and rates between the fourth quarter of one year and the first quarter of the following year, which usually happens, we were able to hold our rates sequentially in the first quarter of 2003, which represented an increase in our loaded mile rate versus the first quarter of a year ago by 3 cents per mile to $1.23 per mile.

From the driver situation, we’re in good shape. Basically, all our trucks are full. We may have 20 or 30 trucks that are open, but it’s virtually full. We’re in good shape on our driver situation. And, based upon our stated plan [indiscernible] equipment growth and if our profitability reach certain levels, we do not expect to raise our driver pay during the year 2003.

So that’s all my prepared statements and we’ll open it up now for any questions.

At this time, I would like to remind everyone, in order to ask a question, please press star then the number 1 on your telephone key pad. We’ll pause for just a moment to compile the Q&A roster.

Your first question comes from David Mack with CSFB.

Hey, guys. Good morning. Hope all is well.

Hi, David.

I have a question about what you were just mentioning, David, with the shift in freight mix away from transportation going from 11 to 7. Could you go --

That is brokers now, David.

So that was just brokers?

Yeah, that was just brokers.

So that doesn’t including --

Yeah, the transportation was actually 36 percent.

Okay.

Yeah, so it’s basically still -- as a matter of fact, it’s grown a little bit. It’s basically still the same where it’s always been.

Where -- so where is that 4 percent shifted to?

It has shifted to the other areas that I mentioned. I mean, you know, you had full coverage. You had consumer goods. Retail was one area that we actually grew in over first quarter last year by a couple of percents. So a lot of, I guess, probably went into the retail section. And retail was a couple of percentage points, manufacturing was one, and the other percentage point was kind of split amongst the rest of them.

There’s been a strong amount of activity out of the West Coast -- and particularly down in the ports -- have you guys -- I mean, how has that affected your business and also has that played anything into your slight shift away from teams?

No. You know, basically, two things there, David. A year, --year and a half ago, whenever it was -- we decided we needed to start to measuring the teams [indiscernible] economic situation that we’re in. But, no doubt, that costs more, so therefore, during slowdowns of economic times, we decided, hey, let’s lower them when it’s time to lower them and increase it when it’s time to increase those times.

And so we have decreased those teams in the last couple of years. Actually, the first quarter, we’re probably up about 100 teams, more than what we were just a couple three months ago. So we’re starting to add some more teams out there, as we speak. And we’ll probably add another 100 teams in the next few months to our fleet because we are sensing an up-kick on the trans continental side of the business very nicely. The port business out in California is doing very good. Los Angeles is in very good shape. So, you know, we are definitely participating in the port very nicely. But, we see greater opportunities ahead out there. So we’re going to increase the teams a little bit.

If you guys could refresh my memory, I don’t remember if Fleming was a noticeable customer --

Varied, maybe 5, $6,000.

All the companies, it’s less than $20,000.

Okay. In terms of the incremental truck costs you were mentioning, the higher costs of running the trucks, what exactly are you seeing and, I mean, what kind of operational challenges are you facing in some of your older trucks and where -- you know, what’s the age break where you’re seeing the big shift in cost -- not shift, but noticeable cost going?

We see a big -- in our model, and it’s going to be different from carrier to carrier, or at least we found that. But, in our model, we see a big difference in cost going from a three-year trade cycle to a four-year trade cycle. And so, as our fleet continues to age, for example, into that fourth year -- fully getting us into that fourth year cycle, we continue to battle through that. Our trailer pool has also got older than we had wanted and has also been some additional cost as well. So we’re looking at both of those diligently from kind of a longer-term perspective where we want to be relative to where we are now. And we’ll be watching it very closely here in the next quarter or so and hopefully making some decisions relative to that.

Okay, Dave, what’s it going to be on both sides of the trailers, is the age decrease going forward.

So, Joey, what do you see -- what are you now projecting for total Cap Ex? Also, is this also going to be on the balance sheet or any [indiscernible]?

Right now, our capital expenditures are planned around -- it depends on this plan that we fully implement. You know, there’s pieces -- we haven’t finalized it yet. We haven’t made any announcements regarding it yet. There’s some things that we’re working on and could, which could involve some of those things that David just said from reducing our trade cycle. Again, those decisions haven’t been fully made.

I would expect -- depending on how -- let’s lay them all aside for a second. We still contend that our capital expenditures are still in the 65 to $70m range for this year.

What’s the average age of the fleet right now?

It’s right at 24, 25 months.

And thus far, you guys have just been testing the freightliners with some Detroits or --

[indiscernible]; yeah.

Okay. How many do you guys have now of the new engine? How many are you running there, Joey?

We’ve got -- right now, we’re running about 65.

How many miles do you have on the oldest one there?

Probably 100 --

100,000 miles.

Yeah, 100,000.

And what type of incremental cost increase are you seeing there per mile?

Minimally. I mean, we’re very pleased. It’s one that I would not take that as a statistical sample. But, we’re very pleased with how that one engine looks so far, very pleased. But, it’s still too early. I mean, it’s way too early.

Okay. All right, guys. Thank you very much.

Your next question comes from Tom [indiscernible].

Good morning, guys.

Hi, Tom.

A couple of different questions here. David, I’ve been kind of tracking the development of your dedicated business over the last year. And, first of all, wanted to get an update if you were able to grow that a little bit in the first quarter. I think you were at about 450 trucks in the latter part of last year.

Yeah, Tom. No, we have not been able to grow that. Actually, we’ve had a reduction of probably about 30 trucks on that because we had one account that we’re still doing a lot of business with and actually reduced dedicated [indiscernible] by about 30 trucks. And so, we actually had a net loss. I think it’s up around 420 trucks on the dedicated side.

So we had a couple that we lost. We added a couple of accounts and lost a couple of accounts. The one was about 30 truck fleet.

Okay.

So it’s kind of -- not a little less than flat, it’s down.

All right. Now, in your dedicated business, do you have some dedicated business utilizing the teams, or is this --

Yeah, we got them both.

You’ve got them both?

Yeah, we’ve got them both. [indiscernible] and really probably about half and half if I was just guessing real quick, Tom.

Okay.

We have a couple hundred trucks. Say, 150 or 60 trucks. 175 trucks running on dedicated team and then the remainder is all single.

Okay. All right. And then, David, as you have pricing discussions, can you talk about that dynamic a little because on one hand, it was positive to see the pricing up about 2.5 percent, but I’m wondering if you’re still more longer-haul oriented if those discussions don’t get to be maybe a little more heated than the regional guys who are maybe seeing more like 3, 3.5, 4 percent rate hikes. Can you just walk through what the resistance points are from a shipper’s perspective.

Tom, I’d say there’s a couple of things. I think on the long haul side of our business, we’ve had probably the most premium rates of anybody running long haul. And [indiscernible] premium rates of anybody running on the long haul market. And there is no doubt, based upon that, being the leader there in economic time, you got people that could take shots at that and they got a lot of room. I’m serious. They’re 8 or 10 cents a mile cheaper than what you are right now on the long haul. They’ve got a lot of room. Where you might only have 1 cent, they ought to be able to get 3 or 4 or 5 cents because they were 10 cents cheaper than you to begin with.

So, you know, we have that side. And one side of that is good, but you’ve [indiscernible] on the long haul, but we want to continue to make sure that we keep that gap, that there’s pressure there on that side of it.

And, I think, on the short haul, it’s where we got a lot of great opportunities on bigger increases to get into some catch-up mode, if you will and [indiscernible] and I’m going to predict that we’re going to 4 percent, those kind of numbers. But, I see some good opportunities over there.

Okay.

Because I think the opposite is true on some of the regional stuff. I think you’ve got some of your regional players who have got some premium rates over there. And, we’re probably a nickel or 7 cents or something like that cheaper than what they are over the last two or three years and we’re going to pay catch up over there.

Okay. Yeah, that would make a lot of sense.

So I think we’ve got great opportunities on the short, medium, [indiscernible] haul to increase our rates. And, I think that’s what you’ll be seeing in the upcoming months, and then we will continue the long haul with kind of what you’re seeing right now.

How’s the reefer business performing in this environment?

Very good.

SRT’s?

Very good. I’m very happy with the reefer side of SRT and Covenant business. I mean, we’re getting -- the pricing is going up on both of them. And, you know, you definitely see the [indiscernible] on the drive side and you see the shortage and capacity.

Joey, on the revenue equipment rentals and purchase transportation line items, what’s the approximate breakdown percentage wise between what’s actually operating leases and what’s payments to owner operators of that 14, $15m line?

About 10m of it is owner operator, and 5 is operating lease payments.

Okay. And you might have given this at the beginning. I missed the first two or three minutes. But, you mentioned the number of owner operators as of quarter end.

Yeah. At quarter end, it was 363, and we averaged 367 for the quarter.

All right. And then, did you say that the fuel surcharge component of [indiscernible] et cetera, was 67.m?

No, fuel surcharge revenue was 7.5m versus 1.3 last year.

Okay. Thank you. And then, I should have called you on this, but refresh my memory. You had an SIR adjustment you were going to make in March. Where did you settle down on your new deductible?

$2m.

Okay. That’s all I had. Thanks, guys.

Thanks, Tom.

Your next question comes from Dan [indiscernible], Stevens, Incorporate.

[indiscernible] guys. Good morning.

Hi, [Chaz] [ph].

David, just wondering, I guess here, if you could talk to us a little about trends through much, you know, the first quarter and what you’ve seen in April.

Well, Chaz --

This is Dan.

Oh, okay. I’m sorry, Dan. I thought it was Chaz.

That’s all right.

You know, the demand has been -- you’ll go two days and need freight. And you’ll go two days and have plenty of freight. And it’s virtually the way in which we [indiscernible] for the entire first quarter, and it’s really been the same way and I’m feeling it for the month of April. We’ll have some good regions of the country that are pumping very good versus the first quarter. The Southeast was basically bad all first quarter. But, the Southeast right now, for the month of April has started to turn around and we’re starting to get some good numbers coming out of the Southeast.

The East Coast was strong all winter long. January, February, March, we had over booked up on the East Coast. And now, we’re starting to see a slowdown on the East Coast. You know, the Midwest has basically been very strong, really throughout the four months. The first three months definitely and the month of April, the Midwest has been good about 90 percent of the time.

California has been very strong. Southern California has been very, very good. Hopefully, you can all hear me with all these sirens going by. But, L.A. has been very strong.

Texas has just been kind of okay. I mean, we’d have a bad day and a good day there. Kind of sloppy.

So you know, we had some areas that [indiscernible], but we had some areas at the same time when the strength was there [indiscernible]. And, you know, I think it’s kind of what you’re feeling. But, if the economy is what we’re feeling out there.

Sounds pretty inconsistent.

It really is.

I guess from the standpoint of rates, just to clarify, you were talking about loaded miles on the 2 to 3 percent increase, Joey.

Yes.

And [indiscernible]. One thing, if you can give any additional clarification on the 100 trucks, I guess, you said in the second half of the year. Do you have those allocated to a specific division? You know, I guess all those 100 trucks going to just the general OTR or could we see some of those go to [indiscernible] or --

Yeah, you’ll see that [indiscernible] split up. Some of it will go to dedicated, probably 20 or 30 of those trucks will go to dedicated. And probably half -- another 50 will go to the reefer side and the rest of them will go to the [indiscernible] side.

And that’s if, you know, we have a deal where we can cancel the trucks in 60 days. I mean, I am -- we’re very religious on this getting back to profitability. I won’t add trucks just to be adding trucks.

So we’ve got about a 60-day cancellation. So, you know, those trucks are coming basically in the September to December timeframe. And so, we’ll look and see, you know, by July and see if like what we’re seeing and then make a determination.

David, one follow up here, I guess on the rate front. You know, you’ve always been really good about getting out and doing one-on-one customer visits. And I presume some of the rate increase we’re seeing here is obviously has got to be a reflection of efforts in the fourth quarter and maybe even prior. Can you talk to us about what your strategy is here moving forward. Are you going to be pushing the bar up more now that you’ve seen this improvement in rates from the rest of the peer group? Just a little bit of visibility there.

Yeah, you will -- as I told Tom a minute ago. Especially where I think that we’re at, number one, you’re going to see a very big [indiscernible] that’s going to be taking place with us, and has been now for about three or four weeks -- really, the whole month of March. We’re going to continue to push that bar up. I think on the medium length of haul that we got a lot of room. And on the long haul, I think that we got not as much room. But, on the medium, we’re going to add them. We’re going to get these rates -- these rates are going up and they’re going to go up more than what you’re seeing.

Fair enough. Thanks, guys.

Your next question comes from Ed Wolfe with Bear Stearns.

Hey, guys. It’s actually Justin Hagerman.

How you doing?

I think most of my questions have been answered, but you guys said that the $2m deductible -- I just wanted to double-check, is that on both the excess and the primary, or is that two separate things on your deductible?

That’s on the primary.

That’s on the primary, so what band does that cover?

The primary?

What does that go up to?

$5m.

How much? I’m sorry.

$5m. Primary coverage is $5m with a $2m deductible.

Okay. And then on the excess is another $2m deductible or --

Yes, on top of that.

And what does that go up to?

[indiscernible] 20m.

40m.

20. 20.

[indiscernible].

And then I think I missed in the beginning you guys said where teams are compared to last year.

We’re down at 150 versus a year ago and we’re just shy of 1200 right now.

All right. And then -- I guess that’s about it for now. Thanks.

Your next question comes from Michael [Latronica] [ph] with Morgan and Associates.

Good morning, David. Good morning, Joey.

Hi, Michael.

Some housekeeping things. Length of haul in the quarter versus a year ago?

It was down actually about 100 miles to just a little under 1100 miles.

Okay. Great. Joey, could you tell us what off-balance sheet debt looks like at the end of the first quarter versus in the first quarter last year?

Yeah. Let’s see. We ended the quarter with $92m, which was actually down $1m versus December. A year ago March, we were at 82m.

And one of these you gave us last conference call, which was very interesting number was the number of trucks that are under lease and the percentage of the fleet that that represented. Do you have those numbers available?

Yeah. Let’s see. There were about 900 trucks on lease, which is about where it was at the end of December and about 2800 trailers.

Okay. That’s actually all I have. Most of my other stuff’s been answered. Thank you very much.

Your next question comes from Doug Coe with Morgan Keegan.

Good morning, guys.

Hey, Doug.

Just a couple of things. The salaries and wages lying down [indiscernible] that’s just a reflection of the teams. There’s nothing else there?

Principally teams because we had a per diem program last year. So that’s -- you know, that’s wrapping back around each other. So it’s principally teams and the different pay options for our drivers that we put in place early last year, as well as late 2001 continued to help us with the cost. You’ve seen it on the sequential basis. It’s starting to -- you know, the rate of decrease is starting to slow as we start to wrap around some of these changes we’ve made in that program. But, it’s principally teams and different pay programs.

Okay. And the per diem plan, that’s optional?

That’s correct.

What percent of the drivers do you think is opting to do that?

We’ve got about 70 -- it’s around 75 percent or our drivers are on that program.

Okay. So move into the tax rate a little bit. What should we use, in your estimation, over the course of the remainder of the year?

Yeah. Again, the first quarter illustrates the difficulty of -- the per diem impact tax rates can be significantly. As your pre-tax profits go down and your per diem expense stays about the same, your effective rate goes way up. And so that’s what we saw in the first quarter.

The rest of the year, it really depends on where your forecasts are as far as what that rate should be. You can kind of look back to the second, third, and fourth quarter of last year when we were running 94 to 95 operating ratio. The tax rate was in the low 50’s. And that’s still an appropriate number. Back then, we said as for every hundred basis points and operating ratio reductions have gone from a 94 to a 93 reduces our effective rate by about 300 basis points. So, for example, it goes from say 52 as you’re making -- as you’re running a 94 OR. If you move to a 93 OR, it goes to say, a 49. So for every hundred basis points [indiscernible] operating ratio, it’s about 300 effect to the tax rate. So it really depends where your forecasts are for the rest of the year of where that could end up.

Sounds good. That’s real helpful. On the track -- could you throw a number at us and tractors to non-driver employees. You know, over the past year and a half you guys, I think bought everything you could on the corporate side. Where’s our ratio now and is that about where it’s going to stay?

We are right at tractor -- you said tractor to drivers or --

Right. Tractors to non-drivers.

Pardon?

Tractors to non-drivers.

We are right at 3.7, 3.6 tractors to non-drivers.

Okay. And just to refresh my memory. What kind of trailers do you guys buy?

We’ve been buying Hyundai’s for the last two years.

Okay. And that’s what’s scheduled for this year?

We have some Hyundai’s scheduled for this year.

Okay. Thanks, guys.

Your next question comes from Nick [Fallow] [ph] of the [indiscernible].

Joey, good morning.

Good morning.

And, David. Sorry.

Hi, Nick.

Just a quick add on to the other questions. Based on your input from suppliers and others, have you see any major decline in competition by region or lanes due to the obvious economic pressures on the trucking industry?

From a price standpoint, Nick, that’s a question?

Yeah.

Nick, not really. I’m going to tell you, I am not seeing necessarily pressure out there. You don’t lower your rates, you’re going to lose this business. I see more that the customers are trying to wrap their hands around some core carriers, and they just don’t have as much business as they would like to give you. I mean, that’s what I’m [indiscernible] there.

I mean, I just got off the road probably visiting the last 45 days. I probably have seen 40 or 50 accounts. And I only a couple of them -- a couple of the accounts that told me that business was good. Most of them were concerned about their own business. But, none of them were asking me for any rate decrease.

Actually, I confused you, David. I’m sorry. I was really looking for your input on whether you’ve seen any major or minor truck companies going out of business, therefore, the competitive profile in a specific region or lane has shifted. Either manifested in higher rates or, as you pointed out, customers becoming a little more concerned about the future availability of capacity.

I agree that that has happened. I think as fuel continued to go crazy in the first quarter that you saw another blip of more companies going out of business. I think in the fourth quarter, it kind of settled down to at least the numbers that were better than it had been for the last couple of years and it kind of settled down. But, I think in the first quarter, you saw more of a up-kick of people going out of business.

But, I think that, again, the capacity has not straightened itself out. So therefore, there has still been more capacity out there than what you want, even with the amount that have left because we can’t -- the economy won’t slow down. I mean, the economy won’t ever pick up any speed [indiscernible] it starts slowing down again and you never [indiscernible] the reduction of capacity that we all know as left the market.

Are you surprised given that we’re now going through what was a difficult first quarter and the licensing period. We’re not -- at least, one might presume that the business seasonally and for other reasons may start to improve. And therefore, if you’re made it this far, it’s probably unlikely you’re going to shut down your business.

You know, those are interesting comments that, you know, you’ve got to believe that a lot of them are being worked with.

But, I’m going to tell you another thing that’s out here hanging though, Nick, is that there’s not a finance company out there that’s not working with the carriers.

Right.

That they have never done like this like they’ve done in the last couple of years. I mean, it is up to the finance company. And I want to tell you, it’s up to the [indiscernible] of the world, the fuel suppliers, and they have been hurt so much in the last couple of years that if anybody almost gives them a hug, they’re going to work with them because they don’t want the trucks and they don’t need to need to lose the fuel business. And they almost are on life support to those people.

So it’s a matter of how much longer those people would go with them. I mean, so at the end of the day, if you’re finance company’s put off two more months of payments, they’ll allow you to make your license tags in March in April, then that gets you by for a couple more months. Just a matter of how long the finance company folks want to go with them.

Thank you, David. I appreciate it.

Okay, Nick.

At this time, there are no further questions.

Mr. Parker, do you have any closing remarks?

I just want to thank everybody for joining us and we’ll get with you in three more months. Thank you very much.

Thank you for participating in today’s conference call. You may now disconnect.