Covenant Logistics Group Inc (CVLG) 2007 Q3 法說會逐字稿

Excuse me, everyone. We now have Joey Hogan in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the presentation we will open the floor for questions with instructions given at that time. I would now like to turn the conference over to Mr. Hogan. Sir, please begin.

Thank you, Chad. We'd like to welcome everyone to our third-quarter conference call. Joining me here on the call are David Parker, our CEO and Chairman of the Board; Richard Cribbs, our Chief Accounting Officer; and David [Hughes], our Treasurer.

This conference call will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. We ask you to please review our disclosures and our filings with the SEC.

As a reminder to everyone, a copy of our prepared comments and additional financial information is available on our website. Our prepared comments will be brief and then we'll open up the call for questions.

In summary, as David said in the release, regarding the freight market, similar to last year, we did not see the typical peak shipping period that usually begins in August. Customer bid activity continued at an accelerated pace throughout the quarter with bids up 47% for the Covenant Transport subsidiary versus the third quarter of last year.

Additionally, the impact that we saw in the second quarter as a result of the large bid activity during that quarter, was a significant negative impact to our fuel surcharge recovery. That result carried over into the third quarter which negatively impacted our results during the quarter when compared to a year ago. The result of the slow start to the peak shipping season, combined with the competitive environment and less fuel surcharge recovery were the main contributors to a lack of earnings during the quarter.

From a cost standpoint, our pre-tax costs increased about $0.10 a mile over the third quarter of last year. Three items comprised the majority of the variance -- fuel net of surcharge increased $0.048 a mile; capital costs, which we define as leased revenue equipment plus depreciation, amortization and interest, increased $0.032 a mile; and purchased transportation expense associated with the growth of our new Solutions subsidiary added $0.023 a mile. For the foreseeable future, we expect our fuel costs, net of surcharge, to remain in the $0.25 per mile range reflecting the new surcharge recovery level that began in the second quarter of this year.

Our capital costs should continue to slowly decline as we rationalize our trailer fleet and execute plans to reduce non productive assets, namely assets held for sale, as quickly as possible. We have several cost initiatives in place to reduce both variable and fixed costs that are beginning to show results. Versus the second quarter of this year, our variable costs decreased about $0.05 a mile, while our fixed costs decreased by $3.1 million. Our goal is for both of these areas to reduce sequentially for the foreseeable future.

From a balance sheet perspective, we have been able to reduce our total indebtedness, including off balance sheet obligations, by $36 million since year end 2006. During the quarter our assets held for sale was reduced by $4 million to $13 million. Our goal is to have that number below $10 million by year end 2007. As of September of '07, the Company had approximately $27 million of available borrowing capacity under our credit facility and we were within our financial covenants. David will now give you an update on the balance of the year and our outlook for 2007.

Thanks, Joey. It is pretty clear from our press release that our largest battle is with the fundamentals at this point. Like most of the industry, we need more freight, we need better rates, and we need some help with fuel prices. The fact that we're in the middle of this turnaround just magnifies these issues.

Before I get into our near-term goals, I'd like to remark on several non-financial areas of progress. First, Joey has done an excellent job in his first few months as President of our Covenant subsidiary, especially in the areas of communicating a clear plan around customer service, a driver-support culture, teamwork, and accountability. Our people have great confidence in Joey and where the Company is headed and have kept focused despite re-assignments and personnel reductions.

Second, our drivers have responded by stepping up service levels, and as we have lead several customers getting their carrier of the year awards. There's no question that we could use a little wind in our sail from a freight standpoint, but we do believe through the efforts that we have begun late in the third quarter that we will begin moving forward, although modestly in the current freight market.

Some of our goals that I want to summarize for you is --- one, reverse the declining trend in revenue per truck. In this market the majority of this move will come from increasing the efficiency of our fleet. We are diligently working with our drivers to maximize available driver time in the geographic areas that are attractive to us. In other words, we've just got to increase utilization, we need to lower our deadhead and just "pray" that rates will hold up or that they'll start going up a little bit sometime next year. We have re-examined our incentive plans for our sales force and feel that targeted plans will produce results.

Second, we want to continue to grow our Solutions subsidiary which is very profitable. We have established a goal of a $100 million annual run rate by the fourth quarter of 2008, producing a mid to low 90's operating ratio.

Third, we want to reduce our variable costs. Variable costs are, of course, comprised of driver compensation and benefits, fuel net of surcharges, operations and maintenance expense and insurance claims expense. We are currently running about $0.95 per mile and targeting to reduce this area in the operations and maintenance and insurance claims areas.

Fourth, lower our fixed cost. Anything left in the income statement other than variable costs makes up our fixed cost bucket. We have reduced that number from about $51 million during the first quarter of this year to $49 million in the third quarter. This area is expected to continue to decrease sequentially going forward.

The plan is a basic blocking and tackling strategy; you know, nothing fancy, just hard work, trying to be smart, and looking at everything that we possibly can look at. We'll go ahead and now open it up for any questions that you may have.

(OPERATOR INSTRUCTIONS). Justin Yagerman, Wachovia Securities.

I wanted to get a sense -- because it looks like you were actually able to lower the amount of brokerage freight that you're carrying sequentially. I think on the last call you said that it was about 13 to 15% of your freight. And I was looking through what you had put out last night or this morning and it said about 8.8% of your freight was broker freight that you're carrying.

So what's going on on those lanes that you're able to balance them better? Are you getting a better feel for the regional market where you'd been using a lot of that to balance that out? Or I guess however you've been compensating for that in a weak freight environment?

Justin, it had been running around 10 on all three companies, Covenant had been doing a little bit better, then, if you remember, during the course of the year when SRT got those trucks back in January, remember it jumped up to about 25 or 30% right off the bat in the beginning of the slowdown. And then Star with the South had been in than 12, 13% kind of number that equated all three to around a 10% number, it's currently running at about 8% and it's predominantly because of the success that SRT had started to have on their side of the table.

They're pretty consistently running right now about 12.5 to 13%, so they've dropped it very dramatically. And Covenant and Star, they continue to be up. Star is in the 12 or so percent and Covenant is in that 9% kind of number -- 8% kind of number -- 7% actually he's telling me, 7% number. But there's no doubt in the first quarter we all -- the fourth quarter will probably maintain those kinds of numbers and in the first quarter it's going to start climbing again.

But we have -- we've taken on -- SRT has taken on new accounts. And of the three companies, even though we are seeing it some things happening positively in the three companies, especially, in my opinion, on the Covenant side of -- SRT is feeling pretty decent about the world right now. I mean, they're not getting a fuel surcharge like they'd like to have so that's hurting them. But just from a pure freight environment SRT has actually got customers for the first time this year that are calling them wanting to talk about capacity. And so Tony and myself on SRT are pretty excited about what's going on in SRT.

And I would imagine I guess they're doing a little bit better with the trucks that you guys pushed over to them at this point?

They're making some nice headway there.

Okay, that's good to hear. You spoke about the bid process that happened in the first half of the year. And I guess given the freight environment that we're in right now are you seeing customers come back to you at this point and start talking about freight rates again? You mentioned in your remarks that you're hoping that rates get better, but with demand being what it is right now is there much reason to think that it will?

No, we're not seeing that at all, Justin. I think we've had one account that has asked for that in my memory but we've not had that. As a matter of fact the opposite is kind of happening. I personally was out on the West Coast a couple of weeks ago and some customers that we were not able to raise at all during this year, they start coming back up for renewal in the first quarter. We had discussions and the two that we talked to both of them are going to give us an increase in the first quarter.

Now again, we were flat, we didn't have to reduce our rates and so they're going to give us an increase. So that's kind of the way in which we're attacking it. I do know that all three companies will get some rate increases next year, just a matter how slow business gets and do you have to put in some rate that offsets or neutralizes whatever you're able to raise the business you can.

Got it. Your team count was down year-over-year and Expedited has been one of the better performing divisions for you guys. What's going on over there? Is that driver issues or is that rightsizing that fleet for demand?

No, it's actually -- the thing actually got a little worse but now it's starting -- the last couple of months it's really starting to improve pretty nicely. There's a lot of good stuff that's started to happening on the team side there. There no doubt in the first half of the year when business was just terrible we did care that we had teams, but at the same time there just wasn't as much availability of freight as you would like you have so you weren't as concerned. But in the last couple of months they've really made some great strides on that. And I feel better right now on the team side of our ability to increase the team side than I have in two or three years.

Got it. Okay. I guess switching focus for a second before I turn it over to someone else -- Joey, what's cash flow from operations through the first nine months? And then I guess what are you guys expecting CapEx to look like on a net basis this year and next?

I'm just now looking at the cash flow statement as it's given to me --through the nine months cash from operations is about $18 million year-to-date this year, we're going to end up -- we said in the release that we feel our CapEx net of dispositions will be $10 million to $15 million for the year. In the third quarter we had proceeds in excess of purchases by about $3 million in the third quarter. And so let's say year-to-date CapEx is about 9 so we're going to spend a little bit more net purchases in the fourth quarter.

And then next year?

We haven't set a target for next year yet. We're going through our equipment plan right now. We're taking some of the new engine trucks right now, taking a look at the market, thinking through the first half of the year. So I'm not really prepared to kind of comment on what our CapEx plans for next year are yet.

Okay, but as you look at your fleet where's your average age right now and do you think about extending trade cycles to keep the '06 engines a little bit longer and to avoid the capital outlays going on in replacing a bigger slug of the fleet?

Our average age is about -- our tractors are still 1.7 years and it was 1.6 this time last year. Our trailers are 3.1 and it was 2.8 last year. And Star is what pushed the trailer age a little bit longer; they tend to run theirs 8 to 10 years versus our other drive end fleets.

It's not rocket science when you look at if the freight environment is as tough as it may be in the first half in a time when you're not getting the miles maybe that you want and you're not generating the cash that you want. So far we have not made the decision to materially alter our trade cycles, but it's certainly on the list to consider and we may tweak it a little bit to get us through the first half of next year. But I'm just not ready to say this is what we're going to do yet.

We're looking at every division, Justin, and the miles that they're putting on it. And if they're not getting the miles on it, it probably makes sense to extend some of them.

It makes a lot of sense. All right, guy; I appreciate the time. Thanks a lot.

Chaz Jones, Morgan Keegan.

Good morning, guys. I think in the prepared remarks, just to make sure I got this right, you talked about net fuel expense per mile kind of hanging around in the $0.25 per mile range, is that correct?

Yes.

Okay. That's been an area certainly the last couple of quarters that's been a big detriment on earnings. Does that take into consideration, Joey, I guess -- we have crude moving up here to $90, diesel probably does not reflect those higher crude prices. And it just seems like we're setting ourselves up for a difficult fourth-quarter comp, probably even more so than the third quarter. Is that $0.25 kind of assuming that diesel hangs out around $3 or could that go higher if we actually do see diesel creep here the next couple months?

Yes, we are assuming that diesel stays around $3 a gallon. We are expecting it to be up a little bit sequentially, but it's still around $0.25 or right at that number. Yes, compared to a year ago it's still a massive comp issue. For us if it is around that it will be about $0.05 a mile impact again versus year ago similar to what it was in the third quarter.

Okay. That's actually really helpful, I appreciate you guys giving that visibility there. As you look at the fleet count, it was off a little sequentially. Have there been some decisions to rationalize any of the capacity in the fleet and should we expect any more of that or is that just more of a timing issue in terms of trades?

No, we have. We made some adjustments in the summer. All three asset companies made some adjustments to their fleets to adjust it down a little bit. We're continuing to watch it each month. And as we said, we're just continuing to watch the asset level and the service offerings and our driver situation, and do you have your trucks full or not, how much broker freight you're hauling -- there are several things that go into that decision and so it's something we look at each month. But, yes, you're seeing that trickle-down. We did, all three companies did make some adjustments in the summer.

Okay. A couple of your peers have talked about perhaps handling some of their truckload service through their brokerage divisions. Certainly, David, you talked about a pretty big ramp up in solutions. Is that a strategy that perhaps at some point down the road as you get some scale that you guys might consider that to maybe alleviate some additional capacity in something like over the road?

Is the question, "are we wanting to grow the solution side and maybe to reduce the asset side?"

Yes, somewhere along those lines. I guess what I'm getting at is certainly some of your peers, whether it's a Warner or somebody like that, have kind of alluded to the fact that they were going to handle surge capacity demand through their brokerage division in the future and not necessarily add company equipment.

Yes, we're Covenant, all three companies is at, the transportation company, it's strictly looking at the assets that we currently have got. And as Joey just said, based upon how much internal brokerage they're using -- not of Solutions, not of our brokerage, but how much outside brokerage they're using and how they stand on trucks will dictate the amount of equipment that they run. We feel like it's in pretty good shape right now but we'll see what happens.

We're strictly looking at utilization of these trucks. And we are -- got two goals. One is to utilize any overflow that we have at all three companies into the Solution bucket, as well as the Solution business gathering freight from them to utilize during the times of our needs and of all three companies. And right now I would say that the Solutions is giving more freight to the three companies than the three companies are giving to Solutions.

Okay.

So that's very similar to what you were saying on the Warner side.

Yes. And then I guess --.

What you would like to do is use -- you'd like to be in a position where you'd utilize your in-house Solutions during January and February, not in October. But unfortunately you're utilizing it in October.

Yes. No, that's kind of along the lines of what I was getting at. One last question here. How many carriers do you have signed up at this point within Solutions? I'm just trying to get an idea as you kind of ramp that area up.

There are 5,000 carriers that are signed up in that. But keep in mind, Chaz, those are --

May haul one load or --

Or have one truck.

Sure. Or they might be signed up and not haul any load.

That's correct.

That's carriers that have hauled a load. We've utilized 5,000 different carriers since May of -- around May of '06.

Okay. So they might not haul a load every week or whatever?

That's correct.

Or they're just in the database.

Okay. That's all I had, guys. Thank you, I appreciate it.

Edward Wolfe, Bear Stearns.

Good morning, guys. You talked about -- in your opening remarks about you had an unusual large amount of bids in second and I guess third quarter. Is that driven by a sense from the customer that pricing has come down and they're trying to lock that in? What's driving that?

I don't think there's any doubt.

And what are you seeing? If you look at the average of those 47%, how much are those contracts down or what's kind of the average price? Or is it more than just price, there are other things involved?

Ed, you know, I don't look at it like that. Our rates are kind of flattish so it's almost kind of like we're being able to hold our own; we're able to take some -- a little few increases for the decreases that we get among all of them, but there's definitely more a tendency for it to be lower than higher, I can tell you that. But I don't have that average; it kind of speaks for itself on what our rates are doing.

What I'm trying to understand is I'm guessing that for everybody, as we go out there's fewer and fewer of the good stuff from a year ago and more and more kind of the bad stuff from right now. So just the reported stuff is going to lag a little bit. Is that a fair assessment?

Say that once again, Ed.

I'm guessing that as we go out -- right now there's probably a quarter of okay stuff from '06 still and three quarters of bad stuff, and it kind of has been getting worse as we go out in the mix with more of the bad stuff with less of the good. Directionally that's still happening it sounds like.

I would agree with that.

Also, in these bids are you seeing caps on fuel surcharge or are customers, more so than they had been, using their own fuel indexes versus yours? What are you seeing in assessorials for (multiple speakers) things like that? Any changes in those things?

Yes, we're seeing no caps. We're seeing the base, a lot of customers wanted to increase the base is what we're seeing and that's basically what you're seeing on the negative side of the cost. The base has gone up.

From where to where typically?

Say $1.05, where you had $1.05, $1.10 dollar basis, they're anywhere from $1.20's to $1.80's.

I see, okay. So just kind of starting from a different zero in other words?

Yes, that's right. And that might be one of the reasons, quite honestly, Ed, that our rates are kind of flattish because we've tried to make up some of that. In reality if you put the rates and the fuel surcharge together it's going to be $0.05 down.

That's correct, yes. That's the way you -- because as the bases are getting adjusted customers give you the opportunity to adjust for that in your rates. And so what you're seeing is the impact, to us anyway, is that the overall rate structure has been negatively impacted by about $0.05 a mile.

About $0.05 a mile (multiple speakers).

(multiple speakers) also part of that equation, though, Ed. Most people dead head as an increase which has nothing to do with pricing.

Yes. But after assessorials, when everyone is putting in the hours of service rules they started to get drop-off in detention. Any of that going away?

No, no. Those are kind of two hours of the gospel and that has not been affected.

Is the stay on the recent case that would reduce -- restrict hours of service further, if that doesn't get continued past the end of the year will that have another negative impact? And do you think you can go out and get some of that back or is it at this point you're not going to even try to get new assessorials?

A, if the new hours of service were to change, depending upon what the change would be. But I think that the carriers are just now coming to realize what impact the existing hours of services are having on utilization and it's a big number. I mean, it's a big number. I could get on my bandwagon on the safety side of it all day long, but it's a big number. If they were to change hours of service today negatively -- I don't know that you could do anything right now.

Anything to offset it, yes. But when you say it's a big number, are we talking 4 or 5%, the original stuff to utilization at this point?

Ed, yes, I do. I think it's 3 to 5% kind of number hit to utilization and, yes, I do.

In terms of October, we're three weeks now almost into October. This is normally probably as good as it gets, is there any pickup at all?

Yes, yes. There is a pickup. Things are loading better and probably the best way to describe it is that freight is pretty good, but I am loading, still loading broker freight and I probably haven't done that in 33 years.

In an October.

Here it is October and I'm loading broker freight. Yes. But freight has increased, your customer base has increased the freight, but I'm still loading broker freight.

And David, if you go back and look at past bad times for freight, whether you look in '01 or '95 or '91 --.

By far the worst in 35 years that I've been in it.

Wow. In those kinds of peak seasons back then. I'm guessing the peak season kind of ended early too, that by Thanksgiving you were done, is that a fair way to think?

No, back up until last year what you could count on was the magical date of August 15th, get me to August 15th and I would start filling the Christmas season. And October was just overwhelming, it would go strong until Thanksgiving, the week of Thanksgiving, but as soon as Thanksgiving is over with it picked up until December 15th and then you said "good night".

Right. And what's your sense right now on how long fourth quarter goes right now, any ideas?

It's similar to last year, that's kind of what I'm feeling is it's similar to -- there's no peak season. But I've got to say, I'm loading more brokers right now than I loaded last year. So it's worse than last year -- even though it has the same feel of last year, it is worse than last year. But yes, it's going to go until probably Thanksgiving on however this great feeling we have.

Specifically to you now, how do we think about the seasonality gets worse, the freight isn't picking up, we get any weather at all in first quarter it's going to be tough. How should we think about your OR progression? I'm guessing that the second to third-quarter progression which was so strong, we shouldn't expect that to continue or should we? Can you improve on the 101 in fourth quarter at this point?

Ed, David was pretty straightforward in laying out what we're trying to do. We don't think that -- we do feel that the rate side of the equation is going to be very difficult for a while. But we do feel that some of the things that David mentioned that we began throughout the third quarter will help us continue to get more efficient from a truck utilization standpoint. And there are just several things on that. But it's just some systems, new structure, sense of urgency and things of that nature.

So I do believe, and we're already starting to see it, that the utilization -- we think that we'll continue to make some strides. And so some of that will be through our current customers, some new things that we're doing as far as capturing as many opportunities as we can as well as possibly hauling broker freight, there's no question.

So I think that -- I think rates will be tough. We do do a lot of different special things throughout late in the fourth quarter that will help our quote rates, as they always do, even the last few years. And so we do have that expectation and we feel we'll participate in that again this year.

So I think we'll continue to get more efficient. I believe our variable cost will not be higher than $0.95 a mile and I think we've got a chance to lower that through some things. And then lastly our fixed cost, there is a large push and expectation that that $49 million will go down in the fourth quarter. So if those happen will we make money? We kind of changed that in David's comments, but I think that we have an opportunity to improve sequentially our operating ratio.

Okay.

Now going into the first quarter, I think the first quarter is a big -- I think it's a big wild-card right now. I think it's just a big wild-card.

And I'm guessing oil is a wild-card here too as well?

Correct.

And Joey, one last thing. The $27 million credit that's available, at this point are there any assets that are not securitized? I mean, is there anything down in that $27 million if push came to shove?

No, I think pretty much everything is -- we have an Accounts Receivable securitization so that's obviously securitized. And then all the rolling stock, any buildings that we don't have already earmarked for sale -- but everything is securitized.

Thanks, guys, for the time and keep up the improvement. You're getting there.

[Deidre Simon], Lippert.

I wanted to ask you about your cost reductions. Could you give us a little more information about what you're planning to do to reduce the costs?

Well, some things that -- and again, I'll answer it as specific as I can without going into some competitive detail, but some of them there are some company specific things that we're working on. Made some changes late third quarter regarding pretty much anything that relates to benefit packages for example. We made those changes and that will affect us beginning in January going forward. And our employees already know about those so they're sorting through those as we speak.

Driver compensation for new hires -- new hires -- not existing drivers but for new hires. We made some progress throughout the summer, pretty significantly in some of our companies, and we fell that we had an opportunity to adjust our compensation structure for our drivers. So it did not lower any existing drivers' compensation but we did make some pretty meaningful changes to our new hire package.

And it hasn't -- I think we've been a good job of managing our recruiting message combined with some retention efforts that has given us the ability to do that without affecting our open truck situation at all. Now how much of that is the economy versus some of our tactics? I don't know. But we've been able to do that and I think that we will continue to see some benefits there that we started seeing late in September.

Would those initiatives, would those reduce costs in the short term but maybe increase costs in the long-term because of driver turnover? Would that increase your driver turnover, do you think?

Arguably if your driver turnover starts going up and you have open trucks there will be additional costs, but our hope with some other thing -- you can't just look at driver pay by itself, you're correct, you've got to look at other things with that. But if our driver turnover keeps going down and our trucks are full -- higher utilization and things that we mentioned on the utilization side for the trucks, I think we've got a good opportunity to keep the our trucks full, keep our drivers happy and potentially lower some variable costs going forward.

I think a lot of our vendors that affect our variable costs have really stepped up and helped us going forward that's in our variable cost. I think on our insurance side on the claims side, that's pretty much more or less a continuation of a very long journey that we feel will continue to bring us some benefits again slowly over time. We'll have in the high deductible area that a lot of us are in, but ours are high and we have a high deductible. And we're going to have a quarter every now and then where we have some bad accidents. And so, but directionally speaking I think that that will continue to slowly come down over time.

On the fixed cost side, that's anything that's not variable. I mean it's getting hammered in a big way. And we announced some layoffs back a month or so ago inside of our largest subsidiary, anything we're spending, terminal operations -- that's a good one too. We identified several terminals earlier in the year that we felt like we didn't need or we could utilize the operations around that in a different way. But it takes time for you to get all that fixed cost out. Until you sell it you still have cost, you're still paying property taxes and still have slight utilities and you may have a security service and things of that nature.

So we shut down our aircraft operation in the second quarter, that takes time. We've shut down some of the fixed cost, but we still haven't sold the plane yet, it's still for sale. So we're still making those. So it's a lot of decisions that we've made will continue to come forth and we will lower our fixed costs. And so that's a long answer to a short question.

How much do you use technology to say monitor drivers, watch speeds and structure the roots and stuff like that?

It runs our lives unfortunately. David says we've too many people looking at black boxes all the time. But your goal is to automate as much as possible and our human capital manage the exceptions and that's the goal. If we can do that -- I'll be specific to us -- if we can do that, and I believe we do that, and I think we can get better at that. But if we do that, that's where the technology brings you real efficiencies.

And I think that that's one of the challenges that we have is use the black box, if you will, to do the work and let the human capital manage the exception versus trying to touch every, single load or every single thing every single day. And we've got some things that we're looking at now on the technology side around our recruiting, driver relations, driver management area, our asset management area, we've got some technology that we're looking at out in our trucks right now as far as communications is concerned.

We've got satellite now.

Right. So that we'll -- we already had that -- but we think gets us even more efficient especially on the training and communications side. So it is a big part of trucking that people don't --?

Do you use J.J. Keller for the training?

No, we don't.

Okay. I don't know if you can, but can you be a little more specific about which technologies you think you'll be looking into to use more?

Well, I think that again we're testing some equipment out in our trucks as a competitor to our current option. I really don't want to go into who that is in fairness to both parties right now. I think that we're looking at some solutions on -- as I said, to manage the driver management process from the time of application to the time of seating a truck that we feel will really get us more efficient. We've got some new technology to help us manage our idle time that we've been running for a couple years now that's -- it's good but it has its challenges.

Can you share what that is, if it's something you've been using for a while?

It's called TriPac but it's a Thermo King product that they bought. We've been using that for quite a while.

One last question. I know you said you think trucking is going to be slow for awhile, but can you give us anymore -- everyone is sort of sitting here I think wondering what does the future look like. Do you have any insights or just more thoughts on that?

To me -- to me, I think that we all read the same thing. So I'm not a trained economist but we all have opinions. And so I think that there's two things that are out there that could be fairly significant that could teeter the economy into a recession depending on how it goes. And I think one is -- if you had asked me six months ago would I have said that what are the chances of there being $90 crude? I would have said not good. But still higher, I would have said $60 to $80 maybe. Well, we're at $90 and people are talking $100.

I don't know. I think if it keeps going higher, depending on what that is, could tip us into recession almost regardless of what the Fed does. I think the second big thing is the whole big collateralized loan obligation unbank consumer debt picture. I think that's bigger than what the general public understands, and I think that whole situation, if not resolved -- I mean, now you've got a large financial institution offering to bail out package to certain groups and so we're starting to hear more about it now. But -- and then the government is saying we don't want to do anything about it; it should sort out however it's going to sort out, which I frankly tend to agree.

But if that blows up, if you will, I think those two things are huge that could tip the economy fairly quickly into recession. Other than that -- and this is just an ignorant Southern boy -- other than that I think that it should be kind of more of the same, 2% GDP'ish until we get housing kind of caught up. And I think most people feel -- of course being in the south we're extremely tied to the textile market -- is that most of the textile industry believes late '08, early '09 before you start to see meaningful movement, meaningful movements in the housing market.

So we're kind of battening down the hatch, expecting more of the same, and hope the two biggies kind of stay where they are and kind of calm as they are -- however they end up sorting out.

Great, thank you very much.

(OPERATOR INSTRUCTIONS)

No more questions?

It doesn't look like there are any further questions at this time.

Thanks, everybody, for joining us.

Thanks, Chad.

Thank you. That concludes today's teleconference. You may disconnect at this time.