Knight-Swift Transportation Holdings Inc (KNX) 2005 Q4 法說會逐字稿

Good morning.

My name is Shan, and I will be your conference operator.

At this time, I would like to welcome everyone to the Swift Fourth Quarter Earnings Conference Call.

[OPERATOR INSTRUCTIONS]

Mr. Cunningham, you may begin your conference.

Good morning from Phoenix and welcome to Swift Transportation's year-end conference call.

We will begin this morning with the legal disclosures.

Today's presentation and discussion will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as expects, believes, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements.

These statements are based on are intended to identify those forward-looking statements.

These are based on Swift Transportation's current plans and expectations, and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

For further information about these risks and uncertainties, please refer to Swift Transportation's reports and filings with the Securities and Exchange Commission.

I will start today with a brief summary of 2005, and then we'll discuss the progress we've made on our operational metrics.

Glynis Bryan, our Executive Vice President and Chief Financial Officer, will then provide some details on the financials and then we will open it up for questions.

In 2005, the operational focus we established for improving our rates, prioritizing lanes, and being selective in the freight we want to haul, has enabled us to achieve improvements in all of our major operational measures.

Our revenue per loaded mile has increased in our utilization and deadhead have improved not only year-over-year, but sequentially each quarter.

These improvements have led us to record productivity as measured by revenue per tractor per week, which I'll show you in just a minute.

We're proud of our improvements, but we also know that this is just the beginning and the focus on these disciplines will need to continue.

Another highlight for the year is the success of our fuel surcharge program.

For the year, we remained relatively whole, and we were able to minimize the impact of the record diesel fuel increases the industry experienced this year.

Our intermodal growth is continuing.

As of the end of the year, we had received 2296 containers and that number grows virtually every day.

Our team is excited about this business, and we look for this to be a significant growth opportunity here at Swift.

And finally, I want to mention the new management team in place at Swift.

Almost all of the senior executive positions have new faces this year.

I am proud of this team.

This is a great group of men and women who are working very hard, and we are all united in the manner and the direction we want to take this company.

Slide four is a graph of our revenue per loaded mile, excluding fuel surcharge.

Our average revenue per loaded mile, excluding fuel surcharge for the quarter, was $1.63.

That's up over $0.07 year-over-year or 4.4%.

As you will recall, we sold our auto haul business in April this year, which we've previously estimated the impact of the sale on the revenue per loaded mile to be between 2 and $0.025.

So on an apples to apples basis, we are up nine to 9 and $0.095 or approximately 6% year-over-year.

Our weekly loaded truck miles is graph number five.

As you can see in the fourth quarter of 2005, our utilization improved 2.7% or 51miles per year-over-year to 1,944 loaded miles per tractor per week.

This compares to 1,893 miles in 2004.

We also improved by 13 miles per tractor per week compared to Q3, which is more good news.

Historically, we experienced a decline between the peak in Q3 and Q4.

In the quarter, we had an average of 16,679 trucks available for dispatch.

As we discussed in the third quarter conference call, we decreased our operational fleet by approximately 1000 units between the month of June and the month of September.

In the fourth quarter, we held our fleet relatively flat at the September ending level.

This reduction in our fleet size and our network management tools have enabled us to continue to increase our utilization rates, and we intend to continue to use the flexibility we have with our purchases and our trades to manage the size of the fleet going forward based on market conditions.

Next is our deadhead percentage.

We continue to make progress in reducing deadhead.

Our deadhead dropped to 11.6 in the quarter compared to 12.5 last year.

For the year, we decreased 150 basis points following an 80 basis point improvement in 2004.

Slide seven is our revenue per tractor per week, which is more real good news.

The rate utilization and deadhead improvements I just discussed are resulting in steady increases in the overall productivity of our tractors.

Our revenue per tractor per week increased $112 from the third quarter and $215 compared to fourth quarter of 2004 to a record $3,163 for Swift.

This is a 7% increase year-over- year and a 4% increase sequentially.

I will now turn the call over to Glynis to review our financials.

Thank you, Bob.

Beginning on slide nine, our total revenue is up just over 7% in the quarter and 13% for the full year 2005, compared to 2004.

Of this, fuel surcharge revenue is up approximately 72% for the quarter and 106% for the year.

This is driven by the higher fuel costs in 2005, the resulting increase in the DOE fuel index and the change in our fuel surcharge program that occurred late in 2004.

Moving on to slide 10, which shows our net surcharge -- our net revenue excluding fuel surcharge.

Net revenue for the fourth quarter was up less than 1% year-over-year as our improvements in utilization and revenue per loaded mile offset the smaller fleet size and the disposition of the auto haul business that occurred in the second quarter.

Year-to-date, our net revenue was up 6.4% compared to the prior year.

Our average fleet count for the year was basically flat compared to 2004, therefore growth was a result of improvements in utilization, roughly 32%, increases in revenue per loaded mile, roughly 57%, and growth in intermodal, roughly 9%.

Since fuel surcharge is primarily dependent upon the cost of fuel and not specifically related to our non-fuel operation expenses, we believe that using net revenue excluding fuel surcharge is a better measure for analyzing our expenses and operational metrics.

The following slides will summarize our operating results as a percent of net revenue.

On slide 11, looking at our salaries, wages and employee benefits, these expenses declined $12 million in the quarter, compared to the fourth quarter of 2004.

As a percent of net revenue, salaries, wages and employee benefits dropped to 34.1% compared to 36% in the fourth quarter of 2004.

The dollar decline is primarily due to a reduction in overall company miles year-over-year, while the percentage reduction is largely due to increases in revenue per loaded mile exceeding the increases in drivers and non-driver pay.

On a total year basis, salaries, wages and employee benefits increased $37 million.

But as a percent of net revenue, dropped from 36.9% in 2004 to 36% in 2005.

Excluding the stock option expensing we discussed on the third quarter call, our salaries, wages and employee benefits dropped to 35.5% of net revenue.

The details of this calculation are shown on the bottom of slide 11.

Moving on to fuel on slide 12.

For the fourth quarter, fuel expense as a percent of total revenue was 19.8% compared to 17.1% last year, and 20% in the third quarter of 2005.

As we discussed on the call last quarter, we evaluate our company fuel expense net of company fuel surcharge revenue associated with the miles driven by the company trucks.

The table at the bottom of slide 12 walks through these adjustments.

With the adjustments as detailed, our net fuel expense for the fourth quarter of 2005 was 64.9 million or 9.1% of net revenue, this was compared to expenses of percent of net revenue of 10.7% last year.

As a point of comparison, the 9.1% of revenue in the fourth quarter of '05 compares to 11.2% in the third quarter of '05 and to 10.6% in the second quarter of '05.

We therefore had a benefit from fuel in the fourth quarter of 2005, that equates to approximately $0.04 of EPS on a year-over-year basis.

For your information, results in the fourth quarter of 2004 also included an EPS benefit of approximately $0.04.

In both years this benefit, despite increases in the cost per gallon, is related to primarily to the change in our fuel surcharge recovery program, which occurred in the fourth quarter of 2004.

Net fuel cost per gallon increase, we see effects immediately on our P&L.

Many of our fuel surcharge recovery programs are billed based on the diesel fuel index that is a week, month or even a quarter in arrears.

This causes a lag in a fuel surcharge recovery that is a benefit in a declining fuel environment like we experienced in the fourth quarter, but a negative in an increasing fuel environment like the third quarter.

For the year, gross fuel expense increased 330 basis points year-over-year.

On an net basis, we actually decreased 40 basis points from 11.2% of revenue in 2004 to 10.8% in 2005.

This highlights the effectiveness of the change in our fuel surcharge program that was made late in 2004.

On slide 13, we discussed purchased transportation.

The bottom portion of this slide shows the reconciliation to adjust purchased transportation, for owner operator fuel surcharge recovery similar to the adjustments made for company fuel expense.

Excluding the reimbursements for fuel surcharge paid to owner operators, purchased transportation increased 18.1% of revenue in the quarter from 17.4% last year.

This increase in purchased transportation dollars, as well as the percent to net revenue, is primarily a result of the increase in rail costs quarter-over-quarter due to the growth in our intermodal container business.

Our owner operator costs were just up slightly as the increase on our costs per mile was offset by a reduction in miles in the quarter overall.

On slide 14 our rent expense, combined with depreciation and amortization, was 8.9% of net revenue in the quarter, compared to 9.7% last year.

Swift has been replacing leased assets with owned assets for the past couple of years and this conversion explains the reduction primarily that you see as a percentage of revenue.

As you probably noticed in our press release, we have now segregated the gains and losses on the sale of equipment separately on our P&L.

Therefore, the gains and losses are not included in the numbers shown on this slide, as was previously the case in other quarters.

In the fourth quarter of 2005, our loss on those leased and owned assets -- owned equipment trades totaled 571,000, this compares to a loss in the fourth quarter 2004 of 2.1 million due to trades on the [MS] equipment.

Year-to-date, rent depreciation and amortization expense, excluding the impairment charge for the specialized trailers taken in the third quarter of 2005, totaled 9.2% of net revenue down from 10% in 2004.

For the year, we had a net gain on equipment trades of 942,000, compared to a net loss of 2.6 million in 2004.

On slide 15, we walk through insurance and claims expense.

Insurance and claims expense in the quarter was 5.2% of total revenue.

As a percent of net revenue, that equated to 6.2% compared to 3.6% of net revenue in the fourth quarter of 2004.

This increase is primarily related to the fact that Swift did not incur insurance premium expense in 2004 to the increase in our self-insurance deductible in 2005, and to the development of prior-year claims.

Our reserve policy and accrual methodology has not changed throughout the year.

For the year, insurance claims averaged 4.9% of total revenue or 5.6% of net revenue, and we envision that it will remain in that range going forward.

Talking about operating ratio and income on slide 16.

In the fourth quarter, our operating ratio dropped 70 basis points to 91.5% compared to 92.2% in the fourth quarter of 2004.

Operating income of 71.9 million is an increase of 10.6 million or 17% compared to the fourth quarter of 2004.

This improvement in profitability demonstrates the productivity and utilization improvements that occurred in the fourth quarter of '05 on a smaller average fleet size as Bob discussed earlier.

Moving on to slide 17, which discusses income taxes.

Just wanted to highlight a couple of things on income taxes.

Our estimated full-year tax rate that we used in Q1 through Q3 of 2005 was 39%.

In 2005, our full-year tax rate is 38.5%.

This resulted in tax expense in the quarter of roughly 37.6% of revenue.

Thus, we had roughly a $0.01 benefit in the fourth quarter from taxes.

Note, this penny benefit is calculated based on just the comparison to the estimate of 39% used in the prior three quarters.

The tax rate in the fourth quarter of 2004 was 34.2% and was 35.4% for the full year of 2004.

Going forward, we are anticipating a tax rate also in the 39% range.

To briefly answer a question -- a couple of questions that were left on my voicemail.

In other income and expense, included -- what's included in other income and expense is a $1.3 million loss on the investment in Transplace.

Just under $1 million of this was a one-time charge related to a write-off of software, the just under $1 million was Swift's portion of that write off.

That was a primary piece that was included in other income and expense.

In addition, we had an impairment on a receivable for trailers leased in Mexico of $1.5 million, also a one-time event.

Both of these were offset somewhat by a normal rental income that we experienced in the quarter.

I will now open up --oh, sorry.

I'm going to talk about capitalization on the balance sheet.

Forgot about that one.

Our balance sheet remains health, debt to total capital has dropped to 41.1% compared to 45.7% in December, despite increase in the number of owned tractors.

As you will see on slide 18, the percentage of owned tractors increased to 82% in the fourth quarter of 2005 from 74% in the fourth quarter of 2004 as we continue to replace leased assets with owned assets.

Our net CapEx in the quarter was approximately $106 million, bringing year to date CapEx to 387 million.

The vast majority of our expenditures this year, as you can see from the fleet size reduction, have been related to replacement equipment.

With that, we will now open the floor up to questions.

[OPERATOR INSTRUCTIONS]

Your first question comes from Chad Bruso with Morgan Stanley.

Good morning.

Good quarter.

Just wanted to ask you a question on a freight demand.

I mean, clearly it was very strong in the fourth quarter.

We have heard that from most everybody.

But we've gotten some data points from [Warner] yesterday and from some other carriers that maybe January started off a little bit softer on a year-over-year basis.

What do you guys see so far in January?

Well, the [ISI] remains a good barometer for Swift.

The first week was good, the last two were not as good as prior year.

So, just with that said, and you mentioned about paring back the fleet a little bit.

If we should continue to see weaker trends, how willing or how able are you to lower the fleet size further?

We do not anticipate doing that, first of all.

But we have the flexibility with our trade schedule and new trucks coming in to react to the market as it presents itself.

That's great.

Thanks for the time.

Okay, thank you.

Your next question comes from Edward Wolfe with Bear Stearns.

Hi.

Morning, Ed.

Hey.

Good morning.

How're you doing, Bob?

Hi Glynis.

You said that kind of net of auto, haulage yields were about 6%, net of fuel, net of the auto haulage mix change.

Where do you see yields as you look out to '06?

Where do you expect them to be net of fuel?

We still think there is room for increase, similar to what we experienced this year.

We're going to probably give a little bit more light on that in our February meeting.

But I think somewhere similar to what we attained this year is still achievable.

So if I look at what you reported -- and I'm doing this off of the top of my head, but in the 3, 4% rate kind of thing?

I would say somewhere between 4 and 6 probably, ballpark.

Okay.

And when you look out at your costs, again excluding fuel, if you look out at equipment cost, engine cost, driver cost, what's kind of your gut of what your costs are going to be up?

Well, right now we do not have anything scheduled for a driver wage increase.

Our cost increase for equipment won't -- we won't experience probably until 2007.

And as far as the rest of our costs, Ed, we're in the middle of looking at every opportunity we have to improve the rest of our operations and our non-operational costs, and we expect some further reductions there.

So is the driver situation under control as you see it right now?

Or are there higher costs for just maintaining your drivers where you're at?

Or do expect a driver pay increase at some point or at this point, it looks like you're okay for the year?

For now, we're okay.

We are prepared for an increase if that becomes necessary to remain competitive.

Right now, we don't foresee it.

It remains our industry's number one problem.

It's a big issue, and the market continues to be extremely tight.

We are doing a very good job keeping our trucks manned, and would anticipate being able to do so throughout the rest of the year.

And roughly, what percentage of your tractors at the end of '05 are post-October '02 engines that are less efficient?

You know what, I do not have that off of the top of my head.

Our average age tractor, Ed, in our operational fleet is 2.2 years.

I do not have that breakout right now to give you.

Okay, but I'm guessing you're seeing, as you turn over those engines, are those tractors with pre-October '02 engines to new ones, that your fuel mileage and your depreciations working against you a little bit.

Is that fair?

It is, but not significant.

But it's definitely a little higher.

Okay.

Bob, it looks like there's been a lot of progress made or, a little progress made in a lot of areas in terms of if you look at utilization, if you look at deadhead, everything seems to be going the right way.

Yet when you take away the benefit from fuel and you offset the one-time things that worked against you on the tax rate and those kinds of stuff, probably EPS was slightly down year-over-year.

When do expect to really start to see the impact compound?

And if you had to give some guidance for next year-- I'm guessing you're going wait until the conference.

But directionally, do you think this is a year we start to really see that improvement?

Well, I think this quarter is evidence of improvement, and we are going to try to give a little more color to where we are going at the conference on February 9.

And I would think that our goal is to continue with the progress we've made in this quarter.

But I'm guessing kind of flat earnings year-over-year, the be all end all.

Is there some sense of what we should expect in '06?

I think you should expect continued improvement.

Okay, fair enough.

Thanks for the time.

All right.

Thank you, Ed.

Your next question comes from Jordan Alliger with Deutsche Bank.

Hi Jordan.

Hi, how are you?

Good, thanks.

I guess my question is sort of more generic from an industry perspective.

There's been -- one carrier sort of announced wage increases.

But it doesn't seem like a heck of a lot of others are really following suit, and I guess if one of the big issues for the industry is the ability to get drivers, why aren't we seeing more wage increases or why doesn't that seem to be really contemplated right now?

Well, it's definitely contemplated.

I think everybody's -- particularly in the first quarter, which is the toughest quarter for this industry, I think everybody's doing what they can to delay it as long as possible.

But the expectation then would be that we would see a wage increase at some point?

I would think, as a rule from an industry standpoint, if we're going to be able to do something about this driver shortage, it's going to have to come with increased wages.

And then, I know you guys are having your meeting in a few weeks.

But are there some -- you have seen some improvement in these operating metrics.

I'm just wondering if you give sort of a thumbnail sketch of sort of the two or three things that'll help keep some of these expense per mile, for instance on the fuel side -- the wage side, which was good this quarter, point it in a positive direction.

Is it really just sort of controlling the cost with the pared back fleet, or are there some other steps that might be underway to help keep expense per mile in check?

Well, I think we're going to continue to focus on our utilization tools and continue to drive operational efficiencies in our miles.

We still would like to think there's some opportunity to continue to reduce our deadhead percentage.

And we have a huge focus on increasing our rates.

Thank you.

Yes sir.

Your next question comes from Ken Hoexter with Merrill Lynch.

Good morning, Ken.

Good morning.

Nice operational turnaround, as you noted.

Just a couple of questions on that.

Can you talk about where there is more room for utilization?

I mean, you talked a bit about the software, to go back --I mean, how much is this negotiating with customers?

Is this just starting?

Are we seeing kind of phase one of something that's going to take three years to kind of go back and negotiate some of these lanes, or is this something we can easily see over the next few quarters?

And then secondly, on a similar subject, can you just talk about your CapEx trends, especially as we enter the '07 engine emissions next year.

What is your purchasing cycle looking toward 2006?

On the utilization front, Ken, first of all, we believe that there's -- we don't have one customer that has all good freight or one customer that has all bad freight.

The tools that we have allow us to identify on a lane by lane basis, so it's opportunities for improvement.

Some of those are improvement in rates.

Some of those are improvement in delivery times and some scheduling issues and some other operational things.

But we're going to continue to work with our customers and with our sales force on finding those lanes that have the best fit in our system.

We have discussed before the elements that go into measuring that -- utilization tools, their velocity rate, balance and seasonality.

And those four issues that help drive those decisions for us.

And it's an ongoing process, but you've seen evidence of progress in this quarter we are just reporting on today.

And we anticipate continued progress going forward.

Our sales and operational folks are all incentified to help bring those results about.

Our sales force has substantial incentives based on increasing revenue per mile and our operational folks, both our driver managers and our terminal managers, have bonuses that are based on operational efficiencies.

As far as our equipment purchases, we expect to bring in 3,000 Volvos in 2006 and we have 3,000 in 2007.

The first '07 engine that we will have to take in our system won't be until about May of 2007.

Okay.

And just finally, if I can.

I don't know if this is the right forum, but I'd say the most heavily pushed back question we get is the potential for Jerry Moyes to either increase his ownership and I guess change the structure of the board or [do] some sort of board proxy [fight].

Can you just give me the process or timing on the board elections and how long a process like that would take?

I guess I'm just trying to understand the potential for something like that to occur in the midst of this operational turnaround.

If Jerry was of the mindset to put up his own election of board of directors, he has to notify the company on or before January 26, according to our bylaws, which is the Thursday of this week.

Jerry has been a friend and a mentor of mine for 25 years.

His Swift stock is, since the day he resigned, is up with this morning's opening price, his personal net worth is up over $200 million.

And I'd like to think that he's got a smile on his face this morning.

Great.

I appreciate that.

Thank you very much, guys.

Thanks Ken.

Your next question is from Jon Langenfeld with Robert W. Baird & Company.

Hey John.

Good morning.

I guess first on the fleet count, Bob, roughly consistent with last quarter, down maybe 2 or 3% I guess at the end of the quarter.

Is that basically what you expected, looking back when you were in October?

Yes, I'd say that's the case.

And so, kind of balancing that with your customer demands, are there any customers-- not that you need to name them, just wondering are there any customers you had to back away from in a larger way than others?

Or is it more or less distributed throughout your top 100 or 200 customers?

Well, there were certainly some customers who we had a pretty significant backing away from.

I would say there wasn't anybody that we totally walked away from.

There were individual distribution centers that we ended up walking away from [was some of the] customers.

But overall, it's like I said.

We don't have one customer that has all bad freight or one customer that has all good freight.

It's a matter of finding the best fits within our operating system.

And we have the ability to, when times are good, to divert the other business into our brokerage operation.

Okay.

Yes, I mean, that makes sense.

And it looks from the decisions you are making, with 17% year-over-year earnings growth, operating profit growth that's taking hold.

Do you get any pushback from the customers?

Are these conversation getting easier to have with the customers?

Because when we look at the rate growth, obviously that's been a tremendous success this year.

When you walk in as a sales professional and you can talk specifically lengths with a customer and why they work with you and what they don't, and some operational changes that they perhaps could make that would make it better freight for us, they like having those discussions.

We have good customer relationships and we have good customers who want partnerships and they want us to be successful, they want us to be there in the long haul, they want us to be able to flex with them during their peak periods.

And so, I'd say those discussions are positive and healthy with those customers.

And from a pricing perspective, obviously you have the external market, which is going to drive price increases.

And then you have your book of business, which may, I'm certain is going to be priced below where it needs to be priced.

I assuming both of those are a combination of where you get to the 4 to 6% growth in '06 on the rate side?

That's exactly right.

Okay.

And then two other things, first on fuel.

Obviously, various ways to look at the benefit.

But did you benefit on any of your bases from better surcharge recovery verses just the falling fuel prices from the third quarter?

I would say the answer to that is yes, we did.

Okay.

So the initiatives last year weren't fully in place in the fourth quarter?

That is correct.

Okay, good.

And then lastly, on the CapEx side.

Any outlook there for '06, what your net CapEx may be?

No, I think that going forward in our K, we'll actually give some more full disclosure about what that's going to be --

Okay.

...going forward.

But we're not accelerating any purchases going forward.

We're not growing the fleet significantly.

So Bob mentioned that we're buying 3,000 in '06.

We're probably going to be selling close to that.

Got it.

All right, very good.

Thanks for the time.

Thank you.

Your next question comes from Tom Wadewitz with JP Morgan.

Hi Tom.

Yes, good morning, Bob.

Good morning, Glynis.

I've got I guess two different questions here for you.

The first one, if we look at comp and benefits on an absolute basis, clearly the tractor fleet was down.

So that's, in effect a benefit.

And I'm wondering, as you look at comp and benefits in '06, do you think it can be down meaningfully in absolute terms?

And do you think perhaps that process can accelerate as maybe you get more momentum on overhead cost reduction, as well as reducing the fleet size?

I think you should come to the conference on February 9 for the answer to that question.

That's a plug.

Do you want to foreshadow anything?

I think that we do have some reduction related to just the absolute lower level of miles that you see in the absolute dollar amounts when you look at that $12 million dollar reduction quarter-over-quarter.

Part of that is related to a reduction in miles driven by drivers and part of it is related to a couple of other initiatives that we have going on.

So some of that will [inaudible-technical difficulty] going forward in 2006.

Okay.

So it sounds like -- it sounds like there's still an opportunity for that cost to be down next year on comp and benefits.

One other question for you.

On the impact of fuel on margins.

Would you expect a favorable benefit from fuel -- net fuel on the margin side in 2006, or, do you think that that was really an '05 event and there's less room for benefit from improved fuel surcharge coverage in '06?

[Inaudible-technical difficulty] flat year-over-year.

We had [Inaudible-technical difficulty]

Okay.

Thank you for the time.

The next question comes from David Ross with Stifel Nicolaus.

Morning David.

Morning.

Just real quick, the losses you've seen on [inaudible].

Do you expect that to continue going forward?

I'm sorry, David.

Repeat the question for us.

Sorry, I'm a little hoarse.

The losses on sale of the lease trades and tractor trades, do you expect those to continue going forward?

I think we have a loss in the fourth quarter and we have a net gain of just under $1 million for the full year, so I'd say that we anticipate being somewhat neutral on gains or losses going forward.

Okay, and then in the past, we'd always looked at the western operations, the [inaudible] and the eastern operation, the old [MS], as having an operating ratio gap.

And I know, Bob, when you came in, you looked at overhauling the network and really kind of getting rid of that gap.

What are you seeing there?

And I guess, what strides are you making in terms of just improving the overall network other than the systems you were talking about earlier with the [links]?

David, I would say that the improvements are system-wide.

We divided the country up into three regions in east, central and west, and we're seeing the improvements that we've shown here in fourth quarter across the board in all three regions.

Okay.

So the network is really being managed more as one network and I guess rates are coming in line?

So maybe even the upper ratios in the east would be better than the west, would that be fair to say?

You know what, we're not disclosing any difference there.

I would just tell you that there's improvements across the board.

Okay.

Thank you, very much.

Thanks David.

Your next question comes from Tom Albrecht with Stephens Inc.

Hey Tom, good morning.

Hey, Bob and Glynis, good morning as well.

A few things, let me start off with the housekeeping questions.

I did not see or hear a discussion of the fourth quarter average length of haul, and if you have the year ago figures, as well, that would be great.

We are at approximately 541 and I think it was 539, pretty close to that.

Very little difference.

On a go-forward basis, Tom, I would tell you that we expect it to remain relatively flat as we increase our intermodal operation with our [Dray] and some of our dedicated operation that's possibly even decreasing a little it as a result of that.

Okay.

And I know you've pointed out the impact that the auto haul had on the year-ago rates.

But would it be fair to assume that some of the decline in the deadhead performance would also be the removal of auto hauls?

I believe that had a hefty empty mile percentage.

That would be a fair assessment.

I would tell you this, our deadhead in Q4 of 2004, ex auto haul, was 12%.

And our Q4 2005 was 11.6%.

All right.

Okay.

That is helpful.

Let me give you some actuals on your loaded miles per trip.

Q4 of 2005 was 528.15.

That compares to Q4 2004 of 525.49.

Good, thank you.

And then, what about turnover?

That had been a slide you've been showing a lot of these conference calls.

Is that something you're saving for February 9 or, could you at least give us the fourth quarter annualized driver turnover?

It was up over 2005.

I would tell you that as of today, we are still under 100 percent.

But 2005 was definitely higher than 2004.

All right.

And then, I think that's probably -- let me just put it this way.

On the whole fuel discussion that you've had, if you were to generally remain flat for the next couple of quarters, which is a big assumption in the world we seem to live in anymore, but would fuel continue to be a modest benefit to earnings or should it be closer to a neutral or even still maybe a slight negative on earnings?

I would say it would be neutral.

Okay.

In the whole movement to get fuel to more of a one for five increment, how far along would you describe the Swift organization?

Are you half of your accounts or revenue base on a one for five?

Or substantially more?

I would say we're substantially complete with that project.

All right.

That's all I had.

Thank you, very much.

Thank you very much, Tom.

Okay.

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

Hey, good morning, guys.

Hi John.

You said you had received -- I didn't catch the number of retainers you had received.

Could you give me that number again?

And also, is that the containers coming in solely from BN or, are you sourcing containers from elsewhere as well?

Both.

We have received 1500 new Jindo boxes that we bought.

All 1500 of those are in.

On the BN units, we've accepted approximately 900 units so far.

That transition's going well.

The inspection process has been taking a little bit longer than what we had wanted, but we expect to have all of those in our system here by second quarter.

How many more do they owe you?

The total of 3,800.

Total 3,800.

So at that point, your fleet will be about 5,300 units total?

We'll have 5,300, 53 foot containers.

Yes, sir.

All right.

And where do think that number is at the end of '06?

Right now, probably not a whole lot of difference in that.

We're going to get those -- it'll be mid-year before we get those in and utilized.

And our goal is to keep them turning and we do expect to add some additional containers probably in 2007.

Can you give me just an idea, now that you are ramping up intermodal and you're ramping up dedicated a little bit more aggressively, can you give me just a kind of a revenue breakdown of what the company looks like right now or is that something you're saving for the 9th?

To be honest with you, we probably --we won't be breaking that out on the 9th.

We will anticipate, as it gets larger, doing that in 2007.

But we don't break that our right now.

Okay, all right.

No breakout now.

Okay.

And then lastly, on the loss associated with Transplace, at some point have you guys talked about, has the group as a whole, I mean, all of the initial investors in Transplace, I mean, it just seems like this thing is kind of bleeding everybody a little bit, a little bit, a little bit every quarter.

It's $1 million here, $0.5 million next quarter.

At some point, have you guys thought about just pulling the rip cord and -- or taking the full write-down and being done with this?

Or should we expect these kind of losses kind of on a quarterly basis to continue for some time?

I think the normal run rate of losses from Transplace has been in around the $300 to $400 per quarter range -- 300,000 to $400,000 per quarter range.

The loss in the fourth quarter was a little bit exceptional because of our portion of that software write-down that they did.

The $300,000 to $400,000 in '05 per quarter is down from -- a little bit from where we were in '04 and down from where we were in '03.

So, they're trending in the right direction.

But we are always evaluating ways to improve our earnings, so that would be on our radar screen.

Okay, so that's the run rate.

You think the run rate it is still-- we won't see a lot of discrepancy from the run rate in '06?

Correct.

Excluding the write-down.

Okay, excluding the write-down.

Okay.

All right.

Look forward to seeing you on the 9th.

Thanks.

Thank you.

Appreciate it.

The next question is from Justin Yagerman with Wachovia Securities.

Hey, good morning guys.

Most of my questions are asked and answered, but I still got a few remaining.

With the assumption of 2,900 more containers from BN, what's lease expense going to look like as a percent of revenue going forward in '06?

I don't actually have that number off the top of my head.

So, I'll give you a call you back with that.

It's still -- lease expense as a percentage of revenue is still going to be declining because the BN trailers are a drop in the bucket, relative to the tractor leases that are going to be rolling off and probably replaced with owned.

We haven't made those final decisions yet.

We'll make a decision on leasing versus ownership based on the economics at the time.

What approximately does it cost to lease a container?

Just to give us a general ballpark idea?

And how is that contract set up and how long is that contract for?

We are assuming that BN leases.

I understand that.

So how long do those contracts last for?

They vary anywhere from two to four and a half years at this stage.

And who are those contracts actually with?

Various third-party lessors.

The normal ones that you'd expect.

Okay.

As we look forward in '06, are you guys targeting any debt paydown, and if so, what is your goal?

We do anticipate that we would be paying down some debt in 2006.

I am not sure that we have a goal in mind yet with regard to that.

But somewhere below the 41% that we're at right now and somewhere above 30.

Of your outstanding debt, what would be your first priority to pay down?

The most expensive one.

And you have the ability to do that under the covenance without penalty?

Yes, we do.

And then I guess finally, just looking at the different operating units that you guys do have outside of regular drive-in, a lot of competitors have talked about dedicated as a way of offset driver issues right now and try to make lifestyle better.

Where are you guys in terms of the percentage of your fleet that's dedicated, and what are your thoughts on that going forward for the next year or so?

Justin, we don't break that out.

But I would tell you, it is an area of focus.

It's the one area, in addition to intermodal, that we are striving to grow in for 2006.

We have a group of dedicated sales professionals that work with the rest of our sales force in helping bring those opportunities about.

We would like to grow in the dedicated arena.

And I guess finally, with Transplace and the non-compete no longer being an issue, are you guys looking to get into brokerage in a bigger way?

I know some of your competitors have expressed some interest and have been growing that business pretty fairly.

We had a good brokerage operation prior to Transplace, and we've got those folks re-engaged on a limited basis.

But we are slowly growing hat division back up again.

So, it's pretty insignificant right now or, is it something that you want to grow to be significant?

What are your thoughts on that?

It is insignificant right now.

There's areas of opportunity to increase it.

And we're going to throw the assets at that to make that happen.

Okay.

Hey, I appreciate it very much, and look forward to seeing you guys.

Thanks Justin.

Appreciate it.

You have a follow- up question from Ed Wolfe with Bear Stearns.

No, my question was asked and answered.

Thank you, very much.

Your next question comes from Michael Lewittes with JL Advisors.

Good morning.

Just to follow up on Ken's question.

Have you had contact with Jerry and what's the dialogue been?

[Inaudible-technical difficulty]

Okay, thanks.

Your next question comes from Sano Hasiotis with Carlson Capital.

Yes, I do not know if you guys covered this, but just sort of looking at your company big picture.

Do expect your operating ratio to be better, worse or the same in '06?

Generally?

Generally better.

Okay.

Will we get some sort of clarity on the magnitude of that at the February analyst meeting?

Yes, sir.

You will get more clarity.

Okay.

Thank you.

You bet.

[OPERATOR INSTRUCTIONS]

You have a follow-up question from the line of Ed Wolfe.

Yes, I'm sorry.

You answered the question about your contact with Jerry, and it was modulated.

It was very hard, at least for us, to hear it.

Could you just repeat the answer?

Oh, we had an echo there.

I talk to Jerry every week, Ed.

I don't know what his intentions are at this stage of the game.

I think Jerry wants Swift to do well, obviously, and so far, his stock is up a couple of hundred million dollars.

Is there any price where you and/or the board support a takeover of the company?

No, there has been absolutely no talk of that whatsoever, or even any discussion at this point.

Okay, but with Jerry or anybody else -- is there --what is your view of the longer term what the stock should be appreciating versus where it is right now?

I don't have any view on that, Ed.

Okay, because that also begs the question about how aggressive you should be about share repurchases.

Is there any plan that you're going to talk about at the conference about share repurchasing over the longer run?

There are no share repurchases anticipated at this particular time, other than for the stock options.

Okay.

Thanks again.

You bet.

And at this time, there are no further questions.

All right.

Thanks everybody, for your support of the industry, and thanks for your support of Swift Transportation.

Have a good day.

Thank you, for joining today's conference call.

You may now disconnect.