Knight-Swift Transportation Holdings Inc (KNX) 2011 Q1 法說會逐字稿

Good afternoon.

My name is Genesia and I will be your conference operator today.

At this time, I would like to welcome everyone to the Swift Transportation Company first quarter 2011 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 session.

(Operator Instructions) At this time, I would like to turn the call over to Jason Bates, Vice President of finance and Investor Relations officer.

Thank you, sir.

You may begin your conference.

Thank you, Genesia.

And we would like to welcome everyone out today.

Just as a matter of housekeeping, we wanted to let everyone know that the conference call slides are posted on our Investor Relations Web site.

You can go ahead and click on the web cast.

It is on the front of our IR site and then you will find the PDF version of the slides attached therein.

If you haven't done so, we would encourage you to go out and grab that.

We will start today with the forward-looking statement disclosure which is on page two of the slides, if you would like to follow along.

This presentation, including documents which are incorporated by reference and accompanying comments, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements include, but are not limited to, anticipates, believes, estimates, plans, projects, expects, intends, will, could, may, optimism for strengthening demand, or similar expressions which speak only as of the date of the statement was made.

Such forward-looking statements are inherently uncertain, are based upon the current beliefs, assumptions and expectations of company management, and current market conditions which are subject to significant risks and uncertainties as set forth in the risk factors section of our 10-K.

You should understand that many important facts, in addition to those listed above, and in our filings with the SEC could impact us financially.

As a result of these and other factors, actual results may differ from those set forth in the forward-looking statements, and the prices of the company's securities may fluctuate dramatically.

The company makes no commitment and disclaims any duty to update or revise any forward-looking statements to reflect future events, new information, or changes in these expectations.

The presentation also includes certain non-GAAP financial measures as defined by the SEC.

To comply with SEC rules, we have provided a reconciliation of these non-GAAP measures.

So, with that, on the call today, we have Jerry Moyes, our Chief Executive Officer, Richard Stocking, our President and Chief Operating Officer, as well as Ginnie Henkels our Executive Vice President and Chief Financial Officer.

Richard will start the call with an overview of the quarter.

Summarizing some of our key statistics and their historical trends.

At that point, he will turn it over to Ginnie who will provide the financial overview and summarizing the first quarter results.

Jerry will finish up the prepared portion of our call with a summary, at which time we will open the line with a brief question-and-answer session.

With that, I will turn it over to Richard.

Thank you, Jason.

And hello, everyone.

As we noted in our press release last month and as you've seen from each of our competitors who have released, Q1 presented a few unexpected challenges.

The first was the unusually difficult weather in January and February which impeded our ability to utilize our equipment as efficiently as we had planned.

Despite this, our trucking volumes were up 5.9% year-over-year.

We were encouraged by the strengthening volumes during the month of March, and saw that trend continue throughout April.

This general increase in volume combined with various shippers reiterating concerns over capacity availability leaves us feeling good about the upcoming quarters.

As many of our competitors have reported, we experienced inconsistent freight trends in the quarter.

The West Coast was unusually soft.

However, the East Coast and parts of the midwest were very strong, which helped offset some of the weakness we felt out in the west.

In addition to weather, the cost of fuel rose dramatically throughout the first quarter, reminiscent of Q1 of 2008.

While we do not have -- while we do have fuel surcharge programs which largely insulate us from high fuel prices, they do have a lag effect which squeezes margins while prices are rising.

Unlike the fuel trends, we are excited by the rate trends we have been experiencing.

As mentioned in our press release, we have experienced year-over-year increases in our trucking revenue per loaded mile, excluding fuel, by about 4%.

This improvement in rates has enabled us to overcome the negatives from fuel and weather and improve our adjusted OR by 330 basis points year-over-year, to a 92.5%.

I am pleased to report that in addition to the 25 carrier of the year awards we received in 2010, we have already received seven additional awards in the first quarter of 2011.

This customer appreciation or recognition has enabled us to deepen our relationships with our customers, and provide additional service offerings to them, which helps us to increase our overall value in the relationship.

Some of the awards have come from customers like Kraft, Dollar Tree, Church and Dwight, Lowe's, Sam's Club, Walmart, as well as an Intermodal Carrier of the Year, as well from Church and Dwight.

In addition to our Carrier of the Year awards, we have obtained many significant new business and customer wins in the quarter.

As we continue to focus our attention towards the improvements and growth of our intermodal business, we added 238 containers to our fleet in the first quarter for a total of 5,080.

We see an ongoing customer need for intermodal services, and we will continue to add containers throughout the year, with an expected year-end count of 6,740.

All of us here at Swift have an ongoing focus on the federal motor carrier safety administration, CSA 2010 initiatives.

We're pleased that our leadership team's efforts continue to ensure that we are in compliance with the seven core behavior areas of CSA 2010.

And we believe that this is important for continued growth and success.

And finally, we are making great progress on our electronic onboard recording project.

As mentioned previously, we are installing approximately 1,000 of these new Qualcomm units per month.

These new units are equipped with the new technology.

And we hope to have the project completed by the end of Q4 of 2011, or Q1 of 2012.

To date, we have several hundred drivers who have transitioned fully to the new electronic logs.

If you will turn with me to slide five, we will go through some of the key revenue trends for the quarter.

We will start by reviewing our total and net revenue trends represented in the graph on the upper portion of this slide.

Net revenue is defined as total revenue, less fuel surcharge revenue.

As you can see, both revenue categories have generally trended upward in the first quarter, from the same quarter in 2010 and 2009.

More specifically, total and net revenue increased in the first quarter of 2011 by 15.9%, and 9.7% respectively, with the difference being attributed to the rising fuel surcharge revenues.

On the bottom half of this slide, we show our trucking revenue and other revenue trends.

Our trucking revenue trend has improved 10.2% over the first quarter in 2010, and the other revenue improved 6.2% during the same period.

Due to the softness in the west, we elected to move more than 1,000 intermodal loads over the road.

If you add that back to the other revenue, we would have seen a 10% year-over-year improvement.

As a reminder, other revenue includes our intermodal, and brokerage lines of business, as well as revenue received from our shop facilities, and lease revenue from our owner-operators.

On the upper half of slide six, we will go over two key statistics for our business.

The first is weekly trucking revenue per tractor.

This represents how efficiently we are utilizing our equipment.

Otherwise, our loaded utilization.

In conjunction with the rate increases we negotiate with our customers.

This statistic has performed similar to other revenue trends previously discussed.

The key components to this statistics are loaded miles, rate per loaded mile and our operational fleet count.

Right now, I will go over the trends for each of these categories for the periods outlined above.

I will start with loaded miles.

From 2009 to 2011, the average year-over-year percentage change realized has been minus 16.3% in 2009, 0.6% in 2010, and a positive 5.9% in 2011.

For rate per loaded mile, excluding fuel surcharges for the same period 2009 to 2011, the average year-over-year percentage change realized has been 0.7% in 2009, minus 1.7% in 2010, and a positive 4.1% in 2011.

We will go over the operating fleet on the next slide.

The second metric represented in the upper right-hand corner of the slide is the deadhead percentage.

This is a measure of the uncompensated miles we run.

Generally associated with moving tractors to pick up loads.

As you can see, this has been an area of focus for us, over the last two years.

While we are encouraged, we are able to achieve 10 basis points improvements in 2011, on top of the 140 basis points improvement in 2010.

We feel we still have opportunity for improvement here.

January and February, were impacted by weather, but we were able to overcome this with better than planned performance in March and the trend is continuing in April, and I would add that we count our deadhead differently than some of our competitors.

Meaning on our dedicated lines of business, if we are paid round trip and we are coming back empty, we count that as empty miles so that our sales has an opportunity to sell towards -- or to sell and profit share with the customer.

And fill those empty miles.

The bottom half of the slide six shows our adjusted operating ratio and adjusted EBITDA trends.

I believe the trends here speak for themselves and are a result of a lot of hard work and discipline over the past few years which we shared with you in the fourth quarter conference call.

This represents a culmination of the belief and the effort of the entire organization and I'm pleased to report that our favorable year-over-year operating ratio trend continues.

From the first quarter of 2009 to the first quarter of 2011, we have been able to realize a 530 basis points improvement.

As you can see in the bottom right-hand corner of the slide, the adjusted EBITDA trend follows a similar pattern.

With our first quarter of 2011 coming in at $104.7 million, up 13.9% from the first quarter of 2010.

These results are strongly correlated with the new Swift way and a culture that fosters teamwork, leadership, and continuous improvement.

As I mentioned last quarter, our goal is to achieve sustained superior performance.

We have come a long way, but relative to our potential we believe we have a lot of room to continue to improve, and that is exciting and motivating to each of us here at Swift.

Finally, on slide seven, we show our tractor count trends.

The top graph shows our total operational trend and the bottom graph shows the owner-operator trend.

As you can see, our total operating fleet has been increasing very slowly over the past four quarters, generally around 1% each quarter.

Our owner-operator division shows continual growth as well with slightly less growth in the fourth and first quarters when compared to the second and third quarters.

This is a trend we have seen in the years past and hope to see continued growth over the next several quarters.

In general, we will try to manage the growth of our fleet over the coming quarters so that, where appropriate, we can take advantage of the supply potential -- upcoming supply and demand imbalance and we have that flexibility to do so that.

And with that I will turn the call over to Ginnie to review our numbers.

Thanks, Richard.

And hello, everyone.

Before we move into the detail, we want to point out a change in the press release process for the quarter.

At the recommendation of our board of directors, we have streamlined the press release itself to include only the highlights for the quarter.

Then we are including in the 8-K filed subsequent to the release supplemental information that includes the balance sheet, cash flow, and operating statistics.

This will be our standard process going forward to ensure the highlights are not overcome by the details and reconciliations.

Unfortunately, due to some issues at the printer, the 8-K did not post on the SEC site until this morning.

So we apologize for that.

And we will work through these kinks to ensure these are more timely in the future.

Moving to slide nine, I will start with the P&L.

The left portion of the slide nine shows the GAAP reported results for operating income and the right side shows our results adjusted for certain non-operational items.

We did not have any adjustments in the first quarter of 2011.

The adjustments for 2010 as shown in the 8-K and the appendix to this presentation are $7.4 million of depreciation associated with the change in useful lives and salvage values of approximately 7,000 trailers in 2010, and $1.3 million of impairment related to trailers identified to be scrapped in 2010.

Our operating income in the first quarter of 2011 was $46.7 million, an increase of over 100% from $23.2 million in 2010 on a GAAP basis.

On an adjusted basis, our operating income grew by $14.9 million, or 46.7%.

This improvement was driven by the volume and pricing increases Richard just discussed, which were partially offset by increases in fuel and equipment maintenance.

I will talk about many of the cost items in more detail on the following slides, but wanted to take a moment here to discuss the gain on sale of equipment.

In the quarter, we realized a gain of $2.3 million.

$600,000 was related to the sale of a small property in Laredo, Texas that was in assets held for sale and approximately $1 million is associated with the sale of used equipment to owner-operators.

Going forward, we expect gains on the disposal of equipment to be minimal.

Slide 10 reconciles operating income to net income and diluted EPS to adjusted EPS.

I'm going to focus here on the adjusted EPS calculation.

This is a metric we introduced in our 10-K to produce an EPS number that is more comparable to our peers and a better representation of our operational results.

To reduce the complexities regarding the tax impact of certain adjustments, we begin this calculation with our income before taxes, add back certain items, tax effect the results at a normalized 39% tax rate, and divide by the diluted share count.

For the first quarter of 2011, we only have two adjustments which we discussed during the IPO and on the call in January.

These are $4.4 million of amortization expense associated with the customer relationship intangible asset that was established during the going private transaction in 2007 and $4.7 million of amortization for unrealized losses on the interest rate swaps we terminated in December as part of the concurring transactions.

As we discussed, and as also included in the appendix, the full-year impact for these items will be $17.1 million for the customer relationship intangible and $15.1 million for the swaps.

The net result is an adjusted EPS of $0.064 cents in the first quarter of 2011, compared to the range of $0.05 to $0.08 that we gave in our pre-release on March 29.

The diluted share count used in our EPS calculations are shown on slide 11.

As a brief review, Jerry and his family owned 60.1 million shares prior to the IPO.

73.3 million shares were issued during the IPO.

An additional 6,050,000 shares as part of the over-allotment option effective January 20 of these years -- of this year, so these are included based on average days outstanding.

In addition for diluted share purposes the employee stock options are included on a net basis according to the treasury method.

This brings us to an average diluted share count for the quarter of 138.9 million.

Moving on to operational expenses, slide 12 highlights some of our cost categories and shows each as a percent of net revenue which excludes fuel surcharge revenue.

Fuel surcharge revenue is primarily dependent on the cost of fuel and not specifically related to our non fuel operational expenses.

Therefore, we believe that using net revenue which excludes fuel surcharge revenue is a better measure for analyzing our expenses and operating metrics.

This calculation is shown on the top of the slide.

Salaries, wages and employee benefits have increased $17.7 million to $195.5 million in the first quarter but are relatively flat as a percent of net revenue.

The dollar increase was a result of a 6.9% increase in miles driven by company drivers, $2.4 million of FAS 123 stock compensation expense which we did not have in 2010, and an increase in the administrative staff to support the growing business.

Operating supplies and expenses increased $9.3 million, or 19.4% in the quarter.

Maintenance expense increased approximately $6 million due to the increases in the number of miles driven, on-road expenses associated with the weather, and the age of our fleet.

The driver recruiting expenses were up about a million year-over-year as we expected.

Insurance and claims expense grew $2.5 million in the quarter to $22.7 million.

This was a little better than we had expected due to the improvement we had in the quarter on prior year layers.

Fuel expense for the quarter as shown on slide 13 was $150.3 million, or an increase of over 19.8% from the first quarter of 2010.

We collect fuel surcharge revenue from our customers to help mitigate the increases in fuel expense.

We pass a portion of our fuel surcharge revenue onto our owner-operators and other third parties such as the rails who also have to pay for fuel.

To evaluate the effectiveness of our fuel surcharges, we deduct the portion we pay to third parties, and then subtract the remaining company-related fuel surcharge revenue from our fuel expense.

The resulting net fuel expense as shown on the slide was $63.2 million, in the fourth quarter -- or in the first quarter, or 10.2% of net revenue, in the quarter, compared to $50.1 million, or 8.9% last year.

The increase resulted from growth in miles driven by company trucks, and the increase in fuel prices during the quarter.

The DOE diesel fuel index which is set each week based on retail prices at various truck stops around the country is the basis for our fuel surcharges.

And it increased 26.4% on average compared to the first quarter of 2010.

As we've discussed, in periods of rising prices, we are negatively impacted due to the structural lag in billing fuel surcharges.

Meaning we bill based on the DOE average for the current week or prior week, but we pay current prices on a daily basis.

The impact of this lag and the degradation of the spread between our costs an the DOE index was approximately $0.03 to $0.04 of EPS in the first quarter.

We have not hedged fuel historically, because we have not found a hedging solution that actually reduces our overall risk due to the fuel surcharge program we have.

We continue to evaluate different alternatives, but believe an effective fuel surcharge program such as ours, management of deadhead, and a fuel efficient fleet is the best hedge for increasing fuel costs in our business.

Purchase transportation expense for the quarter is summarized on slide 14.

Purchase transportation includes payments made to owner-operators, railroads, and other third parties we use for intermodal drayage and other brokered business.

This expense increased $18.3 million to $194 million in the quarter.

A portion of the payments made to our partners is for fuel reimbursement.

Excluding fuel surcharge revenue reimbursed to our third parties, our purchase transportation was relatively flat in the quarter, but decreased as a percent of net revenue from 25.2% to 23.1%.

This is a result of a reduction in the average cost per mile of our purchase transportation due to mix primarily, and a decrease in the percent of miles driven by owner-operators in the first quarter.

Due to fluctuations in the amount of tractors leased to versus owned, we grouped rent expense and depreciation expense together for analytical purposes.

This is shown on slide 15.

Note that 2010 numbers shown here have been adjusted for the additional depreciation associated with the change in trailer lives I previously discussed.

Combined rent and depreciation expense in 2011 decreased $3.2 million, to $68.3 million, or from 12.6% of net revenue, to 11%.

This reduction is primarily due to three factors; the reduction in the number of trucks leased or owned by company, the ongoing reduction in trailer depreciation due to change in the line and the increase in revenue without a corresponding increase in the number of assets.

Slide 16 summarizes our balance sheet.

The major changes here include our accounts receivable balance which is driven by the increase in March volume, and fuel prices driving fuel surcharge revenue up.

The reduction in debt and capital leases resulted from the $60 million prepayment made on the term loan, with the proceeds from the greenshoe, and $20 million of capital lease and other debt payments.

The borrowings on the AR securitization were reduced by $36 million in the quarter, and the increase and other liabilities is primarily related to accrued interest expense which was relatively minimal at the end of the year.

A reconciliation of our cash and liquidity is shown on slide 17.

Our total liquidity, including restricted cash, increased to $397.4 million at the end of March, compared to $381.4 million at the end of 2010.

We have unrestricted cash of $21.5 million, and $234.8 million available on our revolving credit facility after taking into account the $165 million reserve for letters of credit.

In addition, we have $56 million available on our AR facility, and restricted cash used for their payment of claims of $85 million for a healthy total of approximately $398 million.

Slide 18 summarizes our cash flow and capital expenditures for the quarter.

Our cash flow from operations increased to $59.9 million in the quarter, compared to $15.1 million last year.

Net CapEx increased to $33.7 million, compared to $12.5 million last year, but our increase in restricted cash was only $0.5 million in the quarter, compared to $24 million last year.

As you may recall, in the first quarter of 2010, we changed our insurance strategy and began insuring our first million dollars of liability through our captive insurance companies.

This required us to cash collateralize the risk retained by these companies, thus increasing our restricted cash last year.

Total cash used in investing activities was $31.5 million this year, compared to $35.1 million last year.

In the financing section, you will see the proceeds from the exercise of the over-allotment option of $63 million, offset by the repayment on the term loan and the capital leases I just discussed, of a combined $81.8 million.

And the reduction in our AR facility of $35.5 million, resulting in net cash used in financing activities of $54.3 million, compared to $8.5 million last year.

Capital expenditures and growth investment in equipment and facilities are shown on the bottom of slide 18.

Net cash capital expenditures were $33.7 million, as I mentioned.

This includes $5.9 million of proceeds from the sale of equipment.

Therefore, growth cash capital expenditures were $39.5 million in the quarter.

Only $700,000 of equipment was leased in the period, for a total growth investment of $40.2 million.

The majority of this investment in the period was for trailers, as many of our tractor orders were delayed by the manufacturers.

At this point, we expect our net cash capital expenditures to be in the range we discussed of $250 million to $270 million for the year, but this will depend on how much is leased throughout the year.

Due to the delay, in the first quarter for tractors and the timing of our equipment slots, we expect that Q2 will be our heaviest volume for new truck deliveries.

Before I turn the call over to Jerry for a brief summary, I want to touch on one additional item.

As many of you were aware, we launched an amendment to our term loan in early March.

The goal was to re-price the facility and make a few other changes.

Shortly after the launch, we closed our books for February and realized we were likely going to be below consensus estimates for the quarter due to fuel and weather.

Not wanting to complete the amendment before issuing an earnings warning, we decided to pull the amendment until the market was fully aware of this information.

We continued to monitor the situation and when it became clear fuel was not going to retract in the quarter, we issued the pre-release on March 29.

We will continue to monitor the markets and our performance and if the opportunity presents itself, we will address the proposed changes in the amendment again at that time.

With that, I will turn the call over to Jerry.

All right.

Thank you, Ginnie.

In summary, as Richard and Ginnie have addressed, we are encouraged by some of our recent industry trends.

We experienced year-over-year improvement in volumes and believe we will continue to see the demand improve over the coming months in preparation for what should be a strong peak season.

In addition to the demand picking up, the capacity seems to be tighter than ever.

Shippers are continually contacting us, citing concerns over capacity availability, and many of them are looking to secure that capacity now, before it becomes an issue.

As a result of these two items, as would be expected, rates are improving.

We experienced over 4% improvement year-over-year, and hope to see these positive trends continue throughout the year.

In addition to some of the positive trends, I'm happy about some of the trends we have seen here at Swift.

As many of you know, our customer service has been one of our main focus areas.

I'm pleased to see that our customer appreciates the emphasis our team has placed in this responsibility by adding -- by awarding us seven Carrier of the Year awards in the first quarter.

This is in addition to the 25 that we received last year.

I believe this focus on customer service has also played a role in many of the new business awards that we have received, which Richard shared with us previously.

I will spend a couple of seconds on a few housekeeping items.

First, we're pleased to report that our full board of directors are now in place, and we have recently held our first board meeting.

Secondly, as you may know, the proxy statement was filed this last Friday.

We have provided a link to this statement in the SEC filings section of our Investor Relations website.

Third, we will be filing an S-4 registration statement in the coming weeks related to the bonds we issued as part of the December 2010 restructuring transaction.

Finally, we're looking forward to our annual shareholders meeting which will be held June 3, here in Phoenix.

In summary, we're very pleased by the improvements we have made as an organization over these past few years, which is evident in the favorable trends we have shared with you today.

However, we're more encouraged by the fact that we have the potential to achieve so much more.

Our employees, myself, processes, are all aligned with you, the investor, to maximize the value of Swift stock.

With that, we will open the lines to take any questions.

(Operator Instructions.

) Ken Hoexter, Merrill Lynch.

Richard, can you talk a bit about -- obviously you mentioned a lot about the volumes being a bit weaker.

Can you talk about what you're seeing now?

What caused the difference on the West Coast slowdown versus what you saw?

And did you see a difference on the east?

And then talk about how that is flowing through bid season now.

Yes, Ken, good questions.

We did experience heavier volumes, obviously, in the midwest and the east and have most of the quarter.

California and some of the P&W have been off in the west.

We believe, to be honest you with here, if you look at the west, we believe it's going to be slow and steady improvements.

Last year, if you look at imports, their rates were going up on those ocean containers almost weekly, and there was a capacity crunch there.

So, everybody was trying to ship earlier, because of that capacity crunch.

I also think Chinese New Year came a little earlier this year and Easter came late, so there was a larger gap between, and there wasn't that capacity crunch.

But we think that that affected us on the import side.

But we do think -- and the statistics show that the last half of this year, that volume could be up 4%, so we believe it's going to be a slow and steady increase.

That -- we had a great month in March.

Those heavier trends continued in April, and we believe we'll continue to strengthen as the quarter builds here.

Any comment on the bid season progress?

Yes, bids are coming in.

We feel very comfortable with what we're winning, both intermodally and over the road, as well as dedicated.

It has been a good season are for us, and we are winning.

We keep track of those weekly; the increase in new business, and we're pretty proud of our progress there.

Let me follow up with your revenues in intermodal.

Can you break those out and talk about what your turnover on your equipment was?

And I guess you mentioned earlier that you switched some business to truck.

And I'm just wondering why you would make that move if it is more cost efficient to keep it on intermodal?

And can you get the value if you do switch back and forth?

The reason why we did that, Ken, was we had excess trucks on the West Coast, and so we did take that off the rail, put it on the road, so that we could get those drivers into the midwest and east, where we had stronger volumes.

Our turns, obviously we have room for improvement going into the second quarter, because the first quarter was a little bit lighter.

But we're in that 1.5, 1.6 turns, and aggressively pushing that back to the 2.

Great.

Thanks for the time.

Thank you.

Ed Wolfe, Wolfe Trahan.

Could you take us through, Ginnie, the progression of January, February, March, April?

Can you do that for yields net of fuel perhaps and for utilization?

In both cases, they were increasing throughout the quarter.

So, from a utilization standpoint, January was the lightest month, February getting stronger, and March being the strongest.

And rates followed a similar pattern.

So, if rates average 4%, were they up 5% in March, 6%?

How do we think about that?

I don't have that exact number in front of me.

I would just say that they were raising throughout the quarter.

It definitely built.

Okay.

And how do we think about the fleet?

You talked a little bit about the containers for intermodal, but in terms of the tractor fleet, you mentioned flexibility, Richard, in your presentation.

How many tractors should we expect to come on company and owner-operators as we go through second, third, fourth quarter?

At this point, if you had to guess, how do you model it?

Ed, I think previously, we said we'll be up like 300, our company fleet will be flat and our -- will continue growing the owner-operator fleet as we can.

I think going into third and fourth quarter, it could be a little higher than that.

But the main thing we have is flexibility, depending on our business, but we're not out adding a bunch of capacity.

Let's put it that way.

So Jerry, you cut off at the beginning.

300 all owner-operators is the goal?

Yes.

As we previously said, we're trying to keep the company fleet flat and add our owner-operators.

Okay.

So you still got oil that is going up and diesel going up every day, it feels like.

Hopefully the weather has solved itself, and it sounds like the west is not great, but it is less worse than it was.

When I add all of that up, $0.06 of adjusted earnings feels like it is going north, but is it getting back towards that $0.15, $0.20 kind of range?

And how long does it take to get there?

Another way of saying that is the operating ratio, can you get back in closer to 90 in the second quarter coming from a 93.8 in first quarter, or is that just too quick to turn it around?

No, I think we're okay with that, Ed.

The fuel is not rising near as fast as it did in the quarter.

Fuel goes up slow, we're okay at that.

So I think we're still pretty close to target, what our projections are for the second quarter.

Okay.

So fuel is less traumatic, demand is a bit better, pricing is a bit better, and so you're back on track from the original projections?

Is that what you're saying?

Yes.

Okay.

Last question, on gains on sales, Ginnie, I think you said minimal going forward.

When I just look at the year-ago numbers, I had a $1.4 million in the first quarter '10 and a $1.8 million second quarter '10, so I'm not expecting $2.3 every quarter, but should there be a million or so in there going forward?

Something?

We've been selling this used equipment to owner-operators, which has had the effect of having some gains.

That equipment is pretty well worked through, which is why it will be lower going forward.

So is lower zero?

Or is lower, you know, half of 200?

It would be $0.5 million, in that range.

Okay.

If there is a property sale -- we still have some properties and assets held for sale.

So if there is a property that does sell in a quarter, that could change that.

But otherwise, it will be in that range.

Okay.

Thanks, I appreciate all the time.

Thanks, Ed.

Chris Wetherbee, Citigroup.

If you could talk a little bit about the impact of the thousand intermodal loads that you moved over the road in the quarter, and how that impacts price.

Can you back out what that impact was on price when you think about it relative to the 4% yields were you able to get?

Well, when you think 1,000 loads and we haul almost 10,000 a day, it is pretty minimal.

But obviously, we moved that at rail rates, and it is substantially less than our over the road rate.

It's stuff that we really don't break out, Chris.

But 1,000 loads over a quarter, compared to 10,000 loads a day is pretty small numbers.

That's not something that you're seeing very much activity at all in April I'm assuming.

Correct.

And when you think about the business, I think most of the business you're moving Ginnie, you had mentioned, has been on contract but you think about what your mix was relative to some spot moves for truckload, how do we think about that?

Is it basically all contract, is the moves that you're making in the first quarter, when we think about that 4% yield number?

Yes, primarily it is on the contracts.

We don't do a whole lot in the spot area.

We do some repositioning, and we did have repositioning in the midwest and the east, but we don't really play in that spot.

Okay.

That's helpful.

And then, when you think about fuel, and from a coverage perspective, I'm guessing that pretty much everything you have right now has some component of fuel on there.

Is there anything that you feel like you need to true up from a fuel surcharge recovery standpoint when you think about your contracts as you roll through them this year in a tighter market?

In a tighter market, Chris, we have an opportunity to look at the brackets, and if we have brackets that are out of line, that might be too high, that's part of the negotiation with the customer.

But everything we do has that fuel surcharge in place.

Okay.

And when you think about -- finally when you think about the amendment to the term loan, given where we are, now that you have the quarter out of the way.

Given that the credit market where it stands right now, I would assume that it would be something that you would be looking to do relatively near term.

Is that the right way to think about it?

We look at it every day.

Okay.

Fair enough.

Thanks very much for the time, guys.

I prevent it.

Thanks, Chris.

Justin Yagerman, Deutsche Bank.

Wanted to get a sense of how you guys are looking at -- you called out maintenance being up and that being offset by the depreciation help on the aging out of the fleet.

Where are we going from a fleet age standpoint?

Where are we right now?

And how do you monitor that on a constant basis in terms of figuring out where that balance is between maintenance and fleet age?

Justin, that is something we look at all the time.

As Ginnie said, we were delayed in purchases -- or deliveries of a lot of equipment in first quarter, and our age got up a little bit in first quarter.

It is at about 3.3 years in first quarter.

That is higher than what we want it to be, and you will see that come down in second quarter, as we take delivery of more of this equipment.

It is just a number that we watch pretty constantly, what is our repair and maintenance on this older equipment and keep in mind a lot of this equipment does not have the miles on it that it historically has had.

So, run this equipment out a little bit, we're not too worried about that.

And I think the main thing is we have flexibility.

The good news, when the new trucks didn't come in, we was able to keep the old ones and keep our fleet inside.

So it has grown a little bit, less depreciation, a little more repair and maintenance.

But that trend should change in second quarter going forward.

So Jerry, where are you trying to get the age down to on a run rate basis?

And then when I think about where those costs lines should be on a more equilibrium basis, what should I think about a good quarter for D&A and for maintenance?

Well, I think we have changed our model a little bit.

Rather than age on miles, we're looking at about 500,000 miles to 550,000 miles on these trucks, going forward, and so we're more focused on miles than we are age.

I think going forward you're probably looking into 3.0 to 3.1 range going forward.

On an average age.

On the average age.

I think it will vary, it will start to come down.

Yes.

But 3.3 is the highest we've seen it.

And I think that will come down.

But I would say in the 3, 3.1 range is where our focus will be going forward.

All right.

And how do you balance that against -- you guys aren't growing the company fleet this year, but I got to assume the driver market is pretty tight.

How do you think about driver pay this year, and then fleet age relative to drivers as well?

Does that change if drivers become more difficult?

I will address the equipment.

I don't believe so.

This is still a very, very good equipment.

And I don't think the age of the equipment is going to have any -- it will not be determined because of the driver situation.

Richard, you maybe address that.

Jerry is right, on the equipment piece.

And yes, we are going to spend more, Justin, in advertising per drivers, but we're very fortunate to have our schools and academies that are producing a lot of drivers for us.

We do have about 15, 50 drivers in our pipeline today.

We're very focused on retention of those drivers.

And when we look at wage increases, we're going to do that based off our driver ranking, and more of that will be in the incentive of safety and service and productivity per truck.

So, when we think about those increases that we have, Ginnie talked about, scheduled into the plan, we will do that through the incentive driver ranking phase.

Okay.

All right.

So no across the board driver pay hikes planned in the near term?

Correct.

All right.

You talked about rolling out Qualcomm units at a pretty nice clip here.

As you get those rolled out some of the carriers we have spoken to have talked a little bit about utilization drag as drivers get used to the electronic log in the equipment.

Is that something you guys are noticing in your fleet?

And if so, is it something we would expect to be a drag for a little bit?

And how do we think about that in terms of how long that is going to last for, when you're done with rolling these Qualcomms out?

Justin, we're going to be done at the end of this year, the first quarter of next year.

That has not been what we have seen with our tests, and with our drivers that are in the Qualcomm, the new Qualcomm.

They love it because of several reasons.

We have the electronic logs.

We have the text to voice.

We have the left turn, right turn directions, video streaming, all that.

So, we're experiencing is they like them, as well as we think we're seeing three or more available hours for the drivers and we match those three of four hours up with our micro map load optimization software and so we're not seeing the degradation in miles that you're talking about.

We will monitor that very, very closely.

But we're seeing good things come from it.

Great.

And last question, I will turn it over to somebody else, Jerry, as you go through bid season right now, and you're talking to customers, and looking at the contractual rates that you guys have put in, and trying to figure out, what is your best guess, as you look out to the back half of this year, as to where contractual rates will be up on a year-over-year basis?

Justin, we've said all along, we're kind of shooting for that 4%.

And obviously, we would love it to be higher than that.

But I think that's what we would say from a modeling standpoint.

Okay.

All right.

Great.

Thanks for your time.

Appreciate it.

Thanks, Justin.

Thom Albrecht, BB&T Capital markets.

A couple of questions.

Just to nitpick at one a little bit.

Your salaries, wages and benefits, actually was about $6 million higher versus the December quarter.

Even though your freight revenues were lower, as would be expected.

They came in at about $195 million, versus about $189.

And I'm wondering why that went up when it seemed like that would have been the kind of thing that you would have managed very aggressively.

We're getting feedback on the phone here.

Okay.

There's a couple of things.

One is, as you recall, one of the big changes from December to the March quarter was work comp, as we talked about.

In the fourth quarter, we had some large favorable true-ups in work comp to the tune of roughly $5 million, in the fourth quarter.

So, that is driving the majority of that variance.

But still then, that gets you back to about even sequentially.

The other was the $2.4 million of stock options expense that we didn't have last year.

Okay.

So you had $2.4 million in this year's quarter.

That's right.

And then on insurance, too, it was a pretty good number overall, but again, it was up quite a bit sequentially.

The fourth quarter was probably abnormally low, as a lot of fleets had probably slightly over reserve versus their full-year experiences, but it was up sequentially, and it was up year-over-year, to almost $23 million.

Did that reflect bad developments of older claims, or was it a lot of new accidents with the winter weather?

Well, again, as we discussed on the call last time, our fourth quarter for insurance was extremely low, as we trued up the current year, because of favorable trends, and accident frequency and severity.

In the current year, we had favorable developments in the fourth quarter.

And so what we talked about was that typically the way our insurance works is that the tails in the insurance loss runs and picks are based on seven-plus years of history.

And although the last several years have been very good, we accrue at the beginning of the year based on what the actuarial models are, taking into account for the last seven-plus years.

We typically start the year higher.

If our accident trends and severity are good and favorable, like we've been seeing in the last several years, we will see those come down in the latter half of the year.

Okay.

And then last question.

Ginnie, as you broke out the gain on sale of equipment, you gave about $600,000 due to a small Texas property, about a million of used equipment gain on sale.

What is the other $700,000?

And I guess I'm wondering, if you're getting ready to take a lot of replacement tractors, why there wouldn't still be one more quarter of some sizable gains?

Or are the owner-operators not interested in buying right now?

Well, what we sold to the owner-operators was equipment that we did not have residual agreements with the OEMs on.

That's why I was saying that group of equipment is pretty well run out, and so the rest of it will be things that are going back to the OEMs.

The rest of it was -- there is a whole group of different things.

Some of it is the tractors that are going back to the OEMs.

Some of it is other IEL equipment where an owner would buy the equipment at the end of their lease.

And then there's some trailers in there as well.

Okay.

That's helpful.

Thom, let me go back.

Considering the weather we had, that's a pretty good number, we're pretty proud of that for first quarter, and it is an emphasis, safety is really the number one emphasis we've had, and I think that will show in our -- we look at it as a percentage of gross revenue, Thom, and we're very proud of that number.

Whenever you can keep under four, and you compare that to some of our competitors, that is a pretty strong number.

It is, because we're emphasizing a lot on them.

Absolutely.

Okay.

Thanks very much.

Tom Wadewitz, J.P.

Morgan.

Wanted to see a couple of different questions.

First, on the other revenue, or primarily the intermodal, do you think the data will accelerate quite a bit in the second quarter as you're -- maybe 1,000 loads don't make a difference, you called that out, but do you think that growth rate is going to accelerate?

Or do we look at that going forward?

Yes, it will, and that 1,000 will be back in obviously the second quarter and plus volumes will be up, Tom.

So, at least we believe so.

Do you think that goes up towards 10%?

Or what do you think is a reasonable way to look at the revenue growth in other revenue?

That is the number.

Meaning that in the first quarter, had we not transitioned those loads to over the road, that other revenue line would have been closer to 10% in the first quarter.

Okay.

So that -- all right.

X that, and you think that 10% continues.

Okay, let's see.

On the comp and benefits, how do you look at that going forward?

Do you have confidence that that's going to come down as a percent of revenue?

Or how would you look at that in terms of comp and benefits percent of revenue?

There is a lot of moving parts there.

So with -- if our plans hold and we're able to grow owner-operators, and our rail business continues to grow, then that number should come down as a percent of revenue.

With that said, as Richard mentioned, we do at some point expect to give an increase to the drivers.

We have increases coming to our non-driving staff, after several years of no increases.

And so, those things will counter-balance a little bit.

But overall, we would expect that would continue to come down, as those other aspects of the business grow.

Can you quantify -- you said -- I think, Richard, you said it's more incentive-based pay and it's not a broad-based driver increase, but is there an equivalent way you can express that?

Is it a 3% increase in driver pay and what would be the expected timing of that?

Well, it is going to be -- as far as timing goes, we don't want to be the first ones out there, Tom.

Probably in the latter half, obviously, and you're probably going to be in that 3% range, if you look at it holistically.

Okay.

So, sometime the second half of the year and 3%.

And then Ginnie, you said there were some other things.

I guess the non-driver pay would go up and merit increases or bonuses or whatever.

Can you give us a sense of the magnitude of that?

Is that a couple of million a quarter?

Is it a lot smaller than that?

How would you think about it?

It will be roughly 3% on the non-drivers as well.

The trick, Tom, is that we're going to have, as Ginnie touched on, several moving parts, so while you may see a 3% increase on the non drivers, you may see approximately a 3% increase on the drivers and when you have a mixed shift to owner-operator and you have an increasing rail, it makes it difficult from a modeling perspective to lay in a flat 3%.

That's fair enough.

You've got some moving parts.

But is that 3%, was that already in the first quarter or is that something that would build through the year, like the driver pay?

No, it will be in the --

It will be later in the year?

Yes, that will be in the second quarter.

Second quarter.

Okay.

Great.

Thanks for the time.

For the drivers.

For the non drivers.

Right.

Drivers will be in the third quarter.

Drivers third quarter.

Non drivers, more like second quarter?

Right.

Okay.

Great.

That is helpful.

I appreciate it.

John Larkin of Stifel Nicolaus.

First one relates to -- Ginnie, you did a great job of laying out the impact of rising fuel prices during the quarter.

Do you have a similar estimate or guesstimate on the impact of weather during the quarter?

And perhaps also the impact of the weaker-than-expected demand, particularly in the western part of the US?

It is a little hard to split out the western demand versus weather and everything else.

But I would say between the west and weather, it was about $0.02 to $0.03.

Very helpful.

And then, we often talk about pricing and revenue per loaded mile interchangeably, and I guess that the 4% improvement is year-over-year improvement in revenue per loaded mile.

That's correct.

And I guess the question is, how much of that is the result of price increases that you've taken with contract customers, and how much of it is a function of supply and demand being tighter, and you being in a position to better select more profitable freight and/or more profitable customers?

Is there some of each of that baked into that 4%?

There is a little bit of each of that, but the momentum that we picked up in the fourth quarter, John, has continued in the first quarter.

As Jerry indicated on his summary slide, customers are still very apprehensive about the capacity crunch and we've been able to continue those rate increases on through into the first quarter, as well as into April.

So we think that momentum that we picked up in the fourth quarter will continue here.

Most of it is in pricing, John.

Okay.

And then just a final question, on the fuel surcharge, I've heard a number of carriers complain about the fact that the shippers have gotten a little more particular about what fuel surcharge they will accept.

And there are a lot of complaints around, that empty miles out of [route] miles of idle time is not properly compensated.

Do you feel the same way, number one?

And number two, does the fact that you're able to buy fuel cheaper than at the retail price make up some of that differential?

You know, it is an area, John, that we're continually looking at from the shippers, some of them went from 5 to 6, and we're pressuring that to get back to where it needs to be.

It's a moving target that we're placing a lot of emphasis on today, as we're not getting fuel on our deadhead, and we have to make sure we get it on the front end.

So, we agree, John.

We're not fairly compensated for our empty miles.

So, the 3% to 4% impact that Ginnie quoted during the prepared marks, is that mostly due to the lag effect?

Or did that also factor in, the fact that you're not getting compensated on empty miles out of route miles and idle time?

Pretty well all of the lag, John.

Mostly all lag?

Yes.

Because a we've had the other quarters before, so --

But that is something you can claw back if you are able to negotiate better fuel surcharges?

Right.

And you know, when you're running empty and the fuel is a lot higher, those miles hurt more so than when you have lower price per gallon.

So, we're very cognizant of that, too.

Got it.

Deadhead moved down only 10 basis points year-over-year in the first quarter.

I guess some of that was weather.

Is your network such a short haul network that really you can't get down much below 10?

Is that a longer term target or how fast do you think that might step down over time?

We've seen very good improvements in March, and those improvements have continued into April.

Looking at it this morning, it was very good.

So we have an opportunity to continue to drive that down.

We have network engineering that we're really focused on in the west, and the east.

And that is definitely helping our micro map usage is at an all time high which is helping drive those numbers down.

So, we're very excited about our opportunity there, and progress we've made the last 60 days.

Are there hundreds of basis points of improvement possible over the next couple of quarters, or is that too much to expect?

Ginnie is gagging me so I don't know that I can answer that.

That is probably too much, Tom, or John, it really relates back to the way we measure it, and we are different than everybody else.

Got it.

I appreciate your help.

Thank you very much.

John Barnes, RBC Capital Markets.

Ginnie, could you go through the container count in intermodal during the quarter, or at the end of the quarter?

Yes, you have that, right?

Yes.

It increased by 238.

237.

I believe in the quarter.

So 5,080 containers.

Is where we ended.

We ended at 5,080.

Do you have an average number for the quarter?

One second.

It is going to be approximately 49.75 average for the quarter.

Thank you for that.

Was intermodal profitable during the quarter?

I think you had indicated during the fourth quarter it was, or close to it.

Was it profitable in the first quarter?

Actually, it was.

So even though our volumes were not quite where we expected, our profitability still was.

Right.

And that's excluding the 1,000 loads that you moved in the truckload division?

That's correct.

And was it similar to the progression you saw in the truckload group that January was a little weaker, February got better, March got better?

Or was it more pronounced?

Was the improvement more pronounced later in the quarter?

Similar trend.

Similar trends.

Better throughout the quarter.

Okay.

Very good.

And then just one more question back on bid season.

Some carriers that I've spoken with have indicated that -- I used the word witness protection program recently.

Just some shippers have gone into hiding, they're not being as bold about their bid process this year as maybe they were in the last couple of years.

They're making the carriers come to them and really track them down, or even force them into the 30-day notices on rate negotiations, or something.

Are you seeing anything similar in bid season?

Or is your customer base still out there, is it kind of available, as they've been in prior cycles?

There are some that have gone into hibernation, but we're very good hunters.

We're right there on their doorstep.

But we're still seeing a good amount of volume, John, in our bids.

Okay.

Very good.

Thanks for your time.

Make no mistake.

There are shippers out there that are in hiding.

All right.

Anthony Gallo, Wells Fargo.

Thank you.

Just briefly, Richard, have you mentioned what you thought the net productivity benefit or detriment will be from EUBRs once they're in the system?

Is that expected to be a net benefit?

Yes, it is.

But I don't think we've disclosed what that would be.

We're just -- I guess we would just say that we're pleased with our numbers that we're gaining out of the test period.

Fair enough.

And there is going to be four or five benefits from this on board, the new program we got, I mean it just -- there's four or five issues, like guides to where load trailers are, I would be embarrassed to tell you how many trailers we top every week and this thing's got systems to prevent that, safety, better training.

There are about five or six programs on this thing.

It is going to be really beneficial.

In addition to we believe it is going to help us with a little bitter productivity going forward.

Fantastic.

And then one question on intermodal.

Can you remind us, the mix between trailers and containers?

And is there a margin differential that we need to think about to the extent that tight container capacity later this year might cause a draw on trailers?

We think our TOC will grow.

But we have 5,080 containers, and we have 49 --

Thousand trailers.

Trailers.

Right.

But in the first quarter, our COSC business was up a lot more than the TOSC business.

Is there a margin differential you care to share?

I'm just curious, if containers stay tight, we probably see some demand on -- more demand on the trailer side.

I'm just curious how we should think about that from a margin stand point?

I don't know we disclose that, do we?

We don't --

That sounds like I'm not going to get an answer.

(Laughter)That's fair enough.

All right.

Thank you.

When Ginnie gives us that look, we have to pull back.

I was hoping Jerry would answer, but that's okay.

(Laughter)

At least you're honest.

Thank you.

Thanks, Anthony.

Bill Greene, Morgan Stanley.

Richard, can I just ask you a quick question on the contracts, how much of -- what percent reprice in the first versus second quarter?

The percentage, that's tough to answer.

It slows down a little bit in the fourth quarter.

The first and second quarter, Bill, are probably the largest quarters.

But it is fairly close, other than the fourth quarter being a little bit lower than the other three.

Okay.

Fair enough.

And Ginnie, when we look at the overall costs ex fuel, what is a fair level of inflation to think about before productivity?

Because obviously productivity offsets some of that.

Right.

It is -- different line items obviously have different impacts.

We've talked about 3% on the wage line.

Certain parts are increasing more than that.

But there's other costs that we're able to take out of the business that will offset some of that.

So, just from a pure inflationary factor across the board, I would say 2%.

2% to 3% is reasonable.

Okay.

And then last question, Jerry or Richard, when we look at all of the challenges the industry faces on the regulatory front and of course now we have fuel as a bit of a pressure, does this make it a better environment for acquisitions or is that just off the table anyway for Swift, because you want to get the leverage down or how do you think about that?

I think from the regulatory standpoint, Bill, it is -- you know, it is what it is, and we just do a good job, in watching where we are, the CSA, we think that is a positive, for our Company.

We're ahead of the game, we started a lot of this two or three years ago.

And I know a lot of other carriers are struggling with it.

With the hours of service.

That's going to get fought for a few years.

We're not sure how that is going to come out.

You about we think with our new onboard system, that we will be ahead of the game in that area, also.

Sorry.

Does this mean it is a better opportunity for large truck carriers like yourself to do acquisitions or no, just off the table, not really something you want to think about now?

Well, I don't think it really relates to acquisitions.

Some of the smaller carriers are going to have struggles with it and it might lead into acquisitions, but I just don't think one has anything to do with acquisitions.

Okay, that's fair enough.

And then do you feel okay with where your leverage is now?

Or you want to see it improve before you address that strategic action?

Well, I think you know, we're not satisfied with where our leverage is.

We've stated that our goal is to get it back to that two number where we were historically, and it's going to take a couple of years to get it there.

Okay.

That's great.

Thanks for the help.

Bill, I would say to add on to Jerry's point, with all this regulation, and where we're positioned, we should pick up opportunities in volume.

I think you have opportunity to go back with rates, to address bringing in really good drivers, to overcome some of this regulation.

So, in our view, these things are tough, but we're up to the challenge and we believe that we gain from it.

Okay.

So your approach is to try to take share from those carriers rather than look at a carrier that might need some extra capital and you come in and take them out.

Yes.

Okay.

That's great.

That's helpful, thank you.

Ben Hartford, Baird.

Richard, quick question on the net fuel cost per mile.

Overall fuel costs per company mile has improved 4%-5% since 2008, first quarter 2008.

So, thinking about comparable fuel levels and net fuel costs per mile then is about 10%.

So, can you talk a little bit about what has driven that improvement from the first quarter of '08 to today?

I'm sorry, could you restate that?

We had some feedback.

I'm sorry.

Just looking at net fuel costs per mile, on a company mile basis, first quarter of '08, relative to today, thinking about comparable level of fuel prices, it has improved about 10%.

I'm wondering if you can provide a little bit of color on what has driven that improvement.

I think there's a number of factors here.

Number one, our idle time, we've made considerable improvement in that area.

Our trucks are getting a little better fuel economy, as we are really watching the fuel economy standpoint.

I think we're buying our fuel a little bit better than we have.

So I think there is a lot of factors that goes into that.

Is it reasonable to think that you can improve that metric, that net fuel cost per company mile another 10% or even 15%, 20%, assuming fuel prices stay at these levels?

And the other thing I would mention on that is Jerry slowed the trucks down, three miles an hour, which definitely was an impact from back when you're talking to today, as well.

It is going to be difficult to make any more improvement than where we are today.

I mean we're watching it.

We're starting to bring in a lot of these new engines today.

We're not sure how that effect's going to do.

But I think status quo is going to be where we're projecting.

Okay, great I will leave it there, thanks.

Your next line comes from the line of Donald Rotten from Avondale partners.

Donald Broughton.

Good morning, everybody.

I've been called a lot of names -- but how are you all doing?

Jerry, very interesting commentary earlier.

You were talking about watching the truck age on a miles basis which makes an infinitely larger amount of sense, so if 3.3 years, your trucks are getting to what, 600, 610, 615,000 miles?

No, Donald.

We're cutting them off at about 550,000.

Okay.

We might be just slightly over that, because of -- we had some trucks that we just didn't get in, but our goal is not to run them over 550,000.

At some point in that truck's life, it has not averaged the 1700, 1800 miles per week?

Correct.

Absolutely.

And that's why Jerry is referring to the fact that we look more at miles now than age, because a lot of these trucks right now, have aged a lot but they haven't got the miles on them during their useful life.

That makes plenty of sense.

I just wanted to make sure I understood how you're thinking about it.

So, if I've got miles per -- loaded mile rate up 4%, and essentially revenue per truck per week up over 6, miles per truck per week were up 2 1/2 on a year-over-year basis?

Sounds close.

Hold on.

It's in the ballpark, yes.

So insurance on a per mile basis was actually down slightly?

I mean that's good, right?

That's good.

We look at it, I haven't looked at that, but that is -- that could be, yes.

You're correct.

I just want to make sure I'm following along the same metrics here.

Deliveries on equipment were delayed by which supplier?

Two or three of them, Donald, I don't want to get into it, but actually, two out of the four suppliers were considerably late.

Do you have any understanding of what the delay, what the holdup was?

They were having trouble getting parts.

As they've ramped up, all of the manufacturers are really had difficulty in getting parts.

I'm not sure that we got moved around a little bit on the schedule on one of the manufacturers, but at least two of them was parts issues.

Okay.

Tax rate.

Ginnie, I had modeled for 39.

You struck a 42.

I am assuming for the quarter -- I am assuming that is in part the per DIEM and as the operating ratio improves, the tax rate will migrate more towards a 39?

Is that right?

We actually had said that we expect to be on a GAAP basis around 42.

And that has to do with when we changed from an S corp back to a C corp, there are some deferred tax assets that we're amortizing off over the next year and a half.

So, we will migrate down to the 39% as that amortizes off.

Okay.

Which is why, when we had do the adjusted EPS calculation, we're using 39.

Fair enough.

Fair enough.

Then one last question, or maybe two.

EOBRs.

The trucks have you in EOBR, the driver still has a paper log in their cab, yes or no?

Yes, that is correct.

Because if that ever goes down, for some reason, he's got to switch back to that paper log.

And we will obviously slowly go through that once we get the whole fleet going.

But right now, they have it.

So when they go through a weigh station, or some other type of inspection, the primary document that is being checked is the paper log, not the EOBR, is that correct?

No.

Donald, that didn't come out quite right.

He has a paper log to use as a backup in the event that it breaks down, but today, he is only running one log, and that is the electronic log.

So once they pull a transition, it is just the electronic log but he has a pad of paper logs, just in case.

Fair enough.

One last thing and then I will let someone else have the floor.

What was the sequential change in both the short-term and long-term insurance and claims accruals throughout the quarter from December, end of December to the end of March?

We actually haven't disclosed that number yet.

Do you have it or just wait for the cue?

We are going to have to get it for you.

You have to wait on it, Donald.

All right.

Thank you.

And good luck in the second quarter.

Thank you.

And I'm showing there are no further questions.

All right.

With no other questions, thank you very much.

And we will look forward to next quarter.

Thank you.

This concludes today's conference call.

You may now disconnect.