奧多明尼昂貨運 (ODFL) 2008 Q1 法說會逐字稿

Good morning and welcome to the first-quarter 2008 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through April 30 by dialing 719-457-0820. The confirmation number for the replay is 4518403. The replay may also be accessed through May 23 at the Company's website, which is at ODFL.com.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements among others regarding Old Dominion's expected financial and operating performance for 2008. For this purpose, any statements made during this call that are statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by important factors among others set forth in Old Dominion's filings with the Securities and Exchange Commission and in yesterday's news release and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements.

The Company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. At this time for opening remarks, I would like to turn the conference over to the Company's Executive Chairman, Mr. Earl Congdon. Please go ahead, sir.

Good morning and thank you all for being with us for our first-quarter conference call. I am here today with David Congdon, OD's President and CEO and Wes Frye, our CFO. We each have some brief remarks that will cover our first-quarter results and our outlook and then we will be glad to take your questions.

Considering this sluggish economic environment, we were not disappointed with 8.3% growth in tonnage for the quarter. This tonnage growth included a negative impact in the first half of March from severe weather and followed by Easter weekend, which fell in March this year versus April of last year. As a result, our tonnage growth for March was below that of January and February, but it has recovered to higher levels thus far in April.

We produced an increase in revenue per hundredweight net of fuel surcharges for the quarter of 0.8% or 8/10 of 1% in a pricing environment that remains very competitive. This metric was impacted downwardly by several factors, which include an increase in weight per shipment, a decline in length of haul, a decrease in average freight classification and higher-than-average growth in spot quote and container drayage shipments. Nevertheless, we were pleased with solid growth in tonnage for the first quarter.

On the other hand, we were disappointed that the benefits of tonnage gains were largely offset by a sharp increase in fuel prices for the quarter. While we generally recover increased fuel costs through our fuel surcharge mechanisms, the cost increase for the first quarter was large and rapid enough that negotiated fuel caps in our contracts and tariff items limited our ability to recover our costs. We are working with our customers to counteract this issue in the quarters ahead and on a long-term basis. While we are making progress in these discussions, we do not expect to resolve this issue full during the short term.

In closing, let me reiterate that economic cycles are a reality with which we have long been accustom and through which we have successfully operated. Consequently, our strategy is focused on building our Company for the long term through outstanding customer service, constant attention to daily operations and steady expansion of our network and services. We have the utmost confidence in the prospects of Old Dominion to continue gaining marketshare and achieving substantial long-term profitable growth and now here is David.

Thanks, Earl and good morning, everyone. As we move further into the second quarter and think about the rest of 2008, there are a number of initiatives we have undertaken to support our guidance in a year that will continue to be challenging.

Our primary focus is to intensify our revenue quality improvement processes. While we already implement these on an ongoing basis, the constant enhancement of our service products, our value proposition and expanding customer relationships provide us with an opportunity to improve our yields.

It is pretty obvious that our industry remains in "a freight recession" and we are surrounded with signals that spell economic uncertainty, which unfortunately means sluggish conditions for an unknown period. Because of price competition caused by flat to down tonnage growth, rising costs, especially fuel costs, our industry operating ratios, including our own, are rising.

So what do you do in this environment to improve profitability? It is a combination of three things. First, lowering expenses and we have numerous initiatives in this area. Secondly, increasing volume and we are doing pretty well in this area. And lastly, improving yields. In order to continue providing our customers with superior service, to continue investing in our Company for future profitable growth and to reverse the negative trends in our operating ratio, we are placing the highest priority on maintaining our focus on profitable pricing of our accounts.

In the last couple of conference calls, we shared our sensitivity analysis that to make up one percentage point reduction in pricing would require tonnage growth equaling four to five percentage points to break even. This math works in reverse as well. In other words, increasing pricing 1% has the same effect of a 4% to 5% increase in volume. Therefore, faced with this challenging and soft freight environment for the foreseeable future, the most important thing we can do to maintain or improve profitability is to maintain discipline to our revenue quality processes.

We have seen little advantage in reducing a competitor's price to win new business and believe that this has been a primary factor resulting in the industry's deteriorating operating ratio. Most competitors, we included, will protect their existing marketshare within reason. The key is selling your services based upon value and not price.

We are increasing -- or I am sorry -- we are continuing our increased focus on improving operating efficiency, productivity and cargo claim reductions. These efforts encompass all aspects of our operations in line haul, our dock and pick-up and delivery. In the first quarter, we achieved a 1.2% improvement in P&D efficiency, a 1.6% increase in percent direct-loaded shipments, a 4.8% improvement in platform pounds per hour and we posted our lowest cargo claims ratio in the history of the Company. Unfortunately, these improvements were not nearly enough to offset the effects of the pricing environment, the rapidly rising cost of fuel and the increases in other operating costs.

This latest acquisition of Bob's Pickup & Delivery in Montana is the third strategic transaction we completed within a year and is representative of continuing opportunities we have to achieve our expansion targets with the help of acquisitions. In addition to adding 12 new service centers to our network, this transaction took us into the last stage in the lower 48 in which we did not have a direct presence and gave us the ability to immediately launch full-state coverage in Montana. We now offer full state service in 39 states with a goal of expanding to all 48 in the continental U.S.

Consolidation pressure in the transportation industry has grown as the cost of offering competitive services, transit times, coverage and superior technology have increased. Given these factors and the current economic environment, we would expect to see continued consolidation during 2008 from which we are positioned to benefit.

To maximize this benefit, we are also continuing our internal effort to strategically expand our service center network, both through development of new centers and expansion or relocation of existing centers. The pace of opening these centers is affected by the difficulties involved in acquiring and developing real estate for a freight terminal.

In building out our service center network, we not only leverage our existing infrastructure, customer base and salesforce, we also further enhance Old Dominion's structural competitive advantages. Throughout the economic cycle, we have demonstrated an ability to gain marketshare as customers respond to our providing outstanding service standards, extensive coverage and rapid transit times through one organization and one non-union workforce. It is because of this strong competitive position that we are confident of our long-term growth prospects despite the uncertainty of the current environment.

Thanks for your interest in Old Dominion and I will now turn the floor over to Wes to discuss our numbers in more detail.

Thanks, David. Old Dominion's revenue rose to a record of $368 million for the first quarter of 2008, up 15.1% from the first quarter last year. This increase was comprised of a 5.6% increase in shipments and a 9.1% increase in revenue per shipment. This growth in revenue per shipment reflected both a 6.4% increase in the revenue per hundredweight and a 2.6% increase in the weight per shipment as tonnage grew for the quarter at 8.3%. Revenue per hundredweight, excluding fuel surcharge, increased 0.8% and revenue per shipment increased 3.3%. Our operating ratio for the quarter was a 94.3 compared to a 92.2 for the first quarter of '07.

As discussed, the more significant items affecting this result were pricing, high fuel costs and affects from winter weather. We estimate that the harsh winter affect on the EPS to be approximately $.035 per share for the quarter. Excluding fuel surcharge, our revenue per hundredweight increased, as I mentioned 8/10 of 1% for the quarter. A 1.4 reduction in our length of haul -- 1.4% reduction in our length of haul and a 2.6%, about -- which half of which is freight mix -- increase in the weight per shipment have an effect of lowering the percent revenue per hundredweight change. Though difficult to measure, the revenue per hundredweight percentage increase net of fuel surcharge would be higher, estimated in the 1% to 1.5% range. This overall increase was a result of tariff increases implemented on February 11 of approximately 5.8%, which affected approximately 34% of our net revenue.

Also difficult to measure, but certainly affecting the quarter, was our inability to recover all of our fuel costs through an increase in the fuel surcharge. The deficit resulted mostly from the fuel surcharge caps on a portion of our business. Although the line of distinction between rate and fuel surcharge negotiation is blurred, we estimate that the OR affect on the caps during the quarter to be between 100 and 200 OR basis points. We offset a portion of this increase to reductions in salaries, wages and benefits and purchase transportation as a percent of revenue and we also benefited from the fourth consecutive comparable quarter decline in insurance and cargo claims experience as a percentage of revenue.

The effective tax rate for the first quarter of 2008 was 39% compared to 37.7% for the first quarter last year and we anticipate our effective tax rate for the remainder of 2008 to be also 39%.

Our net CapEx for the first quarter was $27 million, including the acquisition of Bob's Pickup & Delivery and we continue to plan net capital expenditures for the year of approximately $155 million to $165 million, down from $195 million for the year 2007. The 2008 budget includes approximately $40 million to $45 million for equipment, $95 million to $100 million for real estate, a portion of which is to complete projects started in earlier years, and $10 million to $13 million for information technology.

With our solid profitability for the quarter and continued cash flow from operations, we reduced debt and strengthened our balance sheet from year-end 2007. We completed our first quarter with cash and short-term investments of $38 billion while our ratio of net debt to total capital improved to 34.4% from 32.2% at year-end. For 2008, we expect free cash flow from operations to be marginally positive without giving consideration to additional acquisition or expansion opportunities that might become available during the year.

As presented in our news release, we remain cautious in our outlook for the remainder of 2008, primarily based on the uncertain economic environment and continued competitive pricing. As a result, we have reduced our established guidance for the earnings per diluted share for the year in a range of $1.85 to $1.90 from the previous guidance of $2.00 to $2.05.

In April, we are experiencing tonnage growth in the low double digits, driven by shipment growth and weight per shipment in the mid single digits each. However, we anticipate that pricing year over year will worsen to a negative one to two basis points in April, excluding the fuel surcharge. Unclear at this time, however, is how much of this revenue per hundredweight decline is attributable to the increased weight per shipment and the lower length of haul.

This concludes our prepared remarks this morning and operator, we will be happy to open the floor for questions at this time.

(OPERATOR INSTRUCTIONS). Justin Yagerman, Wachovia Securities.

Hey, good morning, gentlemen. How are you? Just a quick clarification before I jump into some questions. Wes, at the very end, you said you're, right now, experiencing revenue per hundredweight down one to two basis points?

One to two percentage points.

One to two percentage points, okay. I thought that is what you meant or maybe I misheard. All right. I guess the primary question here is what is on with the fuel surcharge and where these caps are. Earl or David, I think you said in your prepared remarks that you don't expect this to abate in the near term and if this a 100 to 200 basis point hit on the OR, I'd just kind of like to get a bit more clarity on where these caps are, how much of a percentage of your business these caps are on and I guess to what extent you think you can alleviate them and in what kind of timeframe should we continue to expect that kind of drag on the profitability if fuel stays where it is or goes up?

Justin, I will address that. This is Wes. Most of the caps, as you might imagine, are related to our contractual accounts, which account for about 42% of our overall business. Within that, we estimate maybe 20% to 30% has a cap.

Okay. On average I guess, where does fuel cap out on that 20% to 30% of the 42%?

It varies, Justin and the difficulty is -- there are several basis points between what would be the normal fuel cap and what the contractual -- what you don't know and the uncertain that makes it difficult to measure. If there is a fuel cap that we negotiated, then how much, in many cases, we increase the rates. Do you follow what I am saying? In other words, we look at the profitability of the overall account, combining both rates and fuel surcharges.

Can you do that in real-time though? Is there a provision in the contract for that?

I am just talking about as we renegotiate the rates on accounts in the more recent months.

Got it. So you are going to have to wait for contracts to actually roll over in order to get to the kind of healing process on these caps if fuel is staying where it is?

No, we are not waiting until expirations of contracts. We're looking at every account that has any kind of a cap on it and instructing our salesforce to address the issue of the cap with customers now. Most all contracts, although they may have a beginning date and an ending date, they all have 30-day outs by either party. Not that we want to go out and put business at risk and that kind of thing, but we certainly have the relationships with our customers and the superior service products that we're giving to our customers that justify our need and our position to go out and ask for some relief on the fuel.

Got it. So if you had to set yourselves a goal, what is the timeframe that you would hope to have this issue shored up within?

Next Friday.

A realistic goal?

This process started about a month or two ago, really, really focusing heavy on it and so within the next couple of months I would say.

So you wouldn't expect to necessarily maybe get some relief in second quarter, but hopefully by third quarter, this is an issue that you are recovering more of your fuel surcharge?

Yes.

Is there something different about your fuel surcharge versus other major LTL fuel surcharges on an average basis that would lead to the higher fuel impact?

All of them are negotiated differently, so there is no real consistency I don't think between our surcharges and everyone else.

Got it. On the salary, wages and benefit line, there was an increase of about 14% year over year on a dollar basis. With tonnage up 8%, that sounds like a lot. Is there a workers' comp issue going on in there because it sounded like --?

Not workers' comp, but we did have a negative injury and whether that is a onetime entry or whether that is kind of the trend, we had a fairly large adjustment we had to make in group health. There was about a 20% increase in group health, a year-over-year cost.

How much of a drag was that?

The total, without being tax-affected, the total entry we had to make was about $2.7 million. I caution to say whether that's a one -- it is too early to say whether that is a one deal or if that is a general trend. So I mentioned that because you asked about it, but we didn't put that as part of any unusual items in our discussion.

Got it. But at the end of the day, that is impacting you guys to the tune of $0.4 a share. So it is the difference between what you reported and consensus. So I think it is meaningful. The tax rate is also up to 39%. Last year, it was at 37.7%. Is there something different in the way -- we think -- we were modeling that increase, but just curious on a year-over-year basis, would you expect it to stay at 39% going forward this year?

Yes, last year, we had a one-time favorable impact on our tax rate in the first quarter of '07. We do anticipate it remaining at this point at 39% for the remainder of this year.

Okay. Then on your acquisition of Bob's, I know it is small, but just curious if that had any drag in the quarter, getting that operation ramped up?

It did. Without the startup costs, just on the operations itself, trying to build density, it had about $0.005 drag on our earnings in the first quarter.

Got it. Then just on the general environment, then I will turn it over to somebody else. Curious where you guys are seeing the most competition on a cost basis or on a revenue per hundredweight basis. Being that you guys are in the long haul and into regional and regional lanes, is there more competition in one length of haul versus another or is it generally the same kind of pressure you're feeling across the board?

Justin, I would say it is the same that we have been feeling across the board. You have long-haul pressure, you have short-haul pressure. I still think you tend to have a little bit more pressure in the regional business because of the small regional players are real price leaders, if you will, in their regions because that is all they have to sell and they are under competitive pressure of the carriers who can do more than they can do.

Aside from the large national player that talked about getting out of some of the regional space, have there been any of the smaller guys who have, at this point, capitulated or decreased their service footprint?

Not that I am aware of.

I'm not aware of any either.

Okay, all right. Well, that is helpful. I appreciate the time, guys. Thanks a lot.

Tom Wadewitz, JPMorgan.

Good morning. Let's see. On the fuel side, and on the guidance side, maybe if you could just give us a sense of what is the greatest factor in your lower '08 guidance. You mentioned a couple different things. Is it really -- the concern on pricing is the biggest one or is it -- half of it is the pricing issue and half of it is fuel or how do you look at that, not necessarily on the first quarter, but on the change in the full-year guidance?

The major issue we have is a price issue. But it is a fuel issue too, and the fuel surcharge recovery issue. As we have stated before, fuel surcharges, base rates and discounts have all become so blurred over time, the general pricing is the major issue affecting our change in guidance.

Right, okay. Then when you look at the fuel assumptions that you have in the new '08 guidance, are you assuming that fuel stays flat where it is at the present level and then if fuel went up further, then you would have some risk to where the guidance is or what have you baked into that '08 guidance for your fuel assumptions?

Since we have total knowledge of what is going to happen to fuel prices, I will give it a shot, but our estimate includes that fuel prices will probably reign pretty much at the current levels at least through the summer. Then maybe abate a little bit, but not a lot for the second half. That is what our assumption is based on. Whether that is true or not, we need some more expertise on that, but that is kind of our assumption at this point, Tom.

Okay. So it is probably as good as anything, but if fuel went up meaningfully further from where we are, then there is potential that would be a little bit of further pressure versus the range?

Yes, correct.

Okay. In terms of some of the other cost factors in first quarter and the margin pressure in first quarter, I guess how are you looking at -- it seems like a fair number of those were onetime and I guess if you look at the margin out the next few quarters, you think the deterioration will be a little bit less or how are you thinking about margin going forward and whether most of the costs in the first quarter was onetime or not?

Tom, we don't give guidance on margins. David talked about some improvements in productivity. The one area that did not improve in productivity was our line haul, specifically line-haul wages did deteriorate, but on the other hand, as we have said before, the one thing that we will continue giving during this slowed economy, and we think is crucial, is keeping our serve, on-time service very high and that can really affect your line-haul costs. As the year progresses, we have some opportunities and in fact, in April, have seen some better results in our laden load averages, the metric we follow in that regard. So we will be focusing on that quite -- among other things, as David mentioned, have a main focus on that.

Right. Okay, great. Thank you for the time.

Jon Langenfeld, Robert W. Baird.

Good morning, guys. When you look at the pricing environment, how has it trended if you kind of step back and look over the last six months? Has it been a steady decline in terms of deterioration or has it been more dramatic here as fuel prices have run up?

If you look at -- just look at the literal revenue per hundredweight and obviously if you look at it excluding fuel surcharges, it has been fairly steady, but year over year, there has been a decline. Throughout the first quarter, in January, we saw a fairly good increase and I am talking excluding fuel surcharges to kind of get that out. We saw about a 70 basis point improvements in revenue per hundredweight in January.

In March, as we implemented the rate increase on the -- and on general tariff, it went up to 1.9, but in March, it declined 20 basis points. So we saw it doing very well. Fine in January, increasing in February and then declining in March. When you look at our rate per hundredweight, we are maintaining the revenue per hundredweight increases pretty much in the general tariff area. Where the real price competition seems to be occurring is in the larger contractual, which is what you would expect.

Okay, that is good color. I look at your revenue per hundredweight ex fuel and it was I guess flat to negative in the second half of last year and then it popped up positive here and now it's back to negative. So it has actually seemed a little bit more volatile than maybe what I would have expected. Would you agree?

Yes, I guess it is somewhat volatile.

Then how do you go about -- just maybe relay conversations you have had with customers thus far. How do you go out and ask for better fuel surcharge when essentially that is price and you're going to your biggest customers were price aggression has been the most acute, how do you have those discussions and come away successful in this environment?

Well, it is not the easiest thing in the world, that is for sure, but when you can go to a customer with facts on paper in front of you from our freight costing model, which is very accurate and very sophisticated and you can show this customer that we had an ex operating ratio -- let's just say we have a 95 operating ratio on your account or a 90 operating ratio -- and now because of the impact of fuel and because of this fuel cap, we have a 120. That is pretty compelling facts and evidence to present to the customer and to say -- and to also say this is what we are doing for you in terms of service. Here are the lanes, here is the transit times, here is the claim ratio, here is all the value we are adding to you for the freight dollar you are spending. And we just plain long can't live with 120 operating ratio and you start negotiating from there to get some relief and hopefully get it back to a respectable ratio. That is how we address it.

Yes, all right. That makes sense. Then is it your sense that others in the industry, particularly some of these smaller regional LTLs, also have caps in place on certain contracts?

Yes.

Okay. So they are basically battling the same issues?

Well, if we had our druthers, we would not have any caps. I would say that a lot of the caps that we have are because of competition, because of other people putting in caps. We don't put in caps knowingly -- or willingly and voluntarily. It is because of the competitive pricing environment that has caused us to have the caps that we happen to have. Or the customers are requiring it or insisting upon it, but usually it is because of a competitive situation. Someone else has one, so everyone is required to bid the business with a cap.

This is Earl. I think when these caps were negotiated some time ago, that no one, carrier or customer, envisioned the rapid rise that we have had in fuel costs. So it makes sense to our customers I think to grant us some relief from those caps.

And would you say all-in and maybe the trends in the quarters weren't what you expected, but if you look at the quarter in total, did pricing come relatively in line with what you would have expected?

No, no. It was more competitive than we expected.

Okay. Okay. I think that is good. Thanks for the time.

David Ross, Stifel Nicolaus.

Good morning, gentlemen. Start off with I guess weight per shipment. I think, Wes, you said that half that increase was due to growth of existing customers, maybe half was due to the increased truckload business you did in the quarter. Is that --?

Yes. When we look at just our LTL portion of the freight weight per shipment, it was up about 1.2% to 1.3% against an overall 2.6%. So that is where I got the half, is that the LTL was up that much, so we have had increases in our mix of freight for container, for spot quotes, etc. that drove it up more on an overall basis.

Okay. Also, with the network growth going from I guess 184 terminals up to 204 service centers today, do you have -- and I know it is going to be a range because of the real estate issues -- but do you have a goal for year-end where you want to be in terms of network size?

We actually do not have but one definite terminal on the drawing board that we know for sure we will open before the year-end. So we should still be about 205 at year-end, but opportunities could present themselves that cause us to open more service centers by year-end.

Okay, so this year is expected to be more of a density build year rather than an expansion year?

Yes.

Okay. Also, we hear talk out in the marketplace of some of the regional carriers not being able to offer the same interregional service that Old Dominion does, they can't go to all 48 states, so they get together and they form these interline partnerships and sometimes partnerships with a national scale. Are you seeing any increased competition from that and also if you could talk a little bit about how your model is differentiated from those?

David, I know of those -- the one that you're talking about and no, we have not seen any real impact from that alliance -- that recent alliance that was formed and we don't anticipate any pressure from that because the fact of the matter is that we, with on truck, can make a pickup and through our fully integrated line-haul system. We can move freight across the country very seamlessly through one network with green and white trucks on both ends of the deal and in the middle on line haul. So it is all one seamless thing and it is hard to sell a multiregional, interline partnerships against a fully integrated multiregional, interregional, national network that we have.

We have had that experience in past years. David's right. It is a tough sell.

When you're working with business partners in different areas of the country and you are trying to sell an interline type partnership program, invariable you find that operationally when you are dealing with problems day to day like cargo claims and service problems, 90% of the problems you deal with everyday have to do with these interline and partner points, not with your direct business. So it is operationally difficult to manage.

Okay, that is helpful. Also, you mentioned container drayage. I think you had some growth there. Can you talk a little bit more about that? Is that mostly international business? Is that export business?

Our export business has increased because of the value of the dollar primarily, but secondly, we have made some changes in the leadership of that group and also in the way that we are managing our container drayage operations in various terminals that do that. So the growth is primarily coming from management change more so than increases in imports or exports because obviously imports are somewhat down this year, but we are just growing because of management.

That makes sense. The last question is, again, on pricing. Everyone is talking about a tough pricing environment out there and that is the reason that some of your competitors have lowered guidance for the year and people are reporting worse than expected numbers occasionally in the LTL space, but everyone is still showing improvement in revenue per hundredweight, really even excluding fuel surcharge. So I guess I'm having a hard time understanding how bad it can be if yields haven't gotten negative yet or is it mostly people that haven't been reporting yet or those that don't report that are showing the pricing pressure and those that have reported are more disciplined?

I think, in the first quarter, the positive yields (inaudible) per hundredweight probably generates mainly from the rate increases that were passed on in January, February by most carriers. The question is how do you hold onto those and the implication may be is you can't in this economy. So as the year and the quarters progress, you may not see that positive.

On the other hand, when we circle around to the last half of the year, the comparisons become a little more easier comp because we saw the deterioration starting to happen in 3Q of '07. So it could be a combination that the first quarter had a rate increase earlier than it did for the first quarter of '07 and as we circle around the year, the comps start to get a little easier.

Thank you very much.

Tom Albrecht, Stephens Inc.

I just had a bunch of questions here. Let me start with a couple of numbers. I don't know if you gave them in the very beginning or not. David and Wes, did you mention your approximate monthly tonnage percentages for January, February and March?

I did not, but I will give those to you, Tom. As Earl alluded to in his comments, January we started with a tonnage growth of 9.2%. That year over year declined to 8.8% in February and declined further to 7.1% in March. But as I alluded to in my comments, at least it looks like at this point that we will be in the lower double digits in April.

I definitely caught that part. Then you mentioned cargo trends were, I think, favorable. Did you give a percentage?

I did not, but I will give it to you. We have been progressively throughout the year because it has been a main focus to improve our cargo claims. The first quarter of '07, it was about 1.5% and as the year has progressed, we have gotten it to 90 basis points to 0.9% and for the first quarter, it is the best I think that we have had in our history at 0.7%. Continue to improve.

All right. And then a couple of the other productivity numbers and then I want to ask a bigger picture question. David, I think you were rattling so many off there, I can only write so fast, the stops per hour, was that up 1.2%?

Yes. A blend of stops per hour and shipments per hour. It is a general overall efficiency improvement in P&D.

Okay. Then the dock pounds per hour?

That was 4.8%.

Okay. What about your load factor?

Load factors I mentioned in response to one of the questions was actually down 1.6% for the quarter.

Some of that came about as maybe a little impact, very small of the Bob's operations.

Right.

(inaudible) out there in that new territory with less freight on those trucks.

Sure. Lastly there, direct load? Did you say you increased that by X percent?

1.6%.

Okay. All right. And then going back to your guidance for a minute, I was reviewing my notes from January's conference call and the transcript. I think you were pretty clear at the time that you expected '08 to be very competitive on pricing then and you even mentioned a potential range that yields could drop by 1% to 2%. So it seems to me like, in some ways, you are just reaffirming earlier comments. It is just that maybe we are closer to a real-time experience or is there something more that has occurred because you were very clear in January?

I think what we said in January is playing out, played out for the quarter. The thing that is so unusual about the quarter was the rapid and dramatic rise in the fuel costs that was not offset by enough fuel surcharge.

That's kind of my interpretation. Wes, when you talk about contracts are 42% of your business, I am assuming you mean contracts provided by the shippers?

Negotiated contracts.

Okay.

Yes, negotiated contracts. The contract of terms and pricing.

Okay. So when you stand firm on, call it, base rates for lack of a better term, how much willingness is there by shippers to just shop that business around? It has always been competitive, but because there are some people more vulnerable, are they quicker to yank the hook on you guys? Can you just talk about that dynamic a little bit?

One of the things -- it is Earl, Tom. One of the things that we are witnessing is that a customer might leave us because of a better price and, by gosh, 60 days later he is back.

Right.

Some of the competitors that are offering lower prices are not giving service.

Seems like history constantly repeats itself. Okay. Well, that is all I had. I appreciate the conference call today, guys.

Ed Wolfe, Wolfe Research.

Hey, guys. Just fill in a little bit on what Tom said. You went through the January through April tonnage. Can you do the same for revenue per hundredweight, gross and net of fuel if you can do that?

On a gross basis, the revenues per hundredweight in January was up 5.3%. In February, it went up to 6.2% and in March, went up to 7.1% and obviously that is due to the rising fuel costs for the most part. If you look at it on a net basis, and I think I kind of talked about these numbers somewhat, but net of fuel surcharge, it went up 70 basis points in January, went up to 1.9% positive in February and then declined 20 basis points in March.

Do you have both of those for April or a sense at this point?

Yes, for April, and it is difficult to understand why at this point, but it looks like, gross, that it is in the 4.5% to 5% range and when you exclude fuel surcharge, as I already mentioned, it should be in the negative 1% to 2% range.

And is it your best guess that --?

We have several things playing in April that are very unusual that I mentioned in my comments in the conference call, Ed. We have got a 5.6% increase at this point in weight per shipment and also our length of haul was down 2%. In other words, we are growing in the shorter length of haul. Those would have a fairly, I think, significant effect on that revenue per hundredweight and at this point, it is just not clear what that effect is.

Why do you think your weight per shipment is up? I just got off UPS; their weight per shipment is down.

Certainly some of it is revenue mix, but at this point, we are comparing a partial month to a full month and I can't give you a clear answer on that at this point, but certainly some of that would be mix.

Sure. Has anybody approached you guys? We are hearing it from the other side, the customer side, for a two-year or even three-year deals and have you accepted any of those?

If it is 50% higher, we would.

So has anyone approached you and have you accepted any? It sounds like some have approached and you haven't accepted any. Is that fair?

We're not having a -- I haven't heard much about being approached on two to three-year contracts.

Okay. I don't want to beat a dead horse, but on the fuel, we came into this year and it really wasn't clear, at least to me and my team, whether fuel is going to be a negative or a positive for the LTL guys given how fast it went up. It felt like in fourth quarter it was actually a positive for most people if anything and in first quarter, it has been a big negative and I am just trying to ask you, it feels like two things have happened from fourth quarter to first quarter. The overall pricing environment, the competitive environment has gotten worse and second, fuel has spiked even further. So if you had a cap or you had someone with their own plan, you got further behind than a quarter ago. Is that a fair way to think about this or am I missing something here?

I think you are right on the money.

All right, guys. Well, I appreciate the time. It has been a long call. Thanks a lot for all the information.

Art Hatfield, Morgan Keegan.

Good morning. Thanks, guys. Just one question, I know it has been a long call, but -- and maybe this is to Earl or David -- but with all the talk of pricing in the industry and fuel going up so much and maybe what we're seeing now is a precursor to this, but we don't hear enough about capacity leaving the marketplace. Are you seeing any changes in that or do you think the current environment is a precursor to that really picking up in the second or third quarter of the year?

I am hearing the truckload carriers are exiting the scene in droves, but as far as the LTL guys getting ready to close the doors, we are not seeing anything like that, other than I believe there was a midwestern carrier that is having some real problems, but aside from them, I don't know of any.

Obviously, the USF or the YRC regional group is closing some service centers in the Gulf state region.

But outside of that, are you surprised that you're not hearing more of it? We have heard on the truckload side, but more of that going on in the LTL environment?

You have the small regional mom and pops that you really don't hear too much about and I am certain that is occurring. They have got to be faced with tremendous pressure. Small, $10 million, $20 million, but a lot of that doesn't come to the media or even come to our attention.

I would anticipate that we will see more of it in the next three to six months.

That is helpful. Thank you.

Gentleman, with no additional questions in the queue, I would like to turn the conference back over to Earl Congdon.

Okay. Well, listen, thanks to all of you for your participation and if you have any further questions, why, give us a call. Good day.

Thank you. This will conclude our conference call today. We appreciate your participation. You may disconnect at this time.