US Xpress Enterprises Inc (USX) 2003 Q4 法說會逐字稿

Good day everyone and welcome to this U.S. Xpress Enterprises conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Tripp Sullivan of Corporate Communications. Please go ahead.

Thank you. Good morning. Thank you for joining the U.S. Xpress 2003 fourth quarter conference call. On the call today will be Max Fuller and Pat Quinn, co-chairmen; Ray Harlin, Chief Financial Officer; and Bill Lusk, President of U.S. Xpress global systems operations.

Before we begin, I would like to cover the Safe Harbor language. This conference call contains certain forward-looking information that is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Without limitation, these risks and uncertainties include economic recession or downturns in customers' business cycles; rapid fluctuations in fuel pricing or availability; increase in interest rates and the availability of qualified drivers. We urge you to carefully review and consider the various disclosures made by the Company in its press releases and periodic reports on Forms 10-K and 10-Q. I will now turn the call over to Ray Harlin to summarize operating results for the quarter.

Good morning. We thank you for joining our call and we will briefly discuss the results of our operations for the quarter, and following my comments, we will be available to respond to any questions. During the fourth quarter, we continued the momentum of year-over-year improvements in the operating results of each of our business units. Overall, our consolidated revenue increased 4.4 percent to $239.6 million and our consolidated earnings increased to 2.6 million, or 19 cents per diluted share, compared to 1.4 million, or 10 cents per diluted share, in the comparable 2002 quarter, before a charge of 1.7 million related to the settlement of a litigation matter.

This represents the eighth consecutive quarter of year-over-year earnings improvements for our Company. Contributing to the growth in revenues was our truckload operations, which increased revenues excluding the effect of fuel surcharges 2 percent to 204.6 million. This increase in revenue was the result of a 4.6 percent increase in revenue per loaded mile to $1.329, offset to an extent by a 1.7 percent decrease in average tractors. Revenues in the quarter of our dedicated and regional operations increased by over 50 percent year-over-year, and together represented over 20 percent of our truckload revenues in the fourth quarter.

As we stated in our release, tractors committed to our regional and dedicated services now represent over 30 percent of our truckload fleet versus 19 percent in 2002, with a corresponding reduction in our medium- to long-haul fleet. This is consistent with our strategic plan of allocating our tractor capacity to services that we believe provide long-term growth potential and the opportunity for higher returns. The 4.6 percent increase in rates represents the largest quarterly year-over-year increase achieved in 2003. Although the shift in revenue to regional and dedicated, which tend to have higher rates per mile, contributed to the increase, the primary factor was increased rates and improved freight (ph) selection.

Although fourth quarter operating income for the truckload operations was comparable to 2002, our actual pretax operating margins improved for the year. During 2003, a greater percent of our tractor fleet was financed under operating leases when compared to the 2002 fourth quarter. The impact of this is to reduce (ph) interest expense and increase vehicle rents, which is shown above the operating line. On a pretax basis, after consideration of the impact of interest, our truckload margins increased by over 50 basis points. The improved operating margins were driven by the increases in rates, along with control over the growth in our fixed costs. The positive impact of rates and improved freight mix on our margins was offset to an extent by increases we experienced in tractor costs, fuel and insurance and claims expenses.

During the last six months of 2003, we experienced an increasingly difficult driver and other operating recruiting environment. Accordingly, during the quarter, we experienced a decline in our owner-operator fleet and our seated truck count declined throughout the quarter. This resulted in our seated truck count for the quarter averaging approximately 150 trucks, below our expectations at the beginning of the quarter.

Looking forward, we expect the driver and owner-operator supply to remain tight within the industry. To address this issue, we have initiated various programs to enhance our recruiting and retention efforts. Additionally, we announced a driver and owner-operator pay increase of approximately three cents per mile, which will be fully implemented by February 15th of this quarter. To date, we have achieved an increase of over 100 seated trucks since year-end.

As you are aware, the new federally mandated hours of service rules became effective for all drivers on January 4, 2004. During the fourth quarter of 2003, we initiated training of all of our drivers and operational personnel to ensure a smooth transition, and we are working closely with our customers to mitigate the impact. Effective January 2004, we increased accessorial charges to our customers, (technical difficulty) corresponding increase in accessorial pay rates for our drivers to compensate for the anticipated adverse impact on utilization. Although it is too early to form a definitive conclusion regarding the impact of the new rules, we have seen little disruption in our operations in January.

Now I would like to address the operating results of Xpress Global. Overall, revenue of Xpress Global in the fourth quarter increased to 36.1 million, (indiscernible) 13.8 percent over 2002. Our floor covering transportation business increased revenue by approximately 15 percent, and our airport-to-airport operations increased revenue by 11.8 percent. Operating income improved to 492,000 in the fourth quarter of 2003 versus 38,000 in 2002. The improved operating income is principally due to improved operating results in our airport-to-airport operation.

During the year, we continued to strengthen our financial position. With approximately 58 million in cash flow from operations, we reduced our outstanding debt by 21.3 million to 146.6 million. Stockholder equity increased 167.2 million to $11.90 per share, and our liquidity remained strong, with over 50 million in available borrowings under our long-term revolving credit agreement.

Now I would like to turn to our minimum goals for 2004. Absent a significant softening in the economic freight environment in 2004, which is not currently anticipated by most economists, we expect our consolidated revenues to exceed the $1 billion mark. Our revenues excluding fuel surcharges in our truckload operations are expected to increase in the range of 8 to 10 cents, which includes an estimated 4.5 to 5 percent increase in average freight per mile. We expect modest growth in our average tractor fleet of 3 to 4 percent. And in our Xpress Global operations, we are expecting revenues to increase in the 10 to 12 percent range.

Further, we expect our consolidated operating margin to improve by a minimum of 120 basis points over our 2003 margin. Achieving these minimum goals would result in earnings per share for 2004 to be in the range of 90 cents to $1 per share. We thank you for participating in the call today, and our management team would be glad to respond to any questions at this time.

The question-and-answer session will be conducted electronically today. (OPERATOR INSTRUCTIONS) Ed Wolfe with Bear Stearns.

Hello, Ray. Anybody else there with you?

We have Max Fuller, Pat Quinn and Bill Lusk.

I figured you were all there, but I got on a little late and I wasn't sure. Good morning, everybody. So, with the guidance you just gave of 90 to $1, just to kind of get a sample here -- First Call is at 11 cents for first quarter and 82 cents for the year. Is there some guidance range for first quarter how you see this --?

Fuel is putting a little bit of pressure on first quarter. We believe that a kind of a wide range at this point, 5 to 10 cents, is a reasonable estimate for the first quarter, given the fuel situation and given the severe weather we have seen in the last couple of weeks. And that compared to one (indiscernible) earnings last year.

And the 5 to 6 percent revenue per mile increase and even the 4.6 percent revenue per mile loaded this quarter, how much of that would you attribute to rate and how much of that is attributive to a change in the mix as you look forward?

That is a difficult computation, but if you go category by category, well in excess of 3.5 percent is pure rate for better freight selection within the categories. So, I would say no more than 1 percent is just mix.

1 percentage point?

Yes -- of that increase.

The driver pay, just to make sure I understood it, effective February 15th, everybody is up three cents. What is the base average that that is on?

The base including all benefits is around 40 to 41 cents. That includes all benefits.

Prior to benefits what's that?

Pardon?

Prior to benefits, what does that look like?

It's more like 37, 38 cents.

Okay. Is it for both teams (ph) and individuals?

It is for our teams, our solos, only selected dedicated accounts are affected, and our owner operators.

The accessorial increases are in addition to that?

Yes.

And those are kind of case-by-case depending on what a driver on a particular shift does.

It really depends on the type of service. If it's multi-stops, then they will see increases there. If it's because they have delayed at either the shipper or the receiver, they will receive increased money there. But in all of those cases, we have corresponding customer charges.

This might be a question for Max and Pat, but certainly for all of you. We just got a flash for January orders of 30,000 trucks. We had a 25,000 quarter last month. And yet the public guys, one by one, are telling us we are only growing the fleet a couple percentage points, like you just said. Who is ordering these trucks? Where do you think they're going?

I think what you are seeing is a lot of pent-up demand for replacement through the last 3 (ph) years, and especially with the EPA engines that came out, a lot of people delayed purchasing new equipment. And today, you probably have one of the oldest ages of equipment on the highway that we've had probably in the last 10 to 15 years. So I think what you are seeing is that pent-up demand of replacement equipment more than growth equipment at this point. And if you look at the cycle the deeper we get into it, probably the more replacement that you'll see. Because people will finally say, (indiscernible) economics are higher, their cost is higher because of the EGR or EPA engine technology, and now it is time to take the plunge because the rates have increased enough to cover that cost. Because early, obviously they had costs that they incurred that maybe the customers hadn't paid up for yet, and I think being later in that game sometimes may be a little bit better.

What kind of replacement are you planning to do in '04?

We've got a pretty minimal number of trucks that we are going to replace in '04. I think that we are in the 5 to 600 truck range at this point.

And on the trailer side?

Trailers, at this point we don't have any trades on trailers that we are trading. Everything we are doing on trailers is additional.

Ray, where did CAPEX come in the year and what is the early '04 projection?

In '04, I think we will do around 35 to $40 million in CAPEX because we will be growing our trailer fleet.

Is that gross or a net number?

That is a net number.

Where did you come in '03?

In '03, it was 23 million in net capital expenditures.

Where did the debt and cash levels end the year?

The debt was reduced by 21.3 million to 146.5, and cash flows from operations were around $58 million.

Where was just cash on hand at the end of the year?

Essentially, we keep zero balances.

Just quickly on the airport-to-airport side of the business, was it profitable for the year -- or for the quarter, I'm sorry?

Not for the year, but it did have a small contribution for the quarter, for the third quarter.

What are you seeing in terms of rates in that business? Are they still improving?

I will let Bill Lusk respond to that question.

They are up 4 percent quarter-over-quarter from a yield of 1668 (ph) in the comparable period in '02 versus 1735 --.

I'm sorry to interrupt but what does 16 and 68 mean -- that is revenue per what?

Per hundred pounds.

Per hundredweight. Okay. I'm sorry about that. That is year-over-year, you were saying?

That is right.

What was it (indiscernible) third quarter year-over-year?

I didn't hear the question.

What was the same comparison in third quarter year-over-year?

The number is actually pretty close. We implemented a fairly hefty rate increase early on in the fourth quarter. So, it is really quite comparable.

Thanks a lot for the time.

Laurie Hahn with Deutsche Bank.

Are you able to put any rough numbers on whatever hours of service impact you are seeing on utilization at this point?

Basically, at this point, hours of service, the impact is pretty minimal. The most that we have seen is really deadhead, where maybe a customer -- we have a driver close to a customer that doesn't have hours, we have to deadhead another truck in. As we get deeper into March, what you are going to see is the impact really start at that point. With capacity where it's at, and January, with freight volumes where they dip (ph) where you're at in January, you'll probably see minimal effects of hours of service.

Once you get into a period where capacity is really needed, that is where you're going to see the lid on capacity for all the carriers take an impact. So, probably in March is where you will really see that impact more so than you would see in the month of January. There has been an effect; most of it is in deadhead so far.

That makes sense. You talked about where your percentage of regional and dedicated business is now, about 30 percent of your fleet. I think you said just over 20 percent of revenue. Can you talk about kind of your long-term plans? Where you see that going as a percentage, if you've done anything on that?

We have stated -- I think we stated that last year, that we see, for example, the dedicated contract as a good business to be in. Our customers have a lot of demand in that side of the business. We have grown it considerably, and we expect it to continue to grow at a very high rate in the foreseeable -- in the next couple of years. So, we have in essence doubled it every year, and I think we will see pretty rapid growth there too. What percentage we will get to ultimately I can't really -- I wouldn't try to predict that at this point in time.

The same is true for regional. We have a lot of demand from our existing customers in the existing regions that we have started over the last three years, and I think you'll see that also slowly creep up as a percentage of our total fleet over the next couple of years.

Along the same lines, I know you did this for what you think in 2004, but can you tell us what the mix between price and mix on the revenue per loaded mile increase was?

That is a tough number, but I think at a minimum, all but one percent in my opinion was true rate increases, and maybe one percent impact of mix.

Great. Thanks a lot.

Tom Albrecht with BBT.

Good morning, guys. Let me clarify a couple of your statements and then I have comments off of those. On the guidance, Ray, that you gave, did you say overall revenue growth would be 8 to 10 percent?

Yes, I said the range of 8 to 10 percent, yes.

That included maybe three to four percent at truckload, 8 to 10 at Xpress Global?

No, I think, Tom, it was 8 to 10 percent on the truckload side, of which 4.5 to 5 percent is rate. And then 10 to 12 percent on the Xpress Global side.

That is the reason why I'm clarifying.

You would come to different numbers.

That's right. On the number of empties, you said that during the quarter you had maybe 150 trucks unseated greater than your original expectations. How many in total did you average? If it was greater than your expectations, I'm sure you were not at zero.

We usually run 100 or so trading in and trading out, so we ended up with 150 probably in excess on average, that normally we would have seated and be running and generating revenue.

Okay. Then, your tax rate for 2004, it did come down this particular quarter as your trucking profitability improved. Can we start to lower a more low 40s type of number, or should we, for conservative purposes, continue to be closer to 50 percent?

I think that given the expectations I've put out there, I think 46 percent is a reasonable expectation for the upcoming year. And the only reason that would change, Tom, is if our per diem program ramped up higher than I think it will be.

Right now, what is the approximate mix of lease versus ownership of the tractor fleet?

Just a minute. I will get that for you. About two-thirds is leased and one-third owned, financed with debt.

You did talk about your operating ratio being about 120 basis points better. I wanted to clarify, first of all, are you referring to the OR or the pretax margin in that 120?

Really I'm talking about pretax margin.

My next question would have been are you going to start to own more then, because that has been obviously a negative on the OR, even though the pretax margin has been improving.

That is why I've (indiscernible) when I say the 120 basis points is at the pretax level.

What areas do you feel confident in terms of expenses you are going to be able to see improvement in, either in absolute dollars or as a percentage of revenue? I would assume first of all that labor would not be one of those, but as you survey the landscape and look to improve margins, what can we -- what areas can we look for some improvement in?

We have brought down the average age of our fleet over the last 18 months, and we are starting to see the improving trend in our maintenance line. So we should see that as we go throughout the year on the upcoming part of the year. I think that we will also see improvements in our insurance and claims expense. As we talked about in the third quarter, we had a large accident, and our fourth quarter provision has a little bit of catch-up in it based on growth in claims. And I think we will say with improved utilization and higher volume that we're talking about that we will seem on a per-mile basis that we will actually see a decline in our insurance and claims expense. Our fixed overhead, I think we have good controls in place, so therefore, you will not see that grow as a percentage of revenue growth, which will increase our margins. So, those are a few areas that I think we have significant opportunity.

Okay. Then, refresh my memory on your SIR (ph) for insurance, is that 1.5 million or what is it and when is the next renewal?

The next renewal would be September 1 of this upcoming year. We are at, on liability, a $2 million deductible, and on workmen's comp, we are at a $250,000 deductible.

Okay. All right. I guess, Max, maybe for you. You talked about the hours of service impact and the biggest thing so far has been a deterioration in the deadhead. I guess, could you give us a little more flavor on other metrics you are looking at, either in terms of mileage, miles per truck, if there's a two or three percent hit. I know one carrier was sharing the example that if you look at the average miles per hour per truck, including loading and unloading, they had seen a couple of mile per hour deterioration. Any metrics you can share with us would be appreciated.

We have been looking at all of the statistics to see where the effect is. So far, the only thing that we have really seen is deadhead. We do anticipate some impact; as we get into higher utilization levels, there will be a negative impact because we will hit that inflection point. But at this point, utilization seems to be fairly decent for January. Obviously, we aren't running against the wire. So we're not going to have those impacts at this point. But we do anticipate a fairly sizable impact once we get into March.

I think that is sort of the role of the dice here right now in some respects. As the year goes on, I clearly see the momentum shifting to the carriers, but I'm wondering if in March and April, as things tighten up, if there isn't still a little bit of a lag between you getting paid to offset this productivity. What is your best read right now, given the fact that it is only February 3rd?

If you look at the accessorial charges that we put into effect in most cases January 2nd, we are able to collect those, and we are actually starting to see some of those most abusive customers start to clean up some of the abuses they did of us and our drivers. You have also -- we have had conversations with customers where if they don't clean their act up, we won't give them a truck at any cost. So, I think as those continue to go forward, you'll see some of the negative effects that the hours of service will create, but then you'll see some positive effects that kind of offset some of those negatives. Who knows what the ultimate answer is. I think we will have to get into a high utilization period to see what size negatives are actually there.

The way this thing is playing out, it's almost perfect, because we are able to drive customers to clean up their issues before the impact is really hitting us. So we've got January and February theoretically to clean that up and then the impact hits in March, and hopefully, we have minimized that impact before we get to it.

I think we have all -- we have actively gone to all of our customers or all of our major customers and already had this discussion of accessorial, we've already made the changes that need to be made to help cover the impact. So we have seen it already in some of the numbers in January as far as the billings for accessorials, and I think by March we will have that part of it covered.

The acceptance rate has been in excess of 90 percent of the customer base.

So let's say that the rejection rate is seven or eight percent. What are these folks saying? I mean they're saying, we are not going to pay this yet, or we are not going to pay it at all? What could they possibly say in this environment?

They say both, but like Max said, those are the people that are volunteering to not have capacity as the market tightens (ph).

(multiple speakers) saying wait and see. And we basically say, okay, we will wait and see. We will wait to give you a truck and we will see if you fail (ph).

That is the wise approach. Two last questions. Ray, what is your average cost of debt right now for the actual interest expense line?

About 5.5 percent is (ph) our weighted average.

All right. In the regional, dedicated arena, you did mention capacities close to 30 percent there now on a run rate revenues 20 plus percent, but is that closer to 20 or is that closer to 30 on that revenue figure?

On the revenue figure? I think what we said was that it ran -- the combined revenue was about 26 percent for regional and dedicated. And I think we will see that get over 30 percent, especially by the second quarter.

Okay. Good. That's it. Thank you for the time.

Donald Broughton with A.G. Edwards.

Good morning, gentlemen. Nonfuel accessorial revenue. How much of it did you collect in 2003?

We have not reported that number historically, so I do not have that at my fingertips.

How much would you guess as a percentage of line-haul revenue it is? Is it a one percent kind of a number?

It's probably around 2 cents a mile. 1.5 to 2 cents a mile.

Off-balance sheet debt leases. I know you have been leasing more trucks.

Yes, we are about 155 million.

At about 155 million as of the end of the year?

(technical difficulty) values.

Right. And average age of your trucks now stands at --?

Average age now is approximately 22 months.

All right. I heard you say 5 to 600 trucks are going to be replaced in 2004, and a 3 to 4 percent growth in fleet size. Did you specify whether that was Company or owner-operator, or did I miss that?

We did not specify.

So a combina --?

It's probably a combination. My preference would be owner-operators but it's a tough market.

Understood. Understood. All right. Thanks, gentlemen. Good luck.

Michael LaTronica with Excalibur Research.

Good morning, gentlemen. Great quarter. Congratulations. Most of my questions have been answered, but I do have a couple. Max, could you talk a little bit about your experience with the trucks, the new engines, as far as it relates to fuel economy and maintenance cost and things of that nature so far?

We have had quite a few (ph) issues with the new engines. The biggest issue is up-front cost being $3000 to $4000 more. Second issue is fuel economy. This is true for both the Cummins and the Detroit engine. We seeing degradations in the 8 to 12 percent range on fuel economy. We have actually done controlled SAE tests to verify that. We verify it into 7 to 8 percent, which kind of supports what we are saying in real life, because we will usually see 2 to 3 percent worse economy from a control test once would put it into real life. So, fuel is an issue.

We are also seeing another problem of failures which a truck will go into the shop; there will be a problem not found. And what we are finding the issue is, the engine manufacturers put most of the control parameters on the emission (ph) so tight that it's causing a lot of error codes in the engine module which basically derates the engine. Once the engine is derated, then the driver feels like there's something wrong, so he carries it into a shop. The shops are not trained to be able to really identify all of those different error codes and what to do about them, so when they reset the computer, the problem goes away until the next time the number of error codes builds up and it derates the engines. So we have had a lot of issues.

The (indiscernible) engine appears to be in one -- and this wouldn't qualify for an SAE Test because we ran against a Detroit 60 series that at 50,000 miles (indiscernible) -- it was a brand-new truck, brand-new engine, with less than 1000 miles. That engine showed almost one percent better than what (ph) Detroit was showing. So, that sounds pretty positive. But, this EGR engine technology, the EPA engines have been a real issue, especially for people that have bought the number that we bought over the last couple of years.

I want to make sure I understand this very clearly now. What you're getting when you going to the shop, are they false positive readings -- is that what you're saying?

They are true readings, but their readings because some of the emissions parameters are so tight. And then I think the engine module can hold -- I have heard this -- 260 error codes, and once it gets to that point, it derates the engine. It is assuming there is some error that is not being repaired, so it derates the engine. The driver sees that as a problem because he doesn't have full power, and it goes into a shop and then the shops really aren't good at diagnosing the issue.

Are the manufacturers addressing that for you?

They like to say that they aren't seeing that problem.

Oh.

But they don't run trucks like we do either. So --

Right. Okay. One other thing I wanted to ask about has to do with the current tightening of capacity and whether you are seeing spot market opportunities that you wish to capitalize on?

We are seeing tightening in a lot of markets -- midwest; we saw a lot of tightening on the West Coast; the Southeast, which is a little bit uncharacteristic of January, is relatively tight. So, the biggest area that we have issues right now is the Northeast. But we are seeing tightening of capacity; we are seeing customers that are wanting commitments from us on capacity. They are obviously seeing it in different areas of their business. And we are getting probably the most generous rate increases we have gotten in our history. So, Pat, do you want to respond to that?

No. I think that is a good analysis of where the competitive factors are at today.

Then if we are not up against a wire yet in this quarter, in the first quarter, are you allocating some resources, some assets to the spot market?

In the very few instances we are, but most -- you have customers that are paying for the capacity.

Right. Okay.

I think as we get into late February and early March, we will see that inflection point that hours of service is creating, and then you will capacity get real tight as we get deeper into the quarter.

I understand about the mix shift that has taken place, but just for historical reasons, could you give us what your average length of haul looks like in this quarter?

About 750.

750?

Yes.

Okay. That does it for me. Thanks again, gentlemen. Good quarter.

Patrick Newton (ph) with Stifel Nicolaus.

Patrick How are you doing, gentlemen? Just a couple of quick questions for you guys. First of all, you said that your insurance and claims expected to decrease over this upcoming year. I was wondering if you have any kind of number expectation?

I am (indiscernible). I would expect our insurance and claims to come down from what it's been in the second six months of this year by anywhere from (indiscernible) per month.

I'm sorry. I couldn't hear over those coughs.

By 2/10 to a 0.5 cents per mile for the total year.

All righty. Lastly, I guess I probably should have this number, but what is your trailer to tractor ratio at this point?

It is right around 2.7 at this point in time.

All righty. That is all the questions I have for you gentlemen. Thank you.

Tim O'Toole with Delta Management.

Nice quarter as well. I think you mentioned that your average rates on the debt currently are I think in the mid 5s. Have you done anything to lock in rate structures at this point? Where are you, what is your thinking there? And I guess maybe you could talk about what you -- how much incremental that you might be able to pay down over the course of the current year?

From the standpoint of our debt structure, a large majority of our debt, because it's in our revolving line of credit, is fixed rate debt. And the average age of it probably goes out for 2.5 years or so. I don't have the exact average age. So, we are in pretty good shape from that standpoint. It would take a while for increased rates to impact us, especially with our CAPEX plan for next year. The other question related to --?

Essentially, you were able to pay down, I think, 20 some odd million last year. The CAPEX program is going up a little bit this year, so it's probably going to be reduced some. But I'm getting numbers that sort of look like 15 million or something incremental?

It could be 10 to 15 to 20 million. But I also plan on making switches from leasing, as we have some leases maturing off the owned equipment and we haven't decided that. But overall, our debt (indiscernible) on balance sheet and off balance sheet should come down in the 20 million plus range this year.

Okay, maybe as much as 20 million again. Great. One question -- this is kind of a -- as I look at the stock and I actually am an owner here, the stock would probably be trading at least a few points more, a few multiple points more on valuation, I think, given the current state of the industry, the current state of the operations, if people could get more comfortable with the overall liquidity. Are there any plans -- what would take for you folks to kind of help the liquidity in the market by kind of unlocking some of the insider holdings or taking whatever steps you might be able to take to try to get a broader base interested in the stock?

Obviously, we understand liquidity is an issue in our stock in the marketplace. And as you are aware, our two co-founders own over 60 percent of the outstanding stock. In addition, I think that it is clear that at some point in time, raising capital and diversification for our two co-chairmen would make some sense. However, we also believe that the value of the stock at this point in time does not warrant that, and we are just going to see where we go from here.

That is a little bit of a chicken or the egg quandary or something --.

Yes. I think our stock has been trading in the range of 13 to $14. We have issued what we consider to be minimum guidance today. I think the industry fundamentals, once we get over the changes that have taken place, are improving significantly. So, I think now is not the time, so to speak.

I know it is a bit of a balancing act, but I thought I would get you to speak about it a little bit. Thank you very much.

Ed Wolfe.

Two follow-ups. The Company-owned tractors ended the quarter at about 4500. Roughly how many of those are environmentally compliant, post-October engines, at this point?

Around 1300.

Can you talk a little bit to -- that's 1300 at the end of December?

Yes.

Can you talk to a little bit about fuel and the impact in the quarter?

Fuel, it was a slight negative impact. It is not enough to say that it adversely impacted the quarter.

If oil stays -- or diesel fuel stays -- where are we? $1.50?

$1.58 on the BOE (ph) end.

Let's call it even $1.50 for the year. Is that an impact that you can pass through at this point or is it at that point there is some negative impact?

The key is to the extent of how it acts. If it just would stay here and continue here for the rest of the year, that's a manageable situation. It is (indiscernible), and right now, it seems to have leveled off.

So you can overcome at these levels the 10 percent deadhead rate with the surcharge mechanism is set up?

That's correct. Once it stays at a level for a period of time, we can adjust.

What hurts is when it goes up slow and comes down fast, you don't recover 100 percent. And that is typically what happens.

Okay. Thank you very much again.

Donald Broughton.

What was the question here? I got lost in his question. That pretty well answered it. Never mind. Thank you very much.

(OPERATOR INSTRUCTIONS) There appear to be no further questions at this time. Mr. Harlin, I will turn things back to you.

We want to thank everybody for attending the session and we look forward to next quarter. Thank you very much.

That does conclude today's conference call. Thank you for your participation.