Saia - Q4 2014

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome to the Saia, Inc. Fourth Quarter 2014 Results Conference Call. Today's conference is being recorded, and at this time, I'd like to turn the conference over to Mr. Doug Col. Please go ahead, sir.

Doug Col (VP and Treasurer)

Thanks, Greg. Good morning. Welcome to Saia's fourth quarter 2014 conference call. Hosting today's call are Rick O'Dell, Saia's President and Chief Executive Officer, and Fritz Holzgrefe, our Vice President of Finance and Chief Financial Officer. Before we begin, you should know that during the call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. Now, I'd like to turn the call over to Rick O'Dell.

Rick O'Dell (President and CEO)

Well, thank you for joining us to discuss Saia's results. I'm pleased to report that Saia finished off a record year in 2014 with solid fourth quarter results. To produce both record revenue and earnings in our 90th year of operations is a testament to the hard work and talents of the entire Saia team. Some highlights from the quarter compared to the fourth quarter of last year include the following: total revenue increased 10.7% to $310 million, LTL revenue increased 10.6%, LTL tonnage rose 4.3%, purchased transportation as a percentage of total line miles decreased for the second quarter in a row to 12.5%. Our operating ratio of 93.4 improved by 130 basis points.

Our operating income grew 40%, and our earnings per share were $0.53 compared to $0.32 a year ago. In the fourth quarter, we continued to focus on providing best-in-class service to our customers, as demonstrated by our consistent 98% on-time service performance. Our 6% increase in LTL yield in the fourth quarter was primarily driven by contractual increases, but also benefited from our increased usage of dimensioners across our system and continuous revenue mix management. Yield gains are further evidence that the value proposition offered by Saia continues to resonate with our customers, and this marked the 18th consecutive quarter of improved yield. Looking back on the full year, I'm pleased that we were able to overcome a number of challenges, including accident severity, service disruptions due to weather and increasing costs of incremental capacity.

We experienced higher-than-expected costs for purchased transportation and labor in a capacity-constrained environment. And while we were willing to add these costs to maintain quality service for our customers, it did serve to reinforce the need to raise prices and make sure that all of our freight yields an adequate return, particularly, again, in this capacity-challenged environment. I'm sure that you'll note that our yield trends and incremental margins improved materially in the second half of the year. A few highlights from 2014, which should continue to benefit both service and profitability in 2015, are as follows: LTL tonnage grew 6.3% for the year, indicating that our value proposition continues to be recognized and accepted by our customers.

Our LTL yield rose 4.4% in 2014 through a combination of contractual rate discussions, which increasingly include targeted increases on unprofitable lanes, as well as a general rate increase of 4.5% that was implemented on April 1. An increased use of dimensioners in 2014 aided yield improvement, and in 2015, we'll have 30 dimensioners operating in strategic terminals to ensure that freight classification is accurate. Our line haul fleet is now 100% equipped with logistics post trailers, and our load average for the year improved by 1.7%. The uniform fleet promotes repetitive loading techniques, which should lead to continued improvements in load average and cargo claims experience. And to support our company-wide commitment to a best-in-class cargo claims ratio, we continue to invest in equipment and training.

For example, we've recently implemented airbag systems on the docks at all of our major terminals and have portable inflation devices on forklifts in the smaller terminals so that airbags can be used in every facility. We also doubled the number of regional claims managers to ensure that proper loading and unloading techniques are uniform across our network. We've also increased our regional safety staff, giving us more training resources and increasing the opportunity to have daily interaction with our drivers, making full use of all the additional data points available for our in-cab technology to prevent accidents. Our fuel efficiency improved by 2.5% for the year to 6.6 miles per gallon, driven by our investment in ongoing driver training, new tractors, and in-cab technology.

And finally, through the fourth quarter and early into the first quarter of this year, we've increased our field sales force by 8%, positioning ourselves to continue to seek out customers who value our service proposition. Furthering our yield enhancement efforts, in early January, we implemented a 4.9% general rate increase. We believe that we are competitively positioned to grow our market share. However, I would say we're committed to progressing toward industry-leading margins and will forsake tonnage growth for the opportunity to improve margins through yield improvement. Now I'd like to have Fritz Holzgrefe review our fourth quarter and our full-year results. Fritz?

Fritz Holzgrefe (VP of Finance and CFO)

Thanks, Rick, and good morning, everyone. As Rick mentioned, the fourth quarter 2014 earnings per share were $0.53 and include $0.04 related to tax credits for the full year that were not enacted until the fourth quarter. For the quarter, revenues were $310 million, with operating income of $20.6 million.

This compares to 2013 fourth quarter of $280 million in operating income of $14.7 million. Both periods included 62 workdays. As Rick mentioned, LTL yield for the fourth quarter 2014 increased by 6%, which primarily reflects the favorable impact of continued pricing actions, consistent with the trend of the past several years. Our industrial engineering initiatives are driving productivity improvements, and our incremental margin improved with the added density in our network. Now I'd like to mention a few other key expense items from the fourth quarter results. Salaries, wages, and benefits rose 13% to $163 million in the fourth quarter, reflecting additional headcount and wages associated with maintaining service levels on higher tonnage trends, and also a midyear wage increase of approximately 3%, as well as ongoing benefit cost inflation.

Purchased transportation expense for the quarter rose $4.3 million compared to last year, but as mentioned earlier, purchased transportation miles as a percent of total line haul miles was down sequentially from the third quarter. Depreciation and amortization of $14.8 million compares to $13.8 million in the prior year quarter due to continued investment in tractors and trailers, resulting in a newer fleet. Claims and insurance expense was $6.9 million in the quarter, compared to $7.4 million in the quarter last year. For the full year, revenues were up 11.7% to $1.3 billion, while operating income of $85.7 million was 15.2% higher than the $74.4 million posted in 2013.

In 2014, net income rose 19.2% to $52 million from $43.6 million earned the year before. Diluted earnings per share were $2.04 versus $1.73 in 2013. Our effective tax rate was 30.8% for the fourth quarter of 2014, and 36% for the full year. At December 31, 2014, total debt was $82.9 million, net of our $4.4 million cash balance at year-end. Our net debt to total capital was 17.6%. This compares to total debt of $76.9 million and net debt to total capital of 20.1% at the end of 2013.

Interest expense for the full year was $1.9 million, lower than in the prior year. Net capital expenditures for 2014 were $112 million, including equipment acquired with capital leases. This compares to $122 million of net capital expenditures in 2013. In 2015, the company currently plans net capital expenditures of approximately $125 million. This level of investment reflects primarily the replacement of revenue equipment, several real estate projects, and investments in technology. Now, I'd like to turn the call back to Rick.

Rick O'Dell (President and CEO)

Thank you, Fritz. We exited 2014 well-positioned for further margin improvement and earnings growth in the coming year. I believe our ongoing investments in technology and quality will allow us to continue to offer a service level that our customers find to be unique and valuable. And finally, I believe that this consistent strategy provides a strong foundation for long-term profitable growth and increased shareholder and customer value. With these comments, we're now ready to answer your questions. Operator?

Operator (participant)

If you'd like to join the queue for questions, please do so by pressing star one on your telephone keypad. If you're joining us with a speakerphone, please make sure that your mute function is turned off to allow that signal to reach us. Once again, that's star one for questions, and we'll pause for just a moment to allow everyone the opportunity. All right, and first, from Wolfe Research, we'll take Scott Group.

Scott Group (Managing Director)

Hey, thanks. Morning, guys.

Rick O'Dell (President and CEO)

Morning, Scott.

Scott Group (Managing Director)

So, Rick, you talked about you feel, like, positioned well for margin improvement and earnings growth. Obviously, there's a concern about the impact of lower fuel and what it means for LTL profitability and earnings. Can you talk to that and what kind of potential earnings headwind that is and what you're doing to offset that? And I guess we'll go from there.

Rick O'Dell (President and CEO)

Sure. Well, obviously, we have a large variety of fuel surcharge programs within our customer base, and, you know, historically, you kind of really don't care whether I get a yield out of a fuel surcharge or a base rate, you know, as long as the account makes money. You know, these programs vary price with fluctuating fuel prices, so it's generally fair to customers and the company over a period of time. But when you kind of have a macro change in fuel prices or a material change, you know, which has happened recently, you know, some of the programs or accounts really have to be reevaluated to ensure that the combination of base rate and the surcharge revenue that you're currently generating, you know, versus your costs, are generating adequate margins.

So, you know, it really kind of forces us to look at kind of what the impact is on account-by-account basis, what's going on, and what changes we need to make, you know, in base rates or change the surcharge function, you know, to make sure that, you know, we don't—we, that we didn't. Now, you know, the combination of base rates is too low because, you know, you potentially had some margin in the surcharge. So, you know, the positive side of that is the customer's fuel surcharge is down 4%. You know, he's seeing a reduced cost, so sometimes it's easier to go and get, you know, a bigger base rate increase. Let's say you go to them for 7%, you know, it's really net-net.

For budgetary purposes, it's only a 3% increase from a cost standpoint. And, you know, sometimes that's tolerable for them. And, furthermore, don't forget that you know, most customers, TL spend just dwarfs their LTL spend, and those surcharges have come down even more than that. So to the extent they have a transportation budget, you know, they have a way favorable variance that, you know, we can, if we need to make some adjustments because the account's no longer profitable, you know, because of some change or it isn't generating appropriate margins, you know, we're in a position to go do that, and sometimes they have a better budget tolerance. So, you know, it's the pros and cons of this. I think when you it's fair, and generally it works, particularly at the increment.

You know, when you see a macro shift with this, sometimes you have to go back and look at these mechanisms because they're all a little different.

Scott Group (Managing Director)

Is what you're saying is, it's an issue, but the pricing is good enough right now where we can actually put in more pricing than we were thinking and make ourselves whole?

Rick O'Dell (President and CEO)

Well, we, you know, we kind of changed our targeted pricing philosophy in the second half of last year because we felt margins weren't adequate, given some of the capacity constraint costs that we were seeing. So we've been getting some substantially increased yields during that time period, and, you know, we would expect to continue that. And if that needs to step up a little bit because an account doesn't operate because of a fuel surcharge function, then, you know, we'll change the targets again.

Scott Group (Managing Director)

Okay. So maybe just the last question for me. I think you guys have talked about trying to get to a low 90s, maybe even a high 80s operating ratio over the next couple of years or two. Does this lower fuel environment change any of that, make it tougher, easier? Is that still the goal?

Rick O'Dell (President and CEO)

I don't ever remember this business being easy or anything about it necessarily, but maybe that part I've just forgotten or something. But you know, it's always... You always have your challenges, and I think what I would say is, you know, we're familiar with the pricing fundamentals of our accounts. We have a good profitability management model, and you know, we have a history of managing for yield effectively, and you know, we're going to continue to do that. It hasn't changed my opinion on that opportunity. And you know, fuel prices declined in the fourth quarter, and I thought our margins were pretty good in the fourth quarter.

Scott Group (Managing Director)

Yeah. Okay. All right. Thank you. I'll pass along.

Rick O'Dell (President and CEO)

All right.

Operator (participant)

Next, we have Brad Delco from Stephens.

Brad Delco (Managing Director)

Yeah. Good morning, Rick. Morning, guys.

Rick O'Dell (President and CEO)

Morning, Brad.

Brad Delco (Managing Director)

Rick, I wanted to ask you, one of the data points that came out in the results was weight per shipment. It was down 2.7% year-over-year, but looks like it was roughly flat sequentially. Can you talk about, you know, the drivers of that? And is there any concern that you're seeing less shipments from your customers, that there are signs of a slowing economy?

Rick O'Dell (President and CEO)

You know, I don't know, to be honest with you, we've been pushing so much on the yield over the second half of the year, and I can tell you that I, I personally think it's more business mix. But until you saw everyone's results, you know, you might be able to get something out of the marketplace. Obviously, we're, I think we're the first LTL company to announce, so. But I would tell you specifically, in the middle of the second quarter, when we were really having some pretty serious capacity constraints, and incurring a lot of high-cost purchased transportation, we, we changed our spot quoting, for pricing dramatically, and that volume for us was down pretty significantly. So, and there's a lot of those shipments.

They average about 8,000 lbs, and there were a lot of shipments in that 5,000-10,000-lbs category that impacted our weight per shipment when we changed our pricing philosophy on that. You know, it was about 1% of our revenue, but it was a much higher percentage of our tonnage. And, you know, my philosophy was, there's no reason to discount my LTL rates, you know, in a time when you're capacity challenged. So we, we kind of quit, quit doing that spot quoting to the degree that we were, actually dramatically changed our pricing, and the revenue in that segment kind of got cut in half. And then secondarily, I think, we're repricing very aggressively, hazardous material shipments. And those chemical shippers and people tend to be much higher...

Industrial shipments tend to be your higher-weighted shipments, and we've seen some decline in our shipment count due to that repricing. And obviously, in a challenged driver market, you know, truckload, hazmat capacity is more challenging to get than what it used to be. And we think those guys, you know, have to pay their fair share for us handling those hazardous materials. So I think that's had some impact on some of those heavier-weighted shipments as well.

Brad Delco (Managing Director)

No, that's good color. And then maybe just one more quickly on the yields. Yields up 6%, I think, were well above our expectations. Can you kind of quantify for us what the impacts were of maybe mix, length of haul, and then also fuel? Because I would imagine fuel coming down would have pressured that, so it could make those yields look even better.

Rick O'Dell (President and CEO)

Yeah, I mean, we... Again, we have that theoretical model that adjusts for length of haul, weight per shipment, and fuel surcharge. And we show that our yields were up over 5%, adjusted for weight per shipment and length of haul. Right, our length—both our length of haul and weight per shipment went up. And I think that same comparable number from the third quarter was 4%, so our true yield trends went up 1%. And contract renewals were very favorable in the quarter, and we would expect that yield momentum to continue, if not to continue to accelerate.

Brad Delco (Managing Director)

Got you. Well, I appreciate that. Thanks, Rick, and appreciate the time.

Rick O'Dell (President and CEO)

All right, great. Thanks.

Operator (participant)

Next, we have Bill Greene from Morgan Stanley.

Bill Greene (Managing Director)

Hi, good morning. Rick, I wanted to ask you a little bit for some color on how to think about what all these moving parts, the efforts on yield, the fuel surcharges, and how those are changing, and, of course, the mix effect. Typically, we think that the OR in the first quarter will be a little bit worse than the fourth quarter. But can you offer any color there about how to think about these moving pieces and how it could affect it?

Rick O'Dell (President and CEO)

Well, we think because of our yield momentum, we would expect our OR to improve from 4Q to 1Q, even though 4Q was pretty good. Historically, you tend to have a lot of swings between first quarter and fourth quarter, and it depends on certain dynamics in the quarter, particularly can be impacted by weather. And, you know, we were fortunate to kind of avoid a lot of weather issues in the fourth quarter and had good... You know, shipment counts were up 7% range. You know, it's a pretty favorable quarter for us, but, you know, due to the yield momentum that we have, there's a general rate increase in the first of January and the favorable contract renewals that we have, you know, our outlook is to improve the OR from that in the first quarter.

Bill Greene (Managing Director)

Good. How does the tonnage growth? I might have missed that. You might have said how January tonnage was.

Rick O'Dell (President and CEO)

Yeah, Fritz will answer that.

Fritz Holzgrefe (VP of Finance and CFO)

Yep.

Rick O'Dell (President and CEO)

Oh, sorry.

Fritz Holzgrefe (VP of Finance and CFO)

So if you look at... Yeah, no worries. If you look at sort of year-to-date through January, shipments were up modestly, but one trend we do see so far in January, we see weight per shipment down. So overall, tonnage is down modestly year-over-year, but I think you got to keep that in the context of what Rick described around all of our emphasis on yield and the January GRI.

Bill Greene (Managing Director)

Yeah. Now let me just clarify one thing then. So Rick, in your comments, you sort of said, "Hey, look, we're willing to forgo some tonnage insofar as we're becoming more profitable in the tonnage that we keep and whatnot because of the yield focus." So is there a level where we'd worry about demand? Is there, like, does the operating leverage of the business start to kick in at a, I don't know, down 2 or 3 tonnage or something like that? Or are we so far from this because of the yield environment, we don't have to yet worry?

Rick O'Dell (President and CEO)

Yeah, I don't... You know, to me, flat shipments to, you know, down a couple percent, if you can get, you know, mid or high single-digit rate increases, would have a meaningful improvement on our operating ratio, particularly with some of the, you know, efficiency initiatives that we have at the company. So, you know, I, I think it's, we're, we're pretty focused on getting to this eighties, eighties operating ratio, as opposed to just growing. You know, we grew significantly last year, and I wasn't very happy with our margins, so, you know, we've kind of changed our focus to a pricing and yield management story. And, you know, at this point, you know, the demand environment seems solid enough, that we've been able to be pretty successful getting rate increases.

What we tend to see, we go to customers for a meaningful increase, you know, there's a segment of their business that operates okay, and then there's a segment of their business that operates very poorly. I mean, we don't just take 5% on the account overall. We're taking 5% in one, and then some lanes might be 15%, 20%, and then we're going to find out whether we get that business repriced, or if not, it comes out, you know, it's operating in a head haul lane out of Chicago, then the costs come out.

So, you know, part of what we're seeing is a combination of effective yield management and effective line haul network optimization, that some of the suboptimal costs that we saw last year, you know, get reoptimized and/or the business gets reoptimized as well.

Bill Greene (Managing Director)

Makes a lot of sense. All right, listen, thank you for the time and insights. Appreciate it.

Rick O'Dell (President and CEO)

Thanks.

Operator (participant)

Next, we have Art Hatfield from Raymond James.

Art Hatfield (Senior Equity Analyst)

Hey, hey. Morning, everyone.

Rick O'Dell (President and CEO)

Morning, Art.

Art Hatfield (Senior Equity Analyst)

As I think about the big picture, and I think about 2015, you know, if I look back the past couple of years, you know, I go back to 2013, you had modest growth, you know, no tonnage growth, but you had good yield improvement, but and you had good improvement in the OR. In 2014, you had great top-line growth, but the OR didn't move that much. Can you help? And you've kind of talked around this, but can you talk more specifically about how you think about that balance in 2015 and beyond, for the company?

Rick O'Dell (President and CEO)

Well, there's always a balance. You know, I mean, we wouldn't do well, you know, down 7%-8% in tonnage. And, you know, you'll see, obviously, you know, we're investing in sales resources, particularly in field sales. But, you know, there's a segment of our national account business that we see a big opportunity in where we still don't have the pricing right, particularly in today's, you know, higher cost environment. And I think we're going to see some inflationary cost pressure from driver wages, and we all know that, you know, absent fuel, the truckload market is, you know, increasing costs. And I think there's no signs that the rails are going to back off on the intermodal service, a portion of our line haul costs.

So, you know, we see that we need to be properly compensated for what we do, and I'm not very satisfied with where our margins are. So, I mean, it's always a balance, but we're working diligently on business mix management in conjunction with our cost initiatives. And, you know, I think the environment's pretty good for that. I mean, with the wage increases people are doing and, you know, with some of these other external factors that are going to be inflationary, our rates compared to our value proposition at a certain segment of our customer mix needs to be repriced, and, you know, we're prepared to do that, and we think the environment is good for that.

Art Hatfield (Senior Equity Analyst)

Right. That's helpful. Just one other question. You know, obviously, the term of the day is energy exposure. I know that's two words, but energy exposure. So can you talk about a little bit about what maybe your exposure is to the energy industry, one? And two, if we do see a reduction in production in that environment, is there anything in there that could help you on the cost side, i.e., a little bit less pressure on the labor side?

Rick O'Dell (President and CEO)

Obviously, you know, some of the oil field markets have driven up a demand for drivers, and we were in some of those places like Odessa, Texas, and paying signing bonuses and things like that. You know, that, that should kind of mitigate some of those types of things from a driver availability standpoint. And then, just from an exposure standpoint, if you just look at it off of, you know, ZIP codes, figure out kind of what, what the customer mix is, we have about 8% exposure to energy overall. And, you know, I think the other comment, though, we all have to look at when you talk about the economy is, you know, with the fuel prices coming down, a lot of people's disposable income is going up dramatically, too. I guess no one wants to talk about that?

Art Hatfield (Senior Equity Analyst)

Apparently not.

Rick O'Dell (President and CEO)

Right.

Art Hatfield (Senior Equity Analyst)

But I think you're on the right track with that. I appreciate the time today, Rick.

Rick O'Dell (President and CEO)

All right, thanks.

Operator (participant)

Next, we have Jason Seidl from Cowen and Company.

Jason Seidl (Managing Director)

Hey, Rick. Hey, guys. Hope all is well. You know, just kind of sticking with that on the exposure side, what's the breakdown for you guys between industrial manufacturing and retail right now?

Rick O'Dell (President and CEO)

We show it's about 40% retail, 40% industrial, and kind of 20% is distribution, but I don't know which category you put the distribution side into, but that's kind of what. That's kind of the mix that we have had for some time.

Jason Seidl (Managing Director)

All right. And the decline into January and the weight per shipment, do you think, have you seen a drop-off in sort of on the industrial shipment side because of the strong dollar? I know I've had a couple clients asking me about that.

Rick O'Dell (President and CEO)

Yeah, I don't know. I mean, the majority of our decline in weight per shipment is purely in this 5,000-10,000 lbs segment. So again, I don't know how much of that is-

Jason Seidl (Managing Director)

You take that from the hazardous materials?

Rick O'Dell (President and CEO)

Is because of our hazmat pricing and/or because of our and/or because of the spot quote pricing change that we made.

Jason Seidl (Managing Director)

Okay. Well, that, that's fair enough. And I, I guess my, my next question is on the, the dimensional equipment. You said, I think you said 30% by the end of the year is, is where, where you guys are going to be? I'm, I'm just looking for some clarification on that.

Rick O'Dell (President and CEO)

No, we had... We went from 27% at the end, in the fourth quarter of last year, to 30%. They've actually all been installed. The additional three have been installed in January, and we were just looking at, there are some lanes that, freight travels through and didn't have the opportunity to put through a dimensioner. But, your other number is actually right as well. We currently run about 30% of our shipments go through the dimensioners.

Jason Seidl (Managing Director)

Okay. You said that probably had a positive impact on your revenue per hundredweight, but it was just hard to pull out, correct?

Rick O'Dell (President and CEO)

It does. I mean, as, obviously, as we get the more accurate class over a period of time and the density, you know, in some cases, you can change the bill depending upon the customer's pricing program. And in other cases, you know, we have a more accurate measurement of the density to apply to their profitability model, and we go to them and say, "You know, we've historically thought your density was, you know, 9 lb/cu ft, and it's really 11. Therefore, there's a 20% change in your line haul costs, and we need to be compensated for that.

Jason Seidl (Managing Director)

Okay. Well, perfect. That's all I have for today. Thanks for the time, as always, guys. I appreciate it.

Rick O'Dell (President and CEO)

Thanks.

Operator (participant)

Next, we have Tom Albrecht with BB&T Capital.

Tom Albrecht (Analyst)

Hey, guys.

Rick O'Dell (President and CEO)

Morning, Tom.

Tom Albrecht (Analyst)

Good morning. Can you walk through the LTL tons per day, October, November, December? And then I wanted to follow up on Fritz's January comment.

Fritz Holzgrefe (VP of Finance and CFO)

Sure. If you look at our LTL tonnage year-over-year, October through November, December, you'd see up 6.4% in October, 3.9% November, 2.7% in December. So for the quarter, those are the elements.

Rick O'Dell (President and CEO)

Yeah, and just for clarity, though, if we, if we were, everyone remembers, it was a year ago when the Vitran Central Transport merger took place in December, and we saw a significant step up in tonnage in from mid-December into January of last year. So the comps get more difficult, so I don't, I don't know that, you know, this. What we've kind of saw through the quarter was actually, I thought December was stronger than I would have thought that it, that it would have been given kind of where we were in, in, in 2Q.

Tom Albrecht (Analyst)

Okay, and then just to make sure I understood what you were saying earlier, Fritz, were you saying that tons were down about 2% in January, and shipments are up, like, 1%?

Fritz Holzgrefe (VP of Finance and CFO)

Yeah, it's shipments were up a little north of 1%, and then adjusted for the January second sort of quasi-holiday there. And then you look at the tonnage were down sort of a little around, right around 1%-1.5%. So net-net, yeah, you kind of shipments up, tons down, so its weight per shipment is down.

Tom Albrecht (Analyst)

Right. And then, what was your fuel surcharge as a percentage of revenues? I know you give that every quarter in the quarterly filings.

Fritz Holzgrefe (VP of Finance and CFO)

No, we don't, we don't break out fuel surcharge separately.

Tom Albrecht (Analyst)

Okay. And then where did healthcare finish 2014?

Fritz Holzgrefe (VP of Finance and CFO)

Total healthcare costs? Hang on a second. That would have been right around $20 million for the quarter, right? And the full year would have been, let's see. You got the breakout there. A little north of $80 million.

Tom Albrecht (Analyst)

Okay. All right. And then what about, Rick, on the contract renewals, I know you said that, that they were favorable and strong and all that. What about—can you talk a little bit about specifically what kind of contract renewal rates you're experiencing?

Rick O'Dell (President and CEO)

Yeah, they're high single digits, so 8%-9% range.

Tom Albrecht (Analyst)

Okay.

Rick O'Dell (President and CEO)

And again, we-

Tom Albrecht (Analyst)

And then-

Rick O'Dell (President and CEO)

We started that in the third quarter of last year, and it continued to gain some momentum through those contract renewals. We kind of raised our standards from a profitability management standpoint by lane.

Tom Albrecht (Analyst)

I guess the other question I had is, you know, your sales force, you've increased that. I would expect, though, that you would still have expectations of tonnage growth if you're bringing on 8% more field sales agents. What is your outlook after we get past maybe this unusual first quarter comparison? Would you expect tonnage to grow, given the increase in the sales force?

Rick O'Dell (President and CEO)

I think it just depends kind of... I think we should grow field business, which operates well and has a better yield component, but we may trade off national account business in lanes that aren't paying their way.

Tom Albrecht (Analyst)

Okay. And I guess the last question, you know, on the fuel surcharge, I asked, but, you know, in the third quarter, your 10-Q said that it was 16.7% of revenues. If we just looked at the change in diesel fuel prices from the beginning to the, end, or maybe from the third quarter to the fourth quarter, down about 7%, would that be an appropriate way to try to think about what may have happened to your surcharge revenues?

Rick O'Dell (President and CEO)

I think that's probably right.

Tom Albrecht (Analyst)

Okay. All right. That's all I had. Thank you.

Rick O'Dell (President and CEO)

I think during the quarter, the surcharges came down a little more slowly.

Fritz Holzgrefe (VP of Finance and CFO)

Yeah, because of the Monday lag effect.

Rick O'Dell (President and CEO)

Bit of a lag effect, right?

Fritz Holzgrefe (VP of Finance and CFO)

Yep.

Rick O'Dell (President and CEO)

Yeah. I'm sorry, I just didn't. We only report those numbers in the Q, so I didn't bring them with me. I apologize.

Tom Albrecht (Analyst)

That's okay. Thank you.

Rick O'Dell (President and CEO)

All right.

Operator (participant)

As a reminder to the audience, that's star one for any questions. Next, we'll go to David Ross with Stifel.

David Ross (Managing Director)

Yes, good morning, gentlemen.

Rick O'Dell (President and CEO)

Good morning, David.

David Ross (Managing Director)

Thank you. I'm doing well. Rick, can you talk a little bit about any impact you guys saw, positive or negative, from the West Coast port congestion issues over the past quarter?

Rick O'Dell (President and CEO)

I think there's been some higher, at times, truckload rates out there, particularly on the expedited side. I don't know any other specific items. Our West Coast shipment count growth has probably been similar to our company, so I don't know that we've seen a specific dynamic with respect to the LTL volume growth out there, other than some kind of sporadic spikes in kind of your spot market out there.

David Ross (Managing Director)

Then you talked about your intermodal rates still going higher from the rails for some of your line haul miles. Can you comment on service levels? Has service gotten better in the intermodal lanes?

Rick O'Dell (President and CEO)

Yeah, I think service is a little better, and availability is obviously clearly better than it was last year when they had the disruptions, but there's a couple lanes where we're still being limited on trailer availability.

David Ross (Managing Director)

Excellent. Well, thank you very much.

Rick O'Dell (President and CEO)

All right, thanks.

Operator (participant)

Next, we'll move back to Scott Group with Wolfe Research.

Rick O'Dell (President and CEO)

Hi, Scott.

Scott Group (Managing Director)

Hey, guys, sorry about that. I was on mute. So I'm not sure if this came up, so just wanna follow up. In terms of the tonnage trend, do you think that this is some of the LTL kind of spillover from truckload starting to reverse at all, or are you seeing any signs of that?

Rick O'Dell (President and CEO)

I mean, our weight per shipment, you know, decline really happened after at the end of the first half of 2014, right? So if you really look at when our weight per shipment declined, you know, middle of last year. And then since then, you know, there have been some slight declines in it since then, but nothing, you know, no major move, right? In other words, so we're down, what, 30 lbs year-over-year, but it really happened at the end of 2Q of last year, which, you know, was a time when the truckload market was starting to kind of get back to normal and the rail service availability was improved. And then you combine that with, you know, our pricing actions on the spot side and with some of these major industrial customers.

I mean, I think that probably has happened, but I think it's been going on for seven months. It's not something that just happened in December.

Scott Group (Managing Director)

Okay. No, that makes sense. All right. Thank you, guys. Appreciate it.

Rick O'Dell (President and CEO)

All right, great. Thanks.

Operator (participant)

Next from BB&T, we'll move back to Tom Albrecht.

Tom Albrecht (Analyst)

Rick, now you know why they call analysts anal, so just wanna explore something. On the 6% yield improvement, when I look at the positive inputs to that, pounds per shipment and length of haul, they both tally a little over 6%. Now I realize it's not one for one. So those two would sort of offset, and then the surcharge, or they would, they would be aids to yield, and then the surcharge as a percentage of revenues may have dropped 5%-7% sequentially. And then the base renewals, upper single digit, that's ultimately how you settle on what you think is a mix-adjusted 5% increase. Is that-

Rick O'Dell (President and CEO)

That's correct.

Tom Albrecht (Analyst)

All right. So, okay, I just wanna make sure I was looking at it correctly.

Rick O'Dell (President and CEO)

Okay, yeah. That's right.

Tom Albrecht (Analyst)

Okay, thank you.

Rick O'Dell (President and CEO)

All right, great. Well, it doesn't appear as if there's any other questions, so, we'd certainly like to express our appreciation for your interest in Saia. Thanks for joining us.

Operator (participant)

Once again, ladies and gentlemen, that does conclude today's conference. Thank you for your participation.