Douglas Col - Treasurer Richard D. O'Dell - President, Chief Executive Officer & Director Frederick J. Holzgrefe - Vice President of Finance & Chief Financial Officer.

Scott H. Group - Wolfe Research LLC Brad Delco - Stephens, Inc. David Ross - Stifel, Nicolaus & Co., Inc. Ravi Shanker - Morgan Stanley & Co. LLC Todd C. Fowler - KeyBanc Capital Markets, Inc. Art W. Hatfield - Raymond James & Associates, Inc. Matt Elkott - Cowen & Co. LLC Thomas Stephen Albrecht - BB&T Capital Markets.

Good day, and welcome to the Saia Incorporated First Quarter 2016 Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Doug Col. Please go ahead..

Thank you, Wendy. Good morning, everyone. Welcome to Saia's first quarter 2016 conference call. Hosting today's call are Rick O'Dell, Vice 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 this 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..

Well, good morning, and thank you for joining us. This morning, we announced our first quarter 2016 results with earnings per share of $0.42 compared to record first quarter earnings per share of $0.49 in the first quarter last year.

I'm pleased that despite a freight environment generally deemed to be soft, we were able to increase our LTL yield for the 23rd consecutive quarter. Our customers seemed to increasingly view our relationship as a partnership and we're committed to providing best-in-class service to support the value proposition that we offer in the marketplace.

Along with the continued focus on pricing and mix management, we're working hard to find opportunities to offset the impact of an inflationary cost environment with productivity, improvements and other efficiencies.

We've continued to invest heavily in our business, and year-to-date, we've taken delivery of over 300 new tractors, 800 new trailers and nearly 200 forklifts. A younger fleet across our network is expected to yield maintenance savings and provide for higher network liability, and ultimately, customer satisfaction.

Few comparisons of the first quarter results this year versus last year's first quarter are as follows. LTL yield increased by 2.1% overall, with contractual price renewals up an average of 5.3%. LTL yield, excluding fuel surcharges, was up almost 6.6%.

LTL weight per shipment fell 2.6% to 1,118 pound, but was down just 0.6% sequentially from weight per shipment in the fourth quarter. Overall weight per shipment trends continued negatively impacted by less activity across our energy-related customers and industrial customers whose shipments tend to be heavier weight by nature.

LTL shipments per workday were down 0.8%, and adjusted for Good Friday shipments per workday, were down just 0.2%.

As I mentioned earlier, productivity initiatives yielded some encouraging first quarter results as pickup and delivery productivity improved each month through the quarter and it marked the first time in four years that we saw a good improvement in the first quarter versus prior-year results.

Dock productivity improved 3.9% sequentially from fourth quarter and was the best first quarter result in three years. And finally, on the operations side, cargo claims filings were down 19% per day versus last year, resulting in a 14% decrease in claims paid. I'd like to have Fritz Holzgrefe review our first quarter financial results in more detail..

Thanks, Rick. And good morning, everyone. First quarter total revenue of $290 million compares to $293 million in the first quarter last year, a decrease of 1.1%. This decrease resulted primarily from decreased tonnage and fuel surcharges offset by yield management.

Operating income of $17.6 million compares to $21.2 million for the first quarter of 2015. This year's first quarter included 64 workdays compared to 63 workdays in the first quarter of 2015. Also, Good Friday fell on March this year and shipment count on Good Friday usually represents about one-half of a normal Friday.

Good Friday fell in April during 2015. As Rick mentioned, first quarter LTL yield rose 2.1%, reflecting the positive impact of our continued pricing actions, offset by markedly lower fuel surcharge contribution. I'd like to mention a few key expense items and how they impacted the first quarter results.

Salary, wages and benefits rose 8% or $12.5 million to $170.3 million in the first quarter, reflecting the impact of one additional workday, a 4% average wage increase last July, increased internal driver utilization, as well as increased benefit cost, particularly in the area of healthcare benefits.

Purchased transportation in the quarter dropped by $5.2 million to $12.5 million and was 4.3% of revenue versus 6% last year. This comparison benefited from increased utilization of internal assets, favorable truckload carrier rates and lower fuel cost charged by carriers.

Purchased transportation miles as a percentage of our total line haul miles were 6.6% compared to 10.5% in the first quarter of 2015. Depreciation and amortization of $17.2 million compares to $15.2 million in the prior-year quarter reflects our continued investments in tractors, trailers and forklifts, resulting in a newer fleet.

Fuel efficiency improved by 1.9% to 6.51 miles per gallon in the quarter, benefiting from the lower average tractor age compared to the prior year. Claims and insurance expense increased by $3.2 million in the quarter to $8.1 million.

The increase is a result of higher insurance premiums and accident expense, partially offset by lower cargo claims expense. Our effective tax rate was 36.4% for the first quarter of 2016, essentially in line with our estimate for the full year of 36.5%. At March 31, 2016 total debt was $116.4 million; net debt to total capital was 20.9%.

This compares to the total debt of $107.6 million and net debt to total capital of 22.1% at March 31, 2015. Net capital expenditures in the first quarter were $63.7 million, including equipment acquired with capital leases. This compares to $33.2 million of net capital expenditures in the first quarter of 2015.

Full-year 2016 net capital expenditures are forecasted to be approximately $140 million. Now, I'd like to return the call back to Rick..

Well, thanks, Fritz. As some of you may have seen, we opened our second Chicago area terminal in the first quarter in Grayslake, Illinois. The state-of-the-art facility positions us to service customers in the large and growing Northern Chicago suburb.

Also in the first quarter, we completed an expansion of our Kansas City terminal, which included 58 new doors and added yard space as well. In April, we completed the rollout of our new equipment maintenance software system.

We expect to benefit from improved maintenance technician productivity as well as more accurate and accelerated warranty recovery capabilities. We've also completed our integration of a new data management software and are beginning to customize dashboards to maximize this data mining tool across a number of functions.

As you can tell, we had a busy first quarter and are excited about the opportunities we continue to find in our organization and in the marketplace. With these comments, we're now ready to answer your questions.

Operator?.

Our first question comes from Scott Group with Wolfe Research. Please go ahead. Your line is open..

Hey, thanks. Good morning, guys..

Good morning, Scott..

Good morning, Scott..

I apologize if I missed it.

Did you guys give the monthly tonnage?.

I didn't (08:25)..

We haven't yet..

Okay. That would be great. Thank you..

All right. So LTL tonnage year-over-year, and these are by month, January, minus 5%; February, minus 1.4%; March, minus 4%. Now, if you adjust for Good Friday, the March number would be minus 2.2%. Shipments for January, Feb, March, minus 0.9%; plus 1% in February; minus 2.6% in March; adjusting for Good Friday, minus 0.8%..

And I would just comment too. I think we benefited in January and February probably volume-wise from a more mild winter weather than normal. So – just when you look through those trends, I think that kind of needs to be taken into consideration..

Yes..

And do you have numbers for April yet?.

Sure. So April month-to-date tonnage, actual was 3.4%. Now, adjusting for Good Friday – excuse me, minus 3.4%. Adjusting for Good Friday, minus 5.9%. And then shipments for April month-to-date, minus 2%; and then adjusting for Good Friday, minus 4.3%..

What are you guys seeing out there that's driving that weakness in April? I mean, I guess we've heard if from a lot of the transport so far, but any end markets that's driving that?.

It just seems – obviously I think the industrial economy is pretty soft. Geographically, we're having success in growing kind of in the West and in the East and the South Central. Obviously the oil patch is a big impact. Those segments are not nearly as strong as the rest of our geography..

And Rick, you usually share some perspective on how you think about margins from one quarter to the next. There are some moving parts obviously with extra operating day, mild weather.

How do you think about margins in 2Q?.

Yeah. So if you look – 1Q to 2Q trends have been better generally obviously by 1.4 operating points to as much as 3.3 operating points, kind of like you said, depending on holidays, timing of general rate increases.

We look back over the five-year period, successful contract renewals, accident volatility, and like you said, first quarter winter weather.

So I think given the current weakness in the industrial economy and the mild first quarter winter weather that we had, as well as the timing of this year's general rate increase being basically the same as last year, we believe probably the bottom of this range is most likely..

Okay. That makes sense. And just last question, it feels like the past couple of quarters we've heard kind of mixed things about the competitive environment. One quarter was worse, one quarter better throughout the year.

How are you thinking about the competitive environment and LTL pricing for the year?.

Yeah. We were pleased with the pricing for the quarter, up 5.3% on the contract renewals with similar to last year. We are seeing some procurement-type people go out with some out-of-cycle bids. But thus far, those have come in at a pretty reasonable levels.

Again, I think we're obviously very granular and detailed in our pricing analysis and the work to target business that works within our network, but – I mean, it's competitive, but I would still describe it as being rationale, particularly considering some of the softness that we're seeing in some sectors..

And are you still seeing that 5% plus renewal rate in April?.

I haven't even looked at it yet, to be honest with you..

Okay. Fair enough. All right. Thank you, guys, for the time..

All right..

And we'll go next to Brad Delco with Stephens. Please go ahead. Your line is open..

Good morning, Rick. Good morning, gentlemen..

Good morning, Brad..

Hey, Brad..

I think, Fritz, can you talk a little bit about the sustainability of purchased transportation at these levels? I mean, 4.3% of revenue is a pretty good number relative to expectations. Just curious how we should be thinking about that looking throughout the year..

Yeah. I think that – we continue to look for ways to optimize internal utilization.

These sort of – this sort of trajectory, I would say, that the Q1 numbers are – we can continue those at those sorts of rates, but that – if things uptick different parts of the – our footprint change or customer set changes, that sort of thing, you could see that change.

But I think at the current sort of model rate, I think it's probably reasonable expectation..

Great. And then in terms of this question we're getting, salaries, wages and benefits up about probably 8% on slightly down tonnage.

Is that a function of you shifting some of that purchased transportation to company trucks and that's kind of why there is a low abnormal relationship between tonnage and increased salaries, wages and benefits, or how do we think about those – maybe second question, those two line items together moving forward?.

Yeah. I mean, I think there are couple of pieces inside that salary, wages and benefits number you need to think about. One obviously we had, as we mentioned, a roughly 4% increase – salary increase across the workforce on average at July 1 last year. So that, you've seen that impact.

You're also seeing the impact of 10% to 12% sort of inflationary rates around benefit costs. And I think we're utilizing, as you point out, a larger part of our own work line haul network to take on that what was purchased transportation.

So you really have the utilization of our internal assets more, a greater part, and that's part of the savings from PT that is invested there. We're leveraging those employee assets. And then you're seeing the inflationary costs that we're having to deal with.

One last point, although it is a little bit more minor in the total change, is, if you recall last year, we talked a lot about investing in our network around putting the appropriate human resources, asset safety and claims folks in the field. And that was done kind of in Q1 into Q2.

So now you're seeing sort of the ongoing sort of step-up of those folks being on staff full-time now..

Got you.

And then I guess expected benefit in some other areas of (15:18) structure?.

Sure. Yeah. I mean, we've talked about our emphasis on quality claims. So our claims – reducing our claims ratio, those people, those investments are key to that value proposition. And I think we operate or manage the workforce better with those additional HR assets in place and safety assets..

Got you. And then maybe, Rick, just a question for you.

For the April tonnage weakness or I think relative maybe to March, any impact from weather or flooding in some of the areas in which you operate?.

Just a little bit. Obviously the Houston flooding caused us to be shut down for a day plus obviously some customers had some ongoing impact thereafter, but that's probably the only one, and would we say that would be minimal impact..

Minimal impact..

0.2% or something like that..

Yeah, something like that because it was only (16:17)..

Yeah..

Okay. All right. Well, thanks , guys, for the time. Appreciate it..

No problem..

And our next question comes from David Ross with Stifel. Please go ahead. Your line is open..

Yes. Good morning, gentlemen..

Good morning, Dave..

Good morning, David..

Could you talk I guess – you mentioned cargo claims being strong.

What was the cargo claims ratio in the quarter versus year-ago?.

It was 0.81% versus 0.89%..

And then on the insurance and expense line item, you mentioned higher premiums and accident expense.

How much I guess of that higher than expected expense was due to the premiums versus the accident? Just because I'm trying to think going forward, what are we looking at in terms of premium increase and how that might play out into the quarterly insurance volume..

Yeah. So we looked at year-on-year. We had about a 25% increase in premiums. And that is a – that's a part of that increase, the claims and insurance increase. I think that more significant thing to think about in claims and insurance is that last year we had Q1 was a particularly good quarter.

This quarter, we had the number of accidents was actually down, but severity was up a little bit. So – and the development of those expenses related to those accidents was a little bit higher.

So I think, as you think about that line over time, you really should think about sort of a trend over time that's – so this wasn't a great quarter, it wasn't bad. Last year, it was very, very good..

And then, are you expecting to change any of your self-insurance levels given the rise in premium?.

We have studied that pretty closely and we think our retention is appropriate, as you look at sort of the trade-offs. So we will not change that. It's a sweet step to deal with the higher premiums..

Last question on the CapEx side, it sounds like you raised CapEx for 2016 from $130 million to $140 million. I just wanted to see kind of where that's mainly going. And then also, does that $140 million include capital leases? Because you talked in the release about capital leases within the cash flow statement numbers look a bit different..

Yeah. So what we – one of the things that we will do periodically is if we see opportunistic real estate investments, we'd like to move on those. We saw – one came up this quarter, and that was the genesis of that increase. So it's an investment we'll make. I think into the second quarter, we'll take that on.

The total – that's – the total capital expenditure number includes capital leases..

We just had an opportunistic purchase in the Bay Area of a facility we were leasing..

Yeah..

Excellent. Thank you..

Sure..

And our next question comes from Ravi Shanker with Morgan Stanley. Please go ahead. Your line is open..

Thanks. Good morning, everyone.

If I can just follow up on the insurance questions, can you just talk about the role of technology there, what percentage of your fleet today has driver assistance systems and what kind of impact that you have on the insurance line over time?.

Yeah. Okay. So in today's environment, kind of depending on which tractors have this lane deviation system really determines whether you have a forward-facing camera or not, and I have to get a update on that, but probably 70% of our fleet has that at this point in time.

Obviously, you get essentially a kind of virtual ride-along associated with that, meaning that if there is a heart-breaking incident or a lane deviation or somebody swerves or something, then we get a video sent back to us and it gives us an opportunity to obviously either recognize whether the driver was doing good defensive driving and made an appropriate evasive maneuver or whether perhaps was being inattentive.

All of our line haul units and lesser percentage of our city units have that technology in them, and as you might imagine, kind of over-the-road highway line haul tends to be where you have your more severe accidents.

So it's a great opportunity for us to have an opportunity to either counsel drivers who may have been inattentive or made a bad decision, and likewise, to reward people that are using appropriate defensive driving techniques and avoiding accidents..

Got it.

And have you done any kind of early assessment of what that could do to your insurance line over time?.

I mean, we haven't studied that specifically. I mean, in terms of – obviously, the more we can do to put technology that limits our potential for an accident I think over time, you'd like to see some benefit. These tend to be – you want to reduce frequency.

If you reduce frequency, then in turn, when you do, hopefully you don't have those severe accidents as well. So we haven't studied that, but we study it in a sense that we want to look for investments that we think will have an impact, but we haven't tied that to forward sort of analysis..

And clearly, one challenge in the marketplace also just continues to be that some of these settlements tend to be increasing in value. That's being reflected in our – not only our insurance, primarily in the insurance layer, but also through that self-insurance aspect that we have.

So again, as Fritz had commented, our efforts really are focused on avoiding accidents and ensuring that our drivers are properly trained and having as many opportunities and touches as we can to reinforce positive behavior in the cab..

Great. Thank you..

Sure..

And our next question comes from Todd Fowler with KeyBanc Capital Markets. Please go ahead. Your line is open..

Great. Thanks. Good morning. Nice quarter here. Good morning. I guess, Rick, can you talk a little about the comments around weight per shipment? And I understand that it's still – some pressure on a year-over-year basis, but it sounds like maybe a little bit of stabilization on a sequential basis.

Do you think that some of the pressure in your energy-dependent markets is starting to stabilize or what do you read into the weight per shipment trends?.

Yeah. I mean, obviously, some of those industrial sectors have heavier weight per shipments than some others. I think it's probably partially a trend associated with e-commerce.

You tend to have some more residential deliveries and people go and – tends to be an increasing segment that we have, and then obviously that kind of decline in the industrial economy. I don't know on the oil patch, whether that's a bottom or not. Obviously, the year-over-year numbers are severely negative for us.

And if you just sort of look at the volume environment, Los Angeles was our strongest growth region during the quarter and is now the largest of our 11 regions, which used to be in Texas.

Excluding the impact of fuel surcharge, six of our 11 regions grew and the four regions that did not grow revenue are kind of in that lower Midwest or South Central kind of geography, which is obviously affected by the oil segment. So I don't really know what you're reading too much into the change in weight per shipment.

It seems to be that it's happening across most of the LTL segment. So -.

Okay. I mean, those comments are helpful, and it sounds like that maybe there's even some geographic mixes. The West Coast is growing faster and the heavier weighted shipment parts of the market are shrinking a little bit, but that's going to have some impact as well on what you're reporting.

Can you share any comments around the impact of fuel here in the quarter, and as we've seen fuel prices move up at the end of March now into the second quarter, how that impacts either the profitability in the margins or how you think about the impact of fuel on the OR into the second quarter?.

Yeah. Fuel margins year-to-year were pretty negative. It was about three quarters of the operating point. While fuel – obviously our surcharges don't correlate 100%, and as the fuel step down, the cost versus where the fuel surcharge is trended with a negative impact of neighborhood of a couple of million dollars..

Okay.

And then just on the wage side, I know it's still early in the year, but would the expectation be that there would be another wage increase at some point in the middle of the year? And if you can give a sense maybe around the magnitude that we should think about if that's going to be the case?.

Yeah. It's July the 1st, and this order of magnitude companywide, something in the neighborhood of 3%..

Okay.

And then just the last one I had maybe for Fritz, with the increase in the CapEx, do you have a expected run rate for depreciation, either on a quarterly basis or for the full year?.

Yeah. We don't project that or provide that guidance, but essentially if you take our capital number, you would – we're bringing on new equipment and it's primarily what we've invested in so far. So I would adjust basis that.

I think what's important to note about that is those capital investments are part of the savings initiatives that we've talked about, both reducing our maintenance cost as well as the fuel economy kind of going forward. So those are – those were – we looked at those investments that provided pretty close and immediate return..

And as you might expect, the step-up in the CapEx of $10 million in the San Francisco area is primarily land value. There's that much impact on depreciation..

Okay. And then the comment would be though that if depreciation does go up for the new equipment that there's some offsetting impact on the maintenance or operating lines..

Yeah. So – exactly..

Okay. Thanks a lot for the time this morning..

Sure..

Thanks..

And our next question comes from Art Hatfield with Raymond James. Please go ahead. Your line is open..

Hey, thanks. Hey, morning, everyone. Most of my questions have been answered, but one thing I missed, Rick. When you mentioned the OR change that you look at Q1 to Q2, I missed what the low end of that range was that you said..

Okay. It was 1.4 to 3.3, I believe -.

Okay. I got the – okay. That's helpful..

Yeah. We like the upper end better, but given the current environment -.

No, no, I understand – no. I understand. I just didn't – I wanted to get the right lower end because you would kind of (27:32). I didn't want my lower end to be 250 when you really said 130.

I don't know how to ask this, but thinking about the CapEx cycle and how you spend on equipment, clearly when you do that, you mentioned today, you get benefit on the maintenance side, on the fuel side.

And I would assume that's initially somewhat of a net benefit to the income statement, but over time, as maintenance dollars pick up and fuel degradates on the equipment a little bit, it becomes – I don't know, it balance out where it's a net neutral and then it gets worse at end of life.

How do we think about you with regards to an equipment cycle, with regards to that benefit playing out just go round? Do we – we would think about it from the terms that you have, like, maybe a year or two where you get benefit financially and then it kind of goes away, or is that something that you are able to just kind of cycle equipment out of the fleet, bring new in on a regular basis for those, that affect on the income statement is basically stable going forward?.

Yeah. I think obviously you make an incremental investment to lower the average age, and then once you get to the optimal average age, then you get back to a maintenance CapEx as opposed to an investment CapEx. And we'll be able to still accomplish the same benefits net-net, right? But you – your CapEx should go down.

And I think the other comment I would just make is, I think historically we've probably under-invested at times in real estate from a – and part of that is because we kind of put our network together through acquisitions and we got some facilities that we either leased or that were too small.

And so, over time, being able to kind of correct those and have some payback and benefit not only in less freight handling, your door capacity helps you in a number of ways from a production standpoint, et cetera..

And that's helpful. And I guess the real estate side can be lumpy based on how growth is and whatnot.

But I guess, is it fair to say at some point that the equipment sides should be much more of just maintenance CapEx, not – let's assuming very modest growth, obviously that changes the equation, but are you close to getting to that point where you're pretty much on a maintenance CapEx cycle with the equipment?.

Yeah. Actually we prioritize this year to get our tractors at the age that we think they need to be. So we should get back to a normal cycle after this..

Okay. Perfect. That's helpful. Thanks for the time today..

Sure..

And we'll go next to Jason Seidl with Cowen. Please go ahead. Your line is open..

Good morning. This is Matt Elkott actually for Jason. Thanks for taking our question.

Most of our questions have been answered, but Rick, with one key player in the industry still under fairly new management and still undergoing some changes, are you guys seeing some customer switches in the market, either customers coming to you from competitors or vice-versa? And is that mostly price-driven?.

I think we're seeing some opportunities created by some of the changes that are going on at the major competitor that you're speaking of, but I wouldn't call it like a overwhelming. We've seen a lot. You were not getting feedback that there is a big deterioration in service or a major change in their pricing philosophy.

I think you just have some people that have had a long-term relationship there and some of the players have changed, and we're seeing some opportunities from that, but I wouldn't call it a ground flow or anything..

I see.

And your sense of the pricing discipline in the industry as a whole, do you get the sense that people are maintaining that discipline in the face of the prolonged sluggishness in the market?.

Thus far, I believe, that's been the case. I mean, like I said, we've seen some people go out. We've had some accounts that don't operate within our targeted margins and they've gone out for a out-of-cycle bid.

And we obviously continue to get our five-plus type of increases, and in a couple of cases, we've actually won incremental business associated with that. So it's been kind of an interesting dynamic in a soft environment that we haven't really seen before. I mean, I think you have the issues. You have to look at the industry.

And again, we don't have a good history of maintaining pricing discipline in a soft environment, but thus far, it's taken place, and you sort of look at last year with wages with an inflationary item. You continue to have healthcare costs going up, you've got regulatory issues, equipment, tractor costs more than it ever costs before.

So I mean, I just – I don't think we have too much choice and most of us in the marketplace aren't generating the type of target returns that we'd like to see. So thus far, it's been positive, right..

Yeah. It's very helpful.

And lastly, I know it's not a big deal for you guys as it is for the truckload carriers, but have you been getting any questions or having any conversations with your customers about the ELDs?.

Some, but I mean – we're fully compliant and I think where it would have an impact with us is perhaps on some of the smaller players that are already struggling in the marketplace and don't have the type of finances it takes to put that technology in, but yes, I don't think it's as big of a factor in LTL, but I mean, it could still be a factor.

Right?.

Yeah. All right. Great. Very helpful. Thank you, Rick..

Sure..

And our next question comes from Tom Albrecht with BB&T. Please go ahead. Your line is open..

Hey, guys. Good morning..

Good morning, Tom..

Really nice job in a less-than-stellar freight market, I guess we can say. I wanted to follow up, Rick, on your OR conservation and just maybe come at it from a little different angle. So first of all, kind of housekeeping.

When you talked about that 75-basis point hurt from fuel, was that this first quarter or was that referenced to 2015?.

That's 1Q to 1Q..

Okay. All right. And then when you talk about the OR improvements sequentially based upon seasonal patterns and all that, I guess I was thinking that given that fuel off its bottom is now up about $0.22 a gallon over the last five or six weeks. Probably going to go a bit higher. I'm a little surprised.

Well, should we think that, if that were to continue, that would begin to be a help for LTL ORs in general, maybe not commenting so much on size specifically?.

Yeah, it should be..

Okay. And so we're starting in a good way in April versus the quarter.

So the fact that your OR improvement might be at the lower end of the five-year average improvement, would the bulk of the explanation then be just because of the sloppy freight environment?.

I think that's what's causing our caution, right? I mean – and then, to be honest with you, I mean, month-to-month or through the quarter, I mean, we don't project the fuel margin impact in that much detail. So we're kind of trending 1Q forward. So – while, that could be a modest benefit, there is other potential challenging items..

Sure. Sure. I understand. I know we, in the analyst community, get a little angle (35:48) on one month to the next, but just trying to think holistically..

Sure..

Fritz, given where the depreciation was in the quarter, what's your latest thoughts on the annual D&A number? I think it was a little – yeah, go ahead..

Yeah. I think – we've brought in most of all the equipment that we're going to bring in this year. So I think you take that capital spending forward, the depreciation impact of that forward from here.

Right? So you might have – earlier on, you might have spread that out over a full year, but that would become closer to the kind of the full year – or quarterly impact of that full investment would be sooner rather than later, right, because we brought most of it on board..

So $69 million, $70 million – I mean, $70 million might be high, but $69 million to $70 million kind of is a ballpark range is what we're using then?.

Yeah. That seems reasonable..

Okay. And then, Rick, I had one other question. I know about a year ago, maybe a little less, for years, you've thought about the possibility of Pennsylvania and New Jersey. It didn't make sense given where the economy was. And then you kind of reopened that thought process maybe early last year. Then the market went soft in the second half.

What's your latest thoughts on those two states?.

It's on our radar, and we're kind of doing some more detailed planning and some alternatives associated with that. So we – I guess our thoughts are we feel like over time, it's an attractive market; it can contribute to our margin and yield initiatives, as well as growth.

And so we're going to get there, and I think when we have a more detailed plan with some timeline, we can talk to you about – we're going to open four terminals in 12 months or whatever our timeline is, but that's basically what we're looking at..

Okay. All right. Thank you. I'll jump back in the queue..

All right. Great..

And we'll go next to Scott Group with Wolfe Research. Please go ahead. Your line is open..

Hey, guys. Thanks for the quick follow-up. So I wanted to go back, if I can, just to the tonnage numbers you gave just because I think you said, Fritz, that March was 4% reported but minus 2.2% adjusting for Easter and then April was down 3.4% but would have been down 5.9%.

Just curious, why is there a 180 basis point impact in March from Easter but a 250 basis point impact in April from Easter?.

Yeah. One of the things is we're giving you month-to-date number, so it doesn't have the whole – March was a 23-workday month. Right? So you have that. And then today we're just giving you an update on where we're running month-to-date and the month is not over. So there's probably some impact from that just ensuring that month-to-date numbers..

Okay. That makes sense. Okay..

Yeah..

And then, Rick, last quarter, you had talked about even though there would probably be some margin pressure in the first quarter, you still thought you could see flat to improved margins for the full year.

Are you still thinking along those lines for 2016?.

Well, obviously, 2Q, we had very difficult comps. 3Q was clearly not a good quarter for us. So I think it really just depends on what happens in the volume in the yield environment, and that's probably the two biggest triggers (39:35) there. I feel confident. We've targeted our $20 million of savings. We're tracking to achieve that. It's in our run rate.

So, I mean, our key internal initiatives from an execution standpoint, I have confidence and I guess the external environment, probably less so. And we've had a few soft days here in April. So maybe a little cautious with that, but we would still target to achieve that..

Okay. Makes sense. Thanks a lot, guys..

Sure..

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