Doug Col - Treasurer Rick O'Dell - President and CEO Fritz Holzgrefe - VP-Finance and CFO.

Todd Fowler - KeyBanc Capital Markets Matthew Elkott - Cowen and Company Scott Group - Wolfe Research Bruce Chan - Stifel, Nicolaus & Co. Brad Delco - Stephens, Inc. Tyler Brown - Raymond James Ravi Shanker - Morgan Stanley.

Good day and welcome to the Saia, Inc. First Quarter 2017 Results Conference Call. At this time, I'd like to turn our conference over to Doug Col. Please go ahead, sir..

Thank you, Evan. Good morning, everyone. Welcome to Saia's first quarter 2017 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 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’m going to go ahead and turn the call over to Rick O'Dell..

Thank you for joining us to discuss Saia’s results. This morning we announced our first quarter 2017 financial results with first quarter diluted earnings per share of $0.44 compared to $0.42 in the first quarter of last year. The EPS comparison benefited from lower effective tax rate, which Fritz will discuss in his prepared remarks.

Underpinning our first quarter results was the continued improvement we're making on the pricing front. First quarter LTL revenue per hundredweight increased by 7.7% compared to the first quarter of last year marking the 27th consecutive quarter of year-over-year improvement in our reported LTL yield.

The yield comparison obviously benefited from increased fuel surcharges from our customer. But the overall LTL pricing environment remains constructive and our average agreed upon contractual renewals increased by 4.2% in the first quarter.

It's worth noting that 321 contracts were renewed in the first quarter of this year compared to 288 in the year-ago first quarter and it included some of our largest customers. It's also nice to be able report our first quarter trends in terms of year-over-year change in shipments and tonnage remained positive for the second quarter in a row.

A few of the key operating metrics from the quarter are as follows. LTL shipments per workday rose 3.5%. LTL tonnage per workday rose 2%. Excluding the impact of the shift in Good Friday this year, LTL shipments and tonnage per workday still increased by 2.9% and 1.3%, respectively.

LTL weight per shipment fell by 1.5% to 1,101 pounds, but the revenue for LTL shipment rose by 6.1%. Our cargo claims ratio of .77% improved from .89% in the first quarter of last year.

Claims filed per day fell by 1.5%, despite the increase in shipments, improvements reflect a continuous benefits we're seeing from our ongoing quality initiative and investment in our dock tools. Purchase transportation miles in the first quarter were 7.5% of total line haul miles compared to 6.6% last year.

The increase reflects the opportunity used to purchase transportation in certain longer haul lanes as volumes grow. Our maintenance group place more than 2,350 pieces of equipment and service so far this year, including tractors, trailers, and forklifts, with more than 300 of these in our new Pennsylvania and New Jersey facilities.

And finally we continue to see fuel mileage benefit from operating a newer tractor fleet. In the first quarter we averaged 6.7 miles per gallon compared to 6.5 miles per gallon in the first quarter of last year. With that, I’m going to go ahead and turn the call over to Fritz Holzgrefe to review our financial results in more detail..

Thanks, Rick, and good morning, everyone. First quarter revenue of $317 million was 9.4% higher than a year-ago, benefiting from positive shipments tonnage and yield improvement as Rick mentioned, and also from higher fuel surcharge revenue. Fuel surcharge revenue was 39% higher than in the first quarter last year.

Operating income fell by 0.4% to $17.5 million compared to $17.6 million earned in the first quarter of 2016. We incurred roughly $800,000 in expenses in the first quarter directly related to our planned expansion in Pennsylvania and New Jersey. A few of the key expense items, which impacted the first quarter results are as follows.

Salary wages and benefits rose 6.2% to $180.9 million in the first quarter reflecting the impact of an average wage increase of 3% last year. And incremental labor related to year-over-year shipment growth in the quarter. Fuel expense in the quarter rose 33% over last year. The diesel prices were stable.

In the first quarter, the average price was approximately 25% of prior year levels. Purchase transportation expense in the first quarter rose by 18.5% to $14.8 million and was 4.7% of revenue versus 4.3% last year. Outside maintenance and parts expenses were down 8% in the first quarter compared to last year's.

We continue to see savings associated with operating a newer fleet of tractors trailers and forklifts. The newer tractor fleet continues to benefit fuel costs miles per gallon. Across our fleet increased by 3.7% in the first quarter to an average of 6.7.

Claims and insurance expense in the first quarter increased by 12% over the prior year driven by higher premiums and the inflationary cost of claims associated with accidents.

Depreciation and amortization expense of $20.1 million compared to $17.2 million in the prior quarter -- prior year quarter and reflects our continued investments in tractors, trailers and forklifts. Our effective tax rate was 31% for the first quarter of 2017 compared to 36.4% in the first quarter of 2016.

The lower effective rate in the quarter is related to accounting changes for certain equity-based incentive compensation. First quarter EPS benefited by approximately $0.04 per share from this change.

While last year's first quarter EPS benefited by approximately $0.01 per share from the alternative minimum fuel tax credit, which is not place this year. For the full-year, we expect our tax rate will be approximately 36%. At March 31, 2017 total debt was $156.9 million, net debt to total capital was 24%.

This compares to total debt of $116.4 million and net debt to total capital of 20.9% as at March 31, 2016. Net capital expenditures in the first quarter were $108.2 million including equipment acquired with capital leases. This compares to $63.7 million of net capital expenditures in the first quarter of 2016.

For the full year of 2017, we expect net capital expenditures will be approximately 220 million, including investments in terminal infrastructure improvements as well as continued investments made to lower the age of our tractor, trailer and forklift fleets. Now I'd like to turn the call back to Rick..

Okay. As I mentioned in our earnings release this morning, the first quarter was a very busy time for all of us inside. I’m very proud of our employees for maintaining their focus on serving our customers. No matter our first quarter on time service call of 98%.

Terminals to serve the markets around Pittsburgh, Philadelphia and Harrisburg and Newark are fully staffed and equipment is in position for the -- for service to get off this Monday. The early response from customers regarding our expanding service geography has been extremely positive.

We were also pleased to announce that we’ve entered into an exclusive partnership with TST Overland Express to serve both companies, U.S, Canada cross-border LTL customers. As a result of this partnership Saia will service TST Overland LTL freight entering the U.S and TST Overland with server Saia's LTL freight entering Canada.

The partnership will be effective on May 22. Our announced expansion into the Northeast certainly made this partnership more attractive and the timing of the arrangement should give us a nice boost to our volumes in our newest terminals.

We are excited to partner with TST Overland, our Company share similar service goals for our customers with respect to industry-leading damage free on-time shipments. Fritz mentioned, our total planned capital expenditures in 2017 are not likely to be in the $220 million range.

As we were able to opportunistically acquire a terminal in Maryland, which we plan to open in the third quarter. This terminal positions us to serve Baltimore and Washington DC markets. We look forward to providing further update on our Northeast expansion on our second quarter conference call.

So in conclusion, first quarter earnings clearly reflect our investments in infrastructure, equipment, and the costs associated with our Northeast expansion. But in making these investments, we believe we're uniquely positioned for growth in our industry.

The combination of geographic expansion, positive shipment trends, our new cross-border partnership and our ongoing efforts to improve yield give us several opportunities to expand our revenue and create operating leverage in our business. With these comments, we're ready to answer your questions..

[Operator Instructions] Our first question comes from Todd Fowler of KeyBanc Capital Markets. Please go ahead..

Great. Thanks. Good morning, everyone. So, second quarter is going to be a big quarter. Rick, maybe if you could talk a little bit about just how you’re expecting this to progress post May first really from a revenue standpoint to maybe a margin standpoint.

Is that going to be something where -- from a margin impact you in the second quarter, you’re going to have more cost than what you had in the first quarter or now the fact that you’re going to be opening the terminals, are you able to offset some of the incremental costs?.

Well, a little bit of both, right. I mean, especially during the month of April, we fully staffed the terminals. People went through the training process etcetera without any revenue. And then we have a pipeline of revenue that we’re managing from a startup perspective, that will start in May and kind of sense of how quickly that process comes on.

But I guess just in terms of our sequential OR trends, historically have been in the 2.5 operating point from improvement in 2Q over 1Q. And we think that seems reasonable at this point in time.

So, we’re not expecting things to be kind of expensive startup or margin impact item over 2Q and then with some of the positive shipment trends that we're seeing, we saw kind of through the quarter which actually improved a little bit further into April, that’s a positive side..

Okay. That's helpful and the margin comments.

So even with the costs incurred during April, you still think that you can achieve the normal sequential OR progression here in the second quarter?.

Correct..

Okay, good. That helps. And then just a follow-up on your last point.

Do you have what you’re experiencing here in April from both the tonnage and shipments standpoint?.

Sure. Todd, if you take adjusting for a Good Friday, so tonnage through today is plus 6.8% versus last year, and then shipments plus 7.8%..

Okay. Thanks, Fritz. And then, can you talk a little bit about the -- little bit more color on the TST Overland arrangements.

I'm just curious to how do we think about either tonnage or revenue or the contribution, how that works within your model and some of the benefits that you expect to see as a result of that?.

Yes, sure. That cross-border business tends to be attractive from a pricing and a yield standpoint. Obviously, it's a revenue sharing agreement that we would have. We would expect it to have a positive impact on our revenue growth of somewhere between 1%, 1.5% type number..

Okay..

And then we kind of expect or some common customers, we think there will be some further opportunities over time..

And Rick anything on the cost side? Are you pretty much have the infrastructure in place to handle the cost, and it's really just additional revenue coming through the network at this point?.

Yes, just additional revenue coming through the network. And some of its in the Northeast, right, which will us from a start up standpoint, but there is actually multiple interchange points. And it should give us some good incremental revenue in some of our existing terminals as well, we should have good margins..

Okay.

And then just the last one maybe for Fritz, do you have an idea of a depreciation number for the full-year at this point based on the investment that you’ve been making?.

No, we haven't necessarily given guidance specifically on that, but what I would say is that we're projecting to spend $220 million for the full-year. Half of that is going to be equipment related. So you’ve got a sort of depreciating life there, sort of 5 to 7 years of use, that's probably a reasonable proxy extending that.

And then the rest is going to be sort of primarily real estate, which is longer life..

Okay.

So, a ramp from where you were in 1Q, but obviously not depreciating the full 220?.

Yes, so if we in service -- we will in service our fleet expenses or a fleet capital, a big chunk of that went on books in the first quarter and then we will add some more in April, little bit in May, but that will essentially be in place for the balance of the year.

And then, you will see us more real estate related investments towards the second half of the year..

Okay. Thanks for the time and good luck this quarter..

Thanks..

Your next question comes from Jason Seidl from Cowen and Company. Please go ahead..

Good morning. This is Matt Elkott for Jason. Thanks for taking my question. Rick, I was wondering if in the $800,000 in expenses related to the expansion.

Was that right in line with your expectations, was it above, below?.

It's probably in line, yes..

Okay. And then my next question is on pricing.

As you guys try to solidify your presence in new regions, what's your approach on pricing? Do you think this -- you think you may have to be a bit more aggressive to gain market share in the new regions?.

I don't think so. We will be competitive looking at market type of rates, but we are confident in our service offering to from our existing network and we're not going to chase the cheap regional freight in the Northeast, that’s some low cost carrier, so are up there competing with pallet rates and whatnot. We are not going to play in that.

We are going to leverage our existing customers relationship and the rest of our network and sell more into the regional longer -- longer haul regional interregional markets..

Got it.

And staying on the expansion front here, do you have any visibility on what's next after Maryland?.

We haven't identified specifically the other site locations. We've got a strategy to kind of look at four to five terminals a year and I think it will be based on a combination of the most attractive geography and facility availability, which is in some markets its difficult to push your timeline out.

So, but there's -- obviously there's plenty of alternatives, right. And we’re looking to open neighborhood 15-ish more terminals up there. So you could kind of -- you could skip a little geography and go into another major market or you can open some kind fill in terminals in the nearby area of Pennsylvania as well..

Got it.

And so the costs associated with the expansion in the Northeast, do you think that could fluctuate materially depending on what type of terminal you acquire in the future?.

I mean, yes and no, right. I mean, if you open a bigger market, I guess maybe you have a little harder -- little higher startup costs, but you also have more incremental revenue opportunity. So it's -- and then those the smaller markets are less expensive to enter, but probably wouldn’t have as much revenue impact as well.

So I don't think it matters that much one way or the other, which direction we end up going from a margin standpoint. And I think we’ve commented near-term, margin impacts and our projections are somewhere in that happen operating point range would be kind of something maybe to use from an indication standpoint..

Got it. Thank you very much for your time..

Sure..

Your next question comes from Scott Group of Wolfe Research. Please go ahead..

Hey, thanks. Good morning, guys..

Hi, Scott..

Rick, I missed that last point and what’s the half of point of operating ratio, I’m just not sure what you were trying to say..

Its potentially near-term impact of Northeast expansion..

In terms of a drag on margins?.

Right..

And how long you think that will last?.

I mean, it's not very long, right, but then if you turn around open five more in another eight months, then you kind of have a -- the other ones are going to be -- OR drag is going to go away then you may have another small drag. I mean overall it's a couple quarters..

Right.

But you’re including that in the -- your point earlier that you think the sequential margins will be in line with history?.

Yes, I’m..

Okay. So -- okay, okay. Can you just go through the monthly tonnage numbers and then Fritz your point about the 6.8 adjusting for Good Friday and Easter, is that -- are those -- were those operating days this quarter and that's why you're making that comment about adjusting for that? I’m not sure I follow..

Yes, so Good Friday was in April this year and it was in March last year, so we tried to adjust for that. So it's kind of normalize for the impact of that, so you back out Good Friday..

Good Friday in that was somewhere between 50% and 60% of the normal revenue day, so it has a fairly big impact on the month, right, since it slipped from a comp standpoint..

So it counts as an operating day?.

Oh, yes..

Yes..

It's in the number, right..

Okay. Okay, got it..

And then if we were to adjust and say hey, excluding that day, right, so you just basically pull that comp day out and take the simple average, then that's what our -- that's what the adjusted number is, right..

Okay.

Just for the purposes of our model, do you have -- I guess the March number and then do you have the -- what the April would be if you didn't adjust for Good Friday?.

Yes, so you take March was -- tonnage was -- this is LTL freight, so plus 3.4 and shipments were plus 5.6. And in April tonnage was plus 4.3 and shipments were plus 5.4..

Okay, great. Helpful. And then just last couple of things.

The -- once you get these 4, 5 terminals, call it running at capacity, how long that takes? What do you think they would add to the tonnage number?.

Well the initial ones are kind of bigger market. I have to get you that. I don't have that in front of me. But I mean, what we basically did is we looked at what our history has been in terms of market share penetration when we’ve either acquired someone and sold across our network and/or inorganic expansion.

And we’ve kind of phased that in over a period of time..

Yes..

Round number I guess for the first round would be it's a multi-year growth rate of somewhere, I would estimate in the 2% range..

Yes, so we recall our assumption around that has been at the end of -- historically its taken -- we’ve gained 1% market share per year and we said for our own planning assumptions. In this case we get at the end of 12 months from opening, we would be at a 0.8 market share in the markets that we are at. So Harrisburg, Pittsburgh, Philly, New Orleans.

And we kind of grow over time at that kind of a rate..

Okay. Okay.

And then, last thing on pricing, so the pricing renewals kind of slowed a little bit to 4.2%, obviously still a good number, but it's the trend decelerating? Should we be reading into anything is the pricing environment LTL getting a little bit tougher, is it just tougher comps? What do you make of the 4.2?.

Its partially a customer mix. So during the quarter there were some -- some of our larger customers were renewed and they didn't -- they did not require a major adjustment. And then, yes, I think I don’t know what we said, I can't remember what we’ve said previously.

But I think given the way the company is operating and what some of our growth opportunities are, our internal target was somewhere around 4.5%. So, it's still pretty much in line with that. And I know we’ve been running a little bit over 5%, but ….

Yes, its driven as much by mix, customer mix quarter-to-quarter..

Yes, and we haven't changed our philosophy or anything..

Okay. It makes sense. Thank you, guys..

Sure..

Our next question comes from David Ross from Stifel. Please go ahead..

Yes, good morning gentlemen. It's actually Bruce Chan on for Dave Ross. Couple of questions here from me, if I may.

How is going?.

Good..

You had a nice increase on the heavyweight tonnage side, and I'm wondering if that's just an increase in the existing oil and gas business, and maybe that's growing again or was it something else, some sort of targeted effort there?.

Yes, that’s some of it. And then we also tweaked and got a little more granular with some of our spot quote pricing to fill some empty capacity. So probably those two items..

Okay, great. And then just drilling down into the Northeast expansion a little bit, I know on the higher PT expense side you mentioned that it was an increase, in some of the longer haul lanes.

Is it possible to segment out how much of that was related to the Northeast expansion and then what are you expecting that headwind to be for the rest of the year?.

Yes, the Northeast expansion hasn’t occurred yet so, that's not what it is. Its more -- if we’re gaining some of that longer haul revenue that tends to move on the rails, tends to be what drives that..

Okay, great.

And then as far as the new facilities are concerned, are those all owned or you leasing those? And if so, where do those sit on the OpEx?.

Those are the ones that we're putting, its opening with our lease. What will happen over time that we may move in the purchase of facility, but to start with there are going to be operating leases and they would flow through our income statement in that way, in the operating expenses..

Okay, great. That’s it from me. Thanks, gents..

Thanks..

We will take our next question from Brad Delco from Stephens. Please go ahead..

Good morning, Rick. Good morning, gentlemen.

You hear me okay?.

Hi, Brad..

Rick, I think you mentioned in prior call that West Coast is now one of your bigger regions. And it seems like that area was particularly hit by weather. The question I’m asking, you’re posting some of the best yields in the industry and the incremental margins weren't really there this quarter.

I was just curious, was there a weather impact or something that will help us quantify what will happen on the cost side?.

I mean, if you look at -- there two, three items kind of that are up quite a bit year-over-year. Depreciation was up 2.89 and again, I mean, that’s a increase in infrastructure costs and our fleet. Part of that is to kind of prepare for the growth. Obviously you have to have that ahead of the opportunities.

Our BIPD insurance was up about $1.2 million, so that was a bit of a headwind and then you had $800,000 across from the Northeast expansion.

So, you can exclude those things, but at the same time obviously part of that reflects in investment in our fleet on the depreciation side and some of it is kind of upsizing our network ahead of the Northeast expansion to support some of the growth that we are seeing. But I don’t disagree with you.

I guess, I was a bit disappointed in some of our absolute margins. January and February were not little bit below our expectations and March was better and -- so I think were as part of kind of what’s supporting us, in spite of some incremental startup costs that we would expect in 2Q that we'd be able to support the same type of margins..

Yes, that makes sense. And I was able to adjust 800 per the comments you guys made earlier, but I was curious if there was some other items, and I appreciate additional color.

And then just, Rick, can you give some general comments about what you're seeing with your oil or energy exposure? Do you think that what can attribute some of the pickup you guys are seeing from March and April to that or is there some other items driving them?.

I mean we’ve a lot of good things going on at the Company from a marketing standpoint and our service offering is very good, our cargo claims ratio continues to come down, so we’re getting a good reception from our customers. We’ve made some incremental investments in inside sales to help us support our prospecting.

Our field business is growing faster than our national account business. So, we’re seeing some benefits from that and I think the organization has been energized by the announced Northeast expansion. And we're seeing some incremental opportunities with both field accounts as well as some of our larger accounts based on that.

And then, I think some of it the Houston region is up 10% year-over-year, so it's a little bit better than the Company from a revenue standpoint. But it's not material enough that I'd say will be driving that. We have the 11, we call sales regions. 10 of them grew and one was flat.

So it's pretty broad in kind of what we're seeing and what we're achieving as an organization..

That’s good to hear and consistent with, I think, what others are saying as well. Fritz, maybe last one for you.

If you -- I don’t know if you can look at it on a terminal basis or a door basis, what does the network look like right now in terms of own doors or terminals versus leased?.

It is roughly about 559%..

50%, that’s 59% of the door capacity, 40% of the terminals are owned..

Okay. That’s it from me, guys. Thanks so much..

Thanks..

[Operator Instructions] And our next question comes from Tyler Brown from Raymond James. Please go ahead..

Hey, good morning guys..

Good morning..

Good morning..

Hey Rick, I'm just curious, but today do you have an interline agreement into the Northeast with an interline partner? And I'm just curious if there's any measurable or material amount?.

Yes, we do have a partner up there to provide coverage. It's not a particularly meaningful amount..

Okay..

So, and you know they obviously -- we don’t make any pickups there, so it's all on the inbound side, I mean, it's like neighborhood-ish. For this four terminals we're opening is about a 150 builds a day.

It would be kind of our baseline, which is obviously isn't very much revenue per bill on that, I mean it's split today, but it would be higher than our average and then I think the total number would be maybe double that. So obviously these four pretty big portion of the markets..

Right. Okay and that’s helpful. I’m just interested in the 320 contracts that you renewed in the quarter.

Was that just on existing freight or did those renewals include some new lanes in and out of the Northeast?.

Okay. So we put rates in place it to in from the Northeast with all of our three PLs. we’ve been through about our top 40 customers and then -- the field customers have submitted and provided some direct pricing to that as well.

So, we've been through a process, I mean that’s kind of how we’ve identified our pipeline right as we put pricing in place and said, how much business do you have and if we commit these pricing parameters, what’s the business commitment? And then we will monitor our close rate associated with that.

So I mean we’re prepared into the Northeast from a direct pricing standpoint to modify the pricing, because obviously when you’re doing interline split, you can't price the same way as you can, if you’re providing direct through service..

Right. Okay.

And then maybe Fritz coming out of the Northeastern expansion maybe different way, have you guys thought about a target or war that you're looking for on that freight if it comes in?.

For all the new business?.

Yes..

Yes, I mean, obviously it's got to be accretive to our total book of business. So, we apply the same OR targets that we’ve for our Company. That we would into the Northeast. That’s not a -- that’s kind of a -- we’ve got some target costing you got to use in that case, right.

So, you would say what’s the startup cost obviously you're not as efficient as you like to be, but in the end you want to get to a place where its accretive to the whole book of business. That’s really the math for us..

Sure. Where I’m going with -- go ahead..

I just wanted to comment, one of the reasons we’re going to there are also is because it should leverage some of our the fixed cost that are in our network and we had round number, is that somewhere in the 8 to 10% range.

So for argument sake, right, you price it at a 90 to incremental margins to the organization really be somewhere in 18% or 20% range due to the opportunity that we're targeting..

Yes, I know that was exactly what’s were I was going with that. So, you should be able to -- because that 90 OR, or whatever you may be targeting is saddled with G&A, but in theory that G&A just won't come on..

Absolutely..

Right..

Okay..

I think the other thing you will see is like on the initial phase that we talked about, based on some comments earlier about the next phase of opening five terminals, kind of interesting, right. Because today you go up there and you do your startup and it's a new region for us, so we’ve region leadership and operation sales.

Regional safety person, regional HR person, regional maintenance personnel. regional claims prevention per personnel took to start with four terminals and the revenue associated with that. So we open our next five terminals.

I’m not adding that over head, right, I just have the facility operational costs and then I think it's also interesting is, we will have to see if little bit difficult to model, but of the incremental business coming to and from our existing network, while you have the incremental costs in the Northeast and the incremental fixed cost you're actually leveraging your fixed costs as well.

For instance, your pickup and delivery network, especially on the pickup side if you're going there getting -- picking up three bills from our customer today and you give four or five, I mean there is minimal incremental costs there.

So, like I said it's a little bit hard for us to model that, but it's we would expect the margins over a period of time, I think are incremental more on that 15% to 20% range. I would say as oppose to 7% to 10%, right..

Right. Yes, that’s extremely helpful color. And then the last one here, Doug, just a quick housekeeping item.

But do you have what the end of period headcount was? And maybe if you can give how many people were included in the Northeastern roll out?.

We haven't included the folks from the Northeastern rollout yet. And probably get back to you on the end of Q1 headcount..

Okay. That’s helpful. Thanks, guys..

Yes, I will just comment through March, I mean, we basically had the sales and operations leadership positions. I mean terminal managers, sales reps, region -- those region personal or kind of staff and then we didn't hire the hourly personnel and the line driver, etcetera came on -- didn’t come on until April..

Okay. Okay, thank you..

Your next question comes from Ravi Shanker of Morgan Stanley. Please go ahead..

Thanks. Good morning, everyone.

Can you just remind us what your customer end market exposure is currently and do you expect that to change materially with the Northeast expansion?.

We haven't broken out, Ravi, the end market exposure, because we got such a diverse group of business. I think that what you would see in the Northeast is going to be pretty representative of what the rest of our book of business looks like. And I think it's proven true as we see new customer opportunity. So far it is actually pretty similar..

Got it.

But just overall kind of -- if you just look at industrial customers versus consumer driven kind of what that split right now and do you expect that to move?.

Yes, we have that -- broken that out typically, just because of the ….

Okay..

… diverse nature of that and typically what we pointed to and I think it's probably pretty good indication. If we have -- we move a firm out of paint and that goes through a home goods store or home-improvement store is that retailer or is that industrial? So for us that would be that -- how do you break that out. It's very similar to us.

So it -- and I don’t know how meaningful it would be..

Okay, got it. And apologies if I missed it early in the call, but the average rate per shipment was down sequentially.

Can you just talk about why -- what the drivers where there and kind of what sends that up again?.

Yes, I don’t know, it's down, what, 1.5%?.

Yes..

It's such a small number, I mean, I could -- we dissected some of our account base. We are growing a couple of specific accounts that are have a average weight per shipment in the 600 pound range. But I mean that doesn't materially change the entire number. So I don't -- so I will call it average mix change..

Yes..

Okay [indiscernible] thank you..

And we will take a follow-up question from Scott Group of Wolfe Research. Please go ahead..

Hey, thanks for the follow-up. Just a couple of things.

So, I think one of the other questions you mentioned something that using some more spot pricing and I wasn’t sure I followed kind of what you were trying to say?.

Yes. So within that, over 10,000 pound segment, there is a portion of that that's more spot quote related business. So we will give a 12,000 pound or a couple of type rate in some of our back haul lanes to move for certain customers.

And we actually got a little more granular with our stock quote opportunities and seen some incremental closure rate on this. It's not a lot of business, but it had some impact and then in between that and the oil field picking back up, I think are probably the two biggest factors in that..

And does that increase spot? Does that help or hurt your rev per hundredweight going forward?.

I mean it's just -- that’s just in the over 10,000 pounds, so we -- it would impact our total weight per shipment, but we break that out separately and quote LTL revenue per hundredweight is kind of in our focus from a yield management standpoint..

Okay.

Rick, what you think just if you exclude fuel, what do you think yields were up in the quarter?.

Yes, so if you exclude fuel and adjust for weight per shipment, link to all we’ve a theoretical model that we use for that in some progression analysis and our number show, it's up about 4%..

Okay. And then in last quarter you talked about -- you thought that you would have full-year margin improvement in 2017 and down a little bit first quarter ending second quarter, kind of saying flattish.

Do you still think you will get full-year margin improvement this year?.

Yes, I think -- okay, so we said that our sequential quarter improvement from 1Q to 2Q would be 2.5 operating points..

Yes..

Yes, that’s a pretty meaningful increase over prior-year..

That's right. Okay.

And so, I guess because you think you'll get full-year OR improvement, you still feel good about that?.

Correct..

Okay, sounds good..

Right..

Thank you..

Thank you..

[Operator Instructions] And we will take our next question from David Ross of Stifel..

Hello, its Bruce Chan again. Just a quick follow-up on that fuel comment. I know you talked about fuel being up on the cost side and maybe I missed this.

But with the fuel surcharge, did it end up being in a net positive or a net negative in the quarter for OR?.

It would have been -- it was a modest positive..

Great. Thank you. Have a great weekend..

Sure..

And there appear to be no other questions at this time..

All right. Well as I commented, organization -- entire organization is very energized by our expansion into the Northeast. We look forward to giving you guys an update on the next call. Thanks..

And this does conclude our presentation for today. Thank you for your participation. You may disconnect..