Good day, ladies and gentlemen, and welcome to the Saia, Inc. fourth quarter and full year 2021 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Douglas Col. Please go ahead.
Thanks, Keith. Good morning, everyone. Welcome to Saia's fourth quarter 2021 conference call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. 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 SEC filings for more information on the exact risk factors that could cause actual results to differ. I'll now turn the call over to Fritz for some opening comments.
Good morning, and thank you for joining us to discuss Saia's fourth quarter results. I'm excited today to release record 2021 results and want to acknowledge the efforts given by thousands of dedicated employees, again, this past year to make these results possible. Our fourth quarter revenue of $617 million surpassed last year's revenue by 29.5%. Operating income also grew by 92.3% to $97.4 million. Our 84.2 operating ratio in the fourth quarter marked the sixth consecutive quarter where our OR was sub-90. The quarter was marked by consistent levels of demand from our customers, and growth in shipments for workday stepped up each month in the quarter. Total shipments for workday grew by 3.3% compared to the fourth quarter last year.
I continue to be impressed by our operations team and how they're handling the supply chain and workforce challenges still prevailing across our network. Our on-time service was 98% in the quarter, and our cargo claims ratio was among the best in our industry, and it was achieved with a dock workforce that grew by 17% during the year. This attention to quality is critical to meeting and exceeding our customers' expectations. These high levels of service require that we continue to ensure that we're fairly compensated to support our investment in high service levels and to offset inflationary costs. Our LTL revenue per 100 weight increased 19.6% in the quarter. This measure of pricing reflects both specific pricing actions and improvements in mix of business. Our approach to pricing is simply market-based.
We're charging customers for the level of service they're receiving and are seeking to set pricing in line with our competitors who offer comparable levels of service. The combination of improving yield and mix changes resulted in a 28.4% increase in our revenue per shipment to $317, a record for our company. Our total revenue in 2021 crossed over the $2 billion level for the first time, and at $2.3 billion, was up more than 25% from the prior year. Operating income rose 85.9% to $335 million, and our operating ratio for the full year of 85.4 was 470 basis points better than in 2020.
We opened seven new facilities in 2021, and across our network deployed $286 million in capital expenditures as we focused on our efforts on expanding our terminal network and enhancing service levels throughout the organization. We continue to invest in the latest safety technology and in clean diesel and fuel-efficient technology, and have supplemented this investment with pilot programs using alternative fuels, including electric vehicles and compressed natural gas. With that said, I'll turn the call over to Doug for a review of our fourth quarter financial results.
Thanks, Fritz. Fourth quarter revenue increased by $140.6 million- $617.1 million. The components of revenue growth in the quarter were as follows. Tonnage grew 9.2%, a combination of 1.6% shipment growth and 7.5% increase in our average weight per shipment. On a workday basis, tonnage grew 11% and shipments increased 3.3%. Yield, excluding our fuel surcharge, improved by 14% and increased by 19.6% including the fuel surcharge. Fuel surcharge revenue increased by 80.1% and was 14.6% of total revenue, compared to 10.5% a year ago. Now a few expense items in the quarter.
Salaries, wages, and benefits increased 10.1%, driven by wage increases across our driver and dock workforce, as well as hiring and referral bonuses paid in the quarter to attract new employees. Additionally, our January and August wage increases of approximately 3.5% and 4.7% respectively contributed to this increase on a year-over-year basis. Purchase transportation costs increased 56.1% compared to the fourth quarter last year and were 11.3% of total revenue compared to 9.4% a year ago. Truck and rail PT miles combined were 19.5% of our total line haul miles in the quarter compared to 16.3% in the fourth quarter of 2020. Fuel expense increased by 65% in the quarter, while company miles increased by 6.2% year- over- year.
The increase in fuel expense was primarily the result of national average diesel prices rising by nearly 50% year-over-year in the quarter. Claims and insurance expense increased by 86.8% in the quarter, reflecting increased frequency and accident severity in that expense line and higher premium costs versus the prior year. Claims and insurance expense was up 9.7% or $1.5 million sequentially from the third quarter. Depreciation expense of $35.9 million in the quarter was 5.1% higher year-over-year, driven by investments in real estate, equipment, and technology. Our total operating expenses increased by 22% in the quarter, and with a year-over-year revenue increase of 29.5%, our operating ratio improved 520 basis points from a year ago to 84.2%.
Our tax rate in the fourth quarter was 23.9% compared to 19.8% last year, and our diluted earnings per share were $2.76 compared to $1.51 last year. Moving on to the financial highlights of our full year 2021 results. As Fritz mentioned, revenue was a record $2.3 billion, and operating income of $335.1 million was also an annual record. Our operating ratio improved 470 basis points in 2021 to a record 85.4. For the full year 2021, our diluted earnings per share were a record $9.48 compared to $5.20 earned in 2020. In 2021, we made capital investments totaling $285.7 million.
We reduced our long-term debt by $19.4 million- $31 million. Our balance sheet remains strong with $106.6 million of cash on hand at year-end and more than $300 million of availability through our revolving credit facility and additional outside borrowing sources. In 2022, we anticipate capital expenditures will be in excess of $500 million, and we also anticipate an effective tax rate of approximately 24%-25% for the full year. I'll now turn the call back over to Fritz for some closing comments.
Thanks, Doug. Our company has posted record results in the months and quarters that followed the pandemic lockdown in 2020 and 2021, which brought even more challenges. The monster winter storm that ravaged most of Texas in February last year, as well as Hurricane Ida, which dramatically impacted our employees and their families in the Gulf Coast area last August, were added to the ongoing COVID-related challenges and the supply chain disruptions we face. Our employees responded exceptionally well and professionally to all these disruptions and managed to not only take care of our valued existing customers, but also work to execute our ongoing growth strategy. We're able to recruit and hire to support the addition of seven new terminals across our network and ended the year with 176 terminals.
Our efforts to build out our network to provide more direct coverage and get closer to our customers increasingly putting us in a position to offer differentiated service. In addition to these terminal openings, we also closed on several land purchases in 2021 that build our development pipeline as part of our multiyear growth strategy. As we look forward into 2022, we're planning to add 10-15 new terminals, and we will also be re-locating 10 or so existing terminals into larger or better-positioned facilities as well. Our planning horizon for future terminals additions, expansions, and relocations includes not only 2022, but 2023 and beyond. To support our pace of openings, our human resources group is continuously recruiting and onboarding the talent that is required to open and operate these facilities.
We're expanding our driver academy program this year, and we'll partner with driver schools and technical colleges in some markets to increase our candidate pipeline. I'm excited to see what 2022 holds for our company as we enter year six of our organic growth strategy. Knowing how our team handled all of the adversity of the past two years and still managed to provide great service and grow our business gives me confidence that we can continue to be successful and stay on course. In total, as Doug mentioned, we expect more than $500 million invested in real estate, equipment, and technology in the coming year. We'll also continue our investments in people and talent development in 2022, as these efforts have been critical foundational elements of our strategy.
Our company continues to heighten our focus on providing excellent and differentiated service for our customers. Ultimately, this focus will drive the growth of our company while continuing to improve our operating performance over time. With that said, we're now ready to open the line for questions, operator.
Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star one on your telephone keypad. Please make sure the mute function on your phone is turned off so the signal can be read by our equipment. Star one for questions. We'll pause a moment to assemble our phone queue. We'll take our first question from Jack Atkins with Stephens. Please go ahead.
Okay, great. Good morning, and congrats on the great results, guys.
Thanks, Jack.
I guess maybe for the first question, would just love to get an update on January trends so far. You know, Doug, if you could maybe give us an update on tonnage and shipment trends on a year-over-year basis. And then also maybe if you could fill us in on how December trended as well.
Sure. Thanks, Jack. In December, our shipments per workday grew 4.8%, and our tonnage actually grew 13.7%, so a bit of acceleration from the first couple of months of the quarter. You know, moving into January, historically, there's a little bit of a step-up in shipments per day and we didn't see that as much in January, but some of that's related to how the holiday fell around New Year's. That day after the New Year's weekend, a lot of our customers you know took partial day or took a full day off, so that was a little different than the norm. January finished up pretty good. We were up 1.3% on a shipment basis and 7.5% on a tonnage basis.
You know, the first week or two, as everyone knows, it was. It's always gonna happen sometime, and we had got hit pretty good with weather, you know, across the map and had a lot of facilities that were either, you know, shut or partially closed for a day or two. You know, some markets there's ongoing kind of rolling embargoes depending on either weather or, you know, COVID challenges, things like that. All in all, I mean, to be positive, with that kind of start to January, we're pretty pleased with. You know, the end of the month, we were pleased with business levels. You know, winter can happen any month in the first quarter. Let's hope we got it out of the way in January. We'll see how February goes.
No, that makes sense. Thanks for that, Doug. I guess just for my follow-up question, Fritz, in your prepared comments, you talked about the number of service centers or terminals that you plan to bring online this year. I think you said 10-15. Then relocating, I believe you said 10 more. Could you maybe talk about what that will do for you in terms of additional capacity into your network? You know, I don't know if you wanna talk about it from like a door count perspective, but just be curious, you know, how you would expect that to trend maybe, you know, year-end 2022 versus year-end 2021, if that helps.
Sure. I mean, the key focus there, obviously the facilities that the incremental facilities will give us expanded sort of addressable market, if you will, that we touch. For example, we've got in the pipeline, that'll happen in the first half of the fiscal year, the three facilities that will help us more effectively cover the Chicagoland area. That'll do two things for us. One, it'll create a capacity in our existing facilities that we have. At the same time, it gets to that differentiated sort of service level that kind of comes along with that, right? We can better meet the customer's expectations. In other markets, you know, simply as we've grown over time, you know, look at the Northeast, that's gone well.
You know, we're gonna expand our major break operation there in Harrisburg. If you remember when we first opened there, we moved into a facility, we replaced that, and now we're at the place where we've got to expand what we have 'cause the business needs to be there to support ongoing growth. Some of it is, you know, the new openings obviously give us new addressable market. The others give us some capacity. The Chicago examples give us capacity, and Harrisburg give us more flexibility. You know, that's kind of the context. It's kind of more of our continuing sort of strategy going on.
We'll take our next question from Amit Mehrotra with Deutsche Bank. Please go ahead.
Thanks, operator. Hi, Fritz. Hi, Doug. I just wanted to follow up on the margin question. I guess, Fritz, last quarter you talked about 150-200 basis points of margin opportunity and maybe opportunity to get to the top end or even potentially above the top end this year. I don't know if that's evolved or changed at all. If you can just talk about that. Doug, I appreciate the comment on January. It's a tough operating environment, weather- and labor-wise, hoping you can kind of help us think about the sequential movements in operating ratio in the context of all that.
You know, I'll start off, we'll kind of divide that up. I'll start off with the sort of overall margin question. I mean, you know, we've long said that, two things, is that, you know, there's a range out there, 150-200 basis points over time, we feel like is very achievable. I think the other thing that's important to understand, is that over time, as we have developed our own tools and capabilities around execution, I think we've shown that, you know, we'll show that we've shored up the bottom of that range. I also think in environments where it is, favorable, if you will, or the strong economic backdrop, we ought to be able to meet or beat the top end of that range. I think that's kind of where we are.
You know, we've got to continue to execute through the first quarter. Certainly, January is only one month of this of the period or the quarter, and you know, there's a lot of weather that could still happen. You know, we feel pretty good about the idea of you know, top end of that range and let's meet or beat it. I think we can do it. Feel good about you know, our execution in the fourth quarter.
The key thing that we saw through the year, just to emphasize and why we feel better about it, is that, you know, as we build sort of momentum with our customer base and they understand that differentiated quality and service, you know, we have the opportunity to get, you know, be paid for that. And that's important because it's a business that requires quite a bit of investment and a business that has a high inflationary sort of cost structure. That's working, and our operations team's delivering it, and our sales team's communicating that message. I think that's something that's sustainable into the year in a positive economic environment. I think that leads us to the top end of the range, and we'd like to meet it or beat it. Doug.
Yeah. Good morning, Amit. On the second part of your question, like I said, I mean, you know, for January to finish + 1.3% on the shipment side, you know, on a workday perspective is pretty encouraging. We've got a much easier shipment comp moving into February, as a result of the, you know, the big storm that impacted Texas and the Southwest, last February. Like I say, hopefully, we got our winter, the worst of our winter behind us. Historically, you know, we've seen about a 50 basis point erosion Q4 into Q1. I think that probably makes sense this year as well. I mean, we're not making it easy on ourselves, right? I mean, Q4 was a record by 400 or 500 basis points. That's a good thing.
The challenge is there for us each quarter against the records we're comping against. You know, 50 basis points probably makes sense. The timing of our GRI is pretty similar to last year. You know, the magnitude of it is a little bit larger, but you know, I think we probably stick to the historical 50 basis point guide on the deterioration.
Yeah. Just for my follow-up, the tonnage. I guess the biggest discrepancy when I look at kind of my expectations or our expectations for the company and maybe where consensus is seems to be really on tonnage growth and understanding what tonnage growth can look like as you take market share, add all this new capacity. I just kind of wanna come out and ask, you know, do you think tonnage growth can be in that double-digit territory in 2022?
Related to that, you know, this Mastio data that came out, you guys are just doing a great job on claims ratio, which is important, but we haven't really seen it, I would say to a certain extent, whether it's Net Promoter Score or some other criteria that the customers look at Saia or the perception of Saia. We've seen improvement, but maybe not to the level that we would have expected given some of the progress you guys have made on the claims ratio. Just wanted to, if you could talk about that as well.
Snuck that two-part follow-up question in there, didn't you, Amit? All right. In terms of your tonnage expectations, look, I mean, we're probably gonna grow our door count this year if I think about just new openings, you know, in the mid single digit range. Like Fritz said, we're building out other parts of the, you know, the existing network to handle more growth. But at the end of the day, I mean, I know we all wanna grow and we all love growing volume when we can do it.
In a strained network, you know, in a network business, when you're strained either on the labor side or maybe supply chain issues, you know, the right thing for us is to grow the revenue, grow the revenue per shipment and cover some of these inflationary costs and meet the challenges and, you know, earn at a rate that allows us to go invest in the business. You know, I think we, you know, we'd like to grow tonnage at a higher rate potentially down the line. You know, I think mid-single digit kinda shipment growth would be our expectation if the environment holds up. You know, we're building out the network to handle more than that.
You know, we'll take it when it comes to us at the right price. You know, we love the margin improvement we're making and a measured pace of shipment and tonnage growth is the way we've gotten there. I think we're gonna keep on that path.
Then on the Mastio piece, what I'd just comment generally about that, Amit, is that, you know, we are, you know, at this point, it measured against all the national carriers as compared to where we were several years ago, and that's reflecting the national coverage map. That's gonna include opportunities where we've grown into new markets that maybe others have been more established, more familiar with those brands. We're actually, when we look at the Mastio work or the results this year, we feel pretty good when we see, you know, there are a couple of players that are above us, and then there are five or six below us. The more national, more resourced, more longstanding brands that have been out there.
We actually look at the result and conclude, hey, that's a good. We're moving in the right direction. You know, we are appearing more and more in the data set of what customers are providing feedback, and we're doing a great job taking care of the freight, getting it there, meeting their expectations. Those things are getting better over time, and I think that's a differentiator. I tell you, one of the things that's in there that you know, where we have maybe disappointed a customer has been you know, when you point out that you're providing high levels of service to a customer, your claims ratio is you know, arguably you know, top in the industry and you're meeting all those expectations, well, you gotta get paid for that.
That's significant. If you recall, this year we've been very focused on making sure that we bill for all of those accessorials, all the services that we provide. When you do that, customer looks at that and says, you know, maybe it's difficult to do business with Saia. These things are changing. I viewed them as a value before, now they're more expensive. Listen, you look at the Mastio data, we score the best where we're pointed out as a value. For us, for what we're having to do to invest in this business to maintain those high levels of service, frankly, that's not sustainable, right? We've gotta fix that over time, and I think we will, because I think we are continuing to build momentum around providing that great service.
People are starting to understand what that means and our team's communicating that, delivering it. You know, the result of that is that I think you see that show up in our sort of pricing structure over time.
Yep, that's a great point. Okay, thank you, guys. Appreciate it.
We'll take our next question from Scott Group with Wolfe Research. Please go ahead.
Hey, thanks. Good morning, guys. Can you give us an update on the pricing renewals in the quarter? The GRI you guys just took was pretty outsized relative to the industry and your history. Just some thoughts on that as well.
Yeah, in terms of the contractual renewals, I mean, it's still running at a double-digit clip, 10.4%, I think, in the quarter. So, you know, again, a pretty good indication of what the shipper's expecting, kind of more the same around their supply chain struggles and their desire to secure good capacity. You know, in terms of the GRI, I mean, you know, we've talked about it, you know, or the pricing gap for years- and- years. So, it's not that we went out and put a, you know, a 7.5% increase across the entire tariff. We're doing it in a very targeted way to help us work on mix.
I mean, mix has been a big part of our own story, finding the freight that works for us, whether it's the right weight break or the right length of haul, whatever the case may be. You kinda use your adjustments to the tariff. You know, it's not going in and setting the whole thing at, you know, times 1.075. It's more targeted than that. You know, the acceptance, you know, early on, we're only a week into it, but I think in the market in general, I think we saw some higher GRIs than the prior year out of some of our competitors, and we saw some GRIs come earlier. You know, ours was right about the same week, maybe even a week later than the prior year. Nothing more than that.
Okay. Just to that point about mix, weight per shipment up 8% year-over-year. How much of this is sort of truckload in your mind that's coming to you? Or how much of this is more, "Hey, we are focused on changing, improving our mix, and this is more sustainable"? Any thoughts on a goal for weight per shipment this year?
Yeah, I mean, I think it's you know and there's a good chance it stays where it's at or maybe moves a little bit higher. I mean, we don't think of much of what's in our network today as truckload spillover business. You know, if I'm thinking about the tariff, for example, some of those heavier weight breaks, like you know above 10,000 pounds, they got higher increases, right? That's a different load and a different profit profile. You know, we're not necessarily you know shunning all that business, but we need to you know get the rates in line. We don't view a lot of our business as truckload spillover. I mean, freight's kind of you know found the mode where it's supposed to be right now.
It's not like the disruptive environment that we had in, you know, the summer of 2020.
Thank you, guys.
Thanks, Scott.
Thanks, Scott.
We'll take our next question from Jonathan Chappell with Evercore. Please go ahead.
Thank you. Good morning. First, if we look at salaries, wages and benefits and purchase transportation in aggregate, an improvement from 4Q over 3Q, I think you have to go back to 2017 to see that. The question is the pricing momentum just so favorable that you were pushing through, you know, inflationary plus and even growth plus type pricing, or were you turning away business, maybe a little bit in 4Q because you didn't have the capacity or weren't appropriately staffed or couldn't get the purchase transportation to meet all the demand that was there?
You know, the fair answer there is we're always managing that mix of business, right? Our goal is essentially to keep the pricing at or tracking to where the sort of market levels, right? That it's less of a model around cost plus. Certainly there's a point at which you say, you know, "I can do this. I can take this business because it is, you know, accretive versus something I already have." But the focus has really got to be around that. Certainly, as the market changed, and we had to deal with disruptions or challenges in given markets, you know, we adjust what that market is, and that may include, you know, implementing coverage changes or embargoes, that sort of thing.
It's kind of a fluid process. You know, I think what we have, we would change our profile as to the extent that we needed to adjust to the market conditions. That's kind of the MO that we have when we kind of manage these in sort of short time frames like that.
Okay. Then kind of sticking with that theme, I think there's this perception as you accelerate your terminal growth this year, that there's some upfront costs associated with either hiring or the land or equipment, et cetera. Are you at the point, you know, with the size of your network and the national breadth of it, where you think you can onboard 8-10 terminals and really not see any upfront costs or OR drag associated with that type of expansion?
Well, I think where we are on this, I'll just comment that in two ways. We think we've developed a core competency around organic openings. So we feel like we know how to do this, the cadence of, you know, when you start recruiting, when you onboard people, when do you know, make sure you have a pipeline of leadership that you can put into a region. So we feel like we've developed that competency, so there's a bit of an efficiency that comes with that. I think at the scale that we are, you know, it's certainly challenging to open up facilities, so I don't want to underestimate that.
At the scale we are, we're doing things that in many cases, I gave you the Chicago example earlier, where the facilities we're gonna open or add are ones that are gonna be incrementally beneficial to that market. You create some efficiency within your legacy networks, your legacy terminals. Maybe we're trying to cover Rockford, Illinois, from the two terminals in Chicago. Well, if you have a facility there, that certainly changes the service level and your cost structure, your transit times, all those things. There's a cost savings that kind of comes along with that. That helps, you know, I guess, offset some of that investment.
I, you know, as we continue to focus on our initiatives, you know, we'll absorb the opening cost and the relocation cost and all the sort of margin structures that we've kind of commented on. We feel pretty good that our model here allows us to do that.
Okay, that's great. Thank you, Fritz Holzgrefe.
We'll take our next question from Todd Fowler with KeyBanc Capital Markets. Please go ahead.
Hey, great. Thanks, and good morning. You know, as you think about the growth going into 2022, first, can you talk about your availability to get rolling stock and equipment, and basically how that interplays with purchase transportation on a shorter term basis?
You know, we feel like we've got pretty good plans and visibility to the rolling stock right now to what we're gonna be able to get this year, and we think it will support our business plan. At the same time, you know, we feel like we've got the ability to recruit the necessary drivers and dock staff and leadership team to make that. So we don't see a constraint right now. We certainly see, in the rolling stock area, much like anything you see these days, it is inflationary. You know, we saw in 2021 that often the OEMs had struggled to meet timelines. Right now, we've kind of built our plan around the idea of what we think we'll get from them, not necessarily what they have represented that they would provide us in terms of timing.
We've built in a little bit of a cushion to that, if you will. I don't think it's gonna be a hindrance right now. Now, you know, as we all know, things can change, but right now we feel pretty good about it.
In that context, does PT kind of stay in this low double-digit % range, or does that trend a little bit higher or lower? How does that kind of work into the growth factors as well?
You know, that one's a tough one, Todd, because right now the way we do is we build out density, and that gives us the opportunity to maybe recruit drivers, fill in, you know, equipment in the right place, those sorts of things. I think I can't give you a kinda clear focus on where that's gonna go this year because it's gonna be dependent upon how the growth works for us or where it comes into play. I can tell you this, that as we look at our total line haul costs, we'll seek to optimize it, either with our internal sort of resources and assets, or where applicable, we'll continue to use PT. All of that has to be cost justified or margin justified.
We certainly wouldn't be in a position where we add a bunch of volume that, you know, erodes our OR improvements over time. That just doesn't make sense to us. That would be business we'd pass on.
Okay, that makes sense. Just as a follow-up, you know, I remember, you know, several years ago, kind of celebrated when you were hitting 30% incrementals, and now you're kind of doing that very consistently. You know, I know that the incremental margins can vary quarter- to- quarter and, you know, based on investment and, you know, seasonality and those sorts of things. Is a 30% incremental a safe baseline to think about, you know, where you can be, you know, bringing on new business at, or are there other things that we should be thinking about as to why or why not that would be the right level of incremental margin?
Well, I think that's a reasonable range. I mean, it's gonna be plus or minus around that, right? In a newer facility, you know, we're moving in and adding, you know, incremental business quickly, you'd expect those incrementals to be better over time. You know, I think overall, those kind of averages make some sense. But you know, at the same time, if you can get more of that in pricing, then you're gonna push that range up.
Mix of business, you're gonna push that range up. Our focus is, you know, probably, you know, if we were to look at the kind of where we kind of land on this, we'll take margin improvement or operating income improvement over growth for growth's sake. That's an important characteristic of how we manage this.
Okay. Got it. All right. Thanks for the time this morning.
We'll take our next question from Bascome Majors with Susquehanna. Please go ahead.
Yeah. Thanks for taking my question. Fritz, wanted to go back to your comment on your core competency you feel like you developed in organic openings. You know, the five or so terminals you've opened since the end of September, can you give us some thoughts on how quickly those have filled up, where they track versus kind of what normal capacity utilization might be, and how that compares to time, or your history in that? Thank you.
No problem. You know, these have been pretty good ones that we've added. They all are good, but the ones that we've added here recently. I'll give you the best example I can think of is around Calhoun, Georgia. That's Northwest Atlanta. You know, that's an area that our sales team, you know, we didn't have a great product for them in that market, because you know, with this time to get from Southwest or Southeast Atlanta to Northwest Atlanta is pretty cumbersome, so we didn't meet the expectations of the customers. So that's turned into be a winning terminal pretty quickly out of the gate, simply because of its market positioning.
I think as you see over time, as we add in the markets like Chicago or add the Northeast Atlanta terminal, which we'll do sometime this year, those are gonna have similar economic profiles, meaning they are ones that, you know, we kind of cover already, but we don't have a great offering around it. Now we're in a position where we can jump on that, and it becomes incrementally beneficial out of the gate. Youngstown, Ohio, is a facility we opened in October. That was a facility that, you know, kind of was a little bit of a light spot in the map for us. It is an important point for us in that part of Ohio. It also is important handoff point into the Northeast, so into Pennsylvania and such.
It's, you know, that one is a classic. The economics on that location are really about just being positioned in the network and addressing the local market. What's exciting about the incremental ones that we have and why we think this is so important is that this is about addressable market or being able to provide better service in a market. And when you do that, I think you cover the costs more quickly because you create cost savings and almost immediately. And you can meet those customers' expectations. And when you do that, you have the opportunity to charge for it. The profile of everything that we add from here is gonna be more like those sorts of facilities.
There may be, you know, when we get into markets that we're entirely new to, that, you know, there may be a little bit of small startup costs that, you know, may be a drag for a while, but most of these are getting to our company average OR pretty quickly.
You know, not to ask you to spoon feed it to us, but, you know, do you have just a rough sense of what that timeline used to be, the company average OR, and what it's looking like more recently?
Well, sure. I mean, if I go back to the Northeast terminals, I mean, we were excited to get them below 100 OR, you know, kind of in 1.5 Year , right? Now I'm not talking about 100 OR. I'm like, all right, company average is 84.2. Our folks get a little disappointed because they'll say, "Well, we got new business at an 85." I'm like, "Well, that's okay. That's not as good as the rest of the business." It's a focus. The new ones, you're thinking about months rather than years. It's, and they're all different, so I don't mean to be evasive on it. It's just tough to get, say, is it eight months, seven months, six months? I don't know.
Thank you.
Bascome Majors, just to add on the, you know, the core competency piece of it, I probably could have mentioned this when Jonathan asked his question about it, but, you know, can we do it seamlessly and still get OR improvement? I don't. Just to be clear, we opened seven terminals this year, and we had a, you know, a record OR of 470 basis points improvement. I think that's where we gain confidence in the competency issue.
Thanks.
We'll take our next question from Jason Seidl with Cowen. Please go ahead.
Hey. Thanks, operator. Hey, guys, good morning. I wanted to focus a little bit on sort of a longer term look. There's a lot of LTL companies expanding their terminals, both new and also larger ones. Wanted to see what you think that's going to do to sort of the competition for labor, which already is in a tight market as we look through 2022 and beyond. Longer term, you know, where do you think this is gonna help the OR for Saia going forward? One of your competitors talked about a longer term OR in the sixties based upon an improved network in the pricing environment. Would love to get sort of your opinion on where you think Saia could go.
On that, I'll kind of break that into two pieces. On the labor front, I mean, we're competing certainly with LTL, you know, businesses as well, or the typical competitors that we all know about. But in many cases, for labor, you're also competing with, you know, large, warehouse, industrial real estate, sort of, and anybody that's got a warehouse operation, they could be competing for the same dock workers that we're looking for, right? It's the labor thing isn't just discrete to our industry. You compete based on, you know, what the company's values, culture, obviously pay and benefits are critical part of that, but you differentiate on those items around quality and place to work.
You know, we've got a pretty good. We feel pretty good about our company around that, and the growth profile certainly helps. Kind of drive that. With respect to the other companies that are, you know, expanding as well, you know, I think it's also to keep in mind that there are also some that are exiting. You know, we saw some of that just in the quarter, and that creates available real estate, you know, terminals that, you know, we potentially could pursue and others. There are also other folks that are outside of LTL that would be competing for that real estate because it's a potentially attractive real estate that could be changed to industrial real estate property. There's a, you know, there's a few dynamics in that for sure.
With respect to, you know, kind of longer-term OR, listen, when there's a marker out there, and whatever the number is, you know, I don't see a reason why we shouldn't pursue something similar. Now, do we get there at the same time or in the near future? You know, I don't know what that cadence looks like. I think that, you know, so long as we stick to providing that great quality and service to our customers, we have an opportunity to close that gap. You know, does that take our business from, you know, kind of the mid-80s% into the 70s%? You know, I think in time, that does. I don't see an impediment. We think we've got a great product. We got a great team. There's nothing that.
Sky's the limit where that goes, and with the timing, it's dependent on things sometimes that are out of our control. We feel like, you know, if others set a marker lower, then that just sets our marker lower.
Okay. Fair enough. Appreciate the time as always.
We'll take our next question from Ken Hoexter with Bank of America. Please go ahead.
Hey, good morning, Fritz and Doug. So just if we step back for a second look at the market, you know, obviously a spike from e-commerce growth and being a COVID beneficiary in the sector, do you see any fade away of that, or do you see continued growth? I know we talk about the growth going forward and adding to capacity. Just seems like the market's expecting this kind of near term pullback in that demand. I just wanna understand what you're seeing on that underlying demand. Then if there is a rollover in that demand just because of the tightness from the growth or COVID, do you think about any pause in the margin potential?
I think in the sort of macro situation right now, I think the one thing that the last couple years have shown us is that, you know, in a disrupted supply chain, certainly our assets can flex to meet those requirements. I think, you know, other LTLs are similarly positioned. I think the industry is a good place to be. You know, I think going forward, I don't see a retrenchment back to a time that supply chains don't have to be fluid. I think that, you know, maybe they're not as disrupted as they are now, but going forward, people will adjust how they've, you know, consumed goods or how the things are purchased and how
What that supply chain looks like, where those warehouses are, where the goods get delivered, how all that works. I think our assets continue to match that. I think that's important. You know, could things slow down? Absolutely. They could. I think our positioning is unique in this sense, is that I think we're, you know, as you know, Mastio and others have pointed out, we're doing a great job for the customer. That's a point of differentiation. In a slower market, we continue that, and we continue to execute our plan. You know, I guess one of the benefits in some regard is that if you're relatively more inexpensive compared to the competition, there is some, our opportunity remains.
We need to be at market for what we're doing, particularly if we're doing it really well. I think that continues. It may go at a slower rate, but I don't think it stops.
Just on that, doing great job for the customer, it looks like claims and insurance nearly doubled in the fourth quarter, yet up for a full year, up 25%, same as revenues. Is there any way to gain efficiency on that metric? Or I know you talked about your cargo claims being at a solid level, what do you think on that line going forward there?
Yeah. Hey, Ken. You know, that line covers not only, you know, cargo claims expense, but our insurance expense around auto accidents would be in that number too. That's where you see, you know, some of the, most of the inflation and some of the volatility. You know, we've over the years, we've taken a little bit more of the risk ourselves in that line on the auto side as we've made investments in technology in our fleet. We're willing to kind of bet on ourselves to some extent versus, you know, paying some of the highly inflationary premiums that are out there the last two years. You know, that there'll be volatility in that line. Again, we've invested, you know, heavily in safety and, you know, the premium itself is gonna be inflationary.
20%-30% is usually what I've been expecting in the last few years. On the frequency and severity side, I think we're gonna make headway over the next few years with all the improvements in technology that are out there and our adoption of them.
Great. My last one, just real quick on the $500 million CapEx. Maybe talk a bit about what's carryover, what's not. I know you're doubling the service centers, but under 15 from seven. Is that mostly real estate? Is it tractor catch up? Maybe talk about what's gonna carry over and what's growth.
Yeah, it's a mix of both. I mean, we fell short on the trailer side in getting all the deliveries we wanted last year. There's still a pretty good number of trailers in that number. On the tractor side, you know, it'll be another, you know, pretty good number because not only do we have growth tractors in there, but we'll do some buying for age of fleet. But real estate's always a wild card in that line. I mean, we could spend, you know, we could spend more than twice of what we did this year on the real estate line if we're able to put the deals together. I think in the last couple weeks, you know, we've closed on some small real estate deals, two or three small deals.
If some of the bigger ones fall into line, you know, the real estate number could be 2x or 3x what it was last year. Mainly on the equipment side, it was mainly trailers that were pushed out, and that's a piece of the step up in spending that we plan.
Yeah, we've got a couple big projects in the year that are in process that, you know, started late last year into this year.
Thanks, guys. I appreciate the time. Thanks, Doug.
We'll take our next question from Tom Wadewitz with UBS. Please go ahead.
Yeah, good morning. Wanted to ask you a bit about pricing and how you think renewals or if you wanna just talk broader kind of revenue per 100 weight ex fuel. I think your renewals were something like 14% in the third quarter, and you talked about 10% in fourth quarter. Those are obviously both very strong numbers, but some deceleration. How do you think about renewals the next couple quarters? You think you stay in kinda high single digits, 10% area, or do you think it kinda come down to a more normal LTL level of maybe mid-single digits?
Well, I mean, they've been running double-digit for probably, I guess, three quarters in a row now and high single-digit before that. I mean, we're running into some pretty good comps. Each quarter's, you know, number that we share is really, you know, the book of business looks different. I think that we renewed in the fourth quarter probably 10% more contracts than we did in the third quarter, and, you know, that can factor into it as well if you have some that have, you know, recently have seen increases and you're coming on top of those, you know, the following year, maybe they don't get as much.
You know, I think what we're seeing around the environment with the GRIs is a pretty good indication to us that, you know, pricing is gonna be another opportunity this year. I mean, from the truckload and intermodal companies I've seen report so far, I mean, you know, they're still talking about double-digit pricing opportunities out there for them. You know, we're exposed to some of the same cost pressures, especially labor. You know, I think our GRI is an indication of what we think is gonna be achievable for the year. Again, we primarily give you all the contractual renewal rate just to kinda let you know, you know, what the shippers are sensing out there. That's their forward look of the environment, so it was still double digit in the fourth quarter.
Right. Okay. The second question is, you know, you've got a pretty strong ship, you know, capacity growth story, idiosyncratic footprint story. You know, I would think you'd probably do better than the market in terms of growth. But how do you think about the impact from a cyclical perspective? You know, I think you have had a lot of strength in LTL and maybe some truckload shipments move in. Do you think that will kind of swing the other way later this year and be a headwind? Or you just think that the kind of dynamic is that that's in this cycle, and maybe that's not a very meaningful factor? Just thinking more about kind of, you know, LTL market more so than Saia specific.
I mean, I think our commentary around that, Doug alluded to it earlier. I mean, we, you know, from our book of business and we think generally is that, you know, things are kinda back to their more historic modes. That as we look at our portfolio, what we're providing service for right now is we see, you know, it's kinda typical sort of mix of business, if you will, in terms of, you know, if you go back a year, back in this midst of COVID, yeah, there was a little bit of spill over there, but right now we're pretty comfortable with it.
You know, I think if the macro things were to slow a bit, I mean, I think that LTL is in a position to deal with a lot of that, and the supply chain turmoil change, if you will, over time. I think those things are all, you know, we sustain through that. Now, depending on where you think macro environment could go, certainly that could temper, you know, some of the growth opportunity. One of the things as we look at our facilities and our opportunities to make investments, we're not thinking about it in terms of 2022. We're thinking about it on a 10-year kind of horizon. That implies that we think through the cycle, and that's important because these facilities, that network is something that generates great value through a cycle.
Do you think loosening in supply chain or supply chain improvements kind of good or bad for LTL shipments?
Listen, I think that LTL shipments do well as supply chains adjust to consumer or commercial demands, right? As people go through maybe back to more of a JIT sort of situation, any of that, you know, I think we're uniquely qualified to do that, and the industry is. I think that we benefit from that over time.
Great. Thanks for the time.
We'll take our next question from Stephanie Moore with Truist. Please go ahead.
Hi, good afternoon.
Hey, Stephanie.
I wanted to follow up just on a previous question that was asked, just more so on the comments on the demand side. I know that you called out in early January clearly seeing, You know, some disruption just due to weather. Are you still seeing with a lot of your customers just general disruption when it comes to demand and volumes just simply from supply chain congestions, meaning that there's still kind of recovery opportunities as we move through the year?
My comment around that is that I think what's happened is that people, and maybe even Saia around this, we've gotten better at handling the disruption, but things are still disrupted. I mean, you watch what's going on in the port activity, that's not back to normal yet. And the COVID, the Omicron sort of, you know, that's probably tempering a little bit here in the last week or so. You know, there was a time in early January and December where that was every bit as bad as the depths of Delta or the first round of it. You know, I think if anything, people have got adjusted to that sort of change or challenge over time.
Yeah, I think end of the year, I'd like to think we get farther away from that and maybe back to what might be defined as normal.
Understood. Then switching gears, over the last month or so, there's been several announcements of just Saia's expansion with EV trucks. So maybe if you talk a little bit about those, some of those, you know, LOIs or agreements that are in place and maybe any work you've done, you know, as you kind of think forward about how some of these might compare to normal CapEx spend, as well as just ongoing potential maintenance, fuel costs, you know, et cetera, by, you know, expanding more into EVs.
You know, we're still early on collecting the data. So the way we think about this is sort of our R&D, if you will, around the equipment that we have either leased or purchased to date. We need to figure out what the profile of what that looks like. What does the utilization look like? What does the range look like? All those sorts of things. We're still pretty early on this. You know, we're pretty open with OEMs. Give us a shot at some of this. We wanna see how this works. We wanna be an early adopter, assuming that these things perform. You know, we introduced first the Volvo EVs in the first part of the year.
You know, there are some parts of that that I think are compelling. The range and, you know, kind of what the ongoing operational costs are. You know, we're still a long way away from that being a permanent part of the fleet. You know, as we look at the emissions requirements in some parts of the country, you know, we focus more on adding some CNG equipment, so we feel good about what that looks like, what the performance profile of that is. We think that over time, that's probably, you know, as you go from a sort of the emissions environment that we are now to where ultimately everybody wants to be, that's probably gonna be a stepping stone technology, so in sort of in the middle of diesel and maybe ultimately where EV is.
In that case, you know, that's one where we need to make sure we understand what the operating characteristics are of that. Then more recently, you're probably talking about the release we had around the Nikola product and, you know, there's some that looks like that could be really interesting. You know, but the key part of that is that we need to get a look at it. We need to see how it works, get our hands on it, test drive it, run it in operation, collect data. It's early on, but we're very open to the idea.
Great. Thanks so much.
We'll take our next question from [James Monahan] with Citi. Please go ahead.
Hey, guys. Thanks for taking the question. Wanted to touch on the timing of the capacity additions. Is there any detail you could provide about the door adds, maybe first half or second half? More broadly, just touching on the capacity adds and the ramp there, how should we think about that? Is it something that's relatively immediate? You talked about mid-single growth in shipments. Should we think about capacity actually growing faster than that?
We're going to open sort of the 10-15. I think 5-6 of them are going to be in the first six months of the year. The balance are going to be in the second half of the year. We're going to end up opening all 15 of that sort of range. The question is, you know, you gotta get through the timing of dealing with maybe a zoning issue or an upgrade or all those sorts of things. The first ones, we've got really good line of sight around that. We're planning, hiring, and all those sorts of things along with it. Those will be ones, the first ones, because there's three that are Chicagoland related. Those are you're probably not going to notice necessarily.
I don't expect any drag from those at all. None of them actually, but those in particular, because those are immediate sort of market improvements for us and service improvements. There's gonna be a cost savings that comes with that, and there's gonna be some incremental sort of business we likely get out of that right out of the gate because it's, you know, service we couldn't offer before. You know, it's built into kind of what our overall sort of growth plan is for the year. I don't really have a breakout for those individually.
You know, as I've described in a couple of the other questions, you know, the key things with all these is when you're moving in sort of what we'll call saturation terminals, they benefit you pretty closely right out of the gate. I don't expect a lag. If anything, it's gonna be part of our growth for the year.
Got it. How should we think about leverage here? Is this a point where maybe a buyback makes sense, or you're holding it back for some flexibility? If it is the latter, should we think about it, the opportunity set as inorganic growth, or could you use that leverage to sort of accelerate the organic expansion beyond 2022?
The way we're thinking about this, you know, we said 10-15 terminals in this year, and I think that repeats again next year, in 2023. You know, that's gonna require fleet investment, ongoing as well. I think, you know, for the next
A couple of years anyway. I think you're gonna see sustained levels of capital spending. We're also, quite frankly, very conservative around the idea that we need to be able to manage this business, you know, through and take advantage of opportunities that might come to us that are unexpected. I mean, as one player exited the market in December or in the fourth quarter. You know what? Certainly, those are assets that are of interest to us, and there could be others down the road. We're always gonna have powder to take advantage of those opportunities. But we're also custodians of the shareholders' capital. Over time, you know, we'll explore what we need to do to best utilize cash and cash flow.
Got it. Thank you.
We'll take our next question from Bruce Chan with Stifel. Please go ahead.
Hey, Fritz. Hey, Doug. Morning, or I guess afternoon here. Just wanna go back to some of your comments around mix and freight selection. I know that, you know, you mentioned a lot of that is self-directed, but as you think through some of the dynamics around, you know, maybe the consumer recovery being a little bit long in the tooth versus industrial recovery or, you know, rig count recovery, are you expecting or are you seeing any kinds of tailwinds from the market for that?
I don't know if I'd call them tailwinds, but I mean, activity remains strong. I mean, manufacturing data, you know, continues to roll out month- after- month positive. I think the ISM numbers showing growth for the past 19 months. You know, the LTL volumes and tonnage are tied very closely to what goes on with the, you know, industrial manufacturers. Inventory levels are still low. As Fritz mentioned, the, you know, the port congestion really doesn't seem to get better so far. You think about our contractual renewals, you know, and how strong they remain. I think that tells us that, you know, at least through the first half of the year and into the second half of the year, I mean, we remain pretty positive on the environment.
You know, Houston activity was real strong in the fourth quarter, Dallas, obviously L.A. You know, some of that could be tied in the Houston and Dallas markets to energy. Some of the Houston activity could be helped a little bit by repair work going on after the hurricane came through, you know, Louisiana. You know, activity remains good, and the manufacturing data is good, so that's primarily what we track.
Okay. No, great. That's helpful. Then can you just remind us of where your exposure stands to energy? I know, you know, that used to be a fairly sizable chunk of your legacy business.
No, it's. Yeah, you're right. It did. You know, as we grew up out of our Gulf Coast roots, we were certainly more heavy energy than our competitors. But it's kind of a mid-single-digit percentage now if you think about shipments across the network. Our footprint's a lot bigger, and we've grown out of some of the energy markets.
Okay, great. Well, that's all for me. Appreciate it.
Thanks.
We'll go next to Tyler Brown with Raymond James. Please go ahead.
Hey, good morning, guys.
Good morning.
Hey. Of the 10-15 new facilities and the 10 reloads, what's the breakdown between owned and leased? And is there still good product out in that lease market?
I don't have the breakout of what those are. Most of them are gonna be owned. There are gonna be some leases in there. There are good properties, you know, either facilities to purchase or facilities to lease. You know, I don't think that's an impediment. It's just the typical real estate challenges you have to deal with. You know, sometimes it's, you know, maybe it's a zoning issue, like, you know, if we have a facility that we're planning on buying, it's gonna be an owned position, but it's been idle for a while, so you have to go redo zoning when that happens. Those are the challenges there, but we haven't changed our profile around the idea of owning strategic assets.
This market right now, you know, there's a lot of interest in industrial real estate investments, so in many cases, you can't necessarily buy what you'd like to buy. You have to lease them. But the assets are available.
Okay, that's helpful. Then you kinda touched on it with the Rockford example, but now that you've been accelerating the terminal investments over the last couple years, are you actually starting to see it show up in your P&D productivity, as I assume those turn times are getting reduced? Or is that something that's more on the come as the network saturates and matures?
You know, in the examples I've given them, we've seen them. When we think about them longer term, the magnitude of them will become greater over time as we, you know, fill in the map. We're still early on in the fill-in-the-map part, so the saturation part. I think that's an opportunity, Tyler, for sure, over time. You know, the good thing is that it has played out in the instances where it's forked. It's not visible necessarily 'cause of larger company and all the other things going on.
Right. Okay. Is it right to think about the new terminals as, call it, new market entries or those saturations in big metros? Are these reloads largely in the bigger breaks? One, is that true? Two, if you are expanding your break capacity, does that alleviate some P&D pressure? I mean, I'm assuming your line haul isn't optimized if you're needing more capacity.
You know, it's a little bit of all the above. There are. You know, we're always gonna. We'd rather own assets. Some of these that we have in the pipeline are simply in smaller markets where we might be leasing something, or we've got an available purchase, so we'll swap those out, so it's a reload. In other markets, it's a capacity play and a certainly a market position play. Maybe it's a facility better positioned in the market that we can grow from. It's really kind of a combination of all of them. You know, it's a bit of a maturity that comes along with that. With respect to the comments about PT, absolutely.
Over time, as we build out this network, the opportunity to, you know, build our own sort of, I'll call it, internal density and use more of our own assets, that's certainly there. We're always gonna be in a position where we're making a cost decision around, you know, inside or outside for white haul.
Okay. Okay. Yep, that's helpful. Just my last couple ones. Doug, do you have a day count for 2022?
Yeah. You want it by quarters?
Sure.
It's 64%, 64%, 64%, and then 61% in the fourth quarter.
Okay.
Should add up to 253.
Helpful. Real quick. Okay. Okay, good. What is your on-tariff versus foreign tariff mix today?
Of our tariff business, you know, the majority of it. When we say tariff business, it's, you know, 25% or so. The lion's share of that's on Saia tariff.
Yeah. Okay. All right, perfect. Thanks, guys.
Ladies and gentlemen, this concludes today's question and answer session. At this time, for closing remarks, I would like to turn the conference over to Frederick J. Holzgrefe. Please go ahead.
Yeah, thank you. Thank you everybody for participating in the Saia earnings call. We're excited about the results of our record 2021, and we're looking forward to 2022 and hopefully breaking some more records and providing the updates along the way. Thank you, and have a great day.
Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.