Good day, and welcome to the Saia, Inc. Third Quarter 2018 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Douglas Col. Please go ahead, sir.
Thanks, Travis. Good morning, everyone. Welcome to Saia's third quarter 2018 conference call. Hosting today's call are Richard O'Dell, Saia's President and CEO, and Frederick Holzgrefe, our EVP and CFO. Before we begin, you should know that during the call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and all other statements that might be made on this call that are not historical facts, are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. I would like to turn the call over to Rick.
Well, good morning, and thank you for joining us. I'm pleased to announce record quarterly revenue and earnings for the third quarter of 2018. Tonnage grew 7.3% for the quarter, with an 11.9% increase in our yield, we were able to grow third quarter revenue by 19.2% to a record $426 million. The Southeastern U.S. experienced another difficult hurricane season, particularly in the Carolinas during the third quarter. Our business in that region was disrupted for several days, but we were very fortunate not to have sustained extensive damage to our facilities, and our employees were all safe through the storms and subsequent flooding in those impacted areas. Our operating ratio improved by 220 basis points to 90.9% for the quarter, diluted earnings per share grew from $0.55 last year to a record $1.07 per diluted share.
Customer demand remained steady through the quarter with what I would describe as normal seasonality. Our financial results continue to benefit from our focus on freight selection and by taking account specific pricing actions where necessary. The 11.9% yield increase in the quarter marked the 33rd consecutive quarter of year-over-year improvement in our yield. Contractual renewals were similarly strong at an average increase of 10.2% in the quarter. Contractual renewals tend to be annual, the average increase negotiated in the third quarter bodes well for our expected positive pricing well into 2019. Other key operating metrics that drove our improved year-over-year financial results in the quarter are as follows. LTL shipments per workday rose 5.4%. LTL weight per shipment rose 1.8%. As I mentioned, LTL tonnage per workday rose 7.3%. Our length of haul benefiting from our expanded geographic reach increased by 2.7% to 835 miles.
With the 11.9% increase in our yield for the quarter, our LTL revenue per shipment increased by 13.9% to a record $233. Just a couple of other items from the quarter I'd like to mention before I turn things over to Fritz for a review of our financial results. Our cargo claims ratio of 0.7% improved from 0.73% a year ago and improved sequentially from 0.82% in the second quarter. The claims ratio is benefiting from continued training initiatives across our network and also the increased experience of our newest associates. Purchased transportation miles in the third quarter were 10.5% of total line haul miles, compared with 11.6% last year in the third quarter, and down from 11.4% in the second quarter of this year.
Rail PT miles were about 44% of the total PT miles, compared to 32% in the quarter last year as we sought to maximize the use of lower-cost rail on our growing long-haul segment of business. With that, I'm going to go ahead and turn the call over to Fritz to review our financial results in more detail.
Thanks, Rick, and good morning, everyone. Third quarter revenue grew 19.2% over the prior year to a record $426 million, benefiting from positive shipments, tonnage, and yield improvements, as Rick mentioned, and also from higher fuel surcharge revenue. Fuel surcharge revenue was 49% higher than in the third quarter last year. Operating income grew 58% to $38.7 million, compared to $24.6 million earned in the third quarter of 2017. Our operating ratio of 90.9% was 220 basis points better than a year ago. Net income, benefiting from a lower tax rate, increased by 96% to $28.2 million. I'd like to comment now on the year-over-year change in a few key expense items. Salaries, wages, and benefits rose 15.2% to $224.6 million in the third quarter, reflecting the year-over-year increase in our workforce, which was nearly 8% larger throughout the quarter versus last year.
Also, we implemented a wage increase in July, which averaged approximately 3.5% across the company. Fuel expense in the quarter rose 37% over last year. National average diesel prices increased 24% compared to third quarter last year, and our miles in the quarter were up 10.8%. Purchased transportation expense in the third quarter rose by 3.9% to $31.2 million and was 7.3% of revenue versus 8.4% last year. PT usage as a percentage of line haul miles was down, as Rick mentioned, helping offset the 15.1% increase in cost per mile of truck PT versus last year. Rail PT cost per mile rose 7.1% from the prior year.
Claims and insurance expense rose 17% in the third quarter compared to the prior year as accident frequency was impacted by an increase in miles versus the prior year. Depreciation and amortization rose 19.5% to $26.7 million, compared to $22.3 million in the prior year quarter. The increase reflects our continued investment in tractors, trailers, and forklifts. Our effective tax rate was 24.7% for the third quarter of 2018, compared to 38.5% in the third quarter of 2017. We expect our full-year tax to be approximately 23.5%-24%. At September 30th, 2018, total debt was $121.3 million, inclusive of cash on hand. Net debt to total capital was 15.3%. This compares to total debt of $127 million and net debt to total capital of 19.3% at September 30 last year. Net capital expenditures in the year-to-date period through September of 2018 were $182 million, including equipment acquired with capital leases.
This compares to $183.9 million of net capital expenditures through the first nine months of 2017. For the full year 2018, we expect net capital expenditures will be approximately $265 million, including investments in terminals, terminal improvements, technology, growth equipment, as well as continued investments made to lower the age of our fleet tractor and forklift fleets. Now I'd like to turn the call back to Rick.
2018 has been a constructive year, and we have a busy fourth quarter ahead of us. As we mentioned in our press release, we'll be opening two terminals in Massachusetts in December, allowing us to offer direct coverage to the state. Including the two other terminals opened in Pennsylvania earlier this year, we will conclude the year operating 10 terminals in markets that we had not served prior to May of 2017. For 2019, we're planning to open four to six more locations in new markets as we fill out the coverage map across New England. While the Northeast is a compelling multi-year growth opportunity for us, we're also opening terminals in our legacy geography where customer service can be enhanced, and additional locations in a market put us closer to the customer.
These additional terminals also free up some break capacity at our larger facilities for us to handle more longer-haul freight. This year, we opened new terminals in Tacoma, Washington and Fort Worth, Texas, and will target additional openings in the future as density in a market allows. Our strong financial performance and resulting cash flows are allowing us to fund much of this growth internally, and our long-term debt is down year-over-year. Our expanded and enhanced coverage and our business mix management efforts are producing meaningful incremental margins. We believe the environment remains positive for us to continue this strategy, and are excited about the prospects for the fourth quarter and into 2019. With these comments, we're now ready to answer your questions.
Thank you. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 to ask a question. We'll pause just for a moment to allow everyone an opportunity to signal for questions. We have a question from Brad Delco, Stephens.
Hey, good morning, guys.
Morning, Brad.
Hey, Brad.
Rick, first question. Maybe this is for Fritz, too. Can you give us monthly tonnage, or I guess what we need is September, then where you are through October. Then to the extent you can quantify the hurricane impact on tonnage and margins, that would be helpful.
All right. September tonnage well, for the benefit of everybody, July, August, and September tonnage are 10.3%, 8.7%, and 2.8%. Then shipments were +6.7%, 6.6%, and 2.7%. Then October month to date, tonnage +1.6%, and shipments +1%.
Yeah, I think one thing, let's just talk about what's going on from a mix management standpoint, because I think that some of our actions last year, late in Q2 and into Q3, we made some meaningful price adjustments to some of our transactional 3PLs that impacted our volumes for a period of time. We continue to be diligent in our efforts to make sure our business mix is profitable. When you look at our tonnage, I think it's important to look at the segments. I'm going to give you some numbers here that I think will give you some indication of how our mix management is working within the organization. For the quarter, our field business was up 14.6%, our national account business was down 3%, and our 3PL business was actually up 34% year-over-year for the quarter.
As we go into October, our field business continues to grow. It's up 15.5%. Our national account business is now down 7.5% from a comp perspective, and our 3PL business is up 11.7%. As you can see, there's some meaningful changes in our business mix management. It's producing good financial results and return on invested capital, and I think as we work through the business mix management to get business operating in the ranges that we would expect it to and to contribute, then obviously Our growth prospects will kind of continue with customers that recognize our value proposition.
Thanks for that. Could you quantify, though, what impact maybe the storms had on either tonnage or margins in Q3?
Not meaningfully to break it out. It created a little bit of inefficiency in the quarter, but keep in mind, Brad, although we mentioned the Carolinas, that's not necessarily a significant area for us. The Gulf States, that's not significant either.
Okay. Rich, you gave a good detailed comment on your cost per mile in PT. I think you said up 15.1%.
Right.
When do you renegotiate those, I'm assuming, truckload contracts, and what would your expectation be on inflationary cost pressure over the next 12 months?
Yeah, I think specifically on PT, we're kind of ongoing. We kind of walked through that. I think what you would see our expectation on as we watch and see what's going on in the truckload market, that's what we'll kind of project. Depending on what your view is on that pricing right now.
Yeah, probably mid-single digits.
Yeah.
Okay. Maybe last one, the two new terminals in Q4, I noticed you didn't change your full year CapEx budget. Are these leased facilities? Are these being purchased?
Yeah, those two are actually leased. There are some improvements in those facilities. We've got other projects, other facilities that we won't open until next year, though.
Okay.
That's in our number right now.
Could you give us the cash CapEx for the year or what you expect it to be for Q4?
To date, I think the balance of what we will spend in capital will be cash. We won't use any additional capital leases. If you look, that's roughly $80 million-$90 million of balance of the way. That's going to be all cash outlay.
There's a major real estate project in there that actually just closed.
Yeah.
Okay. All right, great, guys.
About $30 million.
Great. Thanks for the time, good results, and I'll get back in queue.
Thanks.
Thanks.
Our next question comes from David Ross, Stifel.
Yes. Good morning, gentlemen.
Morning, David.
Hey, David.
The Northeast expansion has increased average length of haul. A lot of the business initially comes from customers that you're already serving in your legacy territory. Can you describe, I guess, the evolution of the Northeast? How much of the business is going to and from legacy Saia terminals, and then how much is staying within the region? At what point do you get enough terminals? Is it 10, 12, 14, where you feel you have the coverage density to do a lot more intra-regional northeastern freight?
Yeah. Okay. Today, ballpark-wise, we're doing about 2,000 bills a day to and from the Northeast. Of the 2,000 bills going in and out of those terminals, only about 150 of those are intra-Northeast. As you would expect, right? We're leveraging our network, and I think until you get into full coverage up there in the Northeast, then I think there'll be some opportunity to penetrate some of that intra-regional business. I would also comment that there's some good carriers up there, and some of those rates are very competitive. It's probably in our best interest to play in that to the extent it makes sense for customers and for us. Also, there's some more meaningful returns for handling business that's to and from Saia's network. Our length of haul up there is about 1,200 miles.
When you think about the impact of the Northeast business on the network as you've been growing that certainly there's less density in those line haul runs. What do you think the drag has been on the operating ratio as you've kind of expanded into the Northeast? For example, if you weren't in the Northeast, would you be at a sub 90 OR right now?
Probably. When you run a network business, it's kind of difficult to do that. Obviously, we have profitability by regions, and then while some of the Northeast final legs might not have particularly good density at this point in time, the business that flows across, let's just say the Carolinas and the Cincinnati region, the Ohio Valley, those regions' profitability has improved because of the density flow through there. Again, we have regional profitability models and lane profitability models.
It's obviously a dynamic situation because if you move into a new market, it can change the balance ratios. I think I've commented before, one of the benefits of expanding your coverage, besides the obvious benefit to the customer, is that the regions in the middle of the country tend to operate better than the ends, partially because of those flows from a line haul perspective, as well as P&D density within the terminals themselves, right?
Yeah.
Just as an example.
Yeah
Cincinnati regions, our profitability model shows that it improved by 400 basis points. On a fully allocated basis, the business to and from the Northeast is operating at about a break even now. It's improved, what? About 10 operating points since we opened out the gate on a fully allocated basis.
Do you think getting up to 3,000 bills a day or 4,000 bills a day gets you back in line with the rest of the system? Is there a number you have in mind, or is it not that simple?
We have some internal targets based on that and how we think it should improve and how that business should operate. Just the way that things work from a fixed cost perspective, you're going to have way better fixed cost coverage from the fixed cost in the Northeast terminal network. We have excess capacity there. In many of the terminals, we run routes for coverage as opposed to having them be full from a shipment perspective. I think the incremental margins there are going to be, for business to and from the Northeast, could be as high as 35%, which is going to drive the I would expect to get another 10 OR points from the mature terminals in those regions, which is going to be pretty meaningful for us, right?
Absolutely. Thank you very much.
Sure.
Our next question comes from Amit Mehrotra.
Thanks. Good job with the name. Hey, guys. Good morning. Wanted to expand a little bit on the pricing backdrop. The contract renewals are obviously very strong at 10%. Wondering if you could give us a sense of how much of the business has been repriced and if there's more to go, excuse me, in terms of re-rating the book of business.
Yeah. Our national account business is now operating in the low 90s, That's been a positive for us. There's always lanes that we'd have to look at that may or may not be contributing. Actually, I think the book of business is priced pretty well right now. Again, as you look at if we get 10.2% on contract renewals, we don't retain 100% of that business, as you could see some of our comps from a national account basis in October with shipments being down about 7%. Obviously, the revenue per bill is trending in the right direction, and all of our data analytics basically have shown us that yield and business mix management would account for most of the gap between our performance and those who I would call benchmark type performers in our industry.
Yeah. I guess maybe a better way to ask the question is just how it translates to incremental margins. It was nice to see the incrementals kind of eclipse above 20%, I think, on an underlying basis when you adjust some factors out that happened last quarter, or last year rather. You sounded pretty confident about the operating environment prospectively. Is now kind of 20% plus the right way to look at it prospectively? Then you typically do see this sequential uptick in OR as you move from three Q to four Q. Just any color there in terms of how we should think about it from a seasonality perspective.
Yeah. I think we would kind of expect us to continue to see some modest incremental margin improvement. That's clearly what we're targeting. Again, that's balanced by some of the terminal openings and some of the training and investments that are associated with that. Then, in terms of four Q, history would be about 100 basis point deterioration, and that would be in line with our current expectations. If you look at it in spite of comps getting a little bit difficult and some of our business mix management, tonnage isn't looking as strong as our prior comps. With the yield improvements, we still would expect to have double-digit revenue growth and similar kind of sequential margins, which would be a meaningful improvement again over prior year.
Yeah. That's very helpful. If I could just sneak one last one in here that's more high level, but I think topical for the discussions people are having today, is there's obviously been some concern around the deceleration in trends and maybe some concern around the industrial economy. It seems like a lot of the deceleration in your tonnage is really a reflection of re-rating the book of business, if you will, from a pricing perspective. Are you seeing any changes when you talk to customers or look at what your customers are doing, either nuance changes or maybe something more pronounced that maybe gives a little bit more credibility to some of these concerns around slowing macro activity, or is it just unfounded in your view, and you think things are still firing all cylinders?
I think things are still pretty good. We're not seeing anything in any segment that would be particularly concerning or something that would set off alarms in any way that we could identify.
Okay. All right, guys. Thanks. Congrats on a good quarter. Appreciate it.
Thanks.
Thanks.
Our next question comes from Matt Brugler, Buckingham Research.
Yeah. Thanks, and good morning. My question around your heavyweight business, as we understand it, there's been some moderation in terms of the truckload spot market. Just curious to hear if maybe some of your heavyweight business maybe migrated back over to that market.
That's probably fair. We're seeing some of that as truckload capacity has increased. We don't play in that a whole lot, right? It's a segment of our business that can certainly have an impact. It's probably from a revenue perspective, compared to when things were stronger, probably impacted us by about maybe 1% of our revenue.
Okay. Pretty minimal. Then can you remind us, as we look into the fourth quarter, what does peak shipping season look like for Saia? Also, what are your customers telling you about the volume expectations into peak?
I think of it the way the quarter kind of works from our business. October is what October is. Usually, you get a little bit busier in the first couple of weeks of November and in the first couple of weeks of December, then it's pretty tough challenge to run efficiently in the other holiday weeks or holiday-related weeks. If you go back in time, typically the calendar can change year-to-year, depending on where the holiday winds up. Similar to Rick's comments around commentary from customers, we haven't noticed any real change there. I think other modes of transport probably are more impacted by holiday than necessarily us. I don't know that there's real change or difference from the past.
Okay. Then did you guys provide terminal count as of the end of 3Q?
Yeah. We're at 158, I think it's in the press release.
Okay. Appreciate the time. Thank you.
Thanks.
Our next question comes from Scott Group, Wolfe Research.
Hey, thanks. Morning, guys.
Morning.
Morning, Scott.
I totally get all the mix changes here. If we look at comps, it looks like tonnage could maybe flatten out or turn negative by the end of the quarter, maybe first quarter 2019. Given the mix changes, are you okay with that, or do you feel like you want to have tonnage grow and maybe you need to ease off the pricing a little bit, or are you just okay with this because of the mix change?
Obviously we're growing field business, taking share there and benefiting from our enhanced coverage. We're very committed. This is a capital-intensive business with driver challenges and recruiting. There's a lot of cost associated with that, bringing on new people, training them, et cetera. We just need to make sure that we're being compensated for that. That being said, once you get your national account business operating in the low 90s, that's not a bad start, and we'll target growing that segment at those types of margins, particularly from a near-term standpoint. Then obviously, with the terminal openings that we have into some major markets in the Northeast, I would be disappointed if we were trending with negative shipment count standpoint year-over-year, over time.
It doesn't mean we might not have a month or something like that that that would happen, I wouldn't expect that to happen over a prolonged period of time. There's some levers that we have that we could pull should we so desire. Particularly in and out of the Northeast, where we have, again, city routes running for service and coverage without adequate density. There's some good opportunities for us to continue to grow and balance that by making headway from a margin perspective.
Okay. That makes sense. You said now a couple of times the national accounts operating in the low 90s. I guess we always thought that the local accounts ran at much better margins than the national. If national is running at low 90s, how come our OR isn't better than low 90s on an aggregate basis? I guess I'm just not sure I follow.
Well, there is pressure on field margins as well. While they're clearly in the low to mid-80s. It's a smaller portion of our business. Then you got some of the 3PL business has been repriced for us over a period of time, and that business is kind of a constant optimization that goes on there with them being a technology company that you're working with. That's another 11%, 12% of your business that operates at a margin that's now kind of improved back haul adjusted, but it used to be around 100-ish, so that would be a negative. Field business is kind of in the 30%-35% of our revenue, and national account business is in the 55%. It's not a 50/50 mix from our perspective either, right?
Okay, understood. Then just lastly,
I would comment too, I mean, obviously, I commented on the Northeast business operating around breakeven. As we make investments up there, that's having a bit of a negative impact overall, it also, strategically us leveraging our fixed cost network over a broader base of business over time is going to have good incremental margins as well.
Yeah, that makes sense. Just last question. Obviously, pretty fantastic pricing renewals. How do you think we should model revenue per hundredweight net of fuel 2019? Can we do another year of high single, low double-digit yield growth? I know the renewals would tell you that, but is there any offset to think about?
I think it's more of a probably, given where we are with the company operating at a better position and how much of the national account business we've adjusted and repriced to an appropriate level. It's probably more of a mid-single digit range on the renewal standpoint. Obviously you got the General Rate Increase. Probably, if you model from here, more of a mid-single digit from a renewal perspective, 5%-6% probably as opposed to the high mid-single digits. Right?
Makes sense. Okay. Thank you for the time, guys. Appreciate it.
Sure.
Thanks, Scott. Our next question comes from Ravi Shanker, Morgan Stanley.
Thanks. Morning, guys. Just a couple of follow-ups here. I think you and some of your peers have said before that maybe some of the TL freight that has bled to the LTL market before is now going back. Are you starting to see any kind of TLs coming into the LTL freight just given the loosening of the market there?
No. I think it's just very difficult for a truckload carrier to be able to do that. If you look at our average shipment weight of two pallets and 1,300 pounds, I don't see how the economics of that, I don't think are going to work.
That's only something that they kind of resort to when they get really desperate and the market's really weak.
Yeah. Maybe. I don't see how that works for them very well, but potentially, right?
Right. Just going back to your kind of mix shifts. Clearly it makes sense that you guys are prioritizing yield over tonnage. How long or how much freight do you guys have to shed before you guys start to grow kind of meaningfully again, aside from macro?
I think we're in pretty good shape, and we're going to have a record fourth quarter. Sub 92-ish type OR would be our current expectation. We're on the fringe of a sub 90 OR, I think it could come from a balance of tonnage growth, our geographic expansion, and continued reasonable pricing around our enhanced value proposition. I don't think we need to shed a lot of tonnage. We have very few accounts kind of at this point that operate over 100, and those that do are right around 100 to 105, let's say, right? You have to look at back haul adjusted contribution margin for certain customers that are in lanes that are attractive to us. I think we're at a position from a company perspective that we don't have to deal with just yield.
We can go to a more balanced approach.
Got it. Just lastly, you guys talk about how much of a growth is coming from the Northeast versus the kind of rest of the base business, if you will. If I can try and slice that a little bit finer. When you look at the early Northeast terminals that you guys opened, is the growth there kind of consistent with the rest of the national business, or is that part of the business still growing faster? Obviously not as fast as the new terminals you are opening, but just trying to figure out if that's normalized or if there's still some runway there.
Oh, yeah. No, the terminals that our history would say when we open a new market and cross-sell the rest of our geography, it's a multi-year market penetration situation, right? I'll just take a terminal, for instance, in Newark, New Jersey, that we're running at about a 2.2% market share per our calculation. We would expect that to continue to grow by somewhere between 0.7% from a market share perspective to 1%. That's kind of been our history when we've done geographic expansion or bolt-on acquisitions in the past. We tend to kind of take share in the market, or both take share and benefit from the growth in the marketplace that could be taking place at a rate of somewhere around 70 basis points to 100 basis points on an annual basis on average over a five-year period.
Again, it's a multi-year opportunity. Again, as you open, for instance, today from additional geography up there, we become a better option for customers. Not only do you get business into Massachusetts, but they might also move some more Pennsylvania-New Jersey business to you, right? They're selecting you for a carrier for a region, right?
Right. All right. That's helpful. Thank you so much.
Sure.
Again, to ask a question, please press star one now. Our next question comes from Todd Fowler, KeyBanc Capital Markets.
Great. Thanks. Good morning, everyone. Rick, I guess looking out to 2019, I think in the past, you've talked about in a positive pricing environment that you get 100-200 basis points of margin improvement annually. Yeah, I think in the past couple of years, there's probably been some headwinds from the Northeast expansion. Going into 2019 with the terminals that are opening versus the ones that are maturing, do you have some thoughts on what sort of margin improvement you could see if the current environment stays steady?
Again, we continue to target 150-200 basis points.
Okay. That's something that we can think about for 2019 with the moving parts around the terminal growth and with the environment where it is right now?
Correct. Yeah, that's our target.
Okay.
Unless something changes meaningful, obviously, we continue to make investments in our product quality with a fleet expansion, et cetera. There's some fixed cost headwinds there, but there's also some other levers we can pull if the environment changes. I think the range is reasonable given a current outlook and market conditions.
Okay, good. That helps. Just to put together some pieces of some of the other questions on the call. You're coming off of two years of very good top-line growth, I think that that's been a function of the pricing environment and the underlying strength. If we go back, there were a couple of years where tonnage was down and there was more of a focus on yields, and it sounds like that mid-single digits is the placeholder for yields. Should we think about, from a revenue standpoint, that it's a high single-digit revenue increase in 2019, then some price on top of it? Could it be stronger than that based on the growth in the Northeast?
I think I'd be disappointed if we couldn't achieve double digits
Right
revenue growth.
Just the blend of that would be balanced between tonnage and yield, or would it be more weighted towards one or the other?
Probably, just given the comps and the material yield increase that we've had throughout this year and our current run rate. At this point, it's probably heavier on the yield side because of where we are on a run rate standpoint, right?
Yeah. No, that makes sense. That's what it sounded like from some of the earlier comments. Okay.
Right.
Just the last one for me. Fritz, at this point, do you have any thoughts on where 2019 CapEx would shake out? I'm sure you're probably kind of finalizing some of the plans, should we expect it to be similar to where it was in 2018? If you have a kind of a preliminary number, that could be helpful.
Yeah. We're still kind of working through that. We've got a real estate pipeline and equipment kind of orders that we've put in place. I think in total, you're probably looking at a 285 to 300 number, depending on where the real estate is. The real variable for us is that real estate number, right? That's dependent upon whether or not we look as we identify our terminals, whether or not we add them, or if we add them as a purchase or as a lease.
Yeah. Okay. That makes sense. Okay. That's what I had. Excuse me. Thanks for the time.
Great. Thanks.
Our next question comes from Tyler Brown, Raymond James.
Hey, good morning, guys.
Morning.
Morning, Tyler.
Hey Rick, there was an 8-K out a couple weeks ago on some changes in operation personnel. I'm not sure what you can share, but can you talk about that a little bit? Did that have anything to do with operations themselves?
We kind of just have shuffled the deck with an experienced leader that's long time with the company into that position. He was in operations, obviously, for a long portion of his career. While the Northeast expansion has been successful, we're kind of having a back to the basics from an execution standpoint on both our service as well as we think there's some opportunities from a cost perspective. There's a big business mix change, but quite frankly, as much as our yield is up, I would have liked to have had more than 200 basis points of OR improvement, to be honest with you.
Okay. That's helpful. Rick or Fritz, I'm not sure which one mentioned it, but I think you mentioned a $30 million real estate deal that you said you closed.
Correct.
Does that mean you finished it up, or you're getting ready to start one?
It means we have an investment that we've made, and now we need to operationalize it. In other words, get it ready for opening will probably be in the first quarter.
It's a major break bulk for the Northeast, where we were leasing a facility, we'll be moving in there.
Okay. That will be an owned facility. Is that one particularly large?
Yes. It'll be our break operation for the Northeast.
Okay. Do you have what your door ownership mix is today based on all the terminals we've added this year with a high mix of leased facilities?
I don't have the current number, but we update that in our K as well.
Okay.
I'll look through that.
Okay. No, that's helpful. Thanks, guys.
Great, thanks.
Our next question comes from Willard Milby, Seaport Global.
Hey, good morning, guys. Just wanted to ask.
Morning
quick one on Hey, morning. Wanted to ask a quick one on freight mix as you all continue to march northward. Is there a material change to national account business or intra-regional moves as you continue to move north? Is there anything we need to be worried about more freight going in than coming out?
We know what the market is up there, and we know what our imbalance ratios are, and we price business in and out of there accordingly. Obviously, it's a bit of an inexact science when you open a new region too, because you're kind of projecting your costs and the business that you'll take based on the market data that we have available up there. We know what the market is and what the imbalance ratios are, and obviously, you project that, and then you get some actual results, and then you have better cost data, and you do what you need to do up there. I wouldn't be overly concerned about it. I would also tell you, as we add incremental terminals up there, we have experience and we know what our lane imbalances are today.
If you go another 200 miles and open another terminal, we know what the market is and we know what our costs are, so we can price it accordingly. I would actually think that at this point in time, the risk probably goes down from a, I would call it some sort of a mispricing scenario, right?
No, thanks. That's good color. Also, as we look at capacity on terminals that have already been opened up, I think, last year, maybe you all reached capacity on two of the facilities that were recently opened pretty quickly. I was curious if you're bumping up against maximum utilization on any others and if we should see more expansions of that initial wave of terminals anytime soon.
Yeah, the $30 million purchase is a major break bulk operation up there. It's 150 doors. We were in a facility that we knew was going to be inadequate over time. This was a good strategic, immediate availability type situation of a facility that was already used in the marketplace. It's not incremental doors in the marketplace either. We're excited about that and how that would have some enhancements for us.
There's a couple terminals we opened that we know won't last us very long, and it got us an opportunity to get into the market, and that can be addressed by obviously either a larger facility coming available, potentially a construction project, or you do a spin-off terminal that takes part of the coverage, which works probably better on an inbound market like the Northeast than it could potentially in a major outbound market where you would lose more line haul load average synergies on the outbound side by breaking it up. I think there's some options for us. I would tell you, we have a really good pipeline of facilities in the Northeast from an opening perspective.
We actually have, at this point, six terminals, the two that are going to open in December and four to five more into next year that have already been identified and are pretty far down the road from an implementation perspective. I feel good about our pipeline. There was a point in time where we kind of struggled to find terminals in markets, and we spent a lot of time and effort on that and have a nice pipeline of additional expanded coverage underway.
All right. Sounds good. Thanks for the time.
Sure.
At this time, I would like to turn the call back over to Rick. Please go ahead, sir.
Great. Thank you for your interest in Saia. We look forward to continued dialogue.
Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.