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 Cole. Please go ahead, sir.
Thanks, Travis. Good morning, everyone. Welcome to Tsai's Q3 2018 conference call. Hosting today's call are Rick O'Dell, Tsai's President and CEO and Fritz 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 call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. We refer you to our press release and our most recent SEC filings for more information on the exact risk factors that could cause actual results to differ. Now I 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 Q3 of 2018. Tonnage grew 7.3 percent for the quarter and with an 11.9% increase in our yield, we were able to grow 3rd quarter revenue by 19.2% to a record $426,000,000 The Southeastern U. S. Experienced another difficult hurricane season, particularly in the Carolinas during the Q3.
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 due to storms and subsequent flooding in those impacted areas. Our operating ratio improved by 220 basis points to 90.9 percent for the quarter and 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, so the average increase negotiated in the Q3 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 percent 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 8 35 miles.
With the 11.9% increase in our yield for the quarter, our LTL revenue per shipment increased by 13.9% to a record $2.33 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 percent improved from 0.73 a year ago and improved sequentially from 0.82 in the 2nd 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 3rd quarter were 10.5 percent of total line haul miles compared with 11.6% last year in the 3rd quarter and down from 11.4% in the Q2 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. 3rd quarter revenue grew 19.2% over the prior year to a record $426,000,000 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 Q3 last year. Operating income grew 58 percent to 38 point $7,000,000 compared to $24,600,000 earned in the Q3 of 2017. Our operating ratio of 90.9 percent was 2 20 basis points better than a year ago.
Net income benefiting from a lower tax rate increased by 96% to 28 point $2,000,000 I'd like to comment now on the year over year change and benefits rose 15.2 percent to $224,600,000 in the 3rd 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 diesel prices increased 24% compared to Q3 last year, and our miles in the quarter were up 10.8%. Purchased transportation expense in the 3rd quarter rose by 3.9 percent to $31,200,000 and was 7.3 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 Q3 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 percent to $26,700,000 compared to $22,300,000 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 Q3 of 2018 compared to 38.5 percent in the Q3 of 2017. We expect our full year tax to be approximately 23.5% to 24%.
At September 30, 2018, total debt was $121,300,000 inclusive of cash on hand, net debt to total capital was 15.3%. This compares to total debt of $127,000,000 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 $182,000,000 including equipment acquired with capital leases. This compares to $183,900,000 of net capital expenditures through the 1st 9 months of 2017. For the full year 2018, we expect net capital expenditures will be approximately $265,000,000 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.
Thanks, Fritz. 2018 has been a constructive year, and we have a busy Q4 ahead of us. As we mentioned in our press release, we'll be opening 2 terminals in Massachusetts in December, allowing us to offer direct coverage to the state. Including the 2 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 4 to 6 more locations in new markets as we fill out the coverage map across New England.
While the Northeast is a compelling multiyear 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 we'll target additional openings in the future as density in the 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 Q4 and into 2019. With these comments, we're now ready to answer your questions.
Thank We have a question from Brad Delco, Stephens.
Hey, good morning guys.
Good 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 in September and then where you are through October? And then to the extent you can quantify the hurricane impact on in tonnage and margins that would be helpful.
All right. So September tonnage is well, for the benefit of everybody, July, August and September tonnage are 10.3 percent, 8.7% and 2.8%. And then shipments were plus 6.7%, 6.6% and 2.7%. And then October month to date, tonnage positive 1.6% and shipments positive 1%.
Yes. I think one thing, let's just talk about kind of what's going on from a mix management standpoint because I think that's some of our actions last year late in 2Q and into 3Q, we made some meaningful price adjustments to some of our transactional 3PLs that impacted our volumes for a period of time. To make sure our business mix is profitable. So when you look at our tonnage, I think it's important to look at the segments. So I'm going to give you some numbers here that I think will give you some indication of kind of how our mix management is working within the organization.
So for the quarter, our field business was up 14.6%. Our national count business was down 3% and our 3PL business was actually up 34% year over year for the quarter. And 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 point 7%.
So 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 kind of continue with customers that recognize our value 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. I mean, 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. And then the Gulf States, that's not significant either.
Okay. And then, Fritz, 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?
Yes. I think specifically on PT, I mean, we're kind of ongoing. We kind of worked 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. So depending on what your view is on that pricing right now.
Yes, probably mid single digits.
Okay. And then maybe last one. The 2 new terminals in Q4, I noticed you didn't change your full year CapEx budget. Are these leased facilities? Are these being purchased?
Yes. Those 2 are actually leased. There are some improvements in those facilities. We will we've got other projects that will other facilities that we'll invest in that will won't open until next year though. Okay.
That will be that's part of that's in our number right now.
Could you give us the cash CapEx that for the year or what you expect it to be for Q4?
So to date, I think the balance of what we will spend in capital will be cash. We won't use any additional capital leases. So if you look, that's roughly $80,000,000 to $90,000,000 of balance of the way. So that's going to be all cash outlay.
There's a major real estate project in there that actually just closed. Yes. All right.
Great guys.
About $30,000,000
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.
Good morning, David. Hey, David.
So in the Northeast expansion, there's increased average length of haul. A lot of the business initially comes from customers that you're already serving in your legacy territory. Could 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? And then 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?
Yes. Okay. So today ballpark wise, we're doing about 2,000 bills a day to and from the Northeast and only about 100 I'm sorry, of the 2,000 bills going in and out of those terminals, only about 150 of those are intra Northeast. So as you would expect, right? I mean, 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. But I would also comment that there are some good carriers up there and some of those rates are very competitive. So it's probably in our best interest to play in that to the extent it makes sense for customers and for us. But also there's some more meaningful returns for handling business that's to and from size network. Our length of haul up there is about 1200 miles.
And 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-ninety percent 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, so the Ohio Valley, those regions' profitability has improved because of the density flow through there. So 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 in 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 and D density within the terminals themselves, right?
Yes. So So just as an
example, like the Cincinnati regions, our profitability model shows that it improved by 400 basis points. And the business on a fully allocated basis, the business to and from the Northeast is operating at about a breakeven now. And when we open so it's improved about 10 operating points since we opened out the gate on a fully allocated basis.
And 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?
I mean, we have some internal targets based on that and how we think it should improve and how that business should operate. So 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. So 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%. Just wondering if you could give us a sense of how much of the business has been repriced and if there's more to go in terms of rerating the book of business?
Yes. I mean, our national account business is now operating in the low 90s. So that's been a positive for us. But there's always lanes that we'd have to look at that may or may not be contributing. But actually, I think the book of business is priced pretty well right now.
And 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%. But 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.
Yes. I guess maybe a better way to ask the question is just how it translates to incremental margins. I mean, 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. Is that I mean, you sounded pretty confident about kind of the operating environment prospectively. Is now kind of 20% plus the right way to look at it prospectively?
And then you typically do see this sequential uptick in OR as you move from 3Q to 4Q. Just any color there in terms of how we should think about it from a seasonality perspective?
Yes. I think we would kind of expect us to continue to see some modest incremental margin improvement. I mean that's clearly kind of what we're targeting. And again that's kind of balanced by some of the terminal openings and some of the training and investments that are associated with that. And then in terms of 4Q, history would be about 100 basis point deterioration and that would be in line with kind of our current expectations.
So if you kind of 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. But 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.
Yes. That's very helpful. And then if I could just sneak one last one in here that's more kind of 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 kind of rerating the book of business, if you will, from a pricing perspective. But 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 kind of firing all cylinders?
I think things are still pretty good. I mean, we're not seeing anything in any segment that would be particularly concerning or something that would set up alarms in any way that we could identify.
Okay. All right, guys. Congrats on a good quarter. Appreciate it.
Thanks.
Thanks. Our next question comes from Matt Brooklier, Buckingham Research.
Yes. Thanks and good morning. So my question around your heavy weight 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. I mean, we don't play in that a whole lot, right? But 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. And then can you remind us like as we look into the Q4, what does peak shipping season look like for Saia? And also what are your customers telling you about the volume expectations into peak?
I think Amit, the way our the quarter kind of works from our business, October is what October is, Usually, a little bit busier in the 1st couple of weeks of November and in the 1st couple of weeks of December. And then there's it's pretty tough challenge to run efficiently in the other holiday weeks or holiday related weeks. So there's a lot of if you go back in time that typically the calendar can change quarter year to year depending on where the holiday lines up. I mean, we haven't really 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.
So I don't know that there's real change or difference from the past.
Okay. And then did you guys provide terminal count as of the end of 3Q?
Yes. We're at 158, I think, in the press release.
Okay. I appreciate the time. Thank you.
Thanks.
Our next question comes from Scott Group, Wolfe Research.
Hey, thanks. Good morning, guys.
Good 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 Q1 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 like ease off the pricing a little bit? Or are you just okay with this because of the mix change?
I mean,
obviously, we're growing field business, taking share there and benefiting from our enhanced coverage. We're very committed. I mean, this is a capital intensive business with driver challenges and recruiting there's a lot of costs associated with that, bringing on new people, training them, etcetera. So we just need to make sure that we're being compensated for that. And but that being said, once you get your national account business operating in the low 90s, that's not a bad start.
And we would we will target growing that segment at those types of margins, particularly from a near term standpoint. And then, obviously, with the 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, but I wouldn't expect that to happen over a prolonged period of time. And there are some levers that we have that we could pull should we so desire, right, particularly in and out of the Northeast where we have, again, city routes running for service and coverage without adequate density. So 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. And 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.
Yes. Well, there is pressure on field margins as well, while they're clearly in the low to mid-80s, right? It's a smaller portion of our business. And then you've got some of the 3PL business has been repriced for us over a period of time. And that business is is kind of a constant optimization that goes on there with them being a technology company that you're working with.
So that's another 11%, 12% of your business that operates at a margin that's now kind of improved backhaul adjusted, but it used to be around 100 ish, so that would be a negative. Field business is kind of in the 30% to 35% of our revenue and national account business is in the 55%. So it's not a fifty-fifty mix from our perspective either, right?
Okay. Understood. And then just lastly,
so And I would comment too. I mean, obviously, I mean, I commented on the Northeast business operating around breakeven. So as we're making investments up there while the increment and that's having a bit of a negative impact overall, but 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.
Yes, that makes sense. And then just last question. So obviously, pretty fantastic pricing renewals. How do you think we should model revenue per 100weight net of fuel in 'nineteen? And can we do another year of high single, low double digit yield growth?
I mean, 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 where 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. Then obviously you got the general rate increase. So probably if you model from here more of a mid single digit from a renewal perspective, 5% to 6%, probably as opposed to the high as 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. Good 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 in the LTL market before is now going back. But are you starting to see any kind of LTLs coming into the any of the TLs coming into the LTL freight, just given the loosening in the market there?
No. I mean, I think it's just very difficult for a truckload carrier to be able to do that. I mean, if you look at our average shipment weight of 2 pallets £1300, I don't see how that the economics of that, I don't think are going to work.
So that's only something that they kind of resort to, but they get pretty desperate and the market is very weak?
I mean, 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, again, I mean, clearly, it makes sense that you guys are prioritizing yield over tonnage. I mean, 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?
Look, I think we're
in pretty good shape and we're going to have a record 4th quarter, sub-ninety two percent -ish type operating ratio would be our current expectation. I mean, we're on the fringe of a sub 90% operating ratio. And I think it could come from a balance of tonnage growth, our geographic expansion and continued reasonable pricing around our enhanced value proposition. So 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?
And then you have to look at backhaul adjusted contribution margin for certain customers that are in lanes that are attracted to us. So I think you'll see us I think we're at a position as a company from a company perspective that we don't have to deal with just yield. We can go to a more balanced approach.
Got it. And just lastly, I mean, you guys talk about how much of a growth is coming from the Northeast versus the rest of the base business, if you will. But if I can try and slice that a little bit finer, and when you look at the early Northeast terminal 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're opening, but kind of just trying to figure out kind of if that's normalized or is there still some runway there?
Yes. No, the terminals that I mean, 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? So let's take a terminal, for instance, in Newark, New Jersey that we're running at about a 2.2% market share per our calculation. And we would expect that to continue to grow by somewhere between 0.07% from a market share perspective to 1%. And that's kind of been our history when we've done geographic expansion or bolt on acquisitions in the past.
And 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 1 to 100 basis points on an annual basis on average over a 5 year period. So again, it's a multi year opportunity. And then again, as you open, for instance, today from as you open additional geography up there, we become a better option for customers. And not only do you get business into Massachusetts, but they might also move some more Pennsylvania and New Jersey business to you, right, because they're selecting you for a carrier for a region, right?
Right.
Got it. That's helpful. Thank you so much.
Sure.
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 to 200 basis points of margin improvement annually. 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?
Yes. I mean, again, we continue to target 150 to 200 basis points.
Okay. So 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. Yes, I mean, that's our target. I mean, unless something changes meaningful and then obviously we continue to make investments in our product quality with a fleet expansion, etcetera. I mean, there's some fixed cost headwinds there, but there's also some other levers we can pull if the environment changes. So I think the range is reasonable given our current outlook and market conditions.
Okay, good. That helps. And then just to put together some pieces of some of the other questions on the call. You're coming off of 2 years of very good top line growth and 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, so some yield and then some price on top of it? Or could it be stronger than that based on the growth in the Northeast?
Yes. I think I'd be disappointed if we couldn't achieve double digit revenue growth.
Okay. And just the blend of that would be balanced between tonnage and yield? Or would it be more weighted towards 1 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 in a run rate standpoint, right?
Yes. No, that makes sense. That's what it sounded like from some of the earlier comments. So, okay. And then 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, but should we expect it to be similar to where it was in 2018? Or if you have a preliminary number that could be helpful?
Yes. So 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. But I think in total, you're probably looking at a $285,000,000 to 300 number depending on where the real estate is. The real variable for us is that real estate number, right?
So 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.
Our next question comes from Tyler Brown, Raymond James.
Hey, good morning guys.
Good morning. Good morning, Tyler.
Paul. Hey, Rick.
There was an 8 ks out a couple of 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 it have anything to do with operations
themselves? I mean, we've kind of just have shuffled the deck with an experienced put 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. And we kind of have a I would call it while the Northeast expansion has been successful, we're kind of having a back to the basics from an execution standpoint from on both our service as well as we think there's some opportunities from a cost perspective. I mean, there's a big business mix change, but quite frankly as much as our yield is up, I mean, I would have liked to have had more than 200 basis points of OR improvement, to be honest with you.
Okay. That's helpful. And then Rick or Fritz, I'm not sure which one mentioned it, but I think you mentioned a $30,000,000 real estate deal that you said you closed. Does that mean you finished it up or you're getting ready to start 1?
No, 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 Q1.
It's a
major break for the Northeast where we were leasing a facility, so we'll be moving in there.
Okay. So that will be an owned facility. Is that one particularly large?
Yes. Yes. It will be our break operation for the Northeast.
Okay. Okay. And then do you have what your door ownership mix is today based on all the terminals we've added this year with kind of a high mix of lease facilities?
I don't have the current number, but we'll update that in our K as well. So I'll look through that.
Okay. That's helpful. Thanks guys.
Great. Thanks.
Our next question comes from Willard Milby, Seaport Global.
Hey, good morning guys. I just wanted to ask a quick one on hey, morning. I 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 something anything we need to be worried about more freight going in than coming out?
I mean, 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. And 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 market data that we have available up there. But we know what the market is and what the imbalance ratios are and we just obviously 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. But we're yes, I don't I wouldn't be overly concerned about it. I would also tell you as you add some incremental as we add incremental terminals up there, I mean, we have experience and we know what our lane imbalances are today.
So if you go another 200 miles and open another terminal, it's not we know what the market is and we know what our costs are, so we can price it accordingly. I would actually think 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 kind of look at capacity on terminals that have already been opened up, I think last year maybe you all reached capacity on the 2 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?
Yes. I mean the $30,000,000 purchase is a major break bulk operation up there. It's 150 doors. So we were in a facility that we knew was going to be inadequate over time. So this was a good strategic immediate availability type situation of a facility that was already used in the marketplace.
So it's not incremental doors in the marketplace either. So we're excited about that and how that would have some enhancements for us. And there's a couple of terminals we opened that we know won't last us very long and 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 kind of do a spin off terminal that takes a construction project or you kind of 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 synergies on the line haul load average synergies on the outbound side by breaking it up. So and I think there's some options for us. And I would tell you, we have a really good pipeline of facilities in the Northeast from an opening perspective.
So we actually have, at this point 6 terminals, the 2 that are going to open in December and 4 to 5 more into next year that have already been identified and are pretty far down the road from an implementation perspective. So I feel good about our pipeline at a there was a point in time where we kind of struggle 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. 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.