Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Saia, Inc. First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Douglas Col. Please go ahead, sir.
Thanks, Hannah. Good morning, everyone. Welcome to Saia's First Quarter 2018 conference call. Hosting today's call are Rick O'Dell, Saia's President and Chief Executive Officer, and Fritz Holzgrefe, our Executive VP Finance, Chief Financial Officer. 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 our 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'm going to turn the call over to Rick O'Dell.
Good morning, and thank you for joining us. This morning, we announced our First Quarter 2018 financial results with diluted EPS of $0.80 compared to $0.44 in the first quarter of last year. The EPS comparison benefited by $0.03 from an alternative fuel tax credit for the full year of 2017 that was enacted in the first quarter of 2018. Robust shipment and tonnage growth, coupled with continued pricing improvements, translated into meaningful year-over-year operating results. Key first quarter metrics are as follows. LTL shipments per workday rose 8.4%. LTL tonnage per workday rose 12.2%. LTL revenue per hundredweight increased 7.7%. LTL revenue per shipment was up by 11.6%. The operating ratio improved by 160 basis points. Operating income was up 57%.
The first quarter marked the 31st consecutive quarter of year-over-year improvement in our reported LTL yield. Contracts renewed in the first quarter included an average agreed-upon price increase of 7.6%. There are a few other operating highlights from the quarter I'd like to mention before I turn things over to Fritz to review some financial results. Weight per shipment increased by 3.6% to 1,355 pounds, benefiting from continued strong industrial activity and also from our efforts to improve mix. Length of haul grew by 5% to 837 miles, attributed to our expanding geographic coverage. Our cargo claims ratio of 0.88% worsened a bit from 0.75% in the first quarter. Our employee count is up about 10% compared to the first quarter of last year. As these newest associates gain experience, we expect to see further improvement in our cargo claims ratio.
Purchased transportation miles in the first quarter were 10.9% of total line haul miles, compared with 7.5% last year. This increase is being driven by volume growth as well as purchased transportation used to balance the network after weather-related terminal closures. With that, I'm going to go ahead and turn the call over to Fritz Holzgrefe to review our financial results.
Thanks, Rick, and good morning, everyone. First quarter revenue of $393 million was 21.6% higher than a year ago, benefiting from positive shipments, tonnage, and yield improvement, as Rick mentioned, and also from higher fuel surcharge revenue. Fuel surcharge revenue was 45% higher than in the first quarter of last year. Operating income grew 57% to $27.6 million compared to $27.5 million earned in the first quarter of 2017. Our operating ratio of 93 was 160 basis points better than a year ago. A few of the key expense items which impacted the first quarter are as follows. Salary, wages, and benefits rose 16.7% to $211 million in the first quarter, reflecting our growing employee base, as Rick mentioned, and our wage increase of approximately 3% last July. Fuel expense in the quarter rose 37% over last year.
National average diesel prices were up roughly 17% compared to the first quarter last year. Our miles in the quarter were up 12%. Purchased transportation expense in the first quarter rose by 43.7% to $29.9 million and was 7.6% of revenue versus 6.4% last year. PT usage was higher, as Rick mentioned. The cost per mile was 14.6% higher, driven primarily by truckload market conditions. Outside maintenance and parts expense increased 10% in line with increased miles run by our tractor fleet versus last year's first quarter. Claims and insurance expense in the quarter increased by 12.6% over the prior year from a combination of higher premiums and increase in accident frequency. Depreciation and amortization expense rose 14.7% to $23 million compared to $20.1 million in the prior year quarter. The increase reflects our continued investments in tractors, trailers, and forklifts.
Our effective tax rate was 20.2% for the first quarter of 2018 compared to 31% in the first quarter of 2017. We expect our full year tax rate to be 24%-25%. At March 31, 2018, total debt was $142.6 million. Net debt to total capital was 19%. This compares to total debt of $156.9 million and net debt to total capital of 24% at March 31, 2017. Net capital expenditures in the first quarter were $52.1 million, including equipment acquired with capital leases. This compares to $108.2 million of net capital expenditures in the first quarter of 2017. For the full year of 2018, we expect net capital expenditures will be approximately $265 million, including investments in terminal infrastructure improvements, as well as continued investments made to lower the age of our tractor, trailer, and forklift fleets. Now I'd like to turn the call back to Rick.
Thanks, Fritz. Saia is off to a really good start in 2018, and we have an eventful year ahead of us. In the first quarter, we opened two new terminals, one in Fort Worth, Texas. It's our third terminal in the Dallas Metroplex and the 20th in the state of Texas, and it was opened in February. In March, we opened a terminal in Scranton, Pennsylvania, our seventh terminal in the Northeast, all opened within the past year. We'll open our eighth Northeastern terminal later this summer in Pennsylvania, and we continue to advance multiple locations for additional terminal openings in the Northeast, where we continue to target four to six terminal openings this year. We'll be opening our second terminal in the Seattle market later this quarter.
Similar to the opening in Fort Worth, this second location in Seattle will allow us to be closer to the market and provide enhanced service to our customers. There's an added benefit in that the new terminal opening relieves pressure on the existing facility and will benefit our hiring efforts, as the location will allow us to draw from a different pool of candidates. As Fritz mentioned, our capital expenditures in 2018 are likely to approach $265 million, depending on the timing of some real estate transactions. In conclusion, the first quarter results were very positive from a growth and improved profitability standpoint, and we look forward to continuing our growth and margin improvement in both new and existing markets as the year unfolds. 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 take our first question from Brad Delco with Stephens.
Morning, Rick. Morning, gentlemen.
Morning.
Hi, Brad.
First question. Rick, can you talk a little bit about PT? One of your competitors doesn't use a lot of PT. They do have a really good cargo claims ratio. Longer term, as you build out the network and get density and balance like you want, do you still think you're going to have at least some portion of your network using purchase transportation, and why so?
Yeah, there's some suboptimal purchase transportation. It also does provide some enhanced capacity. There are some places where a truckload carrier could run into a head haul, and we'd be running out empty, and they could pick up a load that may be efficient for them. Some of it is suboptimal and creates some capacity, and some of it is optimal. For us as well, we use the rail when we have weekends, etc., to be able to meet our service standards. That's about 40% of those miles, and that's a lower cost opportunity there. We see it as a mixed bag, right? To some extent, you always want to control your own capacity and service quality. Some of the carriers are pretty efficient, and in some cases it makes sense for us. I guess there's kind of a balance in there.
Okay. You're not necessarily saying the increase in cargo claims is a function of increased PT. You're not necessarily.
I said it's.
Correct me.
It's really due to the new employees, the number of incremental dock employees. It just was a bit of a deterioration, and obviously we've been on a multi-year improvement to get the cargo claim ratio where it is. I still think it's a pretty good number, and it was actually driven a bit more by a cost per claim scenario as opposed to the frequency. I think from a customer satisfaction standpoint, it wasn't really much of a deterioration. We tend to report the number because we think it's pretty good in the industry. We're providing that to both from an investor standpoint as well as from a customer standpoint.
Okay. Then maybe my other question. Saia, I think, is pretty unique in the LTL industry. You're obviously growing, adding capacity. Do you see any other smaller private carriers adding as much or trying to grow as aggressively as you guys are? Maybe if you could just touch on what you think is happening with the overall LTL market.
Yeah. I think Southeastern has done some slow expansion over the last year and a half or so, but I don't think they have a vision to be a nationwide, and then ultimately, maybe more of a North American type carrier like we would expect to do. I'm not really aware of anyone who's pursuing the type of strategy that we have. The market's really good, and we're working on yield enhancement. We have some enhanced service offering. We're working on business mix management as well, try to target some shipments that have a better profile for us. I think this is a very good environment for us to be doing that, and it's being well received.
That makes sense. Maybe last one. Fritz, I don't know, do you give monthly tonnage update for April?
Not yet. Tonnage. This is our total LTL tonnage for April through yesterday is up by 10.1%, and shipments are up by 7.9%.
Just to make sure I understand that. I noticed you guys aren't separately reporting TL and LTL. The 10.1%-
Yeah, let me.
you-
It's all in both categories together. Let me just clarify for everybody why we did that. Traditionally, we hit on our public releases, we would list TL, which is simply a weight break, so that would indicate LTL tonnage that was in excess of 10,000 pounds. We felt like that created a little bit of confusion because people interpreted that as truckload, and in fact, it really is simply heavier-weighted LTL shipments. To be consistent with other public folks, we consolidate it into a single line. What you historically would've seen as LTL and this TL breakouts, we're just considering it all one now. The 10.3 I just gave you is the total, so it'd been the old LTL and TL together.
Okay, perfect. I just wanted to make sure I understood that. All right. Well, guys, congrats on good results. I'll get back to the queue.
Thanks, Brad.
We'll go next to Scott Group with Wolfe Research.
Hey, thanks. Morning, guys.
Morning.
Rich, just so we have it, can you give us the monthly numbers for the first quarter on tonnage just so we're apples to apples.
Sure
new-
Yep.
Yeah.
January 13%, February plus 14.4%, and March plus 10.2%. A full quarter plus 12.2% then.
Okay, great.
Would you like the shipments numbers, too?
Sure.
Yeah. January plus 9.1, February plus 10.7, March plus 6.0.
Scott and all of you guys, we have a data sheet that goes back and provides the combination of basically our LTL business, the total tonnage, and we'll be happy to provide that to you guys offline if you need it for your modeling and looking back at history so you have comps.
That's fantastic. Thank you. You always give us a little bit of color on sort of how you're thinking about sequential or margins for the second quarter, if you can give us some thoughts there.
Yeah, I think if you look at it on average, historically, it's about 250 basis points better. I would just say, given the current volume and yield environment, we'd expect to do a little bit better than that.
Okay, great. I think last quarter you talked about sort of one and a half to two points of margin improvement for the year. Obviously, you're right in the middle of that range in the first quarter. You still comfortable with that for the year?
Yes.
Great. Just lastly for me, pricing. I think you said renewal is up 7%, so that's a step up from, I think, the 6% last quarter. Is there a ceiling at some point on this pricing, or can it go even higher than this? That's just a renewal number. How should we think about yields net of fuel the rest of the year?
Obviously, we're seeing some increase in our weight per shipment, which is kind of negative on the yield. You got the offset, right, with the length of hauls going up. We're very focused on business mix management. It's a very positive yield environment. It's a tough driver market. We're paying $5,000 signing bonuses in places to attract drivers. We just need to be properly compensated. You look at the capital expenditures that we have. Obviously, it's increasingly a heavy technology-oriented business. We have a wage increase coming up on the 1st of July. We're just very focused on the yield and margin opportunity. I think it's pretty meaningful. I think it's a very positive environment.
Okay, great.
And the-
Actually, just could I just squeeze one more in?
Yeah.
The wage increase in.
Yeah, go ahead. I'm sorry.
Yeah. The wage increase in July, can you say what that % is and what it was last year?
Yeah. Scott, we approached this just like we did in years past where it's market, it's kind of job category, market-to-market sort of analysis. We'll be in a range of between 3% and 4% with drivers in some markets at the upper end, maybe even a little bit above that kind of a rate with an average kind of 3.5 and above for the whole company. It'll be kind of that basis. If I go back a year, we were sort of 3.3 and a half % on average across the company, a little bit higher obviously this year. Again, just to stress that it's a market sort of based view there, that's why some markets are going to be a little bit higher. We got to be competitive.
it tends to be the highest end of our range of wage increases are going to be the driver, and mechanics, frankly, in total.
Okay. Very helpful. Thank you, guys. Appreciate it.
Thanks.
We'll go next to Matt Brooklier with Buckingham Research.
Hey. Thanks, and good morning. I think you mentioned earlier in your prepared remarks that your purchase transportation cost were a little bit higher, given the inclement weather that we had in first quarter. Are you able to parse that out, talk to how much weather added to that particular expense line? I'm just trying to think about things on a go-forward basis.
I would think the weather was probably a little worse than it's been the last couple of years. We're similar, I don't know about breaking that out for you. I don't even know how I would do that, right? We did create some backlog because you had shutdowns, and we're still picking up freight in different places. We need to move everything, so we used some higher PT during that time period.
I would add that the cost per mile was, as I pointed out, is up almost 15% in total. Most of that being on the truckload PT. Consistent with what you see in the market conditions.
Okay. That's helpful. Maybe if you could just talk to if you're seeing any incremental benefit in your heavyweight product from truckload spillover. It just seems like the truckload market gets tighter every month going forward. Try to get your sense if you are seeing more volume opportunities. I realize that you want to be very picky in terms of how you choose that freight, but do you think there's more volume opportunities on the heavyweight side originating from the truckload market here?
Yeah, I think that's what happens, right? The tighter the truckload market gets and then it from an availability standpoint, I think what you see is people need capacity and the truckload guys instead of taking a truckload stop off type route that they'll just ship it on the LTL because they can get a full load and make one stop and it improves their utilization, I would think. We are seeing that, and those heavier weighted shipments are up, what? Almost at twice the rate that our total shipments are up.
Yeah.
Okay. Well, it sounds like you guys are seeing some benefit. That's all I got. Thank you.
Sure.
We'll go next to Todd Fowler with KeyBanc Capital Markets.
Great. Thanks. Good morning. Nice quarter. Did you give the % of revenue, I think you've given this in the past couple of quarters, that came from the Northeast here in the first quarter?
Yeah. It's in the 7%-8% range and is running obviously over $100 million a year. Even in the month of April, it stepped up again on a run rate basis. We're having good success there. We're also working on repricing some business there now that we have costs and run rates. It's positive on a number of fronts. I think at this point in time it's contributing positively to our margins from a contribution margin standpoint.
Perfect. Yeah. I was going to ask the run rate standpoint from revenue, and you provided that, Rick. Then if you could, I just want to follow up on that last comment. The freight that's coming in now, the incrementals on that approximates the overall book of business at this point?
Not quite. We're not quite there yet, just because we're not that cost effective up there yet, right?
Okay.
As we get density in our routes, et cetera, I think we would expect the productivity to improve at a faster rate. It's probably a little below what our average margins are. What you have too is now our overhead and fixed costs are being allocated over a bigger book of business. From a costing standpoint, the way we look at different regions and whatnot in the network, some of the other ones are benefiting because I'm now allocating costs to the Northeast. Yeah, contribution margin-wise, positive. Yeah.
Okay. Then how do you think about what a normalized level of incremental margins for the business is at this point?
It's a bit of a mix. Are you just talking about volume or are you talking about volume in this yield environment? There's a lot of moving parts right now. I think the opportunities are obviously pretty significant.
I guess if you're bringing on new freight, what are you targeting from an incremental standpoint?
20.
Okay. Okay, good. That makes sense. That's okay. Then, just back to the pricing conversation, the 7.6% that you're experiencing here in the quarter. Rick, do you think that that's where the market's at or is that reflective of some of the targeted actions that you're able to take and some of the yield or mix opportunities that you have within your network?
Yeah. Our data shows that our yield is below the market. I think you guys could look at the same data and you'd probably find the same thing. Part of that is where we are in the marketplace, right? We grew up as a regional carrier and you had to compete with those regional good operating guys that build a lot of directs, et cetera. So we play in that market still to a meaningful degree. Then we also are expanding our footprint, have a different value proposition. We've improved our service, our cargo claims ratio. As you try to improve your yield, some of it's mix, right? Because A customer may use you today because he's a price player.
If I decide I'm not going to be in the price market anymore because that doesn't really work for me, or I have to change him out with another customer, it doesn't just mean he's going to pay 14% more. We're working through this business mix management. The other thing you could say is that's not a direct line thing when you're in a network, high fixed cost business. You want to stage that in, but the market is really good right now, and we're evaluating unprofitable business, or let's just say minimum type shipments that don't have the margin you might want. Even if this is called a 90 or 88 operating ratio, I'd rather have a 88 operating ratio on a $260 shipment than a 88 operating ratio on a $80 shipment. It's just not enough money in today's environment.
We're working through those opportunities, and what I would say is, I think the market is conducive to that right now, given the strength in the market and the quality of our service, product, and an expanded offering. We're going to do it in a staged way and not take a bunch of risk. I don't know if you've seen some other people who decide one day they're getting in this market, and the next day they're getting out of it, and sometimes it doesn't always go the way you're in a network business, the way your modeling is. I'm really excited about the opportunity and with where we are as a company, I think we're staging these actions in a very appropriate manner.
Given the strength of the market, we're also being pretty aggressive with that, and you can see that with the contract renewals, right?
Yeah. Look, the balance has been very good. We've seen people push price at the expense of volume, and you guys have been able to walk and chew gum or balance that, which has been very impressive, and I'm guessing that the market's helping in doing that. Do you still think on some comparable lanes, I think in the past you've said you're maybe as much as 10% or 15% below the market. Has that gap narrowed with the pricing actions that you've been able to do over the past several quarters, or is it still in that range at this point?
It's still in that range. You might call it eight points or something. If you look at us, we've been leading from a yield standpoint, but other people are getting good yield improvements as well. We're like 20% of the way of closing the gap, maybe. It's still the most meaningful opportunity that we have. That plus capitalizing on the broadening network to get that fixed cost leverage that we were talking about.
Thanks a lot for all the thoughts this morning. I appreciate it.
Sure.
[inaudible]
We'll go next to Jason Seidl with Cowen.
Thank you, operator. Guys, in talking to some shippers, it seems like the rails are already planning for peak season months ahead of time. I was just wondering if you've taken any steps to talk to your shippers well ahead of time, and more so than normal like they are.
Yeah. Obviously, I would comment too. We're doing that, and we're also aggressively staffing for anticipated peak. We started earlier this year because of our confidence in the market and the growth that we know we're going to get from the Northeast expansion. It's probably a little more training cost in the first quarter than we would have had in the past from a staffing standpoint. Normally, we wouldn't start staffing for the peak in March, and we hired every week right through January. Our own readiness in terms of capacity is improved, and then like you said, we're having some serious conversations with customers and making sure that the capacity that we're paying for and staffing for, we're being properly compensated for, especially in some of these more head haul, tough markets like in the Pacific Northwest into Colorado, head haul business down into Florida.
We just have to make sure that we're being compensated for the capacity that we're providing. Those conversations are obviously being had.
No, that's good color. Thank you. The other thing is more longer term. Obviously, I think this market is a lot better than I think you would have envisioned it when you started the Northeast expansion plans. I'm assuming your density level is ahead of schedule. How do you think about the need to start adding your own facilities in terms of owned ones instead of just renting them? Has that stepped up, and how should we look at that on a CapEx basis moving forward?
Jason, I think when we have looked at our longer-term CapEx, this year, obviously we've highlighted $265, and we're going to be focusing our real estate investments on what we would say are the strategic sort of assets that we want to own. The Fort Worth facility we added this quarter, that's an owned asset. As we see terminals in the Northeast that allow us to give us that runway to grow, or in a strategic location, we'll own those. I think we pointed out that we bought the Laurel, Maryland facility. That was a well-positioned asset. Great geography there. They're not adding real estate between Baltimore and Washington, so it was a good location. I think we're prudent about that. As we find assets that make long-term sense, we're going to own them.
I think we're going to see in our business going the next several years, you're going to see us making real estate investments that bring us closer to the customer, not only in the Northeast but in other markets. Fort Worth, the third terminal there, that was what that was about. Those are strategic investments. Those are ones that we think differentiate us, and they're ones, the facilities, that give us an opportunity to grow over time. We don't think, with that said, the leased assets that we have currently utilized, we don't necessarily view those as a drag or an overhead cost. Those are things, yeah, we're paying market Cap rates, but we're also in a position where those are ones that are effective for us. If we find opportunities to be more strategic about it or have longer-term assets, we'll do it.
We also just bought Scranton as well.
Yes.
Some of the properties we're looking at will be purchases, we have a contract on a break up there that we would expect to own as well. Yeah, we want to own the strategic assets, we're building terminals in Indianapolis, some other areas we built in St. Louis. You see us kind of make. We want to own those strategic assets when we can. I'll give you an example, though. In our Newark terminal, it wasn't for sale. The landlord didn't want to sell it. It's a nice facility, 101-door. One of the other major competitors was in there. We were able to secure that under long-term lease. It's just the market.
Right. Gentlemen, I always appreciate the time. Nice quarter.
Thanks.
Thanks.
We'll go next to David Ross with Stifel.
Yes, good morning, gentlemen.
Morning.
Morning, David.
Can you talk a little bit about the average age of the fleet right now and where you want it? Fritz, you mentioned that you're wanting to drive it down further, how much further, are you going to get there by the end of this year?
We kind of like the average tractor age right around five years. We're pretty comfortable with that. We're pretty close to that right now. As we expand, we'll obviously continue to need to make fleet investments to maintain that average age. I think the big thing that I think I may have pointed out prior was particularly our forklift fleet was something we were dissatisfied with the age. Last year, we really pushed that, made a significant investment to bring that more in line with what we think the economic benefit of the average age and being able to maintain the forklifts. The trailer fleet we feel pretty good about as well.
There's a little bit of an opportunity to bring that average age down, we feel like it's an appropriate balance of what reliability, fuel efficiency, maintenance costs, significantly all the safety investments that are on board.
Talking about the LTL business overall, Rick, could you give any color on, I guess, which industries, regions might be doing better than others, specifically related to the oil field services or the energy business that was a big part a few years ago fell off. Has that come back with the higher oil prices? How are you looking at the business mix?
David, on that one, the Houston region, which is kind of our, we would consider a proxy for energy, has kind of outpaced the growth of the company here in the first quarter. It's a little bit above the average. It's returning closer, not all the way to where it was in sort of 2014, but it has done well this year. I think it's important to note across the company, there's really not a significant outlier, although that is above the average. We see pretty uniform growth.
I would just comment on business mix as well. We're very focused on growing kind of smaller accounts that have a better yield profile generally. We're having a lot of success there supporting new account opportunities as well as market penetration amongst our existing accounts for that segment. Again, that's a plus too. It operates better, and you're not taking a big position with a big account, going out with RFQs all the time as well. We like our big accounts that operate well, but not all of them do. You're always kind of working through that, and those larger customers tend to have more of a, sometimes a procurement mentality. As opposed to a partnership, relationship, logistics opportunity. It's a mix.
How does that relate to the 3PL business? Because they typically bring a lot of smaller accounts, but they're treated more like a large account. Are you able to, by getting small accounts directly, shrink your 3PL business, or are 3PLs still good partners, and is that business growing?
We provide the assets. Today it's expensive to provide assets and drivers, and they take a margin. That's their business. We're constantly evaluating that to make sure that the partnership relationship works. Quite frankly, in an environment like this, we're going through some pretty major repricing with them, kind of like you would with other national account type profile business, right?
That makes a lot of sense. Thank you very much.
All right, great.
Thank you.
We'll go next to Willard Milby with Seaport Global.
Hey, good morning, everybody. If I could go back to the purchased transportation question and just ask it a little bit differently. Can you give us a sense of the % of line haul miles that are moving here in Q2 and the step up, or just talk about the step up maybe from Q1 that we normally see seasonally, and if that's maybe outsized one direction or the other, just given volumes and also considering, I guess, what weather did in Q1?
Yeah. Willard, we don't break out the kind of step-ups or what we're seeing, because that's more of a mix of business kind of a challenge there on when we use PT. But if I look back at the quarter, we used roughly at the first quarter, our PT % of the total line haul miles that came from truckload was right around 7% for the quarter. If you add the rail in, that'd be about 4% from there.
Yeah. About 11% of our miles are purchased and
Okay. Looking at here, that's this quarter or Q2? Sorry, I just missed that.
That was Q1. If you look back over time, if I were to go back to prior quarters, it's really driven about what that mix of business looks like and where it comes in a quarter. There's really not always a consistent pattern quarter by quarter. One of the things that Rick pointed out earlier on the call was that we've been pretty focused on hiring. That gives us an opportunity to optimize some of that. That's why it's not necessarily a good predictor of what Q2 miles might look like, because we're always taking action with that, and same time, freight patterns are changing.
Okay. Fair enough.
Yeah. I would also comment is some of the high cost PT lanes, where, let's just say, for argument's sake, Dallas to Denver, Colorado, that's a very high cost. You're either going to come back empty or you're going to pay a high cost per mile. We had to make sure that business is being priced properly. If it is, we'll keep buying the PT and moving the freight at a good margin. If it's not, if we adjust the pricing and the customer doesn't take it, we take the PT out. Managing a network like this is a little bit, it's part science, part art a little bit, when you're trying to predict what's going to happen.
All right. Can you talk a little bit about maybe if your real estate strategy has evolved from when you first set out expanding into the Northeast, I think you're running into needing to expand a terminal or two already in the Northeast. Has your view of what you want to, I guess, lease or own initially, have those facilities sort of grown in size from what you thought you might do initially? Can you talk a little bit about how that has evolved and what you plan to do going forward with these additional facilities that you expand into?
I think I would just say we're on our strategy. We're on our plan with this. As we have entered these markets, we knew that we would move sort of upsize the Newark opportunity. When we first entered that market, we leased a facility that would get us operating, and with the full view that we were going to move to a new or larger, more, perhaps strategic location. That's consistent with our plan. As we look at facilities, Rick pointed out that we bought the Scranton facility. That was well-priced and gave us an opportunity to further penetrate the Pennsylvania market. That one was consistent with strategy. Let's buy this one. Price worked, good location, reaches our customers. I don't know that we would have altered that.
We have continued to look for those properties that give us a kind of a long-term, what we would say, advantage or place that we could grow into. It really hasn't changed.
All right. I guess, still thinking initial leases, though, for the majority of the expansion. Is that kind of the best way to think about it?
I hate to be kind of evasive on this. It actually depends. The Baltimore facility I mentioned, there was a seller, it was an opportunity to buy it. We're going to buy that one because that's a great location. Scranton was a good location. Newark, we would've liked to own it, but it wasn't for sale, That one made sense for a lease. That was the option we had. I think it's going to be dependent on what the opportunity is.
Okay, fair enough. Thanks for the time.
We'll go next to Ravi Shanker with Morgan Stanley.
Morning, guys. Broader question on the macro, there appears to be this emerging concern that the cycle may be looking peak-ish or may already have peaked and such, and then we may have seen a few very early data points, but then other data points remain robust. Want to get a sense from your conversations with customers, how do you see things as they are right now? Also perhaps more importantly, what kind of data points are you looking at to maybe consider taking down the green flag and putting up the yellow flag on the overall cycle?
We tend to follow industrial production more than anything else. You and the market have way more data points than we do. Our customer base is so diverse. You got one industry maybe killing it, another one maybe seeing some signs. I don't know that we would have any more insight than you would have. You have any other comments, Fred?
No, I think I would add that our strategy is, yes, there's an industrial emphasis in LTL that's long been there. I think that a little bit of a differentiator for us is that we continue to find traction with our own growth initiatives around, be it Northeast expansion or further penetration in existing markets. The Fort Worth thing is an important addition for us. We'll add other second terminals in other markets later this year. For us, the growth opportunity, our customers like our value proposition, so that continues to drive what our opportunity is.
Great. As a follow-up, are your growth plans agnostic to the macro? If you do see a bit of a slowdown, will you take your foot off the accelerator a little bit?
We could. The thing that we like about this expansion strategy, we can manage this, right? We started out a year ago, we communicated that we were going to start with four terminals, and if it accelerated or we saw opportunities, we could dial it up, push the accelerator down. We did. We added a couple terminals beyond the original four planned. Right now, we feel pretty good about what we see, we're still on the track to four to six in the Northeast. The strategy is built around the ability for us to adjust up or down based on what we see in the market conditions.
Great. Thank you.
It appears there are no further questions at this time. I'd like to turn the conference back over to Mr. O'Dell for any additional or closing remarks.
Okay, great. Thanks for your interest in Saia today. Again, we're excited about the opportunities and expect an eventful year at Saia for the remainder of this year. Thanks.
Thank you.
That concludes today's conference. Thank you for your participation. You may now disconnect.