Earnings Call Transcript - SAIA Q4 2021

Operator, Operator

Good day, ladies and gentlemen and welcome to the Saia Incorporated Fourth Quarter and Full-Year 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Doug Col. Please go ahead.

Doug Col, President

Thanks, Steve. Good morning, everyone. Welcome to Saia's fourth quarter 2021 conference call. With me for today's call is Saia's President and Chief Executive Officer, Fritz Holzgrefe. Before we begin, you should know that during this call, we may make some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements and all other statements that might be made on this call that are not historical facts are subject to a number of risks and uncertainties, and actual results may differ materially. We refer you to our press release and our SEC filings for more information on the exact Risk Factors that could cause actual results to differ. I will now turn the call over to Fritz for some opening comments.

Fritz Holzgrefe, CEO

Good morning and thank you for joining us to discuss Saia's fourth quarter results. I'm excited today to release record 2021 results and want to acknowledge the efforts given by thousands of dedicated employees again this past year to make these results possible. Our fourth quarter revenue of $617 million surpassed last year's revenue by 29.5%. Operating income also grew by 92.3% to $97.4 million and our 84.2% operating ratio in the fourth quarter marked the sixth consecutive quarter where our OR was sub 90. The quarter was marked by consistent levels of demand from our customers and growth in shipments per workday stepped up each month in the quarter. Total shipments per workday grew by 3.3% compared to the fourth quarter last year. I continue to be impressed by our operations team and how they're handling the supply chain and workforce challenges still prevailing across our network. Our on-time service is 98% in the quarter and our cargo claims ratio was among the best in our industry. It was achieved with the dock workforce that grew by 17% during the year. This attention to quality is critical to meeting and exceeding our customers' expectations. These high levels of service require that we continue to ensure that we are fairly compensated to support our investment in high service levels and to offset inflationary costs. Our LTL revenue per hundredweight increased 19.6% in the quarter. This measure of pricing reflects both specific pricing actions and improvements in mix of business. Our approach to pricing is simply market-based. We're looking, we are charging customers to the level of service they're receiving and are seeking to set pricing in line with our competitors who offer comparable levels of service. The combination of improving yield and mix changes resulted in a 28.4% increase in our revenue per shipment to $317, a record for our company. Our total revenue in 2021 crossed over the $2 billion level for the first time and at $2.3 billion was up more than 25% in the prior year. Operating income rose 85.9% to $335 million and our operating ratio for the full-year of 85.4% was 470 basis points better than 2020. We opened seven new facilities in 2021 and across our network deployed $286 million in capital expenditures as we focus on our efforts on expanding our terminal network and enhancing service levels throughout the organization. We continue to invest in the latest safety technology and in clean diesel and fuel-efficient technology and have supplemented this investment with pilot programs using alternative fuels including electric vehicles and compressed natural gas. With that said, I'll turn the call over to Doug for a review of our fourth quarter financial results.

Doug Col, President

Thanks, Fritz. Fourth quarter revenue increased by $140.6 million to $617.1 million. The components of revenue growth in the quarter were as follows. Tonnage grew 9.2%, a combination of 1.6% shipment growth and 7.5% increase in our average weight per shipment. On a workday basis, tonnage grew 11% and shipments increased 3.3%. Yield excluding our fuel surcharge improved by 14% and increased by 19.6%, including the fuel surcharge. Fuel surcharge revenue increased by 80.1% and was 14.6% of total revenue compared to 10.5% a year ago. Now a few expense items in the quarter. Salaries, wages, and benefits increased 10.1%, driven by wage increases across our driver and dock workforce as well as hiring and referral bonuses paid in the quarter to attract new employees. Additionally, our January and August wage increases of approximately 3.5% and 4.7% respectively contributed to this increase on a year-over-year basis. Purchase transportation costs increased 56.1% compared to the fourth quarter last year and were 11.3% of total revenue compared to 9.4% a year ago. Truck and rail PT miles combined were 19.5% of our total line haul miles in the quarter, compared to 16.3% in the fourth quarter of 2020. Fuel expense increased by 65% in the quarter while company miles increased by 6.2% year-over-year. The increase in fuel expense was primarily the result of national average diesel prices rising by nearly 50% year-over-year in the quarter. Claims and insurance expense increased by 86.8% in the quarter, reflecting increased frequency in accident severity in that expense line and higher premium costs versus the prior year. Claims and insurance expense was up 9.7% or $1.5 million sequentially from the third quarter. Depreciation expense of $35.9 million in the quarter was 5.1% higher year-over-year driven by investments in real estate equipment and technology. Our total operating expenses increased by 22% in the quarter and with the year-over-year revenue increase of 29.5%, our operating ratio improved 520 basis points from a year ago to 84.2%. Our tax rate in the fourth quarter was 23.9% compared to 19.8% last year and our diluted earnings per share were $2.76 compared to $1.51 last year. Moving on to the financial highlights of our full-year 2021 results. As Fritz mentioned, revenue was a record $2.3 billion and operating income of $335.1 million was also an annual record. Our operating ratio improved 470 basis points in 2021 to a record 85.4%. For the full-year 2021, our diluted earnings per share were a record $9.48 compared to $5.20 earned in 2020. In 2021, we made capital investments totaling $285.7 million. We reduced our long-term debt by $19.4 million to $31 million. Our balance sheet remains strong with $106.6 million of cash on hand at year-end and more than $300 million of availability through our revolving credit facility and additional outside borrowing sources. In 2022, we anticipate capital expenditures will be in excess of $500 million. And we also anticipate an effective tax rate of approximately 24% to 25% for the full-year. I'll turn the call back over to Fritz for some closing comments.

Fritz Holzgrefe, CEO

Thanks, Doug. Our company has posted record results in the months and quarters that follow the pandemic lockdown in 2020 and 2021, which brought even more challenges. The monstrous winter storm that ravaged most of Texas in February last year, as well as Hurricane Ida, which dramatically impacted our employees and their families in the Gulf Coast area last August, were added to the ongoing COVID-related challenges and the supply chain disruptions we face. Our employees responded exceptionally well and professionally to all these disruptions; they managed to not only take care of our valued existing customers but also work to execute our ongoing growth strategy. We're able to recruit and hire to support the addition of seven new terminals across our network and ended the year with 176 terminals. Our efforts to build out our network to provide more direct coverage and get closer to our customers increasingly put us in a position to offer differentiated service. In addition to lease terminal openings, we also closed on several land purchases in 2021 to build our development pipeline as part of our multi-year growth strategy. As we look forward into 2022, we're planning to add 10 to 15 new terminals, and we'll also be relocating 10 or so existing terminals into larger or better-positioned facilities as well. Our planning horizon for future terminals additions, expansions, and relocations includes not only 2022 but 2023 and beyond. To support our pace of openings, our Human Resources Group is continuously recruiting and onboarding the talent that is required to open and operate these facilities. We're expanding our driver academy program this year and we'll partner with driver schools and technical colleges in some markets to increase our candidate pipeline. I'm excited to see what 2022 holds for our company as we enter year six of our organic growth strategy. Knowing how our team handled all of the adversity of the past two years and still managed to provide great service and grow our business gives me confidence that we can continue to be successful and stay on course. In total, as Doug mentioned, we expect more than $0.5 billion invested in real estate, equipment, and technology in the coming year. We also continue our investments in people and talent development in 2022, as these efforts have been critical foundational elements of our strategy. Our company continues to heighten our focus on providing excellent and differentiated service for our customers. Ultimately, this focus will drive the growth of our company while continuing to improve our operating performance over time. With that said, we're now ready to open the line for questions, operator.

Operator, Operator

Thank you. We'll take our first question from Jack Atkins with Stephens. Please go ahead.

Jack Atkins, Analyst

Okay, great. Good morning and congrats on the great results, guys.

Fritz Holzgrefe, CEO

Thanks, Jack.

Jack Atkins, Analyst

So I guess maybe for the first question, would love to get an update on January trends so far? Doug, if you could maybe give us an update on tonnage and shipment trends on a year-over-year basis? And then, also maybe, if you could fill us in on how December trended as well?

Doug Col, President

Sure. Thanks, Jack. In December, our shipments per workday grew 4.8%. And our tonnage actually grew 13.7%. So a bit of acceleration from the first couple of months of the quarter. Moving into January, historically, there's a little bit of a step-up in shipments per day. And we didn't see that as much in January. But some of that’s related to how the holiday fell around New Year's. That day after the New Year's weekend, a lot of our customers took partial days or took a full day off. So that was a little different than the norm. But January finished up pretty good. We were up 1.3% on a shipment basis, and 7.5% on a tonnage basis. So the first week or two, as everyone knows, it was going to happen sometime. And we got hit pretty good with weather across the map and a lot of facilities that were either shut or partially closed for a day or two. And in some markets, there's ongoing kind of rolling embargoes depending on either weather or COVID challenges, things like that. So all in all, I mean, to be positive, with that kind of start to January, we're pretty pleased with business levels and winter can happen any month in the first quarter. Let's hope we got it out of the way in January. We'll see how February goes.

Jack Atkins, Analyst

No, that makes sense. Thanks for that, Doug. For my follow-up question, Fritz, in your prepared comments, you mentioned that you plan to bring 10 to 15 service centers or terminals online this year, and you mentioned relocating 10 more. Could you discuss what this will do for your additional capacity in the network? I'm also curious about the door count trend you expect for year-end 2022 compared to year-end 2021, if that helps.

Fritz Holzgrefe, CEO

Sure. The main focus here is that the new facilities will enhance the market we can serve. For instance, we have three facilities planned for the first half of this year aimed at better coverage of the Chicagoland area. This will create additional capacity in our current facilities while also improving our service level to meet customer expectations. In other markets, such as the Northeast, we've seen growth and plan to expand our major operations in Harrisburg. Initially, we moved into a facility there, and now we need to expand to support ongoing growth. Some new openings will provide access to new markets, while others, like those in Chicago, will give us added capacity, and Harrisburg will offer improved flexibility. This aligns with our ongoing strategy.

Operator, Operator

We'll take our next question from Amit Mehrotra with Deutsche Bank. Please go ahead.

Amit Mehrotra, Analyst

Thanks, operator. Hi, Fritz. Hi, Doug. I just wanted to follow-up on the margin question. I guess, Fritz last quarter, you talked about 150 to 200 basis points of margin opportunity, and maybe opportunity to get to the top end or even potentially above the top end this year. I don't know if that's evolved or changed at all that you need to talk about that. And then, Doug, I appreciate the comments on January. It's a tough operating environment, whether labor wise. Hoping you'd be kind of help us think about the sequential movements and operating ratio in the contextual manner?

Fritz Holzgrefe, CEO

I will begin by addressing the overall margin question. We have consistently stated that achieving a range of 150 to 200 basis points over time is very feasible. Additionally, it's important to recognize that as we have developed our own tools and execution capabilities, we have demonstrated that we can reach the lower end of that range. In favorable environments with a strong economic backdrop, we should be able to meet or exceed the upper end of that range. Currently, we are focused on executing well in the first quarter. Keep in mind that January is just one month of the quarter, and there is still much that can happen. However, we are optimistic about reaching the upper end of that range and believe we can deliver. I feel positive about our performance in the fourth quarter. Throughout the year, we have built momentum with our customer base, which recognizes the differentiated quality and service we provide. This recognition allows us to be compensated accordingly, which is crucial for a business that demands significant investment and operates under a high inflationary cost structure. Our operations teams are effectively delivering on this, and our sales teams are clearly communicating our value. This positive momentum positions us well for the end of the year in a thriving economic environment, and we aspire to meet or exceed the upper end of the range.

Doug Col, President

Yes. Good morning, Amit. On the second part of your question, like I said, I mean, for January to finish positive 1.3% on the shipment side, on a workday perspective is, is pretty encouraging. We've got a much easier shipment comp moving into February, as a result of the big storm that impacted Texas in the Southwest, last February. So like I say, hopefully, we got our winter, the worst of our winter behind us. But historically, we've seen about a 50 basis point erosion in Q4 into Q1. I think that that probably makes sense this year as well. I mean, we're not making it easy on ourselves, right. I mean, Q4 was a record by 400 or 500 basis points. So that's a good thing that the challenges, is there for us each quarter against the records, we're confident again. But 50 basis points probably makes sense. The timing of our GRI is pretty similar to last year; the magnitude of it is a little bit larger. But I think we probably stick to the historical 50 basis point guide on the deterioration.

Amit Mehrotra, Analyst

Yes. And then just for my follow-up, the tonnage, I guess the biggest discrepancy, when I look at kind of my expectations or our expectations to the company, and maybe were, where consensus is, seems to be really on tonnage growth and understanding what tonnage growth can look like, if you take market share, add all this new capacity. And so I just kind of want to come out and ask, do you think tonnage growth can be in that double-digit territory in 2022? And then later to that, this Mastio data that came out, you guys are just doing a great job on claims ratio, which is important, but haven't really seen it. I would say, to the certain extent, whether it's net promoter scores, or some of the criteria that the customers look in Saia or the perception of Saia. We've seen improvement, but maybe not to the level that we would have expected, given some of the progress you guys have made on the claims ratio. Wanted to just, if you could talk about that as well?

Doug Col, President

Not bad two-part follow-up question, Amit. All right. In terms of your tonnage expectations, look, I mean, we're probably going to grow our door count this year, if I think about just new openings, in the mid-single-digit range. Like Fritz said, we're building out other parts of the existing network to handle more growth. But at the end of the day, I know we all want to grow and we all love growing volume when we can do it. But in a strained network, in the network business, when you're strained either on a labor side, or maybe supply chain issues. The right thing for us is to grow the revenue, grow the revenue per shipment, and cover some of these inflationary costs and meet the challenges and earn at a rate that allows us to go invest in the business. So I think we'd like to grow tonnage at a higher rate potentially down the line, but I think mid-single-digit kind of shipment growth would be our expectation if the environment holds up. And we're building out the network to handle more than that, but we'll take it when it comes to us at the right price. And we love the margin improvement we're making and a measured pace of shipment and tonnage growth as a way we've gotten there. So I think we're going to keep on that path.

Fritz Holzgrefe, CEO

Regarding the Mastio results, I want to offer some general observations. We are currently being compared to all the national carriers, which reflects our progress over the past several years in terms of national coverage. This includes our growth into new markets where other brands may have a stronger presence. When we examine the Mastio results, we feel positive about our position, especially since there are a few competitors ranked higher and several below us. This indicates that we are moving in the right direction. Our visibility in customer feedback is increasing, and we are successfully managing freight and meeting expectations, which is improving over time and sets us apart from others. However, we have faced some customer dissatisfaction when we emphasize our high service levels, strong claims ratio, and fulfillment of expectations without being adequately compensated for those services. This year, we have focused on ensuring we bill for all accessorial services. This has led some customers to perceive us as challenging to do business with, as they view our services as more costly than before. According to the Mastio data, we are recognized for providing value, but the investments needed to sustain our high service levels are becoming unsustainable. We need to address this issue over time, and I believe we will as we continue to gain momentum in delivering great service. People are beginning to understand the value of what we offer, and our teams are effectively communicating and fulfilling that service. As a result, I anticipate that we will see improvements in our pricing structure moving forward.

Operator, Operator

We'll take our next question from Scott Group with Wolfe Research. Please go ahead.

Scott Group, Analyst

Hey, thanks. Good morning, guys. Can you give us an update on the pricing renewals in the quarter and then the GRI you guys just took was pretty outsized relative to the industry and your history, just some thoughts on that as well?

Doug Col, President

In terms of the contractual renewals, I mean, it's still running at double-digit clip 10.4%, I think in the quarter. So, again a pretty good indication of what the shippers expect, and kind of more of the same around there supply chain struggles and our desire to secure good capacity. In terms of the GRI, I mean we've talked about it, the pricing gap for years and years. So, it's not that we went out and put a 7.5% increase across the entire tariff, we're doing it in a very targeted way to help us work on mix. I mean mix has been a big part of our own story, finding the freight that works for us, whether it's the right weight break, or the right length of haul, whatever the case may be, so you kind of use your adjustments to the tariff, it's not going in and setting the whole thing at times 1.075, it's more targeted than that. But the acceptance, early on, we're only a week into it, but I think the market in general, I think we saw some higher GRIs than the prior-year out of small competitors and we saw some GRIs come earlier. Ours was right about the same week, maybe even a week later than the prior-year. So nothing more than that.

Scott Group, Analyst

Okay. And just to that point about mix, so weight per shipment up 8% year-over-year. How much of this is sort of truckload in your mind that's coming to you or how much of this is more a, we are focused on changing improving our mix, and this is more sustainable? Any thoughts on goal for weight per shipment this year?

Doug Col, President

Yes, we believe there's a good chance that it stays where it is or possibly increases slightly. We don't consider much of what's currently in our network as truckload spillover business. For instance, regarding the tariffs, heavier weight breaks above 10,000 pounds have seen larger increases. That's a different type of load with a different profit profile. We're not completely turning away from that business, but we need to ensure that the rates are appropriate. Overall, we don't see a significant portion of our business as truckload spillover; freight seems to have stabilized at the moment. It's not the same disruptive environment we experienced in the summer of 2020.

Operator, Operator

We'll take our next question from Jon Chappell with Evercore. Please go ahead.

Jon Chappell, Analyst

Thank you. Good morning. First, if we look at salaries, wages, and benefits and purchase transportation in aggregate, an improvement from 4Q over 3Q, I think if you go back to 2017 to see that. So the question is, is the pricing momentum just still favorable, that you were pushing through inflationary plus and growth plus type pricing or were you turning away business maybe a little bit important to you, because you weren't necessarily didn't have the capacity over corporate staff or could get the purchase transportation to meet all the demand that was there?

Fritz Holzgrefe, CEO

I believe the correct approach involves managing our business mix effectively. Our primary objective is to maintain pricing that aligns with market levels. It’s not strictly a cost-plus model; there comes a time when we decide to take on certain business because it adds value compared to what we already hold. However, the real focus must be on this approach. As market conditions change and we face various disruptions or challenges in specific areas, we adapt to those market conditions. This may involve making adjustments like implementing coverage changes or embargoes. It’s a dynamic process. We are prepared to alter our profile as necessary to align with market conditions. This is essentially how we operate when we manage these adjustments within short timeframes.

Jon Chappell, Analyst

Okay. And then kind of sticking with that theme, I think there's this perception as you accelerate your terminal growth this year that there's some upfront costs associated with either hiring or the land or equipment, et cetera. Are you at the point, the size of your network and the National President, where you think you can onboard eight to 10 terminals and really not see any upfront costs or drag associated with that type of expansion?

Fritz Holzgrefe, CEO

Well, I think where we are on this, I’ll comment two ways. We think we've developed a core competency around organic openings. So we feel like we know how to do this, the cadence of when you start recruiting, when you onboard people, when do you make sure you have a pipeline of leadership that you can put into a region. So we feel like we've developed that competency. So there's a bit of an efficiency that comes with that. I think at the scale that we are, it's certainly challenging to open up a facility. So I don't want to underestimate that. But at the scale we are, we're doing things that in many cases; I gave the Chicago example earlier, where the facilities we're going to open or add are ones that are going to be incrementally beneficial to that market. So you create some efficiency within your legacy network, to your legacy terminal. So maybe we're trying to cover Rockford, Illinois from the two terminals in Chicago. Well, if you have a facility there, that certainly changes the service level and your cost structure, your stem times all those things. So there's a cost savings that kind of comes along with that. So that helps I guess offset some of that investment. And as we continue to focus on our initiatives, we will absorb the opening cost and relocation cost in all the sort of margin structures that we've kind of commented on. So we feel pretty good that our model here allows us to do that.

Operator, Operator

We'll take our next question from Todd Fowler with KeyBanc Capital Markets. Please go ahead.

Todd Fowler, Analyst

Hey, great. Thanks and good morning. As you think about the growth going into 2022, Fritz, can you talk about your availability to get rolling stock and equipment and basically how that interplays with purchase transportation on a shorter-term basis.

Fritz Holzgrefe, CEO

We believe we have solid plans and clear visibility regarding the rolling stock we expect to acquire this year, which will support our business strategy. Additionally, we feel confident in our ability to recruit the required drivers, dock staff, and leadership team to achieve this. Currently, we do not see any constraints. We are aware that, similar to many sectors, rolling stock is facing inflation. In 2021, many OEMs had difficulty meeting their timelines. We have structured our plans based on our expectations of what we will receive from them, rather than strictly adhering to their projected timelines. To account for this, we have incorporated some extra leeway in our plans. However, we don't foresee this being a hurdle at the moment. Of course, circumstances can change, but as it stands, we feel optimistic about the situation.

Todd Fowler, Analyst

And then so in that context, does PT kind of stay in this low double-digit percent range? Or does that trend a little bit higher or lower? How does that kind of work into the growth factors as well?

Fritz Holzgrefe, CEO

That one is a tough question, Todd, because currently, we are focused on building out density, which gives us the chance to recruit drivers and place equipment effectively. I can't provide a clear outlook on where this will lead us this year since it will depend on how our growth progresses and where it factors in. However, I can assure you that as we evaluate our total line haul costs, we will look to optimize them using our own resources and assets, and when necessary, we will continue to partner with PT. All of this will need to be justified by costs or margins. We definitely won't be in a position to increase volume that undermines our operational improvements over time, as that doesn't align with our strategy. We would decline business that doesn’t meet those criteria.

Todd Fowler, Analyst

Okay, that makes sense. And just as a follow-up, I remember several years ago, kind of celebrated when you were hitting 30% incrementals. And now you're kind of doing that very consistently. Yes, I know that the incremental margins can vary quarter-to-quarter and based on investment, and seasonality and those sorts of things. But is a 30% incremental a safe baseline to think about, where you can be bringing on new business or are there other things that we should be thinking about as to why or why not that would be the right level of incremental margin?

Fritz Holzgrefe, CEO

I believe that's a reasonable range. It will vary a bit around that. In a new facility, as we quickly add new business, you would expect those incremental margins to improve over time. Overall, those averages seem sensible. However, if we can achieve better pricing, that will raise the range, and by mixing the business, we can further enhance that range. Our priority is that if we consider where we ultimately land on this, we would prefer margin improvement or operating income improvement over growth for its own sake. This reflects an important aspect of how we manage our operations.

Operator, Operator

We'll take our next question from Bascome Majors with Susquehana. Please go ahead.

Bascome Majors, Analyst

Yes, thanks for taking my question. Fritz wanted to go back to your comment on your core competency? You feel like you've developed a strong competency around organic openings. The five or so terminals you opened since the end of September. Can you give us some thoughts on how quickly those have filled up where they track versus kind of what normal capacity utilization might be, and how that compares to time or your history in that? Thank you.

Fritz Holzgrefe, CEO

No problem. We’ve added some strong facilities recently. A good example is in Calhoun, Georgia, which is in Northwest Atlanta. Our sales team sees this as a great opportunity because it addresses a gap in the market. Previously, reaching this area from Southwest or Southeast Atlanta was challenging, resulting in unmet customer expectations. However, this location has quickly become successful due to its strategic position in the market. As we expand into areas like Chicago or the Northeast Atlanta terminal later this year, I expect these will have similar economic characteristics as we already cover these regions but lacked strong offerings. Now, we can address this gap and see immediate benefits. We opened a facility in Youngstown, Ohio, in October, which was vital for us as it was previously underserved. This location serves as a key connection point into the Northeast, such as Pennsylvania. What excites us about adding these facilities is their potential to enhance our addressable market and improve service delivery. This capability tends to lead to quicker cost recovery, as we can provide savings and meet customer expectations more effectively. Successfully doing this gives us the opportunity to increase our pricing. The pattern for the facilities we add will focus on similar types as those mentioned. If we enter entirely new markets, there may be some initial startup costs that could be a drag for a short period, but generally, these locations reach our average operating ratio fairly quickly.

Bascome Majors, Analyst

And not to ask you to spoon feed it to us, but did you have just a rough sense of what that timeline used to be the company average OR, or what it's looking like more recently?

Fritz Holzgrefe, CEO

Well, sure. I mean, if I go back to the northeast terminals, I mean, we were excited to get them below a 100% OR kind of in a year, year-and-a-half, right? So, now I'm not talking about 100% OR I'm like, all right, company average is 84.2%, right. Our folks get a little disappointed because I still say, well, we got new business at 85%. Okay, that's not as good as the rest of the business. So it's focus the new ones, you're thinking about months, rather than years. And it's, and they're all different. So I don't mean to be evasive on it, just tough to say is it eight months, seven months, six months, I don't know.

Bascome Majors, Analyst

Thank you.

Doug Col, President

And Bascome just to add on the core competency piece of it, I probably could have mentioned this, when Jonathan asked this question about it. But can we do it seamlessly and still get OR improvement. I don't, I don't. Just to be clear, we opened seven terminals this year, and we had a record OR 470 basis point improve. So I think that's where we gain confidence and part of the competency issue.

Operator, Operator

We'll take our next question from Jason Seidl with Cowen. Please go ahead.

Jason Seidl, Analyst

Hey, thanks, operator. Hey, guys good morning. I wanted to focus a little bit on sort of a longer-term look there's a lot of LTL companies expanding their terminals, both new and also larger ones. Wanted to see what do you think that's going to do to sort of the competition for labor which already is in a tight market, as we look through 2022 and beyond. And then longer-term, where do you think this is going to help the OR for Saia going forward? One of your competitors talked about a longer-term OR in the 60s based upon an improved network in the pricing environment? Would love to get sort of your opinion where you think Saia could go?

Fritz Holzgrefe, CEO

I can break that down into two parts. First, regarding labor, we're competing with LTL businesses and other well-known competitors. Additionally, we face competition from large warehouse operations for dockworkers. The labor situation is not isolated to our industry, so we have to compete based on our company values and culture, as well as pay and benefits, which are crucial. It's important to differentiate ourselves in terms of quality and the workplace environment. We feel good about our standing in this area, and our growth profile helps us in this regard. As for other companies expanding, it's important to note that some are also exiting the market. We've witnessed some of this recently, which opens up real estate and terminals that we can potentially pursue. Other industries outside of LTL may also compete for that attractive real estate, which could be converted into industrial properties. There are several dynamics at play here. Regarding long-term operational ratios, I believe if a marker exists, we should strive to achieve a similar target. I'm unsure of the exact timeline for this, but as long as we maintain our commitment to quality and service for our customers, we have an opportunity to narrow that gap. If this transition takes our business from mid-80s into the 70s, I don't see that as a barrier. We believe we have a strong product and an excellent team, and the potential is limitless. The timing will depend on factors out of our control; however, if competitors set a lower benchmark, that simply lowers our target as well.

Jason Seidl, Analyst

Okay, fair enough. Appreciate the time, as always.

Operator, Operator

We'll take our next question from Ken Hoexter with Bank of America. Please go ahead.

Ken Hoexter, Analyst

Hey, good morning, Fritz and Doug. So just sit back for a second, look at the market, obviously despite from e-commerce growth and being a COVID beneficiary in the sector, do you see any fade away of that or do you see continued growth and I know, we talked about the growth going forward, and adding to capacity just seems like the market is expecting this kind of near-term pullback in that demand, I just want to understand what you're seeing on that underlying demand. And then if there is a rollover in that demand just because of the tightness from the growth or COVID is you think about any pause in the margin potential?

Fritz Holzgrefe, CEO

I believe that the current macro situation has demonstrated that our assets can adapt to the needs of a disrupted supply chain, and other less-than-truckload companies are in a similar position. This industry seems to be in a strong position. I don't foresee a return to a time when supply chains won’t need to be flexible. While they may not be as disrupted as they currently are, people will continue to change how they consume goods, purchase items, and the structure of the supply chain, including warehouse locations and delivery methods. Our assets will continue to align with these changes. While it's possible for demand to slow down, I believe our unique positioning and the positive feedback we receive from customers gives us a competitive edge. In a slower market, we will maintain our operations and execute our plans. One advantage is that if we are cost-effective compared to competitors, we can still find opportunities for growth. We need to remain competitive in the market while delivering quality service, which I believe we will continue to do, albeit at a potentially slower pace. However, I don’t think it will come to a halt.

Ken Hoexter, Analyst

So just on that, doing a great job for the customer, it looks like claims and insurance nearly doubled in the fourth quarter yet up for a full-year up 25% same as revenues. Is there any way to gain efficiency on that metric or I know you talked about your cargo claims being at a solid level? What do you think on that line going forward there?

Doug Col, President

Yes, hey Ken. That line covers not only cargo claims expense, but our insurance expense around auto accidents would be in that number too. So that's where you see some of the most of the inflation and some of the volatility. We've over the years, we've taken a little bit more of the risk ourselves in that line on the auto side, as we've made investments in technology and our fleet, we're willing to kind of bet on ourselves to some extent versus paying some of the highly inflationary premiums that are out there the last few years. So there'll be volatility in that line, but again we've invested heavily in safety. And the premium itself is going to be inflationary 20% to 30%, usually what I've been expecting in the last few years. But on the frequency and severity side, I think we're going to make headway over the next few years with all the improvements in technology that are out there and our adoption of them.

Ken Hoexter, Analyst

Great. And my last one just real quick on the $500 million CapEx, maybe talk a bit about what's carryover, what's not, I know you're doubling the service centers to kind of 15 from seven but is that mostly real estate, is it tractor catch-up, maybe talk about what's kind of carryover and what's growth?

Doug Col, President

Yes, it's a mix of both. I mean, we fell short in the trailer side and getting all the deliveries we wanted last year there's still a pretty good number of trailers in that number. On the tractor side, it'll be another pretty good number because not only do we have growth tractors in there, but we'll do some buying for age of fleet, but real estate is always the wild card in that line. I mean, we could spend; we could spend more than twice what we did this year on the real estate line, if we're able to put the deals together. I think in the last couple of weeks, we've closed on some small real estate deals, two or three small deals, if some of the bigger ones fall into line, the real estate number could be two or three times what it was last year. But mainly on the equipment side, it was mainly trailers that were pushed out. And that's a piece of this step-up in spending that we plan.

Fritz Holzgrefe, CEO

We've got a couple of big projects in the year that are in process that started late last year, into this year.

Operator, Operator

We'll take our next question from Tom Wadewitz with UBS. Please go ahead.

Tom Wadewitz, Analyst

Yes, good morning. Wanted to ask you a bit about pricing and how you think renewals or if you want to just talk broader kind of revenue per hundredweight ex-fuel. I think your renewals were something like 14% in the third quarter, and you talked about 10% in the fourth quarter. So those are obviously both very strong numbers with some deceleration? How do you think about renewals the next couple of quarters, you think you stay in kind of high single-digits 10% area or do you think it kind of comes down to a more normal LTL level of maybe mid-single-digits?

Doug Col, President

I've been experiencing double-digit growth for about three consecutive quarters, and high-single-digit growth before that. Each quarter's results reflect a different book of business. In the fourth quarter, we renewed around 10% more contracts than in the third quarter, which is also a factor to consider. If some contracts have recently increased, they may not see as much increase the following year. However, the environment regarding General Rate Increases (GRIs) suggests that there will be another pricing opportunity this year. Reports from truckload and intermodal companies indicate they are still seeing double-digit pricing opportunities. We face some of the same cost pressures, particularly with labor. Our GRI reflects what we anticipate will be achievable this year. We provide the contractual renewal rates to give an insight into what shippers are sensing in the market, indicating that we still expect double-digit growth in the fourth quarter.

Tom Wadewitz, Analyst

Right, okay. And then the second question is, you've got a pretty strong ship, capacity growth story, idiosyncratic footprint story. So, I think you probably do better than the market in terms of growth. But how do you think about the impact from a cyclical perspective? I think you have had a lot of strength in LTL and maybe some truckload shipments move in, do you think that that will kind of swing the other way later this year and be a headwind or you just think that the kind of dynamic is that's in this cycle or maybe that's not a very meaningful factor, just thinking more about kind of LTL market, more so than Saia specific?

Fritz Holzgrefe, CEO

I believe our earlier comments, which Doug mentioned, highlight that our business is returning to more typical patterns. Currently, our portfolio reflects a standard mix of services. Compared to last year during COVID, we did experience some spillover effects, but I feel confident about the present situation. If macroeconomic factors were to weaken, I believe our LTL segment is well-equipped to handle that along with any changes in the supply chain over time. We have managed to sustain through these challenges. Depending on the direction of the macro environment, there could be a slight impact on growth potential. However, as we evaluate our facilities and investment opportunities, we are taking a long-term view rather than focusing solely on 2022. This long-term perspective is crucial because our network of facilities can create significant value over various economic cycles.

Tom Wadewitz, Analyst

Do you think loosening in supply chain or supply chain improvements kind of good or bad for LTL shipments?

Fritz Holzgrefe, CEO

Listen, I think that LTL shipments do well as supply chains adjust to consumer or commercial demands, right. So as people go through, maybe back to more of a JIT sort of situation. Any of that, I think those are, we're uniquely qualified to do that and the industry is. So I think that we benefit from that over time.

Operator, Operator

We'll take our next question from Stephanie Moore with Truist. Please go ahead.

Stephanie Moore, Analyst

I wanted to follow-up just on a previous question that was asked just wanted some comments on the demand side. I know that you called out in early January, clearly seeing some disruption just due to weather, but are you still seeing with a lot of your customers just general disruption when it comes to demand and volumes just simply from supply chain congestions, meaning that there's still kind of recovery opportunities is in this busy year?

Fritz Holzgrefe, CEO

My comment around that is that I think that what’s happened is if people and maybe even Saia around this we've gotten better at handling the disruption, but it's things are still disrupted, maybe watch what's going on in port activity. That's not back to normal yet. And the COVID, the Omicron sort of, that's probably tempering a little bit here in the last week or so. But there's a time in early January and December that was every bit as bad as the depths of Delta or the first round of it. So, I think that anything, people have gotten adjusted to that sort of change or challenge over time. So yes, I think at the end of the year, I'd like to think to get farther away from that maybe back to what might be defined as normal.

Operator, Operator

Thank you. Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.