Richard Cribbs - SVP & CFO David Parker - Chairman, President & CEO Joey Hogan - President & COO.

Brad Delco - Stephens Increase Jason Seidl - Cowen Rhem Wood - Seaport Global Scott Group - Wolfe Research.

Good morning. Welcome to our Second Quarter Conference Call. Joining me on the call this morning are David Parker and Joey Hogan. This conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures and filings with the SEC, including without limitation, the Risk Factors section in our most recent Form 10-K and Form 10-Q.

We undertake no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. As a reminder a copy of our prepared comments and additional financial information is available on our website at ctgcompanies.com under the Investor Relations tab.

Our prepared comments will be brief and then we will open up the call for questions. In summary, the key highlights of the quarter were, our asset-based division's revenue, excluding fuel, decreased 1.1% to $128.9 million, due primarily to a 0.4% decrease in average tractors and a 0.2% decrease in average freight revenue per tractor.

Versus the year ago period, average freight revenue per total mile was up $0.09 per mile or 0.5% and our miles per tractor per week were down 0.7%. Freight revenue per tractor at our Covenant Transport subsidiary, experienced an increase of 2.7% versus the prior year quarter.

Our refrigerated subsidiary, SRT experienced a decrease of 1.6%, and our Star Transportation subsidiary experienced a decrease of 6.5%. The asset-based division's operating cost per mile net of surcharge revenue, were up approximately $0.045 per mile compared to the year ago period.

This was mainly attributable to higher employee wages, capital costs and casualty insurance expense. These increases were partially offset by lower net fuel cost. We recognized a loss on disposal of equipment of $2.1 million in the second quarter of 2017 versus a gain of $0.6 million in the second quarter of 2016.

The asset-based operating ratio was 98.2% in second quarter of 2017 compared with 95.5% in the second quarter of 2016. Our Solutions logistics subsidiary increased revenue by 18.1% versus the year ago quarter.

Purchase transportation decreased as a percentage of revenue, however other operating expenses increased greater as a percentage of revenue resulted in OR deterioration to 90.5% from 89.5% in the year ago quarter.

With increased revenue, the result was an increase of operating income contribution to $1.6 million in the current year quarter from $1.5 million in the prior year quarter. A minority investment in transport enterprise leasing contributed $0.8 million to pre-tax earnings or $0.03 per share.

The average age of our tractor fleet continues to be young at 2.2 years, as of the end of the quarter, although up from 1.7 years a year ago. Since December 31 of 2016, total indebtedness net of cash and including the present value of off balance sheet lease obligations has decreased by approximately $22.3 million to $204.4 million.

The main positives in the second quarter were, one, sequential check to utilization improvement throughout the quarter, two, deleveraging with the $10.7 million decrease in our total net indebtedness and three, our tangible book value per basic share increased 7.5% to 12.97% from 12.07% a year ago.

The main negatives in the quarter were, one, increased operating costs on a per mile basis, including unfavorable employee wages, capital and casualty insurance costs, partially offset by the lower net fuel costs, and SRT operating loss for the sixth consecutive quarter.

Our fleet experienced an increase to 2,577 trucks by the end of June, a 7 truck increase from our reported fleet size of 2,570 trucks at the end of March. Our fleet of team driven trucks averaged to 1,012 teams in the second quarter of 2017, a 0.9% increase from 1,003 average teams in the first quarter of 2017.

Our second quarter freight improved sequentially on a monthly basis. April started off weak resulting in year-over-year April miles per tractor being down 2.8%. After replacing some of the freight we reduced in April 9 miles per tractor finished even compared with the prior year.

In June, capacity tightened resulting in a 0.5% year-over-year increase in average miles per tractor despite our Star subsidiary experiencing a 6% reduction due primarily to automotive plant shutdowns in its network. For the third quarter of 2017, we expect a favorable year-over-year comparison in freight revenue per tractor.

It is still too early in our continuing discussions with peak customers to provide guidance regarding freight yields for the fourth quarter of 2017.

For the remaining half of the year, we expect year-over-year net fuel expense savings, a flattening of year-over-year impact of the changes to our depreciation policy adopted in the third quarter of 2016 somewhat offset by higher maintenance expense and professional driver wages.

At SRT we expect additional progress in the two remaining quarters of 2017 versus 2016.

To the extent mandatory ELD implementation and resulting lower truck numbers or decreased daily driving time for newly-compliant carriers remove industry-wide freight transportation capacity, and economic growth spurs volumes, we expect the supply-demand environment to improve later in 2017 and into 2018.

However, the timing and magnitude of these changes are difficult to predict and may be different in each of our markets. Our goal remains to deliver earnings improvement for the second half of 2017 as compared to the second half of 2016. Thank you for your time, and we will now open up the call for any questions.

Stephanie?.

[Operator Instructions] Our first question comes from Brad Delco with Stephens Inc..

David, last quarter you gave us an update on commitments you made of capacity for peak season and I believe it was one of the earliest times that you committed capacity.

Can you talk to us a little bit any updates to that? Have you committed more capacity or what your thought is now just given what appears to be a little bit of inflection with supply-demand dynamics?.

Yes. It's interesting Brad. At the end of last quarter we were -- the earliest that we’ve ever committed any type of peak capacity, at that time, there is nothing that had been added from a confirmation in another way that I would tell you thought is that, just in the last two weeks including as we speak, we have got, we’ve had more meeting.

And so, you can see us what the industry is sensing right now from a freight uptick in us. You can sense that our peak customers are starting to drive the conversations much more diligently and in the last couple weeks, like I said we’ve already had, I think they we had about four conversations in the last week on peak.

So I really believe this, if we had this call two weeks from now, there probably be something else, some more light to add to that. I am confident that we’re going to get probably won’t in what we’re trying to accomplish as a company.

One of the things that we’re trying to do, would be honest with you is that, as we seeing freight picking up, the way freight is picking up, is, how much excess -- we’re going to be a major player peak number one.

But how much excess that we’re trying internally to balance that out is going to be as big as it was last year or not or need to be smaller or how we’re going to take care all the existing customers that we got and their business as started to increase.

So I am excited about peak, but we’re not there yet from a standpoint that we tend to anymore agreements that we had last quarter. But we will get there..

And maybe just to clarify that response, is there any thought to maybe not fully committing your capacity because – thought the spot market maybe robust enough to be a better allocation of assets?.

One of the things, your answer is yes, that is absolutely on the table and the discussions that we’re in the process of having with having with our customers is that, even though I love last year’s peak and peak was great and you know, all that wonderful stuff and we all know that it’s a helter skelter storm for about one month period of time there.

But cancelations and add on, if the moving target, it was very, as I said I think in the first quarter, our most difficult peak that I’ve ever experienced last year.

And so, I think as you’re seeing some of the customers coming today or in the last few weeks then they got to do things different in the peak and they got to get paid for this or get paid for that et cetera. Besides the rates that we’ve always charged peak rates.

But there is other things much more as important that we have got to have and we are having more discussions with our customers and that is the flooding in of trailers at origins that their expectations and then volumes are met by 20%, 30%, 40%, 50% of projections.

We’re getting high rate, we are getting high rate for a lot of that, but there is a number that it doesn’t cover. So, we got to have those kind of – which we are having those conversations. We just have an ironed out what all that means yet..

This is Joey. Let me add to that. I think that we are confident to say about and on the David’s statement that we got to do peak differently from a standpoint of the tremendous amount of cost that has been added over the last two or three years to service it and it's been too much.

And so what David I think I would add to that is that we're looking for committed capacity or committed trucks if you will more dedicated trucks less ad hoc trucks, less gas on a projection. And hope you have it and we don't have, it too much cost for that. You can’t hold that a customer fulfills a forecast and it's too costly anymore.

And so I think as we think about peak, we’re thinking a lot about commitments, we’re thinking a lot about dedicated trucks, pop-trucks, a much less trailers, there is way too much money we spent last year on trailers.

And so David as said we’re going to be a major player and continue to do that but we’re going to be thinking about it differently, because we weren’t happy with the margins as we came through peak last year.

And so I think you're seeing the shipping community respond over the last two or three years to the cost of peak on the revenue side and I think they’re going to see the providers respond to peak over say little bit last year more this year and more into 2018.

So you got the shift from - okay we’re paying too much for peak we got to do things different, the vendors is now going to be saying we’re spending too much on peak we’re got to do things different and I think that’s a transition that you’re going to see over the next couple of years in my opinion..

And I agree the only other comment I’d make is that, we’re all know that this is peak has been evolving in the last few years and it has truly became a Cyber Monday to Christmas Day or maybe Christmas week, but it’s 4.5 to five week event that is so intent and you got to get paid correctly to cover those costs..

And then if I could just add one quick question and I’ll turn it over the release kind of talks about the strength you see or into July or at least we heard it from a bunch of different buckers.

David is there any way you can put into context how unusually strong the month of July is versus normal or something to help - understand what's going on and what's driving it?.

One of the things that is that the last few years - the last what two, three years is that quote whatever you want to call it Christmas in July and it’s not just our friends in Seattle but you got all the retail people that kind of attacking that, that goes through all having somewhat of a Christmas in July.

And so beside - wherever July full works which is not good when Tuesday, Wednesday, Thursday interruption, but Friday and Monday are much better. Other than that the Christmas in July is definitely assisting in helping the love the July from freight environment especially sale July 10, and beyond because the 4th really just wrecks you for that week.

So get to the 10th of July and you’re pretty satisfied and I think that is becoming more of a norm out there in the last couple of years because of that event I said talked about. But there is no doubt in my mind that things are in the process of turning around, things are getting better.

We started noticing it August two years ago that things we're started to slowdown August a two years ago and so we've all been in this industry we’ve been in this rut, not horrible, not depression, not recession but having to work awfully hard for two years and freight is now starting to happen once again.

And I don’t think it’s a fake, I think that it is going to be something that is going to get stronger as we speak that’s my expectations but I’m pretty, pretty happy about what I’m seeing out there right now..

Thank you. Our next question comes from Jason Seidl with Cowen..

Let me switch up a little bit talk about SRT it seems at least last time we spoke it - you might have taken a minor step back and a turnaround it's improving but not at the rate that you previously thought it was.

Is that a fair commentary to where we’re at right now?.

Jason, we thought that we will be profitable in the second quarter, four quarters ago.

We thought we would be and they were close, they were close they weren’t quite there but let’s just, you know 100 kind of deal, and in the month of June, because I still felt before we got the books closed out in June, that we had a great shot that we would hit those numbers.

But they had a couple of bad -- not bad accidents, but we had to put more money up on a couple of accidents in the month of June as we learn more about the accidents and then they had two claims of $250,000 on some OS&D on the railroad, our fault, their fault, whoever’s fault, we’re trying to figure all that out.

But anyway, we got to book $250,000 of claims. If you are to take those two things out or just the bottom in two, the bottom by half, we would have been profitable and we would be sitting there saying.

Hey, we are seeing it, we are very, very close and I am absolutely confident that we will see that turnaround and as the numbers will start supporting what we are sensing internally on SRT. So I am happy about what I said at SRT..

Jason, I will add there a little bit. If you just perform like we did in the second quarter, then we will still meet that initial goal we stated of minimum of $5 million of operating income improvement. So if we do as well, just perform exactly as we did in the second quarter for the third and fourth quarter, fully right at that goal.

So we’re still on track and when we came out $5 million to $10 million operating income improvement, the $10 million we will stretch goal. The $5 million we felt like we could do and I am still saying it’s between 5 million and 10 million closer to that lower end. But we should still meet that that goal and so, I think we’re right on track..

So basically ex a couple of things in the quarter, you probably be more towards the higher end of the range, but with those things towards at least lower end of the range all things being equal?.

Yes. Low to middle of that range..

And if I can switch back to sort of ELD commentary because that’s always ongoing and you’re looking anything in the current load space trend mark and analytical. C.H. Robinson had some commentary out there, especially saying that they are starting to see some impact from the ELDs.

Now mind you, they play more with the smaller carriers, with that 50,000 carrier base that they operate off of. Are your shippers stop coming to you trying to talk about 2018 yet? How many people are worried about ELDs. I’m just curious what – why it is out there and as that changed any from 1Q has we moved out the year..

Yes. It is in the process of changing. We’re having more customers that are now starting to get concerned about ELDs and we have got some that as started internally started putting some deadlines of when they are saying that their carriers have got be ELD compliant.

And so, we are and I think, each and every month the rest of this year, that we’re going to see more of that taken place. So it's going from, I don’t think it’s going to happen and three – two quarters ago in January, I don’t think it’s going to happen, I think something will do away with it to – I better start getting prepared for it.

And I think it will just snowball for the next four or five months..

Okay. My last question here. This kind of piggy backs on what we’re talking about with peak season.

You know, do you feel given the current trends, the fact that, you’re not all booked up yet, is actually a good thing because we’re starting to see a tightening in the marketplace and you’re a main sort of peak season partner is probably seeing that as well?.

That’s interesting. I mean Joey has been a big advocate internally about, let’s make sure that we’re not giving away 1000% of what we think our capacity level will be. So we’re having that balance that is there.

So yes, I mean to definitely to play into your hands positively and so we will take our larger, no doubt, we will take our larger percentage of whatever we devote peak and let it be in the spot market during the peak season because we are not going to, I was happy with our [Indiscernible] fourth quarter numbers. Don’t get me wrong.

I mean we made some good money in our fourth quarter numbers. But as Joe, do or don’t know, I mean that peak, you die during that time. I am talking about your 24/7 for months that - and the pressure is just unbelievable and we’re going to make more money than - anyway I’ll shut up..

[Operator Instructions] Our next question comes from Rhem Wood with Seaport Global..

So I’m trying to just triangulate a couple of things. One, you said that your fleet growth is expected to be flat to down for the year. You added a few tractors. I know you had lost some auto business and helped the customer kind of reengineer. But it seems to be, you’ve got solid level of peak demand.

I mean, so how do I think about that? And then how do you go into the discussions with I guess one or two customers in particular where they want all the peak demand but they’re reengineering their networks or pulling some freight in the quarter? How long will it take to replace that? And can you use the peak as leverage to replace that?.

Well, yes, you can. And I would say that the decisions that we’ve made, take them – particular in the month of April protection of the yield on a couple of customers anyway though. All of that have virtually been replaced. That's why the industry is kind of seeing - what we saw during the month of June was very strong.

I’m very pleased with our June results. Most of our competitors were feeling it in May and we were still replacing some decision that we made. Not a loss of a customer, but agreed upon reduction of volume because we were to protect yield in this highly intensified, expedited team market that we play in. So that’s the decision that we've made.

And that freight was replaced. It took us about four weeks to replace that freight which tells you a little bit about the market of our opinion. And we’re also having conversations including with all of our major peak customers about the peak season which includes some of the reduction that we took.

Did I answer that correctly for you Rhem?.

Yes, I think so.

But you still expect the fleet to be down in the back half?.

No, actually we were down year-to-date. We were down 1.4%. And so there actually had to be a little bit of growth. There had to be some growth to get the flat on a year-over-year basis for the full year. And that’s what we were given - guidance on was the full year would be flat to down 1%.

So we actually have to have a little growth in the back half to get the flat and be about equal to be down 1% to where we are today at 25.70..

Can we get back to July for a minute? Have you guys seen any slowdown in the organic produce, is that still going hard or average season? And then specifically in July, like what buckets are moving the best right now?.

Number one, we haven't seen any slowdown on the produce side of the business, it's has been an excellent year. It looks like it’s just continuing to be a strong year. We got another couple of months before you will, kind of - September 15 is kind of a date that we use internally.

So we've got a couple of more months of what we think will be one of best produce season that we've ever experienced anyway. So that part is good. And for other part of the questions, I’m sorry. What was the other part of the question? Oh, any other customers.

I’d tell you, I think you can see a little bit of the increase in the economy because as we all know, LTL manufacturing, what they haul, we see it hit the manufacturing, hit the LTL market first. They probably, as it goes down, they lose it first as way off, but our LTL business has been extremely strong.

It has probably been the leading factor for the second quarter which I relate to manufacturing for them..

And then what kind of a contract rate increases have you been seeing more recently.

If you could just ballpark that?.

No. We’re in that flat to up a little. But we’re just now, we are just now deciding that there is a opportunity in the marketplace of which I have zero problem with because as we all know rates for the last couple of years have not been that well. So we are putting together our plan as we speak that we think that the market is there.

It’s time to raise rates and that’s what I’m expecting from all of our companies or at least non-dedicated companies..

Okay. Thanks. And then last and I’ll turn it over. How much spot exposure do you currently have and where do you think is the ideal amount as we go in the back half of the year? Thanks for the time..

Spot runs, 3, 4% kind of number and I think we all sit there and say, well, when spot market is going crazy, going up, we all want to be at 10%, when it’s going down, we all want to be zero. I don’t think that is going to be change. We are thinking about on the peak side, letting us change.

We’ll probably stay in that 3% to 4% and still try to have regular relationship with all of our customers and expectations of volumes and those kind of things..

Our next question comes from [Joseph Mulally]..

I was wondering if forward thinking a few years, the expansion of the east coast ports due to the expansion of the Panama Canal. Have you given that any thought.

Do you see any benefit or harm to trucking routes?.

No. There is a couple of things, we are excited about what has happened to the – that had and it is going to continue to happen to the east coast ports. I mean it is in particular, we felt probably about two years ago, Joseph, even the east coast, New Jersey, Baltimore, Virginia, ports, increased when California you had once on labor.

We are starting to seeing shifting some of that went back to California. But I love it and it truly make the east coast a outbound state instead of, just get me out of here kind of area that it was before and has become one that you get us a data price going out.

So that thrilled me two years ago when I sold that and then as Savanna in particular, Savannah tossed a bit in particular Savannah as it has just in the last year continue to explode.

It continues to get big and it is really taking a lot of pressure off the state of Florida, which we all know is a bad outbound area and the pricing out of Savannah as held up very nicely and so, I am excited about what’s happening on Savannah and what it’s going to do to the south.

California still hanging in there pretty decently, because it is the day, it’s still the quickest route to destination as we know it’s California. But I am thrill about what’s happening on the east coast port..

Yes. It looks, but they are predicting a 10% shift from the Asian U.S. shipping route by 2020.

So 10% is a big number coming east?.

Yes, it is. Are great..

[Operator Instructions]. Our next question comes from Scott Group, Wolfe Research..

David, just wanted to follow up on what you just said about pricing that your feeling like it’s tighten up for you can kind of going back to the customer the mid cycle and get some increases.

What magnitude of increases do you think the market can hear as you start doing that?.

Scott, I mean that said – that said we have not had official hit our first meeting on that. And there is no doubt, you know the customers and I don’t have the percentage here on top of mind right now. But you know there is no doubt that the customers that have lived with on yearly contracts, they are in the good to bad to indifferent.

We’re not going to them, those don’t expire until March, we won’t go to them and ask - I'm talking about wanting to support a dealer. They supported me with one percent numbers.

Six months ago, 1.5%, I’m not going to go back to the them and say, just because I think I get forward, it’s time raise, we’ll wait until next year as they treated us correctly, we will treat them correctly, but it will be the one that we have virtually had zero or downward pressure for the last year to year and half. We will go to those customers.

And again, you’re asking me a question I’ve not even have one meeting with - what do I think 3% is a good number that I think is achievable, but I may get two weeks into it and say that it’s not achievable. I don’t know, I just feel, I just scent that it’s time to go talk.

And when I say, watch what’s happened to our depreciation of equipment and watch what’s happened to our insurance and we need more driver pay not less, I mean, it’s time to go and share this with my customers and say, I need some help. And that’s what we’re going to do..

Okay. So you’re not sure if market will bear, but if the market feels good enough, you’re at least willing to try..

Yes, sir. That’s exactly what I’m saying..

Okay, makes sense. And then I know - budget questions on peak.

If you have to guess, is your pricing with repeat customers up or down this year?.

Our peak crossing with our customers will be, definitely not down, flat, as up as I'm thinking about whole of them, flat up is what I would say added because I think much more important to us that what the rate - we get the rate on the stuff. And as Joey said, it’s the cost side, it is - guys, you’re going to have anything of whatever.

Anything over 20% calculation I got to start getting paid some money. If those anything - if you want me to stop 50 trailers at this origin, then I need to be - it can’t just be saying its in the right which had been in the past.

But peak is evolving and if you want me to stop 50 trailers, I need to paid not only the agreed upon rate, but here is trailer movement. So it’s those kinds of thing more than it is, shall I raise peak price in 10%..

Really looking at it on margin basis, I really try to make sure that we improve our margins on that freight whether it's in the rate side or whether it’s in the additional cost we have to build up around extra trailers and all those type things in order to make sure we make a better margin..

And do you think your margins will be better than a year ago with peak customers?.

Yes. Margins will be better. Pricing products flat up a little bit, I mean, we will be happy to take even a lower peak rate, that's why I'm saying flattish, but a lower peak rate if they’re purchasing all the trailers.

You purchase all the trailers, you put them in where you own them, here is my capacity, here’s my team et cetera, and I will take a lower rate on that. But at the end of the day, when it comes out of the bucket, the margins are going to be better..

And then just last question, what should happen or what’s happened to Star in the past when the auto cycle kind of starts turning against you? How quickly can you replace auto business with other business? I guess I’m trying to figure out is there a risk that six months from now or a year from now we’re talking about Star like we were talking about SRT?.

I don't think so at all, here is kind of what we've seen say in the last - that’s really '09, the automotive industry has been going up from 9 million number, orders built up 17.5 million to 18 million order build and we think it’s going to be around 17 million. It has definitely plateau.

None of us, or anything I read that we don’t expect anything to go down dramatically. Now what we've seen is that, I think that it affect Star about three to four operating points.

Now that said, they consistently operate in the 80s to give you an idea and so I think it is a three or four point and we’ve seen that in the last six or eight month, really the last three quarter, that we’ve seen that.

And what ends up happening on there is that when you see automotive go from, say, 18 million to 17 million car builds, what happens, Scott, is that instead of the Saturday loading, it’s Monday to Friday instead of Monday to Saturday.

And so you have a lot of Saturdays that get cut out which hurts your utilization by that one day and so you say that's what you saw in the second quarter not many Saturdays work because they re-adjust the load volume there but no I think it is a three or four point number, but it's still a very strong number.

And Saturday is not as full a production day. So it's not like it drops about six..

When you lose a Saturday you lose the 3% to 5% utilization and then when there's additional temporary shutdowns, like the shutting in Malibu and Kansas City for example, then you have a little additional utilization loss for those weeks as you replace that freight during those shut downtime and you might even get a better rate but your cost is higher too and so margins are quite as good when you have those temporary shutdown.

But we are able to replace good amount of that freight during those weeks.

We're also being blessed on more fortunate that it's happening there is a lot of Southeast here on the plants here that they are tracking up truck and SUV with those order have gone at all and so that is playing in because as we speak that is stuff that we got in the future coming home that is going to be very helpful.

Now what we're doing is we're looking at all our existing automotive business and making sure that we're having conversations with them about their truck and their SUV plant to make sure that we're a bigger player in those areas..

[Operator instructions] There are no questions at this time..

Okay. We'll just wrap it up and thank you for listening to our call today and we'll talk to you again next quarter. Thank you..

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect..