Jeff Rogers - Executive Vice President Don Cochran - President David Crittenden - Chief Financial Officer Scott Wolfe - Chief Executive Officer.

Chris Wetherbee - Citi Todd Fowler - KeyBanc Capital Markets Matthew Frankel - Macquarie.

Welcome to the Universal Truckload Services Incorporated Third Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. During the course of this call, management may make forward-looking statements based on their best view of business as seen today.

Statements that are forward-looking relate to Universal’s business objectives or expectations and can be identified by the use of words such as believe, expect, anticipate and project. Such statements are subject to uncertainties and risks and actual results could differ materially from those expectations.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Scott Wolfe, Chief Executive Officer; Mr. Don Cochran, President; Mr. David Crittenden, Chief Financial Officer; and Mr. Jeff Rogers, Executive Vice President for Universal Truckload Services. Thank you. Jeff, you may begin..

Thank you, Keith. Good morning, everyone and welcome. Thank you for joining Universal Truckload Services' Third Quarter 2014 Earnings Conference Call. Before I get into the update, let me take a few moments to talk about the transition between Scott and I. The transition is going well.

As I said last quarter, typically, CEOs do not get seven months to transition into a new role, but I am thankful for the time. I have used the last four months to travel to many of our locations and have met many of our customers. I have spent time with quite a few of our employees.

I have been able to spend time getting to understand the key drivers of our business, our current strategies, our opportunities and our challenges. I can honestly say, I like what I see. Because the transition is going so well me leading the call today seemed appropriate. Scott is here with us and will be available for questions.

One last thing, I want to thank Scott for his years of service and contributions. He is a true logistician. This will be his last call as CEO, before he transitions to our Board of Directors. (Inaudible). Now, to our updates; Our Transportation segment is benefiting from a good operating environment.

Economic growth, while not stellar, has at least been steady. This quarter, we saw continuing growth and demand for transportation services with growth across all verticals, but especially strong in oil and gas and retail. Strengthening price and our ability to keep cost increases modest led to margin improvements.

As you are aware our logistics segment aligns closely with the automotive industry and revenue is reflective of soar volumes. The most recent soar forecast has been reduced slightly to a more sustainable 16.4 million units.

Revenue for our logistics segment is typically lower in the third quarter than in the second quarter, due to fewer production days and the July shutdown when plants are typically retooled for the next model year.

This was not a typical shutdown seasons as plants were shut down periodically throughout the quarter as opposed to the first two weeks of July. There was one exception we have one customer facility with a prolonged 12-week shutdown. This in addition to the normal July and December shutdowns, has and will impact both, third and fourth quarters.

As normal, in the fourth quarter, we will have the year-end shutdown for two weeks as the plants retool for the modeled refresh and other changes. Unlike automotive, the heavy truck market continues to push towards supplier capacity. North American Class 8 sales have increased 22.1% year-to-date over the same period last year.

The recession years between 2007 and 2010 caused companies to delay heavy truck purchases resulting in a Class 8 fleet today that is the oldest that has been in 20 years. This pent-up demand coupled with new EPA requirements and better fuel economy delivered by the newer models point toward a strong market ahead for heavy trucks.

In fact, we expect modest growth above our current levels well beyond 2016. To that extent, we are working on plans to expand one of our facilities in the next couple of quarters to meet our customers' rising demand.

Now turning our attention back to Universal's third quarter performance, overall consolidated operating revenue was up $40.5 million, a 15.5% increase this year over third quarter last year. We saw solid growth in transportation services revenue this quarter, which was up 8.8% over third quarter last year.

As previously mentioned, the transportation services business continues to benefit from increased freight volumes and strong pricing. Intermodal service revenue is on a similar track. It was up 10% over third quarter last year. This was primarily from growth in our container drayage operations.

Don will speak more about our transportation and intermodal services in just a moment. The value-added services revenue was up 44.3%, due primarily because of the Westport acquisition we completed late last year.

If you exclude that acquisition, revenue was down slightly mainly because of the winding down of four operations that we have discussed before. On the bright side, we continue to see a strong and growing pipeline of new business from our enterprise sales team which is key to our growth and margin improvements.

From our update last quarter, several of those programs are in the final rounds of bidding. We have already won multiple awards, one just launched, three others will launch in the first quarter of 2015. Combined, this represents over $10 million in annualized revenue once launched with further expansion opportunities following.

From a contract management perspective, we are currently negotiating two of our logistics contracts both, are extensions with long-term customers. One will be for three years and will replace the contract expiring second quarter 2015 and the other will be three to five years replacing a contract expiring first quarter.

We are confident, we will renew the contracts and anticipate having them wrapped up in the fourth quarter. With the strong growth in transportation services revenue, our business mix momentum shifted slightly toward transportation services when compared to the second quarter of 2014.

That said, transportation services revenue makes up 65.1% of consolidated revenue versus 69.1% over the comparable quarter last year. Likewise, value-added services revenue at 22.9% compared with 21.3% for the third quarter last year, intermodal revenue at 11.9% of total revenue compared to 12.6% for third quarter last year.

Our strategy of growing the value-added business to be a bigger piece of our total pie is continuing to be effective. Last quarter, we successfully launched a major transportation management and dedicated services contract awarded by an OEM in the Southeast.

As with all the contracts and launches, the project continues to evolve which is good news for us. Again, fourth quarter will be our first representative full quarter of performance for the new business.

Our overall dedicated transportation services business is putting a drag on our margin within the logistics segment and we are currently evaluating specific pieces of that business for price adjustment and/or operational changes.

Driver recruitment efforts continue to limit industry capacity in the transportation side of the business, we continue to manage several strategies to improve driver recruiting and retention. From a labor perspective, in our logistics segment, we have one labor contract expiring each quarter next year.

We will begin negotiating with first expiring contract next month. In summary, we see fourth quarter continuing to grow with an even brighter outlook as our customers continue to look to us to help them manage and support their supply chains.

The strong relationships we had with our long-term customers and the ones we are building with newly acquired customers, continue to provide us with ample opportunity for growth domestically and abroad.

We will continue to complement our growth with acquisitions to expand our service offerings and geographical footprint and we look forward to what is ahead. With that, I will turn over the discussion to Don Cochran.

Don?.

Thank you, Jeff. Transportation services revenue which includes dedicated services was up 8.8% overall for the third quarter 2014/ over 2013. Average operating revenue per loaded mile, excluding fuel surcharges increased 7.3% for the third quarter of 2014 over the same quarter of 2013.

Load counts were also up 11.3% for the third quarter of 2014 over 2013. The biggest challenge facing our industry is steel capacity. Our total fleet is 4,242 trucks, up 53 over last year.

Our owner-operator count increased roughly 5% mostly in our intermodal drayage fleet, reflecting improved rates and slightly better conditions outside of some of the more congested ports. Our Truckload owner-operator fleet is actually down slightly.

We are investing our own equipment and drivers to meet the needs in some markets and our expanding sales of equipment to selected owner-operators. We will see this process grow over the next few months. While we are moving is also shifting retail related transportation sales were up 35% for the third quarter of 2014 over the third quarter of 2013.

Meanwhile, oil and gas related transportation continues to be strong up 32%, especially in [and] oilfield related services. Wind energy on the other hand has leveled off by comparison to the third quarter of 2013. Steel is about the same pace as second quarter and building materials were up 18% over the second quarter.

Those are normal adjustments to the annual year. Our brokerage revenue increased significantly, mostly due to TMS work being done with a major automotive customer in [Southeast]. The actual trucking related to this project help volumes and dedicated transactional vans and in brokerage.

Margins in truckload services actually improved by 40 basis, points once we excluded the dedicated service operations from the mix. The result of generally improved conditions I just talked about, we believe the fourth quarter will also show a good revenue pace.

Intermodal services revenue was up 10% overall for the third quarter 2014/over the third quarter of 2013. The largest increase was in the intermodal drayage services, which were up $4.1 million or 14.3% for the third quarter 2014 over the same quarter last year.

The growth in drayage was offset by contraction in our domestic intermodal vehicle business. Within the numbers are our average operating revenue per loaded mile increased 14%, excluding fuel and the load count was up 6.4%. Freight volumes were strong and truck counts continue to increase.

Spot market drayage rates pushed up due to capacity constraints impacts even the larger customers. With the focus on recruiting an extension at terminals truck counts rose 7.4% in the third quarter 2014 over 2013. We are working towards the modest strategic acquisition that will enhance our footprint and give us a revenue boost in 2013.

Unfortunately container yard services lagged as steamship lines are turning containers faster on the street and that constrains maintenance and repair service spending. Domestic intermodal suffered from stiff price competition and pricing with the railroads although we have a few small wins.

In summary, our industry is still exposed to increased regulatory pressure from both federal and state level. In addition to multiple tax on contracted business safety and insurance coverage are targets of increased legislation.

Our Truckload business and our intermodal operations are enjoying improved freight availability and the continued price improvement that we predicted we will see. As I've always said, our truckload business reflects GDP and general business conditions. Conditions look positive for the fourth quarter and into early 2015.

Despite the challenges, it's a good time to be in trucking. With that, I will turn it over to David..

Thank you, Don. Good morning everyone. As highlighted in yesterday's earnings release, Universal's financial performance in the quarter ended September 27, reflects year-over-year revenue growth in all three of our service categories, transportation, value-added and intermodal.

We achieved directly comparable levels of operating profit and net income in the aggregate compared to the third quarter of 2013. On a per share basis, net income was $0.44 in the third quarter compared to $0.45 per share in the previous quarter and $0.46 per share last year.

Universal's third quarter consolidated operating revenues were in the range we anticipated in our September 26 press release and earnings per share came in just above the midpoint of our expectations. Statistically, Universal earned consolidated net income of $13.1 million and operating revenues of $302.1 million.

On a year-to-date basis, we have earned $34.9 million or about 15% and total operating revenues of $889 million through September 27. Although up 8,8% over Q3 2013, when compared to the immediately preceding quarter, revenue from our transportation services in Q3 were basically flat at $196.8 million.

Revenue from value-added services declined 9% in Q3 compared to Q2, again, reflecting typical seasonal patterns and slightly lower overall production volumes from automotive customers and also the final impact of operations that closed in the second quarter.

As Don mentioned, our intermodal revenues continue to enjoy favorable momentum, up 6.3% compared to the second quarter and up 10% over the third quarter of 2013.

In terms of operating income, result from operations totaled $23 million in the quarter, up slightly from $22.5 million one year earlier, but down $1.4 million or 5.8% from $24.4 million in the second quarter.

As a percentage of consolidated operating revenues, our operating margin 7.6%, which compared to 8.6% in Q3 2013 and 7.9% in the preceding quarter. Compared to one year ago, about 70 basis point of the reduction in consolidated margin percentages can be attributed to incremental intangible amortization from acquisitions.

If you take a look at EBITDA margins that I report item captioned non-GAAP financial measures, you will see Universal Q3 2014 EBITDA came in at $31.5 million, reflecting an EBITDA margin 10.4%, which is unchanged from last year, but up just slightly compared to 10.5% in the second quarter.

A comparative analysis of our major cost categories show that when calculated as a percentage of revenue, our combined Q3 cost of purchase transportation and commission expense was 56.9%, down from 58.7% in Q3 2013, but from 54.2% in the preceding second quarter.

In contrast, direct personnel related benefits were 15.7% in the third quarter, down from 17.9% in Q2. Similarly, other operating expenses declined to 9.4% of revenues in Q3 compared to 10% in the previous quarter. These recent cost trends are the result of countervailing influences.

First, the relative revenue growth of the transportation and intermodal services that comprise most of Universal Transportation segments and which drives incremental cost of purchase transportation and commission.

Second, the 12.5%, sequential, quarter-over-quarter revenue decline in Universal's logistics segment, reflecting both, seasonality and the impact of evaluated operations that included in Q2. Page Six of our press release lays out Universal's Q3 segment performance in greater detail.

In our transportation segment, which includes our agent-based transactional truckload transportation, along with Universal's intermodal services, brokerage and specialized services, revenues in the quarter increased to $203.9 million, a $22.4 million or 12.3% increase from $181.6 million in the third quarter 2013 and a 4.4% increase over the second quarter.

Expressed as a percentage, income from operations in Universal's transportation segment increased to 5% of revenues in Q3 2014 compared to 4.5% last year and 4.2% in the second quarter.

As Don just mentioned, favorable pricing has emerged as the response to take capacity this year and our truckload and brokerage operations are benefiting with improved profitability. Revenues from our logistics segment totaled $98.1 million in Q3 an $18.1 million increase compared to $80 million in the third quarter of 2013.

Of note though, is that revenue from the value-added services and dedicated transportation businesses that comprise our logistics segment declined $14 million or 12.5% compared to the immediately preceding quarter. The sequential Q3 versus Q2 comparison is important to understand since continuing operations were generally comparable to both quarters.

The revenue decrease is substantially due to seasonal supply chain adjustments by our automotive and industrial customers which Jeff mentioned earlier and the operations we exited in Q2. The composite operating margin achieved by our logistics segment business was 14.3% in the third quarter.

This compares to 14.4% in immediately prior quarter and also to 19.2% in Q3 2013. When we look at, what we call our bricks-and-mortar value-added services operations, we operated at historic expected margin levels in the third quarter.

Our composite segment margins remained somewhat compressed though due to price and cost challenges with our two largest dedicated transportation customers.

Please take a look at a supplemental information, our earnings announcement which included among other key operational data, our calculation of interest before income taxes, depreciation and amortization.

Turning now to a summary of Universal's consolidated balance sheet, we had $10 million of cash and $12.3 million of marketable securities at September 27. Borrowings totaled $238.4 million, a $900,000 increase since the beginning of the year.

Universal's capital expenditures totaled $10 million in the third quarter and has continued to be funded principally by operating cash flows.

Although our tractor and trailer acquisitions relative to period revenues has trended higher than our historic range, they reflect both catch-up purchases from planned 2013 investments as well as additional equipment we are acquiring in support of our long-term business and customer commitments.

We will file our quarterly 10-Q in about eight business days and it will provide additional detail behind the financial performance we are discussing today. This will include some discussion of a very modest tuck-in acquisition that we recently completed for just under $2 million.

On this morning's call, we have discussed trends that we expect will drive Universal's financial performance through the end of the year, including good fundamentals from our principle customers and market and continued favorable price trends for truckload transportation services.

Although the fourth quarter, due to Thanksgiving and year end holiday, is typically a little light on both, the number of shipping days and the production schedules of our industrial customers. We currently anticipate Q4 results only slightly lower than the Q3 results we just reported.

In our two previous quarterly calls, we shared our expectation that consolidated 2014 revenue would increase about 10% to 12% over 2013.

Due to continued demand growth and favorable pricing, we now expect consolidated year-over-year revenues, including the addition of Westport's revenue to grow at a rate in the mid-teens, and more specifically at about 15%. Generally, we expect year-to-date demand trends to continue across our three service categories.

As the calendar days grow short, we really don't anticipate any near-term bump in value-added services in the last three month of the year. As Jeff said, we like our momentum and the opportunities we see in our pipeline.

From an EBITDA margin perspective, we do anticipate relatively stable performance expressed as a percentage of revenues through the end of 2014. Cautiously, we expect consolidated 2014 EBITDA in the range of 9.5% to 10% of full year revenues.

I should also mention here that our third-quarter operating results reflect a charge to operating income totaling about a penny per share related to the acceleration of the restricted stock awards that was triggered upon retirement of our marketing executive in the quarter.

You should anticipate a similar, but slightly larger charge upon Scott Wolfe's retirement from active employment at the end of December. Based on his participation in the same program for which details are provided in our annual 10-K report.

Looking into the crystal ball, we are circumspect about the overall economic environment going into 2015, both, in the United States and also internationally given impact of international trade on a small part of Universal's business.

Although we don't believe the mid-term elections will significantly change near-term economic trends that impact our customers in the short-term and we believe the interest rate environment will remain subdued for several more quarters, we are aware that there are some [neat] challenges confronting global economy.

Closer to home however, we are pleased to see recently secured awards from existing and new customers across all of Universal service offerings generated by our enterprise sales organizations, also an encouraging pipeline of new value-added business prospects.

Thirdly, ongoing industry capacity constraints and regulatory challenges that favored those transportation companies like Universal, they have the scale and expertise to rise for the challenge.

Finally, increased organizational effectiveness and responsiveness in 2015, following our internal completion in December of the streamlining program that will consolidate our organizational structure reducing the number of subsidiaries that we have acquired through past acquisitions.

On personal note, I want to thank Scott Wolfe here, as he turns the page on a successful career and transitions from Universal's corner office to our Board room, but we fully expect to keep a close watch on Jeff, Don and Me. I have had the privilege of working with Scott for over eight years now.

He is an astute businessman with great strategic insights, integrity and humanity. I have learned much from observing Scott since he first brought me to link over eight years ago to assist on the financed side of the. Jeff, here is a quick starting.

He will lead a great logistics team that has been together for many years and Don is a steady experience handling leading our truckload organization, but it goes without saying that Scott's contribution our corporation has been invaluable. For that, and for his friendship, I am grateful. With that, thank you for your time this morning.

Keith, would you please open the telephone lines for questions?.

(Operator Instructions) Your first question comes from the line of Chris Wetherbee from Citi. Your line is open..

Great. Thanks for taking the question. Yes. Congrats, Scott. It has been a pleasure working with you and good luck going forward on the board..

Thanks, Chris..

I guess maybe a question for Jeff.

You had a couple of months to be at the company and sort of run through and meet with customers and think about the end markets, marketplace so I guess it should be a bigger picture question to start with was as you are going through that review are there any particular areas segments of the business, end markets, geographical region that looked either pretty compelling to get more involved in or maybe conversely, where maybe you want to pull back a little bit, so you can focus on being sort of top tier within the markets that you serve..

It's a pretty broad question, Chris, but I can say that I think there are opportunities that are very positive all around the country. I don't know from my perspective yet. I see in particular part of the country that's booming versus another one other than maybe the oilfield industry from a transportation management perspective.

Don talked about that and we are seeing huge growth there. We talked about and I talked about with you about, we really want to try to expand beyond a little bit more than automotive. That is our bread-and-butter.

That is what we do really, really well, but you know what? If you do something really, really well, you always have the opportunity to grow it and provide a great service. We will continue to do that, but I would sure love to expand into other verticals as well..

On the value-added side, there continue to be sort of retail, maybe aerospace or few of those other sort of verticals that you guys have talked a little about in the past..

Yes, absolutely. There is always opportunities to expand retail. We would love to expand and we have got some opportunities in front of us on the aerospace that will enable us to expand I think further there, so we are optimistic about that and looking forward to it..

Okay. Then it's the question sort of on the guidance a little bit for the fourth quarter. David, you highlighted the revenue opportunity, I think in the mid-teens, maybe 15% is what you suggested. Give us a little bit of EBITDA .guidance as well. I guess it speaks to a bit of a sequential margin contraction.

I guess, when you think about the margin opportunity in fourth quarter on a year-over-year basis, should we see it be roughly steady or does maybe it come down a little bit because of the mix of the business. I guess, I just want to make sure I have sort of been putting in all the pieces together..

Fair enough. My commentary was directed on full-year results as opposed to the fourth quarter. I think, from a margin perspective, I think, we think the fourth quarter will look like the third quarter..

Okay. That's actually very helpful. Then one final question from you before I turn it over, just when you think about sort of the labor inflation side, you have a couple of contracts coming up in the next couple of quarters, just want to get a rough sense when you think about 2015.

Anything changed materially in your outlook on labor inflation or should stay relatively in line with what we have seen so far in 2014?.

No. I think it should be relatively in line..

Okay, so no particular tightness that you are worried about as it stands right now?.

No. I think the whole industry is looking at driver pay. I mean, we all know that that is out there, but I don't see anything that's just going to dramatically change from what we have experienced this year..

Okay. That's very helpful. Thanks for the time. I appreciate it..

Your next question comes from the line of Scott Group from Wolfe Research. Your line is open..

Good morning, gentlemen. It's actually (Inaudible) in for Scott Group. Yes. Congratulations on the quarter and just a couple of questions. One is, I was just wondering given that [WHI] is trending downwards. I know that you said the oil and gas was up very strongly in the third quarter.

Just wondering if you saw any slowdown there as corporate progressed..

We have seen some contraction in some of the direct oilfield work, but there's other things that are going on there supplying pipelines. There are some refinery projects that continue to ramp up, so it's hard for us to say we will see that contraction in relation to the market price, because we are trying to cross the lines there.

It could happen, but we don’t see it at this point..

Okay. That's helpful. Just the second question just question regarding margins. I noticed that in third quarter, again, just like similar to second quarter we saw kind of a step back. I was wondering just has the business evolves, if there are long-term margins targets still mid-teens, high-teens I think you said in past quarters.

If you have any prudent memory locks as to what margins will trends and be [at] in 2015?.

Yes. On transportation segment side, we have seen positive change quarter-over-quarter as the pricing dynamic in the economics has improved. I think I mentioned the 7% basis improvements just into the second quarter.

On the logistics segment side, we have seen in the supply gain operations were operating inside building, in our buildings and customer buildings and things like that. We are back today inside of that typical guidance.

What I was trying to convey was the dedicated portion of that business logistics segment has been a challenge for us over the last three or four quarters. We have not completely solved that problem yet. We are still working on it.

Though we see continued quarter-over-quarter improvement, we don't see anything in the next couple of quarters that we would expect would drive margin compression..

Okay.

Any of your [to] 2015 margin targets?.

Long-term, we expect the transportation segment to operate at north of 95%, - south, I guess of a 95% hallmark..

Better..

Good..

And logistics segment operate at that kind of 85 to 83 of our range..

This is Jeff. I will add to that. We pointed out before the key to really that continued margin expansion or being in a more historical level is all about bringing on new opportunities and getting people launches and that's why I feel so optimistic about the pipeline we have.

We had a little bit of maybe a kind of, I would not call it a hiccup, but we just had a period of time at the beginning of this year where things were a little bit slow and we didn't bring on as many new projects as we typically have done in the past.

I guess looking forward, I am confident that yes you will see us get back to more of a normal margin range for the Value-added..

Okay. Great. Well, thanks for your time. Congratulations Scoot and looking forward to working with you going forward, Jeff..

You bet..

Thank you..

Your next question comes from the line of Todd Fowler from KeyBanc Capital Markets. Your line is open..

Great. Thanks. Good morning, everyone. Jeff, just on the last point about the value-added services pipeline, you mentioned a couple of contracts in your prepared remarks and I think that the aggregate revenue that you talked about was about $10 million.

You the last couple of quarters, there has been comments about the pipeline and some business that you are working on. I know that the timing can be lumpy.

I am just trying to get a sense of at what point you think that we would return to seeing organic growth in the value-added services side?.

Well, I think it's ongoing. Keep in mind that $10 million was really from those four launches that I talked about that are really what we would consider smaller launches. The negotiations that we have got undergoing are some of our larger operations and we feel very confident we will get those done.

There is a lot of great things in the pipeline, a lot of medium things in the pipeline and a lot of small things in the pipeline, but I expect to continue to have organic growth that we have historically had and I am very pleased with what I see in the pipeline..

Okay. It sounds like for the rest of 2014, I mean, you are pretty much - I think, David, comment was that there is not many days left in the calendar, but getting into 2015 you are expecting kind of a normalized level of organic revenue growth given the way the pipeline looks at this point..

Yes..

Okay. Then there has been a couple of comments about the dedicated business and the impact that it is having on margins. I just wanted to see if we can get a sense of kind of the size of that from a revenue standpoint or the margin impact and your expectation for the timing of trying to correct some of that.

I am trying to get a sense of how big of a drag that is right now and kind of the time when you will be able to maybe show some improvement with that..

I will take the first part of the question, because it's easier. We think on a year-to-date basis, that that shortfall has taken $8 million to $9 million out of our operating income..

I am sorry.

Do you have any - a year-to-date 8?.

Year-to-date $8 million to $9 million out of our operating income..

Okay..

As I said, we have not solved the problem yet. It's a couple of specific customers and relationships that we are working inside - There are some other things that are kind of a little bit related from a value-added perspective. For that, I will turn it over to my colleagues here..

I guess, I will just add on that, because it's because its contractual which means you have to go back and negotiate, and because it is with some very key long-term, very good customers, it's just a delicate process and you got to balance it all.

We are obviously not going and we are not satisfied with the current performance and we are not going to continue the current performance, but it does take a little while to get through it and fix it and just the right level of performance going forward with everything being balanced, because of the customers that that we are dealing with.

We are going to get it fix. It just takes a while..

Okay, but it is a pretty big drag right now from the order of magnitude that you just gave..

Well, Todd. .

Yes. Go ahead..

Just to put it in context, it's about two-thirds of the hit to the value-added business this year and the balance of the hit in the value-added side was kind of that first quarter and slightly in the second quarter issue driven by snow, so it is significant and I will let contrary it's just hard to kind of speak to what we are doing about it..

Okay. Then on the transportation side you know the mid-single digit growth you're seeing in load count, is the expectation that you can continue to sustain that level based on where demand is or that more of sheer gains that you are seeing right now in the market, because of tight capacity.

I am just trying to get a sense of the volume growth that you have had here and some of the share, kind of how sticky some of that is as we move forward, particularly into 2015?.

It is absolutely from the tight capacity. We are working and trying to do a couple of things, enhance our brokerage services so that we can take advantage of that spot market better than we have in the past and we see some pretty good results this year in our brokerage results. Additionally, it is blocking and tackling.

We have to continue to recruit trucks. If we can't recruit experienced owner-operators as much, we have to train some which we are doing. We have to go out and find a way to finance trucks for good drivers that are available to us, so it is a multi-plan in fact. It is going to take a lot of time and effort.

We expect marginal growth in that fleet, but it is going to be a lot of hard work to do there..

Okay. That helps, Don. Just the last one I had, Jeff, that when you and I spoke I guess a couple of months ago at this point, can you give an update? Just kind of a big picture strategically as you look at the company, there are some comments in the release.

I am just trying to get a sense of are you still looking at large acquisitions or is it more a small tuck-ins and is there more opportunity to streamline the business and take out costs over the next couple of quarters. I mean, how should we be thinking about strategically what you are looking to do with the business at this point? Thanks..

As David said, we are undergoing a little bit of a restructuring here to kind of streamline back office as well as just in my mind put an organization together that is just more effective, because I want to be really, really good at what we do, so if you are more effective everything else work better whether it would be acquisitions or just ongoing business.

From an acquisition perspective, I do see more of a lean towards small tuck-in-type businesses that just fit with what we do maybe in the near-term.

Although, as I said before, we are always open to something that really just makes sense, when you look back at what we did at the end of last year with Westport, that was a very, very good acquisition and it is performing extremely well. I don't think we will ever turn away from something like that.

If it presents itself, but we are really not out there aggressively looking for something really, really big, it is more of smaller things that allow us to just stay focused on what we are doing everyday and really fits with what we do..

Okay. Yes. That is consistent with what we talked about. Okay. Thanks a lot for the help..

Your next question comes from the line of John Larkin from Stifel. Your line is open..

Good morning, gentlemen. Thanks for taking my questions. (Inaudible) I apologies, I wonder if you could tell.. .

Go royal, John..

…behind the one of sort of the tigers, I also wanted to….

Just the [American]….

There you go. I also wanted to wish Scott, happy retirement. I hope he spends lots of time with his wonderful grandchildren..

Thanks John..

It has been a pleasure working with you over the last few years. I had a question for Don and it relates. I think I heard you say, maybe I got the numbers wrong here, but transportation revenue rising 8% year-over-year, revenue per loaded mile excluding fuel surcharge up 7.3%. Load count up 11.3%.

I think the combination of the revenue per mile increased and the load count increase would imply a higher revenue growth rate.

Then unless there is healthy dramatic mixed change into where we would expect perhaps the length of haul, could you maybe - a little in terms of the mixed shift that in fact has what has happened?.

You kind of led me right into the answer. The length of haul does affect it. We have seen our van operation length of haul will shrink a little bit.

Most all of the wind energy and oilfield stuff as we operate in the oilfields and the pipeline work is shorter, but the revenue per mile a little bit better, because it does take time to do those kinds of things with. Yes.

We do expect continued advance on the rate per mile, but also since an awful lot of this is job did and bid based on where the work is going, it moves around a lot. It may go the other direction too, but at least for now I think the length of haul, it does have an impact. We talked internally about that.

It appeared like an anomaly yesterday, and it really also to add-on to Don's second point there. We have a wide spread of rates per mile, because we have a lot of different types of loads that we do.

Some of them are fairly tightly centered around the certain rate per mile, but because we are doing window blades and unusual oilfield loads and things like that, the percentage change of the rate per mile statistics that we put into our earnings release is very much a composite of a variety of statistics, so the mix makes a big difference..

That's very helpful. Thank you for that. Also, you mentioned that I believe you said that CapEx was about $10 million in the quarter.

I assume that was net CapEx, that maybe which grows - I am guessing that the company is moving in the direction of being a little more asset-intensive than was the original sort of game plan or operating - do you see that trend continuing with respect to both power and trailing equipment or do you think that you are going to level off and stabilize or perhaps - more of an asset light type of opposition?.

Hi, John. This is Jeff. I will start and anybody else here can add in. I don't see our overall strategy significantly changing from being an asset-light model. Part of what's driving this year is what David said is we didn't spend near what we normally would last year, so part of that is carried over this year.

If you kind of normalize those two years apart, it is not as a big of anomaly as this year is.

Having said that, we are going to probably spend a little more than we normally have, because we will be moving more toward more owned equipment as we go forward just because I think that is part of the strategy from a capacity perspective and increasing the ability to grow.

I think there will be a little bit higher CapEx than what we have seen in the past, but we still will consider ourselves an asset-light-type model..

Just to quantify that a little bit, John, we bought a number of tractors for the business that we captured in Southeast. That increased the tractor count there and we have also used some of that tractor purchased to turn in leased equipment that were scattered around the system and we bought a number of light units that replaced older equipment.

While the asset count on the tracker side has increased, we have also been doing some upgrades. As that number of trucks in the dedicated moves around a little bit, we will see that shift, but we also have most of our trailers designed to work in the automotive sector, which has a 10-year life and we have some catch-up to do there..

Got it. One of the companies that we cover Kansas City Southern does a lot of work done in Mexico. Historically, I think like logistics was focused on few plants down here.

With so many new plants opening again in Mexico and a number of - are under construction and in the planning stages, how do you feel like you are positioned to capture some of that incremental business.

Is that a real fertile area or are there other competitors that are better positioned down in Mexico?.

John, this is Jeff. Ironically, I just got back from a three-day trip down to Mexico last week to visit our operations in San Luis Potosi and we do have other operations besides the ones that I visited there and I would say that I think we are extremely well positioned to take advantage of what's going on in Mexico. I love the team down there.

It's very seasoned. They are really, really good. I would say we are just as well if not better positioned than the other folks that I saw down there when I was there, so I like our opportunities to grow and take advantage of what's happening in Mexico..

Okay. Thanks for that color. Then maybe just as a final more philosophical question. Jeff, you spent formative years in LTL business. Obviously Universal is not in the LTL business. The LTL business has a lot going on. It may be a little bit different than what's going on over at the Universal.

Are there any particularly skills developed during those early years and perhaps what [resident] at Universal that you can perhaps add to the party and perhaps take the game up a notch on the universal side?.

Not sure. Hope so. I think that's why I was brought in as any leadership change would bring in even though it's really retirement for Scott. He has done a great job here. Keep in mind, John, I did spend quite a bit of time with yellow and - wires, wire part of that. I spent a long time with UPS on the package side, so I'm not necessarily an LTL guy.

I can promise you we are not getting into LTL at Universal. I would say, I am a finance guy at heart. I consider myself to be a leader of organizations, so I hope to bring strong leadership capabilities and have the ability to focus on what I think is really, really important, make good sound decisions and have the opportunity to just get better..

Appreciate that. Thank you very much..

Your next question comes from the line of Matthew Frankel from Macquarie. Your line is open..

Hi. Good morning, guys. Thanks for taking the question. A few questions here for you. One is, over a year ago when we first started talking, Dave, you had mentioned that auto was about third of your end market business. I am curious and focus was obviously on diversifying.

I am curious where is it now?.

It's about the same, - [32%]..

Okay, any plan or goal over next 6 months, 12 months to really change that?.

Strategically what we have talked about our enterprise sales group and our focus on certain vertical markets. Obviously, we have a very strong market position in automotive and related industries. Diversification will continue.

We have obviously grown a lot in industrial in the last few years and retail is obviously have been a good market for us as well. The challenge, we want to grow all of our verticals. To the extent some of our - about 20 our customers represent about 50% of our total revenues.

To the extent our best customers continue to give us business opportunities we are going to pursue those opportunities, but we recognize the benefit of the diversification and we are pleased that we have as many new customer wins and prospects outside of the automotive sector is what we have inside..

Got it. Turning to just transported for a minute, what is your owner-operator driver turnover? I am curious how it compares to sort of the rest f the industry..

On a combined basis, we are running at about 80%, but that changes depending on the business unit. We had very low turnover in our iron and steel group, which is a relatively short length of haul and can home every weekend.

The guys in van operations and drayage tend to turnover a little bit more rapidly for different reasons, but one of our areas seems to be an improved market in the drayage business. I think it is a shift from some historic things where we would see that bounced up and down very rapidly.

We are kind of optimistic that we are going to improve our turnover in the drayage field and all the short haul businesses, but it remains to be seen because we are using an older generation. Quite honestly, we got a lot of pretty old contractors that have been with us for a long time.

I know we had that one guy just this past week, had a little party down here in Dearborn, because he has been here over 30 years and we are losing some of those. It's going to be a mixed bag..

All right, is there any pressure to raise pay or anything on the payout or anything?.

As long as revenues goes up in the base truckload, their earnings go up, because nearly all of our owner-operator workforce is on a percentage basis. If our rates go up, their truck pay goes up, so most of them are doing pretty well right now.

There is a little bit of struggle, because fuel costs are going down so fuel surcharges are shrinking a bit, but still the rates continue to accelerate.

Overall, they are getting a little shifty in what they are making, because they own the truck and they get the fuel versus and that part going down and the rates going up, so does that make sense?.

Yes. Thank you. In your truck brokerage business specifically, can you talk about what net margins have been doing there? Obviously capacity, price capacity is going up as you all know, so I am just curious if you have been - on pass those costs on to the customers..

Yes. We have two basic brokerage plans that are the pure brokerage deal. About 60% of our brokerage number comes from excess rate. In other words, it is pegged to the agent and owner-operator network and it's freight that goes to people that are in that business, so it's -, if you will.

A big part of our operation is also though centered a little acquisition we made a few years ago called Calvary and it has got a great growth rate right now it has got the best profit performance that it has had in the time that we have owned it.

Again, they have been able to push up rates a bit and they have been able to retain a small piece of it, which improve their performance on every low. They have to do a little bit better for the owner-operator, because the equipment demanded is pretty harsh right now.

Our maturing of that operation as well as good availability of freight at good grades within our core truckload business..

Okay. Thank you. Two final questions, one is what was that $2 million acquisition you made and the other one is maybe the improvement of the liquidity for the stock has been a focus for a while. I am curious if there is any update on that..

The acquisition we made was from a company that we had actually started doing some business with in March as a multi-location agency. We bought a part of that business. It is a machinery for the most part. Again, we have fully expected that that was going to happen at some point and we are real happy with the deal. We believe they are too.

They are going to stick with us with the other locations as an agency fleet operations, but again this one was a good opportunity for them to catch out a little bit..

Okay. Then just on the liquidity. Yes. Thanks..

Well, on the liquidity, there is nothing going on right now that we are talking about. We certainly recognize that we watch it, we watch the flow, we get an event back in the second quarter to address that.

As Jeff mentioned, we are obviously focused on transition here right now, so there is some things going on the back office, so that is not something that not something that we anticipate really focusing on for the next couple of quarters..

Okay. Thanks for the time..

You are welcome..

There are no further questions at this time. I would like to turn the call back over presenters..

Thank you very much. We appreciate you joining the called and look forward to talking to you next year. Thank you..

This concludes today's conference call. You may now disconnect..