Jeff Rogers - Chief Executive Officer David Crittenden - Chief Financial Officer.

Chris Wetherbee - Citi Research Todd Fowler - KeyBanc Capital Markets Thom Albrecht - BB&T Capital Market Matthew Frankel - Macquarie.

Welcome to the Universal Truckload Services Inc. Full Year 2014 Earnings Conference 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 the 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 the 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. Jeff Rogers, Chief Executive Officer, and Mr. David Crittenden, Chief Financial Officer for Universal Truckload Services Inc. Thank you. Mr. Rogers, you may begin..

Thanks, Keith. Good morning. Thank you for joining us today for Universal Truckload Services' fourth quarter 2014 earnings conference call. We really appreciate your interest. 2015 has started off with a number of changes.

I have replaced Scott Wolfe as CEO, who retired the 1st of the year, Don Cochran, who was President of Truckload, also retired last month. Not everything has changed, though David has been here for many years and has been instrumental and effecting many changes we will talk about today.

Since I have been transitioning into my new role since last June, we have hit the ground running and we will not miss a bit. Those who participated or listened in on the two investor conferences David and I attended last week, heard me talk about simplify, focus and execute.

I think it is appropriate to take a minute to talk about it here in the time of so much change in transition. First, simplify; toward the end of 2014 we completed the consolidation of our corporate structure and streamline back office processes to enable faster decision making and allow us to do the more important things we want to do.

Second focus; we are going to focus on safety, growth and margin expansion. Safety is probably the most important thing as the CEO that I can promote for our employees and the general public especially with all of the big equipment who have moving across the highways.

Along with that, growth and margin expansion is what we will focus on from a leadership perspective. That leads to the third point, which is execute. Execution is the key, a good plan means nothing if you don’t execute it well.

Our execution going forward is all about delivering intelligent growth, growing revenue while expending margins, mainly growing margins in our transportation segment and growth in our logistic segment. If you are interested, you're welcomed to see the presentations and recorded audio on our website under Investor Relations. Now onto 2014.

It was a good year for Universal from a topline perspective. Revenue was up 15.3% over 2013 to $1.19 billion.

Of the three operating categories for which we report revenue, transportation was up 8.8% to $769.3 million, valued added was up 45.8% to $284.5 million which includes our first full year of revenue from the Westport Axle acquisition completed in late 2013. And intermodal revenue was up 4.8% to $137.7 million.

David will provide a more detailed run down on the 2014 financial performance in a moment. Beginning the discussion with transportation which is our largest operation where we offer everything from best-in-class truckload to heavy haul and niche transportation for 120 foot long wind blades.

Transportation represents 64.6% of our total revenue in 2014 versus 68.4% of total revenue in 2013. Owner-operator account was down 1.1% for the full year comparisons, while the full year 2014 over 2013 operating revenue per loaded mile was up 7.6%. Load count was down 3.8% for the full year comparison.

Quarter-over-quarter is a slightly different story. Our fourth quarter operating revenue per loaded mile increased 7.1% 4Q 2014 over 4Q 2013 and load count was up 4.2% for the corresponding periods.

Within transportation, our revenue derived from brokerage has grown 22.4% for the full year of 2014 over 2013 and grew 40.1% fourth quarter 2014 over 2013. We expect to continue to grow brokerage very aggressively in 2015 as well. Capacity is still a key issue for the industry and our growth is limited by the number of drivers we can recruit.

We have added significant resources to improve our capacity development and veteran qualification. We have partnered with the company to provide a dedicated training school, to help move veterans through the BA funding process and provide the needed training to ensure a successful conclusion. This is very important to me being an army veteran myself.

In 2015, we will focus on margin growth for our transportation business and in growing company terminals. Our agents are very important to us. And to augment the limited growth we see from agent relationships, we will grow our company terminals in order to meet my expectations of maximizing margin and growth.

The dedicated transportation business has been disappointing in 2014 and has not yet recovered. We are however working to revise those contracts and restore that business to its historical performance levels or we will appropriately decide how to best utilize those assets. Moving on to our value added business.

As we have stated before the brutal weather in early 2014 negatively impacted our operations. We also saw several profitable operations come to a close. The focus throughout 2014 was to ensure continuing operations returned to their expected performance levels. As we ended 2014 I can say that was accomplished.

We were recently awarded two pieces of business from one of our long term automotive customers. The smaller of the two is a new operation in Latin America and the larger one which is our largest program ever awarded have begun implementation.

Combined, these projects will reach well over $30 million on an annual run rate basis by the third quarter of this year. As is normal, we have numerous contracts coming up for renewal in 2015, some involving union labor. We fully expect to complete these successfully.

Automotive and classic trucks make up the largest portion of the value added portion for us. So with strong automotive production forecasting 19 million units by 2020, and Class 8 production at record highs for the next couple of years, we are very excited to be in this market. In fact we want more of it.

We are looking to expand our share-of-wallet with exiting customers to our sales program called own the plant. For many of our customers we manage one or two operations within an assembly plan. But in several facilities, we manage most or all of their links in their supply chain.

We see benefits for us and we see benefits for them when we own the entire plant. We want to help our customers manage every aspect of their operations. Our intermodal operations have continued to grow in spite of obstacles like driver capacity, and the conjunction in the ports.

For 2015, we expect the strength of the dollar to drive strong import market which is where majority of our intermodal business comes from port and rail drayage. Also keep in mind the majority of our intermodal revenue is derived East of the Mississippi and revenue grew 18.6% in the fourth quarter over fourth quarter of 2013.

While we don't expect that type of growth throughout all of 2015, we do expect growth to be very solid. As we move into 2015, we've looked at each business considering the environmental effects of fuel prices, our key industries and the general economy.

With 28% of our business driven by automotive and production forecast at record levels of 17.3 million units for this year, increasing to 19 million units by 2020, it looks very good. Lower fuel prices have improved the outlook for SUBs and light trucks, as well as retail sales driven from consumer confidence.

Class 8 heavy truck production is also very strong due to pent-up demand and fuel economy improvements. Still and metals hauling for which we are a top five carrier in the U.S. is solid just like wind energy. And as far as Universal is concerned, the direct impact to oil and gas from the lower fuel prices will be relatively minimal.

From a revenue growth expectation for 2015, here is the run-down. Transportation services we expect 10% to 13% growth. Value added 3% to 5% growth and intermodal 9% to 11% growth. The environment we operate in for 2015 looks very good. We are positioning our services to take full advantage of it.

With that, I will now turn over the conversation to David..

Thank you, Jeff, good morning. Universal reported fourth quarter net income of $10.5 million on consolidated revenues of $302.5 million. Earnings per share were $0.35 per share, revenues were near the midpoint of the range we anticipated in our February 9 press release, and earnings per share were at the top of the range.

Fourth quarter revenues were $43 million or 16.5% higher than in the fourth quarter of 2013. And this does reflect year-over-year growth in all three of the service categories as Jeff just described. We did report roughly [comparable] [ph] net income in Q4 compared to the fourth quarter of 2013.

Specifically $10.5 million in net income compared to $11.3 million a year ago, and on a per share basis, EPS of $0.35 in the fourth quarter compared to $0.38 per share one year ago. These modest changes in net income mask some counterintuitive trends though.

Specifically, the consolidated statement of income for the 13 weeks ended December 31, shows $18.8 million of income from operations. As presented, this is a $1.1 million decline from $19.9 million in adjusted Q4 2013 operating income.

Importantly though, we achieved $27.7 million of EBITDA in Q4 of 2014, a $2.9 million increase compared to $24.8 million in adjusted EBITDA one year earlier.

So then a closer examination of Universal's earnings announcement shows that although our consolidated operating income did decline 5.4% compared to prior year adjusted operating income, our comparable EBITDA actually increased 11.8%. A driver of this outcome is amortization charges resulting from the late 2013 acquisition of Westport.

Overall, Universal's depreciation, amortization charges increased $4 million to $8.9 million in Q4 from $4.9 million 12 months earlier. $2.7 million of this increase was due to Westport of which about $2 million was specifically due to amortization of intangibles.

Our income from operations totaled 6.2% of consolidated operating revenues in Q4 2014, which compares to 7.4% in Q4 2013, and 7.6% in the immediately preceding quarter. Compared to one year ago, we attribute about 70 basis points of the 120 basis point reduction operating margins to intangible amortization.

In summary then and this is important, we achieved an 11.8% EBITDA increase on a consolidated revenue growth of 16.5%.

Although we're not satisfied with the margin compression that this suggests, I want to highlight that the calculations here do not take into account the impact of excluding two 2014 charges totaling $3 million that we outlined in yesterday's earnings announcement that relate to what can be described as either out of period or non-operating events.

For all of 2014, Universal earns consolidated net income of $45.4 million or $1.51 for basic and diluted share on consolidated operating revenues as Jeff said $1.19 billion.

Although up 8.6% over the fourth quarter of 2013 when compared to the third quarter, Q4 revenues from our transportation services totaling $195.2 million were actually down just under 1% from $196.8 million in the third quarter of 2014. Average revenue per loaded mile was flat at $3.03, but down slightly when fuel surcharges are excluded.

Our average length of haul quarter-over-quarter was up 1.4%, but that was largely offset by the 1.2% decline in the number of truckload transportation loads. Certainly the toward increase in demand and pricing seen earlier in 2014 cooled somewhat at the end of the year.

Fourth quarter revenues from value added services were up about 1%, compared to Q3. In short, we operated the same locations at the end of the year as we did through the late summer and early fall. As Jeff mentioned, our intermodal revenues enjoyed strong growth 18.6% over the fourth quarter of 2013 and up 3.5%, compared to the third quarter of 2014.

Excluding fuel surcharges, our average operating revenues for intermodal load were up 3.1%, compared to the immediately prior quarter and intermodal load increased 2.8%. Page 6 of yesterday's press release lays that Universal's Q4 segment performance in greater detail.

In our transportation segment, which as you know includes our agent based transactional truckload transportation, along with intermodal brokerage and specialized services, revenues in the quarter ended December 31 increased to $203.9 million, a $27.7 million or 15.7% increase from a $176.2 million fourth quarter 2013 and flat to the third quarter of 2014.

Expressed as a percentage, reported income from operations in Universal transportation segment increased to 4.7% of revenues in Q4, compared to 4% last year and 5% in the preceding quarter.

Adjusting to exclude the impact of reserve for an uncollectible oil industry customer account though, operating margins in our transportation segment would have been about 5.4% in the fourth quarter, compared to 5.3% in the previous quarter.

Revenues from our logistic segment totaled $98.5 million in Q4, an increase of $50.2 million, compared to $83.3 million in the fourth quarter of 2013 and slightly higher than the 98.1 booked in the preceding quarter.

Income from operations in the logistic segment declined to $11.1 million in the fourth quarter, compared to $12.7 million in the comparable prior year quarter. The composite operating margin achieved by our logistics segment business was 11.3% for fourth quarter 2014. This compares to 15.2% in Q4 2013.

A fair comparison though would exclude about $2 million of incremental intangible amortization in 2014. As many of you listening this morning know and as Jeff mentioned earlier, Universal's logistic segment is historically the largest component of our profitability. Our logistics businesses experienced [indiscernible] 2014.

The successful integration of Westport was offset by operating challenges triggered by historically bad weather a year ago, by a reduction of total revenues when selected operations closed, and by a start erosion of profitability in the dedicated transportation services.

As Jeff mentioned, while most of these matters are now for the record books, we're still working very aggressively to correct issues with our dedicated transportation business. Universal's capital expenditures totaled $19.6 million in the fourth quarter and about $59 million for the full year.

Tractor and Trailer acquisition costs in particular climbed higher in 2014, compared to our historic investment levels. This reflects both ketchup purchases from planned 2013 investments, and additional equipment we acquired in support of certain customer commitments.

Although Universal’s higher margin services and the SLI business model typically generate high free cash flow and strong return on invested capital, our above trend purchases of rolling stock in 2014 only allowed net debt reduction of $3.2 million through the course of the year.

In that calculation I'm including capitalized lease obligations with our senior debt and reducing the total by our cash in marketable securities balances. In any case, our senior leverage ratio as we reported to our lenders remains just under two times, which is very much in our comfort zone.

I'm going to encourage you to review the supplemental information at our earnings announcement, which includes the methodology we use to calculate earnings before interest taxes, depreciation, and amortization or EBITDA.

And you should also expect to see our annual 10-K in about three weeks, second week of March and it will provide additional details behind the financial performances Jeff and I talking about today. Earlier Jeff described our 2015 revenue growth targets for each of Universal's three service categories.

A quick extrapolation of these growth rates result in 2015 revenues of about $1.3 billion. Certainly, achieving these targets depend on the overall market trends that Jeff described and particularly in our transportation and intermodal businesses, our ability to develop driver capacity.

Nevertheless end market demands for our customers products appears favorable, which bodes well for us. Extending then to profitability metrics, we're looking to achieve 50 to 100 basis point improvement in the operations that we aggregate today in our transportation segment in 2015.

Also as we have discussed today and in previous conference calls, we expect to further solidify margins in our continuing logistics operations and to maintain these margins in new value added operations. From a consolidated EBITDA margin perspective then, we also expect higher performance.

In 2015, our management team and company is focused on delivering consolidated EBITDA in the range of 10% to 10.6%, which will represent a meaningful increase from 9.6% in 2014.

Finally looking closer to home, I'm pleased to report as Jeff mentioned we did complete in December an internal streamlining program that has consolidated our organizational structure.

This enhances our branding of Universal to our customers, it reduces our subsidiary count and I do believe that positions Universal well to deliver on just promise to simply, focus and execute. With that Jeff and I again want to thank you for your interest in Universal and for your time on this very, very chilly Friday morning.

And we invite Keith to open the phone lines for some questions..

[Operator Instructions] Your first question comes from the line of Chris Wetherbee from Citi Research. Your line is open..

Great, thanks, good morning guys. I just want to touch short of on the streamlining of the business and the direction for 2015 for a moment.

Can you talk about, where - have you completed that process or you have you just taken a look at where you want to be most focused on and has that been completed as you turn the corner into the new year? How much more is left to go? And if there is any numbers that may be you can put around potential streamline savings or opportunity that would be really helpful too..

Sure, I'll start that and then may be David can add some comments. I think from the streamlining of business segments or legal entities down to a much lower number, that part is complete.

My organizational review of how I get things set up of, - who is leading what area, that's for the most part complete, the changes Scott, Don and all that, we've made some changes to the [indiscernible], but I think that's all complete.

As with any big change from an ERP and financial system perspective as David will share comment too, there is always may be some things that still have to get cleaned up. But I would say for the most parts it's all behind this.

So from my perspective what that does, once we get all that stuff behind this, we can really start focusing on what I want to focus on as we go in through 2015. But it does clean things up and allow things to move much faster, because we've now got one transportation group, one dedicated group and before it was a little bit clumpy.

So, I'm not going to get into very specific savings targets, it was really more about streamlining versus cutting cost per se, because to be honest with you, I want to do some things little bit different going forward, so I’m really not in a mode of cutting staff just yet, I really want to grow and use the step I've got much more effectively.

So David, I don’t know if you want to add to that..

I would just maybe paint a picture for as an example of what we are talking about, we had five operating authorities a year ago for our trucking transportation business, where we have one today. They were being marketed and sold under Universal but a lot of trucks were still running around under the operating authorities of different companies.

And so when we talk about speed of execution, I think we're now well-positioned all of those kind of legal changes have been done, the regulatory changes have been done.

I think embedded is some of the margin performance that we do expect to get in 2015 reflect that increased efficiency but I think - and adjustment we do have, just we always have a little bit of after shock, little bit of tremors after the event but the big event is behind us.

And now we’re really looking forward to having simplified our back office, trying to figure out exactly what benefits we're going to ultimately go and get from that..

Okay, that's helpful, that's good to understand. And then may be a follow up just thinking about the logistics side and the margin expansion. It's seem inherent in the consolidated EBITDA margin expansion that there is going to be some opportunity on the logistic side for 2015.

But may be thinking a little bit longer term and you kind of look at sort of the margins that you’ve been able to put up in logistics in the past, how likely or how good you feel about the opportunity getting back to those types of levels as you start to, stretch out, not just into '15 but may be beyond that?.

And you're right because I did in my comments say the margin expansion is primarily going to be focused on the truckload core business.

But you're right, we got to get, the whole logistics side back to what I would call more normal and the continuing operations really are, so I'm not looking to expand the margins in the logistics beyond that 15% range that we've all historically talked about.

It's bounced around, if you go back and look over time, could be 15, could be 17, but at the end of the day, I think it’s very sustainable to look at margins in that range going forward and we see that today in our continuing operations, and the things that we just brought on, I think I feel very comfortable that we can sustain those type of margins going forward..

Okay. So new business opportunities are in line with those historical norms..

Absolutely. It varies, you get ten pieces of new business and they bounce around but at the end of the day, I think it, it all averages out and I feel very comfortable we can deliver in that range..

Jeff and I had a Board meeting yesterday, our newest Board Director other than Jeff himself is Scott Wolfe, and so we certainly are frequently reminded by Scott that his expectation is that we continue to maintain the high value of the logistics business..

Sure. That makes sense, we remember some pretty strong margins and that over the years. So thanks very much guys for the time, I appreciate it..

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

Great, thanks. Good morning, everyone. Jeff, you gave us - I wanted to focus a little bit, I guess as well on the value-added services side, but I’ll take it from the revenue growth that you've laid out.

The 3% to 5% based on the comparisons that you have, can you talk about, what’s embedded in there, is that just contracts that you’ve won and things that you have visibility in today or are you expecting some additional wins in the numbers into 2015..

Well, I obviously expect additional wins, you got to keep in mind that 3% to 5% is muted but we still have some carryover from some of those operations that closed and that finally ended, first and second quarter of 2014. So we still got some headwinds for the next couple of quarters when you do comparisons.

Once we get beyond that, I think the growth rate will be higher than 3% to 5% because I sure expect the additional wins as we go throughout the year..

Okay, that's a good point.

And then, maybe just as a follow up to that, how should we think about then the timing of both the revenue growth and the margins and value added service as we move through 2015?.

Todd, I’m going to take a jab some of that. In preparation for the call this morning I looked at what we’re doing in our 2015 expectations, and I took a look at where you and few of other folks [indiscernible] on this call are thinking about us -.

Take it easy, David. We’re doing the best we can..

And actually I’m looking at the sheet that actually shows what everyone is thinking right now and the way I think about it, when I put myself in your shoes is, we really are growing that topline in the transportation business a little bit faster than where I think the market has traditionally expected us to, and we're actually showing the strength in the topline with respect to the logistics and the value-added business in particular.

We've talked about mid teen growth rate [indiscernible] in that business. We have a large project, a couple of large projects but one in particular that Jeff mentioned that it's a large project on an annualized basis but it’s really launching in the third quarter, so we're not going to get a lot of that into 2015.

And so what Jeff and I talk about here is focused margin improvement on the transportation businesses and maintaining margins in the logistics business while we continue to add that $15 million or $20 million or $30 million annualized project.

So net-net what does that mean and we just think everyone is – we're probably going to be on the north side ofeveryone’srevenue estimate but it's going to be in the higher [indiscernible] businesses as opposed to the logistics business.

And we're really focused on maintaining the logistics business margin and adding new projects that as Jeff just mentioned to Chris, meet our existing expectations for logistics businesses..

So, its sounds like the moment in transportation is a little bit stronger to start the year and then the value added services is going to ramp as we move through the year?.

Jeff is taking a long view. His conversations internally with the leadership team go out several years and I think that's a fair characterization 2015..

Yeah, exactly it's going to build momentum just because you got tough comparisons from a growth perspective in the first couple quarters but I think you'll see a much higher growth rate than what we're seeing in the 3% to 5% once you get into that second half of the year..

Okay.

And then Jeff for the 10% to 13% growth in the transportation side, I think that was a little bit stronger than what some of us have been anticipating just given the comparisons that you're coming off? Can you help us think about is that exposure that you have on the automotive side, is that growth in some of the company terminals, is that just your expectations for continuation of pricing, I just kind of some sensitivity and how we can build up to that 10% to 13% that you are expecting?.

I think it's little bit of all those. There is nothing - David comments we saw a little bit of - may be the fourth quarter proven off little bit from a pricing perspective.

I think some of that just normal seasonality because the pricing environment is still very firm, so I think we’re going to continue to see good, solid pricing, increases through 2015. There is no reason sitting here today, where I would think its going to change, I mean there is nothing to say its going to change.

But I also think the growth really from a company terminal perspective and I mentioned that, we're going to continue to get economic growth from the agents in the existing business we have.

I don't see any reason why not, but I think our real growth on the transportation side is the company terminal growth and I've given them an internal goal of 25% growth there, which I think we can do. We saw about 19% this year. So there is no reason why we can’t grow that more because that’s more in our control to do that.

The limiting factor there is [Audio Gap].

[Operator Instructions] …I’m thinking about it. I want to prepare ourselves for that next strategic decision that we might want to make out beyond '15..

Just a tail on, you asked the question about the interest expense at the end. So I just based on just commentary there paying off only $4 million of net debt this year was a low point for us in our history.

We certainly have the capacity to pay down $25 million, $30 million, $35 million of debt if that ultimately where we end up? We're engaged to pushing that around. From an interest perspective though we do have -- our agreement go out for a few more years.

We don't have any pending events, so then it becomes a gap as to what the short term rates are going to do because substantially all of our debt is floating, but right now, the TREIT the IREIT don't indicate that we're going to have like a spike in interest rates out through the second, third or fourth quarter of this year.

We're watching that very closely, but we're still basically not only at or slightly above the interest rates that are currently embedded in our performance..

Okay. That’s all very helpful. Thanks a lot for the time guys..

You have a better sense….

I’m just trying to get your first quarter right. So all right thanks for the time guys and stay warm up there..

Your next question comes from the line of Thom Albrecht from BB&T Capital Market. Your line is open..

Hey guys. Thanks for the comments this morning. Well it’s cold in Virginia also. So….

Is the same in South Florida, driving in with the windshield like 30 below. So it’s cold..

Yeah. We actually had one below here which is very rare for Virginia. So, just last week you talked about a four year revenue target of about $2 billion if you take where you ended $14 billion and play with that four years that’s compound annual growth rate of about 13.9%.

Obviously I think I just hope that you can do that organically and you kind of suggested that maybe '15 is not going to be about acquisition but as you look forward to get there, you're going to need about $900 million more of revenue.

How much of that would you envision being from acquisitions?.

Well to be honest with it Tom, in my head, I’m not really thinking of any significant acquisitions to get there. We always do little small roll ups and tuck ins so I am kind of not counting those, but those are small that will be, kind of, normal course of business.

So I guess you could say some of that will be small acquisitions, but I’m really not thinking of them a lot and I said it’s tough to maybe to have 11% compound year-over-year growth, but I’m really thinking we can do a little more than that based on what I see are opportunities within the Logistic segment to grow faster.

So, I think a little bit of it will come from acquisitions, but honestly, I’m not looking to do that by acquisition, I will say..

Okay. And then where do you think margins and transportations can go? I know, if you exclude the bad debt in the fourth quarter, it was about a 5.7% margin or 6% or 7% on a GAAP basis. But it continues to be on an annual number less than 5%.

It would seem like with an owner-operator based model you’re not going to have an 85 OR, but what’s sort of realistic type of OR to think about for transportation over the next couple of years?.

Well, over the next couple of years, I've let those leaders know and I think we've got clear vision to get there to improve by few OR points. So whether that’s enough or whether there is more beyond that, there could be, but I’m going to focus on what I see over the next two to three years and I think it’s another two points.

So like I told them is we want to go from five to seven and it bounces around five, but I think it's clearly at the end of the day we can get another two OR points on the transportation segment..

Okay. That’s helpful.

And then David, what happened with insurance in the quarter? And what should we expect going forward? It's typically been under $5 million a quarter and it was over $8 million?.

Great question. Appreciate, some looking back we've been through it at this point. We looked very closely at that legal reserves that wasn’t so much insurance but outstanding exposure to claims. And certainly one of the things we looked at was actual experiences that we know we were involved in 2014, that haven’t necessarily come to fruition.

So we felt it was appropriate to be more conservative with respect to the issues outstanding that we didn’t have good visibility to.

And for example like -- there are a couple of very large highly publicized pileups on freeways involving 57 vehicles and although we were attributing cause of any of their and we're also down to the fact that commercial truck carriers are involved in those tend to become targets for playing with attorneys and we're just being very cautious..

Right. Okay. I know yearend there is often adjustment to reserves up or down. So part of that was closing the books one of the best side of it..

Overall the rates, our premiums haven't changed. It was specifically due to a conservative look at the results for the potential litigation..

And you would expect basically more of a normalized level from Q1 onward a realized safety is only as good as today, but assuming….

One of the things we're also sensitive to is because we put smaller companies together, as part of our streamlining that also presents potentially larger targets for a litigation and that was a part of our thought process as well.

So I think we're going to continue to look at our legal reserves for the next several quarters just to make sure as we kind of roll through this streamlining we appropriately considered potential outcomes..

All right. So I’m going to interpret that as maybe not as high as what we had, but maybe a little higher than it used to be.

Is that fair rate?.

Absolutely yes..

And then Jeff, I want to ask you too because you talked both last week and earlier today about the willingness to grow. I can't remember how you said it basically company assets, company offices, I think that company right now is over 19% of your total trucks.

If we look out whether it’s two or three years or all the way out four years, are you envisioning what 25% of your power coming from company equipment or how many of your offices being company offices rather than agents? Could you just kind of help us understand your vision?.

Yes, I don't think it's going to be replacing agents by any means. It’s going to augment that growth because we're just not seeing the growth that I want from the agent based model. Again we love what the agents do for us.

I like that model from free cash flow and all the asset and all that and even in a company owned environment I still expect to have owner operators. So I don’t necessarily have to buy all the assets. It just gives me little bit more control over what we do there.

But as far as a percent of the total, to be honest with your time, I am not prepared yet to give you that answer several years out. My expectation is to grow 25% in company owned stores or terminals what you call, which makes it about $80 million of my transportation revenue right now.

So add 25% of that and the percentage is going to change in total obviously and sustain that kind of growth going forward, we'll see but it’s going to be just a bigger part of the total really..

Okay.

And then the last question; David, as part of the streamline, have you thought about the presentation of the numbers that you provided in the press release versus what’s in your Q and K? I think that there is an elementary there that can be a little bit frustrating the analyst community where we get three segments in the press release that only seems larger reporting businesses in the queue and then we're always pulling back and forth after earnings season trying to reconcile the numbers.

Any of your company with your market cap to expect people to give the same attention to that, that they would a much larger company, it might actually penalize you a little bit..

I appreciate that feedback. What I would tell you specifically is that we expect to take a fresh look at that at the end of 2015. We did evaluate that at 2014. You will recall that we actually went through an auditor transition two years ago and because of issues related to that, because of we’re just kind of waiting for the dust to settle.

Our legal view of the organization actually does not account to move around operating a reported units from a segment perspective, but we're waiting for the picture to clear up a little bit before we are really in a position to do that and the conversation we've had internally here with our finance team is we definitely want to do that.

One of the things that Jeff has focused on is the growth of our brokerage business and the technology part of that and as we continue to kind of develop that business with the objectives that Jeff has put out there for you to get your operations we could get to a point where we need to add another type.

So I guess I would conclude by saying don’t look through that in the first, second or third quarter, we’re constrained by past reporting test audits and those kind of things, but we’re actually taking comments and what would be useful in the view towards taking a fresh look at the end of 2015 and I’m sorry, we can't be any faster about that, but that's kind of where we're at right now..

Appreciate that and got the share what I was thinking so thank you..

That's confusing for you, it’s probably confusing for us to so we’ll try and work through that. .

Okay. Thanks..

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

Thanks for taking my question guys. A few questions here. First question is just to clarify a bit more on the transportation changes that you’re making over there. It seems like it's going to be very significant change in the mindset because we always used to think about Universal as it was becoming much more asset like company with acquisition linked.

That seems to be returning and doing about in a phase now and specially as you guys are going to be relying on transport to generate a substantial portion of your growth over the next few years. So I just want to make sure I understand, when you say you're getting at a little more actually, how are you going to be opening some terminals.

Will you be hiring employee drivers, will you be trying to convince on our operators to be exclusive to you from an employee perspective.

Will you be trying to taking existing agent business in house and what exactly does that look like?.

Yes, Mathew, I think you may be missed -- I don’t know misunderstood a few things that I commented on. We're definitely not moving towards a asset heavy model by any stretch of the imagination. We're going to still be an asset like I just mean as we go through company controlled locations, we still may use owner operators.

So you therefore don’t have to buy additional trucks, tractors, whatever. It's just going be owner operator will be directed by us. But yet we still want to continue to maintain an asset-like model.

I just clearly believe we're going to need to spend a little bit more CapEx than may be what we have spent historically in that 3% range, but it's going to maybe 3.5% to 4%. So it's not a significant change from a capital perspective. So we're still going to be an asset like type model.

And the only significant change -- the logistics we're going to continue to do what we do and we want to grow that and I think ultimately beyond this year logistics may be much faster growing than the transportation segment. This year we just got some very touch comps on the logistic side.

So it's just not going to appear as though it's growing faster.

But there is really -- the only significant change I guess from my seat right now is we are going to focus more growth on the transportation side, by company -- I call it company-owned stores or company terminals, but that’s just because I think we can control that growth more and have more control over what we're doing versus the age model, but we're not significantly changing that model in and of itself.

So I hope that’s clear there, but I don’t want you to be confused and think that we're completely going away from the asset-like model, because we're not..

I might just add because you had a commentary about the link acquisition. I would say from my prospective that both the truckload or the transportation segment and the logistic segment had about the same level of asset intensity.

So when Universal acquired Link, which I know something about it wasn’t really an attempt to reduce the level of asset intensity.

It was really kind of about the same and then on the logistic side in particularly what we have said over time is that for certain intensive opportunities we're actually very willing to invest some capital to pursue certain types of opportunities because our historic experience is that that's a little of a lack out competition as the way to secure kind of multiple wins in the contract.

When we want to and it was a few times and those types of businesses have had excellent ROIC kind of characteristics. So we look at each one of those investments kind of ROIC characteristics and I don’t think it's just that we think that we're fundamentally going in a different directions..

Okay. Well thank you guys for clearing on it, I appreciate it. The other thing I want to ask you about was the dedicated business. You just talked about margins being sub-par and some another large transport companies struggling in that segment of business recently.

What exactly are you doing to revenue that? Is it a discussion of the pricing having more pricing flexibility in the contracts? Is it trying to take some of your operators, move them into that segment to alleviate the outsourced -- to put pressure toward the outsourced some of that business..

Yes little bit of both of those.

I think about what really hurt us and I am sure what you're hearing from other folks is on a dedicated contract, it could be a one-year contract or a two-year contract, the ones that we're struggling are being somewhat evergreen contracts that we have with longstanding customers what we've done this business for a long period of time.

And this year just came up one started off with all the poor weather. So we didn't our drivers available. So we had to outsource and find other transportation to deliver on the contract and therefore you're are spending a lot more money than what you expected and we just haven't recovered well throughout the year.

So how we're approaching that is really kind of what you said. We're going to go back. We're having conversations with those very specific customers about price increases and what it's going to take to continue to do dedicated transportation.

Because it's a value to the customers for sure and they need to value that and we need to get accordingly paid to provide that capacity or as I said, if I've got a driver and I've got a tractor, I can take that and go some place else and make money. So I won't continue to use assets in an area or an environment where I can make money right now.

It's crazy, I mean this is an environment where you should be able to make money in transportation based on the firm pricing. So we're going to do that. We have to shift the resources; we’ll shift the resources to do something different than dedicated..

Understood. Thank you.

And then the final thing from me, now that we're over halfway to the quarter, what type of – can you talk about what type of price increase you're getting in the trucking business right now?.

I would say it's very similar to what we saw at the end of last year in fourth quarter third quarter still in that high single-digits. Some cases it's more.

The spot market still very, very strong I think there was a little bit of hiccup maybe in January but again that's very, very seasonal, February is pretty strong, I mean we are seeing very, very good volume strength right now as well as pricing in spot market rates. So, I would say its very say to similar to what we saw last year..

Thank you very much guys..

There are no further questions at this time. I'd like to turn the call back over to Mr. Rogers..

Thank you very much. I appreciate everybody joining us, and we look forward to talking to all of you again next quarter or between now and then. Take care and stay warm. We'll see you all..

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