Hello, and welcome to Universal Truckload Services Incorporation’s Second 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. Mr. Wolfe, you may begin.

Thank you, Sally. Good morning, everyone and welcome. Thank you for joining us for our Universal Truckload Services’ second quarter earnings conference call. Before we get started today, I would like to introduce Jeff Rogers. He is our new Executive Vice President joining us for the first time. As part of Universal’s succession plan, Jeff will be taking over the CEO role when I transition to the board at the end of this year. Prior to joining Universal, Jeff served as President of YRC Freight and of USF Highland Inc. and was Chief Financial Officer of YRC Regional Transportation Incorporated. Jeff has agreed to take questions during our Q&A session after the review of our quarter. Universal is heading in the right direction with consolidated operating revenue, up $43.4 million, a 16.4% increase for the second quarter of 2014 over the second quarter of last year. We have seen solid growth in transportation services revenue this quarter, which is up 10.1% over the second quarter of last year. The transportation services business continues to benefit from increased freight volumes and strong pricing, which Don Cochran will discuss in a moment in addition to discussing our intermodal business. Overall, performance was further improved by our value-added services, which grew by 48.5%. Primarily this growth was a result of last year’s acquisition. Intermodal revenue was up slightly, an increase of 1.4% over the same quarter last year. In all, Universal is trending back toward historical rates of growth and profitability after last quarter’s weather-related impacts. By design, our business mix as compared to the same period last year reflects a shift. Transportation services revenue is 64.2% of our consolidated revenue versus 67.9% in the comparable quarter last year. Likewise, value-added services revenue at 24.7% compared with 19.4% for last year. And the…

Thank you, Scott. The transportation segment is benefiting from an increase in freight volumes of steady and improved economy and from tighter capacity. As we mentioned last quarter recruiting and retention remain the key buzzword in our marketplace and we continued to add options to gain capacity. The marketplace in general is showing high single and low-double digit rate increases year-over-year for flatbed and specialized haulers. In localized instances we have even seen existing conditions in the van marketplace similar to that. Freight is plentiful and capacity is tight. Within transportation services revenue for both flatbed and specialized heavy haul activity show a 5.3% growth for the second quarter of 2014 over the second quarter 2013, right in line with the overall transportation segment. Net of fuel surcharges the van revenue has increased 12.8% for the same timeframe. Brokerage revenue has increased 20.5% year-over-year for the second quarter of 2014 over the second quarter of 2013. We have seen modest acceleration in the pace of business and in available loans. Energy accounts lead the way for increased business. Comparing Q2 2014 to Q2 2013, our oilfield revenue gained 7.5% and wind energy gained 27.8%. For the six months of 2014, oilfield is up 7.5% and wind is up 76.3%. The remaining flatbed commodities, metals, building materials and machinery were up slightly 2% for the first six months of 2014. All flatbeds are up 10% for the first half of 2014 compared to the first half of 2013. Our van business increased 9.2% for the first half of 2014 compared to the first half of 2013. All of these comparisons are net of fuel. Conditions have improved in brokerage. Total revenue in brokerage increased to $78 million for the first half of 2014 or 5%. Margins are stable on other brokerage…

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

Yes hi, it’s Chris Wetherbee. Thanks guys for taking the call. Maybe I can start on the margin side. I guess I just wanted to understand a little bit how we should think about the cadence of margin in the various segments. I think you said 95 OR in the transport side and 85 value-added or logistics. So, that sort of implies a bit of a pickup here into the back half of the year, but maybe my question is more about the longer term when you think about 2015 and you get past some of the incremental headwinds on the value-added side. Is this still a business that can operate sort of in that mid-to-upper teens type of range, I guess I just want to make sure I understand first?

This is Scott Wolfe, Chris. We certainly believe that from on the logistics side of the business that we will be able to operate and present a margin rate in that mid-to-high teen range for 2015.

Okay, so that’s what you think. And so obviously there is a bit of a step up here coming in the back half of the year, I think that’s consistent with your comments. When I think about some of the normal seasonality from 2Q to 3Q, typically you have some of those interruptions from a maintenance perspective on some of the customers. You mentioned in the commentary that maybe some of that would flow into August. Should we expect a little bit – how should we expect seasonality to trend 2Q to 3Q? Is it a little bit more pronounced than normal or is it basically in line with what we have seen in previous years?

I believe it will be in line. The expansion into August typically what we would see is in the late June July timeframe. The OEM customers particularly would shutdown for model changeover. This year because of new product launches and those kinds of things, there is an extended time frame. It’s no more than normal. It’s just falling outside of the normal cycle.

I might add Chris, year-over-year trends are what we commented on, but if you look three versus two transportation segment is basically flat driven by number of days more than anything and seasonality things like that. The logistics segment again primarily driven by the automotive piece of it is basically down kind of mid-teens over the second quarter. Growth from third quarter of last year, but that seasonal effect – the second quarter is always the strongest quarter for that business. Third quarter is always the softest.

Okay, that’s helpful. And then I guess when I’m thinking about the pipeline of new business, it sounds like things are continuing to go well with – I think, Scott, you mentioned quite a few potential opportunities both for new and maybe existing customers as well. As you are thinking about sort of the conversion of that pipeline, do you feel like things are sort of building and so the pipeline is getting a little bit more robust so maybe we can expect a little bit higher rate of conversion going forward or am I reading a little bit too much into the comments that you made earlier in the call?

We again – when we found the enterprise sales team as Universal purchased LINC and we put the sales activity together. At that point in time, we were in a transitional phase. And in what it took for us in the logistics side, the – there is a significant longer lead time. The items that I discussed with you are once that we see coming to fruition, if we are successful, predominantly in the first half of 2015. But we are working on projects and pricing projects like now that we’ll not launch until 2017 and 2019. I didn’t talk about those at all. So we are seeing a more robust pipeline and we have seen basically in the last 18 months.

Okay, that’s very helpful. And I guess my last question would just be around the potential for acquisition targets. I think Don talked about potential opportunities on the intermodal side. How should we think about sort of your positioning toward potential acquisitions? Is it – is everything on the table as a possibility for one to happen maybe this year or the next 12 months as you think out and into that target most likely going to be on the intermodal side, or are you sort of all options still open here?

I’ll answer at least the part on the intermodal side, Chris, this is Don. We have look at both big and small. What is important to it though, is that it is a good fit with our strategy. We’re not the same in some of the domestic intermodal companies. We rely heavily on the international trade and international steamship marketplace. So we will continue to look at, at least on the smaller side on some of those. We’re always interested in something that would be transformational and we are looking, but again more than likely if it’s strategic, it’s going to be a little bit smaller and it will be leaning more towards the international trade.

Okay, that’s very helpful. Thanks for your time. And Jeff, welcome aboard. Thanks.

Okay, good to see – talk to you, Chris.

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

Great, thanks. Good morning everybody and Scott, congratulations. And yes, Jeff, welcome aboard. I guess I wanted to follow-up with Chris’s line of question kind of on the second half in the expectations. Is the full year revenue guidance still 10% to 12% and that’s the case to me it seems like that it implies a pretty significant step down in the growth rates in the third and fourth quarter and I just want to make sure that number one, I’ve got that right and number two, what would be the pieces that are driving the decelerating revenue growth in the back half.

Hi, Todd, let me take a swing of that. Yes, 10% to 12%, I think that was in my comments as well. The thing that most impacts the third and fourth quarter year-over-year on the logistics side is the trend that I commented on in responding to Chris, second quarter is a strong quarter. So, comparisons to previous quarters have to be taken into consideration. And the rest of that, I mean, I think we think in terms of compared to prior year, we’re still kind of in the low-teens high single-digit numbers with respect to transportation, which is I think very consistent with what we said in terms of both pricing and loads. I think what we’re trying to suggest is that the economy seems to be growing consistently at a low but consistent rate in the markets that we’re in. We’re getting good pricing because of capacity, so we can look back from the numbers. But those are the two major things that are driving the segment revenues. Todd Fowler – KeyBanc Capital Markets: Okay. And then – so just on the value-added services side it’s mostly the seasonality, but are there any contracts that are transitioning off in the back half of the year will be pretty much worked through the contract transitions over the past couple of quarters?

Well, we have worked through them. The costs associated with them has kind of run through, but if you go back to second quarter or third quarter a year ago, it represents $8 million to $9 million worth of quarterly revenue that won’t to be in our third quarter in connection with those old businesses. Todd Fowler – KeyBanc Capital Markets: Okay, that helps. And then the comment on the margin expectations for value-added services, does that include the step up in amortization related to Westport and I guess what I am trying to get a sense of is right now the segment is kind of the mid-teen margin level and a year ago it was kind of in the high-teens, is the biggest difference there the amortization related to Westport, or does they have something more to do with the mix shift and some of the contracts that have transitioned off?

I’m going to let Scott respond to that question because he was responding that to me in my office earlier today. Go ahead Scott. Todd Fowler – KeyBanc Capital Markets: I am just glad I am asking the same question I guess.

What we are really seeing, we talked just a couple of moments ago about getting the enterprise sales group and those kinds of things, the activity in those going and the amount of lead time that it takes to bring that business in. What we are seeing is that our business model the way that it’s cost and priced, to get the higher-teen margin rates requires an influx of new business on the front end. That has been slow to develop. Todd Fowler – KeyBanc Capital Markets: Okay.

Typically that business comes into the higher rate. So that’s why we are working diligently on improving the revenue line.

Westport has performed very well. We are reluctant to say exceeding expectations, but it’s doing what you would hope a new acquisition does. And it’s also kind of got the wind at its back with respect expect industrial demand for heavy tractor. So I think it’s taking the additional couple of million of amortization in stride. And so I would say the first part of your question was how does Westport affect that, we don’t think it’s being hampered by the amortization of Westport’s intangible. Todd Fowler – KeyBanc Capital Markets: No and Scott, the answer really helps because I think that was something that I would knew and maybe just I have forgotten or put it in the back of my mind that the margin profile is typically higher and so if I understand that correctly once we see the value-added services revenue growth start to reaccelerate organically that’s going to help the margin profile?

That’s correct. Todd Fowler – KeyBanc Capital Markets: Okay, good. And last two ones I had. David, I think you had mentioned that there were some corporate costs or I wasn’t sure how you actually termed them in the SG&A line, this quarter I was curious if you could quantify what those were for and how much they were. And then my last question is what we should be thinking about for interest expense? Thanks.

Sure. They were corporate costs and interest expense. If you look at the segment reporting detail of the second quarter versus first quarter, you can kind of get sense of the order of magnitude in the second quarter. But it’s a variety of things, it’s no one thing. But we did do some things in – of an exploratory basis in the capital markets in the second quarter that is the primary driver of the quarter-over-quarter change in interest expense. And we had some additional reserve items primarily in connection with our value-added services business kind of close out costs associated with the close down of some operations, as well as some reserve items in connection with some service claims that were directly hitting kind of the operating margin primarily for the logistics business. So I would say maybe it’s about $0.5 million of excess interest cost and maybe $800,000 to $1 million of costs that hit the operating line that would be not specifically associated with the ongoing operations. Todd Fowler – KeyBanc Capital Markets: Okay, that’s helpful. Thanks for the time this morning.

Thanks, Todd.

Your next question comes from the line of Kelly with Macquarie. Your line is open. Kelly Dougherty – Macquarie: Hi, thanks for taking the question. Just one quick clarification, the margin ranges you are referring to are EBIT margins, not EBITDA, right?

Yes. Kelly Dougherty – Macquarie: Okay, thanks. Just wanted to talk a little bit about the dedicated business that you have, should we think about them as kind of cost-plus businesses where maybe you pay a little bit more for purchase transportations or things like that in a given quarter, but then you’re able to recruit that they’re just a timing lag or are they contracts that have a set price and then the margin has to knew if there is any upward pressure on cost.

Dedicated transportation as we handle it today is contract base transportation. Therefore, it is a fixed scenario for a given period of time so, fixed scenario meaning a fixed cost-in model for a specified period of time. Kelly Dougherty – Macquarie: And how long are they, I’m sorry, I’m just wondering how long that is specified. Is it renewed every year or?

Transportation generally – transportation contracts are reviewed and renegotiated on an annualized basis. Kelly Dougherty – Macquarie: Okay. And now do you sign the – I guess I’m trying to get out is some of these relatively recent upward pressure on trucking costs have already been captured and the pricing or if may be there is some more leeway for margins once you go back and make up for those higher costs, I mean, how do these things get signed on a calendar year basis, kind of rolling throughout the year, how can we think about that?

Each contracts certainly has a – not everything expires on April 1st. The contracts are varied by customers throughout the year, but your question is very appropriate today. Based on the issues that we face in the dedicated transportation in the first quarter has required us to reevaluate our costing relative to that business. So, we are aggressively pursuing interim contract price increases with two or three of our accounts in that dedicated segment. So, it’s a TBD. We will basically specify what we need to be able to do business that then will end up in a pure negotiating strategy and the conclusion to be determined. Kelly Dougherty – Macquarie: Okay. Is there any kind of move to change the way that contracts are structured so, maybe it’s not necessarily a fixed price given that kind of moving parts now or maybe it’s more of a cost plus or fixed margin?

Yes, Kelly, this is David. I know from some of our last – our past conversations and reading some of your analysis another of our peers that you’re kind of focused on the margin, the consistency of the margin. We actually generally believe that the dedicated business allows us to lock in the economics of our contract for a longer period of time than just a spot buy. So, we’re not – that portion of the business is not transactional and it has the opposite of the effect that you’re talking about. What Scott referring to is certainly in the first quarter where productivity was affected, it kind of late open some exposure that we had with respect to the – the economics of dedicated business and one of the great things about those dedicated lanes and those dedicated contracts with those relationships is it allows us to behave, it’s not work in the way need to be for us. We need to renegotiate the conversation. So, it’s not a question kind of margin compression over time. It’s when you become aware of different economics you have the ability to change them and that’s what we do in the dedicated business as opposed to the opposite of that would be like a brokerage type of an arrangement. Does that…

What I was basically talking about when you think about other companies that have dedicated arrangements, it’s a cost of business so, that – it’s not spot at all, I mean, it’s kind of multiyear, but it’s, here’s the margin that I need to get and I was just kind of wondering how yours are. But it seems this is a fixed price contract until your price or your costs move higher, and then you go back and you renegotiate that fixed price. Is that how to think about it?

Yes, it is.

Okay. Are you finding that customers are looking to do more of that as capacity gets tighter and maybe they are worried about being exposed on the capacity side? So, people are more interested in these kind of dedicated arrangements?

In our dedicated environment, it’s one that’s more historical. So, it’s not related to recent trends. What we are seeing are our customers are positioning carriers, positioning from the perspective of what can we do to help you to where they are trying to protect current capacity and soliciting investment for future capacity. All of which again is to be determined.

Okay, thanks. Just switching gears then I know you guys are very focused on the international side of things in the intermodal business. And just wondering if you could help us think about what kind of impact if any there was from shipping company being concerned about the strike situation on the West Coast? Has that kind of boosted how you think about your operations in the second quarter and maybe if so some of that 3Q what would have been in 3Q got pulled into the second quarter?

This is Don, Kelly. And yes, we have been watching it very closely. The negotiation at least seems to be moving along amicably. We have seen some shifting of ships from one market to another, but it hasn’t been a real impact yet. As the real shipping market winds up here in the next few weeks, we are watching it a little bit more closely, but again that’s where we see our best opportunities. Our national footprint with those steamship lines has given us lots of opportunities, where we are seeing some price flexibility going forward. And we are getting that because we serve not only the ports, but the rails. So, we are pretty optimistic about that. We are in Savannah and Charleston and we are also in LA, Long Beach. So, we do see them reading those tea leaves and we are trying to react to them too.

In addition to that, Kelly, I would tell you that we are confident personally in the West Coast capacity. In other words, we are looking at investing potentially making an acquisition, because we need and fairly need a greater penetration in a very large market that can’t be easily replaced.

That’s helpful. Just wondering if you saw I mean because we know of companies here have kind of shipped earlier than maybe they would have otherwise concerns about the strike happening. Did you see that benefit in the second quarter in those numbers or really that’s just kind of the overall environment and hard to pull that out?

Yes, Kelly, that is part of our drayage business. When we look at the first quarter, we also suffered from the difficulty in our intermodal business, but demand for drayage services is pretty strong right now. And we see it going forward the next two quarters.

Kelly, are you – is your question though specifically in connection with LA and Long Beach that somehow people are pulled into second quarter from the third quarter.

Yes. I mean, we have heard of people who are shipping things earlier ahead, because they were worried about this strike deadlines. I wasn’t sure if some of the benefit maybe you saw in the second quarter would have been taken a little bit from what you are expecting to see in the third quarter, but that doesn’t…

The intermodal pulled forward demand.

Very well could be. We are hearing, again a bifurcated response from most of our steamship lines, but yes, we do think some of that is pull forward.

Okay, great. Thanks very much.

Thank you.

Your next question comes from John with Stifel. Your line is open.

Good morning gentlemen.

Good morning.

Good morning.

Just wanted to and maybe if this is too blunt a question, we could handle it offline, but with Scott transitioning to the board at the end of year, Jeff will be taking over, fortunately has a chance to sort of integrate himself into the operation and get to know everyone and so forth. But I was a little surprised and I know many of our clients were surprised that Scott’s replacement came with a preponderance of less than truckload experience, given that Universal is not a big player in the LTL market? I don’t know who wants to address that, but either Jeff could address it directly or perhaps Scott you can address it?

Yes. We both may take a shot at it. First, I would tell you that Universal doesn’t have any plans to get into the LTL market. With Jeff what we – what we saw was an experienced transportation person that isn’t new to the industry and has a very strong background both from a managerial, from a finance perspective. Those are strengths, he has proven his capabilities. What does Jeff have to concentrate on learning certainly is the value added business. That is something that he would be able to learn very quickly. My goal and part of my reason for being on the Board is to continue to help in that arena. So from that perspective we think it can be a very smooth transition. So Jeff?

Yes. I would agree with that. I mean this is a unique opportunity to spend this much time in a transition. I mean I think we could all say that most of the times in our career you don’t get six, seven months to learn in a transition. So I appreciate the fact that we are able to do that. And to Scott’s point, yes I don’t consider myself an LTL guy either just because I am more of a finance guys that was in LTL, but I have also got a lot of experience with UPS and operations. So I don’t consider myself to be very specific but more of a broad business person that I think can understand what levers to pull and we will bring that experience. So John I think it’s a great opportunity for me. I am loving what I am seeing and just looking forward to. But Scott will there and I will get as much out of his brain as I can in the next five months and he will around to help. But I sure think it’s going to be a great opportunity and we have got lots of good things to do going forward.

Those are good answers. I appreciate that. Is it fair to say that there is a fair amount of customer overlap between your Holland customers and the Universal customers?

Well, I think there is definitely some Holland was huge from an automotive perspective, Tier 1 suppliers as well as the direct OEM, so there is definitely some customer overlap. There is customer overlap on the retail side in the value add business there is no question. So I am having some good conversations with some customers and look forward to spend more time converting most of the customers, but there is definitely some overlap.

Thank you for taking the time to answer that question. Secondly shifting gears a little bit towards the acquisition area there are a number of folks out there that have become quite a bit more what I would call proactive in the acquisition space, we just saw this morning that TransForce is buying Contrans just one of the biggest trucking roll ups up in the Canada itself, lots of combinations occurring out there, are you finding the acquisition world a little more cluttered with buyers out there looking for opportunities or what you are looking for sort of unique enough that you are not seeing a lot of competition?

There are a myriad of opportunities that exist, but acquisitions of LINC and Westport I think demonstrate from a logistics perspective what we are looking at. There are some very large companies that are currently on the market. Would you evaluate those to make a certainly huge change in your business model, yes. We don’t believe that that is an area in which we can compete right now. And the reason is private equity is playing a huge role in many of the acquisitions that we are seeing right now. And the multiple is potentially getting a little too far away. From a transportation – so from a logistics perspective with the opportunities we have John, we are hopeful certainly to be successful and would like to focus on the organic side of growth when it comes to the logistics business. In the transportation segment, we will again look at smaller tuck-in type that help us either from a service perspective or a geographic perspective to help us in penetration and get us additional capacity. We do not envision at this juncture a huge transaction to buy competition.

I guess those transportation tuck-ins are almost by definition less risky, less expensive and enable you to build out your geographic footprint and build out your capabilities and so forth. So, those make a whole bunch of sense to me.

We have not had any of those, John that have really let us down. They don’t make the big impact, but they have helped us with our strategy and helped us reformulate the company. So, it still makes a lot of sense for us.

Now, not to beat a dead horse over the head on dedicated, there was quite a line of questioning earlier on that topic, but there are some companies out there that are involved in fairly big dedicated contracts. I guess with truckload capacity being so tight going forward primarily due to the worsening driver shortage, a lot of customers are thinking about the dedicated alternative as a solution to the problem long-term, but it seems like these startup expenses tend to drag on for multiple quarters. How confident are you that the startup expenses associated with this new relatively large contract, I presume, that you started up here in the second quarter will be completely behind you by the end of the third quarter? Is there any risk those swap over into the fourth quarter, the first quarter of next year?

We are certainly currently in our second month. What we have been able to do is to stabilize the operation, which is critical in the dedicated side of that, John. Our focus then going forward for August, September will be to gain control of the launch cost that we put in place. We are already starting as an example to – in a launch like this, the workforce from an administration, excuse me, administrative perspective, we have about 2.5 times as many people involved in the launch as we would on the run rate. And so we will be drawing those individuals and there is a timeframe to get that accomplished and a lot faster than the fourth quarter. From an equipment perspective, we did a lot of leasing and made a lot of purchases to ensure that we could give the customer the service level that we basically promised in execution. We have already started to turn back equipment or reallocate in some instances equipment to other operations. So, I am reasonably comfortable in saying that we think the fourth quarter will be at operational level and startup done.

Got it. Thanks very much for taking my questions.

Sure. Thank you.

There are no further questions at this time. Mr. Wolfe, I turn the call back over to you.

Well, thank you. I appreciate it. Thanks everybody. As always, we appreciate your interest, your participation in today’s call. Certainly, we look forward to speaking with you in the near future. We have got a lot of good things going on for ourselves. We wish you to have a really great day and certainly very enjoyable weekend. With that, thank you all again. Bye.

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