Hello and welcome to the Universal Truckload Services Inc.'s Full Year 2015 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 our 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 Shaun. Good morning. Thank you for joining us today for Universal Truckload Services' 2015 full year earnings conference call. We have a lot of good things to talk about today. We are successfully driving change throughout the organization and appropriately as the company evolved we are also proposing a corporate name change that more accurately describes who we are and what we do. As we said in our 8-K filing last night, the new name is Universal Logistics Holdings Inc. We believe this name better reflects our capabilities and our broad service offerings. We will continue to go to market as Universal using our different value offerings, Universal Truckload, Universal Intermodal, Universal Value Added, and Cavalry Logistics. We will be seeking shareholders approval in April but we fully expect the new name will be adopted. For full year 2015 total revenue was down 5.3% or 62.7 million compared to last year with 54% of that drop attributable to lower fuel surcharges year-over-year. As you would expect, lower fuel surcharge revenue impacts our transportation business unit the most. For the fourth quarter we continue to see the effects of low oil prices, slower U.S. industrial production and global economic shifts like the slowdown in China, all acting as headwinds through our revenue growth plans. We continue to see flat revenue in transportation but solid growth in brokerage steadily improving value-added growth and moderate intermodal growth. Starting with our largest business unit. Transportation services revenue was down 9.1% to 177.5 million. It now represents 62.1% of our overall revenue. Low oil and gas production, weak domestic steel production from the middle of last year continued. [Low comp] [ph] for the fourth quarter 2015 was down about 15% from fourth quarter last year. While 2015 was a difficult year for transportation especially…

Thank you, Jeff. Good morning everyone. Universal reported fourth quarter 2015 net income of $9.3 million on consolidated revenues of $286 million. Earnings per share were $0.33 which, as we communicated on February 2, included a non-cash charge of just under $0.03 per share related to our December refinancing. For the full year, we reported net income of $40 million or $1.37 per share on total operating revenues of $1.129 billion. 2015 operating income is $73.4 million, and we calculate 25 EBITDA of $108.3 million which you can see on the last page of our release. Reported revenues and earnings fell within the ranges Jeff and I communicated both on our October 3 conference call and again in our early February press release. Consolidated fourth quarter operating revenues were 5.5%, or $16.4 million lower than in the fourth quarter of 2014. Extending trends we reported in Q3, 2.4% growth in our intermodal services was offset by a 9.1% decline in revenues from transportation services, and slightly lower revenues from value added service operations. However, approximately $12.3 million of the $16.4 million in revenue decline is the result of lower fuel surcharges. When compared to the third quarter of 2015, Q4 revenue from our transportation services were down less than 1%. Our load count of 149,386 was down less than 1% from the immediately prior quarter. However, average revenue per load excluding fuel surcharge was down 3.9% reflecting this after pricing environment. Although overall demand from our flatbed and heavy haul customers is certainly lower than this time last year, it has been comparatively stable in recent quarters. Value added services fourth quarter 2015 revenues totaling $71.5 million reflect a 4.6% or 3.1 million increase in quarterly revenue compared to the third quarter. Continuing demand from existing operations and new revenues…

[Operator Instructions] And your first question is on behalf of Scott Group, Wolfe Research. Your line is now open.

Hi. This is actually Weng Zhou on for Scott Group. Good morning guys.

Good morning.

Yes, just wanted to drill down little bit more on these rates, it looks like rates net of fuel both in the trucks transportation segment and also intermodal segment, wondering particularly in the truck segment, was there any sequential change throughout the quarter. How're you looking in January and February and was there a kind of difference between spot and contractual pricing?

I will start with that and maybe - this is Jeff, David can maybe turn. We did see pricing change throughout the year. It's a little bit different when you look at truckload versus intermodal. Intermodal saw relatively stable pricing in first part of the year and then declined in third and fourth quarter for really a full year change on the intermodal total rate for load really won’t change less than 1%. But we saw a much more significant impact in the spot market which has a bigger impact on the intermodal side and we’re kind of seeing same things so far year-to-date, not hugely further declined but just kind of in that pressured sense. Truckload I don't have it right in front of me, I don’t have the truckloads quarter-to-quarter, we saw a much more significant rate decline in the truckload segment but I think probably half of that really was fuel surcharge versus just pure price but there definitely was price pressure to the tune of probably about 5% rate decline on the truckload side.

Yes, I would just maybe there clarify a little bit, I think intermodal is very strong in the first and second quarter of this year and the momentum slowed down. So I think as we ended the year in the third and particularly the fourth quarter was basically flat which I gave some of those notes in my comments. And then the first couple of months of this year I think it's kind of a little bit more of the same - trying to figure out kind of where things are going. Obviously we got a little bit different niche in the intermodal business where we were doing you know ocean to inland dry type of work but the access capacity and all of that does impact that business as well. So I think we are holding our own on pricing in the intermodal but it’s still kind of very soft.

Okay. And within fourth quarter was there any change from October to November to December?

I don't have that information in front of me. You know actually the fourth quarter sequentially intermodal -

I guess that’s my point –

It didn't get a whole lot worse.

The fourth, the third was basically off 50 basis points. There was deceleration but I think the deceleration occurred a little bit earlier.

Okay, got it. And has [indiscernible] have a general sense of contract for spot pricing - particularly in Truckload?

There was a lot of activity on customers wanting to renegotiate some contracts. I don't have a specific rate per contract versus spot. There is obviously more pressure in the spot market from a rate perspective. But you know that’s the good and the bad I guess in the spot market.

And some of our larger customers again the volumes didn't weigh off like steel and things like that. Those rate changes came into effect much earlier in the year.

Okay. Got it. And also just a question, I guess on the Panama Canal scheduled to come in some time this year. Wondering how you're thinking about that, will that be an opportunity for your East Coast drayage operation this year, next year and I guess more in the long term.

Yes, I think the expectation is around April I believe is when that will open and as you said we’ve got a lot of East Coast ports where we should be able to take advantage of it. We’ve been planning for. I think a lot of those ports though aren't ready maybe potentially the big shifts, I’m not sure if they have the capability to do that. But we are ready building enable and our facilities to handle more volume if more volume comes through the Panama Canal.

Okay, got it. Great. Thanks for the time guys.

And your next question comes from Chris Wetherbee with Citi. Your line is now open.

Good morning, gentlemen. This is [indiscernible] in for Chris. First question just shifting from more broader - on VAS looking at the guidance, I just wanted to dig in a little bit to some of the bigger pieces that are supporting that 10% to 15% growth. I think you said 10% to 15% margins are getting back to more like historical levels. Just any color you could give in terms of particular end markets or pieces of the business that you're more excited about there.

Again that's the area that has the most activity and the most growth we're seeing because of business we’ve already secured. So there is two pieces, there is business that was already secured last year, that’s now coming online, so I’m seeing the actual revenue growth already in the first quarter. And those two big projects I talked about will be fully implemented by second quarter, the vast majority that's already in first quarter. So it's there, so I’m seeing that 10% range – when I get a range of 10% to 15% growth it's 10% earlier in the year and will be definitely at a 15% by the second half of the year. So the business is already in there. The exciting thing is – the new customers I talked about the aerospace and the off-road tool vehicles that people can probably identify what that is because we’re doing really, really well. A great thing is they reached out – we didn't know it was kind of joint effort, they loved what we’ve done from an automotive perspective because if you look at aerospace and you look at there is other customer, their issue was throughput and velocity. They need to speed up their production. The automotive folks their 4-K is velocity and a lot of units produced so our expertise plays very well with what they are looking to do and it’s a perfect mirage and we’ve been able to secure these additional customers because of what our expertise is. So very excited about that and we see opportunities with those existing customers that we secured last year as more and more opportunities are presented to us, so just very excited about that. So when I say 10% to 15% growth, I see it, it’s there and the margins are there as well. So I’m pretty comfortable with that comment of 10% to 15% growth and 15% margins. Q – Unidentified Analyst: Okay, great. Thanks. That's great color. I wanted to just quickly on fuel surcharge. Thanks for calling up those numbers. How much - what do you guys expecting in terms of fuel surcharge on the truck side or the transportation segment side for 2016, how much of that is baked into the revenue guide?

What do we think fuel is going to do?

I'm sure -

We are not anticipating dramatic change, one way or the other.

I would tell you to look at where we are right now or lower than where we averaged last year. So the expectation would be there are still pressure that we are going to see in 2016 on fuel surcharge. But who knows what's going to happen in the second half of the year.

We are going to end the year-over-year comparisons. We are going to still see that hit. But that's why I always add the color of the momentum from the core - to the prior quarter, because I think that's kind of flushed through. And if anyone can tell us what the – down the oil is going to be worth in April, we like to meet.

Yes, exactly. And just I might have missed $16 million in 4Q '15 and then was it $24 million in 4Q '14? I'm sorry can you repeat the number.

Let me find it in my notes. Specifically for truckload?

Yes.

I'll probably not be able to find it. Let me come back, see on it.

No problem. I guess last question -

I'm sorry. $16 million in Q4, $18 million in Q3 and $28 million a year ago.

$28 million. Okay, excellent. Thank you for that. Trying to - I noticed a little bit of a step up in the direct personal and related benefits, and then an offset in the purchase trends expenses this quarter. So wanted to see if you could comment on what the moving parts were there that drove those two movements.

You're talking fourth to third or fourth to prior year?

Fourth to prior - fourth versus prior year.

In the transportation segment?

No, no, overall.

Overall?

Yes. I saw direct and personnel and related benefits that came in around $61 million, correct? It's stepping up sequentially from $54 million and then year-over-year from $50 million?

I mean there hasn’t been any huge fundamental shift. We are constantly - we still get a lot of back office opportunities for a streamlining and right sizing our SG&A, but up top my head, I can't think anything that would have been that significant of a change unless it's just kind of a reclassification. But we'll have to get back to you on that.

I'm actually going to take a little bit - I'm going to extend that, because I'm actually working at those details and I think it is more just a reclassification issue inside of that account. So I am looking at the $61 million and $51 million and it really is just kind of a different treatment. As we talked about a year ago, we did a significant restructuring of our subsidiaries. And regrouping of things and then launched a new ERP system. So there is some - there is kind of reclassification inside some of our accounts that makes those kind of observations a little bit more difficult. As we've simplified and streamlined the organization, so I apologize for that. I wish I could give you a better answer, but that's probably the driver.

Okay. That's very helpful. Thanks. I appreciate the time guys. I'll turn it over.

And your next question comes from Todd Fowler with KeyBanc Capital Markets. Your line is now open.

Great, thanks. Good morning. Did you have a number for what the headwind was in 2015 for the dedicated operations –

As far as the full loss for the year?

Yes. That will be helpful, Jeff. I mean just thinking about what that impact would have been on EBIT in 2015. Hopefully, that doesn't reoccur in '16.

Right. So look at it this way. So I'll even take you back to '14, because we have been talking about it for so long. So in '14 we had about $6 million loss. I think we cut that about in half in '15 to around $3 million, so we fully expect - again, if we can get to full profitability for the year then that's the incremental pickup you'll get from the dedicated piece.

Perfect. Okay, that helps. That's what I was looking for. And then just with respect to the value added services and the margin expectation, is the 15% kind of a run rate where you expect to be exiting the year or do you think that you can have 15% margins in the first half of the year. Some of the new contracts are coming online.

To be honest here, I think I can get 13% in the first half from what I'm already seeing. If you remember how we talked about the value add in the projects and the key is bringing on new projects, because the way they are priced and the cost structure is, the first part of those projects there is the three year or five year those first couple of years as win, your margins are the highest and then you kind of level out as your cost tend to rise due to project. So, since we're bringing on so many new projects, that's when our margins will be the strongest on the new projects knowing that that offset some of your older projects that are aging out. So I feel pretty comfortable. We can get that 15% margin in the first half of the year.

Okay, yes. That makes sense and we have talked about that. And maybe this gets back to the previous caller's question. But as far as the visibility that you have, I mean within the 10% to 15% of the revenue growth. That's what you have already in the pipeline and so there are additional contract wins. There could be upside or what's the visibility I guess around the 10% to 15%?

Todd, we have things in the pipeline that are kind of also perspective from some of the new customers as well as the other stuff, but it tends to be backend loaded in the year. So we are kind of taking a little bit more of wait-and-see. It speaks well for 2017.

Is it more so for - but I'll take it. Again, I'm optimistic out here. But what I'm already -

I'll read both of the comments.

What I've already seen, again, I've got January results and I've got portion of what I'm seeing in February. The 10% is already and based on what we have already won. So the 15% range is out there, but I'm already comfortable saying we are there on the 10% side and I think as we progressed through the year, I am very comfortable that we'll get out to that 15% as the year progresses. And then as we win more, because we have got a lot of big projects on the horizon that we are working very, very hard to secure. I think there is upside from there to be honest with you.

Okay, that helps. And then just a couple of last quick ones. Do you have a comment on expectations for the transportation segment margins in 2016? It looks like they trailed off a little bit here on the fourth quarter. I'm assuming there is probably some seasonality in there, but any thoughts maybe on a full year run rate where transportation segment margins could be?

I don't see it declining from where it's at now. We've got some initiatives on the books that we are looking at from a cost perspective, because we know we've got - we lost some revenue last year that were - we are trying to do from cost perspective. So I don't see it get any worse. So I would say, that 4% to 5% range.

Okay. And then what would the plan B for your free cash generation, it sounds like this year is going to a little bit elevated from a CapEx standpoint, but outside out the CapEx piece, what are you thinking about with free cash?

A combination of debt pay down possibly something with shareholders.

Okay.

Looking ahead into 2017 with the value added pipeline what it is. We are trying to look around the corners as far as we can to make sure that we have enough resources certainly in terms of our new approach of financing. We have got some different types of considerations then what we historically had. So we want to make sure that in addition to our free cash flow that we just kind of have reservoirs of liquidity to be able to take advantage of opportunities. But we are looking at everything. To the extend we are generating free cash flow, we do have more structured debt principle repayment obligations as part of the new refinancing then what we had historically been the case. So there are - there is more commitment with respect to the use of the free cash flow to debt repayment, structured commitment. But we are looking at a variety of things.

Okay. But nothing - I mean not getting back on the acquisition trail or anything like that anytime soon?

No, Todd, I would say nothing in the near term. Nothing significant. We always look at little small things that make some perfect sense to us. But again, as I've said, at some point that will make some sense, but I would say right now priority one, is probably to pay down debt, which is part of the whole refinancing and the structured amortization paying off of debt as we go but I think that would be number one, acquisitions are probably down the road.

Okay. And then just my last one, Dave I think you made some comments on what blended interest rate is from an interest expense on a quarterly basis, do you have a run rate that we should use for modeling purposes?

You know I think it's going to run out cash interest to maybe about 7 million a year.

Okay.

It is because we have gotten out some structured kind of fixed payments in it that were – principle goes up, payments go up, interest goes down those kinds of deals in the equipment financing in particular is actually probably it will tend to get smaller from first to fourth quarter but not by a lot. So if you just took kind of like, 7 million divided by 4 cash interest. And then the news at issuance cost is comparable to what we rode off is still by 1.2 million, 1.3 million new stock and that will get amortized out over 5 years for the non-cash portion.

Okay. Thanks a lot for the time guys.

And your next question comes from Kelly Dougherty with Macquarie. Your line is now open.

Hi, thanks for taking the question. I just want to quick follow up on the prior question. What do you think normalized margins are on the truckload side of things and the dedicated side and when do you think you can attain those levels?

I made a comment that we really were focused on margin improvement on the truckload side that on the first things I said when I came on as CEO and last year with the economic environment we made it fairly tough but we are still able to maintain for the most part our 4.5% or so margins on the truckload side. I clearly think we have the opportunity for a point better, or 100 basis points for sure. So I’m really shooting for a 5.5% to 6% range and then a long return target of maybe a little bit better than that but that’s probably – it's going to take us more than a year to get there I am guessing. On the dedication piece, at the end of day if you go back prior to a couple of years ago when we used to make money on the dedicated piece, I think a 10% margin on dedicated is what we’re shooting for and we’re looking to price new business right on dedicated if we can get at least the 10% margin, we’re not bringing it on because I think that is fairly reasonable for a dedicated model or we’re providing what I would call a most expedited transportation. So, the new piece of business we just brought on which is significant for us is that debt level the 10% margin so that’s what we are shooting for. Now overall it’s going to be a while before we can get the full book of this on the dedicated side to a 10% margin but I think for sure in a short term its probably 5% and then we’re shooting for 10%.

Okay, great. So 5% is kind of the number. When you talk about returning the profitability, I just wanted to get a sense of what your -

That’s a good point – we’re very close to that ma'am.

Okay, great. That’s helpful. And then just specifically on the truck business. We’d love to get your thoughts on the outlook for load growth this year maybe what pricing looks like ex-fuel. And then also how you think about the enforcement, I’m not sure what the penetration looks like for most of owner operators and maybe how that brings up.

We are working really, really hard to get - again I had said that, 1% to 2% growth on the truckload side, I don’t see much more than that to be honest with you Kelly. From a rate perspective right now, rates are pressed and we are not going to get a lot of growth on the top line from a rate improvement. But I think the opportunity is to grow the load count but it's going to be significant. So I’m going to say 1% to 2% if we achieve what we expect and work really, really hard to get there. On the ELD enforcement, all of our company which isn't very many as far as company turmoil's are already on the ELD. So that’s a fairly small number of our total. We do have some operators already on ELD especially those who maybe had struggled from a safety performance perspective we put them on the ELDs. So my goal is to try to be fully implemented by the end of this year and we’ll see how that plays out. I’m going to stand by what - I think I have said before and what most industry folks are saying, it’s a 6% to 8% impact from a capacity perspective for everything that we can analyze and see and talk to folks about how it’s going to impact them. So again, hope to get fully implemented by the end of this year, and we will see how it goes. It’s a little bit tougher obviously with the owner/operators, but at the end of day, they know they have to do it at some point. So we are going to try to encourage them to do it sooner rather than later.

And is there anything you can do with covering the cost or somehow trying to plot them to do it sooner rather than later, or is that really, the owner/operators, they view things according -

That’s all in the mix as far as - we are looking at certain things that we would like to do. Typically, you pass the cost on to an owner/operator. That’s part of their business. You want to pass the cost on them or something like that. But I think it's got all the parts of negotiations Kelly to try to encourage them, and we can do things like that, offset, maybe the installation cost, they still pay for the monthly fees. There is lots of different conversations going around that.

Sure. That’s helpful, thanks. And just the last one, I'm just curious, what the overall industry exposure looks like for Universal as a company and then specifically, within the VAS segment. So just trying to get a sense of where auto stands and then maybe what the targets are. I know you said you want to grow the business non-auto business. Maybe what the targets are from mix going forward?

There is actually a pie chart that you can still get to on our webpage from some presentations that we did, first week of February. But end markets, the way we ended the year has been actually pretty stable over the last couple of years. Auto is about 28% of the total business. Industrial and now we are adding aerospace, was 16% last year. Steel and metal is 11%, energy 7%, retail 10%, and then everything else probably 28%. Then when you look at the segments, I’d say that our auto exposure is maybe 60% to 65% of our logistics segment. And then if you take that out, you can spread the rest on across the transportation segment. What’s also interesting is about 25% of our customers account about half of our revenues. And so the larger customers tend to maybe two-thirds of the top 20, not that high - maybe 55% of the top 20 are auto related.

Okay. And is there a goal to increase that diversification as well, as you diversify away from auto, you also diverse away from 25% of your customers being half as revenue.

I don’t think it’s going to be diversifying away from the customers. The idea is to grow other non-automotive so that percent gets higher. The tough part of that, Kelly, is the automotive guys just keep on give us more business which is great because I’m taking it, and it makes it harder to maybe to diversify. But the key for us right now is just bringing on new customers that are not in the automotive space. And that will make that percent get bigger. From a total perspective, the automotive gets smaller. But to be honest with you, I don’t have a set percent in my head right now that says I want to be this percent of non-automotive. I don’t have that number for you.

Okay. Fair enough. Thanks guys.

[Operator Instructions] And your next question comes from Aaron Reeves with BB&T Capital. Your line is now open.

Good morning. Most of my questions have been asked already. But I wanted to follow up with a couple of load based question. I know last quarter you told us how your oil and gas and steel related load did in the quarter and also you are driving in. I was just wondering how those did in Q4.

The oil and gas didn’t do anything different because once you get to almost zero, it doesn’t change a whole lot. And that's what we saw. We got to almost zero in oil and gas early on the year and it stayed there all the rest of the year. So that hasn’t changed any, and we are not seeing any movement in that so far this year either. The rest of the flatbed avenged – and I don’t have it here, we may have to get back with the specifics -

We saw the significant decline in the first part of the year and then it stayed and stabilized the rest of year. We didn’t see like sequentially it get worse every quarter it was like a drop very rapidly in the first part of the year and then kind of just stayed down low. And I did say it was basically off less than 1% from the prior quarter in total. And to the extent of that business is largely half flatbed and heavy haul and those deal markets and the energy markets are there again to Jeff's point its basically flat at a low level.

All right. And then I guess another question, just thinking about the margins, I just want to make sure I understood what you were saying, for 2016 you’re looking for transportation to range somewhere to 45% kind of in that range. What about logistics, I know you talked about value added but that’s not always being logistic segment. So you have a target for your logistic segment?

If you look at the logistic segment it has included the value added and the dedicated. And I think I said we did about 23 million in the quarter in dedicated, it runs out at about 90 million of dedicated. That’s where Jeff is talking about $90 million up or down of that segment is - has a potential of moving little under 5% up to that 10% range as the year goes on and then the rest of that falls in that category of what has been historically and is kind of moving back in the direction of a 15% business. And if we add those two components together and that will be blended margin of our logistic segment.

Okay. That's helpful. That's all I’ve got. I’ll hop back in the queue. Thanks.

[Operator Instructions] And there are no further questions. I’ll turn the conference back to the presenters for closing remarks.

Thanks Shaun. We sure appreciate everybody joining us and having your interest in Universal and we look forward to talking to you next quarter. We’ll see you’ll, take care.

And this concludes today's conference. You may now disconnect.