USA Truck, Inc.
Q4 2015 Earnings Call Transcript

Published: 2 Feb 2016

[Operator:]

Good morning and welcome to the USA Truck Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jody Burfening of LHA. Please go ahead.

[Jody Burfening:]

Thank you, Denise, and good morning everyone. Welcome to USA Truck's fourth quarter earnings conference call. Joining us this morning from the company, are Tom Glaser, Vice Chairman; Randy Rogers, USA Truck's newly appointed President and Chief Executive Officer; and Michael Borrows, Executive Vice President and Chief Financial Officer. In addition; Martin Tewari, President, Trucking is with us today to answer questions. Before we begin the call, we'd like to note that this conference call will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of terms or phrases such as expects, estimates, anticipates, projects, believes, plans, goals, intends, may, well, should, could, potential, continued, future, strategy and terms and phrases of similar substance. Forward-looking statements are based upon the current beliefs and expectations of management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth and contemplated by our underlying forward-looking statements. Accordingly, the Company's actual results may differ from those set forth in the forward-looking statements. Investors should review and consider factors that these may affect future results and other disclosures by the Company in its Press Release, annual reports and Form 10-K and other filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statements to reflect actual results or changes in factors affecting the forward-looking information. I'd also like to point out that the Company is using certain non-GAAP financial measures in today's conference call to supplement the consolidated financial statements. A reconciliation of these non-GAAP measures to GAAP is provided in the table at the end of the earnings Press Release and the slides accompanying today's conference call prepared remarks. With those housekeeping items out of the way, I would now like to turn the call over to Tom. Good morning, Tom.

[Tom Glaser:]

Good morning, Jody and good morning everyone. I am really excited to be here this morning with USA Truck's new CEO, Randy Rogers, as well as Michael and Martin they're here with me too. As you know Randy joined us two weeks ago and is a very accomplished executive with an impressive track-record in logistics and transportation management. During his past two decades in the industry, Randy has managed many complex businesses, successfully creating strategic direction and putting them on solid growth track. With Randy onboard, we've taken another step forward in executing our business strategy to drive returns on invested capital and strengthen our position as a capacity solutions provider. I will ask Randy to go over his background and initial observations with you in a minute, but first I want to run through the results for the quarter and the full year. Let's start on Page 3 of the slide presentation, that's posted on the Web site. It summarizes our consolidated results. As you can see, we delivered a record fourth quarter with earnings per share rising to $0.39 from $0.34 in last year's period, an increase of almost 15%. For the full year, earnings per share rose 77% to $1.06 and on an adjusted basis, it was up 67%. This performance reflects the progress we've made in improving the profitability of our trucking operations. In our last call, I described the whole series of improvements we then implemented and as our numbers show, these have already started to take hold. Operating income essentially held at $7.3 million on lower operating revenue. Our consolidated adjusted operating ratio was 93.3%, a 260 basis point improvement over the last year's period. Even in a subdued trade environment like the industry experienced in quarter four, we can still make a lot of headway just through operating leverage. Turning to Slide 4, let's focus on the trucking segment. There much like our first three quarters of the year, our operating revenue decreased as pricing discipline was offset by lower revenue miles and lower volume. We reduced the average number of in-service tractors by 417. In addition, base revenue which excludes fuel surcharge slipped by 2.1%. Our unseated truck percentage improved to 4.8% from 6.9% last year. Moving to Slide 5 for the quarter, our operating expenses were down at more than 26% year-over-year and our operating and maintenance expense per mile fell to $0.179 from $0.215. In addition, we improved fourth quarter insurance and claims cost per mile to $0.086. All these factors combined to help improve our fourth quarter adjusted operating ratio by 240 basis points for the full year, it improved by 540 basis points. Looking at Slide 6, on the second quarter call we shared with you a series of steps we were taking to accelerate the progress of trucking’s turnaround. In addition, today I want to bring you up-to-date on what we've accomplished under this plan. In addition to strengthening our leadership team with key hires, we’ve got a lot of basic blocking and tackling to make sure all the moving parts to make our trucking organization line up in the right direction. We recognized our operations and reduced the number of touch points for each load. We developed incentive plans to simplify trucking and aligned all the functions on the same goals. This is an effort we're implementing now and expect to have growing impact as we go into 2016. We started the process of analyzing our maintenance operations with the goal of determining, what to do in-house? What to outsource? How to best meet the needs of our network and customers? We've brought on two full time trainers to assist our staff on how to better utilize our software. We've also been shifting our recruiting efforts to focus on experienced drivers, investing in their training and partnering with them to improve their work lives. We've already seen a lot of improvement and positive result in this area. We've experienced more than 13 weeks of net gain drivers. Finally, we took steps to improve the balance and consistency of our network. Our goal is to make it more compact in the process, improving customer service, assisting our drivers and making lanes more profitable for USA Truck. Now let's move to SCS, its performance is summarized on Slide 7. In our asset-light business, operating revenue was down in the fourth quarter, due primarily to softer stock market and the decrease in fuel prices. Even though our loads have increased 5.85%, net revenue is a more relevant measure to look at and that decreased by only 1.3 million year-over-year. Gross margin was strong at 18.3% and we continued to implement customer-facing technology that will make it easier for our customers to leverage our carrier partners. Our adjusted operating ratio came in at 92.2 for the quarter and 91.5 for the year. Now, I'm going to ask Michael to update you on our balance sheet and repurchase program. Michael?

[Michael Borrows:]

Thank you, Tom. On Slide 8, you'll find highlights of our balance sheet and cash flow. We ended the quarter with 101.3 million in debt outstandings net of cash, which year-to-date represented a 16.1 million reduction in debt and capital lease obligations. The decrease in debt primarily reflects reductions in capital lease obligations, as well as improved working capital management. We increased by 20.9 million operating leases taking advantage of a low interest rate and favorable lease market. Based on that, I wanted to draw everybody's attention to, we broke out equipment rents on our income statement, so looking at both D&A and equipment rents going forward will be meaningful. And as we manage capital allocation, we will continue to place emphasis on flexibility. Debt through adjusted EBITDA was 1.6 times compared to 1.9 times at the end of 2014 up sequentially. As discussed in previous quarters, we believe leverage between 1.5 times and 2.5 times makes a lot of sense and our capital structure is beneficial to our shareholders. During the quarter, capital expenditures and cash flow received from the new sale of revenue equipment essentially added out. Our 2015 net cash capital was approximately 15.9 million as we continued to execute on our fleet replenishment program and right-size the fleet, generating more proceeds than planned for in fiscal 2015. Additionally, net cash capital for the year was less than we previously anticipated, because of the tractor financings completed in Q3 and Q4. Right-sizing and restructuring our fleet was an important objective for 2015 as we reset our network, we exceeded the targets we had set for ourselves we did total of 817 high cost tractors and acquired 400 new ones for a net 417 tractor reduction to the fleet. In addition, we acquired 1,500 replacement trailers. 2015 was a solid market for selling tractors and as discussed on previous calls, we wanted to take advantage of this situation, while we were reshaping our network and before all the new OEM production began to impact the secondary market. USA Truck is still committed to reaching a targeted trade cycle where the average age of our tractor fleet is two years at 12/31 it was at 26.5 months and the average age of trailer fleet were pressing to five years at 12/31 it was 68 months. We believe the secondary market in 2016 will remain strong for trailers. As we continue to take our high maintenance trailers from the fleet and further reduce the age of our fleet, we will be moving our trailer to tractor ratios down to 3.1 from about 3.31 currently. Okay, with the clear focus on returning value to shareholders, our share repurchase program is currently an important element of our capital allocation strategy here at USA Truck. During the fourth quarter, we repurchased 708,000 shares of common stock or about 7.3% of total shares outstanding. The weighted average price was $18.69 per share for aggregate purchase price of 13.2 million. We continued to purchase shares thereafter and as of January 8th had repurchased a full 1 million shares of common stock authorized by our Board of Directors back in August. And this morning as many of you've seen, we announced that our Board authorized the repurchase of up to an additional 2 million shares of common stock. Looking forward, our capital allocation strategy will continue to leverage our balance sheet and increase liquidities to provide flexibility in our business as we continue executing on all the efforts focused on transforming and growing our business as a premier capacity solution provider. Our objective is to provide reliable capacity to our customers and driver team members, exceeding their expectations we'll continue to create value for our shareholders. With that overview, I'll turn the call over to our new President, and the CEO and Board Member and I really feel great about being able to introduce Randy Rogers. Thank you.

[Randy Rogers:]

Thanks, Michael and thank you Tom for the initial introduction. It's a pleasure to have joined USA Truck and what I believe is a very special time in its history. So let's move to Slide 9, if we can and for those not familiar with my background, I'll start by giving you a brief introduction that hopefully will be of some interest to you. I've spent the last 15 years of my career with the supply chain division as the leader in supply chain management and transportation. I held assessments that were both geographic managing multiple country operations and what I would term challenging geographies such as South America, Greater China and Southern Europe, as well as industry verticals such as the automotive sector in Mexico and mostly recently the chemical and energy sector in North America. My principal emphasis has been on building successful asset lite models and growing strategic businesses both organically and through acquisition. I joined USA Truck because I see a Company poised for success and what is now a much stronger trucking operation and a platform in its asset lite business with strong growth potential. To start out, I believe our business model is a winning one, we have a tremendous wealth of experience in running assets, we work with many of the leading shippers and we understand how truckload and brokerage compliment one other. We've learned what it takes deliver quality, on-time service and to continue to improve overtime. With SCS and trucking, we serve much of the same geographies, 90% of our customers use both services and we're even working through the same IT platform. We can certainly do much more with this experience and information and I believe I can help us leverage this platform and set the Company on an exciting growth path. So now hear why I joined USA truck, before I go further I want to provide a couple of general comments to answer some questions many of you may have. First, I believe our trucking business is an important complement to our asset lite solution and will continue to be so, where we've demonstrated clearly that we're on the right track. I think the model that many of you've heard before of 'even better' is still a very relevant concept and I am confident the team we have in place will deliver on the promise. We have concrete initiatives which have been tracked and measured. We're marking further strides in prioritizing these initiatives and we have in place project management methodologies to accelerate the pace and ensure accountability within our organization. Maintenance remains a key lever for us as such I'll continue to have Chris Parsons, our VP of Maintenance report to me to continue the focus on maintenance and enable him with the resources he requires to get things done quickly. On the SCS side, we're still focused initially on our productivity and ramping up our Kansas City and El Paso offices. We are upgrading our technology, which will help drive continued growth and expansion in our existing branches. Other priorities will be to accelerate the breadth of our other service offers. We continue to evaluate other strategic alternatives to accelerate both top-line and bottom-line growth and focus on a higher return on invested capital. I'll provide more detailed update on our asset lite plans on our first quarter earnings call later in the year. So at this point, I'd like the operator if you could open the call for questions and we'll come back with some closing remarks at the end here.

[Operator:]

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Jason Seidl of Cowen & Company. Please go ahead.

[Jason Seidl:]

So I guess I'll ask the first question about general conditions in the market because listening to some of your peers, it seems early in the bid season for contractual business, the truckload guys are getting anywhere between 0% and 3%, so what do you think at least from what you've seen so far that USA Truck is going to start averaging out on the bid season here?

[Tom Glaser:]

Hi Jason, I am going to turn that question over to Martin since he's involved heavily with the trucking business.

[Martin Tewari:]

In regards to how we see pricing, we're in the process right now of looking at the lanes that we're changing and our belay mix, so what would traditionally hauled in the past we're slowing changing that mix, so it's really a hard comparison to say what we're seeing, but the feedback that we get from shippers is that there is -- rates are flat to slightly up I mean, not much growth as far as rates are concerned like when we just talk in general with our customers to see what they're seeing as far as bid results are concerned.

[Jason Seidl:]

And my next question is on the gains on sale and how we should think about them going forward. I understand that you guys -- and rightfully so took advantage of a better used truck market in 2015, but as I look back to where the gains used to run, historically they were around let's call it $1 million, but you've actually paired the fleet down. Should we think about your gains given sort of the current used truck market and given the fact that your fleet is smaller to be sort of maybe sub $1 million going forward once you've gone through everything you have to sell?

[Michael Borrows:]

I think Jason, this is Michael, as we think about 2016 and gains on asset sale, clearly, 2015 is going to be a bit of an outlier year for us and I would say that we have returned back to what you saw as normal and that would be in that $1 million range.

[Jason Seidl:]

That's what I thought. And so given that and looking at the improvements that you have on the books were at least assured that you're pushing through, do you think the improvements that you guys are pushing through will offset the lack of gains that you're going to have this year compared to last year?

[Michael Borrows:]

We believe that we've a lot of levers going on and we're in the process of doing that. What you saw in the fourth quarter is really taking hold. The example that was used was in the fourth quarter, right, our operations and maintenance expense per mile was $0.188 and that was $0.244 in the third quarter, so that’s come down sequentially significantly and we think that is systemic and we'll continue to improve as we continue to rationalize and do all the work that we're doing in the maintenance cost structure, so that's just one area. I think sequentially you will see that insurance and claims has come down, far fewer incidents and where we have incidents with far less severity and we're continuing to improve our safety program as you know we brought on a new VP of Safety and recruiting and he's really doing a great job and I think some of those things are starting to take hold as we improve our safety culture, so the answer is yes.

[Jason Seidl:]

And last question, I'll turn it over to somebody else was in terms of the SCS division. The implementation of the customer facing technology, is that going to be an upfront cost to you guys in this division? If so, how much?

[Michael Borrows:]

An upfront cost, it's capital, we haven’t disclosed how much we are investing in the technology at this point, but it is underway and we are moving through that implementation and so that's probably a better discussion as we move out, but we don’t see it having a tremendous impact to their overall earnings in 2016.

[Jason Seidl:]

So, it's not going to be a P&L event, there's not going to be much training cost or something like that that we have to look at?

[Michael Borrows:]

There will be some, but it's not going to be significant to where we would.

[Jason Seidl:]

Fair enough, Michael, listen, gentlemen I really appreciate the time as always and I'll turn it over to somebody else.

[Operator:]

And the next question will come from Brad Delco of Stephens. Please go ahead.

[Brad Delco:]

First question maybe for Tom or Randy, just curious as you look at the balance sheet and obviously with the new share repurchase authorization, what's your comfort level with the balance sheet leverage, is there some number that we need to keep in mind like two times the debt-to-EBITDA or just kind of curious how quickly we could see you act on the share repurchase authorization?

[Tom Glaser:]

I think Brad you're going to see us just like we did with the share repurchase program in the fourth quarter we'll act on it at the appropriate times. We still have a very strong balance sheet and we're at -- Michael, was it 1.6?

[Randy Rogers:]

Yes, our current debt-to-EBITDA is 1.6 Brad. I think we said on previous calls, we think between 1.5 to 2.5 is kind of a leverage range we'd be very comfortable and so that could move up to 2 to 2.5, but to Tom's point, we believe our share price is undervalued. We're investing in ourselves. We know what our strategy is and we continue to execute on it and so given certain pricing constrains in terms of where we're at our intrinsic value and so forth, we'll act on it aggressively or not depending on what the market conditions are.

[Brad Delco:]

And the next question I guess for Martin, at what point do you think we're going to see the fleet size stabilize and I know you talked about focusing on a balanced and more consistent freight network, what does that mean I guess in terms of whether it's geographies or markets that you're either going to put more emphasis on or deemphasize et cetera?

[Martin Tewari:]

So as far as geography, we've got that defined right now I mean for all practical purposes, our assets are running from Pedregal from Texas on up to Minnesota at East. We've got to rationalize that the fourth quarter, so coming into this year all our assets our drivers everything has been shifting over to if you want to call it Eastern two-thirds of the U.S., so that has taken place already and as far as the fleet size, right now if we had to follow our units where we got pending contact or plus…

[Tom Glaser:]

We are 1,970 forward curve all independent contractors in the 250 range, so where we're at today on fleet size, we don't see any change in that going through 2016, we're going to make changes in the same fleet size for the year, so we believe we're at a good fleet size that we can operate and value the customer but really just focusing on margin improvement through 2016 for the trucking operation.

[Brad Delco:]

Yes, that makes sense and then, I guess Michael my last one for you, it seems that if your trade cycle or the trading equipment this year will be more balanced, I am assuming with the fleet count staying relatively consistent, what do you think a fair net CapEx number should look like for 2016?

[Randy Rogers:]

So say industrial asset so generally we do in the fourth quarter, right, as we have this call talk about what our projection is for net cash capital. We're kind of delaying discussion on it until we communicate where we're at in the first quarter, but to your point we're in a more wise trade cycle. We just aren’t disclosing at this point like we generally don't give forward-looking information what that cash capital range will be for 2016.

[Brad Delco:]

Yes, I guess maybe since you -- I guess you sold the 100 trucks in 2015 and you' bought 400 that created I guess a more cash flow for you, is it fair just to think of 2016 net CapEx being higher than what it was in ’15?

[Randy Rogers:]

I think it's fair to say that will be more.

[Brad Delco:]

Okay.

[Tom Glaser:]

And we're going to continue to reinvigorate our fleet. Our fleet is going to get a little bit younger, we're going to take the old trucks out and bring new trucks in, but we just haven’t settled out the numbers.

[Michael Borrows:]

We're committed to the age of tractor and trailer fleet I think we discussed and we said, we're moving the two years and we're not far from that on the tractor fleet, we're going to maintain two years in trade cycle and we're moving to five years in our trailer fleet and we're going to maintain five years probably we'll disclose more trailers this year in 2016 as I discussed because our trailer to tractor ratio is probably around 3.3 write-down right and as we continue to improve productivity et cetera we're going to rationalize it at least down in the line of our 3

[Operator:]

[Operator Instructions] The next question will come from Donald Broughton of Avondale Partners. Please go ahead.

[Donald Broughton:]

Just trying to figure out the moving pieces here, a year ago and then we got -- so we got the average age of trucks down at 26.5 months, what was is it at the end of third quarter what was it a year ago?

[Michael Borrows:]

It was -- you're talking about in fourth quarter a year ago, and it was 32.4 months down.

[Donald Broughton:]

And what was it at the end of third quarter?

[Michael Borrows:]

’13 or ’14.

[Donald Broughton:]

End of the third quarter ’15?

[Michael Borrows:]

It was 25.

[Donald Broughton:]

It was 25, so it actually went up in the fourth quarter, that you were in at a 26.5 you said.

[Michael Borrows:]

Right, right it did go slightly up that's correct.

[Donald Broughton:]

So for 25 months to 26.6 months, okay.

[Michael Borrows:]

It's a bubble, because you remember us talking bubbles so on account of that I mean I wouldn't necessarily look at the tractor fleet age in terms of three months cycles because it already has purchasing bubbles in the past. And so that's going to be like that but I mean as we move forward, our trading cycle is a 24-month average age and so that is how we'll manage our fleet.

[Donald Broughton:]

That makes sense to bring the average age of the fleet down makes all the sense in the world, I wouldn't argue that at all I just want to make sure I go back straight did you make any adjustments so I think yourself insurance retention is what 1 million for actually bottle injury, 0.5 million for workers’ comp, has there been any changes either the provider of your reinsurance or yourself insurance retention levels?

[Michael Borrows:]

Yes, I mean I told we -- every October we go we through a renewal process, right, and we look at who our providers are and et cetera and although we don't expose them we have newer providers and they're doing a great job, our retention amounts are the same and our overall coverage in terms of the tolerance of speed of indemnity that we have is it all remain the same.

[Donald Broughton:]

Here on the balance sheet your, to the end of the third quarter self insurance, short-term accruals were 13.5 million and long-term were 6.3 million, 19.81 million overall accrual. When you print the K, will that number change markedly? Will that number be up markedly?

[Michael Borrows:]

No, it won't, it won't change at all.

[Donald Broughton:]

I mean, now I'm confused. Depreciation fell $3.147 million on a year-over-year basis, it fell 1.17 million to 10.5% sequentially. How does it affect the operations and maintenance line? Ops fell 3.65 million year-over-year or it fell 3.2 million and fell 38.9% sequentially. How does the average age of the fleet not change much sequentially, actually go up a little bit sequentially, [Multiple Speakers] given the depreciation fell 5.5 and the operations and maintenance line fell 38.9?

[Michael Borrows:]

You got it right and then…

[Donald Broughton:]

How do you do that by the way?

[Michael Borrows:]

Well it is on your disbelief, so as it relates to depreciation, right? What we've done is in 2015 as we entered into as I discussed more operating leases, right? Almost $21 million were dialed in, so we have started to strip that out. We did tried to show that separately in an equipment rents line on our income statement, so now you could -- really you got to look at D&A and equipment rent together because our depreciation has come down because of the operating leases, all right? And depreciation has come down because we got fewer trucks in our fleet.

[Donald Broughton:]

No I understand that part, but sequentially. I know you've been leasing more equipment, but I didn’t realize you'd made that big of a change sequentially?

[Michael Borrows:]

Yes, we did make that big of a change sequentially because most of the tractors that we -- as a matter of fact I think all of the tractors that we acquired in the latter part of the year were going through operating lease.

[Donald Broughton:]

That would explain that, but what about the ops and maintenance line, I mean you've a 39% drop in ops and maintenance sequentially?

[Michael Borrows:]

That's right, remember in the third quarter, we -- look we can take these details offline, but I'll say going through the end of third quarter, we closed few shops and we rationalized their cost structure and we continue to improve and we had some reverse -- we had a change in accounting principle as it relates to how an entire…

[Donald Broughton:]

Turned the tires, right, it makes it easier.

[Michael Borrows:]

That's right, it has to be started so I mean I can run you through that in great detail offline, if that would be helpful.

[Donald Broughton:]

Certainly, I just I assume it was the formal part, but okay. So the ops and maintenance line, do you expect that line to be permanently suppressed as a result of the change in accounting for tires or is that the closing of the shops or is this a one-time event?

[Michael Borrows:]

We expected to be permanently suppressed. Well, we believe like we said that those decreases in our cost structure and maintenance are systemic and they will continue as we move forward. And it's the umbrella of initiatives are around all the initiatives that we're doing in maintenance not just accounting with the tires as you mentioned, but the closing of the shops, the looking at our largest cost important maintenance as labor and all the rationalizing that, how we're doing the work differently and sourcing and outsourcing in et cetera, the whole maintenance piece is being rationalized and worked through. We just implemented a new maintenance system in October, October 1st TMT and that system is bringing on a lot of efficiency that we didn’t have with our old mainframe system and so there's just a lot of things that are underway that are going to continue to improve our cost structure and maintenance, so we would expect that that would not only be sustaining, but it would continue to improve as we move through the course of the year.

[Donald Broughton:]

One just related to studies before you move forward to do this is what I'm sure it was not an uninformed business decision, but am I hearing you say basically that you determined that outsourced maintenance was going to be less expensive than in-house?

[Michael Borrows:]

We look at the mix of in-source and outsource to determine what we got and we're determined to making changes in our operating practices and maintenance as what's optimal and it depends on geographic locations of our dealer network et cetera and how we manage over-the-road service and so all of that is well being reviewed and there's a strategy around it and it's been executed on it I mean how does that surprise you?

[Donald Broughton:]

No, no, I didn’t say surprise, I just asked a question, I mean obviously I wouldn’t say or suggest you're making uninformed business decisions, but obviously you seem to conclude the outsource maintenance was going to be cheaper than in-source, so I just want to make sure I heard you right.

[Michael Borrows:]

In some cases, we conclude that and in some cases, we conclude the reverse so that it depends we not only [Multiple Speakers].

[Tom Glaser:]

So we still have five shops of the due maintenance in our system, so we haven’t like or six -- six shops.

[Michael Borrows:]

I'd call it 5.5, but yes.

[Tom Glaser:]

Okay. But we still maintenance at facilities and then we still outsource, so I mean we have a mixture of both.

[Donald Broughton:]

Is it 9 or is it, I just whether that is outstanding drop of year-over-year basis as well as sequentially sometimes you look at that and say what the average age of the fleet came down dramatically and all that explains the other times you can -- you see other items that would've influenced it, but obviously you've closed a few shops and you've done so and you think this is strategic reason to do so that makes sense. Insurance and claims, you said frequency dropped, severity had dropped, but again we've got a 46.8% sequential drop on year-over-year basis you are down 2.87 million and on a sequential basis you are down 1.7 million there haven’t been any changes in your power fleet or yourself insurance retention levels, wow you are ahead of -- how do you file a 46.8% sequential decline in insurance and claims, did you have some favorable outcomes that you weren’t expecting or if something this was a rather standing sequential drop?

[Randy Rogers:]

No, I don't know that it is -- I think it is reverse of that. We have had no unfavorable outcomes where you have had to accrue digital expense for.

[Donald Broughton:]

Okay.

[Randy Rogers:]

Where typically that's been more of a trend, but that's right it's clearly changing and rapidly not only that with how we're leveraging and how we're managing risk management with our new General Counsel et cetera, we're holding claims faster, we're settling things faster and it's the confluence of all of these things that are really starting to come together and at some level of this goes away but we've been saying sometime that as we accelerate these things we should start to see some step function improvement and I think that's what we see starting to take hold in the fourth quarter.

[Donald Broughton:]

No I am going to tell you quite to the credibility that I am around just it's an outstanding number is it the right it model for that on an ongoing basis to be the -- I mean you have gotten an $0.08 a mile which is fast growth back I got it upon then. I am sure you have done since 1994 last time the Company produced $0.08 a mile, insurance and claims number and that’s just outstanding.

[Randy Rogers:]

Well we will work hard to be even better so thank you…

[Tom Glaser:]

But we're down year-over-year at [Multiple Speakers] as well in accidents that has been pretty…

[Randy Rogers:]

To start with January there was an EOT claims in months that we can read back in history [Multiple Speakers].

[Operator:]

Our next question will come from Jason Seidl from Cowen & Company. Please go ahead.

[Jason Seidl:]

When you're looking at the insurance and claims which by the way you guys are get any nervous that you're going to jinx yourselves as you keep think, your doubt so much on severity so I am not going to work everything you’ve said there.

[Randy Rogers:]

[Multiple Speakers] we know our reasons we are all commenting on the conference table here saying the discipline you say that is when it starts to go the other way, but let's hope no.

[Jason Seidl:]

I know I work in operations so every time you said it I've been knocking, but should we think about that inevitably just the law of averages that something will happen in terms of server accidents throughout the quarter, so maybe not model as much improvement as you saw in the fourth quarter throughout 2016? And then I have a follow-up on shares outstanding.

[Randy Rogers:]

Could happen I guess another element to that to just to kind of as we're talking about this is on the collision side of the things as we continue change our mix of drivers to the heavier weighted to experienced drivers versus inexperienced drivers, we had fewer collisions too. So we do think that it's going to continue to -- it is the same -- there maybe some ups and downs I mean we can't predict the future in terms of running the way but hopefully like you said knock on wood, and we continue to be safe and we're improving our safety culture and that is -- we're doing all of the preventive stuff that we think is appropriate.

[Tom Glaser:]

And I think also some of the benefit of the technology and the newer equipment the safety equipment that is on our vehicles now is just really starting to show.

[Jason Seidl:]

And here is a new one for you Michael, I see what your average in the quarter for shares outstanding but where did you end the year?

[Michael Borrows:]

We ended the year with a 9 million, about 9.7 million shares [Multiple Speakers].

[Operator:]

Our next question will come from John Levitt of Southwest Times Record. Please go ahead.

[John Levitt:]

I was just looking at the average loading per miles and I was just kind of wondering if there was account of average unloaded miles per truck?

[Randy Rogers:]

Average empty miles per load is what you're asking?

[John Levitt:]

Yes, I mean, basically is there account taking on unloaded miles?

[Randy Rogers:]

Yes, we track the miles between loads as we call it empty miles and we run -- yes empty miles as a percent of loaded miles as a percent of the total miles in they are running right now between 12%-13%.

[Tom Glaser:]

Right, some empty miles are paid and some aren’t so it does necessarily navigate that right.

[John Levitt:]

Okay. I just noticed it went down a little bit about a little about 10% for the quarter and 5% for the year, but everything else is looking good, I was wondering if there was some -- what the logic is behind how that can happen?

[Tom Glaser:]

The idea is that we're getting better at where we pick up and deliver freight we have fewer miles in between the loads, so we improved that. One of the things we are working on regularly is improving the empty miles because generally they're not paid.

[Operator:]

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Randy Rogers for his closing comments.

[Randy Rogers:]

Great, thank you. Again, it's great pleasure to be joining the USA Truck team as we position ourselves for the future. I would like to thank Tom Glaser here in particular for working with me on the transition and sharing a wealth of experience here in the organization. I'm really looking forward to working with Tom and the rest of the Board and I'd just like to thank everybody on the call for attending. And I look forward to future calls. And have a great rest of the day. Thank you.

[Operator:]

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.