USA Truck Inc (USAK) 2015 Q4 法說會逐字稿

Good morning and welcome to the USA Truck fourth-quarter 2015 earnings conference call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the call over to Jodi Burfening of LHA. Please go ahead.

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 Burrows, Executive Vice President and Chief Financial Officer.

In addition, Martin Tewari, President of Trucking, is with us today to answer questions.

Before we begin the call, we would 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 in 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 the 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 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 would 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 statement. A reconciliation of these non-GAAP measures to GAAP is provided in the tables at the end of the earnings press release and the slides accompanying today's conference call's prepared remarks.

With those housekeeping items out of the way, I would now like to turn the call over to Tom. Good morning, Tom.

Good morning, Jodi. Good morning, everyone. Really excited to be here this morning with USA Truck's new CEO, Randy Rogers, as well as Michael and Martin. They are 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 the 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 a solid growth track. With Randy on board, we have taken another step forward in executing our business strategy to drive returns on invested capital and strengthen our position as capacities 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 is posted on the website. 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 have made in improving the profitability of our trucking operations.

In our last call, I described a whole series of improvements we have been implementing, 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 freight environment like the industry experienced in quarter 4, 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 surcharges, 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 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 have accomplished under this plan. In addition to strengthening our leadership team with key hires, we have done a lot of basic blocking and tackling to make sure all the moving parts make our trucking organization line up in the right direction. We recognized our operation and reduced the number of touch points for each load. We developed incentive plans to simplify trucking and align all the functions on the same goals. This is an effort we are implementing now, and we expect to have growing impact as we go into 2016.

We started this 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 brought on two full-time trainers to assist our staff on how to better utilize our software. We have 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 already see a lot of improvement in positive results in this area. We have 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 the lanes more profitable for USA Truck.

Now let's move to SCS whose performance is summarized on slide 7. In our asset light business, operating revenue was down fourth quarter to primarily the softer spot market and the decrease in fuel prices. Even though our load count 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 am going to ask Michael to update you on our balance sheet and repurchase program. Michael?

Thank you, Tom. On slide 8, you will find highlights of our balance sheet and cash flow. We ended the quarter with $101.3 million in debt outstanding, net of cash, which year to date represents a $16.1 million reduction in debt and capital lease obligations. The decrease in debt primarily reflects reductions of 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 DNA and equipment runs going forward will be meaningful. As we manage capital allocation, we will continue to place emphasis on flexibility.

Debt to adjusted EBITDA was 1.6 times compared to 1.9 times at the end of 2014, but up sequentially. As discussed in previous quarters, we believe leverage between 1.5 times and 2.5 times make a lot of sense, and our capital structure is beneficial to our shareholders.

During the quarter, capital expenditures and cash proceeds from the sale of revenue equipment essentially netted out. For 2015 net cash capital was approximately $15.9 million as we continued to execute on our fleet refreshment program and rightsize 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 financing completed in Q3 and Q4. Rightsizing and refreshing our fleet was an important objective for 2015 as we reset our network. We exceeded the targets we had set for ourselves. We disposed of 817 high cost tractors and acquired 400 new ones for a net 417 tractor reductions in the fleet.

In addition, we acquired 1500 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 target 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 our trailer fleet we are approaching to five years at 12/31 was 68 months. We believe the secondary market in 2016 will remain strong for trailers. As we continue to take on high maintenance trailers from the fleet and further reduce the age of our fleet, we will be moving our trailer to tractor ratio down to 3.1 from about 3.3 to 1 currently.

With a clear focus on returning value to shareholders, our share repurchase program is clearly 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 an aggregate purchase price of $13.2 million. We continued to purchase shares thereafter and, as of January 8, had repurchased the full 1 million shares common stock authorized by our Board of Directors back in August. And, this morning, as many of you have 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 liquidity to provide flexibility in our business as we continue executing on all the efforts focused on transforming and growing our business at a premier capacity solution provider. Our objective is to provide reliable capacity to our customers and driver team members, exceeding their expectations while continuing to create value for our shareholders.

With that overview, I will turn the call over to our new President and CEO and board member, and I really feel great about being able to introduce Randy Rogers. Thank you.

Thanks, Michael, and thank you, Tom, for the initial introduction. It is a pleasure to have joined USA Truck at 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 will start by giving you a brief introduction that hopefully will be of some interest to you.

I spent the last 15 years of my career with a supply chain division of a leader in supply chain management and transportation. I have held assignments that were both geographic, managing multiple country operations in 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, most recently, the chemical and energy sector in North America.

My principal emphasis has been on building successful asset light models and growing strategic businesses, both organically and through acquisition. I joined USA Truck because I see a Company poised for success with what is now a much stronger trucking operation and a platform in its asset light business with strong growth potential.

To start out, I believe our business model is a winning one. We have a tremendous wealth of experiencing running assets. We work with many of the leading shippers, and we understand how truck load and brokerage complement one another. We have learned what it takes to deliver quality on-time service and to continue to improve over time.

With SCS and trucking, we serve much of the same geography. 90% of our customers use both services, and we are very -- we are even working from 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 you know 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 light solution and will continue to be so. We have demonstrated clearly that we are on the right track. I think the model that many of you have heard before of, quote, even better, unquote, 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 are being tracked and measured. We're making 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 will 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 are still focused initially on our productivity and ramping up our Kansas City and El Paso offices. We are operating 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 offerings. 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 will provide more detail -- provide a more detailed update on our asset light plans on our first-quarter earnings call later in the year.

So at this point, I would like the operator, if we could, open the call for questions, and we will come back with some closing remarks at the end here.

(Operator Instructions) Jason Seidl, Cowen and Company.

And, welcome, Randy. So I guess I will 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 a contractual business that truckload guys are getting anywhere between zero and 3%. So where do you think, at least from what you have seen so far, that USA Truck is going to start averaging out on the midseason here?

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

In regards to how we see pricing, we are in the process right now of looking at the lanes that we are changing and our lane mix. So what we have traditionally hauled in the past we are slowly changing that mix. So it is really a hard comparison to say where we are 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 when we just talk in general with our customers to see what they are seeing as far as bid results are concerned.

Okay. 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 have actually pared 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 maybe sub $1 million going forward once you have gone through everything you have to sell?

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

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

We believe that we have a lot of leverage going on, and we are in the process of doing that. And what you saw in the fourth quarter is really taking hold. An example of 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 has come down sequentially significantly, and we think that is systemic and will continue to improve as we continue to rationalize and do all the work that we are doing in the maintenance cost structure. So that is just one area.

I think, sequentially, you see that insurance claims have come down. Far fewer incidents and where we have incidents with far less severity, and we are continuing to improve our safety program. As you know, we brought on a new VP of Safety and Recruiting, and he is 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.

Okay. Perfect. Last question and I will turn it over to somebody else. 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? (multiple speakers)

(multiple speakers). In upfront cost, it is 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 is probably a better discussion as we move out, but we don't see it having a tremendous impact to their overall earnings in 2016.

Okay. So it's not going to be a P&L event. There is not going to be a bunch of training costs or something like that, though, that we have to look at.

There will be some, but it is not going to be significant to where we would (multiple speakers).

Brad Delco, Stephens.

First question maybe for Tom or Randy. Just curious as you look at the balance sheet and obviously with the new fare repurchase authorization, what is your comfort level with the balance sheet leverage? Is there some number that we need to keep in mind like 2 times debt to EBITDA or just kind of curious how quickly we could see you act on the share repurchase authorization?

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

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

No, that is good color. It makes sense. And the next question, I guess, for Martin, at what point do you think we are 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 in terms of whether it is geographies or markets that you are either going to put more emphasis on or deemphasize, etc.?

So as far as geography, we have got that defined right now. For all practical purposes, our assets are running from -- if you draw a line from Texas on up to Minnesota and East, we have gone through and rationalized the fourth quarter. So coming into this year, all our assets or drivers, everything, have been shifted over to, if you want to call it, the eastern two-thirds of the US. So that has taken place already.

And as far as the fleet size, right now, if we add up all our units, what are we -- independent contractor was (multiple speakers)?

We are at about 1970, total. Independent contractors, in the 250 range.

So where we are at today on fleet size, we don't see any change in that going through 2016. We're going to maintain the same fleet size for the year. So we believe we are at a good fleet size, that we can operate and add value to the customer, but really just focusing on margin improvement through 2016 for the trucking operation.

Okay. That makes sense. And then, Michael, my last one for you. Since it seems as if your trades cycle or the trading of 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?

Save the best for last, Brad. So generally, we do in the fourth quarter as we have this call talked about what our projection is for net cash capital. We are delaying discussion on that until we communicate where we are at in the first quarter. But to your point, we are in a more normalized 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.

Yes. I guess maybe since you -- I guess you sold 800 trucks in 2015 and you bought 400. That created more cash flow for you. Is it fair just to think of 2016 net CapEx being higher than what it was in 2014? Or sorry, 2015.

I think it is fair to say that it will be more.

Okay.

I just -- yes.

Brad, we are 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. We just haven't settled on a number.

We are committed to the age of our tractor and trailer fleet, like we discussed. We said we are moving to two years, and we are not far from that on the tractor fleet. We're going to maintain two years in our trade cycle, and we are moving to five years in our trailer fleet and we are going to maintain five years. We will probably -- we will dispose of more trailers this year in 2016 as I discussed because our trailers and tractor ratio is probably around 3.3 right now. And as we continue to improve productivity, etc., we are going to rationalize it at least down to a 3 to 1 ratio.

(Operator Instructions) Donald Broughton, Avondale Partners.

And welcome to the team, Randy.

Thank you.

Just trying to figure out some of the pieces here. A year ago, I know that -- so we got the average age of trucks down to 26.5 months, but what was it at the end of the third quarter? What was it a year ago?

It was -- fourth quarter a year ago, it was 32.4 months, Donald.

And what was it at the end of the third quarter?

2015 or 2014?

End of the third-quarter 2015.

It was --

26.5

It was 25.

It was 25? So it actually went up in the fourth quarter? Because you ended at 26.5, you said.

Right. Right. It did go slightly. It did go slightly up. That's correct.

So for 25 months to 26.5 months, okay.

So we had some bottles, if you remember us talking about them. So it kind of -- I mean, I wouldn't necessarily look at the tractor fleet age in terms of three month cycles because of where they had the purchasing bubbles in the past. And so that is going to be like that. But I mean, as we move forward, our trade cycle is 24 month average age, and so that is how we will manage our fleet.

No, 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 wanted to make sure I got my facts straight.

Did you make any adjustments? I know your self-insurance retention is, what, $1 million, for instance, bodily injury, $500,000 for workers comp. If anything changes either the provider of your reinsurance or your self-insurance retention models?

Yes. Every October we go through a renewal process, and we look at who our providers are, etc. And although we don't disclose them, we have newer providers, and they are doing a great job. Our retention amounts are the same, and our overall coverage in terms of the towers of indemnity that we have all remain the same.

Okay. On the balance sheet, your end of the third-quarter self-insurance short-term accruals were $13.5 million, long-term were $6.3 million, [$19.81 million] overall accrual. When you print the K, will that number change markedly? Would that number be (multiple speakers)?

No, it won't change at all.

Okay. Well, now I am confused. Depreciation fell $3.147 million on a year-over-year basis. It fell $1.17 million, 15.5% sequentially. How did -- did the operations and maintenance line, operations fell $3.65 million year over year or fell $3.2 million. It fell 38.9% sequentially. How does the average age of the fleet not change much sequentially -- actually, go up a little bit sequentially? And the depreciation fell [5.5] and the operations and maintenance line fell [38.9]. (multiple speakers).

You got it right.

I mean, how do you do that?

Well, let's just focus on your disbelief. So as it relates to depreciation, what we have done is, in 2015, is we entered into, as I discussed, more operating leases. Almost $21 million worth, Donald, and so we have started to strip that out. We did start to disclose that separately in the equipment runs line on our income statement. So now you could -- really, you have got to look at DNA and the equipment runs together because our depreciation has come down because of the operating leases. And depreciation has come down because we had fewer trucks in our fleet.

I understand that part. But, sequentially, I know you have been leasing more equipment, but I didn't realize it would make that big of a change sequentially.

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 last half of the year were done for operating lease.

Okay. That would explain that. But what about the ops and maintenance line? You get a 39% drop in ops and maintenance sequentially.

That's right. Remember, in the third quarter, we can take these details offline, but I will say don't forget in the third quarter we closed two shops, we rationalized that cost structure, and we continue to improve. And we had some reverse -- we had a change in accounting principle as it relates to how (multiple speakers).

Change of tires.

(multiple speakers). I can walk you through that in great detail offline, if that would be helpful.

Certainly. I just -- I thought this was the format part but okay. So on 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 -- and the closing of the shops? Or is this a one-time (multiple speakers).

We expect it to be permanently suppressed. 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 is the umbrella of initiatives around all the initiatives that we are doing in maintenance, not just accounting with the tires, as you mentioned, but the closing of the shops, the looking at our largest cost component and maintenance is labor, how we are rationalizing that, how we are doing the work differently, insourcing and outsourcing, etc., the whole maintenance piece is being rationalized and worked through.

We just implemented a new maintenance system in October -- October 1 TMP. And that system is bringing us a lot of efficiency that we didn't have with our old mainframe system. And so there is 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 sustained, but it would continue to improve as we move through the course of the year.

Well, I'm sure you did the studies before you moved forward to do this, which I'm sure was not an unformed business decision. But am I hearing you say, basically, that you determined that outsourced maintenance was going to be less expensive than in-house?

We looked at the mix of insourced and outsourced and determined what was -- and we are determining and making changes in our operating practices in maintenance as to what's optimal. And it depends on geographic locations of our dealer networks, etc., and how we manage over the road service. And so all of that is looking -- being reviewed, and there is a strategy around it, and it is being executed on. I mean, why is that surprising? (multiple speakers)

No, no. I didn't say I was surprised. I just asked the question. Obviously, I wouldn't suggest you make an uninformed business decision, but obviously you seem to have concluded that outsourced maintenance was going to be cheaper than insourced. So I just wanted to make sure I heard you right.

In some cases, we've concluded that, and in some cases we have concluded the reverse of that. It depends. (multiple speakers).

We still have five shops that do maintenance in our system. So we have -- or six shops.

I would call it 5.5, but yes.

Okay. So we still have maintenance at facilities and then we still outsource. So we have a mixture of both.

Okay. Like I said, I just with our outstanding drop both year-over-year basis, as well as sequentially, and sometimes you can look at that and say, well, the average age of the fleet came down dramatically and, oh, that explains it. Other times you can see other items that would have been fluid, but obviously, if you have closed two shops and you have done so and you think there is a strategic reason to do so, that makes -- you know.

In shortage of claims, you said frequency had dropped, severity had dropped, but again, we have got a 46.8% sequential drop. On a year-over-year basis, you were down $2.87 million, and on a sequential basis, you are down $1.7 million. There haven't been any changes in your policy or your self-insured retention levels. Wow. How do you drive a 46.8% sequential decline in insurance and claims? Because you had some favorable outcomes that you weren't expecting? So I mean this was rather an outstanding sequential drop.

No, I don't know that it is -- I think it's the reverse of that. We have had no unfavorable outcomes where we have had to accrue additional expense work.

Okay.

Where, typically, that has been more of a trend, all right that trend is clearly changing and rapidly, and not only that, with how we are leveraging and how we are managing risk management with our new General Counsel, etc., we are closing claims faster. We are settling things faster, and it is a confluence of all of these things that are really starting to come together. And picture some level of disbelief, but we have been saying for some time that as we accelerate these things, we should start to see some step function improvement. And I think that is what we see starting to take hold in the fourth quarter.

I am not questioning the credibility of the number. I am just -- it is an outstanding number to model for that on an ongoing basis to be at the -- I mean, you are down to $0.08 a mile, which is -- I would have to go back. I have to find it. I'm sure it would be 1990 for the last time the Company produced $0.08 mile insurance and claims number, and that is just outstanding.

Well, we work hard to be even better. So thank you.

But we are down year-over-year (multiple speakers) January as well, in accidents. Accident free (multiple speakers).

Yes. I didn't -- December, January, the fewest DOT claims in months that we have in history as an example. (multiple speakers). Thank you, Donald.

Jason Seidl, Cowen and Company.

When you are looking at the insurance and claims, which, by the way, you guys are getting me nervous that you are going to jinx yourself as you keep saying you are down so much on severity. So I have been knocking on wood every time you say that.

So are we. (multiple speakers) the conference table here saying, just when you say that is when it starts to go the other way, but let's hope not.

I know. I worked in operations. So every time you said it, I have been knocking. But should we think about that inevitably just the law of averages that something will happen in terms of severe 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.

It could happen. I guess another element to that, too, just as we are talking about this, is on the collision side of things, as we have continued to change our mix of drivers to be heavier weighted to experienced drivers versus inexperienced drivers, we have fewer collisions, too.

So we do think that it is going to continue to sustain. There may be some ups and downs. I mean, we can't predict the future in terms of who is going to run into what, but hopefully, like you said, knock on wood, we continue to be safe. And we are improving our safety culture, and we are doing all the preventative stuff that we think is appropriate.

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 really starting to show.

Okay. And here is an easy one for you, Michael. I see what you average in the quarter for shares outstanding, but where did you end the year?

We ended the year at about 9.7 million shares, 9.65 million, all in that range.

John Lovett, Southwest Times Record.

I was just looking at the average loaded per miles, and I was kind of just wondering if there was a count of average unloaded miles per trip.

Average empty miles per load is what you are asking?

Yes. Basically, is there a count taken on unloaded miles?

Yes. We keep track of the miles between loads, and we call it empty miles and -- (multiple speakers). Yes, empty miles as a percent of the loaded miles -- as a percent of the total miles, and they are running right now between 12% and 13%.

Some empty miles are paid and some aren't. So it is (multiple speakers).

Okay.

Right.

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

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

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.

Great. Thank you. Again, it is a 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 am really looking forward working with Tom and the rest of the board, and I would just like to thank everybody on the call for attending. I look forward to future calls and have a great rest of the day. Thank you.

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