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Swift Transportation Company (NYSE:SWFT)

Q1 2014 Earnings Conference Call

April 25, 2014 11:00 ET

Executives

Jason Bates - VP of Finance, Investor Relations Officer

Richard Stocking - President

Jerry Moyes - CEO

Ginnie Henkels - CFO, EVP, Treasurer

Analysts

Operator

Good morning. My name is Jeremy and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2014 Question-and-Answer Session. All lines have been placed on mute to prevent any background noise. (Operator Instructions) Thank you.

I would now like to turn the call over to Mr. Jason Bates. You may begin your conference.

Jason Bates

Great, thank you, Jeremy. We would like to welcome you all to Swift Transportation's first quarter 2014 question-and-answer session. As a reminder, we have posted a comprehensive letter to stockholders, summarizing our results on the front page of our Investor Relations Web site.

We’ll start the call today with our forward-looking statement disclosure. This call contains statements that may constitute forward-looking statements, which are based on information currently available, usually identified by words such as anticipates, believes, estimates, plans, projects, expects, hopes, intends, will, could, may or similar expressions which speak only as of the date the statement was made. Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements are inherently uncertain, are based upon current beliefs, assumptions and expectations of company management and current market conditions, which are subject to significant risks and uncertainties as set forth in the Risk Factors section of our annual report, Form 10-K for the year ended December 31, 2013.

As to the company’s business and financial performance, there are many factors that could cause actual results to differ materially from those in any forward-looking statements. You should understand that there are many important factors in addition to those discussed and in our filings with the SEC that could impact us financially. As a result of these and other factors, actual results may differ from those set forth in the forward-looking statements, and the prices of the company’s securities may fluctuate dramatically. The company makes no commitment and disclaims any duty to update or revise any forward-looking statements to reflect future events, new information, or changes in these expectations.

In addition to our GAAP results this call also includes certain non-GAAP financial measures as defined by the SEC. The calculation of each measure, including a reconciliation to the most closely related GAAP measure, and the reasons management believe such non-GAAP measure is useful are included in the schedules attached to our letter to stockholders.

So with that out of the way, I would like to recognize the members of Swift’s management team on the line today. We have Jerry Moyes, our Founder and Chief Executive Officer; Richard Stocking, our President and Chief Operating Officer; and Ginnie Henkels, our Executive Vice President and Chief Financial Officer. Again, my name is Jason Bates, Swift’s Vice President of Finance and Investor Relations Officer and I will be moderating today's Q&A session.

We appreciate all the questions that were submitted prior to the dead line last night. Similar to quarters passed we have categorized them and we’ll do our best to provide detailed responses to each one. To the extent you have additional questions, feel free to reach out to me after the call.

Finally, before we get to the questions, I want to remind everyone that we will be hosting our 2014 Investor Day next Friday May 2nd, at the New York Stock Exchange. The format will be similar to last year with the event begin at 9 am and concluding before noon. It will be comprised of presentations from various levels of management followed by a live Q&A with Jerry, Richard, Ginnie and myself and some of our business unit leaders as well. We encourage you to take advantage of this unique opportunity to interact with management and learn more about Swift Transportation, who we are, where we have been and where we are going?

Space is limited, so if you have not yet registered, please do so my sending your contact information to Investor Day at swifttrans.com.

So with that we will start the Q&A portion of the call today with a couple of questions on adjusted EPS trends and guidance.

Question-and-Answer Session

Jason Bates

The updated full-year guidance of $1.31 to $1.41 implies a significant ramp in the second half of 2014 EPS, what gives you this confidence as the first half EPS is expected to be roughly $0.45 at the mid-point of the Q2 guide, new business wins, customer rate increases?

Ginnie Henkels

There are numerous items that cause our second half expectations to be greater than the first half. The first two are obviously weather and the Central Systems integration which combine are roughly $0.08 of EPS. Also as you mentioned, the rate increases that we are negotiating now will be in place for the second half of the year. Within Dedicated, we have start-up cost of the new contracts in the first half that we will be able to experience growth and efficiencies in the second half that will drive both revenue and margins.

In truckload, we will be able to focus on growth as we move away from supporting the Dedicated start ups. Also, we are expecting utilization to improve particularly year-over-year as we lap the hours of service changes and begin to realize the efforts of our utilizations strategic focus team.

In Central, we will move past the integration costs and begin to realize the synergies. Within intermodal and logistics, we have new customer awards that will generate additional revenue in the second half as well as margin improvement.

Also as we continue to reduce our debt position and refinance the notes later in the year, we would expect our interest expense to decline in the second half as well. In addition to all of these, we also have the season of special projects in the fourth quarter that adds to earnings in the second half.

Jason Bates

Can you quantify for us the momentum you are seeing month-to-date in April? Given this momentum, why is your guidance so far below the street in the second quarter?

Ginnie Henkels

The momentum we are seeing in April relates to several of the items that I referenced above with regard to dedicated in other awards but many of them will not be up and running efficiently until Q3. And Richard will expand on this in a minute. So we also have cost associated with this items in Q2 that will payoff later in the year.

Jason Bates

What are the expected proceeds from the sale of the three Central refrigerated facilities? What is the expected timing? Is it included in your $8 million to $9 million of full-year gain on sale? What were the ongoing savings to operating expenses from the sale of these facilities?

Ginnie Henkels

The net proceed should be between $14 million to $15 million for all three properties. The $8 million to $9 million of gain that we referenced in the letter is related to the sale of equipment not these properties. We are expecting at least one property to close in Q2 and that property is not expected to have a gain. The other two properties should close no later than Q3, and could be in Q2. But those should have a gain of $3 million to $4 million. This $3 million to $4 million is in addition to the $8 million to $9 million we quoted on the equipment gains.

On an annualized basis, we expect the savings related to the facilities consolidation to be close to $1 million of expense a year.

Jason Bates

We will move to several questions related to debt? Do you still plan to call or refinance the remaining balance of the $500 million -- 500 million worth of notes in November?

Ginnie Henkels

Yes. That is still our current plan.

Jason Bates

And given the $55 million in net debt reduction in the quarter, what is your full year expectation for debt repayment?

Ginnie Henkels

There will be some costs to refinance the debt and payoff the notes later in the year. But we should still be able to reduce our net debt by roughly $100 million for the year?

Jason Bates

What amount of interest expense is incorporated in the second quarter of 2014 and the full year 2014 guidance?

Ginnie Henkels

For Q2, it’s roughly $23.5 million to $24 million and for the full-year this will obviously depend on the timing and success of the refinance and the movement in interest rates throughout the year. But in total, it should be in the range of $90 million to $95 million.

Jason Bates

With regard to the repurchase and cancellation of the senior secured second lien notes, is the ability to do this depending on market conditions? Are you limited in the amount you can repurchase and is there any update on the potential for refinancing these notes in November 2014 or sooner?

Ginnie Henkels

We are able to call all of the notes in November, but to so we will need to refinance our term loan facilities to give us the capacity and flexibility to do so. This refinance is depending upon market conditions which are currently quite strong.

Jason Bates

Do you regret not having done the equity deal last fall in order to speed the deleveraging process?

Ginnie Henkels

No, because at the time, the stock price was not high enough to make the transaction accretive. I do regret that our stock price was not $25 in October.

Jason Bates

It is encouraging to see you in the open market repurchase senior 10% notes with cash. Can you give us the average price you paid for the notes and the same and some thoughts around the decision to do so now versus 105 in November? How much accretion are you anticipating in the second half 2014 as a result of this decision?

Ginnie Henkels

We were able to acquire the bonds at a price that was a bit less than the call price plus interest between now and the call date, so roughly around 110 which is why we chose to buy the bonds now. The bonds had previously been trading at a premium prior to recent months.

Giving creeping tender rules that we do not expect to continue purchasing bonds at this point but by being able to payoff some of the bonds rather than term debt in the – in March and April will save us about $1.5 million this year.

Jason Bates

So there are handful of questions on volume, general volume and rate trends, the first, how does bid activity compared to a year ago, are more shippers forsaking formal bids and conversing directly with carriers given concerns about capacity?

Richard Stocking

Yes. Good morning. The bids have been very solid in Q1. Some shippers are forsaking formal bids others are limiting their bids to just a few carriers. But for the most part customers are still going through bids as they are seeking to get more capacity.

Keep in mind, however, that just because the customer doesn’t go through a bid, it doesn’t mean that we can’t seek rate increases and we are doing that in certain situations.

Jason Bates

Were you able to play in the spot market much in the first quarter or is all your capacity committed to contract customers?

Richard Stocking

As we have stated few times previously, we do not participate much in the spot market and this quarter was no different. It’s more in our repositioning activities?

Jason Bates

Can you provide some color around recent volume trends and what you are – what is your volume expectations are for 2014?

Richard Stocking

Sure. On the truckload side as we mentioned, we were over booked much of the quarter. But the frustrating part of that was we are unable to take full advantage of the freight due to the disruptions caused by this severe winter weather. During the quarter, we had 19 storms that caused serious problems in our network. Since the weather has abated, we have had a few good weeks in March followed by some positive trends here in April and we expect this trend to continue throughout the quarter and throughout the year.

Jason Bates

We are currently seeing rising rates across many forms of transportation, can you talk about your prospects for raising your own rates faster than your cost of purchase transportation increases?

Jerry Moyes

We are obviously going to do everything in our power to ensure that our costs or the purchase transportation or otherwise do not outpace the rates we are charging our customers.

As we have discussed in the past, we don’t just have great relationships with our customers but rather a great strategic partnerships. Our partners understand that our costs pressures of our industry that we are facing. And just as we are prepared to them for what is likely to be in rate increases, I’m sure that they are preparing their customers similarly.

Jason Bates

So now we are going to move into questions related to each of the different segments. We will start with the Dedicated segment. What percentage of any of your Dedicated contracts are now below market given the improvement in rates to begin in 2014, or there opportunities to address contracts that do not reflect current market rates, if so how long before these conversions can be completed?

Richard Stocking

Well, most of our Dedicated contracts are three and five year terms, they generally have annual price reviews and escalators to that extent there has been a material change in the market like that which people are contemplating in 2014, it opens the door for further dialog with the shippers?

Jason Bates

On your fourth quarter call in late January, why did you guide the Dedicated segment truck growth for the full-year to 350 to 400, when you added 550 in the first quarter alone?

Richard Stocking

Yes. It’s a good problem to have. As we have discussed in the past, we are continually bidding on Dedicated opportunities. And therefore always have several open bids in the pipeline. Our significant growth in the first quarter was a combination of a higher than expected win rate combined with various customers coming to us and requesting that we consider taking over and operating for them.

Jason Bates

Can you quantify for us the impact of the new business start-up expenses in Dedicated in the first quarter? What does the margin profile look like for the new Dedicated business wins and how quickly do you expect the contracts to operate at that level?

Richard Stocking

The new business start up expenses in Dedicated were approximately $2 million in the first quarter. Once up and running which typically takes 2 to 3 months, we would expect the margin profile to be consistent with the rest of our Dedicated business.

Jason Bates

Should we be modeling any start-up costs associated with these new Dedicated business wins during the remainder of 2014?

Richard Stocking

Yes. There will be some spill over into the second quarter from our wins in Q1, given that a couple of the new facility started up in late quarter. Regarding the remainder of the year, we continue to win significant amounts of business every quarter like we did in Q1 then we would need to model start-up costs. However, the more likely outcome is that we have slow steady growth, so the impact would not nearly be as large.

Jason Bates

Do you expect Dedicated revenue per tractor to improve sequentially or year-over-year in the second quarter?

Richard Stocking

Obviously, the answer will depend on various factors specifically new start ups as we just outlined, however, the short answer is that, it is our goal to increase our weekly Dedicated revenue per truck per week both sequentially as well as year-over-year.

Jason Bates

Okay. Shifting to the truckload segment, what is the estimated truck fleet growth in 2014?

Richard Stocking

As we discussed in the letter to stockholders, the operational fleet in our truckload segment actually decreased in the first quarter to facilitate the greater than anticipated growth in our Dedicated segment. This phenomenon may reoccur in future quarter depending on Dedicated demand. That fact combined with our desire to not grow beyond our ability to seek drivers as thus cautiously forecasting our truckload fleet.

As such we anticipate the truckload fleet to remain relatively flat from the second quarter to the fourth quarter. However, we pride ourselves in being relatively nimble for such a large organization. So if the overall market meaningfully improves, and we are able to secure drivers and profitable freight, we will react accordingly.

Jason Bates

As your expectation for truckload revenue per total mile x fuel up 2% to 3% for 2014 changed? What factors could result in this being higher or lower than your expectations?

Richard Stocking

As disclosed in the letter, in the first quarter we were able to realize 3% improvement in our truckload rate per mile. While we do not participate in the spot market to the same extent as some of our peers, who clearly benefited in the first quarter from the increase in rates in that market. We believe that the spot market is generally indicative of the contract market. Therefore, given the strong spot market, we believe the capacity availability concerns expressed by shippers are likely to materialize into more than the previously anticipated range of 2% to 3% exactly how much will – it will increase will largely depend on the longevity of the capacity crunch combined with the economic pick up.

Jason Bates

What specific plans or strategies were in place to drive better utilization throughout the network over and above what was accomplished during 2013?

Richard Stocking

Yes. We have created an entire strategic focus team at the beginning of this year as well as a handful of tactical teams with the specific tasks of addressing processes that would favorably impact our utilization. However, as much as I would love to go into more detail on this topic, unfortunately we have found that too much transparency on our specific strategic initiatives in a public forum like this can takeaway some of our competitive advantage.

Jason Bates

What impacted your network optimization effort have on mitigating the weather related issues in the first quarter?

Ginnie Henkels

That’s a difficult question to answer. In a perfect world, we would be able to isolate each of the variables which positively or negatively impact our utilization in the first quarter. But given all the concurrent moving pieces, it is impossible to quantify the exact amount or the positive impact of the network optimization initiatives in the first quarter.

Jason Bates

Do you expect truckloads fleet to decline 100 to 200 sequentially or year-over-year in the second quarter of 2014?

Richard Stocking

Sequentially.

Jason Bates

A peer cited its expectation that the regular route market is the optimal place to be in truckload. Can you compare and contrast your experience in outlook in Dedicated in one-way truckload?

Jerry Moyes

A regular route freight as well as Dedicated freight are both very good business model for Swift. While they both have unique operating characteristics seasonality, efficiencies and challenges at the end of the day, they both carry relatively similar levels of profitability. We feel strongly that our ability to provide both service offering combined with our other suite of services gives a competitive advantage in securing consistent business with our strategic partners.

Jason Bates

So we will move to the intermodal segment now. There were quite a few questions related to intermodal. What sort of intermodal load growth are you targeting in 2014?

Richard Stocking

We are targeting 15% to 20% intermodal load growth for 2014. We have had a successful bid cycle year-to-date. There are several large accounts currently in the pipeline that we anticipate favorable results as the bid cycle continues. We realize significant growth on our business in March and that trend is continuing into the first part of Q2. The combination of each of these items process in a relatively optimistic position as it relates to achieving our growth objectives in 2014.

Jason Bates

Can you elaborate on the current and intermodal pricing environment?

Richard Stocking

Yes. The current bid season has been very active and we haven’t had to sacrifice price to win new business. While we have realized moderate rate increases in selective markets, overall, I would say the current pricing environment is relatively stable.

Jason Bates

Has your box productivity changed or has it changed at all since the fourth quarter?

Richard Stocking

Whether was a decrease in box productivity from Q4 2013 to Q1 2014, it was more than the typical seasonal drop off.

Jason Bates

Can management provide more color on the recent intermodal business awarded to the company driving the 500 container additions in the second half of 2014?

Richard Stocking

Yes. We don’t disclose exact customer information. But these awards consisted of both truckload conversions as well as an increase in growth with our intermodal customers?

Jason Bates

With the decision to add intermodal containers, have you maximized turns on our existing fleet and now future growth will require containers or is this a reflection of better than expected demand?

Richard Stocking

It’s a combination of both. This season has been very robust and in some regards better than we anticipated. In addition, as I discussed previously, we have several bids in the pipeline, several of which we hope to win. In addition, our container turns are also improving. We have not added additional containers for the past several quarters as we are focused on asset utilization. Asset utilization will continue to be a focus of ours. But keep in mind that in percentage terms our growth of 500 containers only represents a 5.7% increase. This increase is lower than the 15% to 20% projected revenue growth for the year.

Jason Bates

Is the plan to add 500 containers in the intermodal necessitated by the BNSF service issues and resulting limitation to utilization in terms of your existing fleet?

Richard Stocking

No. Our planned growth is driven by our recent bid success and our projected success on outstanding bids in the pipeline.

Jason Bates

With intermodal had a sub-100 OR, if not for the winter related congestion issues in Chicago. Can management quantify the amount of margin drag weather had on the intermodal operating ratio?

Richard Stocking

Yes. We would have been sub-100 in the intermodal segment for the quarter. But we haven’t disclosed exact weather impacts on this segment. We continue to improve our operations. We have increased our asset utilization, improved our network and more effectively managed our [dry] (ph) cost. We believe these efforts will continue to yield benefits on a go forward basis.

Jason Bates

Why would a customer use Swift for it intermodal needs, when experienced giants like JB Hunt and Hub Group are readily available? What is your unique value proposition?

Jerry Moyes

Our value proposition in centered around our ability to handle their total transportation solutions. We believe our customers probably having one organization that they can turn to, to handle their over the road refrigerated, dedicated, intermodal and logistics services. We believe that Swift is uniquely positioned by these services to our customers.

Jason Bates

Are you anticipating being profitable in intermodal for the second quarter and for the full year, if not why are you adding containers now?

Richard Stocking

Yes. We have made substantial improvements in our profitability and expect to be profitable in the second quarter and for the full year.

Jason Bates

What was the average container turn during the first quarter of 2014 and the first quarter of 2013, how long before box turns are expected to normalize?

Richard Stocking

We do not disclose those exact metrics. However, I will say that our container turns improved 8.4% in the first quarter of 2014 compared to Q1 of 2013. With the recent customer awards and projected incremental awards, we anticipate that our container turns will be very strong come this peak season.

Jason Bates

As rail service normalized for your intermodal operations, will the container additions be integrated over the entire course of the second half of 2014, and does this signify that you reached a level of container turn that is tough to increase?

Richard Stocking

Yes. For the most part, rail service is normalized, but we anticipate continued challenges particular in the northern corridor from the Pacific Northwest to the Midwest due to the BNSF. We are working with our rail partners and are taking a more conservative approach in these areas where they continue to struggle. Our plan is to have the container additions integrated into our fleet to take advantage of the peak season.

Based on the strength of our recent bid activity and our projections for the fourth quarter, we believe that our existing container fleet was not sufficient to handle the expected season volumes.

Jason Bates

Let’s move into the Central refrigerated segment. What is the estimated truck fleet growth for Central is it still 200 units?

Richard Stocking

While the system integration, we did experience an increase in turnover in the Central in February given that we are currently anticipating our average truck count for Central in the second quarter to be down roughly 100 units from the average in Q1 but should increase throughout the remainder of the year to the end of the year roughly 50 trucks higher than last year.

Jason Bates

Following the systems integration for CRS to Swift, what is a reasonable operating ratio assumption for CRS in 2014 and 2015, are the integration issues behind you at this point or additional costs expected and incorporated into the second quarter on full year 2014 guidance?

Also what is the magnitude of cost savings from the elimination of redundant facilities and back office combination?

Ginnie Henkels

We would expect Central’s OR to improve throughout 2014 into 2015. We still have integration cost in Q2 related to the facility’s consolidation and the utilization challenges due to the turnover Richard just mentioned. So we will start to realize the synergies which we have said, we expect to be roughly $4 million on an annualized basis.

As a reminder, these synergies will include facilities, back office, fuel maintenance, in addition to these synergies they are making progress on the profitability of the large dedicated business that started in June of last year that will help us further OR improvements as we move throughout the year.

Jason Bates

CRS had negative impact of $2 million from weather and implementation of new systems. How much did weather contribute? Was the impact from the implementation greater than expected or just exacerbated by the tight network conditions resulting from weather?

Richard Stocking

It’s somewhat difficult to separate the impact from weather and the impact from the system implementation. Since both were occurring at the same time but the implementation did have a larger impact than what we were expecting. The difference in process and responsibilities were greater than originally anticipated which had a greater impact on some of the drivers. We believe, we are past that at this point and are making a good progress going forward.

Jason Bates

As you talk about drivers there were several questions about the driver market. Does the increasingly challenging driver market negatively impact your ability to continue to improve your fleet utilization? Or is it simply a constraint to growth? Does the outlook vary by division?

Asked another way, is the driver market limiting your ability to grow both segment simultaneously? And do you believe your multi-pronged approach is a sustainable competitive advantage?

Richard Stocking

Yes. The deteriorating driver market is a constraint on both utilization and revenue growth, but it is also contributing to the shortage of capacity. On the one hand, this generates additional rates in utilization. But, on the other, it makes it more expensive to attract and retain to drivers. While we are not immune to these challenges, we still believe that the programs we have in place as well as our internal academies put us in a better position to face these headwinds. Even though we have seen a recent uptick in turnover we remained better than the industry average.

In addition, we have several strategic teams and initiatives in place to improve our driver experience which we believe will help us attract and retain drivers in the future. Our school still remained full and we have a solid pipeline of new drivers coming in. Keep in mind, that even with all of these challenges in the driver market, we are still been able to grow our fleet by over 600 trucks when you combine all of the segments.

Jason Bates

Can you talk your Dedicated relative to truckload, does the efficient to take trucks from truckload and put them into Dedicated signal your view that the market is more attractive there? Or is it related to challenges in recruiting drivers and the need to have capacity for contract wins?

Richard Stocking

Recently, we have had some significant wins in our Dedicated segment and that struggles somewhat to higher drivers quick enough to fill these contracts in the time allotted. But I wouldn’t say we preferred Dedicated over the truckload business. We priced both of these operations to meet our internal rates of return. However, a lot of our Dedicated operations allow the drivers to stay closer to home and as a result we tend to have better driver retention and satisfaction with this line of business.

Jason Bates

What are management’s expectations for driver pay during 2014, has and will Swift initiate driver pay increase? If so, what is the total year-over-year change – percentage change in terms of driver pay expected in 2014?

Richard Stocking

As we have stated in the past, we are committed to improving the drivers overall W2 through increasing miles and overall pay. We believe we have put in several initiatives that are designed to do just that. Our driver ranking program is working and we expect to give several million dollars back to our drivers this year when compared to last year. This program, however, is a win to both the driver and the Swift as we realized additional benefits that offset these additional costs.

We are, however, looking at additional programs that could increase driver pay. These additional programs would also be similarly design to offset other cost or generate additional revenues.

Jason Bates

Let’s move to insurance. Can we expect insurance and claims expenses to average 4% of revenue x fuel surcharge moving forward? Was the $5.5 million of insurance expense related to the two claims in December incorporated in your prior 2014 outlook for EPS growth of 15%?

Ginnie Henkels

As we stated in the letter, we guided for insurance and claims to be roughly 4.3% of revenue excluding fuel for the full year similar to 2013. The $5.5 million of expense related to the two December claims was not specifically included in the original outlook for EPS growth of 15%. But it certainly included in our current guidance.

Jason Bates

Insurance and claims expense has now been elevated for two quarters and your raised your full-year expectations. Is this an area you expect to see more cost inflation over the coming years?

Ginnie Henkels

Good question. Given increasing medical cost and the litigious nature of our country, the cost of claims is definitely increasing. Therefore, we must focus on reducing the number and severity of crashes to combat this trend.

Jason Bates

Are you expecting any further impact in the second quarter of 2014 on the insurance line associated with the accidents from the fourth quarter of 2013, they required you to take a reserve in Q1, if so how much?

Ginnie Henkels

I’m not aware of anything at this time that would cause an increase.

Jason Bates

Do you expect insurance and claims expense to decline linearly over the course of the year, or will it normalize dramatically in one particular quarter?

Ginnie Henkels

I don’t expect it to decline linearly. It should normalize in Q2, but I hate to use the word normalize when it comes to insurance and since we self-insured for the first $10 million and that can create some volatility.

Jason Bates

So we have several different miscellaneous topics here as we come to the conclusion of our Q&A session here. The first one is related to acquisitions. Are you spending any time on acquisitions and do you have the borrowing capability to do any meaningful strategic deals?

Jerry Moyes

As you heard us say in the past, M&A has always been a part of our D&A, since the time we first became public. We don’t anticipate that to change in the future. Having said that, we will only consider acquisitions, which provide us with a unique competitive advantage on those that will be quickly accretive. We regularly perceive acquisition proposals and when we believe there might be a strategic fit, we will dig into these opportunities to identify if it makes sense for us to pursue.

Regarding the latter part of the question about our borrowing capabilities, we currently have available liquidity of more than $400 million and have access to additional capacity in the market if the right opportunity comes. However, I can tell you our number one focus today is improving on our internal results both at Swift and at Central because we are not satisfied with these results and we are going to do better.

Jason Bates

Great. Can you provide more detail regarding the $15 million of negative weather impact during the quarter? How much was it the result of last revenue versus increased operating expenses?

Ginnie Henkels

It was obviously a combination of both of those items that we have not provided that level of detail at this time.

Jason Bates

How is business in the trans-border market, is intermodal a competitive threat or an opportunity for you in that market?

Richard Stocking

The trans-border market is improving and we absolutely see this has an opportunity. We provide these services for both Canada and Mexico and expect to grow on both borders for both truckload and intermodal. We have recently had some nice wins for intermodal and expect to win additional business in 2014 and beyond.

Jason Bates

What is the difference between trucks available for dispatch and your total truck account in your release? For example, when I add the trucks available for dispatch for the truckload dedicated [recs] (ph) and intermodal segment, it equates to 16,950 versus your total truck count of 18,370. Should we think about the net difference as your unseated truck count, is this because of a lack of drivers and if so could this eliminate the additional need for CapEx?

Ginnie Henkels

The difference between the trucks available for dispatch and the total truck count are as follows; first new trucks that are being kept for service are included in our total truck count but not the average available for dispatch. Trucks that are being prepared for trader sale, trucks used in our academies, yard goods at our various facilities, long-term [recs] (ph) and owner operators who are on vacation are also not included in the trucks available for dispatch.

In addition, when we discussed trucks available for dispatch, so it’s generally shown as an average for the period where the total truck count is generally a period end number. Unmanned company trucks are included in the operational truck count which is also known as the trucks available for dispatch and are therefore, negatively impacting our utilization metrics.

Jason Bates

And finally, can you give us an update on your brokerage business, a year ago you said it would be $1 billion dollar business at some point in the future, is that still the vision?

Richard Stocking

Yes. Our brokerage business is growing. We are establishing new offices and winning new single stores and greater management opportunities. We will provide more details on this at our Investor Day next week. But, yes, our goals to grow this to $1 billion business in the future.

Jerry Moyes

With that said, thank you for the questions that have been submitted and we appreciate your support and look forward to seeing you next Friday at the New York Stock Exchange for our 2014 Investor Day.

Jason Bates

Great. Thank you all.

Operator

And this concludes today’s conference call. You may now disconnect.

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