Ladies and gentlemen, thank you for standing-by. Welcome to the ArcBest Corporation Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference is being recorded Wednesday, February 4, 2015. I would now like to turn the conference over to Mr. David Humphrey, Vice President of Investor Relations. Please go ahead, sir.

Welcome to the ArcBest Corporation fourth quarter 2014 earnings conference call. We’ll have a short discussion of fourth quarter and full year results, and then we’ll open up for question-and-answer period. Our presentation this morning will be done by Ms. Judy R. McReynolds, President and Chief Executive Officer of ArcBest Corporation; and Mr. David R. Cobb, Vice President, Chief Financial Officer of ArcBest Corporation. We thank you for joining us today. In order to help you better understand ArcBest Corporation and its results, some forward-looking statements could be made during this call. As we all know, forward-looking statements by their very nature are subject to uncertainties and risks. For a more complete discussion of factors that could affect the Company’s future results, please refer to the forward-looking statements section of the Company’s earnings press release and the Company’s most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined in the tables in our earnings press release. We will now begin with Ms. McReynolds.

Thank you David and good morning everyone. We have a lot to talk about today as we wrap up another important year for our company. As most of you know since May 1st we’ve been known ArcBest Corporation launching a new era as we look to provide the holistic transportation and logistics solutions our customers expect. But first, I want to welcome David Cobb as ArcBest’s new Chief Financial Officer. David joined our company in 2006 as our ArcBest’s Controller, I worked closely with David and he has done a great job for our company. I look forward to David in his new role as we applies his business finance and acquisition experiences for the benefit of our company and our shareholders. I also want to say how pleased I am that our former CFO Michael Newcity will be leading our Information Technology group and guiding our company in the exploration and improved understanding of new technologies and business innovations. I thank Michael for his service as our CFO. I would characterize 2014 as a change for the better. Following closely on the success of 2013 this was another pivotal year in the history of our company, as we adopted the ArcBest name and new stock trading symbol a unified logo system across all of our companies, updated brand positioning and so much more. ABF Freight continued on its path to better profitability and increase market share to improve service levels in the second half of the year. ABF Freight won the coveted ATA President’s Trophy for safety an unprecedented 7th time and three of our drivers were once again selected as ATA’s America’s Road Team Captain. Simultaneous with those successes and improvements at ABF Freight, we also worked hard to give our customers more of the services they expect from a forward thinking transportation and logistics partner through our emerging businesses ABF Logistics, Panther Premium Logistics and FleetNet America. We are better equipped to offer more easily accessible solutions through a single point of contact at our enterprise customer solutions group and our ability to provide the options for logistic services including the certainty as an asset backed solutions is resonating well with our customers. I’ll talk more about this in a bit. And now David Cobb will cover the details of our results for the fourth quarter and the full year of 2014.

Thank you Judy and good morning everyone. ArcBest fourth quarter 2014 revenues increased 15% to $665 million. Earnings per share were $0.53 for the quarter compared to $0.38 or $0.31 in the prior year on an adjusted basis. Our effective tax rate for the quarter was 26%, this is below the expected rate of around 37% to 38%. Tax legislations signed in late December of 2014; we extended the tax credits related to alternative fuels that previously expired at the end of 2013. As the new tax legislation that was enacted in December included a retroactive tax credit for all of 2014. This year’s fourth quarter includes the full year tax benefit of $1.2 million. The tax credit actually earned in the fourth quarter which is comparable to the prior year quarter approximates 300,000, with the remaining 900,000 associating with the first nine months of 2014. During the fourth quarter of 2014 we also benefited from our life insurance program including market returns on the assets. This is reported below the operating income line and other income and increase earnings by about $1 million versus last year’s fourth quarter. For the full year the income related to this program was the same as 2013. In summary including the non-GAAP items in the table in the press release earnings per share for the fourth quarter include the negative impact of the pension settlement charge of $0.03 and benefits of approximately $0.01 due to the favorable tax rate in increased non-taxable income. The positive impact of earnings per share netted to approximately $0.08 due to these items. For the full year of 2014 consolidated revenues totaled $2.6 billion compared to $2.3 billion in 2013, an increase of 14%. Full year earnings per share were $1.69 compared to $0.59 in 2013 adjusted for…

Thank you David. ABF Freight experienced increased demand for LTL services from both existing and new customers in a marketplace with high capacity during the holiday shipping season. As a result ABF Freight increased fourth quarter revenues and improved its operating results versus the fourth quarter of 2013. While maintaining a high level service progress was made during the quarter to improve system efficiencies and productivity. ABF Freight’s operational team has worked diligently to respond in the challenges and servicing our customers in the midst of significant business growth. During the quarter customer pricing at ABF Freight was enhanced by the early November implementation of a general rate increase impacting one-third of ABF Freight’s total business. We also successfully concluded negotiations on contract deferred and profit improvement business opportunities during the quarter. These increases averaged 5.8% which equaled the highest fourth quarter increase of these types of accounts in the last 15 years. The growth and improvement in ABF Freight’s full year 2014 results reflected a healthier economic environment, necessary reductions in costs and enhancements to operational flexibilities associated with the current union labor contract, network modifications implemented during the year and improved pricing that reflected marketplace constrains on available transportation capacity. As you know through carefully planned investment we have expanded far beyond our core LTL services offered by ABF Freight to include complementary services like truckload brokerage, rail, warehousing and global ocean shipping from ABF Logistics and Panther Premium Logistics through -- Premium Logistics through Panther. Panther had another outstanding year in 2014, during a period of capacity constrains in the marketplace continued demand for Panther’s specialized services was evident across all the markets it serves. Shipment growth was realized from existing shipper relationships and significant new customers added throughout the year. Panther’s ability to effectively respond to…

Eddy, I think we’re ready to do some questions.

Perfect. [Operator Instructions]. The first question is from the line of Bill Greene with Morgan Stanley. Please go ahead.

Judy, I wanted to ask you for some thoughts on first quarter trends, maybe you can talk a little bit about what you’ve seen in tonnage? But also given the fact that we'll have the two GRIs, we’ve got some productivity improvements going on. I’m curious how you think this might affect sort of the sequential change in the OR. I know you don’t give guidance, but typically it would deteriorate we think if you follow history we could actually have nowhere above 100, but it doesn’t feel like that’s the right call here. So maybe you can give some thoughts and color around that too.

I’ll start with your first question which is related to trends that we’re seeing so far. And in David’s commentary he gave an update on the tonnage improvement that we experienced in January for ABF Freight, which is about 4% of an increase. And also that coupled with 4% price increase for a total increase of revenue of about 8%. So that I think gives you a good read on where ABF Freight is in January. With respect to the other emerging businesses and just the overall environment, I would characterize January as a little softer. If you remember there was some severe weather activity in last year’s January and that would benefit both the FleetNet business and our Panther business. And so we’re going to be comparing that to a more significant I think weather disruption scenario last year than we have this year so far. And as you look at some of the demand indicators in the brokerage business or in the spot business in general, just a little bit softer there. But we feel like January is a month that is difficult to really read into with what 2015 will be like and we’re waiting for more to come. So, I think that may answer your question. We don’t give guidance when you look at the sequential history for ABF Freight we would have about 4% increase in operating ratio, which as you point out would indicate a slight loss I think for ABF Freight. You do have the factors that you mentioned which we had a GRI late in the year which is not normal when you look back at history. And we also have the pricing results that we’ve seen on our contracts and deferred increases which are good. I think it was a 5.8% in the fourth quarter and in January that figure is close to 5%, I think it’s 4.8%. So we’re seeing some good indications on the pricing side.

And then on the cost? I was just going to ask on the cost side, is it still kind of going in the right direction, there's still got momentum behind that as we want to think about the OR.

We have continued to see modest improvements in productivity, if you look at our hiring patterns we’re hiring fewer new people so the percentage of people that are with us less than a year has declined. And we’re also seeing some better trends in terms of transportations that we purchase as well as we’re returning rented equipments and lower cartage cost. And so those are all good signs for improvements on the cost side.

The next question is from the line of Chris Wetherbee with Citi. Please go ahead.

I wanted to ask a question on fuel, just sort of curious as we think and it sounds like you’ve made some adjustments to the fuel surcharge mechanism in here in February as we think about 2015 would lower fuel prices. How does that play through the P&L for freight? Is it a modest net positive, negative or is it more neutral? Just trying to get an understanding how we’re thinking about that these days.

Well, when you looked at the impact of lower fuel prices on our account profitability as these fuel prices were low, there was a negative effect. And so with the adjustment of this rate structure we feel like those will be addressed. We’ll have fewer account related issues that would be driven by some sort of fuel results. And so we feel like that this rate structure change is really appropriate for the progression of fuel prices and the impact on our business.

So it offsets some of that negative impact you’re feeling or potentially feeling I guess?

I mean certainly it addresses that impact.

And then just one sort of bigger picture question you mentioned some of the things you’ve been doing financially to increase liquidity, bring down interest expense. As you think about sort of the business a year or two out and then the mix. I mean sort of where you’re going to -- where can you take it I guess from a non-asset perspective? I am guessing that’s going to be the focus of potential acquisitions down the road. Just want to get a rough sense of maybe how you envision in and how you kind of put to work that additional financial flexibility that you gained.

Well we set out a goal for our company to be a $3 billion company by the end of 2015. We’d like for our emerging businesses to be a billion dollars of that total. And we made significant progress on that this year; the revenue total is above 700 million for those businesses as we close out 2014. We really believe as we go beyond 2015 that there is even more room for the emerging business growth as a percentage of the total business. Although there is tremendous growth opportunity for ABF Freight, as well we’ve seen much better trends on the LTL side. I think in this environment LTL or asset based networks are valued more. And we’re seeing some great combinations of services that we can offer to our customers that have non-asset and asset combinations where there is a need for some kind of guaranteed service. And so we're really pleased with how things are coming together, we have our enterprise group forms and working, and that’s all for the benefit of our customers. And we really again are pleased with the progress that we made on that in 2014 and we're really looking forward to seeing the benefits of it as we go into the next few years.

The next question is from the line of Brad Delco with Stephens Incorporated. Please go ahead sir.

Judy I wanted to just ask you a question thinking about the balance of growth and in our ArcBest Freight. Good top-line tonnage, good yields. But do you think it makes sense to kind of curve some of that tonnage growth and focus more on yields. Maybe just comment on that and off there.

Well Brad as you look at our results, I've talked about the GRI that we implemented in November. The contract deferred pricing increases that we experienced in fourth quarter and what we've experienced so far in January. I would suggest you as we always have we are focused on yields. You can see that very clearly I think in the numbers. And so when we look at tonnage growth in our business we want to be sure that, that growth is good for us, it’s effective for our LTL customers and customers that are regular for us to do business with us quarter-in and quarter-out. And we have managed the tonnage levels of the spot business down or our tonnage increases could have been greater. But we enjoyed both growth in tonnage and in pricing, and we want that to continue. And so I think our team is very focused on the right kind of business and making sure that we are bringing that profit to the bottom-line. And we have really began, I think you'll see some improvements there particularly towards the end of the year.

Maybe just a quick follow-up. You don’t tend to think about where the margins are in LTL and whether or not it makes sense to grow tonnage with where the margins are relative to the growth I guess you are seeing in emerging active business.

I think w have a focus on how to spend the investment dollars we have available to us in the best way. But I can tell you that what’s interesting is as you're growing the emerging businesses you also get better business opportunities on the asset side as well. And so you wouldn’t want to do one, and kind be siloed in your thinking relative to the other, because what’s so good about our approach is that it actually results in better business opportunities for all of our business units. And I am talking particularly in the transportation part, obviously that wouldn't affect FleetNet. But really when you look at the profitability of our accounts at ABF we say this all the time, it's on an account-by-account basis. So you are making the decision an incremental decision about what’s best for you each time you make an evaluation of that account. And so we are continuing to do that. And then as we have investment dollars you have seen us spend those dollars to add some scale to these emerging businesses, we feel like that gives us an even better opportunity to grow our entire company.

Your next question is from the line of Todd Fowler with KeyBanc Capital Markets. Please go ahead.

Can you give us some thoughts about how you think about returning to normalized margin level within the freight business? Obviously you saw nice margin improvement in 2014, but I also think that there were probably some things that worked against you if it was your purchase transportation or the efficiencies with the employees. How do we think about the level of margin improvement that you can see over the next couple of years, kind of what sort of rate of improvement we should be expecting?

Well we are focused on returning ABF Freight to historic profitability levels, but that’s a multi-year effort. We've made some progress this year honestly, I would have liked to see even more progress made this year. As we go into 2015 we've got a many additional opportunities for improvements. Obviously the productivity of our newer employees we were gaining ground on that all the time but we still work to do there. Our newer employees tend to have or create more issues in the cargo care area, again we are seeing improvements on that but we still have some work and ways to go there. We have some work to do as we're doing this year with our capital program to improve the age of our fleet for the best total cost of ownership outcome for our company. So we expect to see improvements in maintenance cost trends, in fuel efficiency and that sort of thing. And then our investments that we are making in our service time is really going to benefit us in bringing additional market share to us to the extent that we improve things there. So I could give you two or three more but I think those are significant enough.

So basically the message is that, there is things that you can still continue to do outside of the market are factors the volume in the pricing to continue to move the margins in the direction.

Absolutely.

And then just my follow up to your point on the investment in the fleet. It feels like that there is going to be a pretty big step up in depreciation expense into '15 versus where it had been in '14. How should we think about that? Is that going to be a drag on the overall margins of the company or do you enough visibility where you’re going to see with in terms of non-asset side increased revenue and on the asset base side some improvement in maintenance and those sorts of things where you’re able to offset that, basically able to absorb the higher depreciation expense from a margin standpoint.

Todd, this is David. You are exactly right, with the improvements in both fuel efficiency, maintenance we believe that will all set largely the depreciation impact that you’re talking about were spot on.

And then what about on the non-asset side David?

In terms of the Panther CapEx?

Right.

That is incremental business primarily for Panther life sciences trailers for instance and in some cases replacing rental trailers, they are the only one that has the sort of asset like on the trailer, replacing those lease trailers that they had legacy from the acquisition will improve cost there.

The next question is from the line of David Ross with Stifel. Please go ahead.

On the LTL savings if you look at ABF Freight, Judy we talked in the past about the new labor agreement that you guys got over a year ago is having 55 million to 65 million in annual savings and then the network changes that we’re talking about in the first quarter or last year were in the 10 million to 12 million savings range. The operating income at ABF Freight only rose about 40 million year-over-year in 2014 and I know there was some issues in 1Q with the weather holding that back but given the strong tonnage in pricing environment, I would have expected to see more of those what I would call 65 million to 77 million in savings come through. So if you talk about kind of what maybe holding that back or where that stands in terms of, are we really going to get those savings not get those savings.

Well, to backup and I think you’ve articulated those numbers and details well, but when you look at 2014 really what we’re missing in the discussion as you lay it out is the fact that we did have a significant productivity inefficiencies, we needed significant productivity improvements, and that is the issue. So when we look at the contract savings what we’ve got from the wage and other vacations reduced cost if you look at the network savings as you mentioned. Those things were offset by productivity declines and that’s when we talk about the opportunity in 2015 it is significant. And we have gotten the contract savings that we believe that we would get the network redesign savings are somewhat less than what we felt like they would be in the beginning and that’s because we have grown, and as you grow those savings tend to be a little bit less. And so again as I look at it we closed out 2014, I think I mentioned a little bit ago that I would like to have seen a better result and I would have, we certainly have the opportunity for improvement in 2015 in that productivity area, and also as I mentioned with our cargo care and our equipment management and many other things.

And then just the follow up on the productivity comment with the inefficiency. Was that due to higher volumes that came on board in 2014, not being handled as smoothly because you had to bring the new people on board? Or was there some issue with the union kind of slowing down their work, the payback for the concession they just had to take.

Actually Dave, that’s a natural thought that you could have about our situation. But as we look at it and as we have the ability to reflect on the improvements that people are making, you can clearly see that it was from the business, we hired the people, it was just the newness of the people to our business, something that was interesting and we talked about this a couple of quarters ago. We are adding dock workers to our company that have never driven forklift before. And so you're in an environment where you don’t have access to as many experienced people from the industry hires. And so that created more of a significant issue than what we’ve seen in the past. But I think we also mentioned that this was the greatest sequential growth in 15 years for our company. And so when you’re experiencing that, you’re bringing on significant number of new people you’re also doing things like renting equipment, using cartage and other expensive ways to deal with that growth. You’d certainly have an opportunity for some better results as that settles down. And we’re doing all of that in the spirit of best serving our customers. And again as we look to '15 we’ve got a lot of possibilities for improvement.

Well, it sounds like 2015 is a good year for yield management.

Yes, and we agree with you.

Your next question is from the line of Art Hatfield with Raymond James. Please go ahead.

Judy if I could kind of continue to follow up on Dave’s question. Based on what you said it would lead me to believe that the potential headwinds you saw could be in the $25 million to $30 million range on an annualized basis. One, is that kind of -- am I in the ballpark they're thinking about that? And two, could you talk about kind of where you are kind of what inning and I guess for lack of better words in recapturing some of that stuff? And if so where you’re at today? What if any headwinds may you have in 2015 as you work to get back to where you want to be from an efficiency standpoint?

The number that you mentioned is a material number, and what I’d agree with you on is this is a material effect. And so we don’t give into giving the dollar value is attached to some of those details, because we know you have your model and your way of calculating those. But it certainly is a material effect. When you think about the inning that we’re in, I think that the figure are right, maybe the two days that they’re sitting here can verify this. But I think the percentage of employee that we have that are under a year in the fourth quarter is maybe 27% versus 15% or something like that last year, something like that.

Yes, that’s correct.

We have still a higher number of people that are new with us but that percentage if you compare it to earlier in 2014 it’s the early part of 2014 is certainly greater. But as we moved into the second and third quarter those percentages were higher. So we’re kind of coming down maybe so maybe we’re in the fourth or so inning on this process. We still have a lot of improvement to do, and it will depend on how our growth trends are occurring in 2015 as we see this unfold. Understand that we have a huge amount of emphasis in this area. Our operational team has made significant progress but the management as the details in this area is great and there is a keen understanding of the opportunity that is here. And so again some of what we’ve experienced is just better serving customers and gaining opportunities from existing accounts. And so we’ve heard this, well why don’t you increase prices so that you’ll have less of that. Well, this is about serving existing customers. And so want to be sure that we satisfy our long-term customers.

The next question is from the line of Jason Seidl with Cowen and Co. Please go ahead.

Two quick things, one could you talk a little bit about your expected pension expense for 2015? And then I have a clarification question on something Judy said earlier?

Are you talking Jason about union pension expense or otherwise?

Union pension expense, you can talk about both actually I’d love to hear both?

Well, you know that we have terminated our non-union pension plan.

Correct.

So cost that we see there, the settlement charge that you see there, I’ll let David speak to that and then we can talk more about this the union pension side.

Jason the non-union side, as Judy mentioned we curtail that plan but along with that we have periodic settlement charges as we’ve had in this past year. And we expect that to probably continue in the roughly million dollar range per quarter, so that would be the charge. The underlying really cost of that plan is basically zero at this point.

And will those costs go away after '15?

I am going to let David speak to the defined contribution replacement of that plan.

That’s right, in replacement of the non-union pension plan we’ve submitted a defined contribution plan which is discretionary plan. But it also has an increased cost to it but it was fully implemented in 2014, so we would expect that to be comparable going forward.

And then on the union side, we have the plan that has -- I mean the contract that’s in place we made the contributions to it. The contribution increase will be in August for that plan. And so David, I’ll let David give you the figures, maybe offline, that we have in terms of the total dollars for that plan for 2014 but we’ll have an increase that’s maybe 3% to 4% before our health welfare and pension on August 1st.

Jason as you know that’s just paid out on an hourly basis based on a number of hours worked by our employees. So as we grow, as we work more hours that number would grow potentially based on that.

And my clarification question. You mentioned 5.8% on the contractual pricing in 4Q. And Judy did I hear you right saying that thus far in January you are tracking at 4.8% or did I hear that wrong?

That’s right.

The next question is from the line of Matt Young with Morningstar. Please go ahead.

On the ABF Logistics side, I know it’s still small but what’s the current mix of the highway brokerage in that segment. And I think I might have missed it but could you provide some color on what you are seeing in terms of gross profit margin trends in brokerage?

In the Logistics business that’s almost entirely the brokerage business, when you look at the totals that are in the press release. And the margins on that business were slightly softer. I think in the fourth quarter that is primarily driven by growth with larger accounts, when you're quoting a larger account there is more -- I guess you are closer to the market typically on that business. And so we've seen some compression there, but nothing significant. And we feel good about our opportunities for growth in that business, although as we bring on more businesses it would typically be oriented toward larger accounts and perhaps have a slightly lower gross margin. But we feel like that over time the operating margin opportunity in that business for improvement is really good, as we have more of our employees gain experience there is a significant difference between an account manager that has over a year of experience with us versus someone that’s brand new. And so we have some opportunities for margin expansion there over time.

So is the sales force dedicated on that front? Are you overlapping with other divisions on that?

Well we do have certain -- actually a pretty small number of sales directors that work in that business, specifically for that business, but we also utilize the contacts and the customer accounts and the sales force at ABF Freight, because the customers that we have connections with in that business tend to have a lot of needs in particularly in the truckload arena and the ocean shipping arena. And so what we're trying to do there is better satisfy customers with the services that we have. And so we make those customers aware through their contacts perhaps on the LTL side or the other services that we offer. And we are also seeing more interaction with Panther in that mix as well.

Our next question comes from line of John Barnes with RBC Capital Markets. Please go ahead.

Just real quick. We talked about this before but just the network as it that exist today, where did you kind of finish the year in terms of how utilized the network is? And I think this goes back to question someone was asking earlier just about, I know it’s gotten tighter, I know you've used up more of a network and you can handle less volume in the peak times. What do you think you have to do, is it going to require additional investment in the network going forward, maybe larger than expected or is this the point where you start to get maybe more selective above the type of freight you want in the system?

Well we're continuing to look at effectiveness of our network with the customer business that we have, that’s a little bit of a moving target because the customer business you have is always changing. But we do, as you close out 2014 and you look back we had capacity issues that obviously we were having to address those perhaps to some inefficient cost answers. But by enlarge we feel good about the network that we have in place. We do constantly evaluate that and I would anticipate over the next few years that we as we always have will have changes to that. But we don’t think that there is a necessarily any large expansion that is beyond where we are today, but we do see that things could change over time. And I think that we are focused on the yield side of our equation. As I mentioned we had the GRI in November, we had good results on our contract and deferred price increases for the fourth quarter in January. And with the change that we made on the fuel surcharge side to address the fuel impact. So we feel good about the actions that we’ve taken there and we feel like we can mange some growth. We’re seeing in January a lesser growth rate than we experienced in the fourth quarter. And so I think that that presents obviously an opportunity for things to settle down, but we want to be sure that everyone understands that we have customers that have needs and we’re not afraid of more of a balance between growth and yield as we go forward.

The next question comes from the line of Rob Salmon with Deutsche Bank. Please go ahead.

Judy or David as a follow up to John’s question. How should we be thinking about kind of CapEx as we look forward from here given that the network is a bit tighter, you’re investing more certainly in 2015 regarding to your rolling stock. Should we think about it kind of maintaining at these levels looking forward or should it naturally come down as we look out to '16 and beyond?

I think the large dollars on the CapEx side are really in the equipment area. I mean you’re not really seeing a large dollars there for anything related to terminal facilities although there are some dollars there. But Rob, it’s very difficult for us to say out in 2016 where our CapEx dollars will land. We are wanting to reduce the age of our equipment, so we’ll probably have more dollars over the next few years to try to address that. But they'll really be in the equipment area is what we will anticipate.

And then as my follow up in terms of kind of bringing in the puts and takes for 2015 you’re expecting to see some continuing margin expansion in terms of the strong yield environment. But from a cash generation perspective or from a free cash flow perspective, can that improve in 2015 or is the net CapEx going to make that challenging?

I think the additional investments that we’re making in CapEx will create a more balanced situation than what you’ve seen from us. We have probably in 2014 a build of cash or resources where in 2015 you won’t necessarily see that as much, although there are opportunities for financing on equipment side are good and at low rates. The investments that we’re making in equipment I just want to pause and say we really feel good about those, we feel like it’s going to bring us. So much needed savings on the maintenance side. We think that the fuel efficiency attached to those units makes for a good decision as well. And so, in my opinion if you are going to have a more balanced sort of free cash flow situation it’s always good to be able to look at that and say that that’s actually the right decision. We feel good about the decision.

Your next question is from [indiscernible] with Bank of America Merrill Lynch. Please go ahead.

Just wanted to understand a little bit better. I was hoping you guys can talk about the M&A environment and just if you’re seeing more opportunities than usual and kind of where that lies on your priority spectrum?

Well, it’s a high priority for us and defined good candidates; I mean much like we did with Smart Lines a very small acquisition but it’s one that we made recently. We have a team of people that is looking constantly for those opportunities were primarily focused in our logistics businesses for those opportunities because it could add scale to the businesses. But we’re looking for those acquisitions that can best fold into the existing infrastructure that we have. We immediately folded in the Smart Lines acquisition to be an ABF logistics branch location, the systems and all that are integrated at this point and so we’re glad for that. But that’s what our intention would be. And we feel decent about the prospects that are out there, I don’t want to be overly encouraging because it really is difficult to get the right candidate and the right situation in order to bring that on board. So we’re patient but at the same time we are very active in looking for the right answers there.

The next question is from the line of Matt Brooklier with Longbow. Please go ahead.

Your fourth quarter purchased transportation cost, have things kind of normalized at this point I know in 3Q we saw some inefficiencies; I think rail was part of that equation. But just trying to figure out your PT cost in 4Q that’s a good kind of run rate number to use in '15?

We had higher percentage of purchased transportation in other quarters, I think we were down to about 3% utilization of purchased transportation and I am talking about truck transportation. Our rail percentages if you look at the fourth quarter it was 13.4% of our miles were on the rail that compares to 15.5% last year and really just speaks to our inability to use some rail lanes because of service.

I guess my question being -- has the network kind of balanced at this point in time and do you expect this to be kind of the run rate of your peak PT cost moving forward? Or do you think things could actually get a little bit better next year given rail comes back or maybe the truckload market loosens a little bit I am just trying to get a feel?

I would hope that things could get a little bit better in 2015, but it is hard to predict because that’s just -- when you’re dealing in those areas particularly on the truck side you’re doing it for a reason. Typically because you’re balancing empties or because you’re trying to deal with the customer service need. But I do feel, I'll say this and maybe because we’re in January I feel better about it right now than I did at earlier points in 2014 about the balance of that and the options that we’ll have in 2015. But as you know that could change rapidly depending on the conditions from a capacity standpoint.

I think Matt to your point there though, this is a focus area for us and the team is highly focused on making the best use of purchase transportation.

And our final question is from the line of Willard Milby with BB&T Capital Markets. Please go ahead.

Judy did I hear you right the truck PT is 3% this quarter?

Yes.

And if I could just ask a question around fuel. I think around 11%ish as a percentage of revenue in 2013 was a fuel, fuel taxes, oil and lubricants. What’s that level dropped to in Q4 if you have a number given the precipitous drop in fuel prices?

I am not sure where your number came from there but we don’t typically break that out as a line item that’s on our earnings release which includes fuel supplies and expenses.

That was running at 17.6% of freight revenue for the quarter.

But I was just looking at I guess the annual for NIM for 2013 had 11.4%.

That’s a little bit of different…

No, perhaps we could follow up with you offline we don’t have that in front of us.

I don’t know what your source was on that.

Appreciate it. All right well listen we appreciate everybody’s participation and this concludes our earnings conference call. Thank you very much.

Ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.