EX-99.2 4 pre1q05_transcript.htm

CORPORATE PARTICIPANTS
Tripp Sullivan
Corporate Communications, Inc.

Ray Harlin
U.S. Xpress Enterprises, Inc. - CFO

Max Fuller
U.S. Xpress Enterprises, Inc. - Co-Chairman

Jeff Wardeberg
U.S. Xpress Enterprises, Inc. - COO

Pat Quinn
U.S. Xpress Enterprises, Inc. - Co-Chairman

CONFERENCE CALL PARTICIPANTS
Rob Harley
Bear Stearns - Analyst

Daniel Moore
Morgan, Keegan & Co. - Analyst

John Larkin
Legg Mason - Analyst

Tom Albrecht
Stephens, Inc. - Analyst

Nick Farwell
Arbor Group - Analyst

Michael Meyer
AF Capital - Analyst

PRESENTATION

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Operator

Good day everyone, and thank you for your patience. We would like to welcome you to this U.S. Xpress
Enterprises, Inc. conference call. As a reminder today's call is being recorded. And now at this time for opening
remarks and introductions I would like to turn the conference over to Mr. Tripp Sullivan of corporate
communications. Please go ahead, sir.

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Tripp Sullivan - Corporate Communications, Inc.

Good morning. Thank you for joining this U.S. Xpress conference call. On the call today will be Max Fuller,
Co-Chairman, Pat Quinn, Co-Chairman, Ray Harlin, Chief Financial Officer and Jeff Wardeberg, Chief Operating
Officer. Before we begin I would like to cover the Safe Harbor language. Certain statements made in this
conference call may be considered forward-looking statements within the meaning of section 21-E of the Securities
Exchange Act of 1934 as amended and section 27-A of the Securities Act of 1933 as amended. You should consider
carefully the risk and uncertainties described in our press release issued this morning and various disclosures
and filings with the Securities and Exchange Commission. We disclaim any obligation to update or revise any
forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking
information. I will now turn the call over to Ray Harlin.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Thank you, Tripp. We announced today that we anticipate financial results for the first quarter ended March 31,
2005 to be in the range of a net loss of $0.11 to $0.14 per share on revenue of approximately $270 million.
During the quarter we encountered a number of converging factors which negatively impacted our operating results.
In our truckload operations we encountered a softer-than-expected seasonal trade environment, which persisted
throughout the quarter and which negatively impacted our rates and asset utilization. We expect our loaded rate
per mile for the quarter to approximate $1.48 or 9.5% above the prior year quarter.

While the year-over-year increase was significant, it was less than we expected and represented a greater drop
from the fourth quarter rates than we normally would expect. We believe that this is due in part to soft freight
demand. The combination of lower-than-expected rates and demand affected our total revenues and our ability to
cover higher operating costs. Fuel prices reached record levels during the quarter, and we expect our price for
fuel will be 30% higher this quarter versus the prior year quarter. We estimate the impact of these higher fuel
costs, net of the impact of fuel surcharges will negatively impact our truckload operating income compared to
prior year quarter by approximately $1.8 million or $0.06 per share.

Other than fuel, we anticipate the most significant increase in quarter-over-quarter costs to be driver pay which
we expect to increase by 20% on a per mile basis due to driver pay increases implemented during 2004. While this
cost increase was known, we expected it to be covered by higher rates and revenue than we now expect to achieve.
Historically during the first quarter, we have had the ability to attract drivers and add to our tractor fleet.
During the current quarter we encountered a very challenging market for drivers and owner operators despite a
significant driver pay increase initiated during the fourth quarter. As a result, we anticipate our average
seated truck count for the quarter will be approximately 100 lower than the average for the fourth quarter of
2004.

We are working diligently to increase our seated truck count. We expect that our Xpress Global operations will
incur an operating loss ranging from 2.7 to 3 million due primarily to losses incurred in our airport-to-airport
operations. As we disclosed early in the quarter, we have made several significant changes in management and
initiated a number of actions to reduce costs and improve margins. While we were disappointed in the expected
first-quarter results, we anticipate that these actions we have taken and are continuing to take will help
improve results in this business segment throughout the remainder of 2005.

As you are aware, the first quarter has historically represented our most difficult quarter due to a seasonable
softer freight market that can affect each of our business segments and cause higher operating expenses.
Typically the last three quarters of the year contribute a disproportionate share of our profits. We currently
anticipate the industry fundamentals, such as a strong economy and tight capacity should provide an environment
conducive to improving our rates and asset utilization for the remainder of 2005.

We continue to pursue and have been successful in achieving meaningful rate increases in connection with renewal
of customer contracts. We continue to grow our expedited rail business and allocate our truckload assets to more
profitable business units such as our dedicated contract business.

Arnold Transportation in which we held a 49% equity interest since December 2004 is expected to experience strong
revenue growth in the first quarter and to contribute positively to our first-quarter results. We will now open
it up for any questions.

QUESTION AND ANSWER

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Operator

Rob Harley (ph) with Bear Stearns.

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Rob Harley - Bear Stearns - Analyst

I was wondering how does March capacity compare and pricing compare to January, February? What are your trends
looking like, and do you have expectations for April and any insight into bookings there?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

If you look at basically what has happened during the first quarter, typically somewhere around mid-February you
will actually see freight volumes come up and you will also see rates come up somewhat in the last 6 weeks of the
quarter. This quarter we haven't seen that. We haven't seen the volume increase like is pretty typical during
that last 6 weeks, nor have we seen the rates pop-up during that period. We do think as we get deeper into this
year the capacity thing will tighten and some of the customers that may be diverting freight to other carriers
will bring that freight back to U.S. Xpress.

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Rob Harley - Bear Stearns - Analyst

Do you have any impact or any visibility yet into April?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Hard to have much visibility into April, we believe we will see a stronger freight volume and we won't have
Easter in April that, although we had last year.

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Rob Harley - Bear Stearns - Analyst

Do you think Good Friday at the end of the quarter is causing any impact?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

It had a definite impact because we've lost the equivalent of probably 2 to maybe 3 day's worth of revenue
between last year that had the extra day of the 29th of February and with Easter also in this year, there is 2
to 3 days difference in billing for that period. Those 2 periods.

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Rob Harley - Bear Stearns - Analyst

Okay. Looking at the airport-to-airport and the Xpress Global, how much revenue is that , is your
airport-to-airport?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

We do not have the specific breakdown of the breakdown at this point between airport-to-airport and carpet. The
total revenue for that segment of our business would be about $41 million for the quarter.

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Rob Harley - Bear Stearns - Analyst

Okay. And is that something you would possibly look for a strategic buyer if you continue to see losses there?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Well I think our goal is to get to the point where we don't continue to see losses. We've seen substantial
improvement in March over the two previous months during the first quarter, and we're pretty excited about what
we think can happen as we get deeper into the year.

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Rob Harley - Bear Stearns - Analyst

Okay. Thanks for your time guys.

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Operator

Morgan Keegan, Daniel Moore.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Morning Guys.

I wanted to spend a little bit of time on the demand front because I think there is a little bit of a deeper
theme here. Covenant pre-announced, said demand was weaker than expected. Yellow pre-announced upside
expectations but said business levels were more or less flat or in line with a year ago, which wasn't a stellar
comment, and now you all are saying that demand is weaker than expected. Can you give us a sense for what's going
on here? Because it certainly sounds like the freight economy is decelerating or has decelerated. And that, from
an analyst perspective it begs the question if that's the case, what is going to change that and should investors
really be paying 18 times for the group given that sort of trend?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Dan, we try to look at the different markets, the different customers trying to figure out is there a certain
segment that is soft? We can't see one segment that's soft, we just see individual customers. When we look at
geographic markets we do see that the West Coast is quite a bit softer than we anticipated. We see the Pacific
Northwest just almost totally dead. And then we've seen Texas, which during the third and fourth quarter of last
year was pretty strong for us. It has been pretty soft. The Southeast believe it or not has been relatively
strong.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

What, I mean, given the trend you've seen here over the last three months, can you give us any reason to believe
that while yes, seasonality will improve the supply demand side of the business inherently, what is going to
allow you to in your view, what sort of environment going to develop can develop that will allow you to post
earnings growth over the next couple of quarters, guys?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Well, we think just sheer volume. You know, get through the calendar in the first quarter, which obviously has
an effect. The calendar in the second quarter obviously has more positive effect. But I also think that when you
look at freight volumes that typically move during that second quarter we will see the second quarter be quite a
bit better.

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Ray Harlin- U.S. Xpress Enterprises, Inc. - CFO

Dan, economic activity, I mean indicators still look pretty good. So we may just have a lull in freight demand
right now.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Yeah, it is just that it seems to be going 3 months long. Last question here. What about full year guidance at
this point? Are you in a position to give us any sort of picture on the full year?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

We continue to believe that it will be a strong year as we go through the rest of the year. I think the premise
that we talked about in the fourth quarter given a reasonable economy that we anticipate the fundamentals in the
industry to be good. And we think that this is kind of a temporary lull in freight demand that we have good
prospects because the strategies of moving to dedicated operations, our dedicated operations continue to grow.
Our rail expedited continues to become a bigger piece. Many of the changes we've made we think will help to
accelerate and improve our results as we go forward.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Dan, part of the risk for the balance of the year is kind of the same situation that we saw during the first
quarter is fuel prices were extremely high during the first quarter. We didn't anticipate them being anywhere
close to that figure because we thought they were high enough during the fourth quarter. You know, and that does
pose a little bit of a risk for the balance of the year. But we still think that we are pretty comfortable with
the numbers on the Street.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Fair enough. Thanks, guys.

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Operator

John Larkin with Legg Mason.

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John Larkin - Legg Mason - Analyst

Good morning Max, good morning, Ray. Just a couple of questions here. I guess the intriguing part of this past
couple of weeks has been that really the two carriers that seem to have the more pronounced issues in the first
quarter are those that historically have been in the longer haul East-West lanes and I was wondering if you could
maybe share with us your thoughts as to why, perhaps, U.S. Xpress and your Chattanooga neighbor would be more
seasonal than some of the other carriers that are involved perhaps in shorter haul, more regionalized
transportation.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think if you look at the nature of the long haul business it is typically imported goods or manufactured goods
going into a distribution center. Every year first quarter is always softer in that segment of the business. I
know Covenant has a big stake in that long haul market; I also know that U.S. Xpress does even though our stake
is probably as a percent less than Covenant's. But you're always going to see that first quarter be a much
tougher quarter because of the nature of the business. And that is one reason that U.S. Xpress several years ago
said we needed to diversify our business into other segments like dedicated, like regional and some of these
other things that we've done to kind of change that first quarter effect. And obviously we haven't made it far
enough at this point to really do what we wanted to do. We are still working on it.

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John Larkin - Legg Mason - Analyst

Is it fair enough to say that the softness you mentioned earlier and experienced was really more targeted on
those longer haul lanes rather than your dedicated or regional operations?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think that is true, but we also saw the California what we call the I-5 regional, it was still relatively
soft, too, so this appears to be more of a West Coast issue more so than what we would see on the eastern half of
the nation.

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John Larkin - Legg Mason - Analyst

Can we talk just a little bit more about Xpress Global and maybe the timetable for the turnaround of that
operation? I know a lot of major changes were put into place during the quarter, but from our perspective it is
tough to see just how quickly that business might return to breakeven or profitability.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think that if you look at how much headway that we've made during the first quarter and maybe it doesn't show
in the numbers, but as we get into the second quarter I think that you will see some pretty substantial
improvement. I think in our last conference call we basically said by midyear we would expect to see that company
really operating like it should. And then probably deeper into the balance of the year should turn clearly
profitable. And that is probably even more so on the air freight side because carpet's a good contributor at this
point.

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John Larkin - Legg Mason - Analyst

So you're not making backing away from that earlier statement at all then?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I don't think we need to at this point.

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John Larkin - Legg Mason - Analyst

Okay. Then just a couple of other questions on the driver situation. I think, if I'm not mistaken, that you all
took a couple of driver pay increases last year that totaled up to something on the order of 20%?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Just right under 20%, yes.

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John Larkin - Legg Mason - Analyst

A little under 20 on average and I guess one would think that if there was some elasticity to the supply curve
that that would have been enough to put you in a position to at least equal last year's seated truck count.. Can
you give us any kind of insights as to what you think might be going on in the driver market that would make it
more difficult this year even though your compensation is quite a bit higher?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think that part of it is demographics. You've got the driver age having an effect on the total market. I think
you're seeing the LTLs, be somewhat stronger than maybe they have in the past years. They are taking more
drivers. You're seeing probably more private fleets that are trying to grab the drivers they can to make sure
they've got capacity on their own trucks. And I think there is almost a frenzy in the market for everybody to
grab all the drivers that they can. And I know some of our competitors have done what we think is some pretty
ridiculous things like sign-on bonuses and stuff that are almost a little bit extreme. I guess that you know I
guess in normal times you don't think makes sense and maybe we've been too slow to do some of those really
extreme things to help the driver situation.

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John Larkin - Legg Mason - Analyst

Then just one final question on the fuel situation. I know some of the other carriers have had some success in
modifying their fuel surcharges to account for a larger percentage of the differential between say your base fuel
price or fuel cost of $1.10, let's say and where we are today, maybe $1 north of that. How much success have you
had in modifying your fuel surcharge, and is there more room there to do that?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

We've had some success during the first quarter. Unfortunately a lot of our contracts come due in the second and
third quarters. So that's probably where we will have more success. And for the most part we are pushing for a
ratio of 5 to 1, which in the past has been say 6 or 6.5 to 1, which didn't cover full cost. And I think that 5
to 1 gets us pretty close.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

John, that is a very high priority with our marketing people this year.

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John Larkin - Legg Mason - Analyst

Okay. Thank you very much.

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Operator

Michael Meyer with AF Capital.

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Michael Meyer - AF Capital - Analyst

Actually John just really covered one of the questions that I had on driver pay. I know you had said that you
had an increase of 20% and you had expected that to get passed through with higher rates. Are you still finding
reluctance in raising your rates to offset the cost of paying your drivers?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

We still are having pretty good success in raising the rates. And like I said earlier, a lot of our contracts
come due in the second and third quarter. And that is where you probably see some of that recovery occur.
Obviously it didn't occur enough in the first quarter, but we are working with a lot of customers to push rates
up to where we feel like we get a reasonable yield.

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Operator

Stephens Investment Bank, Tom Albrecht.

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Tom Albrecht - Stephens, Inc. - Analyst

I wanted to explore some things. First off, I missed the first couple minutes. Maybe you commented on this, but
can you talk about the month of March because it sounds like things have gotten better, but they are far from a
March that you would have expected. Maybe how much of a loss were you looking at entering into March and maybe
give us a sense as to how March is performing both for truckload and Xpress Global?

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Ray Harlin - U.S. Xpress Enterprises - CFO

Max mentioned earlier Tom that we did not see as much acceleration in revenue after say this February than we
would normally see or historically we have seen. So March has been disappointing from a volume standpoint.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

And we usually see rates come up some during that same period which we did not see.

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Pat Quinn - U.S. Xpress Enterprises, Inc. - Co-Chairman

And as you understand a significant part of your profits are made in March during the first quarter. So March
was a disappointing month from a volume standpoint, and we did not see that rate acceleration from that
standpoint.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Tom, we basically saw March being almost as flat as February which is very uncharacteristic. Usually your
profits in this business are made in the last 6 weeks of the quarter, and because of the flatness that kind of
sent us sideways. But we are profitable -- we are profitable in March, and it just wasn't enough to overcome the
beginning of the year.

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Tom Albrecht - Stephens, Inc. - Analyst

Are you profitable in both truckload and XGS or only in truckload at this point during the month of March?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

We anticipate to be profitable in -- we will be profitable in truckload and we will be very close in Xpress
Global.

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Tom Albrecht - Stephens, Inc. - Analyst

Okay. I guess another thing that is sort of mystifying is that given how much your business mix has changed the
last couple of years to have sort of these blanket comments about softness given the distinct businesses you have
between dedicated regional and Intermodal I guess is what is so surprising. It would seem to me even though those
are still not a majority of your business they are going to probably exceed 50% of your revenues later this year.
And I don't understand why you are not seeing maybe better trends in the regional or dedicated markets versus
your traditional longer haul generic trucking.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

We are seeing better returns in the Intermodal product. Also in our dedicated product. The regional side has
been somewhat soft partially because of the I-5 corridor but then we've seen softness in the Midwest and a little
bit in the Southeast regional operations. But we have seen some real positive things happen both in Intermodal
and in dedicated. We are seeing some pretty good growth in dedicated this period.

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Tom Albrecht - Stephens, Inc. - Analyst

Okay. What would your average rate per mile be in the neighborhood of $1.48? I'm trying to remember if you gave
exact guidance coming off the fourth quarter. I know you said it would be lower than the $1.61, but what would
you have been looking for had the first quarter been more closer to your expectations?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

We would expect that in that $0.03 to $0.05 higher, probably.

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Tom Albrecht - Stephens, Inc. - Analyst

I think in the beginning -- this is just when I was getting in - you made some comment about estimates. You are
comfortable or you're not prepared to comment. Can you clarify what you said? And then I have a question off of
that.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

I think, Tom, what we said is we continue to believe the fundamentals are good in the industry; that we expect
to be in a position to continue to increase our rates. In other words, get that money that we talked about to see
improved utilization and therefore we still believe that we will have positive results going forward, that given
the economy stays in good shape.

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Max Fuller - U.S. Xpress Enterprises, Inc. - CFO

We also said there is risk in fuel prices if they stay uncharacteristically high.

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Tom Albrecht - Stephens, Inc. - Analyst

Right. I guess I am sort of a big believer in the old adage that there is no such thing as one bad quarter. And
probably would've been willing to live with a more of a disappointing number if we could sort of blame it all on
XGS or more of the shortfall, but even if XGS had been profitable it looks like you still would have lost maybe a
penny to $0.04, $0.05 in the core trucking business. And that's surprising because your mix changes have been so
positive, and you only made $0.06 in the year ago period. So I would've thought that the improved mix might have
offset some of that softness. So I guess my point is where we are at now in Q1 $0.11 to $0.14 loss, your next 3
quarters a year ago were 30, 38, 42. That just seems to be an awful big stretch to quickly get back there in one
quarter.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Tom if you look at part of the effect of the first quarter that $1.8 million negative effect of fuel alone
impacted us during that quarter. If fuel more normalizes in price, then you will probably have some pretty
sizeable improvement there. And typically as you get into the summer months and stuff, fuel prices do moderate.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

The other thing, Tom, as you know we have significant earnings leverage. And since we saw a flat rate, we saw
volumes that were less than we expected and I don't think that will continue. For if our rates had been for
example 1 penny higher in the quarter, it would've converted into around a million and a half in margin. So it is
sensitive to rates. We are putting rate increases, freight selection will improve as we go through the year, and
freight selection has a big impact on your average rate per mile. So it wouldn't take a large movement to make a
difference. We are focused on making that happen. So there could be a lot of change -- it could change fairly
quickly because of the earnings leverage that exists there.

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Pat Quinn - U.S. Xpress Enterprises, Inc. - Co-Chairman

And by design, Tom, in the first quarter it is more difficult to get substantial rate increases simply because
the shipping community has more leverage. We, as Max alluded to, more of our contracts come due in the second and
third quarter by design because, quite frankly, it's at least a more level playing field, if not shifting
advantage to our side. It is a -- gives us a lot more options in the first quarter if you go in and try to raise
increase, or increase rates by substantial numbers.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

I guess the other thing is seated trucks, 100 seated trucks make a big difference in the top line.

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Tom Albrecht - Stephens, Inc. - Analyst

Right.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

So we are working on a number of facets, including seated trucks, continuing the shift of the business that we
started last year that had dramatic impact last year in the second, third and fourth quarter, looking at all of
our cost items to put some insurance in those type of things in the mix. So we are -- we got a lot going in those
regards.

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Tom Albrecht - Stephens, Inc. - Analyst

I guess on the unseated count historically Q1 has been an opportunity for fleets to fill their trucks a little
bit better. Sometimes drivers do look around when their mileage is down, but it seems like the bigger fleets have
tended to do a little better earlier in the year, and then as things get busy later on the problem becomes more
pronounced. And I am just surprised that it has reversed itself this year. Do you have another pay raise
scheduled right now?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

No, we do not. We think our pay is competitive; we are taking a number of actions in the recruiting area, and we
have some dedicated contracts coming up that will allow us to add trucks in those areas. So we are doing a lot of
things to get back the seated truck count.

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Tom Albrecht - Stephens, Inc. - Analyst

Okay. I guess the last question is we all remember 1995 where coming off a red hot freight year in '94, first
time people carriers were able to raise rates in '94 although much less than in 2004, 2 to 3% back then. How do
we know that 2005 isn't going to mirror how '95 was where there was just a tremendous freight slowdown all year
even though it wasn't a GDP recession?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Tom, I guess if you know the answer to that, then you're in the wrong business. But I think that we can build
some insurance into our numbers by making some moves, moving more trucks into dedicated, more trucks into
segments that are somewhat less recessionary, have less affected during the recession. I really think that if you
look at '95 we probably could weather 1995 and not have as much negativism as what most fleets would, and
especially as what a true long haul fleet would.

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Pat Quinn - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think the other thing, Tom, is that we're still seeing a lot of concern from the customer base about capacity
trying to lock it up there. They are expecting the shipper is still talking about a very strong year. So I don't
see any talk other than the concern again as we move into the year that how we are going to provide enough trucks
to keep the goods and services moving.

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Tom Albrecht - Stephens, Inc. - Analyst

That has been my sense, too, but still this quarter has been surprising.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Yes, I think it has, but I think for the rest of the year, certainly, our customers are different than '95 are
very concerned about how to get good and services to market later in the year.

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Tom Albrecht - Stephens, Inc. - Analyst

I'll let someone else have the queue. Thanks, guys.

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Operator

Nick Farwell with Arbor Group.

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Nick Farwell - Arbor Group - Analyst

Jeff, your timing is exquisite. At least they don't stick you with having to handle this entire conference call.

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Jeff Wardeberg - U.S. Xpress Enterprises, Inc. - COO

It's a team effort, Nick.

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Nick Farwell - Arbor Group - Analyst

I just had a few follow on questions, if I may. I wanted to explore the softness in the West Coast. I'm a little
surprised given the weather patterns out here during the first quarter and Union Pacific slowdown that they
experienced due to several washouts. Are there any other explanations that would help you understand either
regional freight patterns and/or cross-country?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

One thing is probably the Chinese New Year that slows down imports coming from that region for approximately 2,
2.5 weeks. That has an effect each year, and it is not always at the same time. So you never know how to plan for
it. The other one is if you look at freight going from Southern California into Northern California it is fairly
strong. The freight going back south is pretty weak, and imbalance really has a tremendous effect. I'm not
totally sure how to explain why the West Coast is softer than the rest of the nation, but sometimes they all seem
to get there earlier than the rest of us.

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Nick Farwell - Arbor Group - Analyst

Does the fact that the gateways of Portland and Seattle, I guess especially Seattle is as slow as you depicted
it further suggest that the imports for whatever series of reason, whether its Chinese New Years or otherwise
have been curtailed rather significantly? It's very surprising.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

The customers that we deal with that does a lot of imports through Seattle and L.A. Long Beach are - when we go
down the list of the customers that's where we are seeing softness from. And that has us a little bit concerned
because it doesn't look like the amount of imports coming into this country are as strong as what it definitely
was in the third and fourth quarter, but maybe even somewhat even January February March of last year.

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Nick Farwell - Arbor Group - Analyst

Have you seen any sort of notable change, either in ship arrivals or say business in the last couple of weeks? I
realize Easter is probably a little bit of a difficultly, but on a seasonal basis but has there been any change
at all?

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Pat Quinn - U.S. Xpress Enterprises, Inc. - Co-Chairman

Not that we've seen. We have had some customers, Nick, that normally ship more in the first quarter tell us that
they worked out some inventory issues that were left over and therefore didn't have the orders coming in. But
they're still saying that it's coming, and that it will be a good year.

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Nick Farwell - Arbor Group - Analyst

Max, you made a comment that March results I believe it was you or Ray that made a comment that March results
and Xpress -- I'm sorry logistics had shown rather noticeable improvements. Is that true for airport-to-airport
as well as carpet?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

That is true for airport-to-airport.

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Nick Farwell - Arbor Group - Analyst

And did carpet volumes for the full quarter, not just for March but for the full quarter meet your expectations,
or was there some noticeable slowdown in say carpet volumes in January, February?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Carpet was pretty strong throughout the whole quarter. That was a little bit of a surprise.

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Pat Quinn - U.S. Xpress Enterprises, Inc. - Co-Chairman

I think it probably reflects the strong housing industry front.

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Nick Farwell - Arbor Group - Analyst

I was just wondering if maybe there was some shift there that perhaps precipitated a greater than anticipated
loss in the logistics side of the business.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

No. I don't think so.

-------------------------------------------------------------------------------------------------------------------
Nick Farwell - Arbor Group - Analyst

Are you experiencing any recent improvement in driver retention and recruitment?

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

Retention levels at U.S. Xpress are probably the best they've been in 5 years. I think with more recent numbers
we've seen figures as low as turnover in the 65, 68% range, which like I said are some of the best that we've
seen in a long time. But the flipside of the equation is we should be able to add drivers easier with that
retention level being at that point. So, and we haven't made it happen. And that is part of the mission that we
are on at this point.

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Nick Farwell - Arbor Group - Analyst

Lastly I am curious if you've seen any recent improvement, either on a regional basis in the spot brokerage
markets.

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Jeff Wardeberg - U.S. Xpress Enterprises, Inc. - COO

Not really.

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Nick Farwell - Arbor Group - Analyst

Okay. Thank you very much. I appreciate it.

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Operator

John Larkin with Legg Mason.

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John Larkin - Legg Mason - Analyst

Gentlemen, thanks for taking the follow-up here. You mentioned earlier on in the conference call that Arnold was
showing quite a bit of strength in the first quarter, as I recall that is primarily a regional carrier with
operations in the Northeast to Southeast and Texas. Would you characterize their strength as being considerably
stronger than what you are seeing in your regional operations? And if so, why do you think that is?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

John, I think their strength comes from they've got incremental capacity that they added since December of this
year. They've added over 100 trucks, and that has driven their revenues up. I don't think that -- and I shouldn't
speak for them, but I don't think they would say it was strong as far as utilization side of the business. Their
revenues growing primarily because of capacity and rate.

-------------------------------------------------------------------------------------------------------------------
John Larkin - Legg Mason - Analyst

So the implication is they were able to seat those incremental 100 trucks relatively easily?

-------------------------------------------------------------------------------------------------------------------
Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Yes.

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John Larkin - Legg Mason - Analyst

Just out of curiosity how does their pay scale compare to yours?

-------------------------------------------------------------------------------------------------------------------
Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

They are just slightly below ours.

-------------------------------------------------------------------------------------------------------------------
John Larkin - Legg Mason - Analyst

Okay.

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Max Fuller - U.S. Xpress Enterprises, Inc. - Co-Chairman

One big difference is they have a bit concentration in Florida, and for some reason that is where drivers want
to live.

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John Larkin - Legg Mason - Analyst

Okay. That helps, and any thoughts do you care to share with us on the timing of exercising your option on the
remaining 51% you already own?

-------------------------------------------------------------------------------------------------------------------
Unidentified Company Representative

We have no plans in the immediate future to do that.

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John Larkin - Legg Mason - Analyst

Okay. Thank you.

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Operator

Daniel Moore, Morgan Keegan.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Just curious on the insurance line. Can you give us any sense of how accident frequency and severity has trended
through the quarter?

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

It has been a normal quarter. Shouldn't be any unusual costs related to insurance.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Okay, and I'm going to delve down a little bit deeper here on the second-quarter earnings and ask if you would
care to give us any sort of guidance for the second quarter, maybe not so much the full year, but.

-------------------------------------------------------------------------------------------------------------------
Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Dan, I think we would prefer to get this quarter over with and maybe address that issue at the conference call
related to the quarterly press release.

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Daniel Moore - Morgan, Keegan & Co. - Analyst

Okay. Thanks, guys.

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Operator

Gentlemen, there are no further questions in our queue at this time. Mr. Harlin I will turn the conference back
over to you for any additional or closing remarks.

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Ray Harlin - U.S. Xpress Enterprises, Inc. - CFO

Thank you for your participation.

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Operator

That does conclude today's conference call. Again, thank you for your participation.