Forward Air Corp (Delaware) (FWRD) 2002 Q2 法說會逐字稿

Ladies and gentlemen, good morning and thank you for standing by, welcome to the Forward Air Corporation second quarter earnings conference call. At this time all participant lines are on a listen only mode.

Later there will by a question and answer session, instructions will be given at that time. If you should require any assistance during today's call please press zero followed by star, the operator will assist you.

As a reminder today's conference call is being recorded. This conference call is also available on the web site at www.fowardair.com. I'll now turn the conference call over to your host Miss

Thank you, good morning everyone and thank you for joining us. With me today are Bruce Campbell, President and Chief Operating Officer and Andy Clarke, Chief Financial Officer.

By now you should have received our press release regarding second quarter 2002 results which crossed the wire this morning. Before we begin let me remind you that our discussion today will include forward looking statements and as such are subject to the risks and uncertainties including those discussed in the company's form 10K for the year ended December 31st 2001 and form 10Q for the period ended March 31st 2002.

Our actual results may vary materially from those discussed today and we do not undertake any obligations or up date this forward looking statements. With that , I'll now turn the call over to Bruce Campbell, President and CLO.

Thank you Lera, good morning to each of you and thank you for joining our second quarter earnings call.

I'll be brief this morning and let Andy take you through the numbers in greater detail but I do want to highlight three areas. First, the cost control discipline exhibited by our people was outstanding during the second quarter and we are confident we can continue this discipline in the future quarters. It has become a way of business for us.

Secondly, while revenue was flat on year over year comparison it did grow sequentially second quarter over first. What's even more important to me is that in comparing week over week revenue growth, comparing this year versus last year we finally turned positive and have stayed positive since week 20 of this year.

That positive trend continued not only for the balance of the second quarter but also into the first two weeks of the current quarter. We believe we've finally achieved positive momentum. Our efforts on the sale side have not let up and we continue to have successes across our system on a daily basis.

We will not let our March to grow our business and continue to gain share.

The third area, I would like to address is a competitive environment, while we continue to hold our own on pricing or yield, we still seek other level pricing practice by many of our competitors, in spite of this our people continue to sell value, we will not change this core concept as long term, it serves us best maintained our pricing integrity.

Finally on the competitive front, it's interesting to note that during the second quarter, we saw two smaller regional carriers, exit the market and we believe more that, is to come in second half of the year.

Before I turn this over to Andrew, I remind you of what we said a year ago and that was, our focus was during a slow economic environment we were going to do, everything to drive our cash, in order to position this company for the future. We believe with over $50 million now in our balance sheet, we are well on our way.

With that Andrew Clarke.

Thank you Bruce and thank you all for joining us this morning.

After I have concluded the financial review for fortune of the call, we will open the lines for your questions.

In the second quarter of 2002, operating revenue was 56.4 million versus 57 million last year. Average weekly line haul tonnage was flat in the second quarter at £23.4 million. Traditional line haul revenue was 47.9 million, a decrease of 3.4 percent. This figure, however was up subsequently 4.8 percent from the first quarter of this year.

Average yield decreased 2.9 percent in the second quarter of this year. Although, as Bruce said, we are in a competitive pricing environment, the decrease in yield has been primarily caused by the increase in the percentage of shorter haul shipments, which generally has a lower rate per pound then longer haul shipments.

Company however, has first indicated, continues to see positive results in its non-traditional business. Logistics in UV revenue, increased 25.4 percent to 4.9 million. Subsequently, this number increased 22.5 percent versus the first quarter of this year.

Other revenue increased a £100 thousand to 3.6 million in 2001 and $200 thousand subsequently. Income from operations, increased point four million from 2001 to 8.5 million, companies operating margin expanded by 100 basis points to 15.1 percent versus 14.1 percent in the first quarter of 2001. Versus the first quarter of this year, the company's operating margins expanded by 40 basis points. And fully diluted earnings per share, increased a penny to 24 cents a share.

Operating income and earnings were reflected during the quarter in the following manner. The company's purchased transportation component has two elements: the traditional line haul network, which most closely resembled that of a low asset base exploited LTL network and the logistics EUV, which more closely resembles that of a truck load brokerage operations.

The company continues to see positive results in the purchased transportation of mileage and dollar costs associated with the line haul network, decreasing 4.2 and 3.3 percent respectively. These figures match the decreases we've experienced in the line haul reference. The company continues to match the general operator account with expected demand and end the quarter with 460 owner operators power units, down from 497 over the same period last year.

The logistics in EUV business, while profitable to the company has a higher PT cost component than that of our traditional business.

During the second quarter of 2002, the company saw an increase in miles and costs, associated with running this business, to the tune of 14.9 and 33.9 percent, respectively.

Salaries, wages and benefits decreased 20 basis points to 21.7, versus the first quarter of this year, the company was able to decrease its items by 90 basis points. Head count is set to remain essentially flat, versus the first quarter of this year and the second quarter of last year. Operationally, the company continued to decrease the terminal handling costs, associated with moving freight.

Operating leases increased by 10 basis points to 5.3 percent, versus the first quarter of this year, however, operating leases decreased by 40 basis points. Depreciation and amortization decreased 60 basis points to 3.3 percent. The primary driver of this decrease was the elimination of goodwill amortization, but was partially offset by increased depreciation associated with new trailers and roller bed systems put into service, during the second quarter of 2002.

Insurance and claims decreased 50 basis points to 2.6 percent. While premiums are up year over year, the company had a better auto and cargo claims experience, during the second quarter of this year.

And finally, other operating expenses decreased 70 basis points to 8.7 percent. The company continues to manage discretionary expenses, at all levels.

Some of the other relevant statistics for the first quarter are: total assets grew to 146.3 million at June 30th, from 137 million, at the end of last year. As Bruce indicated, the company's cash and investments position grew to 53.1 million from 43 million.

The companies asset base, fixed variable cost model, produced pre-tax return on assets and return on equity of 22.7 and 17.6 percent, respectively, over the last 12 months. Accounts receivable decreased 200 thousand from the end of the year and is worth 47, during the second quarter.

Allowance for doubtful account remains flat at 1.1 million.

The company ended the first quarter, with operating terminals in 76 cities, up one from the end of 2001. An average line-haul per week, as discussed earlier, remained flat at 23.4 million, but were up 4.7 percent from the first quarter of this year.

Now let me quickly go to the six-month results, for 2002.

For the first six months of 2002, operating revenue was 109.3 million, versus 117.7 million. Average weekly line-haul per week, decreased in the first six months to 23.2 million from 25.1 million pounds. As a result, traditional line-haul revenue was 93.4 million, versus 103.4 million. Average yield decreased .6 percent for the first six months of this year, versus last.

Logistics and revenues, increased 15.3 percent to 8.8 million and other revenue increased 2.1 percent to 7 million. Income from operations was 16.3 million, versus 17.9 million. The companies operating margin for the first six months was 14.9 percent, a decrease of 30 basis points, versus the same period last year. And fully diluted earnings per share were 46 cents, versus 50 last year.

Purchased transportation, as a percent of revenue, was 42.8 percent, an increase of 20 basis points, versus last year. Salaries, wages and benefits decreased 50 basis points to 22.1 percent. Operating leases were 5.5 percent of revenue, versus 4.7 percent last year. The total dollar increase was, however, was only $400 thousand.

Depreciation and amortization remained flat, at 3.4 percent. As well as insurance and claims remained flat, at 2.6 percent.

And finally other operating expenses decreased 10 basis points to 8.7 percent. That concludes the financial review portion of the call. I thank you all for joining us this morning, and I will now turn it back to the operator for your questions.

Very good. Ladies and gentlemen, if you would like to ask a question, please depress the one on your touch-tone phone. You will hear a tone indicating you've been placed in the queue. You may remove yourself from queue by pressing the pound key. If you're using a speakerphone, please pick up the handset before pressing the numbers. Again for questions, please depress the one on your touch-tone phone at this time. First question in queue is from the line of from . Please go ahead.

Yeah, hey guys. At first, can you give a sense, you said your sense is fencing some strength, and that year-over-year revenues is starting to move the right direction positive, where is the strength coming from? Is it certain kinds of customers versus other certain geography?

Pretty much across the board, Ed. But maybe in the past we would've said we were seeing regionally geographical surges, if you will, but today we're seeing it pretty much across the board. There's no specific region.

And what do you think versus the growth rate of, let's assume the economy gets back to normal later this year, and continues that way in '03, what can we expect is an internal growth rate from forward, based on what you're seeing out there?

We've always said in the good economy that we're you knows, looking at 15 percent as our goal, as our growth.

That's internal or with acquisitions.

That's internal.

So you need to go from you know minus at the bottom 12 to positive 15 in a year, is that doable?

Again, depending on the environment, yeah, it's doable.

And what you see out there in the environment, is there any signs that that's doable in the next you know run rate starting in next couple of quarters, or are we still too early yet?

I think we're still too early. I wish we could predict that. I think what we're most please with is we've seen a momentum turn and we've seen some positive you know, growth there. I don't think we're in a position yet to predict what you asked for.

OK. Salaries and wages were down a little bit, head count really wasn't. Does that mean that there were some bonuses that weren't paid or anything like that in the quarter?

Bonuses are in fact a portion of that cost, but year-over-year I mean, we did not pay bonuses in the second quarter a year ago, nor did we this year, so while the head count is somewhat equivalent you know, it's just a matter of controlling hours and those type of things.

Yeah. Hey Andy, can you give some balance sheet and cash flow numbers for the quarter. Can you look at cash flow from operations?

Cash flow from operations 12 million, investing is 1.1 and financing is 5.3. Capex for the quarter, far be it for the first six months, was 2.6 million versus 3.2 million last year.

And what was it in the quarter, do you know?

Two million. 1.9 million, pardon me. We 1,000 in the first quarter.

Right.

And that basically finishes our Capex for this year, outside of maybe some smaller software, and some type of program like that, Ed. We're basically done.

And the cash ended where?

It was just shy of 53 million.

The cash force was 33 million, the short-term investments was 20 million.

OK and there was no change to your liability, you debt payments or your...

I think you can make normal payments, long-term debt was, well the current portion was 205,000 versus 443,000, capital lease obligations, 3.8 versus four million.

Versus four million a year ago or a quarter ago.

At the end of last year.

OK. Thanks guys for the time.

Thank you.

Our next question is from from please go ahead

Bruce, hi, and Andy you talked about positive revenue growth, I'm a little confused, the revenues were down in the quarter so and during April, the April conference call you said you'd see an upturn in April

That's what we thought David and your points' valid, what we saw in the third week of April which I think was our weak 18, was we saw a surge and that was exactly when I said that.

Then and what we were trying to do was make up for a very weak to the first two weeks of April were very weak, we were behind quickly.

We had the third week of the quarter was positive and then it turned negative again, it stayed negative until the mid week of May and from May on, from mid week, mid month May, I'm sorry, until the end of the quarter was positive.

So what I'm trying to share with you is, sequentially on week over week basis, we started off behind the curve in April, we finally turned that in mid May, and in June and even into the first two weeks of July it got better.

So the end of the quarter you were really, you were up whereas you're down for the whole quarter.

Correct, and actually you know we're just barely down. We almost made it up, we were real close to it.

Right, now the, right, now you lose to the problem though, I mean there is more air freight moving around but somebody is doing it for lower prices and therefore your not capturing your share.

I don't think that's a fair statement, I mean you know there is more competition out there than there was you know probably a year, a year and a half ago, or two years ago, with the two new entrants, but I think if anything we've probably held our own pretty well.

So the airlines and forwarders are reporting more freight in the second quarter than a year ago and sequentially 7 percent more than the first quarter.

I think what you have to look at real hard there David is the impact of the U.S. postal service on Fed Ex, otherwise internationally freight flows are down, and I think its fair to say and we'd have to go in and break this down that probably domestically there flat at best.

Well

We'll get our first apples to apples domestic air cargo comparison in August.

And the other question was you went quickly over that purchase assertion clause for logistics, did I read, listen to rise 85 percent in the quarter

No, PT costs on the logistics side vary between 75 and 80 percent.

75 and 80, and you said it was up about a percent, is that correct from a year ago

The actual, the proposition of the revenue is up 1 percent, a basis point rather, logistics revenue was 8.6 percent of total revenue versus 6.8 percent second quarter last year.

percentage went up, yeah, but the percentage of PT costs didn't vary much, it was about the same, somewhere in the 75, 80 percent range of both quarters

It did creep up slightly during the quarter versus the same period last year but you know as everyone knows who follows the trucking stocks, capacity is a lot tighter out there

Right, OK thank you.

Next question is from from , please go ahead

Hi guys, Bruce a little bit more from 50,000 feet if I could, there's more talk in the market place in general about the efficiency of the trucking business, and the trucking is taking share from air or two degree at least in a package side of the business. Those it affect you to some degree were as you want to take it from a plane to a truck but you need to be at an airport to some degree, is there some kind of shift that you guy's see going on where at the margin freight incrementally isn't getting to an airport to begin with.

Ya, that's a great question, we don't think we have seen that yet, Garry, our customers, our customers are the people who would see that and in obviously in turn we would.

OK.

The issue that we have is you know, even though the LTL's are not, we have great respect for them and other truckers and perform extradited services it is still a different way of doing business and I have been on that side and can they change and can they enter this market sure but the question is can you really and steal that discipline of service and all the things that we do and others in this business un expedited across the board and I can tell you from experience that is very difficult to do again not saying it can't be done but it is very difficult to do.

So to date you're really not, you've not seen that needle move.

Ya, I have not had and I have not heard any of our people Garry, come to us and say you know we lost this business because XYZ trucker came in and took it away from Pilot Air Freight as an example.

Thanks.

We have not seen that.

OK, fair enough.

This is David, how are you guy's doing I had just a question about the number of terminals and the change in company terminals versus agents, I know it's just a slight change in the mix but what's the strategy going forward and should any thing be read in to the change in the second quarter?

What happened their there David was we changed Columbia, South Carolina from a company station to an agent station and candidately there is not, you know, nothing to give Columbia, South Carolina but there is not a big future there and so as a result were not real crazy about investing large terms of our money. We typically can run an agent station cheaper because it's on a variable basis so you know we went to the agent there and think that makes good financial sense. We evaluate that on a on going basis, interest in that in the near term and then we also added to finish your question, added try for, that was done as an agent station also.

Just one more I think this is probably for both you guy's and I hate to bring it up but it's the flavor of the day these day's which relates to the issue of options and expensing and what not, the diluted impact in '01 was a lot more than it would have been, when it was in '99 and 2000 and my question is not so much wither we should be thinking about fully expensing that or not but as it relates to how you compensate folks and motivate people are you forced to some degree of maybe think about that a little bit differently given that there is more chatter in the market about how people should think about the cost of that?

Let me, let me kind of back up just a bit and give you the note that, the over all view we believe in three forms for compensation, one is the day to day, you know, your weakly cheque, two is we incentives people on a quarterly basis to me and exceed their goals and then the third is what we consider long term compensation which is where we have issued our stock options to basically manager level and above.

We have not been excessive in those awards but we think we have been very judicious in those awards and those awards have been very good long-term incentives for our people and we think we get great value out of that.

Now how it's treated accountingly - you know is going to be settled by people above and beyond us. But, we are comfortable with what we have done there - we have not been excessive we watch that very closely and if I could expand for just a moment beyond that - you know this company has probably the strongest balance sheet and we do not silly things - if that's the right way to put it. We are very up front - we are 100 percent above broad so I can assure you that we look at these things very, very hard.

And what tone of the question.

I understood greatly and but I just wanna make sure that people understand we don't play games.

All right thank you.

Last question is from from Deutsche Bank, please go ahead.

Hey good morning guys. Bruce is you've closed out the for the remainder of the year and you've improved your past position and what do you see is potentially the use of the cash going forward?

now, that's the - you know - million dollar question and in this case the 53 million dollar question and we're doing a lot of work on that, we have our board involved, we - I guess it will have to that ere doing a lot of work there.

OK, the only equipment that you guys own is your trailers - any - you know - to continue down the path of asset light, non asset based any plans on - you know engaging any kind of transfixions to - and again I'm not going down any path I'm just asking asyo9u move toward a further asset light environment would you contemplate doing something with that equipment to get it off your balance sheet?

I mean we're always looking at alternatives we have nothing in work as we sit here today but you know certainly we look at anything that's brought tooth and has merit.

OK.

John are you talking about the trailers?

Yeah, the trailers that you own I mean that's the only equipment you guys own - I mean that's the only equipment that you guy's own and I'm just curious - I mean if you guys went to more of a lease out or something like that would it - I mean would it essentially rid you of almost completely.

We've never had success leasing trailers because you know they wanna lease your new trailer and then want you to turn in a new trailer in five years - so you know you run into all kinds of costs there. So we're not real crazy about that, now that's not to say that if somebody came along and gave of an outrageous deal, we wouldn't do it - I mean it's certainly something we would look at.

The other thing that is of merit here is in addition to trailers we own fork lofts so that's the other component of what we own John.

OK.

Forklifts when you have as many as we do they aren't significant but they are.

They share numbers.

Yeah.

OK all right.

Can you describe for us a little bit what the current total operator recruitment environment looks like - you mentioned last quarter that you're pursuing kind a a best in class owner operator fully - you're down about 30 you know - you continue to match with volumes but can you just explain to us you know have you been able to go out into the market place and pick off some more best in class owner operators - what's the recruitment environment like in if volumes begin to shift and this momentum builds are you worried at all about a shortage potentially of owner operators?

Today we continue to have success finding as you so well stated best in class - owner operators we think we will continue to have that success as we go forward. We have as you know, that adjusts at an operator level to our business level and probably we'll start pursuing real hard now to start growing that market. In gross numbers, there are not as many owner operators obviously as there were two years ago. I don't think that's necessarily a bad thing, I think there were a lot of people out there that probably didn't need to be out there.

So, we're confident as we go forward that we can grow that as we need to and that we offer our operator a great place to call home.

OK and last question I'll turn it over to somebody else. Do you, is this momentum bills? Do you believe your going to see a shift back towards longer hall lanes and maybe this mix shift, swing back in your favor a little bit and you know, get the yield going back in a positive direction.

I think if anything John we're to blame for the yield too because we actively went after airline business and airline business by nature tends to be shorter hall. For instance, when we brought on, you know, there going to run their road feeder program where most efficient for them. So, in and out of their gateways there going to moving flight to Chicago and not to Dallas as an example.

That, short hall traffic by nature is not necessarily bad but it will cause your overall yields to go down because you know, your not going to charge as much to go from to Chicago as you do to Dallas. I don't think, when we are sure that our yield went down because the link that Paul changed, that's not necessarily bad.

OK, all right. So the expenses associated with that business should be cheaper? You should get better asset utilization and that off sets the weaker yield?

Exactly.

OK, thank you Bruce.

Thank you.

Next question is from the line of from US Bank Corp, please go ahead.

Could you give us some specifics regarding what the year over year change was for the line hall volumes? For, kind of a monthly basis, kind of going from April, May through June. Kind of what we ended up seeing here for the first couple of weeks here in July?

Specifics meaning what Martey, help?

Say, did it end up roughly at about five percent year over year for the most recent two weeks?

Actually, it was a bit above that.

OK, so in July so far it's been slightly above five- percent year over year growth?

Yeah.

And how about as far as, what was it like in June?

Up, but probably just a bit below five. I don't have those numbers in front of me Martey and I'm hesitant to give that to you. It was not quite as much as five percent.

OK.

And I'll be glad after this to get you those numbers.

OK and regarding your customers by kind of type of business say for Forward Airlines and integrators, what new customers were added or what type of new customers were added or possibly even some lost business or kind of just shift in business. Has that changed very much?

We continue to push hard as we said earlier Martey on the airline side. Although we have not let up in the other areas, we are working very diligently today with one integrator in particular and have started to see the fruits of that labor. So, we are seeing business, we are pushing probably harder outside of our forward base than we ever have in the past.

Now, having said that, we continue to want to forward our business too. But we're seeing a lot of the growth come from outside of that.

OK, and also regarding the pricing, it appears that you pricing was down and I guess I'm trying to find out how much of that was really a rate change versus a possible impact from a fuel surge charge?

Fuel surge charge have nothing, we did not have one in place so that had no effect.

So it's purely pricing then.

It's purely pricing in most of that.

And as we discussed in my comment, the pricing, the rates that we've charged second quarter of this year versus second quarter of last year has not really change, what has changed is, we talked about earlier, that the length of business has actually decreased, obviously your rates on shoulder haul are lower than your longer haul segments.

Right. OK and also just one minor item for other operating expenses I noticed that was up roughly about $400,000 since Q1, was there anything that was really driving that?

Predominantly maintenance associated with putting in the service to new trailers and roller blade systems.

OK. Right, thank you.

Thank you.

Your next question is from from JP Morkan please go ahead.

Thanks, hi Bruce, Andy. Most of our questions have been answered but just a couple of quick ones. Any other discretionary, other expenses where you've done a good job certainly keeping expenses tight and some of the off sets and some of the weakness on the revenue, ya know, can you give us a little flavor for what the bigger items are that are driving that and then maybe how long you think you continue to manage that number down faster than the revenue line?

You know those items are general supplies and expenses, maintenance, telecom data cost, we done a, our people in our tech group have done a great job of going in there and really structuring the net work to decrease a lot of our data in Tele communications costs so they really, there's a lot of different 200 or 300 different line items but ya know, the one's that I mentioned are probably ya know, the bigger one's.

So, but this trend can continue in the second half in terms of expenses sort of continuing to drop as a percent revenue.

Ya know, I think we've been pleased with the 8.7 percent versus 9.4 ya know and obviously we had 9.4 percent in the third quarter of last year so we've comfortable as Bruce said it's a, this is the way we do business now.

It truly, Greg I think ya know, out of bad times comes good things every once in a while and one of the things that we've learned to do even better than we did before is control costs and we think we can bring this forward.

And Bruce secondary on looking towards the revenue line. Can you refresh us where you are in the sales force, what your comfort level is, that your scaled to the right size for the business out there and that you've got the right people in and then also maybe give us a comment on what July is looking like?

You know we review that all the time. We think we have right sized ourselves force. We think we have the people in the right position, we think we have excellent people. Obviously we review that all the time and we think we have a great staff and they are positioned to help us grow our business into the future.

Where's the sales staff at the end of this quarter versus a year ago is it roughly unchanged?

We actually have, I think three heads.

OK

Those are positioned primarily in the airline program.

OK and the July business tone what's that looking like? unid: And as they get more and more desperate, we're going to see pricing continue to go down, on their part. We, at this point, from a corporate standpoint, we are not going to get involved in those - those rate reductions.

So, from our standpoint, we're going to hold right where we are. We certainly are not in position yet to talk about a rate increase, but we don't think down the road that's out of - out of line.

OK. And Bruce, just to follow-up on that, then, talking about the gutter level pricing of some of those competitors, are you losing, I guess you talked about losing potential. Or are you losing actual freight? Do you - so you see that continuing then, going forward, as well? If you just talked about the pricing getting kind of ridiculous on some fronts.

Yeah, whenever anybody comes in and basically cuts your price in half, you're probably going to lose a little bit of business. And you have to make a decision, you know, is it worth it? And we do not think it is, either short-term or especially long-term.

And then secondly, we think we bring greater value than, in many cases, they do. And we think we'll get that business, we may miss it on Monday, but we think we'll get it back the following Monday because, you know, we consistently we have high levels of service.

So, it just is not worth it, in the short run, , to take that - to take that rate down.

: Great, thanks Bruce, thanks Andy.

We have a follow-up question from from Bear Stearns. Go go ahead.

And my questions were asked and answered, thanks guys.

OK, great. We'll move on to a follow-up question from David Campbell from Thompson Davis. Please go ahead.

Yeah, hi Bruce and Andy.

Other assets were down in the quarter, from the March quarter cash was up. Was their some transfer of this.

Yeah, that's - David - that's - the other assets were the long-term investments, of about 14 million. And just due to the way they're classified, they're now classified as short-term investments. Due to their maturity date.

OK. Thanks. And Bruce, you mentioned, in answer to my question earlier, something about August. What is significant about - the significance of August? In your opinion.

That's when the Fed-Ex contract started on the .

Oh, the U.S. Postal Service.

Really throwing numbers, David, so you know, you have at that real close.

Well, I have. And you really can't imagine a stronger import business from the Far East, especially in June. I can't see where you benefited from that, I know that you picked up some freight from Gateways in the - in the - in the West Coast. I can't see much benefit, if you have any - do you have any explanation for that?

The Far East was up, but weren't international volumes as a whole, down?

No, no, they were up in June.

Pardon?

They were up in June.

I haven't - I haven't seen that.

That hasn't been published yet.

OK. Well, I.

But they were up. I mean, even if they weren't up, you still had tremendous, I mean, they were very close to being up and you - and you, and for someone gaining market share and for your tremendous system in the West Coast, you'd think you would - you would have seen a substantial increase in that business.

You know, I guess, philosophically I don't necessarily disagree with you David, I'm not sure that we can answer that in the detail that you probable want. We can certainly talk about that later, off call.

OK. And, I guess, last question is, do you expect any of these new airline contracts to be a help in the third quarter? Or is it more likely in the fourth quarter? The ones you haven't announced yet.

We always expect them to help us, but. unid: as you've stated earlier and that is we've got this network in place lets utilize it even more.

OK and then any new negotiations underway with new international airlines that may want to use Forward Air as its collection and distribution network.

Actually we have multiple negotiations going on now and really don't want to comment on who but there's opportunities in the pipe.

This is big marketing for us in that area still.

Right, thanks very much.

Thank you John.

Next question is from from Capital Markets. Please go ahead.

Thanks lets see what table scraps are left for me. Ed good luck with the button punching thing. I really just wanted to see if I could get one of you to expand a little on the logistics revenue, just for an understanding as to what is driving that businesses growth, which is obviously rapid, is it just that we added the and most of the increment is DUV business, and that would go to my second point of my question which is sort of how do we figure out how to look at the PT and if its some percentage of the logistics revenue is EUV.

Let me answer the first part Alex and then Andy can do the second part. With that question Brittas and KLM and other airlines have helped us grow that EUV business, for which we're most grateful. But also we've put a lot of resources behind that and as a result we've been able to grow not only with the BAs and the KLMs but with other customers, so we think that has been a good investment on our part from a resource standpoint and think it has a really good future for us, so little bit broader based than just KLM and BA and now you can

Yeah on the what we call the traditional long haul revenue but PT is anywhere from 41 - 42 percent of revenue in that environment in the truck load the EU logistics revenue that's as I said more about truck load brokerage where you'll have anywhere between 75 and80 percent of your revenue tied up in your purchase transportation.

Its all mon asset based and as I discussed the difference between the second quarter of this year versus the second quarter of last years trucking capacity is a little tighter.

And how much of the logistics revenue is eve UV approximately.

Ah I'm going to tell you it's probably 50 to 60 percent.

OK All right guys thank a lot.

Thanks.

Your next question is from from please go ahead.

Hi guys good afternoon Just a couple of questions, can you guys quantify the length of change that you've had since you keep talking about that change in mix, can you give us the level of what it was and what it is now.

No we do not actually disclose that we believe its competitive information but it has as I discussed decreased during the second quarter.

Can you talk in percentage terms.

Yeah decreased 3.4 percent.

OK and then on a pricing going forward, you talked a lot about pricing going forward based on the mix and the two competitors leaving the market do we start to see that firm up or will the mix continue to see declining length of distances so we should continue to see that shrink.

I think we're going to see the yields going to be really predicated by how the economy does and I think people get - we're going to see some more people get desperate and as they get more and more desperate we're going to see pricing continue to go down on their part. We, at this point, from a corporate standpoint, we are not going to get involved in those - those rate reductions.

So, from our standpoint, we're going to hold right where we are. We certainly are not in position yet to talk about a rate increase, but we don't think down the road that's out of - out of line.

OK. And Bruce, just to follow-up on that, then, talking about the gutter level pricing of some of those competitors, are you losing, I guess you talked about losing potential. Or are you losing actual freight? Do you - so you see that continuing then, going forward, as well? If you just talked about the pricing getting kind of ridiculous on some fronts.

Yeah, whenever anybody comes in and basically cuts your price in half, you're probably going to lose a little bit of business. And you have to make a decision, you know, is it worth it? And we do not think it is, either short-term or especially long-term.

And then secondly, we think we bring greater value than, in many cases, they do. And we think we'll get that business, we may miss it on Monday, but we think we'll get it back the following Monday because, you know, we consistently we have high levels of service.

So, it just is not worth it, in the short run, , to take that - to take that rate down.

: Great, thanks Bruce, thanks Andy.

We have a follow-up question from from Bear Stearns. Go go ahead.

And my questions were asked and answered, thanks guys.

OK, great. We'll move on to a follow-up question from David Campbell from Thompson Davis. Please go ahead.

Yeah, hi Bruce and Andy.

Other assets were down in the quarter, from the March quarter cash was up. Was their some transfer of this.

Yeah, that's - David - that's - the other assets were the long-term investments, of about 14 million. And just due to the way they're classified, they're now classified as short-term investments. Due to their maturity date.

OK. Thanks. And Bruce, you mentioned, in answer to my question earlier, something about August. What is significant about - the significance of August? In your opinion.

That's when the Fed-Ex contract started on the .

Oh, the U.S. Postal Service.

Really throwing numbers, David, so you know, you have at that real close.

Well, I have. And you really can't imagine a stronger import business from the Far East, especially in June. I can't see where you benefited from that, I know that you picked up some freight from Gateways in the - in the - in the West Coast. I can't see much benefit, if you have any - do you have any explanation for that?

The Far East was up, but weren't international volumes as a whole, down?

No, no, they were up in June.

Pardon?

They were up in June.

I haven't - I haven't seen that.

That hasn't been published yet.

OK. Well, I.

But they were up. I mean, even if they weren't up, you still had tremendous, I mean, they were very close to being up and you - and you, and for someone gaining market share and for your tremendous system in the West Coast, you'd think you would - you would have seen a substantial increase in that business.

You know, I guess, philosophically I don't necessarily disagree with you David, I'm not sure that we can answer that in the detail that you probable want. We can certainly talk about that later, off call.

OK. And, I guess, last question is, do you expect any of these new airline contracts to be a help in the third quarter? Or is it more likely in the fourth quarter? The one's you haven't announced yet?

Are we always expecting that office, but you know, that's a sale that takes a little bit of time and is not always predictable, so we're not really into predicting, when that will happen.

new airlines or new gateways from the same airlines?

A little bit of both actually.

Right, right, right. But that seems to be, as far as percentaging your businesses, airlines as a percentage business is up from a year ago?

Yes, it is.

What, three or four percent or more then that?

I don't have that exact number, but again I would be obliged to get that for you.

OK. Thanks. That does me.

Thank you David.

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