Forward Air Corp (Delaware) (FWRD) 2005 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Forward Air Corp., third quarter earnings conference call. My name is Cheryl and I will be your coordinator for today. [OPERATOR INSTRUCTIONS] As a reminder this conference is being recorded for replay purposes.

I would now like to turn this presentation over to your hostess for today’s call, Miss Lara Tardy, please proceed ma'am.

Thank you Cheryl. Good morning everyone. Thank you for joining us. Before we start I would like to point out that both our press release and this conference call are accessible on our website at www.forwardair.com. With us this morning are Bruce Campbell, our President and CEO, and Andrew Clarke, our CFO. By now you should have received our press release announcing third quarter 2005 results, which we furnished to the SEC on Form 8-K and across the wire yesterday after market close.

Please be aware this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the Company’s expected future financial performance. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Without limiting the foregoing, words such as ‘believes’, ‘anticipates’, ‘plans’, ‘expects’ and similar expressions are intended to identify forward-looking statements. You are also cautioned that these statements may be affected by the important factors, among others, set forth in our filings with the Securities and Exchange Commission, and in the press release issued yesterday. And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

With that caveat, I will now turn the call over to Bruce Campbell, President and Chief Executing Officer.

Good morning. Thank you Lara and thanks to each of you in the call for joining us this morning. As in the past I will quickly go through my comments on the quarter. The financial performance by the Forward Air team during the third quarter was truly outstanding with revenue growth of 18% on a year-over-year basis. Earnings growth of over 40% and even more impressive in operating ratio of 78. We are thankful for the efforts of all our employees and independent contractors who comprised the Forward Air team and delivered these outstanding results.

While we are happy with the third quarter performance we are even more excited with how the company is sufficient for the future. The integration of the XGS airport-to-airport operations is complete and returning the dividends we anticipated when purchased in May of this year. Much hard work and effort by our team allowed this integration to go smoother and quicker than originally anticipated.

Additionally we unveiled our Terminal Automation Program or TAP, as it is commonly referred to, at two of our larger facilities with much success. TAP is designed to improve the quality of our handling processes, to improve the productivity of our work force and most importantly, give our customer base quicker and more accurate shipment visibility. We will continue the development and roll out of the program throughout the balance of this year and into next year.

From a governance standpoint we were most pleased during the quarter to add two additional directors to our board, Michael Lynch and Robert Campbell. With the addition of these two highly qualified individuals we feel we have the strongest Forward in our hands in history, and one that will benefit both our company and our share holders.

Finally, for the seventh consecutive year the Forward Air team was once again recognized by Forbes as one of the 200 best companies in America. An achievement matched by only nine other companies.

Thank you and now Andrew Clarke.

Thanks Bruce and thank you all for joining us this morning. After I have concluded the financial review portion of the call we will open the line for your questions.

As Bruce indicated we are pleased to report both record revenue and earnings results for the third quarter for 2005. It is the 13th quarter in a row of increased revenue and the 1fourth consecutive quarter of increased earnings per share.

In the third quarter operating revenue increased 18% to $84.8 million. Traditional line haul revenue including fuel surcharge was $73.3 million, an increase of 20.4%. Average weekly line haul tonnage increased 12.4% to 33.1 million pounds versus last year. And average revenue per pound including the impact of fuel surcharge was up 7.1% versus last year.

Our March rate increase along with the additional business generated from the XGS Acquisition certainly helped drive yields higher . Logistics revenue increased 6.7% to $6.5 million and other revenue grew 2.6% to $5.1 million.

On a year-over-year basis, income from operations increased 35% to a record $18.7 million and more importantly the companies operating margin expanded by 280 basis points to 22%, an all time record for the company.

Purchase transportation costs decreased 70 basis points to 41.9% of operating revenue. Purchase transportation for the airport-to-airport network was 40.5% down from 40.9% last year. This result was driven by higher yields on freight, better load averages and using more owner/operators as our average owner/operator account increased from 524 last year to 576 this year.

Purchase transportation on the logistics business was 59.8% of revenue versus 73.6% last year. Salaries, wages and benefits decreased by 110 basis points versus last year to 20.6%. The primary driver of this change was – as a percent of revenue, was an increase in operating revenue which corresponded to a proportionate decrease in salaries and wages versus last year. The improvement we saw in this area was offset somewhat in increases in workers compensation expenses.

Operating leases decreased 50 basis points to 4.1% of operating revenue on slightly more dollars spent. Depreciation and amortization increased to 3.3%. The primary reason for this increase is the required accounting treatment on the sale and replacement of approximately 800 trailers, resulting in approximately $625,000 of additional expenses during the quarter.

Insurance and claims decreased 80 basis points to 1% of operating revenue versus last year. As we do every year, the company engaged an Independent Evaluation Expert to perform an actuarial analysis of our lost development factor. Due to our recent positive experience in this area the actuarial report indicated that we needed to reduce our reserve in this account by approximately $300,000.

And finally other operating expenses decreased 70 basis points to 7.2% from last year. The primary driver of this change is the gain of approximately $300,000 on the trade-in of the trailers mentioned above.

Some of the statistics for the quarter, total assets decreased to $199.7 million, from $214.6 million at the end of last year. The company’s cash and total investments position stood at $78.3 million at the end of the quarter. During the first nine months of this year the company spent $12.8 million on XGF, $7.5 million on capital expenditures, $5.8 million on dividends, and $49.1 million repurchasing the total of 1.6 million shares of common stock at an average purchase price of $30.54.

Over the last twelve months the company’s returns on assets and equities rose to 34% and 26% respectively. Net accounts receivables for $48.1 million for the quarter and allowance for doubtful accounts were $1.0 million reflecting the high quality of our receivables.

Operating cash flow for the quarter was approximately $12.5 million. The company end of the quarter with operating terminals in 81 cities which is an increase of 1 versus last year and flat from the second quarter. We began an agent station operation in Harrisburg, PA during June of this year.

So now, for our outlook for the fourth quarter of 2005, the company expects revenue to grow between 16% and 20% versus last year, and fully diluted earnings per share to be between $0.40 and $0.44. These estimates depend on a number of variables, many of which are outside the company’s control.

During the fourth quarter of last year, the company’s net income per share was $0.31.

That concludes the financial review portion of this call. On behalf of all Forward Air employees and independent contractors, thank you for joining us this morning and I will now turn it back to the operator for your questions.

[OPERATOR INSTRUCTIONS] Our first question comes from Ken Hoexter of Merrill Lynch. Please proceed.

This is Jeff [Benacow] in for Ken Hoexter. I was wondering if you could just touch on the volume momentum that we have seen first quarter through the third quarter. At 12% volumes this quarter, how much was that XGS acquisitions and sort of , can you give us a color on what you see into the fourth quarter?

Yes, Jeff, as we have discussed in the past, we are not able to determine what it is excluding the XGS acquisitions, so as we discussed in the second quarter, we obviously saw an increase in the month of June, when we did the acquisition in our tonnage increase, and that increase continued on into the fourth quarter, or pardon me, into the third quarter. And so, if you look at, in terms of our outlook for the fourth quarter, clearly we are expecting our tonnage levels to remain where they have been, and continue to experience positive year-over-year improvement in our average revenue per pound.

And if you just quickly touch on that real quickly, on the yield, we saw earlier in the year you put through the general rate increase. And we saw yield slightly down I think sequentially, it was up year-over-year at 7%, but slightly down sequentially. How should we think about sort of the pricing going forward?

Well, the pricing has remained the same since March. What impacts the revenue per pound is the composition of freight, so longer haul or longer origin destination freight have a higher yield than shorter origin destination of freight. And obviously, lighter shipments have a higher yield per pound than heavier shipments. And so, what impacts that, at 7.1% or 7.3%, as it was in the second quarter, is a composition of our freight.

Great.

So as we get different types of business that will impact the, impact the overall yield.

It sounds like just a little bit of a mix, but overall the yield increases going through, should stay about this level?

Assuming that the composition stays the same, correct.

Our next question comes from Alex Brand of Stephens, Inc. Please proceed.

Thanks, good morning gentlemen. Andrew, on the yield, can you identify surcharges separate from just a pure yield increase?

It was just under 2% of the 7%, so without it, it was approximately about 5%.

Okay, and it sounds like your guidance, you have pretty good trends, or accelerating volume trends. Can you talk about sort of how the quarter proceeded and if there was anything that was sort of good or bad that you saw in those trends and how that is affecting your outlook for Q4?

The outlook that we are giving for Q4 obviously is impacted by what we are seeing thus far in the month of October. But as it relates to what we saw in the third quarter, the trends continue to be positive as we went through the quarter. So July was good, August got better, but August got better because we had an additional day and September continued the strength that we saw in August.

All right, and this question might not be something you guys are concerned about at all, but as [BAX] and Kitty Hawk continue to talk about going after some of the ground business that you guys do and expanding their service offerings, are you guys seeing any effects in the market places with respect to, not only volumes, but pricing? Are there more aggressive competitors in the market now than there were say a few months ago?

I would be able to answer that Alex is that for 15 years we have supposedly never had competitors and for 15 years somebody comes in the market because if we do what we do, anybody else can do it, and for 15 years they have all failed. So we are pointed at taking care of our business, at growing our business, at providing the services that we need to provide for our customers, and if we do all those things we’re not going to be worried about what VAX or Kitty Hawk or whomever comes in the market does.

All right. Well, that’s fair enough but are you also saying that so far there’s no impact that you even needed to consider in any of your lanes?

Again, we don’t price according to what competitors do and we tend to not respond to what they do. Obviously, they have an air component that we don’t have, thankfully, and they, for whatever reason, are going to attempt to supplement that with a ground component which we do have. We’ll let them do what they need to do and continue to run our business.

Okay. Fair enough. Good quarter, guys, thanks.

Our next question comes from Jon Langenfeld of R. W. Baird.

Good morning, guys. Maybe you could comment a little about the profile of your freight. I don’t know, as you look at in the third quarter you’ve had the US Express acquisition in there. Has anything changed that you see materially either day of the week, type of lanes you’re hauling, regions of the country you’re hauling?

The only thing that’s really changed, John, is perhaps more longer haul business off the West Coast where we would not acquiesce on pricing demands prior to the XGS acquisition. But outside of that it’s business as normal. We have seen perhaps a little bit of improvement in actual shipment size, but that’s fairly normal for this time of year. So really, it’s business as usual.

And have any of the airlines that -- I know there was well about 20% of the US Express business that was the domestic airline -- have you seen what they’ve been doing with their freight?

It’s all across the board. We continued our relationships with KLM, with British, and there are other airlines that we have limited relationships with, and there are still other airlines who because of credit issues and pricing issues that we choose not to do business with. But beyond that nothing’s really changed.

Okay, all right. And then what about on the international folder front? I mean we’ve heard some people in the industry talk about trying to get more aggressive with your relationships on the international, with some of the international folders, could you comment generically on that?

We’ve gone through really almost a learning process this year on the international forwarders. It is a longer sell cycle than domestic shipment, but we have had some really good success, I think. We are ready to expand that program; that is a key initiative for the 2006 year, and we continue to work very hard in that area. But it is a different sell, but it’s also in many ways a more secure sell once it’s done.

And why would you say that? I would think that it’d be a more competitive sale because you have -- even the LTLs can handle some of that business in a noncompetitive type fashion.

There’s some truth in that, you’re right. But the other side of it is they have a number of demands not just on the service side but on the electronic transfer and data side if you will and some people cannot perform that.

So, it sounds like you feel better about your gross opportunities in that segment specifically today than you did maybe 12 or 18 months ago, is that a fair assessment?

A fair assessment. Primarily because we had some naivety there and we feel like now we understand the market and we’re going to push forward.

Any new personnel on the Forward Air front that has helped with that pursuit?

Well, that was given to one of our VPs, a gentleman by the name of Joe [Troney] about a year ago. He’s developed a program, our Logistics Program, with the assistance of Craig Drum, who is our Senior VP of Sales. And, we’ll make the assessment as we go into 2006 what further development needs to be made there.

Okay, good. Well, it sounds like a good, good avenue. Thank you.

Our next question comes from Brandon Cook of J. P. Morgan. Please proceed.

Good morning, guys, sorry about that. I had a question, I guess you expressed Global’s been out of the market for 5 or 6 now, 5 or 6 months now and you’ve done a good job picking up that business, and understandably there’s been some mixed shift as you’ve done that. I was curious when you go back and you’re negotiating contracts with your existing customers, have you noticed any shift or change in dynamics in the pricing marketplace now that they’re out of the business, i.e. do you feel like you might have incrementally more pricing power?

I think the general conclusion you or anyone can make, including our customers, is that we do have more pricing power. On the other hand our goal is to keep them in business and keep them in a very competitive posture with the other modes of transportation be it a FedEx, UPS or a Yellow Roadway. So, if we get real greedy and we go in there and say we’re going to up your rates 20% because we can, what we’re going to do is take them out of the market and in turn take us out of the market. So, we’re very judicious in our pricing. I think we do a very good job with it, we’re very fair with it, we try to work with our customers where it makes sense for both them and for us, but we don’t want to come in there with a hammer and say, “Hey, gives us more money” because this month we can do it. We don’t do that.

Right, right. So you’ve got more pricing power but you’re being judicious with it. You added 23 owner/operators in the quarter, you’re going through a period of stronger tonnage growth right now. Should we look for the owner/operator count to continue to go up from here, or are you at a place where you’re able to recruit owner/operators fairly easily?

Well, the recruiting of owner/operators remains as it has in the past and that is to meet our qualifications, and if you look at our insurance numbers we had really good numbers. That’s because we have really good owner/operators. And it’s difficult recruiting the topnotch owner/operator, but we continue that. We continue to add them as you saw in the third quarter. We will continue to add them in the fourth quarter, hopefully, as we go forward and grow that fleet. It just remains difficult, but again it’s doable.

Okay, and finally on facilities. You’ve opened up Harrisburg; again you’re growing at a stronger rate now. Are you comfortable where you are in facility count as we look toward the fourth quarter and ’06? Do you have plans to open up any new locations?

We have no plans for the balance of the year. We will look at ’06 as appropriate. There may be some of the secondary or tertiary areas that we would look at that we haven’t look at in the past, but that’s yet to be determined.

Okay, thank you.

Our next question comes from Edward Wolfe of Bear Stearns.

Yes, actually, I’m Matt Brooklier for Ed. Good morning, guys. Could you guys provide a little bit more color on your terminal automation program that you guys are rolling out? I understand you implemented that to your larger facilities, but kind of the timing on that, where the potential cost saves are, and just additional color, generally?

What it allows us to do, Matt, is really capture that data more accurately and at in a more timely fashion on the dock. So all of the forklifts in those facilities are equipped with the readers, the bar coding goes on the label, and we’re actually scanning those as they go on and off the truck. So, what we’re looking for is increased productivity on the dock and a lot less going back and forth between the dock and the office for that paperwork, and providing more timely information to our customers. So, we should get productivity of improvement from that, but the real key to us is the timeliness and the accuracy of the information for our customers, because that’s what they’re relying on and we hope that when they see the positive results of that it drives more business to us, which allows us to handle that business more effectively.

Okay, and is it a material cost drag as you’re implementing this or how should we look at this as you’re rolling this program out?

Some of the costs are being expensed and some of it, a very slight portion of it, is being capitalized for the development of the software, but we don’t believe, obviously, as we showed in our SG&A and the leverage that we got out of that that we can continue to drive leverage out of that particular line item.

Okay, and you guys are going to implement this across the board, all facilities, what’s kind of the timing on that?

That will develop throughout ’06. You get the biggest bang for the buck with the top 15 terminals, but then again getting those top 15 terminals under the program will be a challenge and so with some of those facilities it’s going to take more than, more than just a couple of days to get not only the technology but also the training.

Okay. You guys have gone through your -- the previous 3 million share purchase program and what are your thoughts on cash going forward or uses of cash and is there an upcoming board meeting for you guys to discuss this?

The answers to all of the questions are yes. We will continue to evaluate the uses of cash. It’s a topic that is and will continue to be covered at the board level so suffice it to say that at our next meeting we will talk about those issues.

Okay. Do you know when your next meeting is?

Yes. Yes, I do. It’s in November.

A question comes from David Campbell.

Hi, Bruce and Andrew. A number of shares in the fourth quarter full diluted, do you have that number?

I do. You mean for the fourth quarter?

Yes. Assuming no more shares buy-back.

I have it for the third quarter.

I was wondering if you had, you gave us your forecast for the fourth quarter, is that based on the same number of shares or less? Same number of fully diluted shares?

It’s based on same number of shares. I won’t know what the dilutive effect of options will be until the end of the fourth quarter.

So, it’s the same as the third. Okay. And you mentioned 12.9 million for nine months, is that capital expenditures?

No, we spent 7.5 or, pardon me 7.7 million in CapEx for the first nine months.

7.7, okay.

And 12.8 million on Express Global.

Oh, oh, that was Express Global. Okay, and then the last, the 5.9 you mentioned, what was that for?

That was the dividends.

The dividends. Okay. And the fourth quarter trailer business, you’ve replaced trailers and you therefore took an extraordinarily large amount of D&A, depreciation in the third quarter, but the trailers went down from the third quarter, from the second quarter.

That is just a timing issue of cycling out and cycling back in.

So that’s a temporary situation? Trailers will go back up in the fourth quarter?

It’ll be approximately 1,600. The 800 that we’re cycling out of we’re going to get 800 new ones.

Okay, 800. And all of that adjustment in terms of gains was taken in the third quarter?

No, there’ll be still some that is in the fourth quarter where we will again recognize additional depreciation in the fourth quarter and that’ll be offset by a decrease in other operating expenses.

Partially offset like the third quarter?

In the fourth quarter it will be entirely offset.

Okay, good. Bruce, I think you mentioned the new international focus on forwarders. I’m a little surprised to hear that because for years you’ve been getting business from forwarders and you seem to know the market very well. I’m kind of surprised to hear you say that it was a learning process in 2005.

That’s a fair statement, David. In fact, we have done business with a few of them for a number of years, but to fully penetrate the larger ones and the ones that offer us the most opportunities it is a different sales cycle and we have gone through that process. Did we know about it? Yes. Did we sell to them effectively in the past? Probably, but not as effectively as we can in the future and especially if it’s a point of emphasis for us. So, it’s kind of taken us a little bit away from the normal selling to a domestic forwarder, but that’s good, that’s an expansion of our capabilities and what we can do and we’re excited about the opportunity.

See, then the forwarder business has more potential than new airline partnerships.

We are always fairly shy of who we will do business with on the airline side. I mean we love doing business with BA and with KLM and some of the others, but then there’s a significant portion of them that caused me not to sleep at night because we are not going to collect the month. That is an unfortunate aspect of the industry, and it is one that we have to deal with on a daily basis. So, we love the business, but we are very selective.

And you did not mention any impact of the Gulf Coast. It must have closed some of your operations. Was there no impact in September?

Well, obviously we had New Orleans shut down. We had -- the good news was, our people survived it and did well. Our facility was not damaged to any great extent, but we were shut down and our operation into and out of -- Our operation was shut down for a quite a period of time. We have resumed what I would call as normal of an operation as you could possibly have considering all the damage. But, they are doing well and we are thankful for that.

You would say that whatever revenue loss there was, was picked up by other stations?

You know, we will never know the answer to that. It certainly was not something that we were going to come out the day after Katrina hit and announce we’re going to miss earnings like some did.

And then, one last question. Is CapEx – capital expenditures this year and next year, do you have any new totals for us?

No. The totals will be the same from what we gave in the second quarter for the full year of 2005 and we have not provided extensive guidance for 2006.

And what was that for ‘05?

Approximately $20 million total.

Our next question comes from Art Hatfield of Morgan Keegan.

Just a quick question. You talked a little bit about looking at new markets in ‘06, some of the secondary and tertiary markets. Bruce, can you just comment how you feel about the size of your existing terminal network from an efficiency standpoint? I mean, are you getting to the point where you start to have to look to up-size some of your existing terminals?

You know, that is a constant process for us Art. We go through it on an annual basis. Who has exceeded their capacity and where we need to make changes in terms of growing the facility. So it is pretty normal for us. Overall next year we are in pretty good shape, with the exception that we are going to have a fairly large expansion of our Columbus hub, which is the first in the 12 years that it has been open. Outside of that, we are in pretty good shape.

So it is fair to assume that you guys can do this on periodic basis without having a big detrimental impact to your operating ratio?

That is a very fair assessment.

Our final question at this time comes from John Barnes of BB&T Capital Markets.

Pretty much everything has been asked I think. Andrew, real quick. When will all the trailers be in on the swap out.

We are optimistic that that will be done by the end of the fourth quarter. But it is a challenge to plop out of 800 trailers and so there may be a slight bleed-over into the first quarter of 2006, but the way we are proceeding now is that everything will be done in the fourth quarter.

Is it as simple as, you are so busy right now that you do not have an extra truck to go get it or--?

It is partially that, yes.

Okay, all right. So, thinking about the implementation of this new kind of system that you are putting in your hubs, it certainly does not appear to me that your capacity can strain at all currently. And that is even handling this influx of business. This obviously with some productivity enhancement will provide you with a little bit more incremental capacity. Do we start seeing the opportunity for head count reduction or something along those lines, or is your hope that bringing up business in, that you just reallocate business resources internally to handle additional freight volumes?

Typically what we do John, with any kind of project like this is our growth takes care of the attrition. Or what should have been a work force reduction; we have other opportunities for those people. The efficiency brought out of the net, out of the TAP program should be significant from a clerical standpoint and from an accuracy standpoint which has down river impacts on us. So we are excited about it, but our goal was not to necessarily bring that out and lay off a bunch of people. Our goal was to bring it out and make our people more efficient. And do exactly what you said, and that is improve our opportunities to handle more and more of demand.

Okay. In terms of -- you kind of touched on this a little bit. Andrew, I just want to make sure I understand. You are saying that the biggest savings will come in your top 15 facilities. I mean, do you believe you get the top 15 done in ‘06, or do you get the top 15 done in the first quarter of ‘06? I am just trying to understand. When do you think you have this completely rolled out to all of your facilities?

Well, again, I do not think it is going to be rolled out to all of the facilities by the end of ‘06. It is just, that is just a resource constraint that, that we have to deal with.

Okay.

Because of the, mentally, there is our IT team dealing with TAP, they are dealing with everything else that they deal with on a daily basis. So, we are going to work to get the next 15 done in as quick and as expeditious manner as possible. But I can tell you right now that all of our facilities will not be up and running on TAP by the end of ‘06. But that is not a bad thing because with some of the smaller facilities, it just, the returns are not as great as getting them out of the bigger facilities.

Sure. We have seen a couple of companies run into issues as they have implemented these type things. I know UPS had a little bit of a setback with their package flow technology implementation. What did you learn in the first 2 roll out -- the first 2 terminals that you are kind of applying? I mean is there some area where the employees are having a hard time adjusting to it? Or is it pretty straight forward and they are coming up to speed rather quickly.

It is really straight forward and they’re up to speed quickly. The interesting thing about it John, has been, you could say, it puts a component to their job that they did not have before. It kind of brings them into the modern era, if you will. So that has been very positive.

And one of the things that our IT team did was work on the dock with the actual users while they were developing it. So that when it came time to implementing it, it really had the feel of -- it was an easy to use, and easy to adopt technology.

In fact, to asked if I can John, to the roll out, for as much as we would like to, as we think we would like to have it in all of our facilities, [Consul] is not top priority and will not impact it very much. But to have it in Columbus, Ohio, was critical.

Sure

To have it in Dallas, to have it in LA, so our whole focus is really on the 15 large terminals that really impact us.

And if you get to the point where you are putting it into the smaller ones, I mean, is it your intention to implement it in both company and agent locations? Or is it just company locations?

Well, initially it is just company. We will make the determination down the road, if it is a -- if it is cost justifiable and if it is justifiable from a customer stand point, to go ahead and put it in an agent station. But right now our whole focus is on the large company terms.

As you go into ’06 have you identified any potential agent locations that you think could be converted to the company locations?

No

No?

No

No. Okay.

I would not tell you if we had.

Okay, I got to ask all right? Everyone else has asked the good questions. Real quick, last question, ’06 CapEx, you have done everything, all the trailer, replacement cycle, you are rolling out this new technology. It seems to me like your CapEx needs are -- other than just your maintenance needs are beginning to dry up here in the near future term, does that just, does that allow for additional monies to be spent on the other things? Or is there a list of other projects that you plan on tackling in that now that you freed up some cash elsewhere?

The answer to your question is yes. We are always looking at projects and as we go through to invest those, we have to make sure we generate a return on them. The big return we are going to generate this term is obviously on the trailers. So that was our focus and we are going to be done with that, we project by the end of this quarter. We will start looking at other projects and continue to look at other projects that generate returns. Right now as we sit here there are not any projects that we are looking at that are going to consume the same amount of monies that we have allocated towards CapEx this year.

Okay, that was the gist of it. All right, I got it. Congratulations on the quarter. Thanks for your time.

And sirs, there is a questions from Christine Kavacie from A.G. Edwards.

You mentioned that freight trends throughout the quarter accelerated. I was wondering if there were any portions of the country that were hot or cold, or how that moderated throughout the quarter.

Basically it was acceleration across the board. If you had to draw a negative, it would be that the West Coast did not experience the push that they experienced a year ago. But the business was good. So I do not want to downplay that. The business was very good off the West Coast. We just simply did not feel the push that we did a year ago, there. Everywhere else is pretty norm.

So would you say that domestic and international were kind of as expected?

Exactly

Okay, taking a step back, can you give some insight on how, what customer reactions were right after the acquisition of XGS. Where they positive, to you taking on the business? Can you give a little more insight?

Basically we had a plan put together prior to the acquisition being completed to -- where all of us were talking to our customers. So we, I think we implemented that plan very well. I think our people did a great job of talking to our customers and telling them what we were going to do and how we were going to do it, etc., etc., and as a result of that it was received very well.

And you have no kind of quantification of what retention levels were?

It’s just impossible for us to tell you that. We have gut feels and that will not get you very far. But because both XGS and Forward Air did business with the same customer, it is just literally impossible to give you that.

Okay, fair enough, just one last question. Kind of a future looking question, we are hearing some kind of scuttlebutt so to speak on the Q1, Q2, that things might be a little bit softer, what are you hearing from customers?

We hear, depending on the customer you speak to, it is going to be okay. We have some customers that are just doing extremely well and expect both Q1 and Q2 to be very strong. We have not heard anybody come out and say ‘gee, it is awful’, unless they are already doing awful. So we think we are going to have a pretty good first half of the year.

There are no questions at this time sir.

Thank you everyone for joining us and if you will please, Cheryl, repeat the information about the replay.

Ladies and gentlemen. Thank you for your participation in today’s conference. A replay of this conference is available in the investor’s relation’s portion of Forwards Air’s website. Log in to www.forwardair.com. This concludes the presentation and you may now disconnect. Good day.