Forward Air Corp (Delaware) (FWRD) 2011 Q2 法說會逐字稿

Thank you for joining Forward Air Corporation's second-quarter 2011 earnings release conference call. Before we begin, I'd like to point out that both the press release and this call are accessible on the Investor Relations section of Forward Air's website at www.forwardair.com.

With us this morning are Chairman, President and CEO Bruce Campbell, and Senior Vice President and CFO, Rodney Bell.

By now you should have receive a press release announcing second-quarter 2011 results, which were furnished to the SEC on Form 8-K and on 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 forgoing words such as believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by 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 statement, whether as a result of new information, future events or otherwise. And now, I'll turn the call over to Bruce Campbell, Chairman, President, and CEO.

Thank you, Operator. Good morning, and thanks to each of you joining us today. As in the past, I will be very brief in my comments so we can quickly get to the question and answer session.

Overall, our team performed extremely well during the quarter. We continue to make good gains in each of our operating segmentsas we pushed hard going into the second half of the year to improve our margins further, grow our revenue, especially in our newer product lines and provide our customers with the best in class service. Truly a team effort by all our employees and independent owner operators. We were pleased, pardon me, we are pleased at how our company is currently positioned especially with our growing cash position, and look forward to an excellent second half of the year, again both in terms of revenue growth and continual marginal improvement.

And now Rodney Bell, our Chief Financial Officer.

Thank you, Bruce. The financial results for Q2 operating revenue for the second quarter was $132.2 million, an increase of 8.3% from the second quarter of 2010.

In our Forward Air, Inc. business segment airport-to-airport revenues were $91.6 million an increase of $9.8 million or 12% as compared to last year. This resulted from 3.4% increase in average weekly tonnage, along with an 8.3% increase in yield. The break down of the yield is as follows. 2.5% from line-haul pricing, a 3.6% benefit from net fuel surcharge along with 2.2% positiveimpact from Forward Air Complete, which had revenue growth of 27% for the quarter.

Logistics revenues were $18 million, up 4.1% from the prior-year quarter.

A decline in truckload business from our airline customers was the cause of this deceleration of revenue growth.

Our Forward Air Solutions segment revenues declined $1 million or 6% compared to the prior-year quarter.

Q2 2010 is the last full year quarter comp for the loss of a major customer that last year had revenue contributed to the Solutions top line. Even though revenue volumes remain sluggish, our Solutions sales team had new business wins that are now coming online in the third quarter.

Moving to expenses for the second quarter, in total purchase transportation expense was up 6.9%, but was down 50 basis points as a percentage of revenue.

Airport-to-airport PT as a result of good load factors and a higher net fuel component in the revenue denominator improved 80 basis points compared to the prior-year quarter. Logistics PT as a percentage of revenue improved 130 basis points, primarily due to successful increasing rates on existing business.

Salaries, wages and benefits compared to the prior-year quarter were down $1.7 billion. This resulted primarily from a positive workman's compensation actuarial adjustment of $1.2 million in the second quarter of 2010 along with a Q2-2010 -- or 2011 pardon me -- along with a Q2 2010 negative actuarial adjustment of $600,000 combined $1.8 million swing from Q2 2010 to Q2 2011.

Operating leases were flat as a percentage of revenue, while DNA insurance and claims were down 20 and 30 basis points respectively. Fuel for obvious reasons was up $520,000.

Other operating expenses, which include maintenance as well as costs susceptible to higher fuel prices like tire and propane, was up $1 million from Q2 2010.

Our operating ratio was 84.9% for the second quarter compared to 88.9% for the prior-year quarter, resulting in a 400 basis point improvement. Operating income was up 47.4% or $6.4 millionon $10.1 million of additional revenue.

Net CAPEX for the quarter was $7.7 billion and $14.7 million year-to-date.

Cash increased in the quarter $10.4 million to end the quarter at $96.1 million. We ended the quarter with $50 million outstanding on our line and $38 million available.

Lastly, we anticipate third quarter revenue to be in the range of 9% to 13% over the comparable 2010 period. This revenue range has been refined from our press release to reflect Q2 being the final quarter we had loss of the major Solutions customer in the comparison along with the start up of new business wins in Q3 for the Solutions group.

We maintain income for diluted share in a range of $0.38 to $0.42 per share compared to $0.31 cents in Q3 2010. This concludes our comments, now back to the Operator for your questions.

Thank you, the floor is now open for questions and comments. (Operator Instructions). Your first question comes from the line of Ed Wolfe with Wolfe Trahan. Please proceed.

Good morning guys.

Hi, Ed.

You talk a little bit about yields and we have seen the LTLs taking 6.9% GRIs and you guys are taking a smaller GRI a month later than last year, they seem to be taking larger ones a month earlier. Is there that much difference in the pricing business between your business and the LTL business, or is it just a different business and we should look at it differently?

I think the answer is let's go back historically, Ed. We took a year ago in May, as you pointed out, a 6% increase, and the rest of the LTLs, if they were lucky, got maybe 1% or 2%. So we came back this year and looked at our business and where we were, and I don't know if this is related to LTL or not, you'd probably be a better judge of that than I. But we thought the 2.1% to 2.9%, depending on how it fell out in the weight breaks, was adequate to help us further compensate our owner operators, and that was what we were after, to make that a neutral increase for us.

I think it is interesting that the LTLs all put out these big press releases that say they've announced a 6% or 7% increase and in fact they will probably get between one and two when it all washes out. So we're happy with where our yield is today. We think it's positioned us for the second half of the year, and we will go with what we have.

It seems like you're bringing to the bottom line most of that since 6% from last year. When I look at margin improvement, you're up 500 basis points on average the last three quarters. Should we assume that once we lap the May increase that we are going to be more in the 2% or 3% kind of margin improvement that'll fall to the bottom line, or are there also some cost pressures that make that harder to do?

I think we can do exactly as you said.

Okay. And what are you seeing from a volume perspective? You have given the guidance on revenue, and some of that it feels like is related to the pull side of things, but what are you seeing from customers in terms of demand? Is there any dramatic slow down, or is it okay? How do you see demand?

I think a couple things, Ed. One, is demand is okay. It's not robust, but it's okay. We're happy with where it's at.

I think what's really going on is we tend to, as an industry, get a bit confused. If you go back two years, things were as bad as they could get, and everybody was screaming and carrying on, and then we had somewhat of a recovery last year, although I think it was a bit overstated. What we are experiencing now, in fact I would call a normal volume trend. We start off the month of July a little bit slower, we expected that and it's starting to ramp now. A year ago, things -- the comp was so easy that it seems like it was a whole lot better, it really wasn't. Especially if you go back to '08.

But all that having been said, I believe, and we believe, we are returning to normal volume adjustments throughout the year. So July, again, started off slow, but is fairly good now. And we expect that fairly good to become really good as we go throughout the quarter.

Rodney, can you give us the progression through the quarter and into July of the line-haul pounds and what the yields were for line-haul?

I can give you the percentage increase in the tonnage by quarter. I don't have the yield in front of me, but it was plus 4% or plus 2% plus 3%. And July so far it's probably plus 2%. In terms of yield, the yield was kind of funny the way it worked. We rolled out of our 2010 GRI at the end of the April, and we didn't put the 2011 in place until the second week of -- well, actually, the 7th day of June. So there's -- it's -- and from a magnitude standpoint, the 2011 was a little bit lower. But all in all, the yield should be comparable, all thing considered in Q3.

So if you've reported revenue per pound, for line-haul yield up 2.5% for the quarter, are you saying that that started off -- April was kind of a big number because you hadn't grandfathered the GRI, then it came down in May, then you got some of the June and it went up in June directionally? Am I hearing that right?

That's what I said very poorly, Ed. I would anticipate the line-haul -- the pure pricing line-haul yield to be 2.5% to 2.75% in the third quarter.

Hey, Ed, let's back up a moment. One thing that occurred during the quarter that will help further confuse you is that as Rodney touched on, the airline business, especially import, slowed down. Airline business, because of the characteristics of that freight, has a lower yield to it. So the bad news is we didn't have as much of it as we did a year ago, the good news is that improves our yield.

So your yield is up 2.5%, but you are saying that the mix helped that 2.5%, so less of that was pricing than 2.5%?

Yeah, because remember the price increase only came in July -- or June 7th, pardon me.

Yeah, and Rodney you said 2.25% to 2.75%, so kind of where we're at for third quarter is your best guess?

2.5% to 2.75% before regard to the mix -- I'm really confusing you now, Ed.

Okay. It should be better assuming line haul is for airlines remains crappy?

That's fair.

Okay. Last question, Bruce, in your remarks you said something about growing your cash position. You highlighted it, so I have to ask, what are you thinking to with that cash position?

We would like to do a lot of things with it, so we are hard at work on that, and hopefully something comes to fruition.

So is it fair to say -- because again you don't give many comments usually and you didn't today -- you did highlight that, that it feels like there's potential acquisitions out there that maybe a little bit more real than in the past couple of years.

Probably a fair conclusion.

Thanks for the time guys, appreciate it.

Your next question comes from the line of George Pickral with Stephens. Please proceed.

Hey, guys, good morning. Let me just follow up on Ed's last question. Would you -- would you presumably be looking within your existing business footprint, or would you consider possibly buying complimentary businesses that are outside of your core business mix today?

The quick answer, George, is yes.

So you're happy to look at nick and everything if it meets your criteria.

As long as it meets our model.

Okay. And then secondly, Bruce, you made a comment just a few minutes ago about expecting things to pick up in the back half of the year, which would follow normal seasonal trends. I guess what gives you confidence in saying that? Is it what you're hearing from your customers? Is it what you're seeing beginning in July? Can you just maybe expand upon that a little bit?

I think to restate what you just said, the answer is yes. We're hearing positive comments from our customer base. We think we've returned to the normal type of freight seasonality and we're looking forward to the second half.

Okay, so normal pre-2008 volumes kind of got better sequentially every quarter.

Typically, you have been in the business long enough, you know, we see -- once we get to the second half, we get through the doldrums of July, we see our business start to ramp up. If you look at last year, our business in August, as an example. August is one of the worst months of the year. That's very unusual. So we think we are through that type of seasonality or whatever, and back to the normal seasonality. So we are eagerly anticipating the second half of the year.

Okay, so then my last question then looks like your volumes are about 5% below peak. Can you maybe comment on where you think your system utilization, or network density is? I guess I'm getting that -- how much do you think you can grow volumes really without much additional cost or investment and keep these kind of 50% incremental margins?

I think we have quite a ways to go. We made some big time investments in the company three or four years ago, building turmoils, adding different lease facilities that will accommodate more volume, so we're very happy with where we are today in terms of the infrastructure that we have built.

Perfect. That's all I've got, thanks for the time.

Your next question comes from the line of Matt Brooklier with Piper Jaffray. Please proceed.

Hey, thanks. Good morning. I wanted to move over to the pool side of things if you will. If I look at the tractor account within that business, it looks like sequentially tractors are down about nine units. I'm just curious as to why that is, and I know that there's been some swapping of company owned tractors and trucks for owner operator equipment which is a good move, but I'm just curious as to why kind of the all in aggregate truck count is down sequentially?

Hopefully, Matt, it's because we are getting more efficient. I think we have touched before that we implemented an optimization plan for our Solutions group.

Okay.

Where they route their drivers utilizing this software and it's been very effective for us.

Okay. So you believe that that optimization is enabling you to use less equipment, but still haul the same amount of volume, because the top line -- the revenue number -- down again, I realize we're in the last quarter of grandfathering that customer leaving, but just given the revenue down and then the equipment sequentially down, it would appear, I guess to the naked eye, that the business is shrinking a little bit, but you don't believe that to be the case?

Not at all. Rodney touched on it a bit in his opening statement. We get the overhang of the lost customer effective now, that's a good thing. Because we can talk apples to apples.

And then secondly, during the second quarter, our sales team closed just over $6 million of business, annualized. So we're going to be running ahead as we implement each of those new business opportunities. It won't be long, and we will be running ahead of where we were last year. We'll be able to do that without changing our cost model, which we've spent a year really working hard to get the cost model where it needs to be.

And I think we will find as we go forward and we are able to add even more business to this model, incrementally it's more powerful than airport-to-airport model.

Right.

So we're very pleased with how they're positioned, and we are really looking forward to the second half of the year for them.

Okay. And final question, how should we think about revenue and EBITDA in third quarter for pool?

The revenue should come in somewhere around, what, $16.5 million, $17 million. I don't have that in front of me.

It will come in between 12% and 15% up from the prior-year quarter.

So third quarter -- third quarter revenue will be up roughly 12% year-over-year, or 12% sequentially?

Compared to Q3 2010.

Okay. And profit wise you guys think you will be slightly profitable or -- break evennish?

[I would go with] slightly profitable.

Okay. All right, thank you for the time.

Thank you.

Your next question comes from the line of Ken Hoexter with Merrill Lynch.

Hi, good morning, it's Scott Weber in for Ken.

Hey, Scott.

Just looking at your purchase transportation, that's flexed up a bit as volumes have come on, and as those volume levels normalize now, how much can we expect PT to come down? And is that likely going to be a quick step down at some point, or is it going to be gradual over the next couple of quarters?

If you look at our airport-to-airport PT -- I mean, if we are lucky it can get a little bit better but that's about as good as you can get. We're really pleased with where that number is. We don't anticipate that changing a whole lot. If we had manna from heaven and all the freight in the world and was wonderful, and it wasn't raining on Tuesday, we might be able to improve a little bit. On the other -- which is our TLX, and our Forward Air Complete, TLX we would be happy if we maintained where we are today. And on Complete, we continue to have really good numbers there. So we will be happy to maintain that. So in total, we aren't going to see a whole lot of improvement when you think in terms of percent of revenue.

Got it. Okay, that's helpful. And then just going back to some of the earlier questions, and thinking about the cash on the balance sheet, and the capital structure. How much leverage do you think you'd ultimately be comfortable putting on the company in the current environment?

I'll speak for me and Bruce can kick me under the table, I wouldn't have a problem levering it up two to three terms for the right deal.

And emphasis there is on the right deal.

Right. Okay. Last question is just -- in the release you mentioned the spottiness, in volumes and I just wanted to confirm with you, you see that across both line-haul and Solutions? And I guess to the extent that you do see it in Solutions, is there any particular vertical that you'd highlight where you're seeing the spottiness, or is it across the board?

I think we probably overstated the situation a bit by saying what we did. Volumes are decent. They aren't great. You know we're used to great. And so that makes us a little bit spotty in our response. On the retail side, it is a little bit sluggish, but that's normal this time of year. I think on the Solutions side it will stay sluggish until you see the consumers start to come back. And when that happens, Solutions is going to be in really, really good shape.

Got it. Okay, terrific, thanks guys.

Your next question comes from the line of Todd Fowler with KeyBanc Capital Markets. Please proceed.

Great, thank you, good morning. I guess just a question on the guidance. The $0.38 to $0.42 for the third quarter, taking the midpoint of that is $0.40 you just had a $0.40 quarter here in the second quarter. You've got maybe a full quarter of a GRI coming through, it feels like Solutions is going to be a little bit better sequentially, can you talk about your thought on the seasonality? Is that just a healthy dose of Forward Air conservatism, or how should we think about the sequential progression in the guidance?

That's a fair question, Todd. Keep in mind that we had $0.02, almost $0.03 of benefit in that $0.40 from that actuarial adjustment, we won't see that again in Q3. So the numbers are more like $0.37 or $0.38 when we think about sequentially. But you're right, there's a fair amount of, as you termed it, Forward Air conservatism -- I can't say it.

Conservatism.

That's right. I just wanted to hear you say it. Okay, and that was actually, Rodney, my second question. I just wanted to make sure I had the numbers right on the actuarial adjustments. So most of that shows up in the SGNA line in the airport-to-airport segment, can you go over again what the magnitude of that amount is on a dollar basis?

It is in Q2 2011, Todd, we had a positive approximately $1.2 million adjustment, in the prior-year quarter it went the other way. It was a negative $600,000, so there's a $1.8 million swing between the Q2 2010, and Q2 2011.

Okay, that helps. I think there was an earlier question on the purchase transportation, the airport-to-airport business. You know, it feels like you are doing a good job of keeping freight within your network, and with your independent contractors. Do you feel like you have enough capacity if volumes do increase going forward that the other network stays in balance and you are using your own capacity? Or if we get in a stronger back half, will you have to go into the brokerage capacity to source some capacity and could that have an impact on the PT in the back half of the year?

Well, overall, we think we are in good shape. Now, if you get surges in certain geographical areas, Todd, then it doesn't matter how many owner operators you have, you have to go to outside carriers. So that having been said, if we see that type of surge go on, that number will go up, but it is still very profitable. If we get a normal across the board increase in volumes, across our geography, we'll be okay.

Got it, that makes sense. And the last one I have on the Solutions side, just to be clear, at this point, is it -- you have the cost, you have the systems in place, is it that you need to grow the business or is it if you just have the normal seasonal trends with the existing business that you should have normal seasonal profitability i.e., more profit in the back half of the year, or do you need additional -- share additional accounts to actually make that business run at a level of profitability consistently?

Well, the answer for the rest of the year is if we didn't add any business, we would be profitable because of the seasonality as you pointed out. The issue that we have been fighting on in this operating segment, is what you also pointed out, and that is we need more business to allow us to void these peaks and valleys. And they, again, to be redundant, they've added $6 million annualized. We think we have opportunity for even more before long, and that will help us get this operating segment profitable year round.

Okay, stay cool, thanks for the time.

Thank you very much.

Your next question comes from the line of David Ross with Stifel Nicolaus. Please proceed.

Good morning gentlemen.

Good morning, Dave.

First question on the airport-to-airport side. I noticed the average number of tractors is up about 11%, growing a lot faster than tonnage, is the reason for that because some of those are for complete and not just for line-haul? Or can you comment about the tractor count?

A couple of things. One is, if we are in balance, we can add more and more tire units to our fleet, in the airport-to-airport side, and make that work, and eliminate the outside carriage. And secondly it's not complete, it's actually our TLX group, where we use some of our own operators [in] TLX.

Okay, that's helpful. And then on the pool distribution side, you had the loss of the one customer, but can you talk about shipments per customer trends in kind of your customers now seem to be adding some business or your current customers growing as fast as the business is growing? On an organic basis or are you still seeing some weakness in shipments per customer?

It is not as robust. What we look at is the carton count per shipment from customers, because if we're delivering 500 cartons to retailer or 250, I mean obviously a big difference. And we've seen that starting to improve. And that is a really key metric for us, again, because you can deliver 500 almost as cheap as you can 250. And so we are seeing a little bit of return there. The question is -- for us, David, is that just the seasonality, or is business actually getting better. And then secondly, if we can go to the mall and deliver the 250 -- or the 500, and get new business from other retailers and deliver another shipment, the cost of that is much less and much more incrementally profitable for us.

And then on driver availability, it looks like you have a record number of owner operators can is impressive given the difficulty of recruiting those. Can you talk about how you have been able to do that and what the opportunity is for growing operator fleet even further?

I think we have a really good recruiting program. Secondly, we have a really good package to offer, and I think thirdly that we treat our people, our owner operators extremely well. We understand that they're a critical part of our future, and of our future success, so we take care of them the best we can.

During times like this, when a lot of carriers get in a little bit of trouble, a good owner operator will seek a safe haven. Where he/she are assured that their paycheck will be there. They don't get hassled and we provide them a great working environment. So I think that's why we have grown. I think it is a great effort on our entire team's part, and you will see that continue.

And then last question on the trailer fleet age. You guys have so much cash, I would assume that the average age of the trailer fleet is pretty good right now, and there's not equipment CAPEX catch up that's necessary, but can you just comment on it?

Overall our fleet is in pretty good shape. We just brought on approximately 300 new trailers, which was part of the CAPEX expenditure -- did I mess up that number?

We'll bring them on by the end of the third quarter.

Yeah, but part of that expenditure occurred in the second quarter, part of it will occur in the third quarter, and that really gets our fleet where we need to be.

Excellent, thank you very much.

Your next question comes from the line of Ben Hartford with Baird, please proceed.

Good morning, Bruce and Rodney. Question on the line-haul side. the demand comments I think are encouraging, and shipment counts are at or above '06-'07-type levels. So assuming that demand here remains stable, and you get another round of pricing in the front half of next year, whenever it may come, you think that objective that you have talked about, Bruce, of being on a trajectory on a run rate basis of being toward 18% to 20% type margins within core is still attainable in this environment?

Yes.

What would compromise that, I guess aside from demand? Is there anything else that from a competitive landscape standpoint that might prevent some of the pricing gains necessary, anything operationally that might inhibit that, again, outside the scope of just simply the economy?

I think it is just an economy issue. I mean you can always have weird things happen, but our people have done a great job with cost controls. And what we just need to continue the margin, and see the revenue come onboard.

Okay. And then on the Solutions side, a lot of time spent there, but certainly progress has been made operationally. Do you feel like you are at the ends of the meaningful amount of progress from a cost stand point that you can address here in the near term? Now it is just a matter of laying ground [on] that new business, or are there additional cost opportunities that you can see that help drive that profitability over the next few quarters as that business layers on?

I think you always have to continue to push on the cost side, overall they are in as good a position as we have ever had them in from a cost side. They have done a really good job in that area. We're positioned well, and as we bring on the new business, incrementally, that's a really nice return for us.

On the owner operator side, on both fronts, some talk about some retention bonuses paid in the market in the second quarter and certainly many carriers are looking at qualified owner operators. Have you seen an increased need to compensate your owner operators, have you seen a more competitive environment here over the past four or five months, Certainly since CSA has come into light?

Number one, it is always competitive, and we don't see that changing as we go forward, obviously. Number two, the only thing we've done on the compensation side is we have rewarded long tenured employees, or owner operators I should say. And then we also take care of any new tractor -- anybody with a tractor five years or newer, gets a higher rate per mile, because their tractor acquisition costs is more than an older one. So we -- and that also helps us keep our owner operators turning into newer equipment, which is important for our service.

Got it. Makes sense. And then lastly on the CAPEX side, $15 million to $16 million run rate here in the first half of the year, what is the outlook for the balance of the year? And what should we be thinking about preliminarily for 2012, assuming no acquisitions?

The reason that the CAPEX number year to date is so high versus prior years is we simply did not -- from a timing standpoint had done more in the first half than we typically do, but we maintain that, $19.5 million to $20 million CAPEX number for the entire year for 2011. 2012 we're in planning right now, but that number will probably be a lot like that, somewhere between $15 million and $20 million.

Okay, great, thanks for the time.

Your next question comes from the line of Alex brand with SunTrust Robinson Humphrey. Please proceed.

Hey, guys.

Good morning.

Rodney, I just want to double check something. So the revenue guidance is really 9$ to 13%, and that's what you meant for it to be on $0.38 to $0.42, or is there an implied upward bias to the earnings guidance as well?

Is that the question or are you just calling me ought because I screwed up?

I guess I'm asking you did you just mess up, or what happened? Is there more fuel in there or something?

The solutions piece of it's been less than scientific in the modeling in the past. And I just screwed up on the -- it should have been 9% to 13% on that EPS range. And someone asked earlier that EPS range conservative, yeah, it is a bit.

Okay, and when I think about how you've answered some of the questions earlier, so the implied yield in your guidance is actually, it sounds like somewhere between 3% and 4%? Because you're doing less airport, less discounted spot business so we're not sort of constrained by the two and change percent GRI on the yield side?

That's correct. Without regard to fuel -- without regard to the benefit of Forward Air Complete.

And then on the volume side, it sounds like we are talking about August is a really easy comp, you're now expecting accelerations so we should think about the 3.5% tonnage growth of Q3 accelerating to a mid-single digit type of range and that's what is implied in your guidance?

Correct.

Okay, thanks for the help.

Yep.

Your next question comes from the line of John Barnes with RBC Capital Markets. Please proceed.

Hey, good morning. With your discussion around the airline business being down a little bit or slowing just a little bit, can you talk a little bit about what filled that void during the quarter and do you anticipate the sluggishness out of that particular piece of business to continue in the back half? And if so, like I asked -- what's filling that void?

Well, I think what's filling the void is our normal airport-to-airport or our domestic corridors that we enjoyed the majority of our business from. So whenever -- and the other thing is, John, always remember that airline business tends to be much larger, average -- our average is about 700 pounds per shipment, and airline probably closer to 3,000 pounds per shipment. So if they back off a little bit, it -- we can see the difference in yield very quickly in the total picture. So what happens is [the balance year] while we are comfortable with our domestic corridors, we're hoping, rather than saying we are comfortable, that the airline business comes back at least as strong as it was last year, and hopefully a bit stronger.

Okay. There's been a number of things talked about recently, in terms of kind of a swap in the U.S. import versus export, seems like there's a little bit more export activity right now. Are you seeing any change in your fright patterns result of that?

Not really. Actually, that's something we watch for a number of reasons, but it doesn't appear to have change hardly at all.

Okay. In terms of -- given that you just did a general rate increase in June, early June, one of the things we have heard kind of roll around in the LTL space is they did an earlier to normal this year, it almost appears like they are trying to position themselves where maybe they can take one towards the end of this year, or early in 2012. Do you think that where are you are, in terms of your rate increase cycle, is there an opportunity to maybe do one a little bit sooner if volumes do creep up? Is -- or do you think you are kind of maxed out until we roll around this time a year from now?

We'll look at it. We always look at rate increases in the -- pardon me, in the latter part of the year as part of our planning process, John. So we will look at it then, we won't take another rate increase this year, unless something dramatic occurred on the cost side, not on the volume side. So we're, again, we like our yield where it is. Our yield's unlike the LTLs. When we put a rate increase in, it actually sticks. When they put one in, it's three years and they might have got a half a point. So it's easy to talk big, it's harder to get the actual number to show up on your financials.

Absolutely. And then lastly, Bruce you talked about trying to smooth out the seasonality of the pool business, and to try some different, new type of customers there, can you just talk about where you stand with that initiative and how close do you think you are to having pool be profitable through four quarters of the year?

On the profitability side, we think we're there. We'll -- the only way we can back that up is to look at the first quarter next year, but again a lot of hard work has gone in there to correct it, and part of that work has been into other verticals. We have had beginning successes we knew that would be a long project. We have four non retail verticals in or business to date. None of them huge. But as you add each one, they start to become more and more influencing in terms of our volumes and leveling it out. So, again, we are pleased with where they are. We have much work left to be done, but it is a long way from where we were a year ago.

There (inaudible) are they 10% of the revenue out of pool yet, or is it still smaller than that?

Probably somewhere around 5%, if I had to guess. We can go back and look at that, but it's changing so fast, that would be my guess.

All right. Very good, thanks for your time, guys.

Your next question comes from the line of Kevin sterling with BB &T capital markets.

Thank you. Good morning, Bruce and Rodney.

Good morning.

I won't take up much of your time, because most of my question's have been answered. I just have one question. Bruce, been a lot of talk about the GRI, as you went to your customers with that, did you get any push back on the GRI?

Very little. I think we positioned it properly. By that, I mean we are convinced that our owner/operator cost, which we have already implemented a month or two ago. We needed that to keep our top owner/operators onboard, so I think our customers understand that there was a need to do it, and we had minimal push back.

Okay, great, I imagine they all kind of had an idea it was coming.

Right.

Okay, well great. Thanks so much for your time today.

Thank you.

Your next question comes from the line of Nate Brochmann with William Blair and Company. Please proceed.

Good morning, gentlemen.

Hey, Nate.

Hey, like Kevin, there, just one quick question. Just wanted to talk a little bit about the Complete business, that continues to remain pretty strong. I was wondering whether that's just the continued push by you or just more customers adopting that? And if you can talk about where we are in terms of maybe the percentage of your customers that have been kind of adopting that in terms of how much further it can go?

Well, we think it can go a lot further, Nate. We don't look at it necessarily by customer, although obviously we are calling on the customer base, and know who is supporting it and who isn't. What we look at more and how many normal airport-to-airport shipments have we tagged with the complete product, and that hit last week about 15%. Which to us means that we have still a whole lot of opportunity to expand that market.

That's great. Thank you, very much.

Thank you.

There are no further questions in cue at this time. Thank you for joining us today for Forward Air Corporation's second quarter 2011 earnings conference call. And please remember the webcast will be available on the I.R. section of Forward Air's website at www.forwardair.com shortly after this call. Thank you, and have a great day.