Forward Air Corp (Delaware) (FWRD) 2011 Q4 法說會逐字稿

Thank you for joining Forward Air Corporation's fourth quarter 2011 earnings release conference call. Before we begin I do would 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 received the press release announcing fourth 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 maybe 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 hereby cautioned that these statements maybe affected by the important factors, among others, set forth in our filings at 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.

And now I will turn the call over to Bruce Campbell, Chairman, President and CEO. Please go ahead, sir.

Thank you, operator, and thanks to each of you for joining thus morning. My comments will be very brief so we can proceed to the financial presentation and the question and answer session. Any time you have record breaking results, as we did, you have to be pleased with the quarter and year end results. Our team members, both employees and owner-operators, did a great job in delivering these results, andwe are most grateful for their efforts.

And now, Rodney Bell, our Chief Financial Officer, to discuss the financials.

Thank you, Bruce.

The 8.9% revenue growth in our airport-to-airport network resulted in a 4.7% increase in average weekly tonnage and 4% increase in yield. Average weekly tonnage for the quarter progressed as follows. October up 4.8%, November 3.5%, December 5.4% against the comparable months in 2010.

As a point of clarification, during the quarter -- the third quarter call we referenced weekly volume trends being in the high single digits. Lighter than expected end of the month volumes, which persisted through the end of the quarter, along with an adjustment which deferred undelivered shipments, drove our actual October volumes lower than we expected.

We closed the month of January, and full month volumes for January were up approximately 4%. The yield improvement consists of 0.6% from line haul pricing, a 0.2% benefit from net fuel surcharges, along with a 1.4% positive impact from Forward Air Complete, which had revenue growth of 20% in the quarter. Line haul pricing, which was down more than originally expected, was due to a shift in business mix, which has now normalized. Again, we closed the month of January, and line haul pricing is up just over 2%, or back to where it was in the fourth quarter.

In the quarter, TLX saw the benefit of new business wins as well as increased overall activity, which drove logistics up -- revenue up nicely to over 25% as compared to Q4 2010.

In our Forward Air Solutions segment we saw the benefit of new business wins, which started late in Q3 as well as early Q4, along with a normal fourth quarter seasonal uptick from our specialty retail customer base. This resulted in a 2.2% -- or $2.2 million rather, or a 9.7% increase in revenue.

Jumping to expenses there is a couple of items we wanted to highlight. In insurance and claims, actuarial adjustments in a late to develop 2010 vehicle liability claim negatively impacted our Forward Air, Inc. business segment. This was partially offset by better cargo [claims] experience in our Solutions segment. We expect to return to our normal quarterly run rate, which is approximately $2.2 million of expense under that line item.

Also in the current quarter our effective tax rate 1% better than guidance. This resulted from a penny of positive impact when we did our return to provision calculation in Q4. We expect full quarter -- full year 2012 tax rate to be approximately 39.25%.

We finished the year with capital expenditures of $21.2 million and expect CapEx for 2012 to be $20 million.

In anticipation of a new credit facility, we did pay off our existing line of credit. Our new facility is for $150 million. It's a revolver and should close later this month.

Lastly we anticipate third -- fourth quarter(Sic-see press release) revenue to be in the range of 8% to 12% compared to the same period in 2011. Income per diluted share should be between $0.31 and $0.35, compared to $0.27 in 2010. Pardon me, in 2011.

This concludes our comments. Now, back to the operator for your questions.

Thank you. (Operator Instructions). The floor is now open for questions and comments. One moment for the first question. Jason Seidl, Dahlman Rose, please go ahead.

Good morning, guys. We had an issue with everyone queuing up there, but niceresults. Congrats on the record. Wanted to drill down a little bit on the Forward Air Solutions business. Obviously that was I think your most profitable quarter that you have had. You mentioned a lot of the new business you took on in 3Q really helped you out. Are we at a point where we have enough density coming into the network where we can expect full year profitability for this division?

Yes. Quick answer is yes.

Fantastic. And could you walk me through -- you mentioned the line haul pricing, there was a mix issue. Could you walk us through, give us a little more color on the mix issue?

Actually primarily came from airline business, which is a shorter length of haul. It really subsided in Q4 2010 and picked back up for us in Q4 2011. That was the biggest reason for -- was the biggest mix shift that we saw.

Okay, and real quickly your interest expense was higher than we had modeled it. Obviously there is some moving parts with the pay down of debt here in the quarter, butyou have taken on a new facility. Can you tell us what to expect going forward here on your interest expense line item?

Okay. We had some tax on some -- we had some interest on some tax settlements that drove that up. That is a one-time thing. As far as that interest, going forward in 2011 now we won't be extended on the revolver unless you see us do a deal, and that will be pretty obvious if we do. So the earnings on our cash will offset pretty much the unused fee on our facility. Interest should be neutral in 2012.

Hello?

Our first question comes from the line of Scott Group with Wolfe. Please go ahead.

Thanks. Good morning, guys. Can you hear me?

We can, thank you.

Okay, great. I want to just drill down into the yields a little bit and understand the mix issues. Even the 2% yield growth you talked about -- line haul yield growth you talked about in January, Bruce, Rodney, are you satisfied with that? Is there a way to get more aggressive on the pricing? Should we be expecting another GRI in 2012?

As we (inaudible -- mic echo) [issues], we will look that the. We've started the process of looking at it. We've reached no conclusion, and we typically will, if we do one, will do it sometime between April and June of the year,but we have more work to do in that area.

Our next question comes from the line of Alex Brand with SunTrust Robinson. Please go ahead.

Thanks. I guess I better get it all in right now.

This is a great call.

Can you just help me -- I got the mix on the yield, but I am not clear on what is it you guys think changed on the volume piece? And do you think 4% or something like that, that sounds like maybe is the right number going forward?

What happened, Alex, when we had the call, the first three weeks of October were really strong. They were up 9%, 9.5%. It tapered off from there all the way through the end of the quarter, as you can understand from the monthly trends that I threw out. Another issue was -- and it is a long story short that Bruce doesn't like to talk about, but our accounting we -- if we have shipments that have been shipped but not delivered, GAAP requires us to defer that revenue. And that impacted both revenue and tonnage, making it lower than what we were anticipating at the time of the call.

Jumping forward to the next part of your question, we would anticipate volumes being some where between 4% and 6%. January is typically a little low slower, but so far we like what we are seeing it is in that mid single digit range.

And so I guess for all of the talk about Bax Schenker and picking up share, this is maybe -- is there more opportunity there, or do you think you already got what there is to get?

Remember that Bax Schenker, that deal actually goes into effect in March.

Right.

And that is in combination with [Estes]. We said from day one on this situation that we weren't sure -- it wasn't as meaningful to us as it was to a lot of others. But we are aware of the situation, we are working with both of the companies, and we are hopeful that positive things come out of it, but we are certainly not holding our breath on it.

And, Bruce, when you think about targeted growth rates, and I'm -- I think 15% is something that sustainably you have mentioned you want to target. Is it the right way to think about it that you get -- over time you think mid single digits on the core business. You maybe get a little price, but then you drive the rest of the growth through truck brokerage, and maybe Complete continues to become a bigger piece of the mix or something like that? Is that how you think about -- how you --

Yes, that is how we think about it. For instance, I think we did over 30% growth in January in both TLX and Complete -- a high double digit number, whatever. And, a lot of emphasis going on there. But at the same time we push hard to continue to grow our airport-to-airport.

But we could literally overnight increase our airport-to-airport volume by probably 10% to 15% on its own if we wanted to go out and lower prices. We are not going to do that, and there's others that will, so that is who needs to do it. We will sit back. We will grow the business. We will grow the profitable sections, and we will do what most don't understand, and that is make money.

I got it. Thanks for the time, guys.

Our next question comes from the line of Ben Hartford with Robert W. Baird. Please go ahead.

Good morning, gentlemen. Bruce, to that point on making money in the core business, if we were to just look at the line haul segment, volumes are comparable to where we were during the previous peak. Where are margins? How far below previous peak levels, if at all, are we on the core line haul business?

The best we ever did -- correct me if I'm wrong on this, Rodney -- we operated one quarter right at 80. An 80 OR. So a 20% margin. I think if we separate out just the airport-to-airport business, without the influence of either Forward Air Complete or TLX, we would probably get pretty close to that number. If the stars aligned and everything went right. But we would be happy in the airport-to-airport to get it back down to 81, 82 consistently.

In terms of where we are today versus that target of 80, 81?

Probably have 200 to 300 basis points more of improvement to go on there.

Okay. And to close that gap, is it simply price, or is it a function of as you continue to build density in that model, it can -- incremental margins can be above that 20% threshold and you can reach that 80 OR through density alone?

You said it, Ben. The easiest way to get there is through pricing, but with incremental margins of 30%-plus we can get there as well, but just take a little longer.

Yes, okay. And then I guess thinking about the way that the network is running today, last quarter you had mentioned, Bruce, that you were satisfied with the balance. What about in terms of the number of direct point to point runs that you are running versus through some sort of distribution hub? It might be difficult to quantify, but you maybe in terms of tonnage, when you were operating at that 80 OR versus today is there a meaningful difference?

You can't tie it that tightly, Ben. I mean I understand what you are saying, and logically what you are saying makes sense, but the direct could be a 250 mile direct versus a shipment that goes from Boston to LAand happens to run through Columbus at a high yield. So in general, if you run it direct you make more money, in general, is the best way to look at that. Does that answer your question?

Yes, I guess thinking about it today the number of direct runs that you are running versus when you were peaked out in 2006, are we close to that level? Is there still opportunity to build direct runs and therefore you can get better incremental volumes or incremental leverage? I'm trying to think of it from that standpoint.

We measure every week what goes through the hub, what goes through regional hubs, and then what is direct. We have more -- a longer road to go to get up to the level of directs that we ran in 2006, 2007.

And then lastly on the wafer shipment trends declining, you talked the length of haul difference between the airline business and traditional incumbent forwarding business, if you will. Is there a discernible difference in weight per shipment as well that is causing mix? Or is -- we'veheard some anecdotes recently about more regular -- more frequent shipments that leading to pressure on weight per shipment. Can you talk about the trend on the former versus the latter as it relates to weight per shipment?

Basically our trend there is a lower trend. It'll go down lower, as you might imagine, we try to slow down and then that trend will pick up as the year goes on. If we were in August, September and the number is where it is today I would have concerns, but we really don't. The -- depending on where the cut occurs on weight per shipment, there are sometimes when average revenue per shipment on a smaller shipment is higher. AndI would take you back to the UPS strike years ago, when all the LTL carriers, with all the UPS minimum shoved into their operating systems, made more money than they ever made, and that is because minimums drove yield.

Thanks. I'll jump back in the queue you.

Thank you.

Thank you. Our next question is from Ken Hoexter with Merrill Lynch. Please go ahead.

Good morning, guys. It's[Scott Weber] in for Ken. I was wondering if you could give us an update on the acquisitions front. It seems like you have been on the prowl for a while, and I'm justcurious if it has been valuation or the types of opportunities you are seeing that is giving you pause? I was just wondering if you could give us updated color on some of the verticals that you have been exploring more recently, if those have been kind of in the same segments that you have looked at in the past, or if you are casting a wider net at all?

I think you probably see it in your business at Bank of America, but there are very limited opportunities out there. Two big deals that went out on the market last year, neither one of them got done. And it primarily is an issue of valuation. Those things, as you well know , run in trends. And today there is nobody available or very slim pickings, if you will, and perhaps in a month or two months there will be a number of companies suddenly on the market.

So the answer to the first part of your question, typically if we can't get a deal done, it is on valuation. But we are hopeful as things go forward that we will find some good opportunities, and they could be outside of where

Got it. Okay. And then just as a quick follow-up. Can you remind us how much capacity is left on the current buyback program that is in place?

Approximately a million shares.

Approximately a million shares. Okay, great. Thanks, guys.

Our next question comes from the line of David Ross with Stifel Nicolaus. Please go ahead.

Yes, good morning, Bruce and Rodney.

Good morning.

Could you talk a little bit about Forward Air's owner-operators driving more brokerage miles than third parties, and why they are growing faster than third parties in the logistics segment?

It is simply a matter of opportunity, David. We have had a lot of success in terms of recruiting owner-operators for that business, which we are happy. Secondly, depending upon the business opportunities that they have, we would prefer if we have teams operating to rent out ourselves because we would make more money doing it. So that will ebb and flow through the year, and it will again depend strictly on what the opportunities are. If it is a high dollar opportunity, you will see our power on it in most cases.

So are most of the owner-operator miles owner-operators who drive exclusively for the logistics segment, or is that also used in airport-to-airport to balance out the network for the one way runs?

Yes, what you just said is, correct.

Okay. As far as [pool] distribution is concerned, had higher PT than expected, up almost 3% as a percent of revenue year-over-year, where as truck brokerage [of] PT was down almost 4% as a percent of revenue. Can you talk about the difference I guess between why PT was rising and pool distribution was falling in logistics?

PT was up as a result of our push to move from company power to owner-operators in some of our facilities. We are probably about done with that program. We have a better balance there between owner-operators and company power. On the brokerage side we have some business with a particular customer where we haul some of it on our own trucks, and in other cases we outsource it to take care of the customer, and basically what it is freight moving from their a distribution center into one of our terminals for final delivery.

And last question, just on the D&A line. Rodney, there was a decline in depreciation when the number of trucks and trailers at terminals looked to be the same or higher than year-ago. I just want to know what was going on there.

I got my controller over here on my left whispering. He's saying that it is old equipment rolling off, Dave. So it is just -- that is probably a pretty static number at this point in time, with CapEx being pretty consistent the last couple of years.

Okay. So it some of that old equipment going to be replaced with that $20 million of CapEx in 2012?

What happened was you just caught us in a cycle. Typically we won't trade trailer for trailer or tractor for tractor. So that when we get a new one in we are going to have the old one sit on our books while we sell it because we think we can make more money with it. So we will go through a period of time -- hopefully a quick period, but we will go through a period of time where those numbers will get a little bit out of kilter, but it is really not a big deal.

Excellent. Thank you very much.

You're welcome.

Thank you. The next question from Todd Fowler with KeyBanc Capital Markets. Please go ahead.

Thanks. Good morning, everyone. Back to one of the earlier questions, I think this was one of the first questions on the call, but the comments about the profitability for Solutions. Is the expectation there that it is profitable for the full year, but what will the trends be on a quarterly basis? Is it still going to lose money in the first and second quarter, and then be profitable in back half? How should we think about the quarterly trends?

I'll tell you how we'd like to think about it. We would like to think about a break even or slight loss in Q1. We would like to make money with it in the second quarter. In the third quarter the same, and in the fourth quarter the typical really good quarter, sothat it is year round a good business model, and we think we have made more progress there, and fortunately our customers have been helping us, so we have made more progress in that area than we have in the three previous years. So we are looking for a good year from Solutions in 2012.

Todd, if we can walk that up over the course of the year like Bruce mentioned and end up with a 95 OR for 2012, we will be pleased.

Okay. And at this point, Bruce, what is the variability in this business? Does it come down to volume commitments from your customers? It seems like you have got the mix right and some of the densities there. Is it a pricing issue? What is kind of the variability into what can be a break even first quarter to a loss in the first quarter? Same thing for the second quarter?

It's a combination of just about everything you said, and also you have to bring into account route -- what we call route structures, which is how we deliver certain points out of Atlanta, Georgia, as an example, and where we attempt to optimize that. So both operationally we have made great strides. But we can do better. But you also reach a point where your volume -- when the retailers are slower. Simply makes it very difficult to operate. Now, the same terminal with the same route structure in the fourth quarter will get down into the 80s. So the variability is critical in managing this business, as you might imagine.

Yes, no, that makes sense. I think we learned that over the past couple of quarters. What is the expectation at this point for how the top line should grow? Feels like, again, you have gone through some adjustments with the account base. If you think about 2012, what would you expect the top line for solutions to grow, and maybe even on a longer term basis would be helpful as well?

Todd, around 10%.

Okay.

If you pull out the [BB&B] from 2010, look at the growth -- the adjusted growth, it was right at 8% last year. We think we can do a little better than that.

Okay. That helps. And then on the airport-to-airport business, there has been some talk from some of the other carriers that have reported to date about cost pressures within their networks. Rodney, as you think about your structure right now, your incremental margins going into 2012, do you have anything coming through on the cost side that we should be thinking about within the network?

The only thing, Todd, would be -- the question mark would be what happens to capacity and what we have to do as far as buying miles on the outside. And you see a little bit of everything out there. First half, okay. [Tiny] up in the second half. Your guess is as good as mine. But really that is the only question mark we have. Everything else as far as the line items look pretty good.

Okay. And, Rodney, what was the dollar amount for the insurance adjustment here in the quarter? It sounds like there was one that was favorable and one that was -- that went against you. But do it you have the two amounts separately?

The total flip flop impact from Q4 2010 to Q4 2011 was about $800,000, Todd.

Okay.

There's a lot of moving parts in that, [believe me].

So just go with the net and go from there?Okay. And then the last one I have is, just thinking about the first quarter this year, I would think that you have got some easy comparisons from the first quarter of last year. If you could just remind us what some of the tonnage trends were, given some of the weather issues and how you are thinking about the first quarter of 2012 versus the first quarter of 2011?

As you noted, weather was the big issue in 2011, but it almost went by geographic region. So if you look at last week's numbers versus a year ago, Dallas and the Southwest was down considerably a year ago, and then this week obviously they are back to normal. We had a couple occasions in Chicago. So really once you get through the month of January, the weather impact is minimal and hopefully will be for the rest of the quarter. So without question, you're right, it is a favorable comp, and it helped us and every other carrier out there.

Okay. I'll follow up offline for the technical pricing term you used with Alex in response to his question.

By all means I hope you do.

Thanks a lot.

Thank you. Our next question comes from the line of John Barnes with RBC Capital Markets.

Hi, good morning, guys. Bruce, you have talked in the past on the pool business about trying to bring in different customer types into that business. Can you just talk a little bit about the success you are having there, and is that the customer base that is really necessary to get that first quarter and even the second quarter profitable on an ongoing basis?

Good question. John, we have brought in probably -- it ranges from 3% to 5% of our overall business is what we call new verticals, and without question that helps us in the off periods. The other thing that has helped us there is the specialty retailer is just doing better. So, for instance, in January Solutions had a pretty good revenue month, and especially if you compared it against a year ago. So two things working there. One is how hard our people are working to get additional revenues, and then the other is how hard our retail customers are working to get more product moving through their store.

Okay. And when it comes to the retailers, is the fact that the retailers are managing their inventory so much more aggressively, I would imagine that is a positive for your business? Is kind of keeps you in there much more often?

Yes, it is. You are exactly right.

Okay. All right. Can you talk a little bit about -- I know you've had success on the owner operator side, but clearly every carrier that's reported earnings thus far is talking about or already implemented some type of rating -- or wage increase for the drivers or owner-operators or what have you. Can you just talk about, especially with Rodney's response around cost pressures, just what you are seeing on the owner operator side? Are you having to make any material changes to that program in order to keep the numbers up?

We really haven't. We were a little ahead of the curve, I believe it was last August, under a specific program, which would bore you, but worked very well for the owner-operators. Gave increases. And then we look at this process basically every summer to see where we stand, and do our people need more assistance, are we having a hard time recruiting? We are not having a hard time recruiting and sometimes I think -- and I don't know if this is right or not -- that as long as you are standup company, and you take care of our owner-operators well, that during the tough times it is easier for us to recruit, because there are so many companies out there that don't take care of the owner-operators.

We are good where we sit today. Our bigger concern to go back to Rodney's point would be what outside carriers will cost us. That tends to run 10% in our airport-to-airport percentage of miles that we run every week, and that would have a big impact on us. So another reason why we are working so hard on the TLX side, to get that number as low as we can get it.

That makes sense. My last question, just from a competitive standpoint. Obviously this announcement between Bax Schenker and Estes, we have seen historically asset intensive carriers to try to come in the business, both on the LTL and truck load side, and have seen very little success. Where do you think the competitive landscape stands today, and especially with the potential entry of some of the Estes into the business. Has the dynamic changed at all where they can be more successful, or do you still think there is limitations to trying to run an asset intensive model in your business?

First of all, let me be clear, because we have a great deal of respect for the people at Estes -- And Schenker, for that mater -- that we don't know their operating plan. But we can tell you what Estes Worldwide Forwarding has done and has been a very, very good customer of ours for the last two or three years. That is a separate operating entity, as I understand it, within the Estes family, and so it really doesn't have a lot to do with their LTL business. I'm sure there is co-mingling in certain situations for them, and again I'm not an expert on how they run their company. But they have been just a great customer. We hope to make them an even bigger and better customer as we go forward in 2012.

Okay. So you anticipate continuing to do business with Estes on the forwarding side --

Exactly.

-- and don't really see the asset part of their business as a threat at this point?

Not at all.

Okay. All right. Thanks for the clarification. Thanks, Bruce. Nice quarter, guys.

Thank you.

Our next question from the line of Kevin Sterling with BB&T Capital Markets.

Thank you, operator. Good morning, Bruce and Rodney.

Good morning.

I thought we had you blocked.

We were having trouble this morning. But hey, Bruce, I think Alex was kind of asking a question about industry pricing, and maybe I could dive a little bit further. How would you describe industry pricing today? Still seeing some squirrelly activity out there?

I think probably in our niche of the market you will always see squirrelly activity because of the competitors. Basically I think everyone is in agreement that as the year moves on, pricing is going to firm up and probably be led by the truck load carriers. And then if things get really tight, I would anticipate seeing the LTL carriers, maybe as soon as summer time, put in another rate increase. Because I really believe -- we are fortunate, as Rodney touched on before, that a lot of those cost pressures don't affect us, but he they are going to affect the industry. We think -- you get through the jibber jabber crap that goes on within our little niche -- that the pricing area is going to get very firm as the year goes on.

Great. And pool distribution, you had some nice wins in the quarter. How does the pipeline look today for your pool business?

It actually looks good. What was shocking about that is typically a retailer won't make a move during what we call and they call peak, which is the fourth quarter basically. And this year we had I think five startups, which we haven't been in this business forever, but that is the first time it ever happened. So we were really pleased with that. We have a good pipeline, as you mentioned, going on now, and we think maybe there is some light at the end of this tunnel and it is not a train.

Right. Okay. Well, great. Thanks for letting me through the backdoor to ask some questions. I appreciate it.

You're welcome.

Our next question comes from the line of Jack Atkins with Stephens. Please go ahead.

Good morning, guys. Thanks for taking my question. Just first here to follow-up on this Bax issue for a moment. I know it is hard to get a handle on exactly the opportunity created by the Bax reorganization, butI was wondering if you could give us a sense for -- as you are talking to your freight forwarder customers, do you have a feel for maybe how actively they are bidding on this freight, and do you think we could see a good chunk of that back spray up for grabs? Maybe change hands in 2012?

In all honesty, Jack, most of that went on -- I'm searching my memory -- let's say back in October, November, in that area. We don't know the exact results is of what went -- what actually occurred after the rebidding, but we did notice a lot of activity.

Okay. Sounds good. So just to follow-up on your relationship there with Estes, it sounds like there is an opportunity as they are operating maybe a piece of the deferred air freight as part of the Bax network as a [3GL] service, maybe to get a piece of it that way. Is that a good way to think about it?

That's an excellent way to think about it.

Okay, great. And then the last thing I have got here, and I will jump back in queue, but your TLX business was very strong in the quarter. and it sounds like you ha, some new business wins there. Could you maybe help us think about how we should model that business throughout 2012? Sounds like you are off to a strong start there in January as well.

About half of the increase in the fourth quarter, Jack, was just increased volumes because of better business activity. The other half was essentially the continental business win that we had in another pretty large customer win. In the -- we are going to be conservative on you here, but in the neighborhood of, call it, 20% for 2012, given those business wins.

Okay. That's great, guys. Thanks so much.

Our next question comes from the line of David Campbell with Thompson Davis & Company.

Thanks. Most of my questions have been answered, including logistics. You still feel like international airlines are one of the growth area for logistics?

There will always be growth. I think the big problem there now, David, as you probably well know, is their business has slowed down. But they are good customers, and we like doing business with them.

You think the international cargo slow down -- we know it slowed last year, and this right now we have the Chinese New Year impact. Do you see that coming back in March, or you don't have a lot of visibility?

We really don't have much visibility. I wish we did. We are hopeful that it does, because it is really good business, but it is very difficult to project that.

Right, right, right. But how do you use logistics -- the airport-to-airport business to get business for logistics, or don't you? Is there any relationship between the airport-to-airport markets and your logistics markets?

Sure. Because when we sell to, say, Rodney brought up Continental -- United Continental, when we sell to them, their product that they offer us is both truckload business and LTL. So the LTL moves into our airport-to-airport business, and the truckload moves into our logistics business.

Right, right, right, right. Anything special on CapEx this year, or is it mostly technology? What else is involved?

It is nearly a carbon copy of last year, David. It is trailers, some [city] equipment as far as trucks and straight trucks, fork lifts and technology, and that is pretty much the story.

All right. Then last question is how about the Columbus hub? Is that up to capacity, or do you have excess capacity there?

We still have run. During the fall time it gets busy, but we still -- we can make it work.

Okay. Thanks very much.

Thank you.

Our next question from Scott Group with Wolfe Trahan. Please go ahead.

Thanks for taking the fop up follow-up.

Sure.

So I wanted to talk about the new Continental business. Sounds like some is in logistic, some is in line haul. How big that was contract win, and that goes through third quarter 2012? Is that right?

We started that, Scott, in -- throughout the month of September, I believe is correct. And the LTL versus truckload depends is strictly on Continental United's business. Very hard to project what that is going to be. Historically as you go into the fall in the busier time, you will see more truckloads and fewer LTL shipments, and then that reverses in the first part of the year.

Okay. So during fourth quarter you think most of the impact was in logistics, and maybe going forward we see more of a benefit in line haul?

Right.

Okay. And then last thing, if I look at the other operating expenses, on an absolute basis it looks very normal level. If I look at it as a percent of revenue, it is pretty low, and I'm wondering is that just the leverage of the model starting to show, or is there something unusual in terms of the other expenses in the fourth quarter?

Nothing really crazy in there, Scott. It is leverage, because the other line item is a measure of fixed and variable costs, so you do get some leverage.

Okay. Great. Thanks for the time, guys.

Thank you.

The next question comes from the line of Matt Young with Morningstar.

Good morning, thanks for taking my call. Just was wondering to you could provide a quick update on the broader addressable market in the airport-to-airport business. I think in the past you said it was in the $2 billion. Is that right, and do you see that changing much over the next several years, especially given the persistently low retail inventory to sales ratios and I guess high demand for replenishment.

Historically, that's -- there is a lot of internal debate on that, Matt, as to how big the market is, but thebest we can as certain is probably around $2 billion. You are exactly right, that has been our working thesis that due to lower inventory levels that our addressable market may actually be expanding. So that is the reason that you see our growth numbers beyond GDP or even GDP times two.

Okay, great. And then what was number -- approximately what was the size of your market on the pool size? Do I have it right, around 4 billion?

Correct.

Okay. All right. That's all I have. Thank you.

And thank you for joining us today for the Forward Air Corporation's fourth quarter 2011 earnings conference call. Please remember the webcast will be available on the IR section of Forward Air's website, at www.forwardair.com, shortly after this call.

This conference is also available for replay starting at 11 AM and will run until March 8, 2012, at midnight. Access the replay service by dialing 1-800-475-6701 and entering the access code of 232330. You may also access 320-365-3844 and entering the access code of 230330. Those numbers again, 1-800-475-6701 and 320-365-3844 and entering the access code of 232330.

That does conclude your conference for today. Thank you very much for your participation. You may now disconnect.