Forward Air Corporation (

FWRD

)

Q3 2010 Results Earnings Conference Call

October 21, 2010 9 AM ET

Executives

Bruce Campbell – Chairman, President and CEO

Rodney Bell – SVP, CFO and Treasurer

Matt Jewell – EVP, Chief Legal Officer and Secretary

Analysts

Kevin Sterling – BB&T Capital Markets

Alex Brand – Stephens Incorporated

Todd Fowler – KeyBanc Capital Markets

Michael Fountaine – RBC Capital Markets

Wilson [ph] – Bank of America Merrill Lynch

Matt Brooklier – Piper Jaffray

David Ross – Stifel Nicolaus

Presentation

Operator

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Previous Statements by FWRD
» Forward Air Corporation Q2 2010 Earnings Call Transcript
» Forward Air Corporation Q1 2010 Earnings Call Transcript
» Forward Air Q4 2008 Earnings Call Transcript
» Forward Air Corp. Q3 2008 Earnings Call Transcript

Ladies and gentlemen, thank you for joining Forward Air Corporation’s third quarter 2010 earnings release conference call. Before we begin, I 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 Chief Executive Officer, Bruce Campbell; and Senior Vice President and Chief Financial Officer, Rodney Bell.

By now, you should have received the press release announcing third quarter 2010 results, which was furnished to the SEC on Form 8-K 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 the statements of historical facts may be deemed to be forward-looking statements. Without limiting, the foregoing words such as believe, anticipate, plan, expect, and similar expressions are intended to identify forward-looking statements.

You are hereby 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 new result of new information, future events, or otherwise.

And now, I’ll turn the call over to Bruce Campbell, Chairman, President, and Chief Executive Officer.

Bruce Campbell

Thank you, operator, and to each of you joining our third quarter earnings call. Good morning and thank you for your interest in our company.

Overall, we were very pleased with our performance during the third quarter with our team producing revenue growth of over 17%, which helped to create operating income of $15.5 million and an operating margin of 12.5%, almost doubling last year’s margin.

In our airport-to-airport segment, we showed strong revenue growth of 22% with each product line including our newer segments of TLX and Forward Air Complete growing in the double-digit range.

We continue to be pleased with our team’s ability to grow not only the airport-to-airport segment, but also all of our new product line offerings. While our solutions team came just short of producing near profit, they did make significant improvement from the cost side of the business, validating the various initiatives we have in place to help us consistently produce profits in this segment.

With all the changes we have made in this product line offering is starting to work, reach to a more comfortable than never, we will soon have them where they need to be regardless of the economic climate. I want to close by once again acknowledging the great efforts by all members of our team, both our employees and our independent operators. Thank you very much.

And, now, here is Rodney Bell, our Chief Financial Officer.

Rodney Bell

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

Operating revenue for the third quarter was a $121.5 million, an increase of 17.8% from the third quarter of 2009. In our Forward Air, Inc. business segment, airport-to-airport revenues were $105.3 million, an increase of a $19.6 million or 22.9% as compared to last year. This resulted from nearly a 16% increase in network tonnage and a 5.9% increase in yield. The yield improvement consisted of 3.9% from line-haul processing, a 1.4% benefit from net fuel surcharges, along with a 0.5% positive impact from the growth of Forward Air Complete.

Logistics revenues were $16.9 million, an increase of $3.6 million, a 27.1% improvement compared to Q3 2009. In our Forward Air Solutions segment, revenues were $16.5 million, a decrease of 7% compared to Q3 2009. New business wins were not enough to offset the loss of a major customer that contributed to the Q3 2009 revenue base. And, additionally, specialty retail sales have continued to suffer through the quarter, hopefully picking up with the seasonality that comes from Q4.

Moving to expenses for the third quarter, our operations and line-haul teams did another outstanding job, managing load factors and network miles. Total PT was 42.1% as a percentage of revenue compared to 42.2% last year. Salaries and wages were up $3.3 million or 11.5%, but were down a 150 basis points as a percentage of revenue. The dollar increase resulted primarily from $1.2 million increase in third quarter performance-based incentives and $1.9 million increase in volume-driven variable wages.

Operating leases, depreciation and amortization, and insurance and claims were down 110 basis points, 60 basis points, and 70 basis points respectively. Other operating expenses were down $1 million or 220 basis points, $680,000 or 60 basis points of that was related to a one-time gain related to determination of the capital lease.

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