Forward Air Corporation Q1 2008 Earnings Call Transcript

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2008-04-22 10:04:07.0

Tags: Forward Air Corp.

Question-and-Answer Session

Operator

(Operator instructions) Your first question is from the line of Ed Wolfe. Please proceed – Wolfe Research.

Ed WolfeBear Stearns

Thank you. Hey, good morning guys. Hi Bruce, hi Rodney. You have the best tonnage that we've seen in two years, 8.8%. Obviously, a lot of that is from acquisitions and some at Kitty. But the OR still feels 270 basis points deteriorated. Bruce, you made some comments upfront that you are almost through the integration. If we look at this 270 basis points of year-over-year deterioration on not all that difficult comp, how should we think about what percentage of that is related to the integration, what percentage is maybe related to fuel, how do we think about that, because it feels like there is more tonnage in the network than what we're seeing from the OR right now?

Bruce Campbell

Before I touch on that, Ed, let me back up and tell you that we also have shorter haul traffic in there, which tends to – it's a bit more expensive to handle. It's still very good. It's very lucrative business. But, that's kind of pushing that number up too. But, there are a number of issues that Rodney touched on, our option expense, there's the cost of Forward Air Solutions that we went through in the quarter. If you looked at just Forward Air by itself, the airport-to-airport business actually improved their operating ratio. So, we were okay with that.

If you look at true operating cost, and so let me explain what I mean by that. I don't look at the option-based cost that we didn't have a year ago as being a true operating cost. And I don't mean to ignore it, but in the day-to-day operations, there's nothing our operating group can do to stop that. So, they made significant progress, as Rodney talked, on purchase transportation. Where we did not make significant progress, and was indeed mostly acquisition related, was on salary wages that type of an area, which we will clean up. It's going to take us at least this quarter to get behind us and some technology improvements that we'll need to bring total efficiencies there.

So, that's a long-winded answer that says we understand that we have gone backwards a bit there. We also understood that was going to happen when we made these moves and that it was going to take us time to get us where we are traditionally used to, if that's the right way to describe it. But, we're confident we can get there.

 

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