Thank you for joining Forward Air Corporation's announcement of the acquisition of CLP Towne Incorporated and preannouncement of Q4 and 2014 results 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 Web site 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 the acquisition and the preannouncement of the fourth quarter 2014 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 foregoing words such as believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You're 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 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, and thanks to each of you joining us today. My comments will cover two areas: our acquisition of Towne Air Freight and our fourth quarter results. First, we are truly excited about the many opportunities we have in front of us once we closed the purchase of Towne Air Freight. Those opportunities include, but aren't limited to increased volume in revenue through our existing network structure, allowing us the benefits of increased density. Next, the addition of a large number of owner-operators, including much needed teams to help us in our quest to reduce outside carrier usage. Third, the expansion of our presence, especially in the Midwest. And we expect additional cost synergies from this transaction over time. Our teams are already well into the integration planning process, and we look forward to a successful implementation in early March. Now, few words on the fourth quarter; results are once again -- and pardon me, it really comes down to one cost area, and that's our purchase transportation. We have and are aggressively attacking this area by first, a whole new recruiting and retention group, who are now firmly entrenched; and secondly, a new independent contractor pay package focused specifically on the recruitment of teams. Our efforts are already paying off year-to-date as we have added over 20 new teams to our fleet, and expect this positive trend to continue throughout the year. Additionally, we announced early January a rate increase that became effective this past Monday. This increase specifically targeted those traffic lanes requiring service by teams. We hope this helps to offset the higher costs that we are incurring. And now, Rodney Bell, our CFO.

Thanks, Bruce. Good morning. Let me begin with some relevant details in regard to our purchase of Towne Air. In 2014, Towne had unaudited revenues of approximately $230 million. Roughly 72% of that revenue was related to expedited airport-to-airport and associated pick-up and delivery services; 15% of the revenue is terminal services, including a final mile dedicated operation. Lastly 13% of the revenue was full truckload, drayage, and dedicated truckload that will roll up under our logistics revenue line item. Based on past deals of this nature as well as due diligence, we feel that we will retain between 65% and 75% of the revenue base. While we'll strive to keep as much business as we can, we have modeled the deal based on 65% retention. At that level, we anticipate approximately $140 million of 2015 incremental revenues as a result of the deal. We are estimating one-time deal costs to total approximately $50 million. Of that 50 million, we expect $8 million in expense resulting from the expenses related to duplicate facilities. The balance is a combination of various deal-related legal banking and due diligence fees, employee severance and other miscellaneous items. Without regard to that $50 million and one-time expense, and assuming revenue retention at 65%, we expect a partial year EPS benefit in the range of $0.16 to $0.18 for 2015. We are funding the transaction with a new $125 million term loan A. The term of the loan is 24 months and the interest rate is LIBOR plus a 112.5. The term loan A is an addition to our credit facility which was renewed this week with a five-year term and continues to add $150 million of revolving line of credit and $100 million accordion feature. The full availability to the line and approximately $60 million…

[Operator Instructions] Your first question comes from the line of Ben Hartford from Baird. Please go ahead.

Hey, good morning guys and congratulations on getting the deal done.

Hi.

I guess I'm just looking for some perspective back to about a decade ago with the absorption of U.S. Xpress's business. I think the retention -- and maybe just some clarification on some of our numbers, but I think the retention of that business was stated to be around 60% at the time of purchase or absorption. I'm wondering what that ended up being and how that can provide a template to how you are thinking about absorption now; obviously, you are talking about 65% retention. Are there any parallels to draw to the U.S. Xpress absorption ten years ago and how should we think of the rate of absorption being a little better to what seems to have been stated 10 years ago?

I'm lucky to remember yesterday, let alone 10 years ago, but we do -- in the U.S. Xpress acquisition, we said 60%; we actually did a much higher number than that. The reason this number is lower and the reason we modeled that way is there is some business or revenue streams there that we are not sure we want to continue. That's not to say that we are going to get -- just go out and rid ourselves of business, but there is some of it that we are going to have to look at very hard. The customer is probably going to have to look at very hard. And we decided if that's something that we want in our company in the future. But we took the worst case scenario. We think the worst case is 65. We think success will be much higher number than that.

Okay. You had alluded in the press release about the customer is being served well with this purchase. I'm wondering if you can provide a little bit of clarity on how you expect that to communicate that to customers, because I imagine one of the responses is going to be like you taking away obviously sizable competitor. And from what we hear customer love your service but like having some options in the market place as well from affording perspective. So, what -- naturally you're going to receive some questions on that front. I'm just wondering in more detail what are you communicating to customers? What are the advantages to them that this purchase brings?

I think without going into great detail; we have always provided a value in our service. We provide what we consider to be best-in-class service. We provide really, really topnotch IT, which includes transparency to them, to our customer base that includes ease of doing business in terms of being able to book online and terms of being able to receive their invoices online on and on in those terms. The other thing we all have to remember is while Towne was our largest competitor out there; there are literally hundreds of mom and pops and other carriers that I'm sure will be competing for this business too.

Okay. And then last one; does the completion of this deal and some of the focus certainly integrating this over the coming months -- does it change the way that you think about the broader portfolio that you have built over the past seven years or so and some of the service line expansions into pool and temperature-controlled and other elements? Does this change the way that you think about the broader Forward Air portfolio?

Well, let me back up and tell you that the last two quarters this acquisition has probably cost us due to -- we having to take resources not applied to our current business. So we're excited to have that behind us. We're excited about getting our people focused and moving forward. I mean as far as our other businesses in the portfolio, you will see us go right back into the final mile in our model with central states and Bryan and his team and start expanding that hopefully in the second quarter some time. That's going to be our push throughout. Our big push is this year, Ben, will be get this acquisition behind us and get it behind us very quickly. And then we will focus not only on continuing to provide the best of service reducing our owner-operator or our purchase transportation costs, and then really taking a hard look at CST and seeing how much we can grow there.

Okay. Thanks for your time, and congrats again.

Thank you very much.

Your next question comes from the line of John Barnes from RBC Capital Markets. Please go ahead.

Hey, good morning, guys. Congratulations. Bruce, you just said that some of the revenue streams that you may not want to continue. Can you give us a little color of these? You talked about some of your competitors having been more egregious in pricing than others. Is that really the reason for having -- is price going to be what kind of dictates it, or is it something else?

I've got lawyers sitting here looking at me. It really won't have anything to with pricing. It has to do with product line offerings. So we're going to go in and look at the non-airport-to-airport businesses, and although they have some really unique business and some business that we're excited about for the future, there's some of it that we're going to have to look at really hard and decide if that's really in our future. So it's all about product line and not the other.

Okay. All right, very good. We have seen in other trucking-related type of acquisitions, truck-related at some point you get to from a driver perspective you get to some diseconomies of scale where your fleet and the number of owner-operators becomes large enough that you get overwhelmed with the recruitment and retention efforts on that. I know this has been an issue in the past couple of quarters. Are you concerned at all that adding another 525 owner-operators -- what do you think the attrition rate is there? And then does it become more complicated or more costly longer term to have to recruit and retain you know in that larger number of owner-operators?

Well, I think the obvious answer is it's probably going to become more costly not only because of your points but just the nature of the environment of the world we're in today. We think after we face fighting this all year last year that we've got a really good team in recruiting and retention. It's a basically a brand new. They're in a brand new location and they've got a brand new leader who is doing a terrific job. So we're excited about what we think they can do for our company. Now, we'll get a little bit of retrieve because when we bring on the owner-operator some of the talent acquisition, in most cases they end up getting higher pay. We just have a better package as we sit here today. So we believe that retention rate there will be very high. And we believe that will give us some relief almost immediately from the battles that we're fighting on the owner-operator side. And so we think that's going to really help us. Now longer term the keys to recruiting and retention is you can't take your eye off the ball. And you know I think if we're guilty of anything, we probably did that a year ago. And it took us all year to get it caught up and get it structured way we want it to be. But today, as we sit here, we really like how we're set up.

Okay. And my last question is on the facilities, the duplicate facilities that you walk away from, is there any concern and you have highlighted the number of competitors in the market, is there any concern that somebody can backfill those facilities? And maybe there is somebody out there that hasn't had the opportunity before but is kind of sitting there and can kind of backfill some of it and put together a larger network? Or is it a case where the competitors that are left, smaller, maybe a little less well-capitalized and it would be difficult for anybody to backfill into this position?

I think the key there even though obviously there would be buildings available but there were buildings available yesterday. The key there is as you all know you have to have business. You have to have adequate density or become very expensive to run the network. We know that first hand because when we started this company 25 years ago, it was very expensive until we hit that hurdle right. So the real key there is not the buildings but the business.

Okay. Very good. Again, guys, congratulations on the deal.

Thank you very much.

Your next question comes from the line of Kevin Allen from South Bend Tribune. Please go ahead.

Good morning.

Good morning.

One of the things that you said you are excited about is taking on the owner-operators from the Towne acquisition. Do you have any feel yet for how the acquisition will affect the employment numbers for the other people, who are working for Towne, say in the dispatch center and other things like that?

We don't at this moment. Obviously, we've been limited on the amount of both information and background that we would need to make hiring decisions. So we've got a month in that, Kevin, to work very hard as you probably know we have a number of people in South Bend today, and we have people scattered throughout the country to make assessments and to help us determine who will stay. We will lose some people without question. That's to what happens when you do the acquisition. We think we will retain a great number of the employees and the owner-operators.

And do you think or do you know yet or do you think that South Bend would remain a hub in your network?

The south Bend terminal will remain and we're excited to have them on board because that's a new company on terminal for us. We will retain initially at least part of the South Bend office because we have work to do there. And then again, we'll make that decision probably in the next 30 districts today as far as how many people we keep there. As far as the hub work, South Bend will become an end, what we call an, "End station." It will not do transfer work or if it does transfer work it will be very limited. But we'll have opportunities for the doc people there too.

Okay. All right, thank you.

You're welcome.

Your next question comes from the line of James Clement from Macquarie. Please go ahead.

Hey, good morning, gentlemen.

Good morning.

The 26% outside capacity percentage for the fourth quarter, as you look at 2015 guidance, and obviously I don't know if you can leave Towne out of the conversation and just kind of talk about your expectations for Forward Air organically, but would you see that number coming down significantly or is that kind of a new norm?

It would make me sick if it were a new norm. We have it down to approximately 18% in January, and our goal is to get it down between 10 and 12. And we'd be really happy with 12. We need to add 22 owner-operator teams. Then you calculate that they are running 5,000 miles a week. That's a 100,000 miles a week that we just converted over. And we think we're going to be able to add quite a few more.

In your experience what exactly happened in the fourth quarter? Because based on what you said, 26% seems like an awfully, awfully high number, even if you consider what is going on in the industry. So is there anything internally that you feel maybe could have been done better, that you are doing better now based on your numbers for January?

First of all, we came in with not enough team, so that hurt us. Second of all, the West Coast was a huge issue.

Okay. And that is one of the things I was getting at, thank you.

Yes, it truly was. To the point where all our competitors basically at 2'O clock or 3'O clock in the afternoon on Fridays would close their doors and not take any more freight. And so, we ended up with a lot more freight than we probably would have got normally. And that was very costly freight because we had to go out and spend $2 to $2.50 a mile to move it, but our commitment is always to our customer, that we will move the freight, and that's what we did, but it was expensive.

Okay, I appreciate the honesty. Thanks very much for your time.

You're welcome.

Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Hey, thanks. Good morning, guys. I didn't know if you gave these numbers yet, just a few numbers. What is the trailing EBITDA for Towne? What's their operating ratio? And did you give a number on what you think the synergies could be and how much of that is in the 2015 guidance?

Well, Scott, adjusted EBITDA for Towne, and when I say adjusted, they had a -- and also great customer in the first half of the year, so adjusting them out; adjusted EBITDA for 2014 was roughly $7 million. From an EBIT perspective they were operating essentially at a breakeven. And they're all substantial synergies, we're still getting our arms around that and we really haven't pegged that, but we've got a number of things internally we're working on and we'll monitor that and get every bit of that we can.

How much of the synergy numbers are in your guidance for 2015? Most? A little? All?

There will be an initial population. So I would say 50%.

Okay. And then, are there amortization costs we should be thinking about?

There are. Scott, I have to get back to you on that; I don't have that in front of me.

Okay, but that's reflected in the guidance?

It is, it is, absolutely.

What of percent of the airport-to-airport line all market are you guys going to be now with Towne?

That's a real hard thing to define.

Again, we've discussed this before, Scott; and that is depending on who you ask, you'll get a hundred different answers on how big is that market because a lot of people would include LTL in it. And there's a lot of freight that's truly LTL. So do you combine those markets and is that the size of it? And if it is, then we're a minnow in the pool.

And if you exclude the LTL?

I would say we're -- I'm ballparking, and please don't hold me to this, I'd say we're 35%, 40%, 45% in the market.

Okay. So in a big picture you been talking for a few years it feels like it is every other conference call you are complaining about some irrational pricing and we assumed it to be Towne. If I look back over the past few years, you guys are getting 1%, maybe 2% and the core line pricing, and the truckload and the LTL guys are getting 4% over the patch three years. Is there a reason we you can't get to that kind of pricing going forward with…

I think we actually have done that with the increase that went in effect this week that was announced in early January. So depending on the outcome of that which we don't have as we sit here today, I think you are going to find us in the 3% or 4% range.

I guess I was thinking more sustainable -- do you just think this changes long-term pricing power of your business?

Not necessarily, no. We are always reacting or we are having to respond to the environment that we are in.

Okay. All right, thank you, guys.

You're welcome.

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

Great. Good morning, guys and congratulations on this transaction

Thank you.

So I guess just kind of going back to the integration process, Bruce and Rodney, and thinking about this. Just from a bigger picture perspective, how long would you think the integration process to take? Is it a function of a couple of quarters or is this a multiyear process? And when we think about the accretion from the transaction from the transaction, the $0.18 to $0.22 for a full year 2015 basis, do we expect that number to have an upward bias as you fully integrate the two businesses together?

To answer your first question; our goal is to have 90% of the integration done within a three-month period.

Okay.

And then the balance of it done within six months; there are certain things that you simply can't get done on an expedient manner. And we are okay with that. We've got everything. We have milestone set. We know what has to get done, and what has to get done quickly. I think our team is extremely focused and are going to do really good job on that, and you can…

The other question, Jack, was the accretion this year versus out years; there is -- in the modeling the out years suddenly increased beyond that quite a bit.

Okay. That makes sense. And then as far as the outside miles in the fourth quarter, do you feel like now 18% in January, how many additional owner-operators do you guys feel like you need to add in the core Forward Air network, legacy Forward Air network to sort of get to the 10% to 12% outside mile market?

Our immediate goal, Jack, was to add 50, and those are all teams.

Yes.

Because we actually have enough singles, but we moved to teams, so, our initial goal is 50 and then we would build from there.

Okay, so…

So we are about 50% of the way there in 30 days. So they've done a really terrific job.

And then, I know it is hard to goes guess at this point but what benefit just roughly from a percentage basis do you think that the Towne capacity will have to the outside miles? Take it down by 5%; just trying to ballpark it?

We remodeled that we would still be in the 15% range of outside miles, just being conservative. Part of what drives outside miles besides the availability of owner-operators is also the balance of our network. So if we're fortunate, we can really improve that, but that yet remains to be seen.

Okay. And then last question from me; you talked about rate increases in some of your more costly lanes where you have team drivers. We are kind of bumping up on 12 months since the last GRI across your entire book of business. How should we think about a GRI in 2015 across all of the legacy Forward Air, and what is assumed in your guidance?

Well, the increase that we announced in early January effective this past Monday was basically our GRI.

Okay.

There was just more focus put on increasing those lanes that require higher cost components. So as far as while it happened for the balance of the year, we have nothing planned.

Okay. And then just to follow up on that, Rodney, as far as the 2015 guide, could you maybe help us with what assumed in there from a core line hold yield perspective?

Jack, we anticipate from this past rate increase to net something around 3, 3.25%, and I expect into that.

Okay, that's great. Thanks so much.

Your next question comes from the line of Todd Fowler from KeyBanc Capital Markets. Please go ahead.

Great. Good morning and congratulations on this deal. It should be fantastic. I wanted to ask on the independent contractors for Towne -- what is your thought process on making sure that you are able to retain the independent contractor as you bring them over? Are there things that you have to do related to the rates to make sure that they stay in place I would think that would be kind of a key part in making the transaction work?

Yes, we actually have put together -- our team has put together a just a wonderful package that introduces the Towne owner-operators to our company our desire and need to have them and then most importantly shows them our pay package and contrasted against their existing pay package and in almost every case Todd it represents a pretty decent increase in their pay. So believe with that type of package we should be able to retain a high number up.

Oh, okay. That helps. And then just from a standpoint of an investment in Towne's business, do you anticipate that there is going to be investment CapEx that you are going to have to make in 2015 or in 2016 from a technology standpoint or to bring their network up to some of the things that you have in place within the legacy business?

We have actually already made substantial investments in that area. We will continue that but you won't see anything out of the park in terms of our expenditures on IT, mainly because we don't have a quick spending on IT.

Okay. And so, Bruce, for a number related to Towne, on a dollar amount basis, are we talking about a couple million dollars, or is it something more than that?

When we finish we will be able to tell you more accurately but I would say between $2 million and $4 million counting it…

Okay. Good, that helps. And then just the laugh one I had. What does it mean for, you have been acquisitive outside of the airport-to-airport business over the last couple of years. It seems like, given the magnitude and size of the transaction, there will be a lot of focus on making sure the integration does well. How do you think about kind of the other parts of the business that you have been investing in and what is the mean for future acquisitions?

I kind of touched on what I said before; we need to get this acquisition behind us but at the same time we got a great Group in Chicago at CST that will be minimally involved in this. So we want them to continue with their strategy and that's to be acquisitive hence I think you will see us pursuing that path in the current year.

Okay, so may be more tuck-ins on the existing platform and leaving it up to the acquired companies to kind of do the integration on those deals?

And for the most part our team is very our CST team is very skilled at that, they know what they are doing, they don't take gambles. So we may pick when we find the company we want to buy, we will make sure all those stuck in a row and we may do the acquisition and integration, implementation they are very, very efficient at it. So we are very comfortable with them continuing on the path of acquisitions.

Okay. Bruce, that's helpful. Congratulations again, and thanks for the time.

Thank you.

Thank you for joining us today for Forward Air Corporation's announcement of the acquisition of CLP Towne Incorporated and preannouncement of Q4 and 2014 results conference call. And please remember the webcast will be available on the IR section of Forward Air's Web site at www.forwardair.com shortly after this call. That does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.