Thank you joining Forward Air Corporation’s First Quarter 2017 Earnings Release Conference Call. Before we begin, I would like to point out that both the press release and the webcast presentation for this call are accessible on the Investor Relations section of Forward Air’s website at www.forwardaircorp.com. With us this morning are Chairman, President and CEO, Bruce Campbell and Senior Vice President and CFO, Mike Morris and Logistics Services President, Matt Jewell. By now, you should have received the press release announcing first quarter 2017 results, which were furnished to the SEC on Form 8-K and on the wire yesterday after market close. Please be aware that during this conference call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding the company’s outlook for the second quarter and fiscal year of 2017. These statements are based on current information and our current expectations. As such, they are subject to risks and other factors that may cause actual operations and results to differ materially from the results discussed in the forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the Securities and Exchange Commission and the press release and webcast presentation relating to this earnings call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Today’s presentation will include non-non-GAAP financial measures, including adjusted income from the operations, adjusted income before taxes, adjusted income taxes, adjusted net income and adjusted diluted earnings per share. These non-GAAP financial measures exclude those items that we believe affect comparability. A reconciliation of these non-GAAP financial measures to their respective GAAP measures is set forth in our first quarter 2017 earnings press release. And now I will turn the call over to Mike Morris, Senior Vice President and CFO of Forward Air.

Thank you, Julia and good morning to everyone on the call. Before we move to Q&A, we would like to make a few remarks about our recently announced acquisition of Atlantic. As Julia mentioned, we are joined on the call today by Matt Jewell who oversees our intermodal and truckload businesses. Matt, let me turn it over to you to provide an overview of the transaction.

Thanks Mike. On April 10, we announced that are wholly-owned subsidiary, CST, had entered into a definitive agreement to acquire substantially all of assets of Atlantic Trucking Co. This transaction has been a few years in the making. Since acquiring CST in 2014, we've been actively looking for an intermodal company with the right mix of customers, locations, driver fleet, and management expertise to serve as our southeast beachhead and we found that in Atlantic. Atlantic is headquartered in Charleston, South Carolina, with eight other locations; Savannah, Atlanta, Charlotte, Norfolk, Nashville, Jacksonville, Memphis and Houston. It has 416 drivers, 83 company and 333 independent contractors, has a legacy leadership team that is all agreed to stay on, and has a great blend of liner freight forwarder and BCO customers. To acquire Atlantic, Forward Air will pay $22.5 million with a potential for $1 million earn out. Assuming the earn out is achieved; the $23.5 million purchase price represents 4.6 times Atlantic 2016 EBITDA. We expect the transaction to close on or before May 15. And we are very excited to welcome Atlantic to the Forward Air family and I want to personally thank the entire CST team and Atlantic owners Kevin Gregg [ph] and Julie O'Donnel for all of their hard work in helping us put this transaction together.

Thanks Matt. Matt will remain on the call this morning to address any questions about Atlantic or our intermodal and truckload businesses in general. Before we move to Q&A, I will mention that we expect Atlantic to be $0.02 to $0.03 accretive and provide roughly $2.5 million of EBITDA in 2017. So with that Julia let's open the line for Q&A.

[Operator Instructions] And our first question will come from the line of Todd Fowler of KeyBanc Capital Markets. Please go ahead.

Great thanks. Good morning and I know we want to highlight the Atlantic deal, but Bruce, I want to say congratulations on the pool distribution results, I think we've been waiting for a first quarter like this for some time.

Be emphasis is we.

Maybe to that point just starting there, can you talk a little bit about what you saw during pool, I think that the results were a little bit surprising given some of the commentary in the retail market. And so maybe just to start there with what you saw here in the quarter and expectations for the full year at this point for that segment?

I quick answer is, pool, even though they're suffering from a tough market today, the good side of that is their competitors are going out of business left and right. So we've been able to do a number of things that we haven't been able to do in the past. So we've been able to get through reasonable rate increases. We've been able to establish a really stable management team that is really doing a topnotch job led by Roger Gellis. So a lot of really positive things. And the bottom line that's interesting to me because what everybody reads, that business is not doing that bad in terms of year-over-year business. So kind of interesting year, [indiscernible] everything is awful but in reality is, it’s okay.

Okay, no it sounds good and it does make sense about what's happening in the marketplace. I guess shifting over to the airport-to-airport business, can you talk a little bit about what you saw on the tonnage side here during the quarter, we've heard a lot of commentary about some softness in February. It looks like your results were relatively consistent and I'm just curious what your experience was and then if you got some color, Mike, maybe about what you got factored into the second quarter on the tonnage side?

Yeah, so Todd, I’ll start on the response to the 1Q tonnage and let Bruce join in. We were really tracking our forecast through the first two and a half months in the quarter. We were surprisingly spot on, and then as we got into the back end of March, things accelerated and the LTL team did a great job taking advantage. Driving the opportunity and then taking advantage of it from an operations perspective to bring the profit in to the bottom line. So it is really a second half of March acceleration. Looking to the second quarter, we returned to normal April trends. So the acceleration in the second half of March is decelerated. And what we've got baked in for the full quarter is essentially flattish, flat tonnage on a year-over-year basis for the second quarter. Just right now given the trends and the overall sluggishness in the environment, we don't see a catalyst at this stage for Q2 to have a pickup in tonnage year on year.

Do you have any thoughts around why the second half of March was strong? I mean was that just a normal quarter and pick-up was or was there anything specific that you think happened in March to give you that strength?

I'm not sure there's a specific Todd, but it seemed like almost an old March, old meaning like five, six, seven years ago. So it is great, it was wonder to see. We're hopeful that it continues. We however stay on the sideline in terms of, jeez, it’s going to be a boomer the rest of the year.

Okay understood. And then just Bruce, thoughts around yields here, I mean they continue to be pretty steady. Do you have any expectations for GRIs this year and then it actually looks like the contribution from completes moved up a little bit here in the first quarter. So not sure if there's something unusual that helps with that contribution, more if that's maybe a little bit of color what's going on with the yields and what drove the step up and Complete here this quarter.

Yield is jumping all over the place or being driven all the place as opposed in the past, where the criteria for yield was fairly stable. Today, it’s not. So having said that, we’re seeing a length of haulage shortening, we’re seeing shipment size, it's getting just a little bit smaller. And then you have the Complete being thrown on top of it. So a lot of mixture going on there that we haven't had in the past. All of that having been said, we're very happy with where yield is. We will, as we always do on an annual basis, come summer time, we'll be looking at, do we need to do GRI or not. We have a lot of work to do before we get there and we'll comment on that next quarter probably.

Okay. And then just a couple of last quick ones. So the second quarter guidance doesn't have anything in there for Atlantic and I'm not sure if that's a EPS comment and it’s going to be breakeven and there is something in the revenue side. And I think that there were some color -- there were some color that Atlantic was going to be $0.02 to $0.03 accretive. I'm assuming that's a second half of 2017, but maybe if you could just clarify what's in the second quarter and how you're thinking about the timing of Atlantic from a contribution standpoint?

Sure. I’ll take that, Todd. We didn't put Atlantic in, because the transaction has yet to close. If we had put it in, it wouldn't have had a noticeable effect in all likelihood, assuming a May 15 close, but we’re in a short stuff period. If it slips a week or whatever, you don't have a lot of opportunity for incremental contribution. So we decided to just leave it out for those reasons. If you do assume a mid-May close, then we would see it adding as I mentioned, $0.02 to $0.03 for the balance, so May 15 to December 31 for the balance of 2017 and again assuming a mid-May close, about 2.5 million of EBITDA for the balance of ‘17.

Okay. And then just my last one, maybe for Matt. So I know that this has been the objective in acquiring CST and having as a platform. Can you just help us think about now how the Intermodal segment is positioned with the Atlantic acquisition, maybe from a high level, I mean the capabilities that that provides you and how we think about either the organic growth opportunity or are there other acquisition opportunities still within Intermodal and maybe some of the benefits that Atlantic brings to the existing platform, either from a synergy standpoint or how those new businesses work together? Thanks.

Yeah. Sure. So we had very little exposure to the southeast ports, which have been the fastest growing in the last few years. So we really needed, as I describe it, a beachhead in the southeast to really generate access to those ports and those revenues and frankly we were a Midwest based company with small presences in Savannah and Charleston and Houston. But this gives us access to all the Norfolk Port, which is growing very fast, Savannah, which is growing extremely fast, they just announced an alliance between those two ports. Virginia and Georgia announced an alliance there to deal with the super-sized ships that are coming in. Houston is growing. This gives us a bigger presence in Houston. And frankly, a lot of our Midwest customers have always asked, do we have a presence here, can we handle their business in these other induction points and we couldn’t. So not only is this going to position us for some really good organic growth in new markets, but it's also going to allow us to have a platform in which the bolt-on and other acquisitions in these new markets. So it's both an organic and an inorganic play and it just takes us up to 19 locations now, which is when we -- essentially Atlantic is the same size as what CST was when we acquired it. So we've really done in terms of expanding the footprint, expanding our opportunities, both organically and inorganically, this is a huge play for us.

Thank you. And our next question comes from the line of Mr. David Ross of Stifel.

International air freight was pretty strong in the first quarter. I know that most of your business is domestic, but you do have some international airline customers, international freight orders. Do you see any of that international air freight strength in terms of the domestic portion and international journey flow through?

The answer is yes. I think we have to keep in mind the perspective and the perspective is Q1 was up over Q1 of a year ago, which was terrible. So it's nice to see. We're happy the business came on. We obviously got to participate in it. We’re certainly not selling our company based on that.

And then just a follow-up on a couple of previous question. Complete picking up as a percentage of total, is that due to any specific initiatives, is that still on its way up to 25%, 30%, because you kind of bid in this 20s range for a lot and if there is anything one-time in the quarter or traction being there to get?

That’s traction. We have a number of initiatives going on today in our air expedite group. The big one is our 3PL push. So we have entered that market, actually entered it a year ago. Had to do a lot of what I call back office work to get ready for it to handle it properly. They have done a terrific job in, especially as we have started 2017, they’ve really done a great job of penetrating that market. We look for lot more to come. And all of that business, for the most part is related to Complete. So not only does it help our line haul product, but it also helps our Complete product.

And then kind of following up on the Complete, when I look at the yields and Complete being a much bigger contributor to [indiscernible] and the line haul yield coming down a little bit, is there -- is the line haul yield coming down related to the increase in Complete, for example, if a customer gets it all, do they get an effective discount on line haul.

It depends on the situation. In most cases, you're right. But it's not -- to us, it's not meaningful because we look at that as incremental. We look at the line haul as it provides us purely incremental to our model.

Okay. Because you're looking at the total expedited yield anyway, not necessarily the components?

Yeah. We're actually looking at all of it.

And then TLX, you mentioned in your comments that there was higher broker utilization as you created your own operators, have you been able to recruit the additional operators to bring that back online, are you seeing any pay pressure in trying to get those guys on board?

Yeah. No pay pressure at the moment. We have been able to recruit. The TLX side of the world is a tough one to keep drivers happy as opposed to the air expedite where they're running on a dedicated run. So we have a little bit more turnover there, but we have ramped up our efforts to make sure we have the right ratio. There's a good ratio there when you do have the opportunity to outsource, but you also want to make sure you can move, let's say, the majority of the freight on our trucks.

And then just to summarize the totality of your comments earlier, the economy is okay, probably growing a little bit. You don't expect it to accelerate too much, but you don't see it getting any weaker. Is that fair?

I think that's very fair.