Forward Air Corporation

Thank you for joining Forward Air Corporation's fourth quarter 2020 earnings release conference call. Before we begin, I'd like to point out that both the press release and 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 CEO Tom Schmidt and CFO Mike Morris. By now you should have received the press release announcing our fourth quarter 2020 results, which was furnished to the SEC on form 8K 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, about the effects of our business efforts on each of our businesses, the future plan of our pool business, steps to expand our operations organically and inorganically, the company's outlook for first quarter and fiscal year of 2021, including expectations for revenues, tonnage, net income per diluted share, free cash flows, and operating margins. the expected impact of growth and strategic initiatives, and those other forward-looking statements identified in the presentation. These statements are based on current information and our current expectations. As such, they are subject to risk 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. And now I'll turn the call over to Tom Schmidt, CEO of Forward Air.

Thank you, Grace, and good morning to all of you on the call with us. I want to go with first things first, and that's a heartfelt thank you to all of our teammates, drivers, customers, and other business partners. You all celebrated the holidays this year a little bit differently from normal. In actual fact, you brought all of our business back from an invasive cyber attack and made very certain that we still kept all of our customer commitments. So thank you for that and for customers and team forward going side by side, making for a clean entry ramp into 2021. Before I go into that 2021 entry ramp, just briefly back, last time we were on this call in October, I made six commitments and talked about how we're keeping those commitments around density, more essential freight. In fact, in December, 20% of our New closed business in LTL was medical supplies. Pricing actions, we took a number of temporary and permanent ones. Organic expansion, number five was no pause in accretive M&A. And number six was opposition execution with record service levels in a very tight holiday period. Let me take commitments this time and take that entry ramp into 2021 and share five observations with you that make me very, very confident for our journey towards our double-double, double-digit annual growth rate and double-digit margins. The first observation is a strong off-ramp. For you to have a strong on-ramp into 2021, you need a strong off-ramp out of 2020. If you look at our fourth quarter, the first 10 weeks of that fourth quarter were clean. They were an operational beat. And that's the type of clean operations performance we are taking into 2021. Secondly, we have early momentum. January is very strong. We showed in our core LTL business daily tonnage, 10.9% up year over year in January. LTL shipments up 14.4% over 2020. Three, we had a very, very strong general rate increase. I oftentimes say there's three things that are certain every year, Christmas, Easter, and a rate increase. Now, Christmas might have been a bit different this year, as I mentioned before, but we did have a rate increase across all of our lines of business. And in LTL, just 10 days ago on February 1st, it's always the first Monday in February, which makes it very predictable for our customers. It allows us to invest in our driver safety, customer service, to keep those customer commitments I talked about earlier. This year we had a 6% rate increase in LTL and the strongest capture rate that I've ever seen, which means minimum exceptions and exemptions. For an observation around continued organic momentum beyond those volumes I mentioned and beyond the GRI I just mentioned, we added six new terminals in LTL last year. We're going to continue investing in our LTL core footprint There's more than six that we will be adding on this year, making sure we provide more access points to our current and new customers. Also, our other business units are organically doing extremely well. Final Mile continues to be on a tear, and we have strong truckload and intermodal momentum. Also, when you look around, left and right, it looks like Chinese New Year's. This year is more like a working period versus a period off. And then you look outside the LA port, and you see 200,000 containers just waiting to even get onto the port. So the tight volumes or the strong volumes will be going on for quite a while. Number five, and the last observation I want to share in terms of a strong entry ramp into 2021, is inorganic precision execution. We signed, as you saw in the release, Another strong intermodal tuck-in, giving us more access to more geographies in the Midwest. Proficient is a great company. First-class service, that's what they're known for, which is the exact DNA that we want to have on our team, and they're going to be a great addition to our team. Inorganic also means sometimes a graduation. As we're sitting here right now, we actually did close the sale of our pool business. Pool does fit our narrative. It is very tight time windows. It's service handling that must be perfect. What did not fit with the pool business was the asset lightness that we have across our portfolio. Pool is heavier. I had always made the commitment to our team and to our customers that we're going to graduate pool only if and when we have an owner whose main show that will be and who will actually be fully investing into this business. We found just that owner, 10 Oaks, and we closed the sale last night, and I'm super confident that the team will continue doing what they've done so far, which is being the best in the retail distribution business, getting into other verticals, and they're going to do exactly what our customers expect and more. Finally, before I turn it back over to Grace, the operator, I wanted to say our entire forward team and I personally, we will be laser sharp, keeping the main thing the main thing, precision execution of a very clear Beyond 2019 roadmap, double-double for maximum shareholder value. And as I said, we're going to mix it up a little bit. We want to make sure there's maximum time for an exchange here. So we're going to go straight to Q&A. And with that, Grace, let's do that and open the lines.

Thank you. The floor is now open for questions and comments. If you wish to ask a question, please press 1 and then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, you may press 1 and then 0 at this time. And our first question is from Bruce Chan with Syphil. Please go ahead.