FWRD
#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're joined on the call today by Matt <UNK>, 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 our wholly owned subsidiary CST had entered into a definitive agreement to acquire substantially all of the assets of Atlantic Trucking Company.
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 our ---+ as our Southeast beachhead and we found that in Atlantic.
Atlantic is headquartered in Charleston, South Carolina, with 8 other locations, Savannah, Atlanta, Charlotte, Norfolk, Nashville, Jacksonville, Memphis and Houston.
It has 416 drivers, 83 company and 333 independent contractors.
It has a legacy leadership team that has 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 the potential for a $1 million earn out.
Assuming the earn out is achieved, the $23.5 million purchase price represents a 4.6x Atlantic's 2016 EBITD<UNK>
We expect the transaction to close on or before May 15, and we're very excited to welcome Atlantic to the Forward Air family and I want to personally thank the entire CST team and Atlantic's owners, Kevin Gregg and Julie O'Donnell, for all of their hard work and 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&<UNK>
The emphasis is we.
I ---+ the quick answer is, Pool, even though they are 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 for instance, 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 top-notch 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 the interesting year woe and everything is awful, but in reality it's okay.
Yes, sure, <UNK>.
I'll start on the response to the 1Q tonnage and let <UNK> chime in.
We were really tracking our forecast through the first 2.5 months in the quarter and 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 was really a second half of March acceleration.
Looking to the second quarter, we've 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.
Because 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.
I'm not sure there was a specific, <UNK>, but it seemed like almost an old March, old meaning like 5, 6, 7 years ago.
So it was great.
It was wonderful to see.
We're hopeful that it continues.
We, however, stay on the sidelines in terms of, gee, it's going to be a boomer the rest of the year.
Yield jumping all over the place or being driven all over the place.
As opposed in the past were the criteria for yield was fairly stable, today it's not.
So having said that, we're seeing a length of haul that's shortening.
We're seeing shipment size that'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 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 a GRI or not.
We have a lot of work to do before we get there and we'll comment on that next quarter probably.
Sure.
Sure, I'll take that, <UNK>.
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 stub 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 of about $2.5 million of EBITDA for the balance of '17.
Yes, sure.
So we have very little exposure to the Southeast ports which have been the fastest growing in the last few years.
So we're really needed, as I've described 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 2 ports, Virginia and Georgia announced an alliance there to deal with the supersized 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 to bolt on other acquisitions in these new markets.
So it's both an organic and an inorganic play and it just ---+ it 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 a, in terms of expanding on the footprint, expanding our opportunities both organically and inorganically, this is a huge play for us.
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.
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, and especially, as we have started 2017, they've really done a great job of penetrating that market.
We look for a lot more to come.
And all of that business for the most part, is related to Complete.
So not only does it help our Linehaul product, but it also helps our Complete product.
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 Linehaul that it provides us purely incremental to our model.
That we're actually looking at all of it.
Yes, 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 their 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 is 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.
I think that's very fair.
