Forward Air Q3 2007 Earnings Call Transcript

Forward Air Corporation (FWRD)

Q3 2007 Earnings Call

October 22, 2007 6:00 pm ET

Executives

Bruce Campbell - Chairman, President and CEO

Rodney Bell - CFO

Analysts

Brannon Cook - JP Morgan

Matt McGeary - Sentinel Asset Management

David Campbell - Thompson

Ben Hartford - Baird

Todd Fowler - Keybanc Capital Markets

Ken Hoexter - Merrill Lynch

Tom Whitecap - Value Holdings

Presentation

Operator

Thank you for joining Forward Air Corporation's Third Quarter Earnings Release 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 website at www.forwardair.com.

With us this morning are our Chairman, President, and Chief Executive Officer, Bruce Campbell, and our Chief Financial Officer, Rodney Bell.

By now, you should have received the press release announcing third quarter 2007 results, which we furnished to the SEC on Form 8-K and on the wire today after market closed.

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 the 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 are hereby cautioned that these statements may be affected by the important factors, among others set forth in our filings with the Securities & 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 Chief Executive Officer. Please proceed sir.

Bruce Campbell

Thank you. Allow me to begin by apologizing for the delay. Good evening and thanks to each of for joining our call. As we previously announced the Forward Air team faced a very sluggish economy during the quarter, which impacted the both our airport-to-airport volumes and to a lesser extent pricing yields. As we have experienced in prior down cycles, our competitors tend to become desperate in their attempts to gain share resulting in downward pricing pressures.

We have learnt through the years that what serves us best in long-term, is to respond only to specific situations rather than irrational across the board permanent pricing reductions. We continue to feel this is the proper direction for our long-term success. Rather than focus on giving away yield, we have continued our quest to provide our customers the best service possible not only in on-time transit performance, but also in the various shipment integrity measures and in providing the industry-leading technologies. We will continue this focus as once again we feel it has and we will continue to serve our customers and us best.

We continue to make progress in our completing the model initiatives, with once again our logistics script leading the way with a very solid performance. We also saw progress in each of our three initiatives areas and look forward to their continued progress.

I would like to touch for a moment on our late July acquisition USA Carriers and our subsequent initiative into the pool distribution business.

We are quite pleased with the integration process to-date of this product line into the Forward Air family, happy that they contributed a small profit and we now feel we have a good operating platform from which we can develop a more national presence. And now allow me to introduce Rodney Bell, our CFO to review our financial results.

Rodney Bell

Thank you, Bruce, and thank you all for joining us this evening. After my comments we will open the lines for your questions.

But, prior to my comments on the pool let me remind you that with the acquisition of USA Carriers we preferred to hear and soon to formally re-branded as Forward Air Solutions. This is our first quarter reporting two operating segments. The impact of approximately two months of Solutions is included in our third quarter results. We will provide details on it to evaluate the overall results, as well as the segment results on this call and in greater detail later in our Q2 filing.

Financial results for the third quarter are as follows. Operating revenue increased $7.3 million or 8.1% to $97.7 million from $90.4 million in '06.

Income from operations was $16.9 million which was a $2.9 million decrease compared to $19.8 million a year ago. As a percent of operating revenue, income from operations was 17.3% compared to 21.9% in the third quarter 2006. This 460 basis point decline is attributable in general to the challenging business environment that Bruce discussed earlier, which resulted in more proportionate growth from higher cost revenue sources.

Net income for the period was $10.8 million which is $1.9 million less than $12.7 million posted in 2006. Income per diluted share was $0.36 compared to $0.41 in the third quarter of 2006.

Operating results for the nine months ended 09/30/07 are as follows: Operating revenue increased $18.6 million or 7.2% to $278.2 million from $259.6 million.

Income from operations was $51.1 million, compared to $56.5 million a $5.4 million decline. As a percentage of operating revenue, income from operations was 18.3% compared to 21.8% last year, this decline of 350 basis points is attributable to the same reason sited for the quarter.

Net income for the period was $32.5 million versus $36.8 million last year, a $4.3 million decline. Income per diluted share was $1.08 compared to $1.16 per share for the first nine months of 2006.

The breakdown of third quarter operating revenues is as follows: Within our Forward Air operating segment traditional linehaul revenue decreased 1.9% from $77.2 million to $75.7 million. Logistics revenue, which is primarily our truckload brokerage business increased 43.9% from $8.2 million to $11.8 million. Other revenue in this segment increased 4% from $5 million to $5.2 million.

Our Forward Air Solutions segment contributed $5.1 million a poor distribution operating revenue to the quarter.

Operating expenses associated with the quarter compared to the same period last year are as follows: Overall purchased transportation as a percentage of operating revenue increased 30 basis points from 42.6% to 44.2%. This is due to shift in the business mix from system revenue in favor of the logistics revenue which is more heavily burdened by purchased transportation offset by lower PT in the Forward Air Solutions segment.

The Forward Air Solutions remove our total purchased transportation would have been 43.8% due primarily to the shift in mix.

Purchased transportation for the airport-to-airport network was 39.4% of revenue compared to 39.9% in 2006, evidenced that we continued to control our system cost.

PT for logistics was 78.8% of logistics revenue versus 72% last year. The percentage increase in logistics continues to be due to reliance on relatively more costly outside capacity to settle the increased growth in our truckload brokerage business, as well as, the impact of lower yielding loss to provide balance for owner operators in our airport-to-airport network.

Salaries, wages, and benefits as a percentage of operating revenue increased 220 basis points to 22.5% from 20.4% in 2006. Approximately 120 basis points are the result of Forward Air Solutions, which is a more employee/labor reliant, than our other operating segment. The balance of the increase is due to increased workers comp, and group insurance costs along with increased share-based compensation offset by reduced incentive pay.

Operating leases as a percentage of revenue increased 40 basis points to 4.6% from 4.2%, due to higher lease payments on facility upgrades. Approximately one-third of the increase was attributable to Forward Air Solutions.

Depreciation and amortization as a percentage of revenue increased to 70 basis points to 3% from 2.3%, primarily due to pricing and service our Columbus Terminal Expansion in our two new facilities in Chicago and Atlanta. The small amount of increase resulted from Forward Air Solutions. Insurance and claims were approximately flat at 1.7% for both periods.

Finally, other operating expenses increased to 120 basis points to 8.8% from 7.6%, cost associated with new facilities as well as training of key personnel were the cause of the 80 basis points increase and the balance was due to Forward Air Solutions.

Operating income as a percentage of revenue for our Forward Air Segment declined 460 basis points to 17.3% from 21.9%. Forward Air Solutions had operating income as a percentage of revenue of 9.8%. As result of a favorable tax credit resulting from propane usage offset by the impact of FIN 48, our tax rate for the quarter decreased to 37.3% from 38.1%, when we anticipate our ongoing tax rate to be approximately 38%.

Another relevant operating statistics are as follows: Total asset as of September 30 were $216 million compared to $230 million at the end of '06. Cash flows from operations were $18.6 million for the quarter and $43.8 million year-to-date. Our cash and short-term investment position decreased $2 million to $18.9 from $20.9 million during the quarter.

Due to material non-public knowledge, we did not repurchase any common shares of stock in the third quarter. The 634,000 shares available at the end of second quarter along with the 2 million shares from the 2007 repurchase plan approved by our board in the third quarter gave us just over 2.6 million shares available at the beginning of Q4.

Through today, we have purchased nearly one half of a million shares and average price of $28.22 per share. Average line haul balance for the third quarter decreased 1.8% to $32.2 million as per weight, from $32.8 million for weight in 2006. Average shipment size is flat at approximately 725 pounds per shipment, and our total shipments were down slightly for the quarter.

Finally, guidance for the third quarter is as follows. We are forecasting operating revenue between 10% and 15% and EPS in the range of $0.35 to $0.39 per share. Growth attributable to our Forward Air operating segment should be between 2% and 5% contributing $0.34 to $0.38 per share on our EPS. Forward Air Solutions will look out for between 8% and 10% of our consolidating growth and approximately $0.01 per share to our EPS. Thank you for joining us. And then operator will now start taking your questions.

Question-and-Answer Session

Operator

Thank you very much sir. (Operator Instructions) And our first question comes from the line of Brannon Cook of J.P. Morgan. Please proceed.

Brannon Cook - JP Morgan

Hi, good afternoon. A question on the volume trends in the quarter. Volumes just were positive in the second quarter. Could you talk a little bit about how things progress in the third quarter, and how things have looked during October?

Bruce Campbell

July was not good. We saw a little bit of build up in August, and what I would call an improvement, Brannon. And then September kind of maintained that. Having said that, it was nothing to jump up and down about, and it couldn't recover July for us. Month today, we're little a bit hesitant to say a lot as you might imagine, the Kitty Hawk bankruptcy has had some impact. We don't know how permanent that is. We don't know what's going to happen there. But we did see a little bit of an uptick and how permanent that uptick is or if it was just simply a matter of volumes are picking, we don't have that answer as we sit here tonight.

Brannon Cook - JP Morgan

But looking towards your fourth quarter revenue guidance at 10% to 15%, you get a little bit of more revenue from U.S.A., but it looks like the volume outlook is a little more optimistic?

Bruce Campbell

You hear me hesitating. It's been so long since we've had an optimistic revenue forecast or volume forecast. I am hesitant to say it, I guess we would say, we're cautiously optimistic that the fourth quarter will see some nice volume trends, but again, we've had our ups and downs before.

Brannon Cook - JP Morgan

Okay. On the pricing front, the things mimicked the volume trends a bit, where you saw some incremental weakening in the pricing environment, you talked about the competitors going in and pricing irrationally in some ways and trying to hold off on that. Was that kind of -- do you see a similar trend progressing through the quarter and any incremental optimism on the fourth quarter?

Bruce Campbell

Hopefully we are going to able to maintain the yield a little bit better than we did in the third quarter and certainly nothing our people did wrong. I mean we really witness some foolish acts by different competitors really on the crazy side. So, I guess when you guess when you're desperate, that's what you do. Hopefully some of that will calm down here in the fourth quarter. Obviously, the fourth quarter tends to be the busiest of our four quarters, and perhaps people want as quite as many desperate things to try to be in the business.

Brannon Cook - JP Morgan

Okay. And a final question just on network size, do you feel like you are kind of where you need to be right now, comfortable with the balance in the different lanes?

Bruce Campbell

With the footprint? Yes, we are very comfortable.

Brannon Cook - JP Morgan

Okay. Thank you.

Bruce Campbell

Thank you.

Operator

Thank you very much sir. Ladies and gentlemen, your next question comes from the line of Matt McGeary of Sentinel Asset Management. Please proceed.

Matt McGeary - Sentinel Asset Management

Good evening.

Bruce Campbell

Good evening.

Matt McGeary - Sentinel Asset Management

Could you just remind me about the capital-spending program for this year, and any insights you might have what they might look like for next year given just a ballpark kind of view?

Bruce Campbell

Sure, Matt, it has changed a little bit due to the delay in getting started with our Dallas facility. Right now we are doing -- we've started in our institutes some ground prep there. We don't think that will exceed a couple of million dollars for the balance of the year beyond that, about $1 million in normal spending for the balance of the year. Next year, the lion share of the Dallas facility call it $13 million, $14 million will be incurred to complete that facility and in addition to that our normal spending of about $8 million to $10 million.

Matt McGeary - Sentinel Asset Management

Okay. Could you just, you had mentioned something regarding the margins in your logistics business affected by -- maybe I guess can you just talk about of sort of what affected those margins. Is it possible to talk about that business in some kind of more normalized level? I mean are we there, are they going lower, can they get higher, sort of your thoughts there?

Bruce Campbell

We think we have settled in on a pretty good rate. We had an advantage before we decided to expand this business line, this product line of using primarily Forward Air owner/operators to backhaul and put our parent position where we wanted it and at the same time haul a truckload or a brokered load. So that's a lot of words to say this. When we were small, we could put cheaper transportation on it and as a result those margins looked really good, and they were really good.

But to run it as a ongoing brokerage business that we can settle in on for the balance of our time, we are going to see this type of normalized ratio about the 78. And if you'll recall, we've talked about that repeatedly on the last two or three calls, that we would see that number go up, but now we think we have it where we can maintain it. And it gives us a nice return on what we invest and certainly we have hardly anything invested to handle this business. So, we think it's a good complementary business.

Matt McGeary - Sentinel Asset Management

Okay, good. Thanks. And just lastly, you talked about the credit facility in the release. What's M&A looking like for you guys? There are opportunities, I’ve got to imagine. Obviously, there is a fair amount of play in your industry rate?

Bruce Campbell

In general, let me speak in general terms. In general it's better than it's ever been.

Matt McGeary - Sentinel Asset Management

Okay, great. Thanks guys. I appreciate it.

Bruce Campbell

Thank you

Operator

Thank you very, sir. Ladies and gentlemen your next question comes from the line of David Campbell of Thompson. Please proceed, sir

David Campbell - Thompson

Yeah. Hi, Bruce. The logistics purchased transportation costs are 78% and that is higher than it used to be, but you are also reducing your airport-to-airport costs as a percentage of line haul revenues owing that?

Bruce Campbell

That's very accurate.

David Campbell - Thompson

So, really have to look at both of them combined to see the benefits of the whole programs?

Bruce Campbell

You are exactly right, David, and if you will notice that we've been able to really rein our system. As Rodney touched on earlier, our system PT has operated as well as we have ever operated it. So, your point is absolutely right. We are pleased with where we are. And I think the question before on the 78 was, is it going to settle in there? And we think it will. That's going to stay right in that area and at the same time help our network.

David Campbell - Thompson

Right. The other revenues of $5.2 million in the quarter, it looks like it's down from last year. Is that an economic problem or does that show some of the effect of the economy or is that just a loss of some business?

Rodney Bell

There is slowdown of some business, but we think mostly that picks back up in the fourth quarter with some business to replace some that was lost.

David Campbell - Thompson

Right. And now called Forward Solutions revenues, you hardly had roughly two months of that in the third quarter can we add a third to that to get the fourth quarter run rate or is it more seasonal than that?

Rodney Bell

I am sorry. David it's actually more seasonal in the fourth quarter. Thanks for getting that out. And we think it's going to be more than the third. It's our first fourth quarter and we are not sure how big the season is going to look like with those guys. So, I believe it to be third.

David Campbell - Thompson

Right. Okay. Thank you very much.

Bruce Campbell

Thank you.

Operator

Thank you very much, sir. Ladies and gentlemen, your next question comes from the line of Jon Langenfeld of Baird. Please proceed.

Ben Hartford - Baird

Hey, this is Ben Hartford standing in for Jon. Good afternoon, good evening guys.

Bruce Campbell

Hi Ben.

Ben Hartford - Baird

Question, if I could touch on the pricing environment. Looking forward, you've got some rationalization in the marketplace. I guess you can argue, but the issues of lower volumes and excess capacity are still there. So, when you kind of look in to the fourth quarter and in the earlier way, what are your expectations kind of taking in the current environment in to account?

Bruce Campbell

Our expectations are that people start acting rational and that we don't have another competitor to go bankrupt. That's what a normal person would think. However, the odds are they won't do that. So, we will continue on with our target price reductions and we do that through a process called spot pricing where if the shipment generally qualifies for a lower price, we certainly are willing to give it and send off the competition.

On the other hand, where a competitor makes a move such as changing the DIM factor from 250 to 500, which is one of the more ridiculous things I have ever heard in my life. We certainly have no intention of matching that. Now, our expectation again goes back, it is hard to predict irrational people. So, we are hoping that we can hold our own. We are hoping that we exercise good prudent management. We are hoping that they've heard of good prudent management and might be able to do the same thing, that's highly unlikely. So, in any event, we are going to hold the line. We will give pricing reductions where it makes sense and where it does not, we will go on.

Ben Hartford - Baird

Okay. Has it worsened in the fourth quarter? Has it stabilized or can you talk about a little bit?

Bruce Campbell

Last week it was better. So, we are hoping that will carry on through, but it is like predicting volumes then, it gets very difficult. In this stage it is just really hard.

Ben Hartford - Baird

Understand, okay, well thanks. On the buyback run, I missed the specific count in the quarter in Q4. Could you repeat that for me?

Rodney Bell

Sure, can Ben. Actually through today in the fourth quarter, we've repurchased almost 0.5 million shares.

Ben Hartford - Baird

Okay, good. And how do you balance your outlook on share repurchases with acquisition opportunities, obviously the credit facility facilitates that but how do you guys view both of those two buckets?

Rodney Bell

Okay, Ben. Health of the environment as Bruce mentioned, is very good right know from the standpoint of M&A. We are going to keep plenty of power drop but we would process in the 27 from 28. We are going to jump all over that too. So, I would view it as it happened half right now, but based on what we have in the pipeline along with the current share price.

Ben Hartford - Baird

Okay, and then real quick on the expense side. Looking at the two items the personal cost and other, obviously the impact from the acquisition, others good run-rates, are there any specific one times, I know you had mentioned that in the other line you’ve got some training of new personnel, but should we look at that as a good base going forward for those two line items?

Bruce Campbell

Hopefully, we’re going to be able to improve upon that. With this solutions being brought on, we’re going to have higher labor costs, because it is more employee intense on the dark side, and it also in the driver side for that matter. And it also tends to be the revenues generated only by the delivery and handling, you don’t have a line haul portion in there. So, as a percentage of revenue, it’s going to drive up. So, we’re going to see a little higher there. We’re hoping better said that we can reign in some of these health care costs. We have good weeks and bad weeks in healthcare and that’s kind of driven it a little bit more than we originally anticipated. That’s not too unusual, where we see the spikes that go on. Hopefully, we’re going to be able to draw that down a bit. So, that’s a lot of words to say, the run rate is probably a little bit high, it’s our pawned wish that it’s around 100 basis points too high. We need to let solutions settle in before we really give you absolute answer.

Ben Hartford - Baird

Sure. And then in the forth quarter you had mentioned re-branding is that going to hit in the fourth quarter and is that a material at all?

Bruce Campbell

Yeah actually, it will hit January 1st, where that operating group is. Today, we retained the name of USA Carriers, simply to facilitate the integration of the business, and we are pleased with that and we’ve been able to get the Forward Air part of the story out there now and so we will begin that process of changing the name from USA Carriers to Forward Air Solutions and that’s also important for our expansion.

Ben Hartford - Baird

Okay, great one. Thanks for the time, gentlemen.

Bruce Campbell

Thank you very much.

Operator

Thank you very much sir. (Operator Instructions). Our next question comes from the line of Todd Fowler of Keybanc Capital Markets. Please proceed.

Todd Fowler - Keybanc Capital Markets

Good afternoon guys.

Bruce Campbell

Hi, Todd.

Todd Fowler - Keybanc Capital Markets

Bruce with USA Carriers, I think when you guys announced the acquisition last quarter, you said that in 2006, the business basically was about $32 million annual run rate from revenue standpoint. Based on what you've seen here in the first couple of months, that business is growing organically, is it feeling some of the pressures of the overall freight slowdown and what your expectation would be for that business, kind of on a standalone basis going forward?

Bruce Campbell

They are right on target. The majority of that business that we acquired, I should say, all the business that we acquired is retail business and believe it or not, that has not, it doesn't appear to have slowed down at all.

Todd Fowler - Keybanc Capital Markets

All right. I don't believe that after some of the things I've heard so…

Bruce Campbell

It has kind of surprised us too. But so far we're very pleased with it. We haven't seen any dips, we haven't seen any less shipments coming out, so we are happy with it.

Todd Fowler - Keybanc Capital Markets

I guess is that business a little bit more insulated then some of the macro-trends you might be hearing from some of the retailers due to the nature of what the business does or is it something else that, due to the size of the business or something else I might not be thinking of?

Bruce Campbell

I honestly can't answer that, I think, perhaps, you are right in some of your assumptions but I don't think we know that answer.

Todd Fowler - Keybanc Capital Markets

Okay. And then I guess you said that it's trending on track with your expectations, does that mean that it is growing on an organic basis from where it was historically?

Bruce Campbell

Yes. And understand the way they look at their business. They divide it in first inside the quarter and they say in their fourth quarter they actually have two-fifths, so that's how peak that business is. I mean it's almost like going back to those freight days, and obviously driven by the Christmas and post Thanksgiving push.

Todd Fowler - Keybanc Capital Markets

Okay. So, we should see some decent seasonality in the fourth quarter?

Bruce Campbell

Yes.

Todd Fowler - Keybanc Capital Markets

Okay, fair enough. And just real quickly, Rodney, I think you covered a lot of this with Ben, but I wanted to go back on the operating expenses, the other operating expenses. I think you mentioned that some of the increase here during the quarter that $8.6 million here in the third quarter for other operating expenses which related to facilities openings?

Rodney Bell

In comparison, yes

Todd Fowler - Keybanc Capital Markets

In comparison. Okay. Did that not pre-occurring is that one-time type costs that were more encouraging in the third quarter or is that because we have new facilities that are open, that we have got a higher run rate of expenses?

Rodney Bell

Todd, it's not only moving into. It’s the moving out cost as much as it is the moving in cost, if you know what I am saying, but they won't occur on the large level as they have in this past quarter, simply because we’re moving into larger facilities and it's more costly. But we’re constantly are turning in and out of facilities, so there’s always a certain amount there, but it's not to a level that it was this past quarter.

Todd Fowler - Keybanc Capital Markets

Okay, that’s helpful actually. Thanks a lot guys.

Bruce Campbell

Thank you.

Operator

Thank you very much sir. Ladies and gentlemen, your next question n comes from the line of Ken Hoexter. Please proceed

Ken Hoexter - Merrill Lynch

Great, good evening. Bruce, can you talk a little bit about on the volume side. Are you seeing any pickup on the export, and does that help you at all to offset any of the decreased import volumes that we’re seeing on the air cargo side?

Bruce Campbell

Yeah, that’s a great question. We actually see on that on the airlines side, probably most vividly. There was a time two years ago, when the carriers we do business with the air carriers, they were dying for anything to export, and their imports were just going great guns, and today that has almost slipped.

Ken Hoexter - Merrill Lynch

Does that help you kind of balance out the traffic that you had to stick in the rate increase from the West Coast? Was it about a year or two ago and do you start to see any meaningful shift or is this just kind of a minor pickup?

Bruce Campbell

I think this right now is minor. I am not sure as we watch the dollar, if they're still going to continue and maybe become a bigger issue. I think the bigger issue that affected the West Coast has been the -- especially containers moving away from Long Beach another ports, and going to Houston, and for instance our Huston business is exploding. So, I think people always find a way or a better way to move their product and they learned from a few years ago, coming through the West Coast was difficult in the past.

Ken Hoexter - Merrill Lynch

And then, you mentioned that others are being aggressive and you highlighted a couple of pricing things. Is that just from Kitty Hawk bankruptcy or are you highlighting that it's getting widespread across many different carriers?

Bruce Campbell

Competitors that we look at are Kitty Hawk in town. I think Kitty Hawk because of the struggles they were going through as a result we really didn't get into a lot of really crazy things from them. So, having said that, you can assume where most of the idiotic actions occurred, hopefully they will begin a fee things, but it's unlikely.

Ken Hoexter - Merrill Lynch

It's unlikely because even though there in chapter 11, they are still kicking around or it's unlikely --?

Bruce Campbell

No, I lost you there. Kitty Hawk actually has been of little concern to us over the last month or so. So, primarily because I think they were obviously fighting for their lives. I don’t know what all they were going through. But we were facing bigger pricing discounts or whatever from other competitors, there is one main one out of town. And then we see things on a spot basis across the US with smaller carriers, who on a one-off basis will come in and do something silly. Will that expand? Again, it's difficult to predict irrational behavior.

Ken Hoexter - Merrill Lynch

So, it's sounds like where we are in the economy, it sounds like in a normal cycle, when you get this much excess capacity, Bruce, is this kind of beyond what you've seen in your past downturn is this in line with where you think you are? And based on your past experience, where have you seen it get to from this point?

Bruce Campbell

I think we are probably hopefully at the end of it, and maybe even since we are going into the fourth quarter and some of the other things that have occurred. Maybe we’ve seen a slowing down of it in the last few weeks. I am hoping that’s the case, I think we’re all hoping that’s the case. And experience would tell us that hopefully that’s where we are going to start an upturn and be through the down part of the cycle. But again, a little bit early to predict that.

Ken Hoexter - Merrill Lynch

Okay. Is anything giving you an indication that you said last few weeks, are you seeing pricing competitions slow a bit?

Bruce Campbell

We’ve seen it slow, but again, we’ve seen this in other periods of time where we think gee is going to finally abate or at least just simply slowdown a little bit. And then, two weeks later, it will get craze again. So, we really don’t have the time to give you an absolute on that.

Ken Hoexter - Merrill Lynch

I think you need to see the seasonal volumes up tick then?

Bruce Campbell

Yeah, we would love to see that.

Ken Hoexter - Merrill Lynch

And then, if I can just wrap up on the truckload kind of business that you’ve launched, the brokerage business. Can you kind of give a bit of an update on how that’s progressing?

Bruce Campbell

Yes. They were up 20% year-over-year. They continue to do a good job. We continue to have new opportunities there. I really think as we look into to the future if go at one, two, three years, I mean this is going to become a vital part of the Forward Air story and its really a nice piece of business, we have relatively no investment in it with exception of our people and it's really performed well and we are excited about it.

Ken Hoexter - Merrill Lynch

Alright. When you talked 28%, you are talking revenue?

Bruce Campbell

Correct. Yeah.

Ken Hoexter - Merrill Lynch

And is it profitable yet or is it a break-even?

Bruce Campbell

It's very profitable. It's just the problem that we have in bringing any new business on to the Forward Air model is nothing is going to be as profitable as our airport-to-airport business. So, we are bringing in the brokerage and PT cost to 78. I mean, you have some other costs, obviously personnel and some technology, so worst case scenario it's probably operating at 85, 86 at the worst.

In most countries they will be jumping up and down and say aren't we good. At Forward Air it doesn't come in first place, because even when we have a bad airport-to-airport quarter we are operating 81, 82. So, it's all the matter of perspective and how it fits within the model. But, again, if we are making $0.15 to $0.14 on $1 for relatively no investment, we are very happy with it.

Ken Hoexter - Merrill Lynch

If I can just throw out this out and what's the difference in a recession and actual recession what you are seeing right now?

Bruce Campbell

Oh my God you had to talk to [coddler] on that. We've seen a stabilization of the weight per shipment. It is not back to where it was a year ago, but it has stabilized within the last two, three, four weeks we've seen that. We hear a few more stories that are more positive as to negative. But, I will temper all of that by saying this; it's a time of year where we should be getting busier, so I don't know if people are just happy that in fact we are getting busier. But, when you compare it to like two years ago it's nothing compared to that. But it's not horrible.

Ken Hoexter - Merrill Lynch

Okay. Thanks for the time Bruce

Operator

Thank you very much, sir. (Operators Instructions). Our next question comes from the line of Tom Whitecap of Value Holdings. Please proceed.

Tom Whitecap - Value Holdings

Hi. Can you go over again to what your fourth quarter EPS and revenue forecasts were again?

Rodney Bell

Sure. It's a little bit confusing, so the overall company revenue will be between 10% and 15%. Now, of that 10% and 15% between 2% and 5% will come from the Forward Air Segment, which is the traditional Forward Air. Between 8% and 10% growth will come from our new operating segment Forward Air Solutions. From the EPS perspective, it will be between $0.35 and $0.39 per share and all except for $0.01 per share will come from Forward Air, that $0.01 will come from Forward Air Solutions.

Tom Whitecap - Value Holdings

Okay. And then also your CapEx projection, what was that one more time just for the fourth quarter now?

Rodney Bell

Q4 it will be somewhere between $2 million and $3 million.

Tom Whitecap - Value Holdings

$2 million to $3 million. Okay. And then in terms of the USA Carriers business can you talk a little bit about what if any effect the housing market is having on that? Is this more of a business that is geared towards existing pools and is therefore not affected?

Rodney Bell

Yeah. It's almost 100% retail business, the customers within this business segment for us. Our people like to limit that to Gap, DSW and absolutely nothing to do outside of the retail in to the world.

Tom Whitecap - Value Holdings

Okay. Strictly retail. All right, that's good to know. And then just to clarify there should be a seasonal up tick in revenues next quarter?

Bruce Campbell

The fourth quarter for this business segment is always the best quarter.

Tom Whitecap - Value Holdings

Okay, great. Excellent. Thank you.

Bruce Campbell

Thank you.

Operator

Thank you very much, sir. (Operator Instructions). At this time, sir, we have no further questions in queue.

Bruce Campbell

Thank you.

Operator

Thank you very much, ladies and gentleman for your participation in today's conference call. This concludes your presentation for today and you may now disconnect. Have a good day.

Copyright policy: All transcripts on this site are copyright Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.