Forward Air Corp (Delaware) (FWRD) 2014 Q1 法說會逐字稿

Good morning. Thank you for joining the Forward Air Corporation's first quarter 2014 earnings release conference call. Before we begin, I'd like to point out that both the press release and the call are accessible on the Investor Relations section of the Forward Air website, 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 a press release announcing the first quarter 2014 results, which were furnished to the SEC on the 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 are not statements of historical fact 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 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 information, future events, or otherwise.

And now I'll turn the call over to Rodney Bell, Senior Vice President and CFO. Please go ahead.

Thanks, Operator, and good morning. As you know, on February 2 we closed on our acquisition of Central States Trucking. CST will be reported within our Forward Air Inc. operating segment. For the approximately two months that we owned CST, they had revenues of $10.8 million, $8 million of which rolled up under logistics services on the intermodal/drayage line item. The difference of approximately $1.4 million is our legacy Houston intermodal business. The remaining $2.8 million of CST revenue rolls up within the other Forward Air services line item.

As anticipated, CST operating income was essentially offset by approximately $900,000 of deal-related costs, which took them for a break-even for the partial quarter. As a reminder, CST 2013 revenues were approximately $66 million, with EBITDA of approximately $12 million. Ongoing post-deal D&A, while not finalized, is expected to be $3.5 million annualized.

Staying with our Forward Air Inc's segment, airport-to-airport revenue, inclusive of Forward Air Complete, increased 7.9%. This resulted from an 8.8% increase in tonnage for the quarter and a 0.9% decrease in overall yield. Average weekly tonnage on the same number of business days was up 8.8% for the quarter and progressed as follows: January was up 9%; February, 9.4%; and March, 7.8%.

We should point out that this is organic tonnage growth and does not include the relatively small amount of CST airport-to-airport business, nor is that CST airport-to-airport within our airport-to-airport stats that are shown within our earnings release. With the exception of the volume reduction caused last week by Good Friday, April volumes have thus far been comparable with Q1.

The yield decline consisted of minus 0.1% from line haul pricing, a 0.1% decline for net fuel surcharge, along with a 0.7% decline for the impact of lower growth in Forward Air Complete. Complete revenue, which grew just 3.2%, was primarily due to a reduction in large distributions from the prior year comparison.

Revenue in our Solutions operating segment grew 22.8%, as a result of customer rate increase, as well as new business wins. TQI, which was acquired in March of 2013, has only one month in their prior year comp. Revenues across all service offerings felt the negative impact of harsh weather during the first quarter.

Moving on to expenses, purchase transportation total was up 20.6%, but down 20 basis points as a percentage of revenue. The 120 basis point increase in airport-to-airport PT was a direct result of weather-related cost incurred to keep our network in balance. This was primarily offset by CST, which has a lower PT component as a percentage of revenue and, to a lesser extent, TQI PT had the same effect.

Salaries, wages and benefits increased $7.5 million and 22%, with expenses as a percentage of revenue up 20 basis points. The increase in dollars was both the impact of weather-related inefficiencies, as well as two additional months of TQI compared to the prior year, along with two months' expense from CST, which was acquired on February 2.

Operating leases were up $1.2 million, but down 20 basis points due to additional facility leases and equipment rentals resulting both from CST and our Solutions group. Depreciation and amortization was up $1.8 million and 40 basis points, resulting from our two most recent acquisitions and higher CapEx spending in this past year. Interest and claims expense increased $1.4 million and 50 basis points, due to higher claims activity, higher than normal cargo claims, weather-related vehicle accident damage, and the acquisitions.

Other expenses were up $3.2 million and 30 basis points. The increase was primarily normal operating costs associated with the two most recent acquisitions, as well as weather-related expenses.

Our tax rate was 37.3%, compared to 30.8% in Q1 of 2013. The Q1 2013 rate relates primarily to the reinstatement of 2012 propane tax credit, along with higher tax benefit that we derived from the exercise of [intangibles]. We expect our Q2 2014 tax rate to be approximately 38%.

Net CapEx for the quarter was $19.5 million, against a full-year net CapEx budget of approximately $35 million. We entered the quarter with $41 million in cash, essentially no debt, $140.6 million available on our $150 million line of credit.

Lastly, we anticipate second quarter growth to be in a range of 22% to 27%, with approximately 10% to 12% of that growth coming from the acquisition of CST. Income per diluted share is expected to be between $0.53 and $0.57 per share, compared to $0.45 last year.

That concludes our comments. Now back to the operator for your questions.

Thank you.

(Operator Instructions)

First question is from the line of Bill Greene, Morgan Stanley. Please go ahead.

Hello. Good morning. Thanks for taking the question. Can I ask a little bit about the underlying freight dynamics that you're seeing? We look at some of the trucking statistics. Everybody knows things have gotten really tight in the markets. Can you talk a little bit about how that affects you and how you might be able to take advantage of that?

I'm not so sure we can take advantage of it, Bill, as we kind of have to fight our way through it. So if we back up and look at the whole quarter, volumes were shockingly strong, considering the weather. They have maintained that strength. It, from a volume standpoint, has been very good.

On the supply chain side, we have fought, as everybody else, on getting equipment way in places we don't need it and then not having equipment in places we do need it. That's very normal to go through during the winter. What's not normal is to go through it over and over and over again.

So what we saw was when we would go to the outside world for additional carriage, the prices went up fairly dramatically. Now that's the bad news. The good news is, we've seen that moderate in April and things seem to be a bit more normal than they have been, perhaps for the last four months. And hopefully, that makes sense to you.

Yes. No, it does. And so when you try to respond to that in the market place through pricing, how successfully have you been able to push through price increases? I think you had a March GRI, for example. Can you talk a little bit about that dynamic?

Yes, the March GRI was really a delayed one from last September. We had to make that decision in late July of last year to increase prices. At the time, we weren't comfortable with the volumes. In retrospect, that was probably the wrong decision. We probably should have gone ahead and done it.

Then as we went through the fourth quarter and the beginning of the first quarter, again, volumes hanging very solidly, more so than we even anticipated. Obviously, it was time to hit the customer base with a GRI. And that GRI was driven by increased costs. We simply had costs we could not overcome, either through better efficiencies or improved productivity. So it was a well -- I thought -- a well-earned GRI.

And then when we look at here in the second quarter, do you feel like the pricing dynamic for you is far better than you were able to realize in the first quarter?

I think we're on really solid grounds. I'm not trying to hedge you, but we have experience the last two, three years, where the first quarter looks -- everybody thinks it's going to be wild and truckload prices are going to go up, and then all of a sudden, they moderate. So as we sit here today, we like our position very much.

We have -- an example of that is we have severely limited what we call spot prices, which is a one-time day-to-day price, that at one time probably averaged between $20,000 and $30,000 per day, all the way down to less than $10,000. So right now, our pricing environment's very good.

Okay. And just one last question. Rodney, I'm not sure if I missed it, but did you say, in EPS terms, the weather impact, or did you try to give an estimate in revenue terms?

Thanks a lot, Bill. I didn't. But that's a little bit of fuzzy math. There are some things we get our hands around better than others. When we reported our Q4 earnings, we said that we felt like it would be probably -- the impact would be between $0.02 and $0.03. Sitting here today, it was more like $0.04, closer to $0.05. And that's our best guess at that.

Okay. Very helpful. Thank you the time, guys.

Next question is from the line of Jason Seidl of Cowen. Please go ahead.

Good morning, guys. It is Seidl. When I look at the macro picture, the one question that I keep getting from clients is, how much of this strength was just a quick restocking and how much do you think is real underlying demand returning to our economy? Just wanted to know your thoughts on that.

I think our position is, Jason, that it's a strong recovery, that things are much better than they were a year ago and that it wasn't a one-time restocking. You know, a month from now, we could be proven wrong. But it sure doesn't feel like that. And we base that not only on our current volumes, but also on our pipeline.

I think I'm in the same camp as you guys with that one. And lastly, it kind of goes to what Bill was getting at, when you look at the GRI that you just implemented, what's the normal rate of decline for the GRI? So if you implemented in March, I know the further you go out, the more you tend to give back over time for general rate increases. What's that life expectancy for general rate increase?

We're a bit different than the LTL and some of the truckload carriers, in that we don't have a lot of contracts. So we do have basically what's considered a price tariff between the two of us. So we can -- when we implement a rate increase, it affects basically all of our customers across the board, and it's effective until the next time we increase it.

Then the question is, I think, if business were to get bad, would we rationalize that price a bit because of bad business? The answer is yes, but we don't anticipate that.

I don't want to see that happening, either. Listen, gentlemen, that's what I have. And I appreciate the time, as always.

Thank you.

Thank you. Next question is from the line of Ken Hoexter, Morrill Lynch. Please go ahead.

Morrill Lynch? Good morning. It's Ken Hoexter. Bruce, how long until, if the truckload market is seeing that tightening, do you then feel it on the airport-to-airport side on the pricing?

We feel it immediately. When it gets tight on the spot market, when we're out 10% to 20% of our line haul miles are pulled by other carriers than us. So we know it immediately.

So I'm just wondering, you kind of toned it down there a little bit, saying in April, we're seeing it calm down a bit from the heavy January-February time frame. Are you intimating that things are slowing a bit here, as we move into the spring? Because from the truckload carriers, it seems like we're hearing a bit more pent up on the pricing side.

Let me clarify that. That's a fair point. When we were struggling through the weather situations, every carrier obviously was doing the same thing. So in some situations, it was extremely tight, i.e., you couldn't get capacity at all, at any price.

Now what we're seeing, the supply chain, the balance, whatever you want to call it, has evened out and is more normal. But when I say more normal, it's much stronger than it was a year ago.

And let me throw in, in the past couple of calls, you've talked about aggressive pricing competitors. How have you seen that market right now, or is that irrelevant in this kind of a freight environment?

We totally ignore.

Okay. And then maybe, Rodney, can you talk a little bit about the integration on Central in terms of how well the intermodal move is going?

Yes, we can, Ken. That's a kind of interesting question, given the acquisition. Central States was and is a very well run company. We're essentially trying not to screw things up. They do a great job. So we are taking our time, and where it makes sense, one back office department at a time, we're moving that down.

It's a very different business than we're accustomed to. The good thing is, they've got a group of great operators that really understand that intermodal space. So over the course of 12 to 18 months, we'll do a certain amount of integration. But we're looking at that as a platform to grow that type of business and have a number of tuck-in acquisitions already targeted. So we're looking for big things from that group.

All right. I appreciate that. Let me revert back, just for a quick sec, on the volumes. Can you lay out the volume growth through the quarter, so I can understand maybe Bruce's discussion on the deceleration in growth?

Sure. It progressed over the course of the quarter. January was up 9%, February up 9.4%, March 7.8%, and thus far into April, it's in that 8%, 9% range, as well.

So accelerating for March?

If I gave you the impression of decelerating, I apologize.

Okay. Yes, yes. No, that's great clarity. Appreciate the time. Thank you.

Thanks.

Next question is from the line of Scott Group, Wolfe Research. Please go ahead.

Thanks. Good morning, guys. Just want to follow up on the GRI, two things there. One, is there something about the GRI this year where it's going to actually gain a little bit of momentum? Just because it doesn't, it doesn't -- I would have thought yields would have been more flat in the quarter, given the March GRI. So just not sure if it got off to a little bit of a delayed start.

And then, Bruce, separately, you mentioned this was kind of a catch up GRI that you should have done last September. Do you think about doing another GRI this September, or do we start a year from now the discussion again?

We'll make that evaluation, Scott, probably in July. It will just depend on environment and what we're seeing on the cost side. So that's something we do two times a year.

And back to the first part of your question, Scott, you're right. We did have the month of benefit from the GRI. We had a couple of customers for actually a couple reasons, the large customers that came on a couple of weeks later. But as of last week and into the full month of April, we're getting the full anticipated benefit from the GRI. So it's always a little bit slower getting that full benefit, call it 30 days, but we're there now.

Okay. In terms of the tonnage growth, which is really good right now, do you have a view on are there end markets or regions that feel, or product types, that feel particularly strong to you right now?

No. Again, it's difficult for us to give you exact answers on that. But what we're seeing is both geographically and then the type of freight are nice increases across the board.

Okay. And then just last thing for me, just in terms of uses of cash. You've done two good sized deals over the past year or so. Are you looking at additional deals, or do you think you start to do more on the buyback side? I noticed you didn't do anything this quarter. But just curious about uses of cash going forward.

It's still the same, Scott. We've got a lot of things we're looking at in the pipeline. It's probably as good as it has been in the last few years, as a matter of fact. So the number one way that we can use our cash is the right acquisitions. Certainly, CST is a great example of one of the right acquisitions, really pleased with that.

Secondarily is buybacks. We've had a high class problem, in that the stock's been hanging in there relatively high. But there's no reason, with our cash and the availability of cash, that we can't do both. So that's probably what you'll see going forward.

Okay. Great. Thanks, guys.

Thank you.

Next question is from Jack Atkins, Stephens. Please go ahead.

Good morning, Bruce and Rodney. Thanks for the time. I guess, just back to the tonnage side for a moment, because I think the growth there was really impressive. We saw the acceleration here versus the fourth quarter and the third quarter of 2013. And I guess I'm just curious, can you break it down? I know it's hard to do, but can you break it down a little bit between your ability to take market share -- and I think that's a big piece of what's happening here -- and then the overall domestic freight environment. Can you maybe break those two down in terms of what's driving your volume growth?

If you will accept a guess.

Sure, of course.

We talk about this a lot. But I think it's probably somewhere in the 50/50 category.

Okay. Got you. In terms of what's driving the share gains, could you maybe talk -- and I don't want you to give away any competitive advantages -- but can you maybe speak to a high level as far as, what do you think is helping to drive those share gains for you guys?

I think we have a great product. We have a great team that sells the product. And we have a great team that performs that good operations that people expect from us. So when you put all those things together, along with what we perceive to be a generally improving economy, things start to go in the right direction.

Absolutely. And then as far as the capacity side of things, is there an effort internally, just given that you've seen your volumes accelerate here over the last several quarters, to maybe go out and recruit or accelerate the recruitment of owner/operators in an effort to maybe drive down some of that PT? Could you maybe walk through any initiatives you guys have internally, as far as that goes?

We just, under the leadership of Chris Ruble, just initiated a 60 and 60 program, which is for us to recruit 60 owner/operators in 60 days. For us to do that, we are involving everybody in the company. So it could be one of our dock workers. It could be a city driver. It could be an owner/operator on the road. Anybody that helps us find owner/operators that meet our qualifications is going to get rewarded.

We did this probably ten years ago, the first time. And it speaks well to our team, because we think we were very successful then. We think we'll be successful again, and we can get a number of owner/operators on board very quickly.

Okay. Fantastic. And then last question for me -- and I'm surprised this hasn't come up yet -- but I thought the Solutions business had a very strong performance operationally in the quarter, with a breakeven EBIT result in a seasonally soft quarter. So could you maybe talk about -- and I know you guys are in the midst of profit improvement initiatives there within that segment, but do you think, Rodney, as we look out over the course of the next several quarters, that we should be expecting this level of OR improvement on a year-over-year basis, or do you think maybe we could even see it accelerate, just given that you're still implementing these new initiatives?

I think it's the former rather than the latter, Jack. I think we can really continue to see this kind of improvement. The group is very focused, did across-the-board rate increase the first quarter. There's been very rifled approach initiatives on things like cargo planes that have been successful. The new business, when we bring it on, it's good business. It's integrate-able, as opposed to not.

So the Solutions group, more so than ever, is extremely focused on bringing value on the bottom line. Last year, we grew the top line pretty significantly; but this year, it's going to be all about bottom line OR expansion.

And Jack, let me add one thing to it. The other thing that's going on in that business segment is the environment is changing. We've seen a number of competitors go out of business, simply shut their doors. So a lot of things going in the right direction there.

Okay. That's great to hear. Thanks again for the time, guys.

Next question is from the line of Todd Fowler, KeyBanc. Please go ahead.

Great. Thanks. Good morning. I guess just quickly on the network, is everything back in balance at this point? And at what point, was it out of balance still in March, or was it back in balance in March and then running as you'd expect it here into April?

It took us until the first week in March. If you recall, the first week in March, the weekend was a big ice storm, along with snow. After that, it took us, let's say between a week and two weeks, so mid-March, to get back in normal and we've been normal since, Todd.

Okay. That helps. And then just thinking about the operating ratio within the Forward Air segment and understanding that your mix is shifting with the Central States acquisition, how should we think about where the operating ratio within the Forward Air segment should be? Is that more of a mid-80 operating ratio business now because of the mix, or are there other efficiencies or things that you can drive where we can see the operating ratio go back to somewhere in the low 80s, maybe on an intermediate or longer term basis?

It's going to start off, as you suggested, in the mid 80s. And we should be able to bring it in, just in that airport-to-airport side, 84, 85. And then with some hard work and a lot of proper initiatives going on, we should get it back down to the low 80s.

And the hard work's probably always ongoing, but when you start to realize some of that, is that more of a 2015 event than anything?

No. It's really going to depend on how successful we are in our purchase transportation.

Okay.

All our other cost segments, for the most part -- I mean, you always have work to do -- but for the most part, our team has done a really good job everywhere else. And then the tough part will be to really drive that PT. And we've done it before. We know we can do it again. But that doesn't get fixed overnight.

Is that driving the PT in all of the different segments, so in airport-to-airport, the truck brokerage, and CST on the intermodal side, or is it predominantly on the airport-to-airport side?

It's predominantly on the airport-to-airport. The other sides, Todd, tend to recover more quickly, because it's a one-off deal. We're going to get a truckload today, here's the pricing today, if that makes sense.

No, that definitely does. Okay. And then, Bruce, the last one I had, thinking about the business where it's at right now, so you did Total Quality a little bit more than a year ago, with CST now, can you talk about the benefit of all these businesses operating together? And I guess what I'm thinking about -- as well as Solutions, I guess. I didn't mean to exclude them. And I guess what I'm thinking about is not necessarily for the next couple of quarters, but maybe looking out into 2015, what would your expectation be for these businesses, some of the opportunity from having them all underneath one roof and what you're able do from an operations standpoint, or from a cross selling standpoint, or from a growth standpoint?

I think there's a whole lot of opportunity there. Obviously, that's why we did it. CST is a small company today that within a few years should be a very large operating segment of ours. We do a number of things commonly, if you will. We have the opportunity. They have seven drayage locations. We have the opportunity to move that to probably 20, 25, either through our own self development or through the acquisition of other companies. They have a big, large CFS process that we have the opportunity to move across the US and build on even more, without any further investment basically. So a whole lot of positives going there.

On the Forward Air Solutions side, we still have the opportunity for TLX to supply them with their truck loads. And in general, the Solutions has just done a much better -- they're just in a much better place than we've been for a while, due to a lot of hard work by our team there, also.

And then with Forward Air -- and I'm kind of jumping back to airport-to-airport now -- they continue, Forward Air Complete continues to provide really top notch services. And that allows us to expand with our entire customer base to do even more. So a lot of positives going on right now.

Okay. That helps. And I'm sorry, I didn't follow what you said on CST. They have a CFS operation? Is that what you said? Is that the consolidation operation? Or maybe I just missed what you said there.

I'm too hung up in our language.

Believe me, there's a lot of initials, at this point.

CFS stands for Container Freight Station, which is a designation by customs. And what they do is they receive freight off of airlines and they basically perform as much work as the customer wants them do, up to and including clearing the shipment, if necessary. But they will, on an inbound shipment from Europe, as an example, they will break it down and distribute it, on outbound shipments, they will consolidate it and prepare it for delivery to the airlines.

And you were previously doing some of that within the airport-to-airport business, right?

We were, but not with the emphasis that you're going to see us put on it.

Got it. Okay. Thanks a lot for the help this morning.

Thank you.

Next question is from the line of John Barnes, RBC Capital. Please go ahead.

Bruce, one question in terms of some of the growth opportunities. You talked about the airport-to-airport business being on this 60 owner/operators in 60 days. You just talked about expanding drayage from 7 locations to maybe 20 or 25 locations, all of which require drivers. And we've heard over and over how difficult that environment is. What gives you confidence that that availability is out there in order to expand those? Is it something you're doing specifically in terms of pay or lifestyle or what have you that you think can afford you an opportunity to recruit that level of driver?

I think our number one goal here, John, is the lifestyle angle. Money tends to not move drivers; and if it does, it will leave you the day after. So we're really focused on the benefits that Forward Air brings to an owner/operator. In most cases, they're able to be scheduled. In most cases, they know their home time. In most cases, they know the revenue that their truck's going to make in any given week. So a lot of positives there that we will push very, very hard.

Your point's well made, though. It's difficult in this environment, but we continue to believe we're the best home for owner/operators.

All right. Very well. And then you talked about the general rate increase either taking a stab at another one later this year, maybe some stickiness in the one you just put in. Obviously, you talk about environment a little bit. I think we all get that. But your industry is seeing some ebbs and flows, pretty dramatic ebbs and flows, with your competition and their outlook on pricing. Again, I recognize that comes into play in the environment category, but are you more confident today that the competition's gotten it more right on pricing than less right, or is the industry still very much at risk in terms of that irrational pricing you've seen from time to time?

When we look at their pricing, John, it would be impossible for me to give you a rational answer to what they do.

Okay. All right. Are they being more disciplined now than they have?

I think that depends on if thunderstorms are moving through. There's just no rationale to what goes on.

Okay. All right. My last question, in terms of the amount of miles in your network being driven by third parties, could you give us a sense for historically what's been the right number, in terms of what percentage has been the right number in terms of maximizing your margin opportunity and what would it take to get back to those kinds of levels?

We need to be, John, somewhere in the 9% to 11% range. And today, we're somewhere in the 17% to 20% range. And that won't get the job done. That will allow us to operate at an 85. It won't allow us to operate at an 82, 81, 80. So we got a lot of work do there to get that back where it needs to be. But we can do that.

And is that entirely the owner/operator recruitment, or is there something else with the network that you can do to more optimize that?

It's partially with the owner/operator additions, but it's also, we have to have the freight in the right places. We have to price the freight correctly. So if it's coming out of Miami, we need all the freight we can get. If it's going into Miami, we need to make sure that the pricing on any freight moving there is very solid. So it's a combination of issues, but the big thing is to get the owner/operators on.

Okay. All right. Thanks for your time. I appreciate it.

Thank you.

Next question is from the line of Ben Hartford, Robert Baird. Please go ahead.

Good morning. Just a couple top line questions on Solutions and TQI. I guess start with TQI. What should we think about from a revenue growth standpoint as the year-over-year comparison starts to normalize here in the second quarter, Rodney? Double digit growth, I assume 10%, 15%. Is that a good --

Ben, we're targeting 15%, 20%.

Same for Solutions?

Solutions ought to be the same.

Okay. And the growth within Solutions, how much of the growth is coming from retail customers specifically -- and you've named them in the past -- versus growth that would fall into that category, but it would be in more of a wholesale type capacity with some customers, let's say an integrator or somebody of that sort?

Ben, that revenue stream remains, call it 90% speciality retail.

And do you think -- is there an opportunity? I want to ask it more directly, in terms of thinking about omni channel and the direction that those modes and that discipline is going and some of the focus from some of the integrated providers. Is there an opportunity to be able to act as a wholesaler in that product, or will this continue to be a direct retail product?

It's an active initiative to diversify that revenue stream, Ben. It's just a hard sell. But once we find the right shipper and show them the value of the approach, it's very sticky. But it's hard to get in the door and it's hard convincing them to change what they're doing.

Good. And then just back to TQI real quick, double digit margins in that segment still the target, the goal for 2014?

2014, we're targeting a 90 OR.

90 OR. Perfect. Thank you.

Next question is from the line of Art Hatfield, Raymond James. Please go ahead.

Good morning, Bruce and Rodney. Most of my questions have been answered, but just a couple quick ones here. Rodney, did I hear you correct that your guidance for CapEx this year is $35 million?

That's correct.

Okay. And then just as I think about, as I look within our model, when I look at forward, the complete shipments, as I'm sure you've talked about in the past, but there's been volatility there. But as we think about modeling that going forward, is there a way we can think about it from the standpoint that you want complete shipments to be a certain percentage of the total of Forward Air volume or shipment levels? Is that a way to think about it, or does the complete shipments run on their own fundamentals?

No, that's really the way we look at it. Going into 2014, we were targeting 20% attachment by the end of the year.

Okay. And did I calculate it correctly, you were about 19.5% in Q1?

That sounds a little high.

Tell me how you calculate that then, real quick. Do you take complete shipments over total?

Yes. And maybe help walk through the last page of our earnings release has that. It's the complete shipments as a percentage of total line haul shipments.

Total line haul. Okay. I'll look at that. Thanks for that.

Then final question, just as a follow up to the drayage comment on CST -- and I may not be as familiar as I should with CST -- but in that business, were they running their own containers? And if not, as that business grows, Bruce, as you mentioned, getting to 20 drayage locations, would you consider running your own containers?

I think that's going to depend on the market, Art. The time may come. We just can't answer that today.

But you're not running any containers today?

No.

Okay. Fair enough. That's all I got today. Thanks for the time, guys.

Thank you.

Next question is from the line of David Campbell, Thompson. Please go ahead.

Hello, Bruce. Rodney, one of your major competitors in the expedited business either went out of business in the first quarter or stopped serving a lot of markets, due to financial problems. Is that loosely help on your business side or helping to raise rates?

I think the answer to that's both, David.

Both. Okay. Then that will continue to be the case, I assume, for quite a while.

Yes.

Okay. Thank you.

Thanks.

Our next question is from the line of David Ross, Stifel. Please go ahead.

Good morning, gentlemen.

Good morning.

A question on TLX. Was that segment helped or hurt in the first quarter environment where you couldn't find a truck?

They had the same issues that we did across the board, where they were hurt where we couldn't find trucks. That's pretty normal now, David. Actually, they're starting to get more and more opportunities.

If they had to pay up for a truck, they might have been able to pass that to the customer who also couldn't find a truck or do they see their margins get squeezed?

In most cases, it's hard to say across the board, but I would say in most cases, David, we were able to pass that on.

And then you've mentioned in your comments about the Forward Air Solutions segment working with TLX, either I guess TLX provided capacity to Forward Air Solutions or Forward Air Solutions providing volume to TLX. Can you comment a little bit more on that? My understanding was that the Solutions business was a little more short haul and TLX is a little more long haul.

The answer is, the difference in the product line offered. So TLX will provide line haul services to Solutions, for instance, from Brownsburg, Indiana to Dallas, Texas. And at that point, it becomes a total distribution product, where we pull it off the trailer, segregate it, and deliver it to the store.

Okay. So TLX wouldn't be used for a one-way move to avoid a back haul or something, it's really for the line haul.

Correct.

And then last question is just, a lot of maintenance issues popped up in the first quarter with the weather. Just curious as to what your owner/operators do within your airport-to-airport segment for maintenance? Does Forward Air have a deal set up with a nationwide maintenance organization? How do they handle getting their trucks in good shape?

Most of them, David, have their own private mechanic, if you will. But when they're on the road, we do have the availability for them to go to a national program that we facilitate.

Excellent. Thank you very much.

Thank you.

Thank you. And with no further questions, we do thank you for joining us for Forward Air Corporation's first quarter 2014 earnings conference call. And please remember, the webcast will be available on the IR section of Forward Air's website, at www.forwardair.com, shortly after this call. We do thank you for joining. You may now disconnect.