Forward Air Corp (Delaware) (FWRD) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for joining Forward Air Corporation's third-quarter 2015 earnings release conference call. Before we begin, I'd 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 Chairman, President and CEO, Bruce Campbell; and Senior Vice President and CFO, Rodney Bell. By now, you should have received a press release announcing third-quarter 2015 results, which were furnished to the SEC on 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 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 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 new information, future events, or otherwise.

And now I'd like to turn the call over to Bruce Campbell, Chairman, President, and CEO of Forward Air.

Thank you. Good morning and thank you for joining our call. I would like to start by touching on some of our key initiatives in the third quarter and the resulting accomplishments.

First, aside from a few lingering issues, we have finished the Towne acquisition, which allows our team to now focus on achieving excellent operating and sales results, as we saw during the September monthly period.

Secondly, all our pricing initiatives are in place, and more importantly, allowing us to improve our desired yield.

Third, our recruiting team has done a terrific job bringing on new owner-operator teams, allowing us to continue our initiative to push transportation costs lower than it's ever been, which is our single largest cost component.

On the Solutions front, where we had less than acceptable results, the good news is much of this was driven by the loss of a major competitor who went out of business, and the resulting expense to us of -- bringing on $5 million of new business startups during the quarter.

In closing, we are excited about where we have positioned the Company, glad to have the acquisition behind us, and looking forward to again producing the high-level results that we have had in the past.

And now, Rodney Bell, our CFO.

Thank you, Bruce. Good morning. I'm going to start with the Q3 revenue, running through that. On the same number of business days, consolidated revenues were up $45.6 million and 22.6% compared to Q3 a year ago. This was the second full quarter with the benefit of the Towne acquisition.

At this time, we believe we've seen the last of any meaningful revenue attrition and estimate the retention is somewhere between 60% and 65%. We are pleased to report that we were finally able to address the legacy Towne class-based pricing. In addition, we took a rifled approach, increasing pricing out of markets where our network had come out of balance. These changes implemented in mid-September should bring approximately [$3 million] of increased quarterly profitability.

CST, intermodal, and related revenues were up $7.8 million and 37%. This was a result of two second-half 2014 acquisitions as well as solid organic growth. TQI revenues were $1.8 million and 15% less than Q3 a year ago, while Solutions revenues were $1.5 million and up 5%.

Like last month, I'll cover the Forward Air, Inc. expenses, calling out the $3.9 million in Towne deal and integration costs. Now, keep in mind this is Forward Air, Inc. and not consolidated. Purchase transportation was up $20.1 million or 28%, but was down 30 basis points as a percentage of revenue. There were no deal-related costs in PT for the third quarter.

We should see the full fourth-quarter benefit of late Q3 route optimization as well as the impact of lane-specific rate increases. These measures will enhance profitability through improved yield and reduced cost from better network balance.

Salaries, wages, and benefits were up $11.4 million and 34.4%. Included in the increase was $137,000 of Towne-related severance costs. After consideration of deal costs in Q2 and Q3, salaries, wages and benefits had a sequential improvement of 130 basis points as a percentage of revenue. Also of significance was the additional headcount reductions and improvement in dock labor efficiency. We'll have the full Q4 quarterly benefit of approximately $3 million in annualized cost in Q4.

Operating leases were $14.5 million, inclusive of $2.6 million of costs associated with these closing of duplicate facilities. Inclusive of CST, we anticipate FAI operating leases to be approximately $11.8 million in Q4. This includes the benefit of $800,000 in annualized lease costs that were taken out in Q3.

At the end of the third quarter, we had shut down a total of 40 duplicate facilities related to the purchase of Towne. At this time, only three duplicate facilities remain, one of which is scheduled for closure in Q4. Depreciation and amortization was up $1.2 million, most of which was related to Towne. Insurance and claims increased $900,000, with $174,000 of the increase related to Towne integration. We expect FAI inclusive of CST Q4 insurance and claims to be approximately $4 million.

Other operating expenses increased $5.5 million and included approximately $1 million of integration costs. This line item continues to be an opportunity and remains the focus of our entire team.

After factoring out the approximately $3.9 million in integration costs, our FAI operating ratio was an 87 compared to 84.9 Q3 a year ago, and compared to 87.9 for Q2 of this year. The aforementioned yield improvements and cost reduction measures made late in the third quarter should have a great -- should greatly reduce the remaining OR gap between Q4 2015 and Q4 a year ago.

The following comments are related to our consolidated income per diluted share and the table at the end of our earnings release that reconciled EPS as reported to the midpoint of our guidance. Adjusted for approximately $0.08 of integration-related costs, our adjusted EPS was $0.58. Not included in our guidance was the $0.03 benefit of a technology-related tax deduction described in our earnings release, so that has been backed out.

Neither Solutions nor TQI performed in line with the prior-year or as modeled. The result was a $0.025 and a $0.01 EPS shortfall for Solutions and TQI, respectively. As mentioned in the release, Solutions had startup costs stemming from unplanned new business awards, some of which related from a competitor going out of business. Additionally, Solutions Q3 insurance and claims expense was much worse than anticipated.

For the most part, the TQI shortfall was revenue-related and we are now in the process of addressing that. Within FAI, the FAI operating segment, CST performed as expected, contributing $0.07 per share. Related to the Towne integration, slower than modeled rate changes as well as cost reductions and efficiencies -- efficiency achievements resulted in a $0.015 lower-than-expected EPS contribution.

And lastly, from Q2 to Q3, the net benefit of fuel surcharges was about $0.01 worse than modeled. Netting these adjustments and adding them to the EPS -- to the adjusted EPS results and $0.61 compared to our midpoint of our guidance, which was $0.60.

Now finally, let me cover our Q4 guidance. We expect revenues to increase in a range of 18% to 21%. The Towne integration substantially complete -- with the Towne integration substantially complete, any costs associated with that should be minimal in Q4. We expect income per diluted share to be between $0.62 and $0.66 compared to $0.55 in Q4 a year ago. This range of earnings is without regard to any additional benefit from our technology tax deductions, cost of integration or any additional declines in our fuel surcharges.

Now, that concluding our comments. Now back to the operator for your questions.

(Operator Instructions) Jack Atkins, Stephens.

Thanks for taking my questions. So, I guess, Rodney, if we could kind of go back to the comments around the savings that you guys are expecting to see in the fourth-quarter on a year-over-year basis, it's $3 million from pricing, I think $1.5 million from cost take-out. So $4.5 million on a year-over-year basis.

Is that the -- can we extrapolate that moving forward into the first quarter, second quarter, and for most of the third quarter next year? Or is that just really -- should we just look at that on a year-over-year basis for the fourth quarter?

You know, Jack, all things being equal -- and that's the caveat here, you should be able to extrapolate that going into 2016. Now, if things change, if volumes changes, that's going to impact pricing. Right now we don't -- things could change that could impact the efficiency at the dock level. But as we sit here today, again, all things being equal, we should get the benefit of that going forward.

Okay. Okay, that makes sense. And I guess when we look forward into next year, I guess there is the opportunity to put in a GRI sometime in the first half of the year. How should we think about that? And then do you feel like the market overall is strong enough to support a GRI in 2016?

You know, Jack, we did our last GRI in February of 2015, just before we closed on Towne. We got -- we had minimal pushback. We did -- it was a rifled approach to certain markets in mid-September. It made sense. There wasn't a whole lot of pushback then as well. We are in the -- our team is in the process of evaluating a 2016 GRI. And typically, if we did that, you would see it coincide with the grandfathering of the one we did last year. So, it would more than likely be a Q1 event.

Okay. Okay. And then you have had some new customer wins in Forward Air Solutions. The new facility that you guys just recently opened up in Rochester; you had a competitor leaving the marketplace. I mean, granted, there have been a lot of puts and takes at Solutions this year. But how should we think about the go forward profitability level of Solutions in 2016? Because it seems like there's some opportunity there on a year-over-year basis.

Well, I think, Jack, there is. We have much work -- not much work; we have work left to get them exactly where we want them. But right now with the failure of the competitor, what that allows us is a revenue base to, in turn, allow a reasonable profit. I don't think the base model of Solutions changes a lot in that the first quarter will always be the worst, and then we worked. And hopefully, this year, we'll be able to make a small profit in Q1 because of the additional business -- $5 million of it, which will come on in January of 2016, and then improve sequentially, as we have in the past.

Okay.

Jack, the other important -- the other meaningful thing in Solutions starting in 2014 and also in 2015, for the first time since we've owned Solutions, we were able to put in general rate increases. So we've got a customer base that is seeing that it's important to have a viable provider of transportation and that provides good service, that actually values what we are doing. So you'll see us look to Solutions to potentially do a GRI in the first quarter as well.

Okay, okay. And then just a couple more questions from me and I'll turn it over. We've seen returns on invested capital take a hit over the last couple of years, Bruce. And I think, historically, Forward Air has operated with returns on invested capital closer to 20%.

I guess how should we think about the return potential of the business as it stands here today, following all the acquisitions and things you guys have been doing the last couple of years? And when should we expect for you to get back to that high-teens level ROIC, if that's possible?

Well, we're hopeful that in 2016, that's the number we're going after in the higher-teens. We do have a bit more investment than we've had in the past, but that's now slowing down. So we are positioned, as we go into -- actually into Q4 and into 2016 to concentrate back on those metrics like we have in the past.

Okay, thank you. And then, Rodney, last question for me. What does the guidance assume for the fourth-quarter in terms of airport-to-airport volumes on a year-over-year basis in terms of growth, and then core line haul yield? And I'll turn it over.

Okay. Jack, in terms of volumes, it's 18% to 20%. Line haul yield -- and we looked at that sequentially, should be up over Q3 about 3%, which brings it up just from a year-over-year basis up into the positive territory for the first time this year. So -- and we -- so far into the quarter, that's been just a little bit conservative. So we are happy about that.

Okay, that's great. Thanks again.

Todd Fowler, KeyBanc Capital Markets.

Rodney, maybe just for the point of clarification on the expected cost savings, I think in the prepared remarks you talked about $3 million of annualized savings on the headcount side. And then, in response to Jack's question, it sounded like there's a $1.5 million coming in the fourth quarter, you can annualize that. Is the difference between the $1.5 million being annualized and the $3 million in the prepared remarks, is it that the $1.5 million has more than just the headcount piece in there? Is that the difference between the two?

That's correct, Todd. The -- to round out that -- call it $6 million of annualized, about half of that is headcount. Just over close to 30% of that is network efficiencies that impact purchase transportation, and the balance of it, most of it is in operating leases, but a little bit on the other line as well.

Okay, that really helps. And then maybe just a little bit more color on the yield improvement initiatives. And I guess what I'm curious about is kind of your confidence in -- that you're not pushing yield too much, and that we don't see some sort of impact on the volume front going forward. My guess is that some of this was a necessary action with maybe where some of where the pricing was. But can you just talk about ticking up pricing in this environment and kind of your confidence in keeping the associated volume with that?

Sure, Todd. There were really two components of what we did in September. One -- and we've talked about this quite a bit for last quarter -- there was one remaining piece of Towne business that was classed -- it was priced on a class rate basis. And we didn't have the systems to accommodate that. It took us until the end of September to get that done. And that business was woefully underpriced. And we went in knowing that we would lose a slug of it and that was okay, because it was a loser.

We retained more than we thought we were going to retain at our price, which was good. We lost some of the business, which you hate to lose business, but if you are going to lose business, that's the kind of business you want to lose. And then we took a very rifled approach to looking at areas of the country where our network was out of balance, primarily off the West Coast as well as out of Florida.

And it was, to some degree, our networks always has that kind of out of balance, but the Towne acquisition really exasperated that. So we went in and put some pretty meaningful rate increases there. And again, it did cause some attrition of business but really not that much. And we got our -- got the pricing that we needed to bring the proper level of profitability and balance into the network. So, all that said --

So with the --

I'm sorry. Go ahead, Todd.

I'm sorry. No, I didn't mean to interrupt. Go ahead, Rodney.

All that said, and given the lack of pushback back in February when we did our last GRI, we feel pretty confident, subject to discussion by the group, which we are currently doing that, that we can push through some level of rate adjustments in Q1.

Okay. Then what I was going to ask is the -- so the 60% to 65% revenue retention from Towne, that incorporates the class business and kind of the adjustment to the pricing in that retention number?

That's correct. And keeping in mind that on the network balancing approach, that was not only Towne business but there was some legacy business that came into -- that's in play there as well.

Okay. That helps. And then I don't know if you gave this, but where is your mix of purchase transportation between owner-operators and outside third-party capacity? Where was that, I guess, in the third quarter? And where do you think that that can go? Or is it where it needs to be?

It's pretty close to where it needs to be, Todd. That's around 13% right now going into the fourth quarter. That typically spikes up a bit. But as you recall -- will recall, in Q4 a year ago, that went up to 26%. You won't see that this year. We're in -- our recruiting and retention teams have done a fantastic job. We're -- from a power perspective and a capacity perspective, we are in good shape.

Okay. And then just two last quick ones, if I could. The Solutions competitor who went out of business, do you have any sort of color as to what the issues were with that competitor and maybe why they were unsuccessful in what they we doing?

I think it's best that we don't comment on that, Todd. If you took all the things you might imagine that could go wrong at a company, you would probably be safe.

(laughter) I can imagine a lot of different scenarios, Bruce, so I'll leave it at that. Okay. And then just the last one just for a question on the fourth-quarter guidance, just to be clear -- the $0.62 to $0.66, what's the tax rate? You are assuming a normalized tax rate? You are not assuming the $0.03 of the technology tax benefit in that guidance?

We are not, Todd. I tried to -- that's kind of a complicated thing that I tried not to -- I tried to make that as clear as possible. But you know, it's tough. But we are -- our tax folks are in the process of amending those returns. More than likely, we'll get the benefit of three years of amended returns in Q4, which more than likely, will result in $0.09 per share. But we are not certain that will get done. And even if it does get done, you guys will back it out. So we went in just not addressing the benefit from the taxes in our guidance.

Okay. I just wanted to make sure from a modeling perspective when we set up our numbers versus your guidance that we should be using kind of a high 30% tax rate.

You should.

Okay. Thanks again for the time this morning, guys.

Yes, sir.

Ari Rosa, Bank of America Merrill Lynch.

Just wanted to touch on the new management team at TQI. What is it that you guys are looking to them to accomplish that -- and kind of where is the opportunity there?

Okay. The opportunity is to expand who they market to and who they sell to. So, in the past, that was a very, very focused on -- mates essentially two customers, and then some smaller ones in addition to that.

This market is so much larger than that. And so we brought in a gentleman by the name of Steve Gillmor; has a great background in the industry. We've worked very hard and he is very new to the job, so no miracles yet. But we've worked very hard to position it so that we are not a single or even a dual customer company. We need to have a really good customer base. And again, the opportunity is, there are those customers out there.

Okay, got it. And what was kind of the challenge in acquiring those customers previously? Or was it just not a focus area?

It just -- you know, it was our failure to focus beyond that smaller customer base.

Got it. So now it's just kind of a matter of being more aggressive or more ambitious with your target?

That's exactly right.

Got it. Okay, just the only other one that I wanted to ask about was, it looks like you guys have trimmed debt a little bit over the last few quarters. And just wanted to get a better understanding of if that was going to continue and what your top priorities are with any capital?

Sure. The -- you'll see -- you'll continue to see that debt come down. That's the $125 million that we borrowed to do the Towne deal and it's on a two-year term. So, you'll see that continue to come down over the next six quarters and go away.

But as we look at capital, there's a lot of acquisition opportunities using the CST platform that they have a team that's separate and beyond just the team at Forward Air that are focused on that. They did two small tuck-ins late last year that have performed well, and they have a great pipeline going into the end of the year into the first of next year.

So that's a focus. We were also active purchasers of our stock last quarter. So, when we have the ability to buy back shares, you will see us doing that from a stemming of dilution standpoint. And beyond that from a uses of capital we continue to pay a small dividend.

Got it. And just the last one I'll ask. If you could maybe provide a view on the macro economy and what you are kind of expecting for fourth-quarter as you set your outlook. I would appreciate that.

Ari, sure. It's -- you know it's tough being an amateur economist, but right now we are like everybody else -- we see a little bit of sluggishness. Volumes haven't -- you know, it's tough for us because we have the Towne acquisition that somewhat clouds our view of what legacy tonnage looks like. But with some assumption-driven work, we think volumes right now are slightly positive and we expect that to remain going into Q4.

Okay, terrific. Thank you.

David Ross, Stifel.

Forward Air Solutions' new business -- just to be clear, did that all come from a competitor closure? Or just part of that $5 million come from a competitor closure in the quarter?

All of it except for probably $1 million, David.

Okay. And then you said there is an additional $5 million to come on in January?

That's correct.

All right. And then so with the onboarding that you talked about kind of weighing on third-quarter margins, is that finished? And so should kind of Solutions margins in 4Q be up year-over-year?

Yes, they should.

Okay. And then on to the M&A front, have you talked about kind of which segments you're most likely to continue the M&A path? It doesn't seem like there's a lot left in the airport-to-airport business. CST seems like it's growing probably best out of the rest of the bunch. Is there any place other than CST that you might be looking to grow into?

Our focus and our team's focus has been to do additional acquisitions within CST. Number one, there are acquisitions available, which is not always the case in the other groups. Number two, we have a great team at CST who can handle the acquisitions and continue to build that. So you'll see us focus -- and, as you know, the world changes, but for the most part, it's to grow the intermodal. And they have delivered such wonderful results. That's where we want to focus our energy and money.

And then, this year there's been more, I guess, issues pop up on the independent contractor front. Is that something that you've seen at all at Forward Air? Or is that something that's fortunately stayed away from you guys?

You know, I think, David, as Rodney mentioned before, our team, our recruiting team, has done a terrific job. We are in the best position in the history of the Company in terms of owner-operators. We have the largest team fleet we've ever had, and we have the largest TLX fleet we've ever had. And the TLX fleet is actually double from what it was a year ago, which gives us so many more opportunities to grow, as you might imagine. So, thanks to this team, we are in really, really good shape on the owner-operators. Don't have hardly any issues.

And last question is just impact from eCommerce and its growth during the holiday season on the core line haul business. Has that disproportionately helped you guys? Is that hurting in some way?

Both (laughter) -- is a fair answer. Some of it is really, really good business. Other of it is business that is difficult to handle. We have to isolate it so it's handled properly, and we go through a different operating process when that type of business comes into the network. But this is our probably fourth, fifth year of dealing with it, so our team does a good job.

And is that any more, I guess, likely to go into the complete product than just the line haul?

A portion of it does. A portion of it goes into our Forward Air -- into their P&D network, but we do handle a portion of it into Forward Air Complete.

Thank you very much.

Thank you.

Kevin Sterling, BB&T Capital Markets.

In Solutions, you're picking up business because a competitor exited and that's a high quality problem. How much more do you think there are in startup costs? Or if you continue to pick up additional business, could we continue to see startup costs? Or is this more of a little one-time event?

For the most part, that was a one-time event in Q3, because it required a different building and a different delivery network, if you will. So that was really an isolated incident. On the -- what we should pick up in January, we have to make no capital investments. We don't have to do anything to absorb that business. So, the startup costs -- which there will be some -- will be minimized.

Great. All right, thank you, Bruce. That's good color. And let me follow up a little bit on Jack's question earlier, possibly thinking about 2016 and the opportunity. You've got the integration of Towne essentially complete; got the cost improvements, your yield initiatives. You are doing a great job on your PT costs. Some of these one-time costs in Solutions should be behind you.

Regardless of the macro, I know obviously you don't want to play amateur economist and I'm not asking you to, but regardless of the macro, it seems like with all of your internal self-help initiatives, you've got an opportunity to grow earnings, at a minimum, double-digit percentage. Am I thinking about that right with all the initiatives you have going on?

I would take you back to the earlier comment, which was, we think we have positioned the Company to be very successful in the future. And we would kind of leave it at that.

Okay. Great. Gentlemen, thanks so much for your time today.

Thank you.

Ben Hartford, Robert W. Baird.

This is actually Zach Rosenberg on for Ben. Just hoping -- you had talked around this, but if you could talk to, in retrospect, why Towne integration was maybe more challenging than initially expected? And does that change the one to two-year view on the ultimate accretion that Towne can bring to the Company versus the initial expectations?

It has minimal impact on what our expectations were for future accretion. The big thing that we incurred with Towne that we kind of had to slug our way through was contracts and finding some what I call unknowns. And it wasn't that we didn't know what to do in that type of situation. It was simply getting through both regulatory and legal issues that really slowed us down.

Once we got through them -- and I can give you a quick example. We had to move a Customs -- a CFS -- in one of our cities into our existing terminal. Well, Customs wouldn't give us approval to do that for like four months. That cost us about $35,000 a month because we had to keep the Towne building open.

And you know it was a litany of those things. At times it became very frustrating. But in general, our team never gave up, and we kept pushing and pushing, and finally got it to where we needed to be. The regret is that it was slower and harder to do than we originally anticipated. The good thing is we're done.

Great. Thanks for that. Yes, that's great color. Just one more here from me. You talked about it a little bit with the GRI of -- for 2016, but what do you expect is reasonable for a growth rate in 2016, understanding that you are still probably just entering budgeting period and haven't formalized anything yet?

Yes, I think we are just too early on that. We have put in initiatives, as we've discussed previously, that probably will hold, so they are not going to go away. And then we will look at the balance of the business and -- as we do every year -- and make a determination of where we need to go and when we need to go.

Great. Thank you very much.

David Campbell, Thompson Davis & Company.

I just wanted to ask about the business in general. Usually being the seasonal peak in your business in September, late September; has that occurred this year?

Actually, David, over the past few years, that peak has compressed. So, instead of a startup in September -- although September was good -- the peak is really due to hit about now. And we are starting to see some of that, especially on the Solutions side.

Our opinion is, peak will be okay. It won't be anything great. And I think that's a result of the shippers are much better at controlling their inventories and avoiding peaks. But without question, knowing that more product has to move in the fourth quarter.

What was the September growth in tonnage?

It was up just over 20%, David.

20%, including Towne?

That's correct.

And in general, have you lost more business than you expected in -- from Towne transitioning to Forward Air yields and rates?

In general, we've kept more business than we thought we would. So we are pleased with that in most cases. There's a few cases we're not. So we are happy with where we are there.

Right. Okay, thanks. I appreciate the question.

You're welcome.

Scott Group, Wolfe Research.

It's actually Vanck Zhu on for Scott. And yes, just a few questions. A lot of my questions have been asked already. The first question I had was just -- I was wondering if we could go back and on the line haul yields, I was wondering if we can get a little bit additional color. It looks like it's ticked down -- it's worse than year-over-year relative to your last quarter, and also decreased sequentially. And I know last quarter, we talked about yields -- line haul yields -- stabilizing, and I just want to get a little bit of additional color as to what happened there.

Yes, Vanck, I'm ready for you this morning. We found an error in Q2 and it relates to the class-based pricing that I was talking about earlier. Once we had that integrated, we realized that the downward impact wasn't being fully baked into the yield. So, the Q2 line haul yield was actually [16.97] compared to [17.07] in Q3. So, sequentially slightly better and now quite a bit better with the impact of the two pricing initiatives that we put in in mid-September.

Okay, got it. And also just a little bit further on the September pricing initiatives. One, I was wondering if you can provide a little bit additional color as to what initiatives you specifically took? And also wondering I guess about the timing, why it was implemented in September rather than earlier on in the integration process?

Sure. And I'll go back to the class-based pricing again, Vanck. It was a technology issue. We didn't have the systems to accommodate that, so we had to do some work on our side. It was September before we got that completed and tested and ready to go. So that was as early as we could do it. Also, we were looking at the imbalances in our network, primarily off the West Coast, now to Florida, and took the opportunity to adjust those markets as well.

So a very rifled approach to that. And between those two pricing initiatives, sequentially, we'll see from Q3 to Q4, yield improved by over 3%.

Okay. And I was wondering if any of the, I guess, weakness, particularly on the TQI side but also Solutions, was any of that due to just the Towne integration being so time-consuming? And I guess going forward, is there a possibility that TQI margins will improve just because as the Towne integration nears completion?

I don't think I would link those two things together. I certainly understand your point, but I just wouldn't link them together. We are hard at work at fixing those, and as are the teams at each of those locations.

Okay, great. And I guess just one housekeeping question. Just in light of the puts and takes on the tax rates between the higher tax rate, I think, earlier this year and also the tax benefit from the technology. How should we view a normalized tax rate going forward?

Vanck, I may have to shoot that to you. I can't -- I'm thinking [37.8], Vanck, but I'm having -- actually [37.4]. I found it. That will be in starting in Q1 of 2016 and with the benefit of that technology tax deduction we talked about.

Okay, great. Okay, thanks so much for your time guys.

Thank you.

Bruce Chan, Stifel.

Gentlemen, I'm actually all set here. So I appreciate the time. Have a good one.

Thank you, Bruce.

And with no further questions, ladies and gentlemen, I'd like to thank you for joining us today for Forward Air Corporation's third-quarter 2015 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. That does conclude your conference for today. Thank you for your participation. You may now disconnect.