XPO - Q3 2015
November 5, 2015
Transcript
Operator (participant)
Good morning, and welcome to the XPO Logistics Q3 2015 Earnings Conference Call and Webcast. My name is Brandon, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you have a question, please dial star one on your telephone keypad. Please note, this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which, by their nature, involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements.
A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release or made on this call are made only as of today, and the company has referred to certain non-GAAP financial measures as defined under applicable SEC rules. Non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures, in the Investors section on the company's website at www.xpo.com. I will now turn the call over to Mr. Brad Jacobs. You may begin, sir.
Brad Jacobs (CEO)
Thank you, operator, and good morning from Ann Arbor, Michigan. Thanks, everyone. With me here today are John Hardig, our CFO; Scott Malat, our Chief Strategy Officer; and Tavio Headley, our Director of Investor Relations. Well, as you saw last night, we delivered Q3 results that far exceeded our targets. We achieved significant margin improvement across all our lines of business. We grew both net revenue and EBITDA by more than six times. We grew organic EBITDA by 77% on organic revenue growth ex-fuel of 3%. We completed the Con-way acquisition last Friday, and all of the acquired operations, Con-way Freight, Menlo Logistics, Con-way Truckload, and Con-way Multimodal, are all now operating under the single global brand of XPO Logistics. The integration is off to an excellent start. I'd like to particularly thank the outgoing management for their extremely helpful cooperation in the pre-integration planning.
It's really paying dividends. We've held countless town halls and group and individual meetings with the Con-way employees prior to closing and challenged the whole organization to contribute their best ideas on how to take customer service to an even higher level while running the business more efficiently. This week, we held kickoff events around the globe, and if you've been following us on social media, you know that Team XPO is highly engaged. You'll recall that at the time we announced the deal, we said we would improve profitability by at least $170 million-$210 million over two years. I'm happy to report that we've already taken out more than $30 million of costs, primarily through headcount reduction, adjustments in vendor contracts, and the elimination of public company costs.
We have a high level of confidence that we will hit our profit improvement target. Last night, we announced that we've hired Tony Brooks as President of our LTL business in North America. Tony is a 30-year industry veteran who has run three of the largest transportation fleets in North America. He's a high-energy, high-impact leader with 11 years in LTL with Roadway, and he's managed complex networks at Sysco Foods, Dean Foods, Sears, and PepsiCo Frito-Lay. I'm looking forward to working closely with Tony in executing our growth plan in LTL. Welcome aboard, Tony. Looking at the company overall, the Con-way synergies are just one piece of our larger plan to drive up profitability over the next few years. Our business in Europe is going very, very well. We beat budget on both top line and margin.
We increased the EBITDA in our European transportation business by 26% in the quarter. We increased our logistics EBITDA in Europe in the quarter by 17%. And now on an annual basis, we're now at $1.1 billion of adjusted EBITDA company-wide post-Con-way. Next year, we're targeting full-year adjusted EBITDA of at least $1.25 billion, and our target for 2018 is $1.7 billion of EBITDA. That's $200 million more EBITDA and a year earlier than our previous long-term target. The components of how we'll get to that $1.7 billion of EBITDA are very clear. In our LTL business, there's $170 million-$210 million of profit improvement opportunities to start with.
We also have a host of other initiatives designed to run the business more efficiently. Around the world, we're also addressing underperforming locations and unprofitable customers and lanes. We're redesigning our entire organization with one global sales force, one global IT organization, one global HR group, one global procurement team, and one global back office... and we'll continue to cross-sell our multimodal services to our more than 50,000 customers. This is a huge lever for growth that's right on our doorstep. Today, at $15 billion of revenue, we've established leading positions in key areas of transportation and logistics where there's strong secular demand. Now, our laser focus is to optimize our global franchise, execute on opportunities to increase our profitability, and create dramatic long-term value for our customers and shareholders. With that, I'll turn it over to John to review the quarter. John?
John Hardig (CFO)
Thanks, Brad. We increased gross revenue in the quarter by $1.7 billion, or 257% year-over-year. Adjusted EBITDA was $166 million in the quarter, up 586% from last year. The increase was due to a mix of acquisitions and margin improvement. By division, gross revenue for our transportation segment was up 128%. The increase in net revenue was even greater on a year-over-year basis, up 152%. This was due mainly to the acquisition of Norbert and margin expansion. We increased net revenue margin in every single transportation business unit across the company. Transportation net revenue margin was 22.6% versus 20.4% in the prior year quarter.
The increase in margin was due mainly to the expansion of our North American truck brokerage margins, improvements we made in our last mile operating performance, and the acquisition of Norbert. In our North American brokerage and intermodal business, we increased gross revenue by 21%. We continued to generate strong volume and margin growth in truck brokerage. This was partially offset by weak volumes in intermodal, as we shed unprofitable accounts. The intermodal market was also generally slower due to lower fuel prices, which narrows the cost advantage of rail versus truck, especially when truck capacity is loose. In last mile, the demand for home delivery of heavy goods continues to gain momentum, driven primarily, and net revenue margin increased 165 basis points over last year due to operational improvements in our field operations. In Europe, our transportation business exceeded expectations.
Volumes were ahead of plan in our dedicated fleet, LTL, and brokerage businesses. The measures we're taking to improve pricing and cost management, as well as some impressive wins in our UK business, all contributed to improvements in both margins and earnings in Europe. Our logistics segment once again performed well in the quarter. In North America, we continued to grow earnings through strong operating management in the field. Our logistics business in Europe is performing significantly ahead of plan, due primarily to new business wins, especially in the UK. We began work on a wave of new contracts in the quarter, representing over EUR 100 million of annual new business, and we won several large contracts that will start up in the next few quarters. In addition, we addressed some unprofitable contracts and are now serving these customers on a more equitable basis.
In corporate, Q2 SG&A expense was $22.8 million, essentially flat with a year ago. Corporate expense included $4.7 million of one-time transaction expenses related to acquisitions, $1.4 million of non-cash share-based compensation expense, and $1.2 million of litigation. Depreciation and amortization to be in the range of $145 million-$150 million, based on our current estimate for Con-way intangible amortization. Interest expense in the quarter will be in the range of $75 million-$80 million, excluding the one-time commitment fees related to the Con-way financing.
Starting in 2016, when the acquisition of Con-way is fully reflected, we would expect EBITDA to be in the range of $165 million-$170 million per quarter, and interest expense to be in the range of $85 million-$90 million per quarter. Our effective tax rate was negative in the quarter. The valuation allowance in the U.S. limited our use of our U.S. deferred tax assets, while our European operations generated pre-tax earnings, resulting in a small tax expense, despite a consolidated pre-tax loss. We expect our Q4 effective tax rate to be in the range of 18%-22%, as the Con-way acquisition will result in a release of valuation allowance. We have a very strong liquidity position following the closing of Con-way.
As of November third, we had approximately $530 million of cash on our balance sheet. Concurrent with the acquisition, we increased our existing ABL revolver to $1 billion, which is completely undrawn. We ended the quarter with $5.8 billion of debt and capital leases, pro forma for the Con-way acquisition. Before I hand the call off to Scott, I want to share some data from Con-way's performance in the Q3 prior to our ownership. Con-way performed as we expected in the quarter, with revenue coming in lower, but with a better improvement in pricing. Con-way's consolidated revenue decreased 6.8% year-over-year to $1.4 billion, primarily due to lower fuel revenue and a decrease in transportation management revenue at Menlo....
This was partially offset by higher base freight rates and operating income, excluding $6 million related to the sale of XPO, the sale to XPO was $84 million. Con-way Freight, which is the LTL business, had revenue of $906 million, a 4.3% decrease from last year. While pricing improved, it wasn't sufficient to offset the decline from lower fuel surcharge revenue and lower tonnage. Revenue per hundredweight or yield, excluding fuel surcharge, continued to be strong and was up 4.2% for the quarter. When you include fuel surcharge revenue, yields declined 1.4% in the quarter compared to last year. Daily tonnages declined 3.1%, reflecting softer demand and the impact of pricing initiatives.
LTL operating income was $68 million in the quarter for an operating ratio of 92.5, in line with 92.4 last year. Con-way's logistics business, Menlo, reported Q3 gross revenue of $387 million, a 12.8% decrease from the prior year quarter. This was primarily due to a 19.3% decrease in revenue from transportation management services or TMS. Menlo net revenue was $189 million in the Q3, or flat compared to last year, and operating income increased 15.1% to $9 million, mainly due to growth and operating performance improvement at warehouse management sites. At Con-way Truckload, revenue in the quarter was $144 million, a 9.7% decrease from last year.
The majority of the decline was due to a 45.6% decrease in fuel surcharge revenue. Excluding the fuel impact, truckload revenue in the quarter was unchanged from the prior year period. Truckload operating income was $9 million in the quarter for an operating ratio of 93.7, compared to 93.3 a year ago. Now I'm going to turn the call over to Scott, and then we'll go to Q&A.
Scott Malat (Chief Strategy Officer)
Thanks, John. From a macro standpoint, U.S. volumes continue to be sluggish, which is having a mixed impact on our business. We've been able to drive lower transportation costs and higher margins that more than offset lower volumes. It's a different picture in Europe, where the macro trends have been improving, especially in Spain, in the U.K., and in France. We see a clear path to significantly increase the profitability of our business without the need for much top-line growth. Con-way is a good example of this. We're executing on the $170 million-$210 million in savings that we originally identified, with a clear line of sight on each item in the plan. A large piece of the savings is in procurement. Our North American and European teams are running a global procurement summit in France this week.
We plan on strategically sourcing everything from trucks and equipment to fuel, temporary labor, IT hardware, and office supplies. This is a large opportunity. We're attacking about $3.6 billion of addressable spend company-wide, so even a small percentage of savings will be meaningful. We also have significant potential in LTL to improve pricing, to better balance lanes and improve utilization, and we're planning a number of initiatives to optimize pickup and delivery while maintaining our industry-leading on-time service record and mitigating damage. We've been having lots of calls and meetings with the sales force. We're holding a national sales summit next week to realign the combined sales force, plan our go-to-market strategies, and identify cross-selling opportunities. We have 1,600 salespeople globally.
This is one of the largest, most experienced, and well-rounded sales organizations in the industry, and we're charging them with offering customers our complete range of services with market-leading positions in many of the fastest-growing areas. We can add a lot of value to customers. Our service range offers us cross-selling opportunities to grow, even if the market doesn't. Our strategic accounts team is continuing to make significant inroads with new, new customers. We told you about a big win last quarter in the U.S. for a new logistics contract with a European customer. Right now, we're in advanced stages with seven other large customers, where we're cross-selling our services across the pond. In one case, it's a joint proposal to do work in both North America and in Europe. These are customers where we already have strong relationships.
We can help them expand internationally by supporting supply chain strategies and organization. Another thing that's rising to the top of our priorities list is the synergy between LTL and last mile. These two networks are highly complementary. Our LTL platform in North America improves our national density to better reach the end customer. This is especially important to our e-commerce customers. We now have a comprehensive network to move everything from pallets to large-- new sales so far this year in last mile, with accounts tied to e-commerce making up a significant portion of this new business. We're in the startup phase on a number of new contracts that will drive growth well into next year. In Europe, where we're also a leader in less-than-truckload, the two services are just as complementary. We've made good progress towards developing our last mile business in Europe.
And are pursuing several sizable opportunities there, which will be supported by our LTL network. We have additional ways to increase the profitability of our business. For example, in Europe, we've uncovered opportunities to address locations that are under-earning. There are detailed plans in place to either turn these locations around or to close them, and we expect to continue to improve our North American transportation margins as we gain scale and as our sales reps increase in tenure. This is all in addition to the secular growth offered by our end markets. So we have many avenues to grow our profits, and we're in a strong position to drive that growth in any operating environment. We've met or exceeded every financial goal we've announced over the last four years. We're confident in our outlook for this year and our long-term financial targets.
With that, operator, we'll turn it over to questions.
Operator (participant)
Thank you. We will now begin the question-and-answer session. If you have a question, please press star one on your telephone keypad. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're on a speakerphone, please pick up your handset first before dialing the numbers. Once again, if you have a question, please press star one on your telephone keypad. And from Deutsche Bank, we have Rob Salmon online. Please go ahead.
Rob Salmon (Analyst)
Hey, good morning, guys, and thanks for taking my question.
Scott Malat (Chief Strategy Officer)
Good morning, Rob.
Rob Salmon (Analyst)
With regard to the long-term target, near and long-term targets, I appreciate kind of the additional visibility you guys are providing with us. They've strayed a little bit from kind of your recent top and bottom line forecast, in that you guys are making a statement that there's EBITDA improvement independent of the economy, that you guys see internally. Or is this more aligning kind of your street targets with how people at XPO are compensated?
Scott Malat (Chief Strategy Officer)
Well, there's two things here. One is we're not impervious to the economy. The economy, our business is certainly dependent on GDP. Our business is certainly dependent on the level of industrial and manufacturing activity. Our business is certainly dependent on retail activities, so we're very much part of the global economy. There's no question about that, of course. There are many things that we are doing and will continue to do and are planning to do, that regardless of what the economy does, will improve the ... Now, as a $15 billion company with almost $14 billion of costs, the opportunity to chip away at hundreds of millions of dollars of that $14 billion of costs is very concrete, and procurement is one big bucket that's independent of the economy.
So now we're one of the biggest purchasers in the world of trucks, of trailers, of fuel, of tires, of office supplies, of, we have $550 million of temporary labor on a global basis, of equipment that goes in warehouses, of IT services and supplies. So there's many, many categories of products and services that we're buying independently around the globe that we'll consolidate and do on a global sourcing basis, that we will save very, very substantial amounts of money on. That's one example of things that we're able to do regardless of the economy, but we clearly will be affected by the economy.
Rob Salmon (Analyst)
No, I, I appreciate that, that color. I guess, if I shift gears a little bit to, to the 2016 EBITDA guidance, can you give us a sense of, of the organic EBITDA improvement you're looking at the XPO businesses, excluding Con-way? And then how much of the $170-$210 million of profit improvement you guys are expecting in 2016? It sounds like you've already achieved over $30 million with, with regard to those synergies and any other either puts or takes that, that we should be thinking about, as we're updating our models for next year.
Scott Malat (Chief Strategy Officer)
All right. Thanks, Rob. In terms of the long term, we're looking for 15%, mid-teens type of EBITDA growth over the next several years. And the $170-$210 million is included in the guidance to get to 2018. We're expecting about half of that to roll in through 2016, the other half to roll in through 2017. So that we'll be at the full run rate of $170-$210 million. By the half of the savings, that's $170-$210 million.
Rob Salmon (Analyst)
Got it. Appreciate it. I'll hop back in the queue here. Thanks.
Scott Malat (Chief Strategy Officer)
Thanks, Rob.
Operator (participant)
From Citigroup, we have Chris Wetherbee. Please go ahead.
Chris Wetherbee (Analyst)
Hey, great. Thanks. Good morning, guys.
Scott Malat (Chief Strategy Officer)
Good morning, Chris.
Chris Wetherbee (Analyst)
Wanted to touch on, on that 2016 guide, just to say again, for a second, trying to sort of think about the business as it stands right now, and then, and maybe sort of, you know, how it should grow going forward. I think you're at about $1.1 billion EBITDA run rate, and, and maybe seasonality has something to play into this, 'cause I think the performance in the Q3 maybe would suggest a little bit better than that. But, you know, I guess as you think about sort of the Con-way piece of it, at least next year, when you think about the $30 million you've got, it looks like we're at about a $525-ish run rate on Con-way, based on the numbers, John, that you gave out.
So just kind of curious how we should think about the growth there as we think about 2016?
Scott Malat (Chief Strategy Officer)
Yeah, I think that we will be—today, we're on about a $1.1 billion EBITDA run rate. You're right in that the Q3 is a little bit seasonally stronger than the Q4. So all else being equal, you expect the Q3 to be stronger than the Q4. And just as an aside, Con-way will only be included in our results for the Q4 in November and in December. December is one of the weakest months of the year. So you will get a much lower number when you're looking from Q3 to Q4 than that run rate.
But as you move into 2016, you start with that $1.1 billion, which is an average type run rate of the year, and actually, the recorded number would be below that. We've been increasing our profitability as we went through 2016, and then you have growth on top of that to get to from $1.1 billion to $1.25 billion, which includes some of the cost savings that we outlined, plus organic growth.
Chris Wetherbee (Analyst)
Okay, so you are still looking for organic growth at Con-way in 2016?
Scott Malat (Chief Strategy Officer)
Oh, yes, absolutely.
Chris Wetherbee (Analyst)
Okay. Okay, no, that's helpful. I wanted to get a sense, you know, sort of the organic revenue growth versus the organic EBITDA growth at the businesses. It, it seems like you're going through a bit of a culling process on the intermodal side and maybe even on the New Breed side. Could you give us some help in terms of sort of how much of that, you know, impacted sort of the net revenue growth and maybe what's a, a bit more of a normalized number? Just trying to get a sense of kind of how that's sort of flowing through the business right now.
Scott Malat (Chief Strategy Officer)
Sure. One of the biggest areas, and you're exactly right, one of the biggest areas is in intermodal. In intermodal, there were, there was one large customer and some other customers that were not making money. So we decided to raise price or to let them go somewhere else, and we, and then backfill them with other customers that are that are more profitable. So in intermodal, our revenue was down about 17%. If you exclude intermodal from organic growth, we have organic growth of about 10%. So, in that, customers that were culled out. If you look at, in contract logistics, both in North America and in Europe, there's been a significant number of opportunities under earning, or in some cases, we have wound down some contracts, again, both in North America and in Europe.
That was a sizable percentage as well.
Chris Wetherbee (Analyst)
Okay. Okay, that's helpful. And then final question, just so when you think about the 2018 targets, I know they're exclusive of, of incremental M&A, but from a free cash perspective, it seems particularly once you get past some of the deal costs in 2016, that free cash will ramp up pretty meaningfully. I guess I just want to get, you know, Brad, your rough sense.
Scott Malat (Chief Strategy Officer)
We're going to pay down debt with the cash and improve the leverage of the company. And not this year, meaning not the rest of this year or next calendar year, I don't think those will be the time to be doing big acquisitions. I think with much better use of our time, just focus in on this beautiful business that we've put together and improve the level of customer service, improve coherent global organization. We can revisit the acquisition trail after that, but that's not our near-term focus at this point.
Chris Wetherbee (Analyst)
Okay. That's, that's helpful, guys. Thanks for the time. Appreciate it.
Scott Malat (Chief Strategy Officer)
Thank you.
Operator (participant)
From Credit Suisse, we have Allison Landry online. Please go ahead.
Allison Landry (Analyst)
Good morning, and congratulations on the quarter and closing the deal. Thinking about Pacer's historical relationship with the UP and the intermodal volume declines we're seeing there, maybe as well as some of the lingering service issues on the KCSM. Can you talk about where you are with respect to your original goals to drive cross-selling synergies and improve asset utilization? And maybe how you see each of those playing out over the next 12-24 months when you consider your strategy to increase intermodal for, you know, substituting for line haul at Con-way Freight.
Scott Malat (Chief Strategy Officer)
Yeah. Thanks, Allison. So in intermodal, we've improved profitability significantly from when we bought it and from a year ago, while revenues were down significantly. One of the ways that we've been able to do that is through participation rates. So we've been able to move more of the freight on the owner-operators that work exclusively with us. In terms of empty miles and other different pieces of metrics, it has not improved as much. Some of that has to do with volumes. Volumes in intermodal, in addition to the fact that we did take out some of the larger customers in the business, volumes have been relatively weak.
You noted some of the reasons, cross-border Mexico did have a tough quarter, and overall, fuel prices being low and truck availability being high is not a positive driver of volumes in intermodal. But despite that, we're able to improve the EBITDA. As we look more time, intermodal will absolutely be increasing because it's still cheaper than truck. But for right now, that's an area of our business that the volumes have been a little weaker. You know, Allison, from a customer service perspective, we're completely mode agnostic. So if intermodal at one point in time is better for our customers, that's great, and we have that to offer to them. If truck is better for them at a certain point in time or in a certain situation, that's fine, too.
The beauty of having a very diversified multimodal model is, at any one point in time, some of our, most of our businesses are doing just fine, some of them are doing not so great, and some of them are doing really great. So if we're in a certain part of the cycle where intermodal, for example, is a little bit soft, that's okay because the truck and truck brokerage part is doing much better, and sometimes it's different parts of the cycle.
Allison Landry (Analyst)
Okay, that, that's really helpful. Thanks. Thinking about, you know, I guess, how are you thinking about net CapEx at Con-way in 2016 relative to the $300 million, you know, they were expecting to spend this year? And in the event that the U.S. is headed for a broader recession, is this one of the levers you think you can pull? And maybe to what extent could you reduce that capital budget?
John Hardig (CFO)
Hey, Allison, it's John Hardig. Thank you for that question. Yeah, in terms of CapEx next year, this year, we're actually going to come in a little under $300 million at Con-way in terms of total net CapEx.
... we don't expect that to grow a lot in a, you know, even if the economy were to stay, you know, consistent with where it is right now. In fact, we'll be looking to drive more utilization out of this network over time, and that could actually reduce our total CapEx need as we go forward. I think if the economy were to get soft, and we wanted to manage that CapEx spend, we've got a lot of flexibility to do that. You know, one of the great things about LTL assets is that you run them for 10 years, and every year, you're replacing, you know, only a tenth of your fleet. And that allows you really to defer CapEx for a good period of time if, when you have an economic downturn.
And so if you look at what Con-way did in 2009, you'd see that they cut back their CapEx dramatically, and certainly, we've got the flexibility to do that if we need to.
Allison Landry (Analyst)
Okay, great. Thank you for the time.
John Hardig (CFO)
Sure. Thank you.
Operator (participant)
From Morgan Stanley, we have Alex Vecchio online. Please go ahead.
Alex Vecchio (Analyst)
Good morning. Thanks for taking my questions. Brad or Scott, you know, it's been about two months since you signed the Conway deal, and presumably, you've learned a lot more about the company than you had during your diligence prior to announcing the agreement to acquire it. So can you talk a little bit to what the incremental things you may have learned about Conway, and specifically, the extent to which there are more opportunities for improvement that may be even incremental to the goals you've established right now in this 170-210 in terms of synergies, to the extent that, you know, there are actually more opportunities that you've learned about?
Brad Jacobs (CEO)
Alex, there's a ton of opportunities. There are so many initiatives that we have begun to improve the business. It starts from the sales force. It starts from the sales organization. We're having two big sales summits this week and next week. We're energizing and incentivizing the sales force. We're connecting the sales force to the rest of the organization. We're studying the freight that we're taking and purging unattractive freight or making sure that we're charging for it appropriately, appropriately. We are growing the business with small and medium-sized customers, as well as the 3PLs, in order to balance the network. We are looking at rates all across the spectrum on a lane-by-lane, customer-customer basis, and we're optimizing those rates. That means raising them where it makes sense, that means lowering them where it makes sense. We're not going to casually waive accessorials.
If we're going to do liftgate, if we're going to do residential deliveries, if we're going to do inside deliveries, if we're going to correct bills due to reweigh, if there's excessive length, we're going to charge fairly for that. We're going to collect on that. We're going to optimize on P&D with optimization software, with route planning, with loads planning. We're going to increase every possible way, cross-dock efficiency, and build on the great safety ratios that we've got already. We're going to install dimensioner, dimensioners, which aren't installed yet in the cross-docks. We're gonna decrease line haul costs by bringing more of that line haul onto our own trucks and by purchasing transportation more efficiently. We're going to accelerate the IT roadmap to support all these projects.
And then we're gonna continue to rationalize the back office and to capitalize on the synergies with the rest of XPO. And I mentioned before, the procurement opportunity, which is really, really immense, much larger than I had originally expected. And then there's the cross-selling opportunity. All the ways that we can take the customers here at the former Con-way and the former Menlo, and offer them services other than LTL and other than logistics, that they've already been doing with the company prior. This is a really, really big opportunity. And to offer all our customers the services of LTL and the services that Con-way/Menlo were offering before. So it's really just a world of enormous amounts of opportunity, and now bringing Tony in next week, we're going to work closely and really execute on all these.
The team is very, very invigorated here. I mean, the team here in Ann Arbor and throughout the rest of the former Conway organization, the former Menlo organization, morale is very, very high and very united and determined to increase the profitability of the business and increase customer satisfaction as well. Already from a high level of customer satisfaction, but bring it up to another level. I mean, I could keep going on for hours, but those are the main things off the top of my head that we're working on at the moment.
Alex Vecchio (Analyst)
Yeah, that's, that's actually really helpful color. Thank you for that. You know, the next thing I wanted to ask about was, you know, on the deferred LTL offering that I think you're planning to roll out. Could you maybe provide some more rationale behind that initiative, and then maybe talk to what extent this is gonna impact Con-way's density and profitability going forward? And what kind of capital investments or costs would be required associated with the rollout of the deferred service offering?
Brad Jacobs (CEO)
Sure. So I have to get in the habit of not saying Con-way Freight. XPO LTL, so we don't use the names Con-way and Menlo. We've retired those names, and everything is XPO Logistics now. So in our LTL division of XPO Logistics, we offer more next-day and two-day LTL lanes than anybody. So we are the premier provider of priority service in LTL. What I want to do is build up on that terminal network, build up on that service organization to also offer an economy product, a deferred product for longer shipments is a very large market, which Con-way really wasn't going after very intensely at all. So that's something that we absolutely will roll out. We will not roll that out in the next six months.
That's something that's a 1-2-year project because it has to be done very carefully and has to be mapped out and engineered, a big IT component to it, and there's a compensation component to it, and there's a route out, there's a lot, and executed flawlessly, so there's not a beat missed on customer service. But we're doing that. We have resources associated to that and dedicated to it, and that's gonna take 1 or 2 years to open up. That's not a top-of-list project right now. It's an important one, and it's one that's going on in the other side of the room.
But the things I mentioned before about the sales and about purging the unattractive freight, and about doing more business with the small and medium-sized customers and the 3PLs, and charging for the accessorials, and P&D optimization software, and the cross-dock efficiency, and the dimensioners, all those things, the procurement. Those are the main things that are immediate, that we're jumping on like our hair's on fire.
Alex Vecchio (Analyst)
Great. Okay, that's very helpful. Appreciate the time.
Brad Jacobs (CEO)
Thank you.
Operator (participant)
From Oppenheimer, we have Scott Schneeberger online. Please go ahead.
Scott Schneeberger (Analyst)
Thanks. Good morning. If we could focus over on contract logistics, it looks like a lot happened in the quarter and a bunch of new contract wins. Could you speak to what verticals and a little bit about that North American, Europe opportunities? And then a follow-up on that would be a little bit of your discussion on shredding of, shedding of unprofitable business and logistics. Thanks.
John Hardig (CFO)
Yeah. Scott, it's John Hardig. So the-- in terms of the wins in Europe, they were pretty broad-based, all across the board in terms of, you know, their, their customer base, which is a, which is a broad industry vertical exposure. So I wouldn't say there was any, any one particular, vertical that was stronger than another in term, in terms of wins. Although they've had a lot of retail and e-commerce wins of late, that have been driving a lot of their, their, upsell, you know, their, their increased activity level. And in, in terms of, shedding business, I mean, really, it's been mainly in the North American area where we-
Brad Jacobs (CEO)
May I add to that also? A lot of the wins in Europe were in the UK. It was a big, big jump. If you actually look at, to back up John's point, if you look at our mix of, and we're looking at the mix of new customers and then existing customers, we have no end market that's more than 15% of our total. So retail is our largest end market at 15%, and then food and beverage is at 12%, and then it starts to fall off after that. So there's, we're, we're very well diversified across those and in terms of our unprofitable customers and unprofitable lanes. We're not a nonprofit business.
We are a for-profit business, and we have over 50,000 customers, and I'm sorry to admit, there's a fair chunk of them that we're losing money on, and that's not fair. We have costs, and we have obligations to our shareholders and our employees, and we need to basically go to those customers and have discussions about pricing and or when contracts expire not renew them because we're not in the business of doing unprofitable business. That's not what we're here for. So unprofitable locations, unprofitable customers, unprofitable lanes, this should not be in our vocabulary.
Scott Schneeberger (Analyst)
Thanks, guys. That's helpful. And if I could slide one more in, going over to the transportation side. Scott, following up some attrition, some culling of revenue right now, when do you anticipate a swing back to revenue growth in intermodal? I imagine it'll take some time to get some of these through, but could you just elaborate a little bit there? Thanks.
Brad Jacobs (CEO)
I expect things to grow from here. We have culled some freight, we have made lanes more profitable. It will take another few quarters for us to lap that. So in terms of a year-over-year growth, sequentially, we'll be growing, but year-over-year growth, you'll start to see that in the beginning of next year, Q2 of next year.
The service levels have come back on the rails. What will determine how much converts to intermodal or not is really the difference between the pricing on intermodal versus trucking. As I said before to Allison, we're agnostic on that. We serve our customers with intermodal, we serve our customers with truck, whatever makes most sense. I think that'll be the main determining factor.
Scott Schneeberger (Analyst)
Thanks for taking my questions, guys. I have a few questions around labor. First, can you talk about the Teamsters strike in October and any impact that you guys think that that might have on the Q4?
Brad Jacobs (CEO)
Zeke, I believe the Teamsters have wasted their time chasing the former Con-way and chasing XPO. They have had no success, and this year they had three unionization attempts against roughly about 100 employees in three locations at Con-way before we bought them, and they were defeated in two of them. And actually, it wasn't Teamsters; it was another union and withdrew on the third, because probably because in most cases unions withdraw votes when they think they're not going to win them. The employee base here at XPO is happy to work for XPO. They're not interested in having an intermediary between us and them. I don't really view the unions as a serious threat. I do view it as a distraction and kind of a nuisance.
Scott Schneeberger (Analyst)
Okay, great. Thanks. And then more broadly, can you discuss any warehousing and logistics, labor issues, any shortages there? And then what kind of wage pressure you're seeing given the minimum wage hikes? And lastly, sort of any geographical pockets of labor tightness?
Brad Jacobs (CEO)
...On the labor, it has been something that's been front-page news. We've done a very good job of planning. We've done a very good job of going back to some temporary labor that we've used in other years and have had no issues in terms of getting temporary labor to ramp up during seasonal periods.
Operator (participant)
From Cowen, we have Jason Seidl online. Please go ahead.
Jason Seidl (Analyst)
Thank you. Good morning, gentlemen. A couple quick questions. Have you guys had any feedback from some of the other less-than-truckload carriers that you've acquired Con-way? Have any sort of backed down from doing business with you guys?
Brad Jacobs (CEO)
Yeah, a couple have backed down. It's not a material amount at all, whatsoever. I consider that petty, to be honest. I mean, we deal with other 3PLs all the time in most of our businesses here and in Europe. We have a great relationship with our competitors. Sometimes we're providing capacity, sometimes we're using their capacity. There's no reason in the world that 3PLs can't figure out, and even capacity providers can't figure out, how to do business with each other in an ethical way, in a fair way, in a reasonable way, in a commercial way that makes money for both sides. We have no problem with that. Some companies have psychological issues with that, and so be it.
Jason Seidl (Analyst)
Okay, fair enough. You mentioned, Brad, I think that you're sort of agnostic, whether you ship something intermodal or you either broker something on truck for your company. I get that, but, you know, how is intermodal gonna, you know, increase its volume now with an improving rail market? Are they gonna have to come back on price or just wait for fuel to eventually increase?
Brad Jacobs (CEO)
Well, it's still cheaper to move by intermodal versus truck. It's very important to have good service levels. We've been very focused on investing in technology in that area through the Rail Optimizer to improve our service levels. If service levels are approaching and very close to truckload levels and the price is less expensive, we continually believe that just by the hidden hand of free markets, business is going to migrate from truckload to intermodal. I don't think that's changed over the long term of things. When you do have service disruptions and then prices of fuel are low and the amount of a discount for intermodal versus truckload narrows between all those factors, you're not gonna get a big drive of conversion. But over the long term, we expect that to pick right back up again.
Jason Seidl (Analyst)
Scott, where would you say we are now, sort of intermodal service versus, you know, trucking service on a comparative basis? I know we've improved, but where are we comparatively?
Scott Malat (Chief Strategy Officer)
It's a few percentage points. In general, truckloads are in the 97% range. We have a little bit higher than that in our division. And intermodal is generally in the mid- to lower 90s.
Jason Seidl (Analyst)
Okay. That's, that's a good color. One follow-up question here. You know, look, Europe's had a plan. One of your competitors in Europe talked about seeing increased competition in France. Is, is Norbert gaining market share in its home market? And what's the split, sort of, with Norbert between France and non-France today?
Brad Jacobs (CEO)
Norbert, Norbert. Oh, you mean XPO Logistics Europe. Okay.
Jason Seidl (Analyst)
Uh, yes.
Brad Jacobs (CEO)
Sorry. Sorry. XPO Logistics Europe is just... I would, I would use the baseball, and I almost gave and said, hitting the leather off the ball, but that would be very, very poor. That'd be an American kind of way of looking at Europe. Baseball isn't big over there. XPO Europe is doing great. We beat EBITDA in Europe Logistics 17%. We beat transport EBITDA by 26%. These are great numbers. And so are we taking market share? Yeah, we probably are. We're not doing that consciously. We're just focusing on ourselves and on customer service and on sales and rewarding our salespeople for going out and doing a good job and just running the business very well.
Scott Malat (Chief Strategy Officer)
Overall, France is about 13% of our combined pro forma sales, including Con-way. The UK is about 10%, and Spain is about 4%.
Jason Seidl (Analyst)
Okay, well, we'll say they're kicking the leather off the football, i.e., soccer ball then.
Brad Jacobs (CEO)
There you go.
Jason Seidl (Analyst)
How's that? There we go.
Brad Jacobs (CEO)
That's exactly-
Jason Seidl (Analyst)
All right, guys, appreciate the time, as always.
Brad Jacobs (CEO)
Thank you, Jason.
Operator (participant)
From Barclays, we have Brandon Oglenski online. Please go ahead.
Brandon Oglenski (Analyst)
Hey, good morning, everyone. Thanks for getting me on the call here.
Brad Jacobs (CEO)
No problem.
Brandon Oglenski (Analyst)
Scott or John, did you guys walk through... Sorry, because I joined the call a little bit late. But did you talk about organic growth? I heard that at transportation, if you back out the intermodal business that you trimmed, I think you said 10% growth. But what was the organic growth rate for logistics this quarter, too?
Scott Malat (Chief Strategy Officer)
We didn't own logistics last year for the full quarter. The first logistics business that we did acquire was the former New Breed, now XPO Logistics Supply Chain. That was in the middle of the Q3 of last year. In general, EBITDA growth in that business has been in the low double digits.
Brandon Oglenski (Analyst)
Okay, and was that consistent this quarter, too?
Scott Malat (Chief Strategy Officer)
It was. Yeah, it was, it was very much in line. It's interesting, since we made that purchase, our business in supply chain has beaten budget very consistently. It's been a very, very well-run business in North America, in supply chain, and we've beaten budget almost every single month, if not every month. There might have been one in there that I'm not thinking of, but I think almost in every single month, we've beaten budget.
Brandon Oglenski (Analyst)
Okay, well, in that context, I guess, because last time you provided updated long-term guidance, you did, I believe, provide organic growth of, I think it was 7%-9%. Can you talk to what growth rates you're assuming now for your 2018 targets that you've put out there?
Scott Malat (Chief Strategy Officer)
So we're assuming mid-teens EBITDA growth. In terms of top line, we would expect that to slow as it has now. That'll be based on business that we are culling, business that we're passing up in favor of-
Brad Jacobs (CEO)
... higher margin business, and it'll depend on the economy. But in general, we're looking for significant margin improvement over the next several years, and the opportunity could be upwards of 200 basis points and 15, mid-teens percent EBITDA growth.
Brandon Oglenski (Analyst)
Okay. I, I think some of the concern, you know, that might have crept into the stock a little bit here is that you've done so much on the acquisition side that maybe the organization lost a little bit of focus around growth, but I guess it doesn't appear to be that.
Brad Jacobs (CEO)
Absolutely not.
Brandon Oglenski (Analyst)
That doesn't appear to be the case.
Brad Jacobs (CEO)
Absolutely not. We certainly have done a lot of acquisitions. We've done 16 acquisitions in 4 years. At the same time, the organization has been laser-focused on operational excellence, on closing the books promptly every single month, and having a variance analysis and an operating review to what the plan was, taking any corrective actions that were needed, being very focused on customer service, and having high customer service levels. The business has been run very, very well, as if it wasn't a highly acquisitive company. It will run even more efficiently now that we've got time to step back and focus more of our management time solely on non-acquisition activity. But it's been focusing on growth. It's been focusing on customer service from day one.
Brandon Oglenski (Analyst)
Okay. Thanks for that, Brad. And John, when we think about EBITDA of about $1.25 billion next year, how do we reconcile that to what you expect free cash flow to be? And I know we talked about Con-way CapEx, but can you talk about overall CapEx expectations for next year?
John Hardig (CFO)
Sure. Overall CapEx for 2016, we think will still be slightly under $500 million for the year. And so when you think about cash flow, you know, we're gonna have a, you know, $1.25 billion of EBITDA. CapEx will be just under $500 million. Interest will be, you know, for the year, $340-$350 million or so. And then we're really not gonna be a federal U.S. taxpayer next year, but we'll pay a little bit of European tax. So total income tax, cash paid will be something under $20 million next year. Working capital is gonna be, you know, something around $70 million or so next year.
And that'll grow, you know, with revenues in the mid-teens% as we look out beyond 2016.
Brandon Oglenski (Analyst)
Okay, appreciate it. Thank you.
Operator (participant)
From William Blair, we have Nate Brochmann online. Please go ahead.
Nate Brochmann (Equity Research Analyst)
Yes, thanks for taking the question. You know, Brad, obviously, you have a lot of opportunity, you know, ahead of you here with, you know, and again, like as a lot of people alluded to, a lot of heavy lifting. Can you talk about, like, where you really see the challenges as you shift from kind of more the acquisitive story to more the organic growth story? And where you do... I mean, obviously, you pointed out all the opportunity, but in terms of the process, like, you know, whether it's a slow grind or whether it's a faster pace, and what are the opportunities that are a little bit quicker versus a little bit longer?
Brad Jacobs (CEO)
It's a fast grind. It's not a certainly not a slow pace, and it's not a slow grind, but it is being on top of the details. It's being very well organized, having a very clear plan, having a very clear time and responsibilities mapped out, having a high level of accountability, making sure that all parts of the organization know what all the other parts of the organization doing, are doing, and how everyone fits in to the main goals of the or- of the whole company, and keeping everyone's morale up, keeping everyone's engagement up, keeping everyone focused on the, on the plan, on results, on achievements. And that's what we're doing. It's pure meat, potatoes, execution, which is the best part of the business. It's focusing on customers, customer satisfaction, sales, sales, sales, efficiencies at every level.
Nate Brochmann (Equity Research Analyst)
And then kind of, so that's the process side. How about the technology side in terms of, you know, going in there and overlapping everything onto the one platform? Obviously, you guys have invested a lot there. You know, talk a little bit more about the process with the technology integration and then what the opportunities are once you get that all in place.
Brad Jacobs (CEO)
Technology is something that we're very good at. Integration is something we're very good at. We have hundreds of millions of dollars a year invested in our IT organization, and we're committed to continue doing that. There's ways to optimize the business at what we've acquired through applying technology. We've had a lot of success in our prior acquisitions in bringing technology to them. In some of the acquisitions, we gained some great technology, and I'm extremely confident that the IT roadmap that's gonna support the initiatives that I mentioned before for here at the LTL business are gonna be really solid. We've already had a lot accomplished, even though we've only owned the company for less than a week.
I mean, transferring all the emails over, keeping the whole thing, stable, getting the website over, getting all the social media over, getting the, OpEx and CapEx plans for the IT rationalized, getting the IT organization rationalized. We've already renegotiated or are in the process of renegotiating some of the IT contracts. There's a lot going on, and Mario and his team are now fully the former Con-way IT organization, all part of the same IT organization. It's not our organization and their IT organization. It's one IT organization. They're the busy way at, rolling out all the systems and prioritizing them to support all the strategic plan levers that I mentioned earlier in the call.
Nate Brochmann (Equity Research Analyst)
And then just finally, thanks for that. But just finally then, I mean, you've always been focused on people from day one, and that's been something that I know that you've always been laser focused on. How do you personally now as CEO, looking at this broader organization with, you know, a fair amount of moving pieces to it, how do you approach the business now differently, as you know, you have the piece of the puzzle that you want and now, you know, putting them together? How do you shift your role in terms of thinking about that and how you think about, you know, the people that you have in place and running a, you know, slightly more complex business?
Brad Jacobs (CEO)
Look, my role is exactly the same as it's been. I'm a CEO. The buck stops here. I get a lot of opinions from a lot of great people and a lot of people smarter than I am, and a lot of people who know their part of the business better than I do. At the end of the day, I and the board pull it all together and sign off on a strategic plan, and then I'm in charge of making sure that the whole team stays unified in executing that plan. That's the same exact role I've had all along, and it's the same role I've had in all my companies.
Nate Brochmann (Equity Research Analyst)
Fair enough. Thanks for the time.
Brad Jacobs (CEO)
Thank you.
Operator (participant)
From Wells Fargo, we have Casey Deak online. Please go ahead.
Casey Deak (Analyst)
Thank you. Morning, everyone.
Brad Jacobs (CEO)
Good morning, Casey.
Casey Deak (Analyst)
Just wanted to ask, in your prior targets that you had out there with the $23 billion in revenue, embedded in there was $4 billion of organic growth. Is that a number that we should still anticipate? Does that change at all with Con-way coming in the mix? Kind of just your thoughts around how that $4 billion organic over the next three years.
Scott Malat (Chief Strategy Officer)
It does change. We'll likely have higher margins over the next several years because of the acquisition of Conway. So our opportunity set is to get North America potentially into the double digits from the 7.5% on a blended basis it is today. From an overall organization, we have the opportunity to improve our margins around a little over 200 basis points over the next several years. The organic EBITDA growth will be higher. That's why we raised the targets and brought them forward a year. The larger piece will come from margin improvement.
Casey Deak (Analyst)
Okay. Good. And one last one for you, kind of on the legacy, what was Con-way Manufacturing? Don't know how you're labeling that today, but, how does that fit into the overall plan? Do you view that as a strategic fit, as, you know, plans going forward?
Scott Malat (Chief Strategy Officer)
We haven't made any decisions on that piece. I would say that it does give you an advantage, especially if the shift from 28-foot to 33-foot, so it could give you an advantage. We haven't made any decision on it, but it is a well-run business. We've met them, we've looked over the numbers. It's very efficient, very well run, but we haven't made any long-term decisions on it.
Casey Deak (Analyst)
Okay. Thanks for the time, guys.
Brad Jacobs (CEO)
Thank you.
Operator (participant)
From KeyBanc Capital Markets, we have Todd Fowler online. Please go ahead.
Brad Jacobs (CEO)
Morning, Todd.
Todd Fowler (Analyst)
Great, thanks. Good morning, Brad. It's not like this every November in the Midwest. I hope you know that from a weather standpoint. But, hey, where I just wanted to start on a near-term basis, you know, if we adjust for the acquisition costs for Con-way here in the Q4, would your expectation be that you'd be positive from a net income standpoint in the Q4?
Brad Jacobs (CEO)
No, from a net income? Okay, let me address that. There's EBITDA, there's net income. We have a issue in that we've been a very acquisitive company, and due to all those acquisitions, we're going to be amortizing intangibles, non-cash intangibles, for many years, for a long time to come. So from a GAAP basis, it's. You're going to be seeing losses for at least another year, maybe longer, because of the significant non-cash amortization that we're going to have. In addition, you've seen in this quarter, for example, you've seen a lot of non-cash accounting charges related to the equity offering that we did earlier, the PIPE that we did. There was about $42 million of non-cash amortization of a transaction and integration costs, lawyers, bankers, audit fees, third parties, the consultants, things that were involved in integration.
And we also had $16 million of interest expense in the quarter, where there was a negative arbitrage, where we had pre-funded and raised debt that we're paying interest on. In this case, it was $16 million of interest in the quarter before we closed on Con-way. So the money was sitting in the bank. Those kind of acquisition cash charges will go away. But the amortization of the non-cash amortization of intangibles, they're gonna be there. If people have problems with that, they should talk to FASB and the SEC.
John Hardig (CFO)
Hey, Todd, this is John. We're and the accountants aren't finished with that work yet, so that's a big question mark in terms of the Q4.
Todd Fowler (Analyst)
John, you did have-
Scott Malat (Chief Strategy Officer)
To add on to that-
Todd Fowler (Analyst)
Sorry, Scott.
Scott Malat (Chief Strategy Officer)
Like we were saying, the seasonality-wise, it's gonna be lower than the Q3, so you'd expect the 166 to come down a bit. And then in Con-way, we're only getting two months out of the year, and we're two months out of the quarter instead of three months, and one of those months is December, which is a very slow month in general. So maybe $65 million added from the Con-way business, so it's not indicative of a full quarter.
Brad Jacobs (CEO)
We are free cash flow positive in the quarter, and we will continue to increase the amount of free cash flow positivity going forward.
Todd Fowler (Analyst)
No, and I, I appreciate and I understand all that. Of course, you know, I think that most of the Street is focused on the EBITDA growth, but it is helpful to get, you know, your perspective and the context on what's happening from a net income perspective, because it is a question and it is an area that people look at. All of that's helpful. Just my second question, it's a little bit more longer term, but, you know, going back to the 2018 guidance and the fact that you don't have acquisitions in there, you know, when I model out what the free cash could look like on some of the numbers that John gave, you know, I'm coming up very easily under 3 turns levered, you know, maybe under 2.5 turns levered as you get out to 2018.
That seems well within your prior comfort range. I guess, just to be clear, I mean, why not put acquisitions in the numbers? Is that because of where the capital markets are now and kind of the view on leverage? Is there something else that you're thinking about as far as, you know, not including acquisitions in the 2018 targets at this point?
Scott Malat (Chief Strategy Officer)
... It's, it's just not our focus right now. Our focus right now, and the biggest lever we have to pull to improve value, to create shareholder value, is to improve the businesses we have today, to optimize our existing operations. We have a major opportunity to increase margins, to make the organization work better together, from global procurement, to cross-selling, to all the opportunities that are in front of us. So it's not something we're focused on for at least the next 12 months. If we have done that, taking advantage of more of those opportunities, and we look forward, and it makes sense to focus on acquisitions in future years, we'll then, we'll then, talk about those.
Brad Jacobs (CEO)
We are focused on four things. We are focused on bringing levels of customer service to higher and higher and higher levels, and being known and respected in the industry as the provider of world-class customer service in each one of the service verticals. We are focused on having a workplace where employees, we're a magnet for talent, where people don't want to leave, they just want to come, come, come to us. A real engaged workplace. We are thirdly focused on shareholder returns, and fourth, we're focused on reducing our debt level. So for all four of those strategic goals, acquisitions is not the right thing right now in our life cycle. Right now, we can achieve all four of those things by slowing down that whole acquisition bandwagon and focusing in on operations.
Scott Malat (Chief Strategy Officer)
Okay, sounds good. Thanks so much for the time, and good luck.
Brad Jacobs (CEO)
Thank you, Todd.
Operator (participant)
From Stephens, we have Jack Atkins. Please go ahead, sir.
Brad Jacobs (CEO)
Morning, Jack.
Jack Atkins (Analyst)
Hey, good morning, guys. Thanks for the time. So, you know, Brad, I know several people have tried to ask and get you guys to comment on the organic growth that's assumed in the guidance, and I know there's some hesitancy to do that. But, could you maybe explain why organic growth is slowing in your outlook, when theoretically, there's significant amount of revenue synergies to be had in this model now that you have all these different businesses tied together?
Brad Jacobs (CEO)
So organic growth, obviously, is very important, and there's countervailing forces helping and hurting organic growth. On the help side, we've got a very focused sales force worldwide, and we've incentivized them, and with the new acquisition, we're improving, we're going to improve the incentivization program so that people are motivated on selling, selling, selling, and particularly cross-selling. We have so many thousands and thousands of customers that we're only doing one or two service offerings to, and they, they, they could use... We can help them. We have other service offerings that we're very good at, that we're number one or two at, and we're going to sell to those. That's going to help organic growth. What's going to hurt organic growth is on the economy. The economy is sluggish. It's still growing. It's growing at low single digits, but it's growing, but it's not growing gangbusters.
The other factor that's going to hurt organic growth, it's going to be a negative factor in organic growth, is we are going to shed lots of unprofitable business. There's no reason to continue business that's losing money or to double down on business that's growing money, just for the sake of posting a, a revenue growth. It makes much more sense to focus on profitable business. Now, that all being said, mid-single digits organic growth is a very reasonable and to some extent, conservative assumption that we feel comfortable with.
Jack Atkins (Analyst)
Okay. Okay, thank you for that, color there, Brad. And then, you know, you've talked publicly, Brad, I think about selling the Con-way Truckload business, if a potential suitor were to come along. You know, I guess the rationale that you guys put out there for doing the Con-way transaction was it provided assets when capacity gets tight. Could you maybe explain why selling the truckload business would make sense in that scenario?
Brad Jacobs (CEO)
Well, we might sell the Con-way Truckload business, or we might not. The business is actually performing better than most truckload companies right now. Even though you have a freight environment for truckload, where tonnage is soft, load count there has been holding flat, and it's positive on a sequential basis. We get a 20-day rolling report on various metrics. And in that trailing 20-day report, revenue is up year-over-year, which is impressive, especially with fuel being down, and our revenue, excluding fuel, is above last year. And the main reason that we're bucking the trend is that 35% of our truckload revenue is cross-border Mexico, and that's got a different dynamic than the U.S. market.
Rate per loaded miles up over 2014, though slightly, and our empty miles in truckload have improved versus 2014. It was about 9% versus 9.5% last year. So there, there's some good things going on in Con-way Truckload. That being said, we have received serious interest from a number of parties who are spending time and spending money on lawyers and time, hired bankers and so forth. And as a public company, we're going to take those very seriously. And we have a little process going on, and we're going to bring that to a head, fairly soon, and we'll make a decision.
Jack Atkins (Analyst)
Okay, great. Thanks for the time.
Brad Jacobs (CEO)
Thank you, Jack.
Operator (participant)
Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.
Brad Jacobs (CEO)
Thank you.
Operator (participant)
Thank you.