Landstar System, Inc. Q4 2008 Earnings Call Transcript

Jan.28.09 | About: Landstar System, (LSTR)

Landstar System, Inc. (NASDAQ:LSTR)

Q4 2008 Earnings Call Transcript

January 28, 2009 4:15 pm ET

Executives

Henry Gerkens – President and CEO

Jim Gattoni – VP and CFO

Pat O’Malley – President, Landstar Carrier Group

Jim Handoush – President, Landstar Global Logistics, Inc.

Analysts

Jon Langenfeld – Robert W. Baird

Justin Yagerman – Wachovia

Chris Ceraso – Credit Suisse

Tom Wadewitz – JPMorgan

Todd Fowler – KeyBanc Capital Markets

David Campbell – Thompson, Davis & Co.

John Larkin – Stifel Nicolaus

Michael Beer – Wolfe Research

Donald Broughton – Avondale

Anand Waller [ph] – Buoyant Advisors [ph]

Operator

Good afternoon and welcome to Landstar System, Inc.’s year-end 2008 earnings release conference call. All lines will be in a listen-only mode until the formal question-and-answer session. Today’s call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Henry Gerkens, President and Chief Executive Officer; Jim Gattoni, Vice President and Chief Financial Officer; Pat O’Malley, President, Landstar Carrier Group; Jim Handoush, President, Landstar Global Logistics.

Now I would like to turn the call over to Mr. Henry Gerkens. Sir, you may begin.

Henry Gerkens

Thanks, Terry. And good afternoon and welcome to the Landstar 2008 fourth quarter and year-end earnings conference call. This conference call will be limited to no more than one hour. Again, please limit your questions to no more than two questions each when the question-and-answer period begins.

But before we begin, let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, I and other members of Landstar’s management may make certain statements containing forward-looking statements, such statements as statements which relate to Landstar’s business objectives, plans, strategies and expectations.

Such statements are by nature subject to uncertainties and risks, including but not limited to the operational, financial and legal risks detailed in Landstar’s Form 10-K for the 2007 fiscal year described in the section Risk Factors and other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements, and Landstar undertakes no obligation to publicly update or revise any forward-looking statements.

As I did in the 2008 fourth quarter mid-quarter update call, I’m going to divide this conference call into three segments. First, a recap of the 2008 fiscal year; secondly, some detail on what occurred in the 2008 fourth quarter; and thirdly, what we anticipate seeing in 2009.

2008 was a very volatile year to say the least. And so what I’m going to say is somewhat repetitive of what I said on the fourth quarter mid-quarter update call, but I think it is important to understand the trends. At the beginning of 2008, the market had excess capacity. There was low freight demand, downward pressure on price, and escalating fuel prices.

As a result, many small carriers and single owner/operators went out of business and many large carriers permanently reduced the size of their company iron fleet. Demand started to improve in the second quarter and pricing seemed to have stabilized. Fuel prices continued to escalate. In the third quarter, the freight environment began to reverse itself yet again. Towards the end of the third quarter demand slowed. There was again downward pressure on price, capacity began to loosen, and fuel prices began to dramatically decline.

Freight demand continued to decline in the 2008 fourth quarter and was at its lowest levels of the year in December 2008. December 2008 revenue was 19% below revenue generated in the December 2007. And although I anticipated a continued decline in freight demand in December, the volume falloff was far worse than anticipated. Year ended with excess capacity in the market, low freight demand, downward pressure on price, and lower fuel prices.

Overall, Landstar’s revenue for fiscal 2008 was $2.6 billion, up 6% from 2007. And 2008 diluted earnings per share was $2.10 versus $1.99 in 2007. Landstar’s impressive annual results were despite a dramatic decline in all automotive related freighted hauls, which was down 20% year-over-year and an overall decline in the fourth quarter revenue. Landstar finished the year with 484 agents who generated over $1 million in Landstar revenue versus 495 in 2007.

The decline of 11 agents who did an excess of $1 million in Landstar revenue was largely due to the automotive and fourth quarter revenue declines. It should be noted, however, and that in 2008 there were 92 agent locations who generated between $750,000 and $999,000 in Landstar versus 61 in 2007. Overall, Landstar had 1,073 agent locations open both 2007 and 2008. Revenue at these locations increased approximately 5% year-over-year.

In the 2008 fourth quarter we saw a continued decline in demand, which resulted in a 6% decline in consolidated revenue. In the fourth quarter, automotive-related revenue and substitute line haul revenue declined quarter-over-quarter by 14% and 21% respectively. Revenue hauled by BCOs was down 7%, revenue hauled by broker carriers was down 3%, and revenue hauled through rail intermodal carriers was down 30%. The intermodal revenue decline was largely due to the shortfall in substitute line haul service revenue previously mentioned.

From a macro perspective, the ISM index fell in every month of the fourth quarter, with December at the lowest level since June of 1980. Housing trends continued its downward trend and unemployment continued to rise. It is not a pretty picture, and it is the worst freight environment I have seen.

Despite all of this, Landstar’s fourth quarter diluted earnings per share was $0.47 per share and within our December mid-quarter update revised earnings guidance. As demonstrated from these results, our P&L is somewhat insulated from the effects of the recession due to our variable cost business model.

Let me highlight a few operating statistics of the quarter. Our agent location base was up by 25 locations from the end of the 2008 third quarter. Trucks supplied by BCOs increased 90 from the end of the third quarter and our approved broker carrier capacity increased by 651 [ph] carriers from the end of the third quarter.

As others struggled to survive, Landstar used the current environment as opportunity. It is a time when Landstar should increase its productive agent base and third party capacity base. As an example, 18 of the new agents added in the fourth quarter alone have an annual revenue run rate of approximately $1 million or more each. We continue to have a robust agent pipeline and it is as strong as I’ve ever seen it. I expect Landstar to continue to add productive agents throughout 2009.

Although the current operating environment over the next number of months might be uncertain, Landstar will be creating the foundation for future growth by adding new agents. From a profit and loss standpoint, it is all about our business model. In order to supplement our variable cost operating model in these recessionary times, Landstar has instituted a salaried employee headcount freeze. In addition, we have also made certain other 2009 cost cuts in non-personnel areas.

Let me talk about our balance sheet for a moment. Our balance sheet and cash flow remained strong. We ended the year with $122 million in cash and marketable securities, an increase of $19 million from the end of the 2008 third quarter. In addition, we’ve reduced long-term debt including current maturities by approximately $21 million from the end of the 2008 third quarter. We also purchased $23 million of our stock in the fourth quarter. In short, Landstar’s financial position remains very, very strong.

Let me spend a few moments on 2009. As we move into 2009, I see more capacity exiting the marketplace. Although there might have been a temporary low in capacity exiting the marketplace because of lower fuel prices, eventually the lack of demand will overtake the benefit of lower fuel prices and force additional capacity out of the marketplace.

The overall month-over-month volume declines experienced in December of 2008 versus December of 2007 has continued through the first several weeks of January 2009 over January 2008, and we are not projecting any change in business levels in the short-term. However, as new agents are assimilated into our system and as new customers look for a financially sound partner, we should be able to offset some of the volume shortfalls in existing accounts with new revenue.

Visibility, however, is very clouded. As such, I will not provide any 2009 revenue and earnings guidance at this time. However, as an example of how Landstar’s variable cost business model would react on the certain negative assumptions, I will offer the following. Given a range of breakeven revenue to a decline of 20% in annual revenue, Landstar’s diluted earnings per share for the year should be in a range of $1.65 to $2.12. This in no way should be interpreted as guidance or prediction, but what it demonstrates is how the Landstar business model would perform under various levels of revenue shortfalls. More importantly, it demonstrates how our earnings are somewhat insulated from the effects of the recession. The takeaway here is that no one is recession proof. But Landstar’s business model is very self-protecting.

In summary, as a result of Landstar’s variable cost business model and its strong financial position, Landstar should emerge from this very weak freight environment in a much better position than its competitors with more agents, more market share, and more capacity.

And with that, I’m going to turn over to Jim for his financial review.

Jim Gattoni

Thanks, Henry. Henry has already discussed revenue for the 2008 fourth quarter. I’ll cover various other financial information included in our fourth quarter release. Investment income was approximately $653,000 in the 2008 quarter compared to $1.2 million in the 2007 period. The $600,000 decrease in investment income was attributable to a lower rate of return due to lower interest rates on investments held by the insurance segment during the 2008 fourth quarter.

Purchase transportation was 76.2% of revenue in the 2008 fourth quarter compared to 76.1% in the 2007 fourth quarter. The increase in purchase transportation as a percentage of revenue was due to increased ocean revenue, which has a higher cost of purchase transportation.

Commissions to agents were 8.1% of revenue in both the 2008 and 2007 periods. Other operating costs were 1.2% of revenue in both the 2008 and 2007 periods. Insurance and claims costs were 1.5% of revenue in the 2008 fourth quarter compared to 1.7% in the 2007 quarter. The decrease in insurance and claims as a percent of revenue was primarily attributable to decreased frequency and severity of actions in the 2008 fourth quarter compared to the 2007 fourth quarter.

Selling, general and administrative costs were 5.3% of revenue in the 2008 quarter compared to 4.7% of revenue in the 2007 quarter. The increase in selling, general and administrative costs as a percent of revenue was attributable to the effective lower revenue in the 2008 fourth quarter, an increased provision for customer bad debts and an increased provision for bonuses under the company's management incentive program.

Depreciation and amortization was 0.9% of revenue in the 2008 quarter compared to 0.8% in the 2007 quarter. This increase was primarily due to increased depreciation for company-provided trailing equipment. Interest and debt expense was approximately $1.7 million in the 2008 quarter compared to $2.2 million in the 2007 quarter. The decrease in interest expense was primarily attributable to a decrease in interest rates on borrowings outstanding under the company’s senior credit facility.

The overall effective income tax rate was 37.3% in the 2008 quarter compared to 37.5% in the 2007 quarter. Operating margin for the 2008 fourth quarter was 6.8% compared with 7.6% in the 2007 fourth quarter. The decrease in operating margin was primarily attributable to the effect of lower revenue and an increase in selling, general and administrative cost, as previously discussed.

Looking at our balance sheet, we ended the quarter with cash and short-term investments of $122 million and long-term debt, including current maturities, of $136 million. During the fourth quarter, we purchased approximately 724,000 shares of common stock at a cost of $23.1 million bringing the total number of common shares purchased in 2008 to approximately 1.3 million shares at a total cost of $51.6 million.

Landstar’s Board of Directors authorized a purchase of an additional 1,569,000 shares of its common stock. The company is currently authorized to purchase up to an additional 3 million shares of common stock under its most recently authorized share purchase programs.

Shareholders equity represents 65% of total capitalization at the end of 2008. 2008 return on equity remains high 48%. Back to you.

Henry Gerkens

Thanks, Jim. And Terry, what we’ll do is we’ll open it up for our questions at this time.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question will come from Edward Wolfe of Wolfe Research.

Henry Gerkens

Ed, how are you? Ed, are you there? Hello?

Operator

His line is open, sir. Do you want me to go ahead and move to the next person?

Henry Gerkens

Ed, are you there? Yes, I guess so.

Operator

Thank you, sir. Our next question comes from the line of Jon Langenfeld, Robert W. Baird.

Jon Langenfeld – Robert W. Baird

(inaudible).

Henry Gerkens

Jon, are you there?

Jon Langenfeld – Robert W. Baird

I’m here. (inaudible) talk about how you’re approaching? And are there certain tiers you are looking at that if they don’t develop, you will intensify the cost actions? Are these cost actions thought to be pretty defined out here for the next several months?

Henry Gerkens

We’ve taken some pretty defined cost actions obviously. We issued instead a salaried employee headcount freeze. We’ve taken a look at various things that Landstar does as it relates to employees, agents, BCOs, third party capacity, and we scaled that back. And we think we are in pretty good position as we move into the 2009. That’s not to say if there is something that gets worse, if you will. I mean, there are the actions obviously we can take.

Jon Langenfeld – Robert W. Baird

But you are essentially saying that you think you can grow or you think you can moderate your expenses with the revenue levels and essentially hold margins roughly flat. I mean, that’s kind of what you’re implying by your stated range of outcome –

Henry Gerkens

That is correct. I mean, I think it’s very difficult under this environment to predict what’s going to happen. And therefore we are not going to provide any revenue guidance. But what – if you look at Landstar from a macro perspective considering our variable cost model in certain other things that we can do, I mean, that – even that set of assumptions of a flat revenue year to minus 20%, I mean, those are the range of EPS numbers you would be looking at. And I think the takeaway there is, you know, we’re pretty well insulated from a lot of different things that occur.

Jon Langenfeld – Robert W. Baird

What’s the magnitude of the cost action taken?

Henry Gerkens

Around $2.5 million to $3.0 million at this point in time.

Jon Langenfeld – Robert W. Baird

And with the bonus – the bonus accrual you had this year was like $5 million in total?

Henry Gerkens

Jim?

Jim Gattoni

No, it was slightly higher, Jon. It was approximately $7 million.

Jon Langenfeld – Robert W. Baird

That – I mean, where did that fall in terms of cost initiatives? I mean, is there bonus paid out if you don’t grow earnings next year?

Henry Gerkens

At a $2.10 level, there would be a slight payment, but most of it would be not paid.

Jon Langenfeld – Robert W. Baird

Okay. Very good. Thank you.

Operator

Our next question comes from the line of Justin Yagerman, Wachovia.

Justin Yagerman – Wachovia

Hey, good afternoon, guys. How are you doing?

Henry Gerkens

Good, Justin. How are you?

Justin Yagerman – Wachovia

Good. I wanted to get a sense on a few different things. On the pricing side, if you guys could go into a bit more detail on what you saw during the quarter, how that progress on a month-to-month basis and what’s going like in January? And then, I wanted to get into a little bit of what you are expecting from any kind of bid packages that are out there that you are participating in?

Henry Gerkens

Let me give the general comment as far as what we saw. The pricing, if you will, and I will talk to the carrier group side, if you went month-to-month, there was a gradual decline in the increase. So the rate of increase decelerated using your terms. And Jim, you have the – is that –?

Jim Gattoni

Yes. For example, if you look on a rate per mile on our typical truckload business, we are – for the quarter, we were up 6% over prior year’s fourth quarter. But in December, it was down to 1% growth. So it – there was a little softening in pricing coming into – as we ended the year.

Justin Yagerman – Wachovia

But it stayed positive throughout the quarter even on a monthly basis?

Jim Gattoni

Yes. I said December was 1%.

Justin Yagerman – Wachovia

And coming into January, Jim, do you have what that number looks like right now?

Jim Gattoni

I think it’s weakened a little bit more and I think more so on the demand side than the flatbed side.

Justin Yagerman – Wachovia

Got it. And then as you are participating in these bid packages, do you have a sense of whether or not you’re going to be able to hold rates positive year-over-year as we move through the first half here?

Henry Gerkens

Pat, do you want to take this –?

Pat O’Malley

Justin, there has been a dramatic increase in bid activity, and obviously that bid activity isn’t complete yet. Clearly, we are attacking the marketplace in pricing to try and get the business, sensitive of course to our model. But there is a lot of bid activity out there.

Justin Yagerman – Wachovia

Got it. Henry, you mentioned that things are running up a little bit better in flatbed. That’s been a bright spot for you guys throughout this whole economic downturn. Can you talk a little bit about what you are seeing in that market in the heavy haul business? And has that moderated just at a slower pace or is that still moving along pretty robustly? And what your expectations are –?

Henry Gerkens

My expectations on that, it’s like everything else, it’s moderated. If you take a look at the – GE, for example, they have cut back some things. And I would expect cutbacks in a lot of other areas. So I think you’re going to see moderation from that also.

Justin Yagerman – Wachovia

Got it.

Henry Gerkens

Justin, we’ve got to go to next question because last time we had somebody who – couple of people who got cut off.

Justin Yagerman – Wachovia

No worries. Thanks for the time guys. Appreciate it. I catch up with you offline.

Henry Gerkens

In the queue, Justin.

Justin Yagerman – Wachovia

Yes.

Operator

Our next question comes from the line of Chris Ceraso, Credit Suisse.

Chris Ceraso – Credit Suisse

Hey, thanks. Good afternoon.

Henry Gerkens

Hey, how are you?

Chris Ceraso – Credit Suisse

Good. I’m having a tough time assimilating this level of variability in earnings having looked at companies with a lot more operating leverages in it. Is there any difference in the mix of business so the composition of that 20% revenue decline is one type of business versus another? Do you still have that same level of stability in earnings?

Henry Gerkens

Yes, again, you need to be careful. I mean, that was not meant to be any sort of indication of any outcome of the year. It was an indication to try to show how our model works. And when you think about our business model, you’ve got about 55% of our revenues generated through BCOs. That’s a straight variable cost type operation. If I don’t have a dollar of revenue, I don’t have like 83% of the cost. From a brokerage standpoint, obviously with loose capacity, and Jim can talk about that, we gained margin in the quarter from brokerage. Brokerage actually declined less than our BCO revenue. And I guess what I’m saying is given a relatively stable environment where the same percentages are generated, it’s just a matter of what revenue level you want to pick. That’s what our earnings would be. And I think considering the recessionary environment, it’s just trying to show the variability of our model and how it works and that fact that we generate that type of earnings under the most – a large decline like 20%, for example.

Chris Ceraso – Credit Suisse

Is that just as true in the short run, say, over a quarter as it is over the space of a year?

Henry Gerkens

Well, quarter is – a quarter generally would be the same. I mean, it – so, yes, I would say that would be accurate. Correct.

Chris Ceraso – Credit Suisse

Okay. And then can you just quantify the fuel impact on the top line and on the operating profit line?

Henry Gerkens

Fuel, as I recall, had a $3 million revenue shortfall on the top line. And from a P&L standpoint, Jim?

Jim Gattoni

No, the –

Henry Gerkens

It was not material, was it?

Jim Gattoni

No.

Henry Gerkens

It wasn’t material.

Chris Ceraso – Credit Suisse

Okay. Thank you very much.

Operator

Our next question comes from the line of Tom Wadewitz, JPMorgan.

Henry Gerkens

Hey, Tom, how are you?

Tom Wadewitz – JPMorgan

Good. How are you doing, Henry?

Henry Gerkens

Good.

Tom Wadewitz – JPMorgan

Let’s see. So – I don’t know if you had went through this already, but did you talk – you talked a little bit about pricing through the quarter. Did you talk about the load progression through the quarter by month?

Henry Gerkens

Yes. The load volume, obviously, decreased also. I think the biggest declines I mentioned – when you look at automotive and you look at the substitute line haul, as you recall, all of 2008 what you had was around at that 20% decline in automotive volume each quarter-over-quarter, but you really had that offset a large degree by some substitute line haul stuff. The substitute line haul business basically dried up in the fourth quarter. And so now you had those declines both hitting in the fourth quarter and that’s really what drove the volume decline. You got to remember on the substitute line haul business, where we lose some revenue because it’s such a very low margin business that we actually gain margin back.

Tom Wadewitz – JPMorgan

Right. Okay. But did – what I meant was, if you look at October, November, December, can you give us the total load numbers year-over-year, what they look like, or if you wanted to look at BCOs and give us those numbers?

Henry Gerkens

Jim?

Jim Handoush

Just total loads was primarily a truckload business. You are running – December was about 15% compared to prior year. If you were looking at October, it was slightly negative, maybe you are talking about 2% to 3%.

Tom Wadewitz – JPMorgan

Okay.

Jim Gattoni

So you probably went 2% to 3% October to 6%, 7% November, and it spiked to 15% in the last four weeks of December on load volumes. That’s primarily your truckload business. I mean, rail of off. The other stuff was off, but – and that’s really the guts of it.

Tom Wadewitz – JPMorgan

Okay. And I guess the second one, just – fourth quarter, you showed some operating leverage. Obviously revenues were up, whatever, 6%. The operating income was off harder. I think that it sounds like it’s primarily the increased bonus accrual, but are there – is that something that you put it off in 2009 and you don’t pay it, and so then you can show better cost control, but then you come back in 2010 and that will be another headwind that will hurt you, so you have margin compression again in 2010? How should we look about how the margins might work the next two years and what would you do on the cost side?

Henry Gerkens

Two things. This company has always operated on the fact that you perform, you get paid some bonuses. It’s not like these things are an entitlement. So the budget was put together. You hit the budget, you predetermine targets, and you get a bonus payment. If you don’t, you don’t get that payment. And that ties to the longstanding variable cost business model that Landstar operates. So as far as the bonus piece, I don’t – that’s in and out, and you can call it headwinds in 2010 if there is no payment or whatnot. But I call it the way we manage the business because you could get paid for rewarding people. And recognizing it’s a difficult environment, we’ve taken appropriate actions. We think that we’ll stabilize those margins. We’ve taken out some hard cost, if you will. And there are other things we can take. I think if you look at what occurred in the quarter, as Jim mentioned, you had an increased provision for doubtful accounts. Obviously in this environment, you’ve got to look at that a little bit more careful. And we’re – the model is going to perform, as I said before, very well in this environment. It’s – I don’t have fixed cost to carrier. That’s really the issue that other people have.

Tom Wadewitz – JPMorgan

I’m sorry. Are some of the other costs that you are taking out perhaps, those don’t come back as readily in 2010?

Henry Gerkens

I think – I’d say as you go through any cycle and things are operating very well, you start to maybe add some costs here. It sounds like just that you reevaluate. You really need to do this. And those are the things that we’ve taken out. So I would suspect they would not come back.

Tom Wadewitz – JPMorgan

Okay. Thanks for the time.

Henry Gerkens

Thanks, Tom.

Operator

Our next question comes from the line of Todd Fowler, KeyBanc Capital Markets.

Henry Gerkens

Hey, Todd, how are you?

Todd Fowler – KeyBanc Capital Markets

Hey, Henry, I’m doing well. Good afternoon, everybody. Henry, could you talk about some of the other end markets we have some exposure? I think that earlier in the year some of the wind movements, alternative energy were doing well. Can you talk about what happened to those markets during the fourth quarter? And then also one of my favorite terms recently has been all these shovel-ready projects. Understanding that there is lot of stimulus coming into the economy, your free – your equipment profile certainly lends itself to doing some business in that area, is there anything you guys are doing internally to position the company or position your agents to have a leg up on some of the activity that’s coming through?

Henry Gerkens

Well, let me answer your first question and then, Pat, if you want to take a shot at the second question. The –

Todd Fowler – KeyBanc Capital Markets

Those are one question.

Henry Gerkens

I’m sorry, what?

Todd Fowler – KeyBanc Capital Markets

Those are one question. I’m saying –

Henry Gerkens

All right, fine. Good, Todd. The wind generation, power generation business slowed throughout the quarter. I mean, December was extremely slow. I expect that to continue to be slow. I don’t think there is as much emphasis currently on that type of stuff. I think the current administration when they start focusing on alternate energy and whatnot; I think that focus will be back. When that comes back? I don’t know. I mean, you mentioned the stimulus package. I think – and Pat can answer that, but I think we’re ready and prepared to assist on that. We think we will participate to some degree. At what point in time? Even the general economy get jump started based on whatever is – what this administration is going to do. I don’t know – Pat, you want to –?

Pat O’Malley

Yes. Kind of going back to what Justin had mentioned, Todd, about bid activity, we’ve seen bid activity in the first part of 2009 up considerably. Conversely, if you look at the fourth quarter and 2008, we historically through the year have been running significantly ahead of 2007 in terms of bid activity. This is for heavy haul specific business, okay? And then in December, it was the first month that we actually did fewer bids than we did in the previous year. So you saw some significant drop-off in bid activity in December of 2008. And now as we enter 2009, the bid activity is out again over 2008 number. You don’t know if that’s people looking for price or people’s anticipation of the spring thaw and construction projects, or if there is anything to do with the stimulus package that’s kind of like working its way through Washington. But that’s kind of some of the ways that we look at the prospects on the heavy haul business.

Todd Fowler – KeyBanc Capital Markets

Okay, good. No, that’s actually very helpful. And then just for the follow-up here. You talked – Henry, I think you talked about bringing on some agents here. I think you said during the fourth quarter there were 18 agents that came on, each it sounded like had a book of business that they were going to be $1 million agents. Did I understand that correctly? What should we expect from those? Along the same sort of line, as we get into the first quarter, do you have – is the pipeline with agents that strong, you have agents that can jump on and these agents are built out and they are going to be revenue producers day one when they sign up?

Henry Gerkens

Yes. I mean – and that’s what’s exciting about what we see currently. I mean, those 18 agents have, as I said, an annual run rate of $1 million at a get-go. And it’s really just a matter of – and you see people have been signed on when they assimilate into the Landstar System. And it gets to the pipeline. The pipeline is pretty robust, as I said in my comments. And that’s the important part. I mean, we’ve got discussions on agents coming onboard just about every day. I mean, it’s the environment that is right for Landstar to grow its small business. And if you go back to Landstar’s roots, it’s a small business company, and small businesses are having problems. We’re bringing on more capacity and we’re bringing on more agents. Now, the automotive industry, I mean, is tough. All right? And those loads are going to continue to go down. I talked last year about automotive going down 20% to 25% a quarter. How low could it go? Well, probably going to go a little bit lower. All right? But that’s okay because what we’re going to do is we’re offsetting that with additional agents. So we’re excited about the fact that we’ve got great business opportunity. Obviously we can’t control the economy, and the economy is going to do what the economy is going to do. But we need to continue to be focused on bringing in opportunity, and that’s what we’re doing.

Todd Fowler – KeyBanc Capital Markets

Okay. And then just those agents, their book of business was $1 million or those are going to be million-dollar agents for the company?

Henry Gerkens

Their book of business coming on was $1 million or more for each one of those, and we would anticipate those to be our new million-dollar agents. And yes, talking about the million-dollar agents, even though we had that decline, I hope everybody caught that, we had a very big number of agents that was just below the threshold, 31 more than we are below the threshold last year. And really where they got knocked out of the box was in the fourth quarter.

Todd Fowler – KeyBanc Capital Markets

Okay, good. Thanks a lot for the time, guys.

Henry Gerkens

Thanks.

Operator

Our next question comes from the line of David Campbell, Thompson, Davis & Co.

David Campbell – Thompson, Davis & Co.

Henry, this is David Campbell. I want ask you about the new agents. I mean, you added significant numbers of new agents during the course of 2008, but by the end of the year, there wasn’t enough to offset the economic problem. That could happen again in 2009 I assume.

Henry Gerkens

Well, I think anything is possible. I think if you looked at our agent adds through the first nine months, I think what you saw in the fourth quarter was a big ramp-up and big ramp-up of productive agents. So they have yet to be assimilated. I can’t predict where the economy is going to go and therefore I don’t know where it’s going to go. I mean – so that’s hard to say. We know we have a lot of agents that are in the pipeline. We’ve assimilated a bunch now. The fourth quarter was very good. And then the time for us to bring those on is right now.

David Campbell – Thompson, Davis & Co.

All right. And second question is, do you think brokerage revenues would perform better than the BCOs in 2009, that is the decrease would be less if that would continue?

Henry Gerkens

Hard to say. Most people have the opinion that brokerage revenue would decline more. But as you saw in the fourth quarter, it was the BCO revenue that declined more. I mean, it’s like anything else. I mean, I want to make sure we satisfy the customer. And certain customers want BCOs only. So I don’t have any preference. I could say that, yes, the BCOs would decline at a lower rate, but the fourth quarter proves exactly the opposite of that. So again, as long as I’m satisfying customers, that’s hard to predict.

David Campbell – Thompson, Davis & Co.

Okay. Thank you.

Operator

Our next question comes from the line of John Larkin, Stifel Nicolaus.

Henry Gerkens

John, how are you?

John Larkin – Stifel Nicolaus

Good (inaudible) Henry?

Henry Gerkens

Pretty good.

John Larkin – Stifel Nicolaus

Okay. Lot of companies have put their share repurchase program on hold given the instability in the credit market, Jim, certainly about the economy et cetera. What’s your philosophy on that?

Jim Gattoni

Well, we’ve been pretty – in the fourth quarter, we were – I’d like to say we used a scalpel approach and we were little bit more surgical as far as when we bought stock back. And on the other hand, we’ve generated a bunch of cash. We have a bunch of cash sitting on the balance sheet. And I’m confident in our ability to generate cash. We have a new credit facility, as you might – I think you know that we entered into just before a lot of the stuff occurred back in May. We’ve got a lot of liquidity. We are in very good financial shape. I mean, we are not afraid to buy the stock back. And at the right time, I think we could be very aggressive.

John Larkin – Stifel Nicolaus

Okay. And then I guess my second question is, you’ve talked a lot about new agents and the 18 guys that have a $1 million book of business coming on stream. But isn’t the real leverage in getting some of the more comfortable older agents that are selling maybe just one line of owner/operator flatbed type business to branch out and sell the broad range of products? How much progress you’re making there?

Henry Gerkens

Yes, absolutely correct, and that is a major emphasis. And if I look at our revenue strategy, it’s clearly to bring on new agents and basically go to our existing account base and try to get further penetration bringing on other types of revenue that we didn’t ask for in the past. We are fully staffed in these business unit specialists. Jim, maybe you want to talk a little bit about progress that’s being made in those business unit specialists, which I think is really what John is after?

Jim Handoush

Yes. I mean, there has been a lot of progress made ever since we launched this in the middle of the third quarter. We are seeing more and more interest as our field organization and our agents family get more comfortable in our strategy to sell a broad base of services to our existing client base. And we’re seeing more and more of agents on the carrier group side of the house starting to participate mostly on the intermodal side, but more and more on the international side. And it is something that we’re strongly emphasizing throughout the entire organization. As we start to get some more broad traction there you will see that start to accelerate as we move forward. And it actually helps us as well from an agent recruiting standpoint, but that’s one of the sales that we bring to a new agent coming on is the fact (inaudible) diversify by their business and it has helped from a recruiting standpoint. Especially in this market, as we talked about, from an agent recruiting standpoint, you’re seeing not only other agency based network that are starting to falter, so those agents are looking for new homes, but also stand-alone businesses on the front broker side, intermodal side and the forwarding side, all look for ways to accelerate their business growth and also diversify their business. And we give them a home to be able to do that.

John Larkin – Stifel Nicolaus

Thanks very much, Jim. Thanks, Henry.

Jim Handoush

Thanks, John.

Henry Gerkens

Thank you.

Operator

Our next question comes from the line of Ed Wolfe, Wolfe Research.

Henry Gerkens

Ed, are you there this time?

Michael Beer – Wolfe Research

Hey, guys, good afternoon. This is Michael Beer actually in for Ed. I apologize for that a little earlier. Quick question. Just the improved profitability on the insurance segment, I think you may have touched on that, but can you go over that once more?

Henry Gerkens

Jim?

Jim Gattoni

It’s all tied to claim frequency and severity. It’s just related to accident frequency that happens at the transportation and logistics segment. It’s all tied into the business model. We had – I think my comment was frequency and severity lower this year than last year.

Michael Beer – Wolfe Research

But notwithstanding the reduced kind of volume environment it was all? Okay, got you. And then on the mix impact, the change in your business, talk about the variable cost model, is there any mix impact as you started growing out some of the air notion operations with respect to the variable cost model?

Henry Gerkens

Really – really not. I mean, because again that’s all a matter of – I don’t have revenue, I don’t have cost. You’ve got different margins in each of those businesses. So as they become more impactful, they become a little bit – they play in that. But I don’t see any major impact on that mix unless – you guys got any comments on that?

Jim Gattoni

No.

Henry Gerkens

Okay.

Michael Beer – Wolfe Research

Okay. And then just real quick. Pace of the share repurchases I think you touched upon, you may be able to get a little bit more aggressive throughout the area, but in this kind of environment, in this kind of credit environment, that would change or any expectations for ’09?

Henry Gerkens

No. As I said before, I personally – we were cautious in the fourth quarter. I think we’ve demonstrated that we generate cash. We are comfortable with our liquidity. We’ve got a lot of cash in the balance sheet. And I would think we can be very aggressive.

Michael Beer – Wolfe Research

Okay. Thanks so much.

Henry Gerkens

Thanks.

Operator

Our next question comes from the line of Justin Yagerman, Wachovia.

Henry Gerkens

Justin, back in the loop.

Justin Yagerman – Wachovia

Back in the loop, look at that. Why don’t you give a sense if there was any – is there any FAA revenue in the quarter? Was there anything left over for many of the hurricane activity or cleanup that you guys were doing?

Henry Gerkens

No.

Justin Yagerman – Wachovia

Okay. And has there been any indication, I know you touched upon it, with all the infrastructure stuff that’s talked about, are there government bids out there that you guys feel like you have an inside track on or –? I mean, you’ve been involved in those kinds of things before in the past. Is any of that stimulus or infrastructure legislation or spend manifesting yet, or are you still waiting to hear about any of that stuff?

Pat O’Malley

Justin, this is Pat. There is no specific government bids out on the stimulus package. As I mentioned, when I was answering Todd’s question, one of the things that you can kind of look to with the heavy haul business is the number of quotes that you’re doing, how many people are calling in and say they want your quote on business in. And that can be – we have mentioned in the fourth quarter, specifically December where it was down for the first time year-over-year, in January we’ve seen bids up in a year-over-year comparison. We don’t know if that’s price shopping, if that’s – with the spring coming, there is going to be building, or if it is in anticipation of some of this stimulus money coming on Washington. I really couldn’t tell you, but there is no specific government contract that we’re bidding on directly related to the stimulus package.

Justin Yagerman – Wachovia

Sure. And Jim, you mentioned the provisions for doubtful accounts. Would you feel we are in a cycle right now? Do you think that you guys have taken accruals in the fourth quarter and that that’s kind of the run rate of where we’re going to be? Or – I mean, do you anticipate needing to hike that up as we go through 2009 potentially? And where does that show up in the P&L? Is that a –?

Jim Gattoni

I’d anticipate having a hiking up. The run rate is probably consistent with where we were in the fourth quarter.

Justin Yagerman – Wachovia

Okay. And that’s in SG&A or –?

Jim Gattoni

That’s in SG&A.

Justin Yagerman – Wachovia

Okay. I appreciate it. Thanks, guys.

Henry Gerkens

Thanks, Justin.

Operator

Our next question comes from the line of John Larkin, Stifel Nicolaus.

Henry Gerkens

John, a second round again.

John Larkin – Stifel Nicolaus

Round number two.

Henry Gerkens

There you go.

John Larkin – Stifel Nicolaus

Thinking about your line haul substitution business, got a couple of questions, which hopefully will only count for one. If in fact the largest of the LTL carriers were to run into some severe problems and either downsize dramatically or cease to operate, it seemed to be that given that they have 20% to 25% market share, that could create tremendous opportunities. Are you all developing contingency plans to help out with that if that possibility were to become a reality?

Jim Handoush

Well, that’s a good observation. And obviously many of the LTL companies that we are working with are developing their own contingency plans in case the advent that were to happen. If that were to happen, they would obviously see an increase in tonnage, which would increase the number of line hauls scheduled. And I we would obviously benefit from that.

John Larkin – Stifel Nicolaus

And the second part of question number one is the UPS volume, traditionally there was a big surge of holiday shopping related package volume. Is Landstar still participating in that?

Henry Gerkens

Yes.

John Larkin – Stifel Nicolaus

And how did that shape up versus past years?

Henry Gerkens

Is that your second question?

John Larkin – Stifel Nicolaus

No, that’s the second part of the first question.

Henry Gerkens

Okay. I’ve got UPS stuff flat is what I got.

John Larkin – Stifel Nicolaus

Year-over-year? Okay. And then just lastly, the new agents and the new incremental BCOs are quite a few that have been added sequentially from the third quarter into the fourth quarter.

Henry Gerkens

Yes.

John Larkin – Stifel Nicolaus

Where as a general rule are they coming from? Are they independent agents? Are they former salesmen? Are they people who are affiliated with another organization? Actually it’s a two-prong question. Where are the agents coming from and then where the BCOs coming from?

Henry Gerkens

BCOs are basically owner/operators that have been paid a mileage basis more than likely with some company, iron company that’s just struggling. So therefore they're looking to Landstar. I mean, that’s in general – a general comment, because we get them from all over. From an agent standpoint, boy I tell you, we’re getting – I don’t want to mention company specific, but we are getting inquiries from a lot of different companies that people are agents for – all right? – which is a high volume. And that’s why when I talk about run rates, that’s what’s happening. And I don’t want to mention names.

John Larkin – Stifel Nicolaus

Are these domestic truckload-based companies or are they also people that have, say, intermodal books of business or LTL books of business or even ocean and airfreight forwarding businesses?

Henry Gerkens

I think all of the above.

John Larkin – Stifel Nicolaus

Okay. Very interesting. Thanks very much.

Henry Gerkens

Thank you.

Operator

Our next question comes from the line of Jon Langenfeld, Robert W. Baird.

Henry Gerkens

Hi, Jon.

Jon Langenfeld – Robert W. Baird

Hi. A couple of cleanup questions for you. What would be your average revenue for a typical new agent? Trying to put it in context, you talk about these 18 being over $1 million, but what would be a typical number for an agent being added?

Henry Gerkens

Pat, do you want to take a stab at that?

Pat O’Malley

Well, Jon, I think there is two ways to look at. We have the agent that Henry has referred to consistently throughout the call today, the agent that comes in with a solid book of business, a loyal customer following probably deeply penetrating several accounts. And that agent, as Henry has mentioned, they are at $1 million rate when they come on. There is the other agent who has probably not got that depth of experience nor that depth of coverage with his accounts. And if you take a look at, I think it was the second quarter Henry talked about, the average revenue per agent per week, new agent per revenue per week, okay, and we compare that to 2007 and 2008. And if you take a look at the fourth quarter, that agent population – now we are going to talk about that agent population that doesn’t have that dramatic book of business or that deep penetration. The average revenue per agent in that population in 2008 fourth quarter was $3,661 compared to $2,272 in 2007. So, about a 42% increase. We’ve done some things internally to provide greater support to that type of agent.

Jon Langenfeld – Robert W. Baird

So bottom line then, I mean, when you think about adding $1 million agents in a quarter, is it unusual to add 18 in a quarter?

Henry Gerkens

Yes, very.

Jon Langenfeld – Robert W. Baird

One or two, would that be considered a good quarter for agent addition?

Henry Gerkens

The agents that have the kind of depth and customer following that the ones that we’ve talked to in the fourth quarter, that’s correct.

Jon Langenfeld – Robert W. Baird

Okay. And then just moving on, couple wrap-up questions. Cash flow from ops and cash CapEx, either for the year or the quarter?

Jim Gattoni

The year, Jon, it’s $120 million on the cash from ops and $8 million on the cash purchases. Those are both annual numbers.

Jon Langenfeld – Robert W. Baird

Great. And then lastly, Henry, talk about what your disposition on acquisition, what you're thinking about there?

Henry Gerkens

I think as – that’s a very good question, Jon, because as we’re getting a lot of opportunities from agents from existing companies, there are other things that are out there that at these depressed levels become very attractive that we might be able to integrate in rather quickly. My major focus is still bringing in one agent at a time. However, I would not rule out a freight forwarding company, for example, that makes sense or something that would fit very nicely into our operation. But the focus clearly is on bringing and closing on a lot of these agents that we have in our pipeline currently.

Jon Langenfeld – Robert W. Baird

Thank you.

Henry Gerkens

Thanks, Jon.

Operator

Our next question comes from the line of Donald Broughton, Avondale.

Henry Gerkens

How are you?

Donald Broughton – Avondale

A little housekeeping. Allowance for doubtful accounts in the quarter, Jim, what did you end up setting aside?

Jim Gattoni

What do have in my balance sheet or what kind of P&L charge did I put up?

Donald Broughton – Avondale

How much did you add?

Jim Gattoni

$1.6 million.

Donald Broughton – Avondale

$1.6 million. All right. Can you give me a little bit of color? I'm looking at that what looks like rather extraordinary gains, whether it’s year-over-year or even sequentially on the revenue per load in ocean, which is somewhat counter. I’m sure you are well aware that pricing in ocean has been weak. How was that achieved? Is that a customer mix, length of haul, what happened?

Henry Gerkens

Jim?

Jim Handoush

Yes, it’s a customer mix. We do a tremendous amount of business that have been referred to as the bulk side or the heavy haul side to the construction equipment, that type of things. That’s up a little bit, but we’re still seeing some strong activity. Obviously it is a growing sector of our business. So when you look at the percentage of growth there, obviously off a small base. But that is a big part of our business.

Donald Broughton – Avondale

Is it safe to assume that if you were going to move equipment back from Iraq that might be one of the areas where I’d see it?

Jim Handoush

No. On the ocean side, we traditionally haven’t – we really haven’t done anything with regards to any kind of government orders like that or anything in and out of Iraq. Most of our heavy trade lanes are in the Asian trade lane and the European trade lane.

Donald Broughton – Avondale

Fair enough. Fair enough. I’ll let someone else ask a question.

Jim Handoush

Okay.

Donald Broughton – Avondale

Yes?

Henry Gerkens

You can have another question if you like? You were cut off last quarter.

Donald Broughton – Avondale

Well, I appreciate that, appreciate that. Well, I want to delve into something we’ve kind of dance around and touched on then. You only bought 724,000 shares back. And a long time ago when you were the CFO you taught me that the way you looked at the pretax accretion of it, and we're way past the – what historically has served as the acid test of when you guys become – go from being interested to just downright aggressive. And so I was a little bit surprised. Have you changed the percentage of pretax accretion that you began to look at or is it just a sign of the current times that will pass quickly and you’re still looking at anything above 8% as being very interesting?

Henry Gerkens

Look, Donald, you’re absolutely correct. I think – and when you go back to times – the times were different. And I said we purchased our stock in the fourth quarter not knowing really what was happening. And the market was squirrelly. You had issues out there with a lot of different things. And what we’re trying to do is just to being a little bit more careful and we weren't as aggressive. I think I addressed that before. I think what you're going to see, and with the cash, the amount of cash we have in our balance sheet, with the liquidity we have, there is no reason why we can’t be aggressive at these levels.

Donald Broughton – Avondale

I wouldn't fault you. I mean, if the average – I'm getting the average cost per share you paid was $31.91. You damn near bottom ticked it throughout the quarter. So if Landstar thing doesn't work out for you, I believe you’ve got a job for you on our training desk.

Henry Gerkens

Thanks. Next question?

Operator

Thank you. I just wanted to make sure he had all his questions. Thank you, sir. Our next question comes from the line of David Campbell, Thompson, Davis & Co.

David Campbell – Thompson, Davis & Co.

Henry, one last question. That is, has any of the agents disclosed any kind of credit problems with their customers that your customers are having trouble getting credit so that they can’t ship because of that and maintain between delivery – between shipment and delivery getting credit? Is there any discussion of that?

Henry Gerkens

Well, I mean, we have discussion all the time. I mean, the issue – I mean, you got to remember how we operate here is that credit is approved here at Landstar. All right? So we have those discussions with agents all the time as far as whether this customer is creditworthy or not. So before anything is shipped, the agent has got some sort of approval here and that’s the way it works. Jim, you want to add to that? I mean, that’s –

Jim Handoush

(inaudible) We take all the credit risk. It is really not up to the agent to determine whether that customer is creditworthy or not. As for whether that customer is creditworthy, you know what’s going on in US economy. So there is a little bit of pressure on all the manufacturers out there to be able to access credit. But from our standpoint, it’s not up to the agent, up to the company that provide the credit.

David Campbell – Thompson, Davis & Co.

I was thinking in terms of the manufacturers being unwilling to manufacture something because they are trying to minimize applications for credit or something.

Jim Handoush

I think that’s what’s going on in the company. I mean, if there’s companies out that don’t have the financial wherewithal stability or the flexibility to borrow from banks, yes, they are having trouble.

David Campbell – Thompson, Davis & Co.

Okay. Okay, thanks.

Henry Gerkens

Thanks, David.

Operator

Our next question comes from the line of Todd Fowler, KeyBanc Capital Markets.

Henry Gerkens

Todd?

Todd Fowler – KeyBanc Capital Markets

Everybody else was doing it.

Henry Gerkens

As long as I’ve got everybody to answer the question, I just don’t want to leave anybody out, that’s it.

Todd Fowler – KeyBanc Capital Markets

No, no. I was just – actually I have a serious follow-up. The rate per mile statistics that you gave earlier, the up 6% earlier in the quarter and then the up 1% during December, was that including or excluding fuel?

Jim Handoush

It was including fuel for the brokers but not the BCOs. That was a combined number. But fuel shouldn’t have much of an impact. Like Henry said, it was only a $3 million difference from (inaudible) from ’07. Fuel shouldn’t have much of an impact on the rate on the comparable quarters. And that percent was the entire quarter, not at the beginning of the quarter.

Todd Fowler – KeyBanc Capital Markets

So the up 6%, I’m sorry, was for the entire quarter, the rate per mile?

Jim Handoush

Yes.

Todd Fowler – KeyBanc Capital Markets

Okay. And that does have fuel in it?

Jim Handoush

Yes.

Todd Fowler – KeyBanc Capital Markets

But it is a blended rate between the BCO and –?

Jim Handoush

And the effect of the fuel shouldn’t have much of an impact on the rate because we collected the same amount of fuel surcharge pretty much in the same '08 quarter and the '07 quarter.

Todd Fowler – KeyBanc Capital Markets

Yes. And obviously the question is – I mean, that’s – do you think those percentages, or those amounts, I mean, that’s directionally not what’s happening with base rates or capacity, what you are paying for capacity in the marketplace, excluding fuel?

Jim Handoush

What we are paying for capacity? That’s what we’re – that was our revenue per mile. And what we’re paying for capacity, we picked up about 20 basis points off our broker carriers in the quarter.

Todd Fowler – KeyBanc Capital Markets

Okay, that’s helpful. Okay. I’ll let it go at that. Thanks.

Jim Handoush

Thanks, Todd.

Operator

Our next question comes from the line of Anand Waller [ph], Buoyant Advisors [ph].

Anand Waller – Buoyant Advisors

Hi, guys. Thanks for taking my questions.

Henry Gerkens

Hey, how are you?

Anand Waller – Buoyant Advisors

Question on – in terms of – you mentioned before that you were quite surgical in terms of doing the buybacks. And I was just wondering was it – do you guys did a buyback after the mid-quarter update or prior to that?

Henry Gerkens

We did it prior to – did we do anything after that? Okay. I have to look. Jim says it was all prior to.

Jim Gattoni

I’m almost sure it was prior to the mid-quarter.

Anand Waller – Buoyant Advisors

Got it. And the other question was in terms of your sensitivity – EPS sensitivity for FY ’09, the $1.65 to $2.12, doe that include future share buybacks?

Henry Gerkens

We factored in about 1 million shares.

Anand Waller – Buoyant Advisors

Okay, got it. Thanks a lot.

Operator

At this time, I show no further questions. I would now like to turn the call back over to you, sir, for closing comments.

Henry Gerkens

Thank you, Terry. And then, Jim?

Jim Gattoni

Yes, just to wrap up, it’s an environment such as the one we are currently experiencing that really shows the strength of the Landstar model. Landstar’s variable cost non-asset-based business model continued to generate significant free cash flow and maintained financial stability and flexibility throughout this weaker environment. For example, free cash flow in the 2008 fourth quarter was $65 million compared to $25 million in the 2007 fourth quarter. As a final comment, in times when all the transportation companies struggle to cut costs and manage costs, the company’s strong financial position provides increased opportunities in recruiting agents and capacity and the ability to attract new customers to the Landstar System. I’d just like to thank everybody for participating today and pass it back to Henry for his comment.

Henry Gerkens

Jim, I think what you said says it all. And we look forward to seeing everybody on our first quarter mid-quarter update call, which is scheduled for March 2. And have a great evening and good afternoon.

Operator

Thank you for joining the conference call today. Have a good afternoon. Please disconnect your lines at this time.

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

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

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!