Landstar System's CEO Discusses Q4 2011 Results - Earnings Call Transcript

| About: Landstar System, (LSTR)

Landstar System (NASDAQ:LSTR)

Q4 2011 Earnings Call

February 02, 2012 2:00 pm ET

Executives

Henry H. Gerkens - Chairman of the Board, Chief Executive Officer, President, Member of Strategic Planning Committee, Member of Safety & Risk Committee, Chief Executive Officer of Landstar System Holdings Inc, President of Landstar System Holdings Inc and Director of Landstar System Holdings Inc

Jim B. Gattoni - Chief Financial Officer, Principal Accounting Officer and Vice President

Pat O'Malley - President-Landstar Carrier Group

Joseph Beacom - Chief Safety and Operations Officer and Vice President

Analysts

Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division

John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division

Robert H. Salmon - Deutsche Bank AG, Research Division

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Scott H. Group - Wolfe Trahan & Co.

Alexander V. Brand - SunTrust Robinson Humphrey, Inc., Research Division

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

John L. Barnes - RBC Capital Markets, LLC, Research Division

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

David P. Campbell - Thompson, Davis & Company

Ryan T. Bouchard - Avondale Partners, LLC, Research Division

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

Operator

Good afternoon, and welcome to the Landstar System Inc.'s Year End 2011 Earnings Release Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Henry Gerkens, Chairman, President and CEO; Jim Gattoni, Vice President and Chief Financial Officer; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. Henry Gerkens. Sir, you may begin.

Henry H. Gerkens

Thanks, Terry, and good afternoon, and welcome to the Landstar 2011 Fourth Quarter and Year End Earnings Conference Call. This conference call will be limited to no more than 1 hour, and please limit your questions to no more than 2 questions each, when the question-and-answer period begins.

Before we begin, let me read the following statement. The following is a Safe Harbor statement under the Private Securities and 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 team, may make certain statements containing forward-looking statements, such 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 2010 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.

I stated on the 2010 fourth quarter earnings conference call that I believe 2011 could be a breakout year for Landstar. Well, not only was 2011 a breakout year for Landstar, it was a record-setting year. 2011 was truly an outstanding year as the organizational changes, strategies and action plans created, developed and implemented in 2009 and 2010 continued to drive increased revenue and create new opportunities. Revenue for the 2011 full year increased to over $2.6 billion, the highest annual revenue in Landstar history.

Operating income for the 2011 full year increased 31% over 2010 to $183 million, and 2011 earnings per diluted share increased 34% over 2010 to $2.38 from $1.77 in 2010. It was a very strong year.

Let me talk a little bit about the 2011 fourth quarter results. Revenue for the 2011 fourth quarter was approximately $718 million, a 22% increase over the revenue generated in the 2010 fourth quarter. And as you know, the 2011 fiscal fourth quarter included an extra week. Our estimate that excluding the extra week from the 2011 fourth quarter, revenue increased approximately 17% over the 2010 fourth quarter, a strong revenue performance by any measure. Truckload volumes in the 2011 fourth quarter increased 14% over the 2010 fourth quarter and revenue per load continued to show strength as revenue per load increased 8% in the 2011 fourth quarter over the 2010 fourth quarter.

Total truck brokerage revenue increased approximately 42% in the 2011 fourth quarter versus the 2010 fourth quarter and represented approximately 43% of consolidated revenue in the 2011 quarter versus 36% in the 2010 quarter. Revenue hauled by BCOs for the 2011 fourth quarter versus the 2010 fourth quarter increased approximately 9% and was approximately 49% of consolidated revenue in the 2011 quarter versus 55% in the 2010 quarter. This change in mix also had a favorable impact on insurance and claims expense as a percent of revenue. Jim will talk about that later.

On a 2011 fourth quarter versus 2010 fourth quarter comparison basis, rail intermodal revenue increased 19%. Revenue generated through air cargo carriers increased 30%. Revenue generated through ocean cargo carriers increased 7% and all other revenue increased 7%. Revenue generated with a fixed gross profit margin represented 65% of total consolidated 2011 fourth quarter revenue versus 70% in the 2010 fourth quarter, while revenue generated with a variable gross profit margin represented 35% of 2011 fourth quarter revenue versus 30% in the 2010 fourth quarter.

The change in mix is primarily a result of the continued strong growth in brokerage revenue. Gross profit dollars in the 2011 fourth quarter increased approximately 15% over the 2010 fourth quarter. Total operating income for the 2011 fourth quarter was approximately $51 million and increased approximately 42% over 2010 fourth quarter operating income. The operating margin was at 45% versus 36% in the 2010 fourth quarter. Earnings per diluted share for the 2011 fourth quarter was $0.70 per diluted share and increased 40% over the 2010 fourth quarter. Jim will elaborate further on the outstanding financial results shortly.

Landstar finished the year with 504 agents, who generated over $1 million in Landstar revenue versus 468 in 2010. It was the first time in Landstar history that Landstar had 500 or more million revenue-producing agents. In addition, there were 69 agents who generated between $750,000 and $1 million. Our agent recruiting strategy of focusing on quality, productive agents rather than pure agent count continued to pay dividends.

Overall, for the 2011 full year, new revenue from 2010 and 2011 agent additions amounted to over $171 million. From a capacity standpoint, Landstar ended the 2011 year with a BCO count of 7,871 and a broker carrier count of 28,495. Since the end of the 2011 first quarter, the point in time when we made several changes to refocus ourselves on truck recruiting, Landstar increased its BCO count by 174 BCOs and its carrier count by 2,375 broker carriers. I'm now going to turn it over to Jim for his financial review.

Jim B. Gattoni

Thanks, Henry. Henry has already discussed revenue for the 2011 fourth quarter. I'll cover various other financial information included in the fourth quarter release. 2011 fourth quarter gross profit, representing revenue less the cost of purchased transportation and commissions to agents, increased 15% over the 2010 fourth quarter to $113.2 million or 15.8% of revenue, compared to $98.5 million or 16.8% of revenue in the 2010 quarter.

The cost of purchased transportation was 76.3% of revenue in the 2011 fourth quarter compared to 75.3% in the 2010 fourth quarter. The 100 basis point increase in the cost of purchased transportation, as a percent of revenue experienced in the 2011 fourth quarter over the 2010 fourth quarter, was primarily due to an increase in the percentage of revenue contributed through truck brokerage, which has a higher cost of purchased transportation and, to a lesser degree, in increased cost of purchased transportation paid to truck brokerage carriers, which was partly attributable to higher fuel costs.

Revenue contributed through truck brokerage carriers grew to 43% of total revenue in the 2011 fourth quarter compared to 36% at 2010 fourth quarter. Commissions to agents as a percent of revenue in the 2011 fourth quarter was approximately equal to the 2010 fourth quarter and 7.93% of revenues 2011 fourth quarter, compared to 7.95% in the 2010 quarter. Other operating costs were 6% of gross profit in the 2011 quarter, compared to 7% in the 2010 quarter. This decrease was due to the effect of increased gross profit. Insurance and claim costs were 7.7% of gross profit in the 2011 quarter compared to 11.9% in the 2010 quarter. The decrease in insurance and claims as a percent of gross profit was primarily due to favorable frequency and severity of accidents in the 2011 fourth quarter and an increase in the percentage of gross profit contributed by truck brokerage revenue, which has a lower claims risk profile, partly offset by favorable development of prior year claims in the 2010 fourth quarter.

Selling, general and administrative costs were 35.9% of gross profit in the 2011 fourth quarter and 38.8% of gross profit in the 2010 fourth quarter. The decrease in selling, general and administrative costs as a percent of gross profit was primarily due to the 15% increase in gross profit, partly offset by a $2.4 million charge to establish a provision for a customer bad debt in the 2011 fourth quarter related to 1 specific customer.

Depreciation and amortization was 5.7% of gross profit in the 2011 fourth quarter compared to 6.5% in the 2010 fourth quarter. This decrease was mostly due to the effect of the 15% increase in gross profit. Investment income was $411,000 in the 2011 quarter compared to $489,000 in the 2010 period. The decrease in investment income was mostly due to a low rate of return on investments held by the insurance segment.

The effective income tax rate was 35% in 2011 quarter compared to 31.5% in 2010 quarter. The effective income tax rate in both periods was favorably impacted by reductions in the provision for uncertain tax positions. 2011 fourth quarter operating income increased 42% or $15 million over 2010 fourth quarter operating income. The growth in operating income was primarily driven by the $15 million growth in gross profit, demonstrating the ability of the company's non-asset-based business model to leverage its relatively fixed cost infrastructure.

Operating margin representing operating income divided by gross profit grew to 45% in the 2011 fourth quarter compared to 36% in the 2010 fourth quarter, as the growth in gross profit was passed entirely through to operating income.

Looking at our balance sheet, we ended the quarter with cash and short-term investments of $109 million. 2011 cash flow from operations was $118 million. Return on average shareholders' equity for 2011 was 41%, and in 2011, return on invested capital, representing net income divided by the sum of average equity, plus average debt, was 29%. At December 31, 2011, shareholders' equity represented 69% of total capitalization. Back to you, Henry.

Henry H. Gerkens

Thanks, Jim. Overall, revenue trends experienced in January 2012 over January 2011 are very strong and have not changed very much from what we saw in the 2011 monthly gains over 2010. For the 2012 full year, my belief is that the economy will continue to gradually improve throughout the year. Basically, the economic recovery will continue, but at a slow pace. I also anticipate that capacity will remain tight. Overall pricing in 2012 should improve, although probably not at the pace experienced in 2011.

That being said, the truck revenue per load increase in January 2012 over January 2011 was approximately 7%. If the economy does continue to improve, one would think pricing would also continue to improve given a tight capacity environment. Customers are very concerned over truck availability in 2012. Our ability to access capacity will be a major advantage in 2012.

As I said at the opening, the steps taken in 2009 and 2010 should continue to drive more freight opportunities. Our objective in 2012 is to take more market share, to be that customers' one-stop shop for transportation freight services. We have all the tools and we are hitting on all cylinders.

I currently estimate the first quarter of 2012 revenue to increase in a low to mid-teen range over the 2011 first quarter revenue. I estimate earnings per diluted share for the 2012 first quarter to be in a range of $0.51 to $0.56 per diluted share. On a full year basis, I estimate earnings per diluted share to be in a range of $2.62 to $2.82 per diluted share on an estimated revenue range of approximately $2.8 billion to $3 billion.

And with that, Terry, we'll open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Jason Seidl with Dahlman Rose.

Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division

A couple of quick questions. Henry, could you talk a little bit about the tightness in capacity that you're seeing and sort of separate the different end markets, the flatbed from the dry van and the refrigerated?

Henry H. Gerkens

We don't do a lot of refrigerated, but I think, clearly, the flatbed market continues to be very tight. Van is less so, but Pat, I mean, I don't know if that's really -- I mean that's really the answer.

Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division

Okay. And are you seeing increased demands from a lot of the unconventional drilling markets? Or is that making it harder to find capacity for you?

Pat O'Malley

Clearly, Jason -- this is Pat O'Malley. Clearly, the alternative energy research that's going on and the associated transportation with that is adding to the tight capacity. But if you think about it, no one's buying equipment and adding capacity, if you will. And in the likelihood that you can enter into the business and go from transporting a van to a specialized piece of equipment and some over-dimensional freight, that just doesn't exist. So that capacity tightness is not only from the equipment side, but also from the experienced side.

Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division

Okay, great. And as a follow up, Henry, you mentioned that revenue per load is sort of an all-in at 7%. Can we assume from the tightness in the flatbed market that flatbeds are higher than van right now?

Henry H. Gerkens

Yes.

Operator

Your next question comes from John Larkin, Stifel, Nicolaus.

John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division

You talked about how many incremental million dollar agents you had during the year or at the end of the year, I guess. Could you talk a little bit about how many agents you actually added in terms of raw numbers? I know that's not your focus, but are you growing the agents at 10%, 5%? What's the growth rate?

Henry H. Gerkens

Again our focus is really the quality agents, and we've actively decided not to put that forth because, again, if you've got agents -- the count really doesn't matter. I mean, our pool of available agents to pick from is pretty strong. And as I said, we're concentrating on those. And we haven't disclosed that and we're not going to disclose that, so I mean that's...

John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division

Is there also a calling process that's going on, Henry, where some of the weaker producers are being asked to move along?

Pat O'Malley

John, are we asking the weaker producers at Landstar to move along? Really, what we're designed to do is try and make those people more successful through our systems and our support. But we don't throw someone out unless they aren't going to make it here at Landstar. So we don't have a threshold where we say, "You can't be here." But clearly, what we're trying to accomplish is, bring people in that have an existing book of business and get them into the Landstar System, help them understand how things work and then they grow their business. And we've had some very good luck with that. And if you look at the marketplace today, it's very difficult to grow your business because of the constraints on lines of credit, if you will. And so we have a lot of folks that have a lot of demand from their existing customer base, can't capitalize on it because they can't secure the capacity, they can't fund the receivable, they can't grow their business. And so they see Landstar as an excellent alternative and then they can go back into their customer with that relationship and grow the business.

John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division

Maybe as a follow on, if I could, 1 of our guys attended the Navistar session out in Illinois yesterday, and there's an increasing amount of talk about natural gas-powered trucks, as well as a shift from 15-liter trucks down to 13-liter trucks. The big fleets seem to be sort of leading the chart with this and, ultimately, over 2, 3, 4 years, conceivably could lower their cost of production, if you will. How does Landstar cope with some of those trends in terms of moving to natural gas and perhaps to some of the smaller engined trucks?

Henry H. Gerkens

Well, I'll let Pat answer a little bit, but I've got to tell you, the infrastructure too, I think, put together a natural gas stops, if you will, I think is going to be a little bit longer than 2 to 3 years. And like anything else, as we move forward, we'll figure out ways to cope with that as far as from our BCO standpoint and things like that. I actually heard that interview. I think it was yesterday on CNBC with Boone Pickens and the CEO of Navistar, and that sounds all good. And I think that's the direction that we're going to go at, but it's going to take some time.

Operator

Your next question comes from the line of Justin Yagerman, Deutsche Bank.

Robert H. Salmon - Deutsche Bank AG, Research Division

It's Rob Salmon on for Justin. I guess to drill a little bit further into the million dollar agent, could you guys talk a little bit about the productivity? What was the revenue per million dollar agent? And you had indicated you've got a strong pipeline. Could you give us a sense of how many people in the pipeline are potential million dollar agents?

Henry H. Gerkens

I'll let Pat deal with that. I'll let Jim give you the answer as far as the -- and I know they accounted for about 91%, I believe it's 91% of our total revenue, Jim?

Jim B. Gattoni

Yes.

Henry H. Gerkens

It was 91% of our total revenue as far as those 504 agents. So it gives you a pretty good flavor as far as -- and when you think about Landstar over the years, I mean, it's run between the upper 80s and 90% approximately, but it's 91% this year. And, Pat, as far as the pipeline, if you will?

Pat O'Malley

I think we've got a very good practice in place to identify those agents that we believe are great candidates for Landstar and then the ability to reach out, bring them down to Jacksonville, have them see what we're all about. So we're very satisfied currently with the process that we have for identifying those agents. And then we're satisfied with the pipeline of new agent prospects.

Henry H. Gerkens

I think you've got to go back to what Pat said before also as far as the difficult operating environment for a lot of these smaller guys, and Landstar provides just a great home for those agents.

Jim B. Gattoni

And $4.8 million is the average for the million dollar agents.

Robert H. Salmon - Deutsche Bank AG, Research Division

Okay, yes, I was going to just back in to that with the 91%. I must have missed that in the prepared remarks. I guess shifting gears to the capacity side of the equation, you guys, we saw the gains accelerate in Q4, which is typically a time we actually see it drop off a little bit just seasonally. Could you talk a little bit about kind of the incremental gains on the capacity, what that pipeline looks like and what you guys have changed to help drive those gains?

Henry H. Gerkens

Well, a couple of things. One, and Joe, I'll let you jump in also, if you recall, you go back track all the way back to the first quarter, we had a number of quarters where we had a decline in BCO count, for example. We also had a falloff, which I think we actually previewed as far as some of the things we were going to look at our broker carrier fleets, if you will, and as it relates to CSA 2010, as far as making some exceptions there as far as when we re-crafted our requirements. So as we went through that piece, we were able to build our carrier base back. But the BCO piece clearly had a different target. We put together a program of increased advertising, put together a program of focus, actually, and it puts us together some things that actually made our recruiting more efficient. And Joe, if you want to just touch base a little bit?

Jim B. Gattoni

Yes, I think we, Rob, we really -- on the 3 things from a BCO perspective that separate Landstar from the others, and that is clearly our percentage pay. So when the rates go up, as they have been going up, the BCO gets an automatic increase in pay. 100% pass-through in fuel is also critical in any oil cap program that allows these independent owners to really reap the benefit of a large company in the way of pricing on a lot of things from tires, to fuel, to phone services, and et cetera. But a little bit more broadly, I think what we've done a pretty nice job of is getting our agents to look at capacity and form relationships longer term, whether it be BCOs, and that was re-emphasized amongst the agent network. And our retention finished up 2011 just a shade over 27%, which is extremely good. But also the broker carriers, not just to utilize the carrier once and then not think about them again, but actually put together a plan, a strategy around -- a capacity plan, if you will. And that's what we've been pretty successful in doing. And if you look at not just to increase in carriers that we have approved year-over-year, but the number of active carriers. The number of active carriers jumped by 1,174 year-over-year. So not only are we adding to total capacity that's approved, we're actually fostering productive relationships that will carry us into the future, and that's kind of been the strategy behind the capacity piece.

Operator

Your next question comes from Peter Nesvold, Jefferies.

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

I think you said in the release early on, there was an extra week in the quarter?

Henry H. Gerkens

Yes.

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

How does that work?

Henry H. Gerkens

Well, we closed on the last Saturday of the month, and really what happens is, every, was it, 7 years, we basically have a 53-week year, and that's how that works. We estimated that, that would cost -- it's hard to judge what that day is, but we estimate it's about $25 million to $30 million of incremental revenue that we had in the year related to that extra month, and Jim -- or a week, I don't know if you want to add anything else to that?

Jim B. Gattoni

Except 2010 that ended on Christmas Day the 25, and then the next Saturday was January 1, so we ended on the 25 in 2010. But this year, we ended up on the 31, the last day of the year, so you got that extra week. The extra week really is the week between Christmas and New Year's, which is generally a slow week. So you can't just take the quarter and divide it by 14 and say that's where we picked up. What you really do is, we know that during that week, we probably dispatched about 16,000 loads and that's how we get a $25 million to $30 million of additional revenue for the quarter.

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

Okay. So I'll put a comment in my outlook for 7 years from now, and I'll make sure I -- Air Freight, did you address this in the prepared comments? It looked like it dropped off sequentially much more than it normally does in 4Q. Was there anything happening there?

Henry H. Gerkens

No, nothing specifically. I’d have to look if there was a sequential drop. I know it was 30% -- approximately -- what was it about 30% over from the -- not aware of anything specific.

H. Peter Nesvold - Jefferies & Company, Inc., Research Division

Okay. And then last quick one, there's this growing sentiment that housing and construction end markets are starting to show some signs of bottoming out. Are you seeing anything in your business that might confirm that? And what could you tell us about it?

Henry H. Gerkens

It's really nothing that, that would confirm or say that's not true. I mean, again, when you look at our business from a home construction standpoint, we don't do a lot of that, and I think people often confuse that. Obviously, there's a lot of flatbed stuff that's utilizing that. I mean that's only going to make capacity tighter. But nothing that we can point to because it's really not one of our stronger areas, if you will, as far as that type of building.

Operator

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

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

I got a question for you. One of your remarks, Henry, I think you were talking about outlook for the market in 2012. You mentioned that you were constructive on pricing but you thought maybe the pace of pricing gain you realize in 2012 would flow down a bit from 2011. Can you give me some of the logic behind that? It kind of feels like the economy feels okay, it doesn't feel like there's been a lot of capacity added. So I guess it's not intuitive to me that this pricing would necessarily slow down.

Henry H. Gerkens

Yes and I know people like to use the term decelerate, and I like it when pricing increases all the time, so I'm still looking at a, what I would say, a price increase. So when I want to go back over a 2011 over 2010, I mean, month-over-month increases ranged from 7% to 14% on a revenue-per-load basis and used the word logically. Logically, it's kind of hard for me to believe that you're going to get that type. On the other hand, in my prepared comments, I said all that being said, basically, January was 7%. So yes, the economy continues to improve and there's no capacity added. One would think that pricing would have to increase. I'm not factoring in that type of increase when we gave the estimates. I mean, I think what you're going to see a lot from Landstar in 2012 is really volume gains based on what we've done. Now price kicks in, that's only better for Landstar.

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Right. Okay. Does that 7% you're mentioning in January, is that a base rate type of number? Or does that include some fuel in it?

Henry H. Gerkens

That does not include -- I don't think that includes -- oh yes, brokerage. It includes brokerage fuel and I don't have the picks of that as far as what's what.

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Do you know what the BCO was up in January or you don't have that math?

Henry H. Gerkens

We haven't really closed the January books, I mean I've got this off of what we call our flash reports. So I don't have a breakout of that.

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Okay. All right. What are your thoughts on capacity in the market? Do you think there is capacity that's coming in, in dry van or in flatbed? Or do you think it's really the type of thing that it's relatively static and the equipment purchases are really kind of reducing fleet age as opposed to increasing capacity?

Henry H. Gerkens

My understanding is that no one is really increasing capacity, that everything else is basically -- what's happening is replacement. Now again, we don't do that because we don't own equipment. So I would think some of the other companies out there would be better off answering that question. But I don't believe there's anybody really putting equipment on. I think everybody's scrambling to -- for capacity. And then you've got a lot of people brokerage, owner operatives, all that stuff going on. But I'm not aware of anybody that is really putting on equipment and then have to seek the tractor. I don't believe that's happening.

Operator

Your next question comes from the line of Chris Ceraso, Crédit Suisse.

Christopher J. Ceraso - Crédit Suisse AG, Research Division

So it doesn't sound like you've dialed in that much price in your guidance. I had a question about the upper end of that range. What do you think has to go right, Henry? Or what gets you up to the upper end? Is it price, is it better volume or both? How do you get there?

Henry H. Gerkens

Well, I mean, we're going to get there with, as I said, not without giving the exact numbers I'm looking at, but price increases that are not as robust as we had in 2011, but still price increase. And I think we've got a lot of good things going from a volume standpoint. And again, I fall back on what I really said in my comments, that if, in fact, the economy does continue to really pick up, you would think maybe there's more price than you would think. But it'd be nice to have. That upper end that I quoted at $3 billion, that'd be real nice to have a $3 billion year and that's clearly our goal.

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Okay. And then as a follow up, if our numbers are right, toward the higher end of that range, that would be something close to about a 45% margin on net revenue, which is roughly what you did in the fourth quarter. Is that right? And is there much upside from there, given your business model?

Henry H. Gerkens

Two things. One, that is correct as far as 45%, and I think that was a goal we laid out a couple of years ago. As far as trying to get to that 45% level, I think we're on the verge of tracking that. I think as we go further, obviously, I think there was some questions on -- how do I put this, there's a lot of good things we have as far as that's going to create incremental revenue. And the key to Landstar is creating incremental revenue. I don't have to add, or incremental gross profit because I don't have to add a fixed cost to basically generate the -- to leverage that. So I think that's where you're going to gain the leverage. You saw a part of the effect also as far as brokerage exploding, and some of the new things that we're doing is brokerage, and that doesn't have the insurance and claims impact. So that's a positive also. So you've got to look at all. In fact, I can't remember, ever, Landstar's total revenue, BCO revenue, at 49%. I mean, that's low and that clearly drove lower insurance expense as a percent of revenue. And as we get incremental business, we're going to try to bring on as many BCOs as we can because we like that. But obviously, there's going to be -- brokerage is going to have to be utilized, and we did that very effectively and I think that's how you're going to see Landstar in the future, is continuing to drive both. But I think you're going to leverage a lot of costs.

Christopher J. Ceraso - Crédit Suisse AG, Research Division

So you think you can punch through 45%?

Henry H. Gerkens

That'd be nice.

Operator

Your next question comes from the line of Nate Brochmann, William Blair & Company.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Henry, I was wondering if you could talk a little bit more about your end markets. We talked a little bit about construction, and obviously, you guys don't play a ton there anymore. Could you talk about some of the other areas, though, where you are really seeing the pockets of strength?

Henry H. Gerkens

I'll let Pat go into that?

Pat O'Malley

Nate, I think if you look across the landscape of either take a look at where commodity prices are today, and so you take a look at what some of the equipment manufacturers are doing and then they're really driven by the commodity prices. We had a couple of equipment manufacturers down here last week and talked to them about what they see coming. So that segment of the business is very strong. The alternative energy business is extremely strong. If you look at the wind energy credits and you look at some of the buildouts for this year, we anticipate a very strong year in that segment of the business. So any alternative energy, anything tied, any equipment manufacturers tied to commodity prices, those segments are very strong right now.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Great, and then, two, could you talk a little bit about kind of the revenue trends and the customer pickup and interest that you're seeing on the technology solutions side like with A3i and NLM?

Henry H. Gerkens

Yes, we put that all together and now refer to it as Landstar supply chain solutions. And I've said on the last several conference calls, where you're going to see the benefit of this is really in increased freight, and that's really my comment as far as things we've laid out in 2009, 2010 is far as you're starting to see some of the benefit of that particular thing and increased rate volumes because it goes hand-in-hand, and that's really how we're going to drive the incremental freight is through the use of Landstar supply chain solutions, which is based in Southfield and doing very well.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Okay. And then just last one real quick, just in terms of the mix, in terms of what you're feeling, and I know it's hard to pinpoint, but what you're feeling in terms of new wins with new customers versus either increasing penetration or just growing with your current customers in terms of the mix there?

Pat O'Malley

Nate, all of those things. We are calling on our existing customers, calling on new customers and bringing on new agents, and those are the 3 main focus areas for our sales people and that's all they have to execute on. So I would submit to you that we're doing well in all 3 of those segments.

Operator

Your next question comes from the line of Scott Group, Wolfe Trahan.

Scott H. Group - Wolfe Trahan & Co.

So I want to start with brokerage and try and understand what's changed here that's allowing for such strong growth? A lot of market share growth here and what's driving that really? And then when we think about the double-digit, give or take, revenue growth for next year or -- sorry, for 2012, how much of that is coming at brokerage versus BCO?

Pat O'Malley

Scott, let me comment on brokerage. And I think that if you look at our agents, the new agents that we're bringing on, I think that they have a kind of a background in brokerage. Many of them have their own brokerage business. They were unable to stay independent, if you will, because of all of the things we've already talked about, whether it's the credit markets or a customer going belly up or the need to fund their growth. I think that's a big part of it. I think another big part of it is what Joe and his group have done with the brokerage here and the support that they provide the agent and I'll let Joe kind of talk about some of the things they're doing operationally from that perspective.

Joseph Beacom

Yes, Scott, as I kind of said earlier, it's really about trying to -- it starts with the customer relationship that the agent has. And if historically the customer really wanted us to use BCOs, we start by talking to the customer about, "We could provide a lot more capacity if you give us the latitude." And a lot of customers in this environment are very receptive to that. And those that aren't, we get in front of them and we talk to them about the steps we take to qualify broker carrier capacity because a lot of times, there's some concern about who actually might haul their loads. So we’d walk the customer through that process on how we vet those carriers, how we don't just take anybody, that we look at a lot of different factors. Get them comfortable with the idea of brokerage and then turn loose the 28,000-plus carriers that are in our database, put those at the disposal of the agent and let them use some of the additional technology that we've acquired with the acquisitions to try to make that work well and drive more capacity to an existing customer. That's a pretty typical example of how we've grown the brokerage.

Scott H. Group - Wolfe Trahan & Co.

And any thoughts on within the double-digit guidance for revenue this year, how that splits out between brokerage and BCO?

Jim B. Gattoni

Scott, generally, what you see is you can only add so many BCOs into the network. So we’d anticipate that you're more in the mid-single digit on the BCO growth, but with the most of it coming from truck brokerage.

Scott H. Group - Wolfe Trahan & Co.

Okay. And then just staying on this theme of brokerage versus BCO, given kind of the current state of capacity, I know there's moving parts between purchased transportation and insurance, but overall, how do you think about the margins currently on the brokerage versus the BCO business?

Jim B. Gattoni

Well, I mean you got to remember the BCO business is a fixed margin. So it's a little bit different than the brokerage. And even the brokerage, 30% of brokerage business is fixed. So we like tight pricing. We like tight capacity, which drives pricing because 65% of our business is at a fixed percentage. As it relates to the capacity that's on a variable margin, that brokerage piece where the tighter capacity gets squeezed on your margins and looser capacity expand your margins. Even that part we split 50-50 or 60-40 with agents. So we like the tight environment and we’re tied to pricing because a lot of our profitability is fixed. So when we look at it, we're not looking to see, well, let's put this on a BCO, let's put it on a truck broker. We're just looking to haul freight satisfactorily and safely for a customer.

Scott H. Group - Wolfe Trahan & Co.

That all makes sense, but the mix is certainly moving more towards brokerage and we've seen that for years, but looks like it's accelerating right now.

Henry H. Gerkens

Scott, you got to -- and think about what you said, that's correct because I've got more loading opportunities and if I've got a limited base of BCOs, you're really going to go to brokerage. And actually when you think about some of the stuff that we're doing with, as Joe described, some of -- using our technology, some of this stuff can be more defined lane, which is going to be basically a brokerage type operation is what we're looking at. So where the BCO is more of the irregular route type stuff, that stuff. So it's a little bit different and it's all a matter of getting the revenue in the system and we're getting the revenue in the system through a whole bunch of different things that Pat's doing with his consolidated sales force, with what Joe is doing on certain things, and that's the key, is put the revenue in the system and if we're going to grow the business, I've got to get the capacity and the capacity has got to come from brokerage because there's not enough BCOs out there that are going to qualify into the Landstar System that is not to say I don't want to bring in BCOs. I clearly want to bring in as many as possible. It's just that the nature of our qualification process, we're just not going to grow that as fast.

Scott H. Group - Wolfe Trahan & Co.

Right. I guess my question's more on the margin side of it. So the BCO is more fixed and the brokerage I know can be more of a variable margin depending on where you are in the cycle. I'm guessing the brokerage margins can either be better or worse than the BCO margins. Where we are today, how do you think those margins compare on brokerage versus BCO?

Henry H. Gerkens

You've got to look at it -- I've always looked at it in total because, again, I don't have that and we don't really split it up because -- I can give you revenue, I can give you PT and those types of things. But when we get to after that line, all right, I have a favorable impact on insurance the more you haul on the broker carrier because I don't have the insurance exposure on that. Above that line, on the gross profit line, obviously, the BCO business is more profitable to us at this point in time because of the fixed nature of it. So it's kind of hard to break all that stuff out. And I think better, Scott, that maybe you take it off-line with Jim, and Jim can probably run you through that stuff. That might be a better way to attack that.

Operator

Your next question comes from the line of Alex Brand of SunTrust Robinson Humphrey.

Alexander V. Brand - SunTrust Robinson Humphrey, Inc., Research Division

I just wanted to see if I can sort of wrap up this, it seems we go back and forth on the insurance as a percentage of revenue we have for a long time. Can we assume that it's not going to go back to 2%? Or Jim, can you give us an idea of where you think it might run going forward with brokerage as a bigger percentage of the mix?

Jim B. Gattoni

Look, you're always going to have your unfortunate incidents going to drive it. But on average, it should come down from where it's been just because we're putting more brokerage. 97% of the insurance is related directly to BCOs. So I kind of, the way I look at it is I look at the load volumes of BCOs and how much it cost per load and types -- and just you’d kind of take the brokerage out because there's no -- not none, but there's limited risk on the brokerage load. So you would expect as we grow brokerage, yes, it would come down. What's the percentage, you'd have to tell me what the percentage of brokerage increase would be.

Alexander V. Brand - SunTrust Robinson Humphrey, Inc., Research Division

Okay. Can you talk about the flat growth versus the van growth in the fourth quarter and where we ended up in Q4 in terms of the mix that was flatbed?

Jim B. Gattoni

Q4 flatbed was 37% of revenue and last year's fourth quarter was 34%.

Alexander V. Brand - SunTrust Robinson Humphrey, Inc., Research Division

And what was the growth in flats versus dry in the quarter?

Jim B. Gattoni

Flats was up 35%.

Operator

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

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

My question's around the balance sheet. When I think about your model, you've always generated a lot of free cash and then you've always, in turn, bought back a lot of stock with that. If I take the midpoint of your guidance, I'm coming up with EBITDA in 2012 somewhere in the, let's say, $240 million, $245 million type range. What's your thought on using cash next year? Given where the share price is, given where your repurchase authorization is, maybe you have a number for CapEx, that could be helpful as well.

Henry H. Gerkens

Also on the share repurchase, I mean, that has been a part of Landstar's business model since '97 when we started this buyback program. So I would think that we would continue to buy back shares as we went through the year, pending on, again, how we look at things and where the stock price is, if it settles in a range, again, it's not a matter of, obviously if it was low, we put more in. And if it just settles in a range, we'll buy. I mean we use cash flow to return -- it's one of our ways to return to the stockholder. So that's going to stay the same. As far as your other question, Jim, you want to...

Jim B. Gattoni

Cash CapEx, generally, cash CapEx generally runs $5 million to $10 million a year. So that's kind of where the range I would expect. Capital, we go through a cycle replacing our van equipment. So we anticipate replacing about 1,400 vans next year. So on a capital lease standpoint, it really doesn't show up in the cash flow when we do it. You probably got another $40 million on top of the $5 million to $10 million.

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

Okay, but I mean it's fair to say that I mean there should be no directional change in how you've used cash historically? I mean it still is a model that you're going to generate cash and you're going to use that to buy back stock? I mean that's essentially what I'm getting at with, is the earnings...

Henry H. Gerkens

That is correct.

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

Okay. Great. And then just for my follow up, I'm assuming that within the guidance, you have just some numbers in there for incentive comp. Do you have or can you talk about directionally year-over-year what incentive comp is in 2012 versus 2011?

Henry H. Gerkens

Incentive comp in 2011 compared to 2010 was lower because the baseline was higher. And 2012, the baseline is higher than it was in 2011. So let me put it -- let me just leave it at that because that's really I think what you're looking for. 2010 was a year where the baseline was set low. 2011, the baseline was set higher. And although we had a record EPS performance, the incentive comps was lower. Next year, again, the 2012 target is higher. And therefore, depending on where we finish in 2012, it'll determine how much the payout is. But -- if that answers your question.

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

Yes, so it's going to be higher year-over-year in '12 versus '11 based on how you’ve guided the year, I guess, is that's kind of what I'm getting at.

Henry H. Gerkens

No. Actually, not necessarily, all right? It depends on where that target is set. You follow what I'm saying? The target 2011 was -- we outperformed the target in 2011, so we had a payout. But the payout wasn't as great as the payout we paid in 2010 because the target in 2010 was lower. When you go to 2012, the target goes up, all right? So depending on where we finish in 2012, I mean the payout could be higher or lower and there still could be a payout.

Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division

Okay, I'll probably follow up in line, but I guess what -- you had that though in both the high end and low end of your guidance. If you came in at the high end, you've got the higher payout. If you come into the lower end, that you're factoring the lower payout.

Henry H. Gerkens

Yes. That's absolutely correct, I mean depending on where you finish, it is pay-per-performance type thing as we've had for years.

Operator

Your next question comes from John Barnes, RBC Capital Markets.

John L. Barnes - RBC Capital Markets, LLC, Research Division

A couple of quick questions. Going back to the agent recruitment, can you just talk a little bit about your hit rate, your success rate at taking a sub-million dollar agent that might be in your network and converting them, and typically, what the timeframe of that success is?

Pat O'Malley

Well, John, if you look at the $1 million -- the growth in $1 million agents, that isn't all necessarily new agents into the network. It could be agents that heretofore, have been at Landstar but had never broken that $1 million level. We have specific sales programs that our sales people have to hit specific activities that they have to conduct, specific customers that they're focused on, specific industries. And as you know, in our model, the agent is the conduit to moving that business. So if you think about the responsibilities of the sales group, they're using the agent where they're working in concert with the agent to make certain that they can target those industries and grow that business. So we don't have a specific program that says, okay, this agents at $750,000, let's get them to a $1 million. We have industries, accounts and responsibilities. And if we execute on those, then our $1 million agent group will automatically grow.

John L. Barnes - RBC Capital Markets, LLC, Research Division

Okay. All right. That makes sense. And then also, Henry, you had talked I think earlier this year about there had been a little bit of a shift in recruitment efforts to maybe a lesser focus on agents that were in the traditional trucking kind of business and more of a focus on maybe some of the other product offering, service offerings. Is that still the case? Or have you modified that at all to maybe shift a little bit more?

Henry H. Gerkens

I think we've had -- we recruit all agents, all right. And it's not that we've had a change in who we're after as far as from an agent base. I think we put a little bit more, not emphasis, but we restructured some things as far as how to recruit certain agents, if you will, and we've been very successful. I think when you look at our air and ocean agents and our rail intermodal agents, I mean the rail intermodal for example, grew very nicely. And what was important about the rail intermodal, Pat, I think the number was, we had 25%? 25%, what do you got?

Pat O'Malley

The 24% of the revenue is produced by agents that we're -- are not intermodal approved, John. So that means they don't run intermodal operations out of their office. They do, however, utilize one of our other agents, and that 24% also includes agents that we brought on that hadn't been with Landstar before but had intermodal business. So there's some smaller IMCs out there that they're trying to look for a way to diversify because they can see that, gee whiz, that IMC worlds kind of getting them froze out. So they find Landstar to be a great alternative because now all of a sudden they can explore brokerage. The BCOs are appealing to them. So that segment of the world we converted some of those folks.

John L. Barnes - RBC Capital Markets, LLC, Research Division

Okay. All right, that makes sense. And then, Henry, lastly just on the wind tower business, one of the larger wind tower manufacturers recently filed suit against a customer for basically not placing promised orders, contractual orders. I'm just kind of curious as to what you're seeing on the wind tower side. I know there's been just kind of mixed reviews on how that business has been, and have you seen any impact or maybe a slowdown of orders there.

Henry H. Gerkens

Pat?

Pat O'Malley

John, the exact opposite.

John L. Barnes - RBC Capital Markets, LLC, Research Division

Okay. Anywhere specific? I mean, geographically, have you seen any weakness in one place and strength in another?

Pat O'Malley

No. We have the request for quotes last year. For this year's business, okay. So through the course of last year, request for quotes for tower business this year is at an all-time high, and it's across North America, including Canada. So there's wind tower sites going up all over and we're quoting on -- we've never quoted on so much business in that segment.

Operator

Your next question comes from the line of Ben Hartford, Baird.

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

I wanted to expand a little bit along on the intermodal side. Now that the comparisons are starting to normalize, I know you have the agents deal into 2010. You have the accelerating growth this year. Pat, how much of that, I guess, Pat, could you talk about how much of that, the growth in load count in intermodal in the fourth quarter was from new agents versus or call it organic growth within the existing agent network? And then I also would like a little bit of perspective in terms of thinking about that growth rate in 2012, Henry, in the context of you talking about taking market share broadly.

Pat O'Malley

Ben, I couldn't give you the breakout in the fourth quarter loads on intermodal versus existing agents that have that business and new agents. I don't have that number with me.

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

I guess just perspective then, Henry, when you were talking about taking market share, that specific vertical has been in line to maybe slightly behind the broader domestic intermodal market. So in terms of thinking about growth where it in that vertical next year and your comment about taking market share, any specific initiatives to allow you to take share in intermodal specifically?

Henry H. Gerkens

We're going to continue to do the same thing. I mean I think that part of it and Pat's 24% of agents, who previously didn't do anything in intermodal now starting to utilize other agents to do intermodal stuff I think is very telling because that is something that we've been trying to pick the lock on for a long time. And our objective is to keep moving that forward and -- if that’s what you’re driving at. That's clearly part of it. I mean, look, I think we've got great opportunity as far as all the services that we offer. Obviously, we're going to be a big truck player. I think our software solutions that we have that we're going to go out and create more loading opportunities, I think that's where you're going to see huge -- huge is a big word. How about or good market share gains from that. And I think we're starting to see that happen, and I'm very positive on all of that at this point. But clearly, air, ocean, rail, that's all part of our array of things that we offer, and each one of them have grown pretty nicely year-over-year. And I think we have a -- the big change of all this is really putting groups together, if you will. I mean you go back in Landstar's history, you had the logistics group on one side. You had the truck group on the other side. Under Pat's leadership, what we've done is we've combined all of that field, all that agent base, all of the corporate sales account under one leader. They all have the same common direction. I think that is paying huge dividends and I see that going forward in the future.

Operator

Your next question comes from the line of David Campbell, Thompson Davis & Company.

David P. Campbell - Thompson, Davis & Company

I've been hearing a lot about the BCOs and why it's difficult to get more revenue in their net section of the carriage. But why would it be down from the second quarter and the third quarter was down from the second quarter? Why do those revenues per carrier peak in the second quarter?

Henry H. Gerkens

Jim will check that. I mean, and I don't know if that's accurate. I would think it's actually should be the opposite, but I don't know. Again, when you look at our system, we have very strict qualification standards as it relates to our BCOs. And we only qualify about 1 out of every 5 BCOs that tries to sign on with our systems due to safety reasons and some other things. So I think when I talk about we want to bring in as many BCOs as possible, but when you think of the qualifiable pool that's out there, it's not very large. There's a lot more small carriers, if you will, so I don't know, but Jim's looking at your number thing. Joe, you've got anything more to add to that?

Joseph Beacom

No. I would just echo that. I mean we're not going to roll the BCO fleet by reducing our standards. So we keep our standards the way they are and then we satisfy the customer by augmenting our capacity offering to include brokerage, and it's worked well and it continues to work well and that'll be the path that we'll continue to take.

David P. Campbell - Thompson, Davis & Company

Yes, I understand that, and my numbers show that the business capacity owners have been going up since the second quarter, but the business hasn't. So I was just curious about that. I see 7,871 at the end of December, business capacity owners. That's up from the numbers I have for the second quarter. But that's okay. We'll assume that's what it, it is, what it is. Next question, my last question, Jim, you went over pretty fast, the G&A cost in the fourth quarter included a charge for bad debt reserves? I couldn't remember that, this year or last year?

Henry H. Gerkens

This year.

Jim B. Gattoni

2011 was $2.4 million in SG&A, this year's fourth quarter.

David P. Campbell - Thompson, Davis & Company

Okay, yes, so that means that next year should be, all things go equal, that should be fine.

Henry H. Gerkens

Correct.

Operator

Your next question comes from the line of Ryan Bouchard, Avondale Partners.

Ryan T. Bouchard - Avondale Partners, LLC, Research Division

I wanted to follow up on one of the questions that was asked earlier. You said the flatbed revenue was up about 35% year-over-year. Can you give us an indication how much of that was volume?

Henry H. Gerkens

Jim, you got that? I'm going to say the bulk of it was price, but. . .

Jim B. Gattoni

About 18% of it from load count.

Henry H. Gerkens

That's about 50-50.

Jim B. Gattoni

50-50.

Ryan T. Bouchard - Avondale Partners, LLC, Research Division

And then did you find the van revenue growth rate?

Jim B. Gattoni

15%.

Ryan T. Bouchard - Avondale Partners, LLC, Research Division

15%, and the same thing, was it about 50-50 volume and price?

Jim B. Gattoni

That was mostly volume is what I'm getting.

Ryan T. Bouchard - Avondale Partners, LLC, Research Division

And then finally, you may have already identified it. I may have missed it. Substitute line haul as a percent of revenue, is it still about 2.5%?

Henry H. Gerkens

Yes, it's right around about 3% and we didn't talk about it because that was the first mention of substitute line haul. I told you last conference I wasn’t going to mention it. I could have excluded all that stuff, I didn't do that but yes, it's been around about 2.5%, 3%.

Operator

Our last question will come from the line of Anthony Gallo, Wells Fargo.

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

A quick question. Jim had mentioned that within the broker business, about 30% is a fixed setup versus the variable. Just remind us how that's negotiated or how frequently that changes.

Henry H. Gerkens

Well, go ahead, Jim.

Jim B. Gattoni

Well, it's a contract we have with the agent really is how that works. About 30% of the brokerage business is hauled by agents that have, what we call, a retention contract, which means Landstar takes a piece off the top and the agent keeps what's left over after we pay the truck. So it's basically fixed for us.

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

Okay. And then if I can, just back to -- the wind turbine business or alternative energy however you want to bracket it, roughly what percent of overall revenue is that right now?

Jim B. Gattoni

We don't necessarily have it broken down that specific. It's kind of in our equipment category, which is about 18% of our business. I don't have a break down, down to that level.

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

Less than 18%, fair enough?

Henry H. Gerkens

Yes.

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

Okay. And Henry, last question, any color on what you think the Iraq wind-down might mean, kind of your mixed views about what may come back or what may not come back?

Henry H. Gerkens

My opinion is, it's not going to mean a lot, but maybe, unless Pat you’ve heard anything different.

Pat O'Malley

It just depends on what the government decides to do with all that machine rent that's over there and if they bring it back and on a retro grade we'll certainly participate in that, Anthony. But they haven't made those decisions yet.

Operator

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

Henry H. Gerkens

Thanks, Terry. Let me go around the room and see if there's anybody here who wants to. Joe?

Joseph Beacom

I have nothing.

Henry H. Gerkens

Pat?

Pat O'Malley

Nothing.

Henry H. Gerkens

Jim?

Jim B. Gattoni

Well, I think we're coming off a couple of great quarters and that you can feel that momentum continuing into January. And unfortunately, in the fourth quarter we did have that charge of $2.4 million for one specific bad debt and we don't anticipate that and didn't anticipate that going into the quarter. And you know I just -- I feel some good momentum coming into January and continue out throughout the next quarter or so.

Henry H. Gerkens

Yes, I'd reiterate that we've now put, I mean dating back to 2009, we've now put together 2000 -- I mean, first quarter, at the end of 2009 into 2010, 2011 we've put together like 8 consecutive quarters of really solid EPS growth. I think we've gotten a nice kick on some volume gains. We'll see what happens as we move forward. But right now, we feel pretty confident. As I said in my prepared remarks I think we're operating on all cylinders and we look forward to 2012. And we'll talk to you again on our mid-quarter update call. Thanks. Have a great afternoon.

Operator

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

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