羅賓遜全球物流 (CHRW) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the C.H. Robinson first Quarter 2006 conference call. [OPERATOR INSTRUCTIONS]. I would now like to turn the conference over to Angie Freeman, C.H. Robinson director of investor relations.

Good morning everyone. On our call today will be John Wiehoff, CEO, and Chad Lindbloom, Vice President and CFO. John will provide some prepared comments on the highlights of our first quarter performance, and we will follow that with a question and answer session. I would like to remind you that comments made by John, Chad or others representing C.H. Robinson may contain forward-looking statements, which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations.

With that, I'll turn the call over to John.

Thank you, Angie.

The first area of prepared comments is with regards to our past acquisitions and the impact that they've had on the quarter. The press release that we sent out yesterday gives you all of the relevant percentages, but I just want to cover the fact that on February 15th or right in the middle of the first quarter, we did lap the one-year anniversary of the food source acquisition that significantly impacts the sourcing revenues of Robinson. In the first quarter of 2006, we have additional revenue from that acquisition that increased the growth rate of the sourcing activity. The release indicates that the comparable growth, without the acquisition, would be 11% for sourcing for the quarter.

We talked in our year-end earnings release that, because of the transition of our sourcing business to a different customer base and the acquisition of food source, that we were continuing to evaluate our longer term growth expectations for the sourcing line item, and we do hope to continue to see high single digit growth rather than the 3 to 5% sourcing growth that we had talked about for years before that. In addition, last fall, we had two freight forwarding acquisitions named Hirdes and Bussini that we've discussed several times in the first quarter of this year.

We also had incremental revenues in the air and ocean and customs brokerage line items from those acquisitions, and those occurred in the fall of last year, so we would expect to see incremental acquisition revenues in the second quarter of '06 as well, too. We're very happy with all three of those acquisitions in terms of our integration plans and where they're at, but I just want to make certain that everybody remains sensitive to the growth impact on revenues from those acquisitions.

Next area of prepared comments would be in the truckload revenue and net revenue categories. Last year we talked about our business in the truckload area being driven by mid teen volume growth throughout 2005. That growth rate continued into the first quarter of 2006. We experienced mid teen volume growth of truckload services for the first quarter of 2006 as well. Similar to last year, our volume growth was helped by additional pricing and margin activity for the quarter.

In the first quarter of 2006, we had estimated pricing increases of high single digits, and our best estimate of that being broken down between rate increases and fuel would be about half and half, again similar to several of the quarters last year. So the pricing increase of high single digits is maybe a little bit slower price increase or a little bit lower rate of growth for price increases compared to the tail end of last year but still meaningful price increases in addition to mid teen volume growth that helped with the 20, 26, 27% net revenue growth for the truckload category for the quarter.

Third category of comment would be with regards to operating ratios and the operating leverage of the Company for the quarter. We've talked in the past numerous times about how, when we have higher growth rates, that it typically allows us to show some improvement in our operating growth. What we saw for the quarter -- first quarter -- of 2006 was a slight improvement in the personnel -- total personnel -- costs as a percentage of net revenue compared to the first quarter of last year.

Probably the most significant thing that is worth discussing for the first quarter of 2006 is the fact that we have had, for several years now, our new restricted stock programs as a significant equity component of our total compensation program. We are in the fourth year of that program and, at the beginning of 2006, we issued incremental and additional equity awards to a number of the management and executive people at Robinson, and though impacts -- the accounting and reporting impacts first began in the first quarter of 2006, what you may have seen on the cash flow statement that we released yesterday is stock-based compensation charges of about $14.5 million related to these programs.

We feel very positive about the motivation and the impact of these programs. Going into the fourth year, we think it's been a very good decision to move from the option programs to the restricted stock programs. Almost all of those stock-based compensation charges are variable based upon the performance of the Company. So in addition to our cash compensation bonus programs that adjust based on the performance, we continue to have more and more significant equity programs that adjust accordingly as well, too.

So that is a significant component of the increase of compensation charges for the quarter. And, in addition, as you see in the head count numbers that we released, we do have about 900 more employees than we did in the first quarter of a year ago as well, too, so obviously the compensation and salary impacts of adding those employees drive some of the compensation increases to the expense for the quarter as well. So overall the model is operating very similar to how it has in the past. We measure productivity and metrics in a lot of different ways and feel good about how we are investing in people and -- how we are investing in people and continue to add to the people and the growth we are experiencing. Last area of prepared comments would be in regards to a tentative settlement on our class action lawsuit.

Earlier this quarter we released an 8-K that described the terms of that tentative settlement. To refresh those of you who are unfamiliar with it, about 3.5 years ago, we were sued with a broad set of allegations and seeking class certification in a number of different ways within that lawsuit. About a year ago, the courts ruled and granted class certification on the category of pay and promotion discrimination but denied class certification in a number of other areas.

Earlier this quarter, we reached a tentative settlement on the component of the litigation that was granted class certification. The terms of that settlement are laid out in the 8-K, but the primary term is that there was a $15 million tentative settlement amount which we have insurance that we believe will cover that entire amount. There is some remaining pieces of the litigation, some individual EEOC claims and other components of the litigation that will be resolved separately, but this tentative settlement would address the portion that was granted class certification.

Those are the prepared comments that I have. We are going to stick with our policy of not making forward comments. And since the month of April is not completed as well, we are not going to answer any questions or discuss the month of April activity. But beyond that, we'd like to open up questions about our first quarter and anything else that we can help understand.

Thank you, Mr. Wiehoff. [OPERATOR INSTRUCTIONS] Our first question comes from Brannon Cook with J.P. Morgan.

Good morning. I had a question just in terms of how the quarter progressed in demand trends. Could you talk a bit about how you saw capacity in the marketplace? Was capacity looser incrementally in February than it was in January? Heard about some retail customers and some market weakness in February. Did you guys see that in.

Our business, for our volumes and our net revenue growth, was pretty consistent month by month during the quarter. As far as capacity, January and February are always kind of the loosest 2 months of the year, so it's really difficult for us to know if February was looser than January. We were able to find trucks to move our loads relatively easy both of those months.

Another question on operating leverage. There seems to be a particular amount of leverage on the SG&A line, and you spoke to how, when you generate better revenue growth levels, you tend to get a lot of operating leverage. Is there any specific things that would help you there or was it just general operating leverage?

In the SG&A category, it is pretty much just general operating leverage. There's many expenses in there that are relatively fixed, things like occupancy expense. So all of our leases across the country. When we're doing more revenue, those don't immediately create more costs. There's some that are pretty variable, like telecommunications tend to be pretty variable, but there's nothing in particular that is creating the leverage.

Thank you.

Our next question comes from Ken Hoexter with Merrill Lynch.

Just wanted to delve into the sourcing. I guess we've overlapped the two acquisitions last year if I've got the math right. Should we continue to see kind of above historical average growth at the sourcing business or is that something we should see return to the low to mid single digits going forward?

When we went public eight years ago, we had set out expectations and stayed with that for a long period of time in the kind of 3 to 5% range. And remember, Ken, the way we're structured internally at Robinson, our sourcing offices provide both product sourcing and transportation and distribution for their customers. So those offices internally have a higher growth rate similar to the rest of the Company where they are providing both transportation and sourcing. But the component of those transactions that is the mark up on the product for the sourcing gets categorized as a separate revenue line item.

We believe, because of a transition to a more retail customer base and because of hopeful synergies with the food service acquisition, that we're now targeting higher single digit growth rates for that sourcing business. Still not comparable to the long-term 15% target that we're saying for the business as a whole or for transportation but slightly elevated from where we've been for the last six or 7 years.

That is very helpful on that. As far as the truck side of the business goes, long-term you've been with the 15% growth. Is there something structurally that would cause you, for a few years based on the tight market, to shift kind of that near term target?

No. The reason why we keep emphasizing that is because, if you look at the fundamentals that are driving Robinson, we talk about the volume increases and the market share penetration of our company and third party services. Mid to high teens is really what we continue to experience in terms of our growth.

The pricing and margin activity that's really been giving us incremental growth for the last couple of years, there are people who believe that that is going to continue for some period of time based on market conditions, and there are probably other people who believe that that's going to retreat at some point. So it's difficult for us, and we don't try to forecast what that incremental growth might look like or not look like, so we just keep trying to invest in the network and the people and the transaction and market share growth in that longer term mid to high teens target.

And then last one. On the acquisition front, is there anything that you're focused on in looking at acquisitions? Are you seeing more I guess books presented in one specific kind of area or is it consistently across the board whether it's in sourcing or in trucking or international intermodal operations?

The types of books we're seeing are pretty standard with what we've seen in the past. There's no one type of company that's for sale more than it was previously. As far as our focus, we have done and will continue to do some tuck-in truck-type acquisitions, and we are also focusing on small international -- small or medium sized international forwarders that will help us build our network.

Thanks.

Our next question comes from Alex Brand with Stephens, Incorporated.

Good morning. This is Kevin Sterling calling in for Alex. Just a couple quick questions. Did your spot versus contract mix stay about the same this quarter compared to last quarter?

We've talked before about the difficulty in cleanly categorizing the differences between spot market activity and contractual business, but if you think of it as a continuum on the one end being purely transactional spot market type activity and on the other end of the spectrum being more fixed pricing or more longer term contractual relationships, the entire market, from our point of view in the last few years, has really moved more towards the shorter term or transactional end of the spectrum.

There are some accounts who are seeking and we're trying to provide longer term contractual rate commitments, but our entire customer base is probably under the understanding that there's more volatility in the market and more risk of inability to live up to longer term pricing commitments that get entered into. So as rates start to level off a little bit, maybe a little bit more stability, but I would not characterize it as a broad change in the customer relationships compared to last year.

Great. Thank you for the color on that. Is your freight forwarding business -- are you beginning to expand that beyond a few large customers? Are you starting to see, I guess, increase more of your customer base with your freight forwarding business?

One of the things that we liked about the two acquisitions that we did last year is their customer base was very diverse. There were no real significant customers within there. So by nature of adding those businesses, we have spread out our customer base a little bit more. But despite that, we still do have probably around 15 customers that make up more than half of that freight forwarding business just because of again still the relative size of it compared to the rest of Robinson.

So we do have a greater dependency on a more limited amount of customers as compared to the rest of C.H. Robinson, but we feel like we're making good progress in terms of the diversification and spreading out of the freight forwarding customer base.

Great. And one last question. What was your carrier count at the end of the quarter? Were you able to add carriers?

We usually only publish that number annually because, yes, we did continue to add carriers during the quarter, but it's very difficult for us to assess how many dropped out, which is why we only give an annual count. So, yes, we were signing up hundreds of carriers each month.

Great. Thank you for your time this morning.

Our next question comes from Edward Wolfe with Bear Stearns.

Good morning. John, you talked about truck capacity or truck price fog your angle still going up but maybe decelerating a little bit. Yet your yields year-over-year, taking the seasonality out, expanded quite a bit on the transportation side. Was there just more capacity versus a year ago in this period available?

I think that would be a reasonable assumption. Again, it's hard for us to prove that, but that would -- we believe that to be the case.

And again year-over-year -- and I'm talking directionally. Year-over-year, taking seasonality out of it, was it much different in March year-over-year than in February year-over-year or January year-over-year?

No. As Chad mentioned earlier, the quarter progressed pretty evenly.

Well, he was talking about demand. I'm talking just about capacity, availability kind of stuff.

And the answer would be the same for both that we saw pretty even activity throughout the quarter on both sides.

And directionally you've talked about seeing more small guys directionally getting in the market than leaving the market. Would you say directionally it still feels that way?

Yes.

Or some of the big guys starting to add capacity again more so than the little guys?

No. Our carrier growth continues to come from the medium and smaller carriers.

You talked a little bit about the personnel expenses and some extra costs for restricted stock and compensation. I was a little confused by part of that. Could you just clarify? Was there some piece of extra grants in the first quarter that aren't so ongoing or is this more ongoing kinds of stuff, assuming that the operating metrics continue to be as good as they are?

Yeah. Our restricted stock program provides for a number of different types of grants, but the larger ones for the management team and the executives are set up to happen on a three-year cycle. So there were new awards that were granted actually in December of '05 that began vesting in January of '06, and those awards will run for the next four to five years depending on how quickly they vest and how the company performs. So what you're seeing in the first quarter of 2006 is the incremental equity awards that were granted last year that began vesting this year that will continue to show up in each quarter depending upon how much vesting occurs, and the vesting is driven by the operating income and EPS growth of the company.

So, yes, there's some new components of compensation in the first quarter that will be there going forward. However, there are previous option grants and restricted grants that are finishing vesting and running out as well, too. But we think the first quarter is indicative of what at least the next couple of years should look like.

If our growth sustains itself.

Is that all in the personnel or some of that amortized in D&A?

All in personnel expense.

One last kind of bigger question. You responded to the acquisition question before. Would you consider buying a larger European company if there was a brokerage business available, something bigger than you've done to date, or is the idea that you're going to continue to do more kind of tuck-in kinds of things?

We have always been and continue to remain very open to any size acquisition if it fits the right cultural and financial parameters. We've had a difficult time identifying any larger targets within the European continent on the roadside that would fit our model and culture. Clearly there's some larger forwarding companies.

And with those, as we complete more acquisitions and get a bigger network, the dynamics change of integration risks and things that we'd have to consider to acquire a larger forwarder, so the further we get at building out our own network, the less likely the larger forwarding type of acquisition would become. But the answer to your question is we're open-minded to any sort of business transaction that would make sense for Robinson.

Thanks a lot for the time, guys.

Yep.

Mike Hamilton with RBC Dain.

Good morning. Could you walk through your views on CapEx through the remainder of the year with facility additions, et cetera?

Right. On the last quarter call, we mentioned that we expected our total CapEx to be about $50 million. 25 million kind of the normal ongoing Cap Ex that we've experienced along with some growth. This quarter we are at about a fourth of that number. The incremental $25 million is for some land that we have under contract here in Eden Prairie where our corporate headquarters is and in the fact that we are going to move into another building in Eden Prairie and we'll spend some money outfitting that building. But that $25 million will happen in the second half of the year.

Thanks. Could you spend a little bit of time on the IT business and what you're seeing in there?

On the information services line item?

Yes.

Okay. That business is entirely -- consists entirely of Key Check Services, a wholly owned subsidiary of Robinson, which is providing the fuel and debit card services for the carrier community. And really that business continues to progress and take market share similar to what we've described in the past couple of years where they are marketing services to the carriers to get incremental drivers and incremental trucking companies to use their Key Check card, and then we collect processing fees every time they use those cards to purchase fuel or get cash advances or do other things within that network. So the 10 to 15% growth that we've talked about and expect key check to continue to obtain is really just marketing itself to that carrier community and trying to grow its priss sense from a market share standpoint.

What is the dynamics of fuel volatility done and your ability to gain share in here?

Within the information services category?

Right. Right.

Our business model is that we're basically earning transaction fees every time the carrier is refueling. As value-added services, we provide a lot of fuel information at the various truck stop networks and try to help our carrier customers manage their fuel prices by buying intelligently and understanding what their alternatives are. So these escalating fuel prices and fuel volatility makes that carrier customer base more sensitive to the fuel costs and and to do it appropriately.

So it does give us opportunity to market to those carriers, but it also obviously puts strain on our customer base that it's a significant expense for them, and we immediate to help them manage it. But our revenues do not benefit significantly or move significantly based on those fuel prices. There are some truck stop charges that that business receives that are a percentage of the fuel price, but most of those are capped, and it's not a significant component of the total revenue that Key Check would get on that information services line item. So the real business is driven by selling and getting new customers and new transactions.

Thanks.

David Mack with J. Goldman & Co.

I had a question about net operating margin. You've done a really good job over the last year or so of posting some gains there on a year-over-year basis. I guess this kind of goes to what Ed was asking, but if you could just kind of sum it up, going forward, what are you expecting in terms of improvements there? Should we continue to think about the kind of improvements that we've seen over the last year or so or an improvement there as the volume keeps expanding or just what your thoughts are there?

Our method remains pretty consistent with what it's always been which is our long-term growth goals are 15% for gross profits, income from operations and earnings per share. So implied in there is that we do not plan on margin expansion. But during these last few years when we have significantly expanded our margins, we say our goal is to hold onto that margin expansion. But internally, we do not plan for more operating leverage. But obviously, when we're managing the business, we do whatever we can to achieve more.

If I could ask one more question on that issue, in fourth quarter you had very substantial improvement of upwards of 400 basis points, and this quarter it came down a bit to what you had been seeing, which is around 200. What were some of the differences you saw between fourth quarter and first quarter that led to, I guess, that reversion back to what you had been seeing?

Most of the difference is in personnel expense. And we mentioned on our fourth quarter conference call that some of our incentive programs that are based on a percentage of profits at different levels of profitability tail off at the higher end. So towards the fourth quarter there was more incremental revenue disproportionate to the incremental incentive pay. In addition to that, the biggest difference would be the restricted stock grants that John's already talked about.

One other question on acquisitions. Chad, you and I have talked about and a lot of other companies have mentioned that private equity firms are kind of bidding up the values of some of the smaller privately held companies. In that type of environment, are you still finding things to buy or maybe going to other geographic regions? I mean, should we expect more overseas deals as the domestic market becomes somewhat frothy?

There's really two types of acquisitions we end up doing. One is where we proactively go after a company or initiate the process. There we'll likely continue to have similar success ratios. But when a book's put out with an option, we've kept our same disciplines in place, so we're less likely to do some of those deals in this current environment. But we believe -- we've seen this happen before, like in the late '90s, 2000, and then it dries up and goes back to normal. We don't think it's over forever.

A lot of where the private money is more competitive, too, is in asset-based businesses where they apply more leverage. In our core business of service model, there tends to be, we think we can be as competitive as anybody if we need to on those types of deals.

Of the acquisitions that you did last year, which would you classify as ones where where you went after them because you liked the model and which were where you saw the books and it looked interesting?

Two of them where we initiated the process and only Hirdes was a book.

Great. Thanks a lot, guys.

Helane Becker, with the Benchmark Company, please go ahead with your question.

All my operating questions were answered, but I just have one balance sheet question. I noticed the deferred tax liability went to zero in the quarter. From year end. Can you just walk me through that, why that occurred?

The biggest change in our deferred tax asset or liability is the restricted stock expensing because that creates a deferred tax asset. So the deferred tax asset related to restricted stock expense plus all the other net liabilities or assets has moved it up to be a net asset.

Got you.

There still is some deferred tax liability. It's just it is the asset side is bigger.

Just one other question on the tax rate actually. It dropped a little bit from last year to this year, 39.4 to 38.9. 39%, though, is still a good going forward number?

With the expensing of stock options and the accounting around stock options, there's actually some tax benefits that are created if people exercise an option and do it with what's called a disqualifying position, meaning, selling the shares. We get a credit in our tax expense at that time. so it is going to be more volatile than it has been in the past.

David Campbell with Thompson Davis & Co.

Most of my questions have been asked, but on sea freight, I wanted to ask whether you saw any Ben from the huge capacity growth in sea freight and the general what other competitors are talking about, including higher gross margins on sea freight.

Did you see the same thing in the first quarter? I mean, it's not going to continue. Did you see anything in the first quarter?

I think or I know our margin slightly increased during the quarter, but it's not a big part of our growth. The main part of our growth in the ocean freight net revenues is the acquisitions that we have closed.

And do you have any number on volume growth in terms of units or TEUs or anything like that?

We don't disclose transaction amounts for any of our modes of our transportation.

So it really was acquisitions that drove -- you mentioned -- you told us how much that was. That's about it. I just want to thank you very much for the chance to ask questions.

You're welcome.

Jordan Alliger with Deutsche Bank.

Good morning. Sal Vitale for Jordan Alliger. Sorry if these questions are already answered. Looking at the margin on the transport business, that was up about 100 basis points year-over-year. I think you spoke earlier about looser capacity environment producing some of those gains there. What should we look for in the next few quarters in terms of that?

And the second question I have is I look at the leverage on the SG&A line. I think that was down about 170 basis points year-over-year as a percentage of net revenue. Is that something that you think is sustainable over the near term?

The SG&A line we did discuss earlier, but it is just -- there are some expenses within SG&A that are relatively fixed or more fixed than completely variable. As we grow, we do gain some leverage.

The other question was on the net revenue margin. That was up by a healthy amount of about 100 basis points year-over-year. Is there a certain point where you start passing that on to your customer or do you think that's something sustainable over the next few quarters?

The gross margin at the net revenue line item is really the collective by-product of buy and sell, demand and supply that, as we said, we really can't predict that and don't try to in terms of understanding where those margins are going to go. In general, what's happened historically is that if freight demand seems -- remains very high, relative to the capacity side that that gives us greater volume activity and less margin opportunity.

And as we commented earlier, when capacity is relatively softer or more available than was expected, it gives us margin increase opportunities. So depending upon your view of the supply and demand situation that you think will happen in the future, you could anticipate where margins might go.

Thanks.

The next question comes from Mike Halloran with Robert W. Baird.

When you look at the gross profit in the transportation line, I'm assuming some of that was up year-over-year. How much of an impact has there been because of the managed transportation service that you provide and how much of this work is helping to drive growth in some of your other transportation segments?

The bulk of the margin expansion just based on sheer numbers is because our truck gross profit percentages were up. You're right there is some management fees in there that are growing, but this quarter they grew about the same as total transportation, so they really weren't a big part of the margin expansion.

And then just looking at the D&A line that's been going up year-over-year at a pretty high rate, what's behind that? And then do you expect that trend to continue going forward?

That's obviously a function of what we buy and our depreciation life. Most of what we buy is technology equipment. Most of what we buy, we depreciate it over a three-year life. With the additional Cap Ex at the end of this year for a building and some more equipment for that building, yes, it will continue to go up.

I appreciate the time.

John Larkin with Stifel Nicolaus. Please go ahead with your question.

Good morning, John, good morning Chad.

Good morning.

Thank you for taking my questions. You mentioned, I think, that you ended the first quarter of '06 with 900 more employees than you had at the end of '05. That's quite an increase, but I guess natural in light of the top line growth that you've experienced.

No. It's 900 more than the end of last year's first quarter. John's comment was we had 900 people more this quarter than we did last year'ss first quarter.

That's what I meant to say. If I misspoke, I apologize. That's pretty strong growth. And I guess most of these folks are coming in at what I would call junior level positions that are actually at their matching loads with empties programming brokerage functions. Is that true?

Yes.

As they kind of mature in the organization and grow, is their compensation a function of the longevity of their performance in the organization or more a function of how much business they do?

Virtually all pay for performance. Now, the majority of the compensation is team based, so it's distributed in a pretty variable way based upon performance, but it's within the various operating units. There's different bonus programs, and most of it is team driven.

And so you're not really worried that if over time the overall growth rate would revert back to your long run strategic objectives that the workforce sort of by definition matures, since you're bringing in fewer young people that that would really provide much of a squeeze on margins?

There is a risk probably for a short period of time, maybe for one or two quarters that, if the business were to slow down very quickly that we would have more new hires in the pipeline and we wouldn't be able to react real quickly, but there is a pretty consistent amount base of turnover, and when the business does start to slow down or grow at a different rate, it can generally correct itself fairly quickly. But I wouldn't want to portray that if there was a very sudden slow down in the level of activity that you might see some higher personnel ratios for a short period of time.

And if you look back to 2001, 2002 when we were growing slower, you'll see that our personnel as a percent of net revenue even improved slightly.

How long does it take you to train a, say, recent college graduate to become a productive truckload broker?

It really varies by individual. We have some that become productive very quickly, and we have others that take longer and maybe never get there and end up being turnover. But we think within their first year , for sure that they become fairly productive and start contributing.

Is the turnover kind of self-policing or do you have certain objectives that you expect these people to meet every six months or whatever the timetable might look like?

We have a performance review process, and we have all sorts of metrics and expectations. And through the combination -- a high percentage of the turnover is people deciding that they don't like it, and that's probably some combination of performance and some other things. So it's fairly self-policing, but there are a lot of different performance metrics around it that hopefully gets us to the right answer of who stays and who chooses not to.

Got it. Just one more question open the intermodal side. That gross profit I guess is a percentage of the total declined a little bit year-over-year in the first quarter. Is that a function of the fact that you're generally displeased with the service available there or is there just less customer demand or what's exactly going on?

The intermodal change is largely driven by the volume increase that we talked about, and that is largely driven by different service eliminations by a lot of the railroads that eliminated some of the offerings that had us push certain freight back to truck. So I would say just the general transition in the marketplace in terms of price and service eliminated some of the intermodal volume that we were doing in the past. I think overall the service levels of kind of the lanes that are continuing to operate are actually probably improved from a year ago.

So they eliminated a lot of the lower density lanes I guess so that puts you in a position where you can really only choose the higher density lanes for enter modal?

I believe that's true, yes. The type of intermodal business that we do, the more transactional, spot market type stuff, was even more heavily affected by some of those lane eliminations.

That's very helpful. Thank you for taking my call.

Yep.

That was the last question for today. Please continue.

Thank you for participating in our first Quarter 2006 conference call. Before we conclude, I want to remind you that this call will be available for replay in the investor relations section of the C.H. Robinson web site at www.chrobinson.com. It will also be available by dialing 800-405-2236 and entering the pass code 11058272#. The replay will be available at approximately 2 p.m. eastern time today. If you have additional questions about our first quarter results, please call me, Angie Freeman, at 952-937-7847. Thank you.

Ladies and gentlemen, this concludes the C.H. Robinson Worldwide, Incorporated first Quarter 2006 earnings conference call. Thank you all for your participation. You may now disconnect. This concludes the conference call.