Hub Group Inc (HUBG) 2005 Q4 法說會逐字稿

Good afternoon ladies and gentlemen, and welcome to the Hub Group fourth quarter conference call. We'll begin with the discussion of the financial results led by Tom White, Senior Vice President, CFO, and Treasurer, followed by an overall business discussion to be conducted by David Yeager our Vice Chairman and CEO. The Company will make its prepared presentation followed by a question and answer session. [OPERATOR INSTRUCTIONS] We would like to start by noting that statements made in the course of this conference call that state the Company's or Management's projections intentions, hopes, beliefs expectations or predictions of the future, including projections regarding 2006 earnings are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements; additional information concerning factors that could cause actual results to differ materially from those projected in such forward-looking statements, is contained from time to time in the Company's SEC filing included, but not limited, to the Company's reports Form 10K for the year ended December 31st, 2004 and form 10Q quarters ended March 31st, 2005, June 30th, 2005 and September 30th, 2005. Copies of these filings may be obtained by contacting the Company or the SEC. Now I would like to introduce Tom White, CFO of Hub Group. Please proceed, sir.

Thank you and good afternoon. In the fourth quarter gross revenue grew 8.6% versus 2004; net income grew 45% to 10.1 million. This is the largest quarterly net income in Hub's history. Diluted EPS grew 48% to $0.49 a share, and we have $36 million in cash at hand.

Now I'll discussion revenue details. Intermodal revenues increased 11.8 %. Truck load brokerage grew by 15.6%, logistics was down by 23.9%, and Hub Group distribution was up 5.3%. For our intermodal business, we are pleased to report that volume was up in the fourth quarter. While an increase of 1.3% may not seem very significant, it's our first quarterly volume increase since the second quarter of 2004. In addition to the volume increase, the quarter also included a total increase in revenue of about 10.5% relating to pricing, fuel, and mix. Truckload load brokerage revenue increased by 15.6% due to higher volume, pricing, fuel, and mix. We are pleased to report that it's the fifth consecutive quarter of double digit increases in gross revenue.

Logistics revenue decreased by about $9 million which reflects the loss of two customers, Diagio and Novarits, in mid-2005. These customers account for about 7 million of the revenue decline. Other causes for the decline relate to customer-specific situations including lower business levels. Consolidated gross margin dollars, or net revenues, grew by 8% which tracks closely with the increase in gross revenues of 8.6%. As a percentage of revenue the gross margin percentage was 11.8% which approximates last year's amount. During the quarter we intensified our focus on margin enhancement on a number of fronts. This continues to be a high priority for 2006.

Total costs and expenses were 33.4 million compared with 34 million in 2004. Total head count was 1,184 at year-end, an increase of 13 people in the quarter. This increase included seven new people for our drayage company, Quality Services, and four additions in truck brokerage. We continue to press hard on containing our costs while we grow our revenues. The gross operating margin was 3 .9% in the quarter compared to 3.1% last year. The full-year operating margin was 3.6% versus 2.8% for 2004, an improvement of 80 basis points. Our effective income tax rate for the quarter was 39.5%, and for the full year it was 40.3%. We are estimating a 40% rate for 2006. During the quarter we spent $900,000 on CapEx, which brings our full year amount to $4.4 million.

Regarding the Comtrak acquisition, things are progressing smoothly and our internal goal is to get it done by the end of February 2006. If this happens we will begin to include the Comtrak results in our figures beginning March 1.

Regarding share repurchases, in August 2005, the Hub board authorized a stock buyback plan of up to $45 million with an expiration date of December 31st, 2006. To date we have made no purchases under this plan. As we discussed in our January 20th conference call we are now prepared to enter the market and repurchase shares once our trading window opens and the stock price meets our criteria.

Now I will discuss 2006 full year earnings guidance. For the full year 2006, we're comfortable that our earnings will be within the current analysts range of $1.82 to $2.00 per diluted share. We have included Comtrak in our 2006 estimates for the 10 months beginning March 1st, 2006. CapEx is estimated to be in the range of 7 to 9 million, including Comtrak. Weighted average diluted shares are estimated at 20.8 million and this share estimate does not include any share repurchase impact.

And now I will turn it over to David Yeager, our CEO.

Great. Thanks, Tom. Hub Group is pleased to announce that we posted another record quarter, earning $0.49 per share. This is the most Hub has ever earned in a single quarter, and the fourth quarter earnings caps off a great year as 2005 was the best earnings performance in Hub's history. As Tom has mentioned, we have turned the corner and have started growing our intermodal volume again. Our intermodal volume was up about 1.3% compared to the fourth quarter of last year. This compares favorably with the domestic intermodal market and our competition. Thanks to disciplined pricing, our gross margin percentage stayed nearly constant, enabling us to grow our gross margin by 8% during the quarter. We expect to grow our intermodal volume in 2006 at the same pace as the overall domestic industry, while maintaining our focus on margin enhancement.

As Tom had noted, our costs also declined this quarter. Throughout the past year our operations teams have continued to work on streamlining processes and procedures. These improved efficiencies have contributed to reducing our costs by $4 million during 2005 while enhancing the level of service offered to our customers. The search for these types of initiatives will never end and the focus will certainly be on going.

As is always the case equipment capacity was tight through the peak shipping period. However, our increased fleet and improved freight balance allowed us to do a better job of meeting our customer's capacity needs during the peak season. The number of rolled loads, or customer shipments, that could not be handled on any given day due a lack of equipment was down nearly 25% during the fourth quarter of 2005 compared to the prior year. Obviously this is a positive statistic that enhances overall customer satisfaction. Another positive note is that despite some rail service challenges and a 50% larger container fleet our equipment utilizations remained good during the quarter.

Now many of you may know the BNSF has elected to terminate its NACS product. NACS is the Burlington northern Norfolk southern neutral container fleet. While there are some NACS containers available for our use, we have been shifting more of our business to our own fleet over the past few months. We have not seen and we don't expect the elimination of the NACS product to have any effect on our business. We continue to believe that thanks to our fleet we are well positioned on the BN and the Norfolk southern networks. In addition our relationship with UP, CSX and Pacer continues to be strong as Hub's strategy of being the largest IMC on all rail providers remains a primary focus of our Company.

As we talked a few weeks ago we recently signed an agreement to purchase the business of Comtrak, which is an asset light drayage company based in Memphis, Tennessee. We are making good progress on this transaction and expect the deal to close on February 28. We believe this acquisition will assist us in growing our drayage, enhancing the performance of our own internal drayage company's operations, and also give us an immediate presence in the international drayage market. As we discussed in our most recent conference call we do not intend to change Comtrak's customer base. Comtrak's success is partially due to their business mix, and we do not intend to interfere with those relationships. We do believe that Comtrak will allow us to grow our drayage network in size, scope, and quality. And even after the Comtrak acquisition, Hub still performs less than 25% of our own drayage. This obviously leaves us witha tremendous amount of room for potential expansion of our drayage product.

Truck brokerage once again posted a strong quarter, with revenue growing by 16%. Our brokerage team continues to work on building collaborative relationships with key accounts, and we have seen an awful lot of great success stories using this approach. Our brokerage leadership continues to improve the technology platform of our brokerage product; we're making enhancements to our systems to make it easier for our carriers and our customers to do business with Hub. We also continue to add carriers to our network. During the fourth quarter we added 450 more carriers to our supplier list.

As Tom had stated, our logistics revenue for the fourth quarter was negatively impacted by the loss of two customers. We have since been notified by two additional customers that we will no longer be servicing their accounts by the end of the first quarter. This will continue to put pressure on our logistics revenue. On the positive side, our logistics group has recently signed contracts with two new logistics accounts and is working hard to backfill for the lost business.

We want growth from all of our business lines. However, we remain disciplined in evaluating and accepting opportunities. Our goal will be to continue to build a profitable logistic franchise and not just grow logistics revenue. As a result of the business losses in logistics, we anticipate that our 2006 logistics revenue will decline approximately 5 to 10% compared to 2005. We will push our logistics leadership for better results, but this is currently our best estimate. This logistics revenue decline, while not acceptable, will in no way prevent us from growing the revenue of our other business lines. Please keep in mind that logistics only represents about 8% of our revenue, and we do expect our core businesses of intermodal and highway to continue to grow in 2006.

Intermodal revenues are targeted to grow at 7% for 2006. Volume growth is forecasted to be 4% with the remaining 3% projected for rate increases and fuel. Now, while the price increase projection of 3% is low compared to the prior two years, we believe it is in line with industry expectations as they stand today. We are, however, confident that if rates rise more quickly than our projection, that we will be able to recover any of those additional cost increases that may occur. And lastly, truck brokerage is targeted to grow revenue by 12%. We continue to believe that this business has margin enhancement opportunities and will continue to grow net income at levels higher than our revenue growth.

In summary, 2005 was a great year for Hub Group. We were able to accomplish numerous strategic and financial objectives that enhanced our value. To mention just a few, we successfully controlled our costs, we continued to strengthen our balance sheet finishing the year $36 million in cash, we repurchased $30 million worth of stock, we grew highway revenue--or rather highway volume and finished on a positive note with higher intermodal volume levels, we realigned our sales force, increased our drayage control, grew our container fleet by 50% while maintaining utilization, initiated the Comtrak acquisition that will help us further our core strategy and allow us to effectively enter a new, large, and aligned market, and most importantly 2005 saw Hub produce our best shareholder return in its 35-year history. We take all of this momentum into 2006 as we look forward to another great year.

At this time we will open up the line to any questions that may be out there.

Thank, you sir. [OPERATOR INSTRUCTIONS] Sir, our first question is from the line of Edward Wolfe with Bear Stearns.

Hey, Tom. Hey Dave.

Hi, Ed.

Couple of things; first of all on Comtrak, are you expecting to pay for it with cash, the 38 million?

Yes, we are.

So, at that point assuming you didn't generate any cash before February you would kind of be flat with cash on your balance sheet. Are you willing to leverage the balance sheet a little bit to buy back stock?

Yes, we are, Ed. This is Tom. We've got $40 million worth of a credit line and in the next week or so we will have increased that to 50 million. So, we will have $50 million of borrowing capability.

I saw you generated a lot of cash in the quarter, but working capital swung against you 10.5 million; is some of that receivable coming due soon as well?

Let me catch up with you, Ed. Say it again, please.

It looked like your-- your working capital worked against you about 10 million in the quarter there's some receivables at the end of the year out there; I'm guessing maybe some of that will get made up in the first quarter. Is that fair?

Yes, it will.

Okay. Dave, when you gave the guidance for volume growth of intermodal at 7%, including 4% volume, that didn't include Comtrak in it, did it?

No, that did not.

How should we think of Comtrak as we go forward? Shall we create a separate line in our model? Are you going break it out? Is it in intermodal? Does it have a difference between gross and net? How should we think about that.?

Ed, this is Tom. We're not going to break Comtrak out in our financials, much like we don't break out our drayage company that we have today, Quality Services. But just to give you some-- some help, in '05 Comtrak had about 85 million in revenue, 7 or 8 million of that was Hub's, so that will get netted against the 85. We also intend to have 10 months in '06, not 12, so whatever growth-- whatever growth you want to put in there, put in there. But that-- that should help you.

Does that change your yield, though? I'm guessing that changes your net over gross a little bit.

Yes.

Is there are no spread there? There's no transportation cost?

No, it will change-- it will change our-- our spread, but we're not-- we don't intend to break it out. I think what you're going to have to do is just kind of-- you'll see a little bit in the first quarter and help work your models a little bit.

Are you giving any verification at this time, having spent a little more time since your call, in terms of do you expect to lose anything other than the 7 or 8 you are eliminating in revenue, any more revenue or gain any more revenue or is $0.05 or $0.06 fair for accretion?

Well, we're not going to comment on what the accretion will be, I think everybody makes their own estimate, but in terms of any potential revenue leakage, Dave, I don't think we have seen--

No, fortunately I think that Mike's service and his relationship with his clients is such that even some of our direct competitors have made the decision to continue to move with him. So, at this point in time, we're not aware of any revenue defection whatsoever. So-- which is all very positive. Because, again, obviously I did outline in my prepared comment that we don't intent to be infringing upon his current customer base and those relationships. It appears as though there's a positive relationship between Comtrak and their customers. So.

What should we think in terms of head count? The head count has been flat to down for so long how should we think about it both with Comtrak and internally without Comtrak in '06 over '05?

I may need to get back to you on that one, Ed. I had intended to have on that slide-- and unless I can find it quickly-- yes, I can find it. I think head count-- if we were at 1184 at the end of the year, we intend to maybe grow that, 1200, this is without Comtrak .

So 16, not 1200 but to 1200.

I need to Double check.

And then Comtrak, we'd have to get back to you on that.

Okay. And Dave what are you seeing out there with the railroad service if you had to look out right now in January versus a year ago, is service any much different? Is it getter any better?

You can say somewhat better. It's-- we are telling our customers at this point in time to expect 2006 to be very similar to 2005 as well-- and 2004. We should see some incremental improvement. Unfortunately the rails are having some unusual incidents that are impacting some of their service levels, so we really don't look for tremendous amount of improvement.

Have you seen any changes in January in your trends in terms of volumes? Are they still starting-- moving the right direction.

Yes.

Okay. Thanks, guys for the time.

Ed, on the head count I may get back to you because I think I need to-- I think a better number-- I didn't include Hub distribution when I gave you the-- I didn't give you apples and apples, so I'll get back to you on that head count number.

So ignore the 1200 number in other words?

Yes.

Okay. Thanks.

And sir, our next question is from the line of Alex Brand with Stephen's Inc.

Thanks. Hey, guys.

Hey, Alex.

I guess I'm--I'm encouraged to hear your 2% to 3% is now 4% volume, Dave, but why the confidence; what has changed to give you that increased level of confidence there?

As we-- obviously we had said that we-- we have been telling our shareholders is that we're targeting 2 to 3%, the run rate for '05 for the fourth quarter. We achieved that. We feel as though we're well positioned-- and when we build our budgeting process it's done from the bottom up and then Tom and Terri and the entire finance committee just rip apart the budget, and so we have a high degree of confidence that in fact the forecasts are real and that we'll be able to move forward on that.

So by real, you mean you have got the confidence from some of the key customers that you have talked about in the past.

Yes, this just isn't a sales guy saying, gee, I hope I may get this account. We feel that these are--while they are not firm orders necessarily, but it certainly has a high degree of likelihood of coming into being.

And are you maintaining the strategy that you started last year where you really are just focusing mostly on a few of your key larger accounts, or are you now starting to move downstream in your-- in your sales focus.

We-- we do continue to focus on those target accounts the four key guys as well as our tier one customers. We are probably getting a little further down the chain, and continuing to focus on that, but it's really those key strategic accounts which can drive your revenue and profitability.

Okay. With respect to logistics, obviously not-- not great revenue results there, but it didn't seem to affect the bottom line; is it less profitable? Is the---some of the customer less there something we really shouldn't worry about? And what is the strategy there going forward?

Well, one of the clients that represented over half of the revenue was in fact a very, very low profit margin customer. And so that-- no-- no doubt did have a-- part of the impact. Going forward we're very focused-- we've said it before, it's very easy to grow logistics revenue, it's very difficult to grow profitable logistics revenue. We are being very focused on the opportunities, and there's a pretty decent pipeline right now ,but we're making sure that---we're going to make a decent return on the investment.

Is there something about that that's core to your business? I mean is that helping you grow your business in your other core transportation areas?

Iti can have a slight impact and feed some of our core business, but for the most part I would say most of the revenue, no. That-- it's not- a feeder, but -- it wouldn't qualify as a strategic account, I'll put it that way.

Okay. All right. And my final question: you're now fully depreciated on your IT investment from 2000. Does that imply new hardware investments that need to be made? Where are we with systems? Do those have a good longevity in front of them that we shouldn't worry about that?

This is Tom, Alex. I think we shouldn't worry about it. I think the system we built in 2000 was built from the ground up and kind of call it industrial strength. So that shouldn't---that doesn't need to have a refresh. We do need to refresh adjunct pieces of software or servers or things like that, but we don't have any complete IT refreshes on the horizon whatsoever.

Great. Great quarter, guys. Thanks.

Thanks, Alex.

And sir, our next question is from the line of John Barnes with BB&T.

Hi, good afternoon guys.

Hi, John.

Real quick on the--going back to the logistics questions for a minute on the lost business was there any common theme among the four lost pieces of business? Is it a service thing? Was there just a common theme or could you give us some of the reasons behind just losing the business or more importantly did you choose to walk away from it, or did they choose to walk away from you?

John, this is Tom. I think above all, logistics-- the business-- it's not a real sticky business. Customers tend to switch for reasons such as change in management; they may have a philosophy that they want to in-house instead of out-source. They may want to change providers who promised them more savings, but I think what we can say is that we're not going to stick our neck out too far to promise guaranteed savings or performance guarantees, and so I think what we do find is that either a change in management or a bidding process whereby the-- the other competitors, perhaps, are promising saving guarantees that we think are just unrealistic and we don't want to-- we don't want to sign up for-- a charge to earnings in '06 or '07.

In---direct answer your question too, there was no one core reason that we lost those four accounts.

Okay. The two new pieces of business, are they enough to backfill the lost---two of the lost, half of the lost revenue, quarter of the lost revenue--could you give us magnitude on customer win size?

I think Dave-- going back to Dave's prepared remarks, he did say that in '06 he believes that logistic's revenue on a year-over-year basis will be down 5 to 10% , so it's not completely backfilled.

Yes, they make up some of it, but obviously not all of it.

All right. Very good. In terms of looking at the volume growth---Tom you indicated----I guess you said the first-- first positive quarter of volume growth on the intermodal side in what, five or six quarters now, do you believe this is an inflection point and we should see volume growth going forward or was this the result-- I know what you said about in terms of '06 guidance, but I just want to make sure that----now we're back into positive volumes going forward this wasn't a one-time thing, a benefit from the strong fourth quarter---we're going to get back into a couple of quarters of declining volumes and then try to make it up in the back end in peak season. Do you feel like all of '06 we should begin to see steady volume increases in the intermodal business?

We do. We feel as though---that we're well positioned. The domestic market is actually a little bit flat right now. If you look at some of the AAR statistics, which are hard to break out domestic---but, domestic is relatively flat, but we feel as though we have gone-- we have culled the accounts we needed to cull. We feel as though we positioned ourselves effectively with our target accounts and we feel as though this volume growth is sustainable.

Okay. All right. And then lastly in terms of----operating margin improvement and as it relates to potential further asset ownership, I mean, is -- as some of these pools of asset goes away and you may have to look at other means of getting-- getting capacity whether it's longer term leases or having to buy some--- are you fearful at all that this is changing the dynamics of your business and that your operating margin could suffer in the near term as you try to address these pools of assets that historically have been either cheap or free are going away?

That's a great question, John, because really right now if you look at it---the party that's getting out of the rail controlled fleet is the Burlington northern. They are the ones that are demanding that everybody bring their own containers. If you talk to CSX to UP to Norfolk southern none of them are making such demands they are still willing to supply the assets, as well as Pacer, which is adding to their fleet this year as well. So, I don't think that that is going to force us to change our model to become more involved with owning more and more assets.

Okay. All right so-- well let me put it a little bit different way. I talked to a couple of other companies who dabble in intermodal, who, when I approached the subject of additional asset ownership, and becoming more asset intensive than asset light, have-- have-- expressed that they would exit the business before they got asset intensive. How would you address if the the other three Class 1's follow [BN's] lead in eliminating these pools and you were forced to look at either longer term commitments to lease assets or more ownership of the asset, how would you address that, I mean is that a fundamental change to your business model?

That would be, albeit-- I think the smaller guys you may have spoke to that dabble in intermodal, number one, they may not know how to manage the intermodal equipment. With a fleet of about 10,600 boxes--- while that represents about---a little less--under 45% of our overall capacity on a given day, we know how to manage those assets very effectively. If a change such as that which we do not see right now-- were to occur we could in fact take that up. But in all candor, I mean, we meet with all of the railroads on an ongoing basis and have not gotten any indication from any of the rails or from Pacer that, in fact, they would be demanding us to bring our own equipment in the near future.

Okay. I have one last question on rail service; I just want to address rail service real quick. Are you seeing---because of the poor rail service---are you seeing any pressure from competitive-- modes of transport because of how poor rail service has gotten? We have heard from a couple of people that they are having to abandon some of their rail oriented products whether it's in the LTL space or truckload space, because the rail service is so bad. Are you getting pressure from other modes? Or is the capacity situation across modes protecting you somewhat right now?

Right now I think that we're being protected. We have lost business, but that-- that was honestly done prior to this year if you-- you deal with time sensitive materials, certain customers that may have just-in-time inventory levels, those customers we have lost and we had lost them early '05 probably best case. So there is certain customers that just can't tolerate the inconsistencies that we're currently experiencing.

All right. Very good. Hey, guys nice quarter.

Thank you.

Thanks, John.

[OPERATOR INSTRUCTIONS] And sir, our next question is from the line of Jon Langenfeld with Robert W. Baird.

Afternoon guys. Nice quarter. Good job.

Thank you.

A couple of things, first, Dave can you just walk through the railroad strategy or what you think the strategy is relative to the intermodal piece? We look at the international volumes and those continue to accelerate in growth as we move through '05, and yet the domestic side was flattish. How-- how do you think the railroads look at those two pieces of business moving forward?

Well there's no question that I think that the-- the international side is certainly a growth engine with the amount of-- with the amount of manufacturing that's going overseas, and it will continue to, that will continue to be a significant growth engine for intermodal. The domestic side, I believe all the railroads at the same time recognize that they want to stay in and be in the domestic market, whether that's true the BN where they want asset-- assets to be brought to them or whether it's the union Pacific who is desirous of providing those intermodal assets or having people deal through Pacer, so there's-- for 2006 if I had to guess I would say intermodal domestically is probably down and you are going to see the international market up another 7%, 8% so that will be an on-going trend at this point.

So with that, and based on your 4% volume growth you expect to be growing faster than the market?

Yes.

Okay. Does-- all right that makes sense. Can-- can you walk us through, then, pricing from the railroads and how that impacts you? If-- if prices are at 3% or 5%, do you have a preference, is there one environment that's better than another for you to get in terms of their pricing?

Well, we've had-- over the last several years we have had some very aggressive pricing by the rail carriers. They were in a position with tight capacity, obviously a tight truck market, and that gave him-- them the-- the power to, in fact, increase rates at-- for someone who has been in the industry for 30 years has been at historic levels. We do not belive that 2006---or at least we're not aware of, as 2006 unfolds, that many rail increases are pending. I think it's the proper thing for the rails to do, because I believe that our customers are getting a little rate weary. When we receive a price increase, we basically go and pass it on to all of our customers. We have been very aggressive about it. In much of 2004 and early 2005 that's really all our sales force did was work with customers on the service and work with customers to increase our rates so that we could cover our expenses with our higher railroad rates.

Okay. So-- so it sounds like relative to your performance, where the rates are are up or flat, you are pretty much neutral, assuming you can get that pass-through.

Exactly, and we would prefer-- I think right now a little breathing room is-- is appropriate.

Okay. And then with-- kind of back on the domestic side in talking about the market being flat growth, what sort of concern do you have of the competitive landscape going out and-- and trying to get more aggressive on the pricing side because of some of these-- these other players are ramping up capacity, some of the smaller players, have you seen much of that and what is your thought about that in 2006?

We haven't seen a lot of smaller players really entering the market thus far. We haven't received--- there's a lot of talk about a variety of large motor carriers becoming more involved in intermodal. They have not had an impact from a bid perspective, nor from a daily solicitation on us thus far.

Okay. Okay, good. And then, finally, on the container fleet side can you give us an aggregate and the break-down of the container fleet you specifically own? I think you said it was like 10,600 but what that looks like in terms of the ones you own versus the ones you rent on the railroads and then what that would look like potentially at the end of '06?

Do you want to go ahead, Tom.

Yes, John-- John right now of the roughly 10,400 boxes that we have, 3400 we own and we have operating leases on those with a third-party bank.

Okay.

The rest of that fleet is "rented" from BN and NS and looking forward I think if you compare the [ten four] to roughly a year from now we'll probably have a net addition of a thousand boxes.

And so of the [eleven four] then, how many of those would be owned versus rented?

We will-- based upon our current plans the 3400 that we own today will be 5400.

And we're-- we're continuing to do an analysis regarding this, John. As I said in my prepared comments the NACS fleet, that neutral container pool of 10,000 boxes on BN and Norfolk southern is going away.

Correct.

We are the single largest user of that. And the 2,000 would be the maximum amount that we would need. The 1,000 increase in order to replace the NACS capacity that we currently use.

So, quick math, [ten four] we turn in a thousand of the rentals, we buy 2,000 that gets you to [eleven four].

Okay, and then if you look at the second half of the year, '05 what would have been roughly a good number to use for the number of boxes you controlled on any given day?

What is it, Dave, 23,000?

Roughly 23,000, 24,000 boxes.

Okay. Very good thank you.

Thank you, John.

And sir, our next question is a follow-up from the line of Ed Wolfe.

Hey, Dave I'm just curious which railroads are you getting a sense that their pricing is going to moderate a bit in '06 over '05?

Actually from all of them at this point, Ed. I mean, we don't have any first quarter rate increases on the books yet. This time last year, or even in December of last year we knew that several-- in fact we knew that everybody was taking increases in the first quarter. So at this point in time, we're not aware of any. Now that could change. Tomorrow we could be told that they are going to increase on April 1, but we have no knowledge of any rate increases, just as a matter of course, we build in rate increases minimally for the peak shipping period and do anticipate that that's when they-- they'll occur.

But [inaudible] the railroads longer term, has anybody said throughout the year or generally you can expect a little less than last year? Or are you just surmising because so far first quarter, so good?

So far-- well it's to the best of our knowledge at this point in time. We're trying to be conservative so that even if we had a 5% hit in June or July, it still wouldn't be over the 3% increase that we currently projected.

Thank you.

Okay.

And with that, ladies and gentlemen, this concludes the Q&A portion of today's presentation. On behalf of Hub Group we would like to thank you for your participation in today's conference. This does conclude your presentation and you may now disconnect.

Thank you.