C.H. Robinson Worldwide, Inc. (CHRW) Q4 2011 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Welcome to the C.H. Robinson Fourth Quarter 2011 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Tuesday, January 31, 2012. I would now like to turn the conference over to Ms. Angie Freeman, C.H. Robinson Vice President of Investor Relations. Please go ahead, ma'am.

Thank you. On our call today will be John Wiehoff, CEO; and Chad Lindbloom, CFO. John and Chad will provide some prepared comments on the highlights of our fourth quarter and full-year performance, and we will follow that with a question-and-answer session. [Operator Instructions] Please note that there are presentation slides that accompany our call to facilitate our discussion today. The slides can be accessed in the Investor Relations section of the website, which is located at chrobinson.com. John and Chad will be referring to the slides in their prepared comments. Finally, 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 risk and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. And with that, I'll turn it over to John.

Thank you, Angie, and thanks to everybody who's taken the time to listen to our fourth quarter call today. As Angie referenced, I'm going to start on our presentation deck with Slide 3, which has our high-level fourth quarter and year-to-date results. For the fourth quarter of 2011, consolidated net revenues grew 3.4%, income from operations grew 4.8% and EPS was $0.67, up 8.1% from last year. As you can see for the year-to-date numbers for the year ended December 31, 2011, our growth rates were more consistent, which is generally the case in our business model as a big component of our cost structure is based on annual programs. So there you see the net revenue income from operations and net income all up 11% with EPS up 12.4%. One of the other items that I wanted to highlight on the year-to-date results is that total revenues for 2011 were $10.3 billion. One of the goals we set for ourselves when we became a public company 14 years ago was to reach that $10 billion in gross revenues, and it's kind of a fun milestone for us and we're proud of being able to achieve that in 2011. I'm going to make some comments now about each of our individual revenue service lines. So moving onto Slide 4, starting with the consolidated transportation results. The transportation net revenues grew 4.9% for the quarter, 13.4% for the year. I'll get more specific on each of the individual service lines, but in general, we had volume growth in most all of our services with varied pricing impacts that I'll talk about given each of the individual services. On Page 4, one of the things that we like to highlight is the history of margins. And one of the more difficult things to predict or sometimes understand in our business is the fluctuations in the transportation margin percentage. For the fourth quarter of 2011, we had 16.3% net revenue margins on our total transportation. We've talked at length in the past about all of the different variables that cause those margins to fluctuate, including fuel and our supply and demand conditions, our account management decisions around how we price and the delays and timing of customer and provider pricing, and maybe more importantly, the business mix by lane and by type of service. And again, there's a lot of moving parts in there, but I guess the way we would evaluate 2011, is that while the fourth quarter, our 16.3% compared to 17.6% last year and caused some net revenue margin compression in our growth rate year-over-year, if you look at that 10-year history and as we analyze our business model, we feel like those gross margin or transportation margin percentages are within a typical range of our business model during the fourth quarter. Moving on to the truck results category. As a reminder, our truck net revenues include both full truckload and less-than-truckload net revenues. For the fourth quarter, the combined net revenue grew 5.5%, just under 15% net revenue growth for the year. We do see -- we did have 7% volume growth in the fourth quarter, which increased from the last couple of quarters and year-to-date volume growth on the truckload side of 5%. The truckload net revenue margin declined during the quarter for the reasons that I described before, as truckload is the most significant portion of the overall transportation. So it's indicative of the percentages that I talked about on the previous page. In our LTL business, we continue to have strong double-digit volume growth with 14% growth for the quarter. I've talked in the last couple of quarters about how our LTL service offering and systems continues to hit well in the marketplace in terms of providing the types of values that a lot of shippers are looking for now, and we continue to be pleased with our volume growth and success in the LTL services. Moving on to Page 6, our intermodal services. Net revenues grew 7.9% for the quarter, 12% for the year. We did have double-digit volume growth in our intermodal services. But again, that was offset by some net revenue compression. I think our overall feeling towards the intermodal business is through the longer-term secular trend of intermodal growth and taking some share. We feel like we're participating in that, even though it's a smaller component of our business. We feel good about our operational and execution capabilities. We've talked in the past about how we've ordered some dedicated equipment that we've integrated into that business, and we feel very comfortable about our execution capability and the success that we're having in driving that intermodal business. In terms of pricing and mix changes that compress the net revenue margin a little bit, we did have stronger growth in the East than in the West, which contributed to some of the lane mix where the margins would be a little bit different. Moving on to Page 7, the air and ocean global forwarding services, this service line is something that we're far less mature in. So you see a lot more of the industry volatility and the impact on our results in the fluctuations of our activity. Ocean net revenues grew 1.8% for the quarter, 10% for the full year. We did have volume growth in our ocean services, but as most of you probably know, that industry softened quite a bit towards the end of the year, driving some pricing declines in our services there. We continue to see a lot of volatility in our Air business, which is one of the smaller service offerings that we have. So we did see volume and price decline in the quarter. As most of you again probably know, there's a lot of consolidation, economics and density factors that drive your net revenue growth there that, given our lesser scale in that, the industry impacts translate to a meaningful impact for us. Moving to Slide 8, other logistics services for the quarter. As a reminder, there are several things that are in there but the most significant are the transportation management fees and the customs brokerage business. Our net revenue growth accelerated in the fourth quarter to 12.6% growth for the quarter, 4.6% year-to-date. As we've talked in the past, our transportation management fees and the outsourced services that go with that continue to have really good momentum. We feel like our global capabilities and our industry-leading technology combines to be a good offering for us, and we continue to feel good about our pipeline and the value that we can create above and beyond the traditional transportation services. As a reminder, a lot of the fee-based logistics services that we provide that show up as revenues in the other logistics category are also tied to accounts that we have significant freight relationships with. So we feel like this is a good measurement and a good indication of how we're transforming the business to add value to our more dedicated customers with more technology and with more industry knowledge in an integrated way with the transportation services that we offer. Moving to Page 9, our Sourcing results. Sourcing net revenues declined 13.5% for the quarter, down 7.8% for the year. Our explanation and comments are very similar to the last several quarters. We've had some significant change in the mix of our business with lost business from a large customer. We've also had a lot of seasonal fluctuations which would be typical for that sourcing business. Longer term, we do feel good about our growth prospects and that we continue to add value with a lot of new customers. And as we've mentioned before, there will be 1 or 2 more quarters into 2012 where we have difficult comparisons from lost business. That business has been gone for couple of quarters now, but we just continue to cycle through the comparisons for a couple more quarters. Moving to Slide 10, Payment Services. Net revenues for the quarter up 4.1%, up 8.7% year-to-date. Our MasterCard services continue to grow nicely, as well as some increased fees due to higher fuel prices in the fuel payment services that we give. With that, I'll finish my comments on the individual revenue service lines. I'm going to turn it over to Chad for some prepared comments on income statement and cash flow, and then I will come back to finish and wrap up with a few thoughts about our long-range strategy and what we're thinking about the future.

Thank you, John. As you can see on Slide 11, as John mentioned earlier, total net revenues grew 3.4% in the fourth quarter and 11.2% for the year. Overall, our operating expenses in the fourth quarter and for the full year were in line with the growth of our net revenues. As John mentioned earlier, and you can see the impact of our variable cost model, in particular -- in any particular quarter, the growth rate between net revenues and operating expenses can fluctuate. In the fourth quarter of 2011, our personnel expenses declined, and also obviously, declined as a percentage of gross revenues. That was due to a reduction on some of our incentive compensation and on equity compensation programs that are based on the growth in earnings. Because our earnings growth in the fourth quarter of 2011 was slower than our earnings growth in the fourth quarter of 2010, and also because our growth rates have slowed throughout 2011, where they accelerated throughout 2010, that creates a fluctuation as is designed into our incentive programs. For the fourth quarter of this year, our restricted stock expense was $6.5 million -- I'm sorry, it's our total equity expense, which includes primarily restricted stock, compared to $14.5 million for the fourth quarter of 2010. There were some other -- other operating expenses did increase at a greater rate, driven by some claims, travel, temporary services and some other categories that grew faster than the business. Moving on to Slide 12, we continue to have a strong balance sheet, with cash and investments of $374 million and no long-term debt. We had a good cash flow from operations, quarter of approximately $136 million for the quarter and $430 million for the year. As you can see, there is quarterly fluctuations sometimes in our cash flow. Even though our cash flow for the fourth quarter of 2011 was lower than 2010, you can see that it increased by nearly 25% for the year. Our net CapEx for the quarter was approximately $24 million. As we discussed on the third quarter call, in addition to our usual ongoing CapEx, we had some additional expenditures in the fourth quarter. Approximately $6.7 million for the intermodal containers that John mentioned earlier and a net expenditure of about $6.1 million for a corporate aircraft. Our 2012 CapEx expectations are to be in the $40 million to $45 million range. During the second half of the 2012, we expect to start the construction of another building on our Eden Prairie campus. This estimate of $40 million to $45 million includes about $5 million for the portion of the building that will be paid for during 2012, and we expect the total cost of the building to be approximately $15 million with the remainder being expended in 2013. Moving on to our share repurchases, we have discussed in the past our strategy of using share repurchases as a variable way to return excess cash to our shareholders. We continued that program. And as you can see, during the fourth quarter of 2011, we purchased 1.3 million shares at an average price of $67.84. With that, I'll turn it back to John for some final prepared comments on our long-term growth strategy and goals.

So moving to Page 13, I thought I would start -- at the end of each fiscal year, we like to sort of recap our take on the year and how we're thinking about our long-range plans and what our growth objectives look like. As a reminder, our long-term growth goal is 15% for net revenues, operating income and diluted EPS. Our primary tactics for reaching those goals are to take market share in the services that we offer today, add some new supply chain services and expand what we're capable of, and expand our global network into new geographies and new areas to serve our customers. We feel like we have a lot of market share left to grow in and we feel like the macro trends around focus on supply chain and focus for the types of value-added things that we're trying to provide to our customers has as good a demand as ever. If you turn to Page 14 then, there's a lot of numbers on that slide, but we thought it would be useful to kind of look at our 14-year history from the standpoint of our key financial metrics and talk a little bit about our performance and how we think about things going forward. If you look on the far left-hand side of the slide around gross revenues, I mentioned earlier that for 2011, we achieved that milestone of $10.3 billion of gross revenues, which is something we've been striving for during this period of time and are very proud to have achieved it. Looking at that $10 billion of revenue, I think focuses on the question of market share and kind of growth opportunities. For those of you who are familiar with the industry, you know that the services that we offer and the scale -- we're literally starting with a market of trillions from a global standpoint and at least $1 trillion in the U.S. around the total freight and logistics market. So while we're proud of that $10.3 billion of revenue, it is easy for us to imagine being a $25 billion or $50 billion company in the near-term future and continuing to grow and take market share over the next decade or 2, the way we have in the past. So when we look at our gross revenues and our total presence in the marketplace from the services that we're providing, we continue to feel like that market opportunity is there. And as I mentioned earlier, the macro trends around our customers and most industries focusing in on supply chain as a way to add value and the types of services that we're providing, we feel pretty good about that opportunity. When you look at the net revenue category, that brings in the discussion around margins and what I talked about earlier in terms of the market fluctuations and all the reasons why our net revenues can grow or change differently than those gross revenues. Similarly to the quarter or the year in this 15-year history, there's a lot of changes going on in those net revenues. But when we analyze our business from a margin and capacity standpoint, we feel like we can continue to buy and sell services and grow our business the way we have over the past couple of decades, really since deregulation in 1980, but particularly, since 1997 as a public company. So while we expect those margin percentages and the net revenue growth to fluctuate a little bit, sometimes in unpredictable ways based on the market, we do believe that our business opportunity and our business model will stay intact with regards to the net revenue piece of it. When you move over to the operating income and the variable nature of the model that we've talked about several times in our call, if you look to the far right-hand side of this slide, you see the operating income as a percentage of net revenue staying very variable and increasing throughout this period of time. We do believe that we can continue to drive productivity and drive efficiency in our models, and as we've talked a number of times, our compensation and incentive system, which are a huge part of our cost structure, have a lot of variability to them and we will expect to continue that going forward. If you look at the 3-percentage change columns around net revenue, operating income and diluted EPS, we're very proud of the fact that there's no negative numbers in there. I think that really speaks to our continued emphasis on growth and the fact that our business and cost structure is very much driven by a variable cost model. We talked in our last call at length about 2009, how that $1 billion decline in total revenues still resulted in a slight growth in net revenues because of margin expansion and the challenges that we've had to dig out of that over the last couple of years. Because of our variable cost model, a lot of the expense was taken out in 2009 when we had a more challenging year from the beginning of the recession. But over the last couple of years, our stock expenses and others -- operating expenses, while they've come back to more normal levels, we still have had some of the more challenging comparisons from quarter-to-quarter as the business sort of grows back. When you look at the year-to-date 2011, we're proud of the fact that we got back to double-digit growth in all of our categories, and we feel that when you look at all of these different key metrics, that it does support the case that a 15% long-term growth goal remains reasonable for us. Down on the bottom of the slide, we have the different compounded growth rates for the periods there, the 15, 10 and 5 years. We're proud of the fact that we've achieved our growth goals as a public company. Obviously, we haven't in the last 5 years in terms of that 15% growth goal. But we do feel like our opportunity is there in the marketplace. Our execution and our variable model is in as good a shape as it's ever been, and we think we're pretty well positioned to emphasize growth and continue to expand our presence in the marketplace going into 2012. Moving to our last slide of prepared comments then on Page 15. In terms of more specific comments for 2012, we did share in the press release that while it's still very hard to give guidance and be too forward-looking in our comments, we have found it most productive to just share what we do know to date, which is that through January 30 into 2012 North American truckload volume growth per business day is about 7% and total net revenue growth from an enterprise standpoint was about 6%. As we always like to share, the caveat that those things can change quickly, they move around a lot, especially early in a first quarter like this where March is probably the biggest month of the quarter and things can change quickly. But that's what we know to date. In terms of the variables that we control and emphasizing our growth and focus into 2012, we are hiring, probably as aggressively as we have in the last couple of years, to continue to build out our network. We've got some training and investment in our people that we continue to ramp up on and feel very good about how we can add value with our customers from a broader account management and broader service offering standpoint. We continue to make significant investments in IT. We've talked a lot the last couple of years about our systems investments and our integration around the world. We're happy with how that's going and we're investing more aggressively than ever in the automation of a lot of our services, as well as -- when I talked about the other logistic services really expanding the technology offerings and the types of things that we're doing with customers, which we think is not only an additional source of revenue for us, but really helping to transform the business and help us grow it in a meaningful way. So we're trying to build on that return to double-digit 11% growth in 2011 and emphasize some of the growth processes that we know helped drive the success of our company. We understand that the last couple of years have taught us that the overall economic environment can have an impact on our business and we have to stay flexible and stay sensitive to that. So hopefully, we'll get some cooperation in North America and Europe, especially, in terms of economic growth and a stronger economy that -- to help us get back into our longer-term growth target areas. But we feel very good about our long-term opportunity, how we're executing, our business model and the relevance to the marketplace. That's the end of our prepared comments. So with that, I will turn it over to the operator to begin our Q&A session.

[Operator Instructions] Our first question comes from the line of Ben Hartford with Robert W Baird. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: John, I was wondering if you could talk a little bit about the -- you touched on it earlier, but the gross margin squeeze on the truck side this quarter. To what extent is it kind of a natural part of the cycle and I look back to '03 and there appears to be similar type of dynamic or parallel to be drawn there with volumes or positive pricing, growth that's positive but slowing, and it's not so much being squeezed on the capacity cost side as much as it is the normalization of gross profit per unit. So could you talk a little bit about that and your ability, I guess, to continue to get pricing from customers and their willingness to pay for capacity?

Yes. So what we have always talked about it when we analyze our business model is that a balanced market or a more stable market where freight is generally flowing a long route guides and bid prices, the way things were planned by most shippers at the beginning of the year, is a period of time where our margins will tend to normalize. And I think over the last couple of years, as we and others have talked about it being a balanced North American truckload market, what you've seen is just the normalization of some of our margins back to a more typical long-term range. If you look at that 10-year chart that we have on our slide, what you really see is that the recession and some of the ongoing volatility in 2008 and 2009 especially, where there were unprecedented volume declines but margin expansion. A lot of the last couple of years has just been the ripple effect of those impacts in the trucking community. The way we handle it, we've also talked about -- there are times when we'll go to shippers for rate increases or the shippers really drive when the bids occur. And there are timing differences between how the carrier cost will adjust and the shipper billing rates will adjust. And throughout the last part of 2011 here, while there were some customer price increases, our carrier pricing was increasing at modestly higher rates which was leaving -- leading to that net revenue compression from a year-over-year standpoint. But overall, we would characterize it as a balanced market that has gravitated back towards fairly typical margins from a long-term standpoint. Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then I guess, to follow on that, you described the market as balanced and volume growth appears to have normalized on the truck side. And to take share on the margin, is it just a matter of introducing some volatility, whether it's demand volatility, capacity volatility, to allow your share gain opportunity that you highlighted to begin to play itself out?

Yes. Measuring market share is a little challenging in the trucking piece because there's so many different indexes and it's hard to tell. But our general belief is that we can sort of hold our own during any period in terms of growing with the market and growing with our customers, but that our large market share gains generally come during periods of volatility, where there are route guide failures or a lot of more transactional freight than -- and we think we can help in different ways and be very flexible in the marketplace. So we're proud of our growth and success from the last couple of the years and where we're executing and yet we acknowledge that this hasn't been likely our best gains in market share over the last couple of years in North American truckload because it has been a fairly balanced market.

Our next question comes from the line of Mr. Bill Greene with Morgan Stanley.

John, help me think about sort of the return to these long-term growth targets. Because I see some things that I'm sort of struggling a bit to reconcile. It would seem that only the market can get you back there, if I'm understanding you. Because when we look at your month-to-date growth rates, it's even below the 5-year CAGR, I think, and the 5-year CAGR is below the 10-year. So is it just the market or are there things like headcount growth and branch offices or an acquisition or something that's going to get you that you can actually do yourself? Or are we really just wait for the market from here as evidenced by that long 15-year trend that markets come and go, and we'll see when it comes back. Is that the right way to think of it?

It's all of the above. If you look at our 30-year history from deregulation or the last 15 years, we've had some acquisitions that have helped us expand our service offerings and have helped us grow into new geographies. And we continue to look for those more aggressively now than we have for the past couple of years. We have opened offices and used hiring as a way to drive growth and take market share. And again, we didn't do that as much the last several years because of the overall environment and uncertainty and the fact that we felt like we had excess capacity so that we could drive productivity gains for a while. There's no question that GDP growth and the tailwind of a stronger freight market helps to create some of that volatility or disruption or incremental need that we think we can get more than our fair share of. And then another point that I think is worth understanding, though, is that if you look back through this entire 30-year history, we don't necessarily need 15% volume growth to achieve our 15% revenue and earnings growth. We've always had some margin fluctuation. But over time, our mix and our margins have expanded a little bit, as well as using productivity to gain some of that. So it's a long list of how we manage the business and all the different things that we do to drive growth that we think can help us get back to a longer-term growth target.

Okay. And if you look at the international opportunity on the truck side, not sort of air and ocean. But is that yet at a point where it's worth thinking about what are the growth rates there? I assume they're much higher than the U.S., but maybe it's not big enough to move the needle and sort of -- is there sort of any kind of color you can provide in terms of scale that you have there and where that can go?

Yes, the European truck business is by far the most significant outside of North America. We believe that's somewhere between 3% or 4% of transportation net revenues. We continue to think that there's tremendous upside for us to be as large of a truckload service provider in Europe as we are in North America. It took us many decades to get to where we are here and we know it's going to be a long growth process there as there as well, too. But we feel like that's a marketplace that has a lot of opportunity and has a business environment similar to what we have in North America so that we can continue to grow at a faster pace there for the foreseeable feature. We have some road business in South America and are working to try to establish some of it in Asia. So those non-North American truck growth rates will help us over the next 10 or 15 years. They're not probably going to make a difference in the next quarter or 2 despite how successful we might be. But from a longer-term standpoint around diversifying our services and expanding in other geographies, they continue to be an important part of our strategy.

Our next question comes from the line of Mr. Anthony Gallo with Wells Fargo.

Congratulations on the $10 billion. John, could you spend a little time on the Sourcing gross margin which seemed to contract pretty good sequentially? I don't remember those types of moves in Sourcing. I was wondering if you could maybe put a little color around that.

So I think the main thing that you see there is in a lot of our different commodity categories, the fact that we lost some dedicated portions of business from a large customer, we were very aggressively trying to replace that with other customers and growing our business. So there's some typical seasonal fluctuations just based upon the crops and the strength of the supply and demand in the growing environment. But we also expanded pretty aggressively into some new items and some new customer relationships that didn't have the margin of some of the traditional business. So we actually had a slight volume growth for the quarter. But because of the significant shift in the types of items and the customer relationships that ended up with some meaningful net revenue decline.

Should we now think about that, at least over the intermediate term, as you rebuild volumes, is that a sub-8% or is it a low 8% -- which would be a progression with that margin now?

It's really difficult to predict because it does depend on a lot of different factors like weather and the mix and the prices of the commodities as well as the types of programs that we're successful with. Some of the new initiatives that John mentioned and some of the new volume we were taking on, we do expect those margins of some of those programs to expand over time. So I think 8% is very high 7s, or 8% is probably a good target.

Our next question comes from the line of Scott Group with Wolfe Trahan. Scott H. Group - Wolfe Trahan & Co.: So if I just look at the truckload pricing you got from your customers slowed to about 3% in the quarter, how are you thinking about 2012 for pricing in truckload and how does that impact your view on truck net revenue margins? I guess, at the end of the that I'm just trying to understand, what's the environment you need to start seeing those net revenue margins start to expand again now that they're back at, I guess, what you said, John, as fairly typical levels?

Well, the -- I guess, there was a couple of questions in there. From an overall pricing standpoint, there is a fair amount of bid activity that's going on in the early part of the year which is common for this part of it. I think pricing is pretty interesting right now in the marketplace because, as everybody probably knows, there's been a lot of concern about impacts on the supply side and the fact that there's not a lot of trucks. And I think you see a pretty wide -- we see at least a wide avenue of different approaches around pricing where many shippers are trying to lock in more modest increases but make sure that they have good access to capacity going forward and others are trying to be more aggressive. But I would say low single-digit price increases are more common. What will change this kind of volatility that we talked about is that whenever there is a period of time where supply or demand gets significantly out of whack with the other side. So if we see a pretty tight capacity environment this year, and there's a lot of freight that starts to fall through route guides and there's a lot of transactional opportunities that customers need help with, that's when you'll see pricing start to move more fluid and you'll start to see more significant price increases and it will cause our margins to move around more aggressively like they have during periods in the past. So if we have this balanced market and things go fairly according to plan, at some point, our margins will at least normalize. And there won't be net revenue margin compression just because it will level off. But when they typically expand is when you start to see some of those more immediate opportunities based on market tightness. Scott H. Group - Wolfe Trahan & Co.: Do you think it needs to be a demand-driven market tightness or any kind of market tightness? I mean, I guess in 2011, in many ways the market felt tight from a supply perspective but not from a demand perspective. Do you think you need demand or either way?

Demand is usually better just because incremental freight sort of allows us to keep our contractual commitments at healthy levels. And normally, we're getting more volume in dedicated relationships when there's a demand-driven side of it. So demand growth is better when that causes the disequilibrium. But, yes, like in the fourth quarter of 2008 and early 2009, when demand fell through the floor, you saw the opposite where we had volume declines like everybody else but significant margin expansions. So it can come in either direction, but we would prefer a healthy economy and strong demand growth, which we think has the best long-term outcome for us. Scott H. Group - Wolfe Trahan & Co.: Okay, that's helpful. And just last thing real quick, if I can, we think about the 6% net revenue growth through January. Is there something about the comps in February and March that make it likely to be above or below that 6%, or the comps feel pretty normal the next 2 months?

No. I don't think there's anything unusual about the months of the year. Like John said -- or the months of the quarter. And like John said, as January tends to be the smallest month of the first quarter, so it's difficult to know how the whole quarter will turn out based on the first 30 days.

Yes. By March, you're generally starting to see some greater indication of how tight the spring might be in ramping up of volumes. So I would say that March, by definition, tends to be a little bit less predictable, even where January tends to be more soft from a volume standpoint. Scott H. Group - Wolfe Trahan & Co.: Okay. I guess, I was thinking just from a year-over-year perspective, if things get tougher or easier in February, March.

Not so much within the quarter. I don't think there's anything that we can say. When we look at all of our metrics, the fact that we grew faster and performed better in the first half of 2011, we do feel like our comparisons in general are a little bit harder in the first part of the year with the Sourcing business and some of the margin metrics around profit per load and other things that we analyze internally. But within the first quarter, I don't think there's really anything from a comparability standpoint. Obviously, if you'll look at the operating expenses, there's variance from quarter-to-quarter for the fluctuations that we've talked about. The big variable will be what happens in the transportation demand side of it, especially in the month of March and how much, if any, incremental volume and dislocation there is which would probably cause, I would guess, the biggest variation.

Our next question comes from the line of Nate Brochmann with William Blair & Company. Nathan Brochmann - William Blair & Company L.L.C., Research Division: Just wanted to ask John a little bit. We talked -- I think it was Bill's question, talked about kind of the long-term growth drivers in terms of things that you control -- can control and things that you're working on. In this kind of balanced environment that you've been in for a while, are there any different levers that you're trying to pull currently to make up the difference or is it really just as simple as the long-term C.H. Robinson strategy of managing for that long term?

There are some things that we can do more aggressively. Most of them fall under what we would refer to as account management strategies where we try to expand the service offerings and expand account penetration. And then there is just the hiring strategy. A lot of people debate, is hiring people a growth strategy when you can go into new markets and new services? And as we've talked over the last couple of years, we've been in that balance of growth and efficiency. We've been managing towards efficiency and making sure that the volatility of the market didn't cause us to serve our current customers in a lesser way, or that we compromised our incentives or the variability of our model. And now that we're back to a little bit different environment, we can press on some of those things a little bit harder without being concerned about our service levels deteriorating. So we can hire people, we can open offices, we can look a little bit more aggressively at acquisitions like we have done in some periods of time and we'll look to expand services and grow those account relationships with current customers. When you put all that together, I mean, those are what we do, those are our long-term competencies and competitive advantages that we continue to push on. And then we do -- there's a certain element of accepting the fact that at some times the market is going to give us different things. And we try to be ready for the higher growth when it comes and tolerate the lesser growth when that's what the market gives us if we're executing the best we can. Nathan Brochmann - William Blair & Company L.L.C., Research Division: And then my second question is, when we think about pricing as you're kind of rolling out and trying to penetrate different customers with multiple services, and obviously, the increasing investment in technology to link up to your customers, how do you think about pricing as you're doing more services or more integration versus what may be used to be a standalone service?

So the transportation pricing of any customer relationship generally stands alone and is pretty market-driven around the rates and the pricing, the way it always has been over the last couple of decades. So even when we're working in more of an outsource solution or systems-provider environment, there's almost always very typical bids. And we will compete on those bids lane by lane, and the markets get very competitive and price driven for all those transportation services much like it has. When you get into the fee-based stuff and tying that together, it is different pricing models around understanding the people and the incremental technology cost that we're going to incur in order to implement an account or manage an account and then trying to understand what's a fair contribution to fixed cost and overhead in order to manage that relationship. So it's much more like other professional services-type environments where we're looking at time and cost and trying to make sure that it's healthy ROI for our customer for the fees that they would be spending with us, and that we can get a return on it by leveraging in our network. And ideally, what we're doing with more and more of our top customers is some kind of combined relationship, where we have those fee-based services and kind of the broader supply chain initiatives around taking costs out and driving value. And then a component of that is our participation in the freight management and the route guide execution, where we'll end up with traditional transportation revenues at normal margins as well.

Our next question comes from the line of Chris Ceraso with Crédit Suisse. Christopher J. Ceraso - Crédit Suisse AG, Research Division: I wanted to talk a little bit about the productivity in terms of net revenue per employee which looks like it got quite a bit weaker in Q4, certainly relative to what you printed last quarter. And it seems that within that, maybe that other operating expense was part of the problem. Could you go back to that and dig into that in a little bit more detail? What was behind the big increase in the other operating expense line?

Okay. So there's 2 questions in there. One's about net revenue per person because -- the SG&A expenses don't have anything to do with that. Net revenue per person, the way we calculated it, based on average heads was about 199,000 compared to 204,000 last year and 212,000. The one thing that we've always said about our business model is when we are generating less revenues, it's actually mainly driven on profits but less profits per head, our compensation expense will go down as well. So although there was slightly less -- something like 2% less net revenue per [indiscernible] compared to last year's fourth quarter, there was about 9% less personnel expense compared to per person compared to last year's fourth quarter. So I would say there is going to be fluctuations in that net revenue per person, number going forward, and the fact that it's down to 199,000 would be concerning if the personnel expense didn't react the way it was supposed to. And then your second question was SG&A expenses or the nonpersonal expense growth. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Yes, operating expense.

Yes. The slide highlighted the major categories where we saw growth above the level of the business. And going back to that slide and talking a little bit about each of the different categories, the travel is -- us being aggressive in the marketplace, there's also impacts of our cost per flight are up and the implementation of our global system has created a lot more travel than we had a year ago. Some of the temp services is various different -- mainly call-center type people where we're starting to leverage temporary services which is taking away a little bit of headcount. But it's mainly a temp-to-hire process with some of our centralized call centers. Depreciation and amortization, that's mainly due to the investments we've made in IT over the years. And then over the years which are beginning to amortize. When you look at the claims expense, we do have lumpy claims expense in our business our business. There's constantly a list of different claims we're negotiating. And we did have quite a few freight claims this quarter where we decided to step in and take care of our customers' claim. Many of those will continue to pursue the carrier, the ones that are officially liable to the -- or for the freight claims. But we did take care of our customers and some of them to help maintain our customer relationships as part of that account management strategy John mentioned earlier. There was also one contingent auto liability settlement that was not a large one. The total settlement amount was within our retention limits, so it wasn't a very -- very large claim, like we had in the first quarter, which was tens of millions of dollars. This one was under our retention limit of $5 million and we were a participant in a settlement with the other parties to the claim.

Our next question comes from the line of Chris Wetherbee with Citi.

I was wondering if you could talk a little bit about headcount. When we think about 2012, you mentioned about hiring aggressively and training the staff. Do you feel like we're at a point now, just given on kind of the volume outlook for 2012, you might be able to see some slowing in the rate of growth at least in the headcount in 2012, or is this something that's going to keep up with the pace of volume growth?

We've talked often in the past that with our 220-some offices, we do allow a high degree of discretion. The managers are really making a lot of those hiring decisions based on their pipeline of sales activity and how they see the business with a little bit of benchmarking and coaching and encouragement from the leadership team. Some of it is just the resumption of investment in people and investment in our network to grow the business and some of it will be based upon actual wins and what they're seeing in the marketplace and if they want to expand into another service line more aggressively. So it'll be a combination of all of those decisions based on the individual productivity levels and growth goals at the branch network. We talked about the net revenue per person on the previous question. Some of that, too, can be driven just from the fact that we're investing in people and starting to hire a little bit more aggressively. We feel like we get those people up to speed fairly quickly in our business model. But when we take off on growth, just like margins, they will fluctuate. Sometimes the personnel expense will lead a little bit and then the growth will start to come with that.

Okay. So I guess that's kind of the root of the question, you guys have been hiring at reasonably aggressive pace. In the 2011 calendar year you potentially could see some uptick there but I guess, it's going to depend on a kind of case-by-case basis from branch level.

Yes.

And then if I could just follow up just on the Sourcing side. When you talk about the absolute level of business that you're doing, now that you've seen most of the culling, I feel like you said that you're going to see some tough comps on a year-over-year basis, I think, persisting for a couple of quarters. But when we think about the absolute level of volumes that you're doing there, is it fair to say that we've reached kind of a level that's appropriate for that and that's just more of a comparison issue going forward? Or is it still a little bit more of the adjusting to the losses of customers?

No, we've reached the baseline for the last couple of quarters. The challenge is that even in that baseline business, there's a lot of seasonal fluctuations based upon the commodity strength and strawberries that are very different than lettuce, they're very different than potatoes. And so when you have commodity mix and different crop levels and different seasons, the volumes in the buy-sell margins can change quite a bit even within what is otherwise consistent categories. So there will continue to be a little bit of fluctuation but your primary statement is inaccurate that for at least for a couple of quarters now, we've been to our new run rates and our new level of business and it's just mostly the first quarter part of the second quarter are cycling out of some of the lost dedicated business that we had.

Okay. So fourth quarter a function of kind of seasonality that would be typical and we can use that as a benchmark going forward?

Yes.

Our next question comes from the line of Justin Yagerman with Deutsche Bank.

I guess going back to the long-term guidance, the biggest pushback that I typically get when talking to clients is that the environment has changed, at least from a capacity standpoint. We're not coming out of deregulation where there's a lot of market share growth in truckload carriers. And in fact, there's been an unprecedented amount of contraction in terms of the available pool of capacity. And then the other piece, obviously, being the influx of -- at least a more visible brokerage competition. So I guess, the question I have is a, do you guys feel like there's actually more brokerage competition now than there has been in the past? B, do you think that the capacity pool has ultimately shrunk to a point where the market's a little bit different? And I guess, the third part of that question before it gets too unwieldy is, how much does or does not that actually change your ability to execute your business?

Okay. Lots of good questions wrapped up in there. I would say, first off, there's no question that over the last 30 years, the capacity environment has evolved. And especially some of the regulatory stuff around the impacts of emissions and hours of service and CSA rules, there is a different environment in terms of the decision-making and the cost side of how truckers are ordering equipment and how capacity is being added. And so there is a pretty strong sentiment which we certainly feel that over the last couple of years, the marketplace has probably not added supply or added capacity the same way it has during a lot of periods in the past. You know when we went public 14 years ago, there were a lot of people who believed that there would be significant carrier consolidation and the fragmentation would go away in the short term and it wouldn't be there. And we've always been of the view that it's a fragmented industry, that supply and demand will fluctuate. And from a real high-level standpoint, I don't see a lot of change in that. The largest carriers aren't that much larger than 14 years ago. The big changes have been just around all the economics and regulations around the supply side and the fact that over the last couple of years, we've had a more muted economic growth, and we've had a lot of hesitancy to add a lot of supply because of the unknown impacts of financing and rule changes and the economy and all the rest of that stuff. I'd like to believe that that's a more temporary thing that will get back to more typical capitalistic fluctuations in supply and demand, and that people will be ordering trucks and that there will be higher growth than slower growth. So I don't think that fundamental dynamic has changed a lot. From the standpoint of the competitive landscape, that's something we get asked about a lot as well, too. There -- I think if you look at the absolute numbers of brokers, there's probably fewer of them than there was 10 or 20 years ago, but there's more big ones and more people at least proclaiming their desire to be larger or to grow aggressively or people who have money who are into it. So from the standpoint of larger, more visible competitors, there certainly is a change and that there's more of them and they're more vocal about what their aspirations are and how they're participating. What we've analyzed around that, though, is we really do believe that there's been a pretty positive trend towards third-party logistics, the acceptance of it and the fact that our model has a much greater portion of the marketplace that it applies to today. So as third-party models and managing truckload capacity has evolved in the marketplace, how that greater market share and greater opportunity balances out with all of the additional providers who are operating under that method, it gets hard to tell day-to-day, month-to-month. But it still feels to us like there's plenty of opportunities to grow for the foreseeable future.

Okay. I mean, I guess, the fear is that you guys were the original hedge fund in an inefficient market and now you guys you have a lot of other guys coming in, making this market much more efficient. And now it's harder to dig out the opportunities. But time will tell, I guess, on that.

Yes and I -- that's certainly a valid theory and time will tell as to whether that is the case or not. It feels like if that is the case that based upon the size of the market and how we see things, that, that impact is going to be a more gradual one. I think sometimes when we see a net revenue compression in a quarter and we know that it's almost entirely driven by fuel price fluctuations and changes in rates that there's a temptation to attribute a quarter-over-quarter variance to a change in the competitive landscape, where, by our judgment, while that's certainly a valid component that we're paying a lot of attention to that, that started, frankly, 15 years ago. When we went public, there was a lot of other companies who were getting into it and trying to compete and there are many new ones today as well, too. So we see that as a very relevant factor but a much more longer-term gradual one that oftentimes gets inserted into the otherwise kind of quarter-to-quarter fluctuations that some of the other things cause.

Yes. A little bit more I guess, eclectic OJ recalls, are those going to hurt sourcing in Q1?

No, they won't. We really only deal with the fresh produce. We do occasionally get involved with recalls, where there can be some, but not in processed foods or processed juice.

Okay. And last one for Chad, interest income, a bit higher here this quarter. Just curious what was impacting that and the tax rate for next year.

We don't see any major changes in the tax rate, the 38%, 38.5% range for next year. The interest income, actually was some investment income. Prior to being public, we had put some money into a -- so we're talking in the early to mid-90s, we've put some money into a privately held company as a minority shareholder. We own something like 2% of the company. We had written that investment off long ago but that company actually sold a portion of their business and we generated cash income from it. So that was about $1.1 million or $1.2 million of that investment and other income. So we're still not making much money on our excess cash.

Okay. And so that's one-time. Is there any residual that gets paid out in '12 that we should be thinking about?

There is some, but it's -- we're not counting on it until we have it. But yes, we are due more payments for that as well in '12.

Our next question comes from the line of Tom Wadewitz with JP Morgan. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Yes, I have -- let's see, 2 questions for you. So that when you're looking at the long-term growth and, John, kind of the outlook that your opportunity is similar that it's been the last 10, 15 years, one of the things that stands out to me is that your earnings growth has been -- and operating income as well, has been boosted by your margin expansion. That's been very impressive from kind of 28% operating income as a percent of net revenue up to 42%. So is there -- can you give us some thoughts on how much further that can progress? And is it realistic to think that that's less of a driver of growth the next 10 years than it was the last 10, which means I guess, you have to make it up somewhere else?

Yes, so for starters, we feel very good about the sustainability of the progress that we've made, and that mid-to high-40s is probably achievable over a period of time that we can continue to leverage our network and gain some further productivity enhancements. A lot of that is driven by some of the systems investments and fee-based things that we're doing that are a different business model, where you would start to recognize that. And some of it is investments in Europe and Asia and other places where we're just getting to more normal levels of profitability. So we would acknowledge that, going from 28% to 42%, that's probably -- you're probably not going to see 14 percentage points of improvement over the next 15 years but we feel very good about the sustainability of where we've gotten to and that there is room for some further improvement over the next 10 or 20 years. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: But you -- to be clear, you think mid-to high-40% is -- you can get towards that area given some time?

Yes. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Okay. And then the second one, in terms of your market, there's been a lot of discussion about kind of truckload capacity. What about the idea that intermodal is taking more of the growth in freight and if truck capacity is somewhat constrained going forward for a variety of reasons then just simply more of the freight growth goes to intermodal. And if that's the case, does that imply that you perhaps need a new solution there? I'm thinking of an acquisition. It could be a more aggressive organic push. But what are your thoughts on strategically, whether intermodal is becoming a more important potentially driver of growth for you?

We do think intermodal is more important, and it's a very lane-specific thing. We have been making investments and we will continue to look at what we need to do to stay competitive and make sure that we participate in the growth of that secular trend because we do think it's real. But we always do remind people that if you look at intermodal and the size of the containerized intermodal freight relative to the size of the truckload market today, it's still a relatively small market compared to the entire over-the-road industry today. So the way we think about it is that there are some long-haul West Coast to Chicago and some East Coast lanes where the rails have made very good investments and they're doing a very good job of taking some freight off the highway and we are participating in that. And that could be impacting, especially some of the full truckload, longer-haul lanes that would have less growth for a period of time around it. Our general view is that we want to be a better service provider and equal pricing and capability in all the different transportation services and then do a better job, like one of the specific things that I would say is, we have a point of pride around doing truck versus rail mode selection and helping customers that have seasonal freight or freight that needs to go back and forth between the 2 modes. And if we have competitive pricing and access to both modes of transportation and better systems for helping our customers understand what the right choices are in the marketplace that we can participate in the overall economic growth. So we'll continue to look at it and we're committed to making whatever types of investments we need to stay relevant in that and we do think it's growing in importance. Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division: Do you consider acquisitions in that or not?

Yes, we have. Yes.

Unfortunately, we're out of time so that will have to be our last question today. We apologize we couldn't get to everybody. Thank you for participating in our fourth quarter 2011 conference call. This call will be available for replay in the Investor Relations section of the C.H. Robinson website at chrobinson.com. It will also be available by dialing (800) 406-7325 and entering the passcode 4504485 #. The replay will be available at approximately 7 p.m. Eastern Time today. The slides are posted in the Presentations section of our investor website. If you have additional questions, please contact me, Angie Freeman, at (952) 937-7847. Thank you.