Jan 27, 2010
Executives
Henry Gerkens – Chairman, President and CEO Jim Gattoni – VP and CFO Pat O’Malley – Co-COO Jim Handoush – Co-COO
Analysts
Alex Johnson – JP Morgan Todd Fowler – KeyBanc Capital Markets Ed Wolfe – Wolfe Research John Barnes – RBC Capital Markets Nate Brochmann – William Blair & Company Matt Brooklier – Piper Jaffray Jon Langenfeld – Robert W. Baird Donald Broughton – Avondale Alan Brand [ph] – Stephens Chris Harrell [ph] – Capco Asset Management Neal Deaton – BB&T Capital Markets
Operator
Now, I would like to turn the call over to Mr. Henry Gerkens.
Sir, you may begin.
Henry Gerkens
Thanks, Dora. Good afternoon and welcome to the Landstar 2009 fourth quarter and year-end earnings conference call.
This conference call will be limited to no more than one hour. Please limit your questions to no more than two questions each when the question-and-answer period begins.
But, before we begin, let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995.
Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, I and the other members of Landstar’s management team may make certain statements containing forward-looking statements such as statements which relate to Landstar’s business objectives, plans, strategies, and expectations.
Such statements are by nature subject to uncertainties and risks, including, but not limited to, the operational, financial and legal risks detailed in Landstar’s Form 10-K for the 2008 fiscal year described in the section Risk Factors and other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated.
Investors should not place undue reliance on such forward-looking statements and Landstar undertakes no obligation to publicly update or revise any forward-looking statements. I am pleased to report that I believe the worst is over.
The 2009 fourth quarter revenue trends appeared to have signaled a positive turnaround. But before I talk about the fourth quarter, let me recap the entire year for you.
In the first three quarters of 2009, Landstar’s consolidated revenue decreased approximately 28% compared to the revenue generated in the first three quarters of 2008. The number of loads hauled was down almost 15%, and revenue per load was down anywhere from approximately 10% to 22% depending on the mode of transportation.
As we entered the 2009 fourth quarter, we began to see improving trends. Overall load volume in October of 2009 versus October of 2008 was only down 2%, and revenue per load on a sequential basis began to stabilize.
Load volume in November of 2009 over November of 2008 increased slightly, and revenue per load showed some signs of sequential improvement. December 2009 load volume over December 2008 load volume increased 13%, and revenue per load amount showed sequential improvement.
Our total revenue outlook at the time of our 2009 fourth quarter mid-quarter update call called for a total revenue decline in a range of 10% to 14% when compared to the 2008 fourth quarter. Overall, fourth quarter consolidated revenue was only 9% below the 2008 fourth quarter, a dramatic turnaround from the year-to-date third quarter decline and better than our mid-quarter estimates.
More importantly, the revenue trend throughout the quarter showed continuous improvement as a result of improving economic conditions and new revenue from agent additions. Total consolidated revenue declined 20% in October of 2009 versus October of 2008, only 9% in November of 2009 versus November of 2008, and increased 2% in December of 2009 versus December of 2008.
The 2009 fourth quarter all automotive related revenue and revenue generated from our substitute line haul business increased 23% and 47% respectively over the 2008 fourth quarter. Revenue declines occurred in most other sectors, however, the rate of decline in just of all cases decelerated from those experienced in the 2009 third quarter versus the 2008 third quarter.
Landstar finished the year with 405 agents who generated over $1 million in revenue versus 484 in 2008. The decline in $1 million agents was almost entirely due to the 2009 negative operating environment, as 93 agents who did more than $1 million in Landstar revenue in 2008 generated less than $1 million in 2009.
In the 2009 fourth quarter, Landstar did terminate its relationship with one rail intermodal agent who generated approximately $20 million in 2009 revenue, however only contributed approximately $800,000 in net revenue. In the 2009 fourth quarter, we signed on five new agents who had a prior revenue run rate of at least $1 million.
Overall, for the 2009 full year, new revenue from 2008 and 2009 agent additions amounted to approximately $94 million. I’m very pleased with our recruiting efforts in 2009.
And with an improving economy, I would expect these new agents to add further revenue growth in 2010. Additionally, our agent pipeline of prospective new agents remains very deep.
During our fourth quarter mid-quarter update call, I stated that our operating income would be negatively impacted by increased insurance claims expense. However, despite an anticipated increase in insurance claims expense, I still expected that Landstar’s fourth quarter diluted earnings per share would be in the previous range of earnings guidance of $0.37 to $0.42 per share.
The unusual increase in fourth quarter insurance claims expense was $7.3 million or $0.10 per share and was more than initially expected. It was partially offset by a lower than anticipated provision for income taxes of $0.01.
Landstar’s actual fourth quarter diluted earnings per share was $0.37. Absent the unusual increase in insurance and claims expense and the total effect of the decreased provision for income taxes of $0.03 per diluted share, earnings per diluted share would have been $0.44 per share.
The total quarter-over-quarter increase in insurance claims expense largely related to several claims that settled for more than originally expected and increased reserve levels for certain cases that pre-existed at the beginning of the quarter due to adverse development in those cases. Jim will further discuss the increase in insurance claims expense in his comments.
During the fourth quarter, we purchased approximately 665,000 shares of our common stock at a cost of approximately $24 million. For the entire 2009 year, approximately 1.6 million shares were purchased at a cost of approximately $56 million.
I’m now going to turn it over to Jim for his financial review.
Jim Gattoni
Thanks, Henry. Henry has already discussed revenue for the fourth quarter.
I’ll cover all our financial information included in our release. Investment income was $314,000 in the 2009 quarter compared to $653,000 in the 2008 period.
The $339,000 decrease in investment income was due to a lower rate of return on investment held by the insurance segment in the 2009 fourth quarter. Purchased transportation was 75.5% of revenue in the 2009 fourth quarter compared to 76.2% in the 2008 fourth quarter.
The decrease in purchased transportation as a percent of revenue was primarily due to transportation fee revenue from the recently acquired entities, which does not incur purchased transportation costs, partially offset by increased rates paid for purchased transportation to truck brokerage carriers and increased less-than [ph] truckload substitute line haul revenue, which tend to have a higher cost of purchased transportation. Commissions to agents were 7.8% of revenue in the 2009 quarter compared to 8.1% in the 2008 quarter.
This decrease was primarily due to decreased gross profit, representing revenue less the cost of purchased transportation on revenue hauled by truck brokerage carriers. Other operating costs were 1.4% of revenue in the 2009 quarter compared to 1.2% in the 2008 quarter.
This increase was primarily attributable to $832,000 of other operating costs incurred by the recently acquired companies in the 2009 fourth quarter. Insurance and claims were 3.1% of revenue in the 2009 quarter compared to 1.5% of revenue in the 2008 quarter.
This increase was primarily attributable to $4.8 million of adverse development in the 2009 fourth quarter of four claims from prior years, three of which settled in the 2009 fourth quarter, plus adverse development of 2009 claims incurred prior to the 2009 fourth quarter. In addition, although the 2009 frequency representing accidents per million miles of the company’s commercial liability actions was the longest in the company’s history, the favorable frequency of accidents was more than offset by increased severity of accidents in 2009.
I strongly believe the company’s safety-first business emphasis provides safe and reliable transportation service to the company’s customers and are in line with the financial objectives of the company’s non-asset based variable cost business model. The volatility in insurance expense as described in our SEC filings primarily results from the $5 million self-insured retention limit of commercial trucking claims in the severity and unpredictability of occurrences.
We annually review the economics of maintaining a $5 million self-insured retention versus purchasing insurance coverage for claims in excess of $1 million. Management believes purchase incomes for claims in excess of $1 million would generally reduce the volatility insurance and claim cost quarter-over-quarter.
However, management also believes over the long-term, it is significantly more favorable financially to continue to maintain a $5 million self-insured retention than to purchase insurance coverage for claims exceeding $1 million. Selling, general and administrative costs were 6.2% of revenue in the 2009 quarter compared to 5.3% of revenue in the 2008 quarter.
Selling, general and administrative costs of $33.9 million in the 2009 quarter included $3.9 million of costs incurred by the recently acquired companies. Excluding selling, general and administrative costs of the acquired companies, the 2009 fourth quarter selling, general and administrative costs were $2.3 million or 7% less than the 2008 fourth quarter.
There was no provision for bonuses included in the 2009 fourth quarter, as 2009 bonus targets were not achieved. Depreciation and amortization was 1.1% of revenue in the 2009 fourth quarter compared to 0.9% in the 2008 fourth quarter.
This increase was due to the effect of decreased revenue, increased depreciation on company-owned trailing equipment, and amortization of intangible assets attributed to the acquired companies. Interest and debt expense was $937,000 in the 2009 quarter compared to $1.7 million in the 2008 quarter.
The decrease in interest expense was due to lower interest rates and lower borrowings outstanding under the company’s senior credit facility during the 2009 fourth quarter. The effective income tax rate was 31.1% in the 2009 quarter compared to 37.3% in the 2008 quarter.
The decrease in the effective income tax rate was primarily attributable to the recognition of benefits for several uncertain tax positions that have reached the statute of limitations in the 2009 fourth quarter. Looking at our balance sheet, we ended the quarter with cash and short-term investments of $110 million.
Cash flow from operations was $145 million during 2009. And at December 26, 2009, shareholders equity represented 74% of total capitalization.
(inaudible).
Henry Gerkens
Okay. Thanks, Jim.
We entered 2010 with positive momentum and are cautiously optimistic. The revenue trends experienced in December 2009 are continuing to improve the first four weeks of the 2010 first quarter.
Revenue for the first four weeks of 2010 has increased approximately 7% over the first four weeks of 2009. The new productive agents added in 2009 coupled with an improving transportation environment should foster growth in 2010.
In addition, our 2009 organizational and structural changes, along with the acquisitions of A3i and NLM, should promote growth not only in Landstar’s truck business, but more importantly in its intermodal, international, warehousing and supply chain solutions areas. I’m very excited given the improving economic conditions in our current strategic direction.
Based on the current revenue trend continuing throughout the first quarter of 2010, I would anticipate 2010 first quarter consolidated revenue to increase in a mid to upper single-digit range over the 2009 first quarter, and I would anticipate earnings per diluted share to be in a range of $0.28 to $0.32 per share. In summary, we are happy to say good-bye to 2009 and welcome in the new year.
It is our long-term goal that we get back on track to yearly double-digit revenue increases, improving margins, and growing earnings per share at a rate higher than the rate of revenue increase. I believe we have positioned ourselves just to do that.
And with that, I’ll take questions.
Operator
Thank you very much, sir. (Operator instructions) Our first question today comes from Tom Wadewitz with JP Morgan.
Henry Gerkens
Hey, Tom, how are you?
Alex Johnson – JP Morgan
Good afternoon. It’s actually Alex Johnson in for Tom.
Henry Gerkens
Okay, Alex.
Alex Johnson – JP Morgan
Two questions. The first in regards to the insurance claims, what level are you expecting in the first quarter in terms of how much you accrued for in your expectation there?
Henry Gerkens
The answer in insurance always is, it’s based on your accident frequency and severity and looking at what facts might have changed in the pre-existing reserves. So that’s a question you can’t answer directly other than typically we’ve said all along that insurance and claims expense runs anywhere from 1.5% to 3.0% of revenue, and that’s the way you’ve got to look at it.
And then it really depends on how many accidents you get into, if there is a change in fact pattern vis-à-vis changing some of the pre-existing reserves and then those accidents that you have, how severe it is.
Alex Johnson – JP Morgan
And what drove the severity of the claims of this time around?
Henry Gerkens
As I said, we had – as Jim said, we had four claims that actually settled in with a fortune. Three settled in the quarter for more than we had on the books, and we had some existing claims on the books at the beginning of the quarter that we had to change in fact pattern where we had some adverse development in those cases and we up those reserves.
Jim Gattoni
Alex, if you think about an accident though, sometimes it’s just luck of the draw. You could – someone could bump against one of our wheels or that would be the best thing, or worst, you could end up under the – between the tires.
Frequency – we controlled frequency very good this year. We were at the lowest frequency in our history.
The problem is so many accidents we had just turned out to be unfortunate. You know, you end up under a trailer and it’s all circumstances of what the result of the accident.
Alex Johnson – JP Morgan
Okay. I’ll switch gears a little bit and then I’ll get back in queue.
On the cost side, you mentioned that there was no bonus accrued in the fourth quarter. And I’m just wondering at the current rate of profitability, what comes back I guess in terms – specifically in terms of bonus in 2010 and then the other cost items that would come back in 2010?
Thank you.
Henry Gerkens
Jim, you want to answer that?
Jim Gattoni
If we achieve target, it’s probably about $6 million in bonus, somewhere – you know, $5.5 million, $6.5 million.
Alex Johnson – JP Morgan
And that was zero in all of 2009?
Jim Gattoni
Full year, we had none in ’09.
Alex Johnson – JP Morgan
Okay. Thank you.
Henry Gerkens
Thanks, Alex.
Operator
Our next question comes from Todd Fowler with KeyBanc Capital Markets.
Henry Gerkens
Hi, Todd.
Todd Fowler – KeyBanc Capital Markets
Hey, Henry, good afternoon. How are you tonight?
Henry Gerkens
Pretty good.
Todd Fowler – KeyBanc Capital Markets
Just as a quick follow-up to that last question, in the first quarter guidance that you gave out, do you have some anticipation that there will be some incentive comp or some bonus in that number?
Henry Gerkens
Yes.
Todd Fowler – KeyBanc Capital Markets
Okay. And if the number is 5.5 to 6.5, is that something that would occur evenly throughout the year?
I mean, is that the best way to think about that?
Henry Gerkens
Yes. Basically, yes.
Todd Fowler – KeyBanc Capital Markets
Okay. Henry, some of the areas that you talked about are seeing some strength here in the quarter.
You had auto, you had substitute line haul, and it sounds like everything also starting to improve. What’s your expectation for the tail or basically how strong those things will continue as we get into 2010?
Is that something that – what you are seeing from an activity rate that you would expect those in markets to continue to carrier? Is that something that you could have a builder or replenishment and see that drop off a little bit one side, you see some restocking?
Henry Gerkens
Yes, I’m actually pretty optimistic – cautiously optimistic I’d say. But the economy is still I think a little bit fragile.
We have started to see some things change. And that’s important.
In fact, one of the other categories, I believe it was machinery and equipment actually increased slightly in the fourth quarter. I mean, very slightly quarter-over-quarter.
But as I said before, in all the other commodities, I mean, they were still down, but a nice improvement from where they were. So we think with we’ve done as far as bringing in some of the new agents, we’ve purged some agents.
So the location count is down a little bit, but when you look at that, I think the location count is only down year-over-year 4% when you had an overall decline of 24%. I think that we did pretty well.
Even with the capacity piece, when you look at that as far as only being down 6% considering revenue haul up, all that – we did a pretty good job as far as holding on to things, and we clearly moved some really good productive agents into the system. So we are looking for hopefully some good things.
But again, based on what happened in 2009, I don’t want to go any further than right now what we see for the first quarter. But Jim, you got something?
Jim Gattoni
And then I think with appliances and furniture.
Henry Gerkens
Appliance and furniture.
Jim Gattoni
It wasn’t machinery.
Henry Gerkens
It was appliance and furniture.
Todd Fowler – KeyBanc Capital Markets
Okay. Sure.
I know that it makes sense to me as far as how far do you want look. And just a follow-up on the comment about the agent locations and the capacity, there is really nothing to read in there that the agent locations are down, the capacity is down.
It’s a function of you getting rid of some of the underperformers replacing with better performers.
Henry Gerkens
Yes, we go through this once a year. You’re looking at a tough year also.
I mean, so as I said, when you look at the numbers overall compared to the revenue decline, things actually worked very well. Capacity is going to flex back up as soon as revenue comes to the system, and we are actively working on the agents every day.
So I’m not worried about any of that stuff.
Todd Fowler – KeyBanc Capital Markets
Okay. And then just my last one and I’ll turn it over to somebody else.
Just so I’ve got the comparison straight, I think that I have in notes that volumes were down in the first quarter, basically down like 19% in January, I think 15% in February, 16% in March. Are those numbers right?
And then how does that also look as we get into the second quarter from a monthly standpoint?
Henry Gerkens
Jim, we got those – this is last year, right? Are you saying this is ’09 overall?
Todd Fowler – KeyBanc Capital Markets
’09, yes, exactly. So what are we comping against when you talk about where volumes coming out here in January at this point?
Jim Gattoni
You said 19, 15, and 16, I think?
Todd Fowler – KeyBanc Capital Markets
Right.
Jim Gattoni
That’s true.
Todd Fowler – KeyBanc Capital Markets
Okay. Okay.
I’ll let somebody else have it. Thanks, guys.
Henry Gerkens
Okay. Thanks, Todd.
Operator
Our next question comes from Ed Wolfe with Wolfe Research.
Henry Gerkens
Hey, how are you?
Ed Wolfe – Wolfe Research
Hi, good afternoon. I don’t know about you, but I had a fender-bender a year ago and my insurance keeps going up, and it wasn’t my fault.
At some point, even if it’s not your fault, if you have big claims, does that impact the go-forward and how do you think about that part of the equation for insurance?
Henry Gerkens
I think any time – logic would tell you any time that you have insurance cost that where the insurance company has to basically pay money, I mean, you can probably expect that your premiums are going to go up. But this is the deductible that we carry.
So from a premium standpoint as long as nothing pierces the level, I wouldn’t expect major increases, unless there is a general-type, industry-type thing they are going to do. So I hear you, but it depends on if you pierce that level, usually it’s when you get back.
Ed Wolfe – Wolfe Research
And what level is that?
Henry Gerkens
Well, we carry a $5 million deductible. So if it pierces the $5 million level where the insurance company is going to have to take in some money, that’s usually when they come back and we will increase your premiums the following year.
Ed Wolfe – Wolfe Research
And if somebody say to you at some point you have to accrue more though when you’re self-insuring yourself at these levels, is that in your estimates when you go forward in the first quarter, for instance?
Henry Gerkens
We always make an estimate as far as loan – when we move as far as what our insurance and claims are going to be. And that’s just part of how we do it.
I mean, Jim, I don’t know if –
Jim Gattoni
Every – twice a year, we have a third party actuary to calculate their estimate of what our claim costs are. And that’s what we – we book within the range of what they say that those results are.
And the effort includes accidents that would have happened prior to cut-off. So if our cut-off was December 26, if there was an accident that day, they have to include that.
It wouldn’t include anything for anything that’s subsequent to that. It’s – one is the cost of claims on that date, and we are naturally coming to look at our trends, how our estimations are doing and they come up with an estimate and we book within that range.
Ed Wolfe – Wolfe Research
When is the next time that that’s due.
Jim Gattoni
We typically do it over the summer. So we recently had two within the last six months, and then we’ll get through the first two quarters and probably do it again.
Ed Wolfe – Wolfe Research
Okay, that’s helpful. Henry, I noticed at the end of the release you talked about a long-term growth rate of mid-double digits for revenue.
If you look out the next three to five years, I think it might have been – how do you get there? If I look back at the last five years before ’09, it’s been a bit below that and you are on a higher base now.
Can you just walk me through what the –?
Henry Gerkens
If you strip out, if you go back – I believe, if you go back to ’04, ’05, ’06, strip out the FAA, I think you’d start to see some double-digit revenue increases without the FAA stuff that we had back in those years. I mean, you got to remember, we are a little bit different company now.
I think with the acquisitions and what I think that’s going to mean to our overall transportation services that we provide, we think we are certainly pretty good at this point in time. We’ve got I think the expertise and the service offerings that we haven’t had before.
I mean, we’ve evolved I think to a different type of transportation company.
Ed Wolfe – Wolfe Research
Well, that’s what I’m looking for. Can you discuss when you think about that 15% or so, how much of it is the traditional BCO growth, how much is the traditional brokerage, and how much is new products and how you think about that?
Henry Gerkens
Well, how I think about that is one is going to feed the other. But I would anticipate that you would increase some of the others services at a faster rate than your traditional, if you will, truckload service.
And let’s take the BCO piece of that, for example, I mean, our BCO count reflection works anywhere from probably 8,000 to 9,500 BCOs thereabouts are in that range over a continuum of time. And that’s going to grow, I think, probably in conjunction with piece – a piece of that with the economy.
We just can’t get enough guys qualified in. But on the other hand, when you look at some of the supply chain solution stuff where we are going to hopefully control information and therefore control freight, that’s going to attract more brokerage-type business.
So I would expect that to grow at a much faster cliff than some of the other stock. And it’s not to say that BCO revenue is not going to grow, because I think – again, as I control that information through our supply chain solutions companies with A3i and NLM, that’s going to grow.
It also is going to feed the intermodal. It’s also going to feed the international.
I’ve talked about warehousing before also. It’s very slow or off the ground.
I think with our restructuring of the – and rebranding, quite frankly, of the national accounts group to corporate sales solution and restructuring that whole group under Jim Handoush as far as having product expertise in house to help or you can sell this stuff. One of the big under – that I underestimated or overestimated, I should say, was our agents’ ability basically to sell all of our services.
And we recognized that during this year. We’ve taken different approaches as far as how to educate and step internally to help our agents make that sell.
And again, I keep going back to the supply chain solutions piece that that all fits in. So we are pretty comfortable and confident as far as how we are structured right now and how are going to attack the marketplace, specific at numbers, I’m not going to lay on that.
I mean, our strategic – and what we are trying to do is get back to that goal, but I think you will see the other pieces grow a faster cliff than your traditional stuff that you do.
Jim Gattoni
Along when they –
Ed Wolfe – Wolfe Research
Yes, I know, but it was helpful. And then just last follow-up on that and I’ll let someone else have it.
When you talk about the supply chain solution, how big is that revenue now and ideally how big can that get?
Henry Gerkens
I’m going to turn over to Jim for a second. We purchased A3i really like a venture capitalist.
I mean, they had no customers. All right?
We are currently working with a number of opportunities. Obviously, as you probably know, it’s a little longer sell.
We acquired them in beginning of July. We’ve got a number of good opportunities working there.
I believe they will be landed hopefully within the first six months of this year. We also – with NLM, they have traditionally worked in the auto business and we’ve worked with them in the past.
I don’t know what their fee revenue was first half of – it was $10 million since we’ve acquired them. And I would expect that – that half a year I would expect that to increase.
What I like about that business also is the fact that that’s very adaptable to the other business that we have. They don’t have the sales channel that we have.
So as I said, I think we got a lot of good things done.
Ed Wolfe – Wolfe Research
Okay, thanks. I’ll let someone else have it.
Thanks for the time.
Operator
Our next question comes from John Barnes with RBC Capital Markets.
Henry Gerkens
Hey, John, how are you?
John Barnes – RBC Capital Markets
Great, Henry, thank you. How are you?
Let’s see. Can you talk a little bit – I'm sorry if I missed this.
I too was bouncing around a little bit. But talk a little bit about how many agents you finished with the year, kind of agent additions in 2009?
As things have begun to stabilize, can you talk a little bit about the agent pipeline as you are starting 2010? And what you think you can achieve in 2010?
Henry Gerkens
We – as I said, overall agent locations were down about 4% year-over-year. And when think about how many people had a very difficult year, that’s pretty logical that you lose your low performers.
If I look at last year’s $1 million agents, 92 of those guys that generated $1 million in ’08 didn’t generate $1 million in ’09. On the other hand, of all the productive agents that we had this year, 12 of those guys actually generated over $1 million.
And of that total $94 million increase accounted for like I think it was 33% of it. So it takes some time to assimilate into the system.
So when you add up all those people that we – those productive guys that I’ve talked about on previous conference calls, I think with an improving economy that they are all going to contribute to further revenue growth next year. As it relates to the pipeline, again, and I’ve said this before, we review that constantly.
And Pat O’Malley is here. Pat is part of our structuring all the agents.
The field operations now report up through Mr. O’Malley.
So Pat?
Pat O’Malley
John, if you think some of the advantages of becoming a Landstar agent, whether it’s our cutting edge technology and with our acquisitions that are very interactive component for a prospective agent to come in and be able to sell additional services to the customers. So you look at where the credit crunch is and then some of the difficult times people had in the 2009, that’s really served as a springboard for us.
We see the quality of the candidate that’s contacting Landstar increasing. We see the revenue base there – potential revenue base they could bring to Landstar.
A very solid – we are very optimistic about the agent pipeline that we have. It’s very robust with the quality candidate.
John Barnes – RBC Capital Markets
Okay. Very good.
Henry, last quarter somebody asked a question about your insurance line item starting to turn up a little bit and then obviously it was more severe this quarter. I think last quarter you answered that that was a natural extension of more business being done for your BCO network versus brokerage.
Would you expect that to balance out a little bit as the economy begins to recover and maybe brokerage takes on a larger piece of the business? Or do you anticipate the split between BCO and brokerage kind of staying where it is now and therefore naturally the insurance line, maybe it’s at the higher end of that 1.5% to 3% range that we’re talking about?
Henry Gerkens
John, obviously when we have more brokerage, I mean, the effect of that decrease is the insurance as a percent of revenue. And clearly that is going to happen.
And with a depressed freight environment that we saw in 2009, BCOs, because as I’ve always said before, they really get the first shot only because they see the pricing. And they can react faster.
So we clearly had to move more revenue being contributed by BCOs. Now, as our revenue pipeline increase and there is more demand, and we start increasing, I expect that brokerage would grow at faster cliff only because there is only X amount that our BCOs can haul.
They will get good loads and everything, but therefore what’s going to happen is, as a percent of revenue, that will an effect of pushing it down. Now, as far as action frequency and severity, that’s – as Jim was saying, that’s – you have an accent, you’re going to have an accent.
Our objective and our strategy has always been to attack frequency. And our frequency rate this year was 2.01 million miles driven at all accidents.
That’s the lowest we’ve ever had. We did a real good job on that.
We just happened to have some bad facts that developed over in the fourth quarter, quite frankly, as far as certain case reserves that it was prudent basically to book to where we thought that was going to be settled. And that’s exactly what we did.
It’s hard to predict that going forward other than generally it’s going to be between 1.5% to 3% of revenue, the more brokerage that I have in the numbers obviously has an impact to lower that number. And I hope that answer your question, John.
John Barnes – RBC Capital Markets
Yes, sure. Thanks.
I appreciate that. And then lastly, could you give us a little color on rate per mile for van and flatbed, and where that is in the fourth quarter versus a year ago?
Henry Gerkens
You got that, Jim?
Jim Gattoni
I have that. Just one sec.
Rate per mile van –
John Barnes – RBC Capital Markets
Yes, and flatbed.
Jim Gattoni
Q4 over Q4, for the quarter, van was down 13%, flats was down 17%.
John Barnes – RBC Capital Markets
And is that fuel adjusted or is that inclusive of fuel?
Jim Gattoni
Inclusive of fuel for brokerage.
John Barnes – RBC Capital Markets
Okay.
Henry Gerkens
BCO – if you look at – if you only look at BCO without fuel, because they don’t have fuel in there, the BCO then was down to 11%. BCO flat was down 14%, if that helps.
John Barnes – RBC Capital Markets
That’s awesome. Yes, thanks.
Henry Gerkens
Okay. Thanks, John.
John Barnes – RBC Capital Markets
I appreciate it, guys. Thanks.
Operator
Our next question comes from Nate Brochmann with William Blair & Company.
Henry Gerkens
Nate, how are you?
Nate Brochmann – William Blair & Company
I’m wonderful. How are you, guys?
Henry Gerkens
Good.
Nate Brochmann – William Blair & Company
Great. Hey, why not ask a little bit of a deeper dive, Henry, in terms of the look at some of the other service offerings, whether intermodal, international, et cetera.
In terms of – clearly there has been a little bit of a pickup in terms of cross-selling and the agent’s willingness to kind of learn some of those other modes. Are there anything else that you have kind of going on in your playbook that you kind of expect to increase the revenue from some of those areas this year and beyond?
Henry Gerkens
As I said before, one of the things that we did this year is, if we back to 2008 in the fourth quarter, we’ve created the business unit specialists. Right?
And you got 2009, which was by everybody’s – just a horrible, horrible year as far as the freight environment. So it’s kind of hard to judge as far as how successful that was.
One thing we did realize is that, all right, did I think we’ve overestimated the agent’s ability to sell that. So what we needed to do is increase their awareness and put the expertise on board here, which we did.
We’ve restructured and put some people on board here that we think will help them make that sale. I mean, we want them to go into that customer and ask for all their freight.
I mean, we want all the freight because we can handle it. And so the restructuring of the national accounts – not in restructuring, but re-branding as corporate sales solutions, I think goes a long way into that.
And Jim, if you want to comment, that’s –
Jim Handoush
Yes. I mean, some of the subtle changes we made over the last couple years are really coming to fruition.
We recognized clearly where we made some missteps. And the restructuring really kind of united everyone out in the field.
So it was a positive influencer, meeting with the agents and really understanding the corporate – the overall corporate strategy. I mean, if you look at the ocean side, for example, even though those markets were down significantly in 2009, ocean loadings were up 1% and overall air revenues were up.
And a lot of that – even though it is on a small base, a lot of that the fact that we are building greater and greater awareness with our agency family because of the changes we made. We added support structure both in house and out in the field.
So we feel very well positioned going into 2010. And if that trend will continue and in the recent acquisitions where we are going to compliment that, our sellers have a much higher level in the shippers’ organization now.
And we are selling the complete package of Landstar and our full capacity. And as that brand awareness of Landstar starts to – starts both to carry to more of a 3PL supply chain provider who can provide all the services, as that brand awareness changes, it makes it much easier for agents in our field and our corporate sales group to sell Landstar and all of its capabilities to clients.
Henry Gerkens
I mean, one of the things – we've gone through, for example, meetings with internal employees. We are planning a road trip that basically is going to visit with all of our agents.
But the main thrust of what we are trying to get to is that we were structured as two companies basically, the Carrier Group, if you will, and Landstar Global Logistics. We functioned as two companies.
The message is we are one company. Every agent is capable of selling every service, and we no longer refer to Landstar Global Logistics and we no longer refer to the Carrier Group.
We’re Landstar. And that is most important message that I think we can get out and we just got to make sure our total agent base understands that we have now the proper mechanisms in place in here at corporate to help them make that sale.
And I don’t want to be in competition with each other, which – if you go back in Landstar’s history, we went through that with the Carrier Group when we put Ranger and Inway and Ligon to go. So we know how to do this, but there is always some – people get nervous when you start talking about that stuff.
But the fact of the matter is the true power of Landstar comes to play when we act as a united front.
Nate Brochmann – William Blair & Company
And while it’s kind of early in that move, I mean, can you have some antidotal evidence from some of your customers who are eager to kind of accept that new mentality in terms of giving you more freight and other modes than they did historically?
Jim Handoush
It’s an interesting question. And I think as we talk to more and more customers, either alongside or agents or in the corporate sales group, we recognized that Landstar really wasn’t – our full service offering wasn’t made aware to the client.
And as we sitting down with clients now and really exposing them everything we have to offer, they are very pleased, because one, they have a great relationship with the existing agent and the service that he is performing for them today. And like all clients, they are trying to downsize the number of vendors they use.
And so they are very pleased with the fact that we can provide these alternative services under one umbrella and the fact that from an ASP standpoint, that small business owner really services that client better than any other employee-based company. So we really have an advantage there.
We just need to expose and build awareness in those clients. And we’ve had very, very good success here over the last six months, and I think 2010 is really going to show that penetration.
Nate Brochmann – William Blair & Company
Great. And then my second question is kind of talking about your cost base right now, Henry, in terms of – obviously you have taken some costs out and looked at some ways to do things more efficiently during the past year.
And we talked about clearly obviously some variable things like bonuses and salaries coming back a little bit, which already appear to be included in your guidance. But how much of the kind of cost and better efficiencies that you have gained over the last year do you think are sustainable?
And you used to say that pretty much like every three years or so that you could probably improve your margins by 100 basis points. Whether that might be a little – whether we could accelerate that just with some volume improvement over the next three years?
Henry Gerkens
Volume improvement along with some price improvement is going to cure all. So yes, I mean, that’s always my objective.
I mean, and more directly answer your question, I don’t plan to add back a lot of the things that we cut. I mean, there are certain things I’m going to go after, i.e., revenue.
So we’ve got some people that we’ve put on the supply chain side because I think that’s a real opportunity for us. But we don’t plan to add back much of what we cut last year at all, because we recognized, as I said before, although I feel good about what’s happening, I’m cautiously optimistic, as I said, because I just – and there is a lot of things that are beyond our control that potentially could work against us from an economic standpoint.
But I do think we have the right horses in play, and I think – so in answering your question, I don’t plan on adding anything back other than we’ve got some people in plan and people that we’ve actually hired on the supply chain side.
Nate Brochmann – William Blair & Company
Great. Thank you.
Henry Gerkens
Thanks, Nat.
Operator
Our next question comes from Matt Brooklier with Piper Jaffray.
Henry Gerkens
Hey, Matt, how are you?
Matt Brooklier – Piper Jaffray
Thanks. Good afternoon.
If I think back to your guys' mid-fourth-quarter conference call, you indicated that volumes were going to be, I think, ending the quarter modestly positive. I'm looking at today's report.
You put up something close to a 5% growth rate in total in terms of total loads. It feels like you guys saw a nice pickup in the second half of fourth quarter.
I just wanted to hone in terms of what drove that strength or that acceleration in the second half of fourth quarter, if we look at it from maybe a product perspective or from a verticals perspective.
Henry Gerkens
I think the biggest drivers – Jim, and you can correct me if I’m wrong. I mean, the biggest drivers of volume increase was substitute line haul business, automotive, and as we said, appliance – furniture and appliances were up also, and then the – and those were actually increases over the prior quarter.
I mean, those were the things that really drove it. And the other things were down, but when you compare from a sequential standpoint, they were down – all of them were down to a lesser degree, which is a good positive thing.
And as we move into January, I mean, my total revenue – I mean, volumes, as I said, were up. Load counts up 13% in January.
January?
Jim Gattoni
Yes.
Henry Gerkens
Yes, January. And my total revenue was up 7%.
As we move through the quarter, if you recall last year, we had a dramatic pricing fall-off in March. I don’t believe that’s going to happen this year.
So I think – it all bodes well for the whole first quarter at this point in time, but again I’m a little bit leery about going further than that.
Matt Brooklier – Piper Jaffray
All right. If I hone in on the substitute line haul product, would you describe that pickup and that acceleration, is it across-the-board, is it with all transport providers?
Are there some specific, I guess, market share shifts that are driving that particular product?
Henry Gerkens
I would say it is not across the board in the substitute line haul.
Matt Brooklier – Piper Jaffray
Okay. So it’s fair to say that there are some industry-specific issues or industry-specific market share shifts that drove some of the strength in that particular product?
Henry Gerkens
I would say that’s correct.
Matt Brooklier – Piper Jaffray
Okay. But it – again, the substitute line haul and the strength there, you have seen that continued into first quarter, at least in the first four weeks?
Henry Gerkens
And then I do anticipate that that to ratchet down as we go through the quarter, but if you recall, that business fell way off in 2009. But I don’t think you are going to see those same level of increase that we’ve had.
I mean, again you went through the holiday season.
Matt Brooklier – Piper Jaffray
Correct.
Henry Gerkens
And although we are seeing increased volumes now, and I still think you might get some increased volumes, I just don’t know if it’s going to be as – the level is going to be as high in that segment.
Matt Brooklier – Piper Jaffray
And thus far in the first quarter, have you guys been active in terms of repurchasing company stock?
Henry Gerkens
No.
Matt Brooklier – Piper Jaffray
Okay. Thank you.
Operator
Our next question comes from Jon Langenfeld with Baird.
Henry Gerkens
Hey, Jon?
Jon Langenfeld – Robert W. Baird
Good afternoon. Can you just give a little bit of an update on the agents?
You talked a little bit about this, but I guess I struggle a bit with why agents – if they haven't joined you thus far, why they would want to join you right now, now that we are past the bottom, let's say? So could you talk a little bit about the mindset of the agent that may join in the next, let's say, 12 months?
Henry Gerkens
It’s no different than when we were recruiting agents when the economy was booming. I mean, I said that I think when the economy is where it was in ’09, I think we were able to basically get more people on board.
I mean, but I’ll let Pat answer. It is no different than what we’ve had in the past.
The other thing we have to offer now, which we didn’t have to offer before, is a solution – a mechanized solution that they can tap into with A3i and NLM. I mean, that is I think very critical.
But go ahead.
Pat O’Malley
Yes. Jon, I think that all the things that people find appealing about Landstar through the years, whether it’s our cutting edge technology or the great name in the marketplace or unparallel support systems, I think those all continued to sell agents.
What Henry mentioned and I’ve mentioned earlier when we were talking to John Barnes, the new acquisitions have brought a different kind of agent to us. One that is more interested in providing supply chain solutions to their customers because their customers are demanding it.
You heard Jim talk earlier about how customers don’t have to have a variety of providers and vendors. They want to kind of scale that back.
And so agents are finding or people that have their own operating authority are finding that they are getting squeezed out of opportunities. They may have provided great service to this customer over the years, but only in one segment.
Maybe that segment was in truckload. Now they find that they can provide all those services with Landstar coupled with the supply chain solution through these acquisitions, and that makes us a very attractive place for them to land.
Jon Langenfeld – Robert W. Baird
Okay. That’s a good explanation.
Thank you. And then as far as the intermodal agent that you mentioned that you had lost, what was the timing on that, and how long had that revenue been with you?
Henry Gerkens
.
Jon Langenfeld – Robert W. Baird
Okay. And was that a mutual departure, or how does something like that happen?
I know it’s not a big deal to the bottom line. I'm just trying to understand the dynamics behind it.
Henry Gerkens
We initiated a termination. Let me leave it at that.
Jon Langenfeld – Robert W. Baird
Okay. Any thoughts on intermodal in general?
A lot of changes in the landscape out there in terms of the underlying providers, does that alter your use of – or your ability to grow the intermodal footprint?
Jim Handoush
Well, everything we’ve discussed earlier I think is going to help us grow in every segment. And at the new breed of agents that Pat was talking about that we’re able to bring on now is going to sell more strategic comprehensive solutions.
So when a customer is looking out, again, they are not looking out towards one particular mode of service. They're looking out for everything.
And at the same time, at that mid-level account that really is our sweet spot that really doesn't do a lot of intermodal, for example, today because they haven’t really been exposed to it. And our agents are touching those types of customers every day.
So as we expose those customers to all the services that we have to offer, we believe we are going to grow in every segment putting intermodal.
Henry Gerkens
I think, Jon, the – I think Jim hit right on the button. I mean, the opportunity in intermodal comes from all the agents who don’t utilize intermodal.
I mean, we’ve got intermodal agents, a great group of intermodal agents that have X amount of volume. What I need to do is we need to put more volume on the table in total.
And the way we get there is by making – getting our agents that don’t utilize intermodal to think about intermodal, because I think it’s just a great opportunity for us and actually a good opportunity for additional business for all the intermodal providers out there. So we look at that as just a tremendous opportunity.
Jon Langenfeld – Robert W. Baird
Okay, good. And then last question, do you have the cash flow from operations and CapEx for the year?
Jim Gattoni
The cash flow from ops is $145 million. The CapEx, I believe the cash CapEx was $2.5 million – hold on one sec.
I’m sorry, it’s $2.7 million cash CapEx.
Jon Langenfeld – Robert W. Baird
Any big change in terms of total CapEx, cash and capital leases in 2010 versus 2009?
Jim Gattoni
Well, we just – we are going to end up purchasing this building in March for $21 million. Other than that, it’s pretty routine year.
Jon Langenfeld – Robert W. Baird
Okay. The $21 million will be – that will be cash CapEx?
Jim Gattoni
Yes.
Jon Langenfeld – Robert W. Baird
Got it. Okay.
Great. Thanks, guys.
Operator
Our next question comes from Donald Broughton with Avondale.
Donald Broughton – Avondale
Good afternoon.
Henry Gerkens
Hey, Donald, how are you?
Donald Broughton – Avondale
Well, thanks, I’m well. It is certainly a tragedy, but in the past when we’ve had horrific events such as the hurricanes that has proven something that you have been able to help assist those people in need, and in the process generate a little revenue because of your relationships with the government.
Currently given what is happening in Haiti, do you think there is any opportunity for you to help them with their logistics? And if so, what kind of an incremental revenue do you think we can boost – do you think we could anticipate?
Henry Gerkens
Right now, Donald, most of that stuff is being done by the military. And there has been some bids that have been given out.
I mean, we’ve done some air, we’ve done some ocean, if you will, and we’ve done a handful truckloads down to the port. But there is really nothing major that has been actually offered and bid on.
And there were some bids – actually there were some big bids that we put on, but they were pulled off the table because they learned FEMA didn’t have the funding. So basically it is really all being done by the military.
Obviously we stand ready when needed. But there is some but very – I mean, it’s not material.
Donald Broughton – Avondale
Okay. Nothing compared to what we saw with, say, Katrina?
Henry Gerkens
Oh, no, not even close.
Donald Broughton – Avondale
All right. Thank you, gentlemen.
Henry Gerkens
Okay, Don. Thanks.
Operator
(Operator instructions) Our next question comes from Alan Brand [ph] with Stephens.
Alan Brand – Stephens
Hey, good evening, guys.
Henry Gerkens
Good. How are you?
Alan Brand – Stephens
Good. I think you guys gave rate for dry and flat.
But volume trends, do you have those for dry versus the flats in the quarter?
Jim Gattoni
I do. Hold on one second.
The vans were plus 7%, flats were off 10%.
Alan Brand – Stephens
Okay.
Jim Gattoni
And that doesn't include our expedited business or certain other stuff. That’s kind of the traditional drive van and flatbed.
Alan Brand – Stephens
Okay. And with respect to flatbed business, I’m assuming that Arrow going away didn't benefit you guys much.
But it sounds like you got other – that there are large players out there that are struggling. We heard today there maybe some more layoffs at a large competitor.
Are you seeing capacity movement and/or maybe priced starting to firm or move up in the flatbed market yet?
Jim Handoush
Alan, we are seeing some tightening of flatbed capacity.
Alan Brand – Stephens
All right. And has it started to affect the price yet?
Jim Handoush
Not materially, no.
Alan Brand – Stephens
Okay. And just one more question, if I could then.
The load count in the quarter, it looked like the brokerage loads were up a lot more sequentially than BCO loads. Is that just sort of typical initial phases of a recovery, which I think is something that is part of an answer you gave earlier, or was there something specific that was driving that trend?
Henry Gerkens
Jim Gattoni
I missed that. I’m sorry.
Could you just repeat that?
Alan Brand – Stephens
Basically brokerage loads versus your BCO load count, what would have maybe driven the much greater sequential improvement in broker loads?
Henry Gerkens
You see, it’s load count question. I think the answer is substitute line haul drove the increase in brokerage.
Alan Brand – Stephens
Okay. That’s helpful.
Thank you, Henry. That’s all I have.
Operator
Our next question comes from Chris Harrell [ph] with Capco Asset Management.
Henry Gerkens
Hey, Chris, how are you?
Chris Harrell – Capco Asset Management
Hey, good. How are you, Henry?
So I had a question about some numbers you gave I guess a while back in sort of the depths of the downturn, where you guys estimated a down 20% revenue would give you something like $80 million to $100 million, maybe a little better than $100 million in earnings.
Henry Gerkens
(inaudible)
Chris Harrell – Capco Asset Management
Yes. $1.65 to $2.21 or something.
And so – I know revenue was down a little more than that sensitivity analysis, but I was wondering if you could kind of highlight the major differences in what you actually did compared to that range, particularly with things at the higher end of range?
Henry Gerkens
In what regard? I mean, the revenue was down 24% for the full year.
Chris Harrell – Capco Asset Management
Right. So maybe another 5 points of revenue, so $100 million.
So at your contribution margin maybe that’s $17 million of the difference. And I’m trying to come up with somewhere between maybe $15 million and $45 million of difference [ph].
Henry Gerkens
You got to remember we –
Chris Harrell – Capco Asset Management
The insurance claims –
Henry Gerkens
Jim, you are going to have to – that's a question I don’t think I can –
Chris Harrell – Capco Asset Management
And I can call Jim back later if it is not easy to do here.
Henry Gerkens
That might be something you might want to do. And I do know when we went through the year, our targets as far as our reduction in SG&A, ex the acquisitions, all right, were hit in each of the first quarter, second quarter, third quarter, and fourth quarter.
Jim is going to have to get back to you on the –
Chris Harrell – Capco Asset Management
That’s fine. I guess what I’m wondering is, let’s say, just hypothetical, again a sensitivity, let’s say, your revenues are up 10%.
So you pick up a couple of hundred million dollars in revenue. Just kind of working through the contribution margin, it seems like it would add back maybe – or increase earnings maybe $0.40 and maybe you don't have – you have a better insurance claims environment.
I'm just wondering if there is any other things that you would call out that were significant that might not be recurring next year that were pulling that number down?
Jim Gattoni
Just one thing that to consider, and this isn't all of the reason. But if you did that sensitivity analysis at a point of 20% revenue decline, EPS was going down 21%.
There is a certain level of fixed cost. If you accelerate the revenue decline beyond 20%, EPS goes down faster.
So – and a 24% decline, I would expect probably a faster decline in EPS than 24%, because you just can’t get that with the SG&A cost. I mean, it’s mostly hedged.
And we didn’t really do anything to adjust hedge much other than have a hiring freeze. So that’s part of the –
Chris Harrell – Capco Asset Management
Okay. How about the acquisitions?
Henry Gerkens
I’m sorry, go ahead.
Chris Harrell – Capco Asset Management
I'm sorry. I was just saying, how about the acquisitions?
What did that end up impacting earnings this year, or was it significant?
Henry Gerkens
Slightly positive, less than $0.01. As we said, it wasn’t going to be very much additive, but it was kind of a breakeven.
It was just slightly positive.
Chris Harrell – Capco Asset Management
Okay. If revenues did snap back fairly – strong may be the wrong word – but if they were up 10%, would you expect a fairly dramatic snap back in profitability?
Henry Gerkens
I believe profitability will grow at a faster rate, if that’s your question.
Chris Harrell – Capco Asset Management
Yes. Okay.
I tell you what, I will leave it there. I will catch up Jim later.
Henry Gerkens
Great, thanks.
Chris Harrell – Capco Asset Management
Okay. Thanks, guys.
Operator
Our next question comes from Neal Deaton with BB&T Capital Markets.
Neal Deaton – BB&T Capital Markets
Hey, guys, good evening. A quick question here.
I hate to get you repeat something, but at the beginning of the call when you said automotive and substitute line haul was up, were the percentages 23% and 43% respectively or did I flip-flop that?
Henry Gerkens
That’s sounds about the rate. Hold on a second.
23% and 47%, that’s correct.
Neal Deaton – BB&T Capital Markets
47%, okay. And so auto was up 23%?
Henry Gerkens
That’s correct.
Neal Deaton – BB&T Capital Markets
Okay. And you ended the year with – did you say 405 million-dollar agents?
Henry Gerkens
405 million-dollar agents.
Neal Deaton – BB&T Capital Markets
Versus 484.
Henry Gerkens
Right. And I made the statement that 92 of those agents that generated over $1 million in 2008 were under $1 million in 2009.
And it really all due to the economic environment.
Neal Deaton – BB&T Capital Markets
Okay. Touching on something one of the other guys asked, the air cargo revenue, the revenue per load, obviously it’s off of a low base, but it was up pretty sharply.
Is that just where you're partnering and outsourcing that, and you're seeing a lot of business from Asia to the US, for example? Or what is driving the growth in that one particular mode, if you will?
Jim Gattoni
(inaudible) that led to several large air charters that we moved during the quarter.
Neal Deaton – BB&T Capital Markets
I think it broke up for a second. Several large air charters?
Jim Gattoni
Yes.
Neal Deaton – BB&T Capital Markets
Okay. Okay.
And then one other maintenance question. The $231 million was non-controlling interest.
That is just the minority interest payment?
Henry Gerkens
Yes, old-school accounting, that is what I would have called it, minority interest, but that’s new accounting terms for me. (inaudible)
Neal Deaton – BB&T Capital Markets
Right. I may have thought –
Henry Gerkens
Again that minority interest back when I was a CPA.
Neal Deaton – BB&T Capital Markets
Okay. Thanks.
That sounds good. Thanks guys.
Have a good night.
Henry Gerkens
All right. You too.
Operator
Our final question comes from Tom Wadewitz with JP Morgan.
Henry Gerkens
Tom, you made it all the way back, or is this Alex?
Alex Johnson – JP Morgan
It’s still Alex. Sorry to disappoint you.
Henry Gerkens
All right.
Alex Johnson – JP Morgan
I've got two quick questions. I appreciate you getting them in at the end here.
In terms of the – following up on the substitute line haul, I understand you're saying that there is still strength moving into 2010 here. But you also mentioned that I guess the comps are easy.
What if we looked at it on a month-to-month sequential basis, how would January look versus December – or January versus December as opposed to December versus November? What – can you give a little more granularity on that?
Henry Gerkens
Jim might have November to December and whatnot. But logically based on because you're dealing with peak season type shipping patterns, I would have expected that November was much bigger than October, and December was bigger than November.
Now you move into January, I would imagine that has slid down quite a bit, although still better than what did the prior year. I would anticipate February probably to drop off a little bit.
And then you sought to get – and I’m talking sequential. And then probably sort of flat, but again compared to the prior year because prior year was way off that you probably still have some growth there.
Alex Johnson – JP Morgan
Yes. I guess the second part of the question – maybe I should have asked this upfront – would be, how does that compare to historical trends?
But maybe that is easier if I had just asked Jim about that.
Henry Gerkens
Yes. Our historical trends is interesting.
Typically substitute line haul picks up in the fourth quarter. All right?
I mean, it’s a seasonal thing. I mean, last year’s fourth quarter however everything dropped off.
So we used to refer to October or September through December as the peak shipping season, and then probably the last three years, four years, whatever happened to it. Now this year, at least from our standpoint, things sort of came back pretty nicely.
But I think it’s generally those terms under normal circumstances.
Alex Johnson – JP Morgan
Okay. And then the last question, I promise.
You mentioned the potential new customers for A3i in the first six months here. What is the profit potential from those customers?
Henry Gerkens
I don’t want to put anything specifically, but we’ve got a number of good opportunities, and just let me leave it there.
Alex Johnson – JP Morgan
Was A3i profitable in the fourth quarter –?
Henry Gerkens
Yes, we bought as a venture capitalist. They had no customers.
Alex Johnson – JP Morgan
Yes, that makes sense. Okay, thank you.
Henry Gerkens
Right, thanks. Dora, I think that’s it, right?
Operator
That’s correct. At this time, we have no additional questions.
Henry Gerkens
Okay. Well, I want to thank everybody for dialing in, and I look forward to speaking to you all again on our first quarter mid-quarter update call, which I believe is scheduled for March 1, 2010.
And with that, I will say good night. Thank you.
Operator
Thank you for joining today’s conference. That does conclude the call at this time.
All participants may disconnect.