Landstar System Inc (LSTR) 2009 Q3 法說會逐字稿

Good afternoon, and welcome to Landstar System Inc.'s third quarter 2009 earnings release conference call. All lines will be in a listen-only mode until the formal question-and-answer session. Today's call is being recorded. If you have any objections, you may disconnect at this time.

Joining us today from Landstar are Henry Gerkens, President and Chief Executive Officer; Jim Gattoni, Vice President and Chief Financial Officer; Pat O'Malley, Vice President and Co-Chief Operating Officer; Jim Handoush, Vice President and Co-Chief Operating Officer.

Now I would like to turn the call over to Mr. Henry Gerkens. Sir, you may begin.

Thanks, Terri, and good afternoon and welcome to the Landstar 2009 third quarter earnings conference call. As in the past quarterly conference calls, today's call will be limited to no more than one hour. And again, I would appreciate it if you would limit your questions to no more than two questions each when the question-and-answer period begins. My opening comments will be limited so we can get to all the questions.

But before I start, 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 other members of Landstar's management 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.

During our 2009 third quarter, mid-quarter update conference call, I stated that I anticipated that the revenue decline in the 2009 third quarter versus the 2008 third quarter, excluding bus evacuation revenue, would be slightly less of a revenue decline, compared to the revenue decline experienced in the 2009 second quarter versus the 2008 second quarter. Actual revenue for the 2009 third quarter was pretty much what we had anticipated.

Additionally, in our mid-quarter update call, I stated that earnings per diluted share for the 2009 third quarter should be in a range of $0.35 to $0.40 per share. I am pleased to report that the diluted earnings per share was at the upper end of our earnings guidance at $0.39 per diluted share.

Let me talk a bit about our third quarter revenue performance.

Revenue hauled by BCO's represented 58% of total consolidated revenue in the 2009 third quarter versus 51% in the 2008 third quarter. Truck brokerage revenue was 33% of consolidated revenue in the 2009 third quarter versus 38% in the 2008 third quarter.

Revenue generated through rail, ocean and air cargo carriers represented 6% of consolidated revenue in the 2009 third quarter and 7% in the 2008 third quarter. Included in 2008 third quarter was approximately $27.6 million of revenue from bus evacuation services.

Also included in the 2009 third quarter revenue was approximately $3.7 million of freight under management fee revenue generated from NLM, which was acquired by Landstar at the beginning of the third quarter. 2009 over 2008 quarterly revenue declines were experienced in a wide array of accounts and sectors.

Large revenue declines were seen in our business with the United States government, down 44%; in the machinery sector, down 43%; and in our substitute linehaul service offering, down 36%. However, total automotive revenue in the 2009 third quarter over the 2008 third quarter was up 1%, largely due to the fee revenue generated at NLM. Generally, load volumes have stabilized and pricing is beginning to show signs of stabilization.

As I said in the third quarter mid-quarter update, the worst appears to be over. Both the load volume and revenue per load trends in our truck transportation business are improving.

If you look back to each of the 2009 quarters, the load volume decline in the 2009 first quarter versus the 2008 first quarter was 16%. It was 15% in the 2009 second quarter versus the 2008 second quarter, and was 10% in the 2009 third quarter versus the 2008 third quarter. Sequentially, load volumes increased approximately 1% in the 2009 third quarter over the 2009 second quarter, compared to a 5% decline in the 2008 third quarter versus the 2008 second quarter.

Revenue per load with respect to truck transportation declined 8% in the 2009 first quarter versus the 2008 first quarter; 16% in the 2009 second quarter versus the 2008 second quarter; and 22% in the 2009 third quarter versus the 2008 third quarter. However, sequentially, the revenue per load decreased approximately 3% in the 2009 second quarter from the 2009 first quarter, while the 2009 third quarter revenue per load amount was approximately equal to the second quarter amount.

It also should be noted that the revenue per load amounts include the effect of fuel surcharges as it relates to revenue hauled by broker carriers. Fuel surcharges included in truck transportation revenue in the 2009 third quarter were approximately $12 million versus approximately $42 million in 2008. As everyone remembers, fuel prices fell rather dramatically in the 2008 fourth quarter.

Landstar continued to sign on productive new agents in the 2009 third quarter. Our agent location count at the end of both the 2009 and 2008 third quarters was 1,403. Agents added in 2008 and 2009 contributed approximately $18 million in new revenue to the 2009 third quarter. Additionally, during the 2009 third quarter, we added another nine agents who had a prior revenue run rate of approximately at least $1 million each.

Since the beginning of the 2008 fourth quarter, we have now added 46 of such new agents. During 2009, we have replaced non-productive, low revenue-producing agents with quality revenue-producing agents. Our pipeline of prospective new agents remains very strong.

From a P&L standpoint, Landstar's net margin increased to 17.7% from 14.8% in the prior year. Landstar's operating model, coupled with the cost reduction programs instituted at the beginning of the year, contributed to a very solid operating performance in a very challenging operating environment.

As it relates to our cost reduction programs, SG&A expenses were approximately 14% lower than the prior year's quarter if one were to exclude the $3.3 million of SG&A costs related to the acquired companies. Overall, operating profit margin was 6.5%, and as I said before, diluted earnings per share was $0.39 per share.

Our balance sheet remains strong. We ended the quarter with approximately $93 million in cash and marketable securities. We have reduced long-term debt, including current maturities, by approximately $61 million from the end of the 2008 fourth quarter.

So far during 2009, we have purchased 960,000 shares of Landstar stock under the Company's authorized stock purchase program at an aggregate approximate cost of $31.7 million. In short, Landstar's financial position continues to remain very, very strong.

I'm going to turn it over to Jim now for his financial review.

Thanks, Henry. Henry has already discussed revenue for the 2009 third quarter. I will cover the various other financial information included in our third quarter release.

Investment income was $279,000 in the 2009 quarter compared to $817,000 in the 2008 period. The $538,000 decrease in investment income was attributable to a lower rate of return on investments held by the insurance segment in the 2009 third quarter.

Purchase transportation was 74.4% of revenue in the 2009 third quarter, compared to 77.8% in the 2008 third quarter. The decrease in purchase transportation as a percent of revenue was attributable to decreased rates of purchase transportation paid to third-party truck brokerage carriers, which was due to excess truck capacity and lower fuel prices, and decrease less than truckload subs to linehaul revenue hauled by truck brokerage carriers, which tends to have a higher cost of purchase transportation.

Also, the 2008 third quarter included $27.6 million of revenue from bus capacity provided for evacuation assistance related to storms that impacted the Gulf Coast. This bus revenue had a higher cost of purchase transportation than Landstar's typical transportation business.

Commissions to agents were 7.9% of revenue in the 2009 quarter, compared to 7.4% in the 2008 quarter. This increase was primarily due to increased gross profit, representing revenue less the cost of purchase transportation on revenue hauled by truck brokerage carriers.

Other operating costs were 1.4% of revenue in the 2009 quarter compared to 0.9% in the 2008 quarter. This increase was primarily attributable to $870,000 of other operating costs incurred by the acquired companies in the 2009 third quarter and the effect of decreased revenue.

Insurance and claims were 2% of revenue in the 2009 quarter compared to 1.1% in the 2008 quarter. This increase was primarily due to a higher favorable development of claims in the 2008 third quarter compared to the 2009 quarter.

Selling, general, and administrative costs were 6.6% of revenue in the 2009 quarter compared to 4.7% of revenue in the 2008 quarter. Selling, general, and administrative costs of $33.1 million in the 2009 quarter included $3.3 million of costs incurred by the acquired companies. Excluding selling, general, and administrative costs of the acquired companies from the 2009 third quarter, selling, general, and administrative costs were $4.7 million or 14% less than the 2008 third quarter, and consistent with our prior projection.

There was no provision for bonuses included in the 2009 third quarter, as management does not currently anticipate achieving bonus targets.

Depreciation and amortization was 1.2% of revenue in the 2009 third quarter compared to 0.7% in the 2008 third quarter. This increase was primarily 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 $957,000 in the 2009 quarter compared to $1.8 million in the 2008 quarter. The decrease in interest expense was primarily attributable to lower interest rates and lower borrowings outstanding on the Company's senior credit facility during the 2009 third quarter.

The effective income tax rate was 37.4% in the 2009 quarter compared to 38% in the 2008 quarter. The decrease in the effective income tax rate was primarily attributable to the recognition of benefits for several uncertain tax provisions that had reached the statute of limitations in the 2009 third quarter.

The non-controlling interests, as presented on the income statement, is comprised of the losses of the 25% interest currently held by one of the previous shareholders of one of the acquired companies. The $214,000 represent the allocation of the 25% of the losses of the 2009 third quarter to the non-controlling interests.

Looking at our balance sheet, we ended the quarter with cash and short-term investments of $93 million. Cash flow from operations was $125 million during the 2009 39-week period. At September 26, 2009, shareholders equity represented 78% of total capitalization.

Just to make a brief comment on the companies acquired at the beginning of the 2009 third quarter, as anticipated, these strategic acquisitions did not have a material effect on revenue or earnings for the 2009 third quarter. We continue to expect that the acquired companies will not have a material effect on revenue or earnings in the 2009 fourth quarter.

Back to you, Henry.

Our 2009 fourth quarter over 2008 fourth quarter revenue comparisons should be easier than the prior 2009 quarterly comparisons. I anticipate a fourth quarter freight environment with stable demand and no further degradation in price. As such, I believe our fourth quarter overall consolidated revenue amount will be similar to that generated in the 2009 third quarter.

Additionally, diluted earnings per share for the 2009 fourth quarter should be in a range of $0.37 to $0.42 per share. During 2009, we have added new quality productive agents; acquired two freight under management technology-based companies; and adjusted our organizational structure to better position ourselves in a marketplace as a one-stop shop for all of a customer's transportation needs.

I am excited about the future and have much confidence in our direction as the economy begins a slow recovery.

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

(Operator Instructions). Edward Wolfe, Wolfe Research.

Can we get some cash flow information? Can you give us a sense of cash from operations in CapEx in the quarter? Was it $32 million spent on the acquisitions in the quarter?

Yes, just one second. I gave -- the $125 million was the year-to-date and I believe it was $106 million through the second quarter. So yes, I believe it's $19 million on the cash from ops.

And what was working against that cash flow? It seems like a lower than normal number. Was there a swing in something in working capital?

I think what you've got is it's coming back to really normal, because what -- in the downturn in the first six months of the year, you're collecting a lot of receivables whereas you're not paying out because of the downturn. I would expect that it might be a little lower than a typical run rate for a quarter, but it's not that significantly much lower than what your normal run rate would be. Because our cash flow is pretty close to our net income, our free cash flow.

Okay. And was $32 million the amount paid out for the acquisition, that was all in the quarter?

Yes. Yes, it was acquisitions plus assumption and there were liabilities, of which we paid off. That's approximately -- that's right.

Okay. And just still on the cash flow side of things here, Henry, is $32 million for acquisitions kind of the way you view the world going forward, give or take? Or is this an aberration? Relative to last couple of quarters, it's a big number.

Well, I don't think it's a big number at all. I mean, I think we -- what we anticipate from gaining from these acquisitions, I think we -- in my opinion, we did a fine job as far as this.

What we're looking for when we look at an acquisition -- and as you well know, we don't literally acquire and go out and look at companies all that much, because it's very difficult to integrate into our organization. We tend to build our Company, as I said before, brick by brick. These acquisitions are technology-based.

One being a -- it's a startup company. And what we liked about this is the technology that it has to offer. NLM, on the other hand, has been around for a number of years. I think we got them at the very bottom of the market timing from our perspective. And I think -- they were historically very big in the automotive industry. And as that industry recovers, we think that's a pretty big win for us. In addition, their technology just plays very nicely into our wide range of accounts that we have, so I think we actually expand their total business.

So we're pretty pleased with everything. Getting back to your question, the $32 million, I think, was a fair price and I think we did very well with those.

I was just asking the $32 million of share repurchases -- is that a fairer way of thinking about going forward? Because you haven't -- in the old days, that's normal, but recently it's not.

You let me go on all that time talking about share repurchases.

It was a soft ball for awhile, Henry.

There you go. Look, again, getting back to our business model, that is part of our model. The opportunity presented itself and we bought shares back. I mean, what was it, $32 million in the quarter, Jim? Is that what we spent?

It depends. I mean, it could be more, it could be less. I mean, we try to be opportunistic.

Is it fair to say you went from [2] the quarter before to $32 million, the answer is probably somewhere in between that but closer to the $32 million as a (multiple speakers) --?

The reason the quarter before was low, and I think -- and again, I think you've got to look back quarter by quarter -- nothing is evenly spread; but if I look at the second quarter specifically, it was really because we were in the process of doing those acquisitions and we really didn't think it was appropriate to go out and buy our stock.

Okay, thanks a lot, guys. I'll get back on the other [side]. Thank you.

Justin Yagerman, Deutsche Bank.

Justin, welcome back.

Mike Weber filling in for Justin, actually. I guess maybe from a macro standpoint, you guys mentioned in your last couple of releases that the worst is probably behind us and now things are actually moving off the bottom. Could you give a little bit more color on that as to whether that's demand, pricing, or both? And whether or not we're seeing any regional pockets of strength maybe out on the West Coast?

I think from a general standpoint, what I tried to go through with going quarter by quarter by quarter, I think what you've started to see is when you look at it comparatively, our load volume declines have decelerated, if you will, 16%, 15%, 10%.

If you look at it from a -- on a sequential basis, volumes are starting to pick up. I mean, first quarter versus second quarter, we had a 5% decline. In the third quarter versus second quarter, volumes picked up 1%. It's pretty broad-based.

And as it relates to price, you've got the same thing going on. We had pretty substantial declines in price on a revenue per load basis, but when you track it back, sequentially, pricing was flat generally from the second quarter to the third quarter and the first couple of weeks. And albeit it's only 2.5 weeks into the quarter here, I've got even more of a sequential improvement, actually.

So things are moving in the right direction, both from a volume standpoint; as demand starts to tick up, you're starting to see the corresponding pickup in price. So we feel a little bit better but I think as you well know, as you go into the fourth quarter, the fourth quarter has given us a couple of head fakes the last couple of years. So we're a little bit cautious. And as I said, I'm cautiously optimistic, but the economy is a very -- it's slowly recovering.

As far as pockets, I think -- I don't know, Jim or Pat, is there any pocket that you would --?

He had mentioned West Coast. There's been some tightening of capacity out on the West Coast.

Interesting. Yes, that kind of leads me to my next question as to whether maybe this is anecdotal, but are you guys noticing any banks being, I guess, less lenient with some of the mom-and-pop operators out there to, I guess, further tighten capacity? Maybe more in a broad sense. I think you mentioned that it was getting tighter out West. But any color you can shed there?

That would be hard for me to -- I haven't seen any increase in bankruptcies. I don't track that data. And if Donald is on the phone, I know Mr. Broughton has that data. But -- so I don't know if there's any increase in that activity.

I do see where there's a pickup in demand, which -- believe me, we've still got a lot of capacity out there but it's sort of stabilizing pricing at this point in time. But again, I'd be -- I couldn't give you any evidence one way or the other on that.

Got you. Fair enough. I guess, lastly, can you maybe go through pricing and volumes on a month-by-month basis throughout the quarter?

I think I basically gave that on a quarter basis and that might be better served as far as talking to Jim. But we don't normally give the month-to-month volumes and that stuff. But -- so I don't know, Jim. I don't know what you want to -- but that's going to take awhile and I don't want to take up the questions to just come through with numbers, if you will.

Fair enough. Fair enough. I appreciate the time, guys.

Tom Wadewitz, JPMorgan.

Let's see, so you've got some optimism on, I guess, stability, maybe a little bit of sequential improvement. What parts of the economy or what customer segments are picking up? And how much enthusiasm do you have about some follow-through on that?

Actually, I'm pretty positive on a lot of fronts. I think you're going to start to see more of an impact on our new agent additions that we had all during the year. I think from all of our sectors you started to see a little bit of improvement, except maybe the US government, which I think continues to decline. But I'll have Pat answer that; although recently, I think we've had some pickup recently with that.

But generally, when I make the comment that generally, we are declines in a wide array of sectors, when I look at where things are picking up, it actually is spread across that same -- so instead of having a 25% decline, it's a 20% decline, to give you an example.

I mean, so -- but we're seeing just about a lot of different sectors. The one sector that turned positive quarter-over-quarter, as I said before, was automotive. And that probably is the first time I've seen that trend in a couple of years.

You know, you had the Cash for Clunkers there. I think we, clearly, strategically with the NLM acquisition, I think that's going to help. I think NLM is going to add further fee revenue, if you will, as we get other customers onboard. The A3i acquisition -- which, by the way, is our 75% owned company; the owner retained 25% and that's that non-controlling interest that Jim relayed before.

I think that is going to be a huge win for us as we move forward from a customer supply chain thing. But there's really been -- I can't pick out anything specific, but Pat, do you have anything you want to --?

Tom, moving through the quarter, as you get out towards the end of the third quarter, the government revenue has stabilized and actually improved, compared to how it was earlier in the quarter.

Henry has mentioned automotive. And then absolutely correct, it's a broad base -- it's a couple of shipments here from this customer and a couple more shipments from this customer. So it's spread across the landscape of business.

Okay. And maybe if you could comment on pricing as well. I mean, I guess you tend to be more driven by spot pricing just by the nature of your model. How much confidence do you think that pricing will have some follow-through in terms of stability and, hopefully, improvement? Or do you think that maybe a little bit of the spot market tightening is temporary and related to the seasonal factors?

Well, as I said before, seasonal factors -- I tend to -- a little bit leery about calling anything seasonal over the last couple of years, because I think it's been sort of, as I said before, we've seen a few head fakes. And as I've described, whereas sequentially, we were flat overall, if I looked at the first 2.5 weeks, actually in our traditional truck business and our 3PL business, if you will, I mean, pricing is up in both of those over the September quarter.

So the trend continues to move up in both volume and price. And that's a good thing. It's just that I think when you get back into the November period, December period, because, again, I think last year and other years, the end of the years tended to be a little bit different. And I don't know if you can extrapolate that all, but right now, things feel pretty good.

Okay. All right, great. Thanks for the time.

Alex Brand, Stephens.

I was wondering, Henry, I think last quarter, you had talked about sort of drive-in trends in the quarter relative to flats. And I was wondering if you could comment on that again, and maybe tie that into any trends where you're seeing loads particularly improve in certain sectors or industry segments there.

I'll let Pat answer that.

We can look at this two ways, Alex. Demand or spot requests, for trailers at our customer locations in the third quarter was up over the third quarter 2008. So -- and the spot requests came into Landstar for new customer locations.

So it wasn't necessarily our existing customers that were growing their business with Landstar, but it was new customers that we identified either through agent additions or national account sales calls or agent sales calls.

And flats, Pat?

Flats have continued to kind of be the same throughout the balance of the year.

And what percentage of the business is flats, currently?

It's about -- it still remains -- well, I don't know, maybe -- it's still about 35%, correct, Jim?

That sounds right. I'll [get it] one second.

While he's doing that, Henry, can I clarify on the acquisitions, you said they added $3.3 million to SG&A, but to the bottom-line, it was $0. So there was enough revenue to --?

Yes, there was actually a slight profit but nothing -- I mean, if you recall, I had -- on the top, you had $3.7 million of fee revenue. And the SG&A is $3.3 million and then you basically -- you've got to remember, the costs, if you look at that non-controlling interest -- and that was at $214,000 loss, we just added back -- the A3i acquisition generated a loss in the quarter, whereas the NML acquisition actually generated the profit. So when you combine the two, it netted to very small profit, if that helps you out.

Flats was 33% in the quarter.

Okay. That's all I have, guys. Thanks a lot.

Jon Langenfeld, Robert W. Baird.

Thanks for taking the call. Henry, you talked about the 46, I think, agents that are million dollar agents year-to-date. How does that compare to maybe '08? And what would a typical year look like, if there is such a thing?

What a typical year looks like, it's hard to describe but that's a lot more of the larger agents than we would typically bring in, if you will, in any given year.

For example -- and they're added throughout the year. If I were to look at year-to-date through this year, those agents year-to-date generated about $21 million in total. And it depends on when the agents came in. So you can tell -- and that's only going to increase as you move into next year, because then they cycle in a whole year. So it's -- we're pretty impressed.

For example, the guys who were added in the first quarter generated $2.6 million in the third quarter and they had $6.3 million year-to-date. So you've got those types of numbers moving forward. So we're pretty -- we like what we've done in that arena.

So would that be 20 -- 28?

My guess is that's more than double. The quality agents.

Okay, great. And then the second question was in terms of incentive comp. How do you think about that conceptually going into 2010?

You can't keep incentive comp zero forever; but at the same time, you want to send some level of reach goal, I guess. So how do you think about that in an environment that basically isn't going to grow a whole lot? Will there be opportunities for the executives and the management to make bonus next year?

There will always be an opportunity. We're in the process of the budget process currently. And the goals we put in place will have sufficient stretch that hopefully will give adequate reward and return.

But the hope would be to be able to pay bonuses next year?

Oh, yes, I mean, look -- we don't like going through -- remember, our bonus programs work the same way as a lot of our variable cost structure. We're going to set our bonus targets and the plan at the beginning of the year. They will be etched in stone. And once they are put in place, those are the numbers.

And the danger -- it's a very difficult environment you're coming off of. And we will put together a plan that we think is appropriate and, hopefully, targets are attained where people attain bonus payouts. But that's just the way our program works.

John, we dealt with this in 2007. There was the same issue. You had no bonuses in '07. And we set targets appropriately for '08 and we've managed to hit targets in '08. We -- unfortunately, right now we're not on target for '09. So we've been through this before, and you just look at the results of those two years, you can kind of get an idea of what we do.

Good point.

Got it. Okay, thank you.

Todd Fowler, KeyBanc Capital Markets.

Henry or Jim, just to be clear on the acquisition-related SG&A costs in the quarter, that $3.3 million -- are those ongoing costs related to those businesses? Or are any of those costs one-time or non-recurring here in the quarter?

No, those are recurring costs. Those are purely the SG&A costs. If you recall in the second quarter, I think we reported about $2.5 million -- or $2 million of acquisition costs. Those were non-recurring, because those actually related to the actual doing of the acquisition, if you will. The $3.3 million is the actual SG&A related to both of these companies.

So then with SG&A right now on a quarterly basis at about $33 million, that's roughly a run rate to use going forward, excluding any incentive comp going into 2010?

Yes.

Okay. And then from a high level, thinking about the guidance here for the fourth quarter, basically, you've guided -- or you've talked about revenue being flat sequentially. But then the earnings guidance at $0.37 to $0.42 is a couple of pennies better than where it was in the third quarter.

What's the best way to think about the delta with flat sequential revenue but a little more confidence in the earnings range? Is that because of where you came out in the quarter? Or is there anything else that we should think about in the fourth quarter?

Well, I think it's where we came out in the quarter. I think Jim mentioned the -- we would expect to continue to move forward. We've got some issues -- we've got some more -- the tax expiration of this statute of limitations I think is going to impact that number a little bit. And look, I think you've got -- on a go-forward basis, things look like they're improving. And we'll see where that all comes out.

Okay. And then is there any other costs that come back in 2010? You guys have done a good job of taking out the costs. You've got the acquisition, but things can improve on a volume standpoint, on a gradual basis. Do you expect anything different to happen with the cost structure getting into 2010 from where it's at right now?

That's a good question. I think we will move forward. I think permanent things that we have taken out, there are certain items -- there are certain things we are not going to add back in.

I think we would reevaluate certain things mid-year, i.e. -- well, I'll use this as an example, Todd, and don't take this one way or the other, but -- the midyear is one of the time frames where we give salary reviews. If things are going well and things are -- I mean, there might be additional increases or something like that, because right now we've got a freeze on. So that could change.

So things like that. But specific costs, big costs that we took out, I don't think you'll see major costs added in. There might be one or two that we bring back, but that's -- nothing from a material standpoint.

Okay, good. And just a point of clarification and I'll turn it over -- but there was some talk earlier about the share repurchases here during the quarter. The dollar amount of share repurchase here in the third quarter was -- that was $18 million, correct? And then the $32 million is the --?

Yes, $17.9 million -- the $31 million was the year.

The year-to-date. Okay, great. Okay, that's helpful. Thank you very much.

Nate Brochmann, William Blair.

Just wanted to kind of dig a little deeper into the trend question a little bit. Was just wondering -- we have some great performance out of the new business brought on by the new agents -- just wondering what you're hearing kind of from some, maybe the old existing accounts in terms of whether you're seeing some value picked up with them as well.

I think -- (technical difficulty) go ahead, Pat.

Nate, I think it's across the board. There's no one specific account I could point to and say that that account is showing some signs of life or not, other than the ones that Henry has already mentioned in the opening comments and we've mentioned before. I think we've done a nice job in attacking certain segments and then all the producers in that segment.

For example, the wind energy business or the heavy haul business -- we were primarily servicing one major customer last year. This year, across a base of providers in that -- or manufacturers in that segment. So it's broad-based to really kind of identify anyone specifically from those we've already done.

Okay, fair enough. And then also just wanted to hear a little bit more in terms of what you're hearing from your own BCOs in terms of the pipeline. Are you getting a larger pipeline? Are people still lining up in terms of wanting to work with Landstar? Have you seen that diminished a little bit? In terms of trying to gauge from a different angle in terms of the capacity out there.

(technical difficulty) comparison. The demand into the recruiting department is up about (technical difficulty) [6%].

Wow, fabulous. Okay, great. Hey, thanks a lot. (multiple speakers)

Donald Broughton, Avondale Partners.

Henry, I appreciate the plug.

I appreciate the plug you gave us the other day.

Happy to do so and glad to be rewarded for my confidence. Unlike John, I'm not going to be as worried about your incentive comp. I know that warms your heart to have an analyst concerned about your incentive comp. I know if you make the numbers and make the rest of us rich, you'll get rich in the process.

You've always done a great job on the insurance and claims line. And recently, that line has crept up just a little bit. I mean, every single line, you've done a great job. That one has crept up a little bit recently.

Can you kind of give us a little bit of insight into what's driving that? Is it incidence? Is it frequency? Is it severity? And what should we be modeling for on an ongoing basis?

Well, let me start and, Jim, I'll let you talk a little bit also. I think, in general, the first thing you've got to look at is the composition of our revenue now has swung to -- I think it was 58% or 59% BCO versus where it was at the third quarter last year, probably about 51%. And therefore, the swing was in brokerage. And you have less of an insurance exposure if you're more brokerage.

Sure, fair enough. Okay.

All right. So, therefore, you've got some pickup there. From a frequency standpoint, I believe our frequency was pretty good. It was down actually, but we did have some more severe accidents. And then you had some movement I think in some of the case reserves up -- or actually, down, but the difference, the change from last year to this year was bigger last year than this year. And we did have more severe accidents in the third quarter. So that was really the rationale.

So you couple those -- if you take all three of those together, that's where it comes out to be. And Jim, from a modeling or how Donald should think about that on a go-forward basis?

The ratings that you look at, if you look at what our historical has been, it's between -- you're doing between $40 million to $48 million a year. So a $10 million number is not unusual. I think, last year's, I believe was $8.1 million in the quarter. And that included a significant amount of favorable development of claims that we had put up in prior periods that we had favorable experience on, so they kind of came down in the third quarter.

So that (multiple speakers) prior year's number was unusually low. I'm comfortable in that number that we put up today. Last year, we had favorable development there. We've been running in the low $9 million recently, but when I look at our claims history the last five years, it puts us to a $40 million to $48 million range annually.

No, no. It's good performance; like I said, just the last two quarters, it was just popped a little bit. The mix certainly explains part of it and severity does as well. So, from a severity -- if it's severity driving it, then we shouldn't have a tail, a very long tail then. And that if your safety performance in the coming weeks and months gets back towards norm, then the numbers should come down again pretty quickly, right?

(technical difficulty) You know, you've got a couple of those -- you turn a -- what can happen quickly, a bump alongside of a tractor can pretty quickly turn into an underwrite, you know? And it's just unfortunate that some of the claims that we might have had last year weren't as severe because it was just -- they passed over tires and pulled through the undercarriage, right? You know, that's what happens. And it's volatile and it's just -- we had some more severe -- a handful of more severe accidents this year.

Fair enough. Thanks for the time, gentlemen.

Todd Fowler, KeyBanc Capital Markets.

Well, Todd, that's pretty good. You got back right away.

Yes, that was better than what I expected. I do just have a quick follow-up here, and I don't want to get too much into the weeds, but one number that did jump out at me here in the quarter -- looking at revenue per load in the air carrier segment, the air carrier loads -- that was actually up, if my numbers are right, about 25% on a year-over-year basis. Is there anything going on within the revenue per load in that segment or anything to think about or read into that number?

Any comments?

There's such a mix within that business. It's not a consistent we're doing that same customer every week, year-over-year. It's just -- you could land a new account or lose an account and that could drive that rate up or down, depending on who the account is.

There's a couple of large air charters that we did during the quarter. They're going to have an impact on the revenue (technical difficulty) the exact impact on our overall consolidated basis, where we had two large air charters that moved in the quarter.

Okay. That's fair enough. I was just curious if there was anything else there. So thanks a lot.

Tom Albrecht, BBT.

A couple of questions. I'm sorry, Henry, I didn't catch the number. I think you said how many million-dollar agents you've added year-to-date since the beginning of fourth quarter '08. I just wanted to clarify.

46.

And that was since the beginning of the year or beginning of Q4?

That's the beginning of the fourth quarter of last year. So those fourth quarter agents beginning in this fourth quarter would have cycled through a whole year.

Okay. And then occasionally, you will give some insight into the actual rate per mile for drive-in and flatbeds. I didn't know if you had those numbers available.

I think Jim Gattoni will give you the insight into those numbers.

All right.

Rate per mile on van in the current quarter -- $1.61. And on the flats, it was $2.19 in the third quarter.

And does include the fuel surcharge too?

That would include the brokerage fuel surcharge piece on both -- in both those.

Okay. And then do you have the year-ago number?

$1.95 for vans and $2.92 for flats.

What's the fuel component? Do you know that?

That really -- Tom, as we move further into the fourth quarter, that from a brokerage standpoint, that's going to distort it. Now that's why we're starting to see the revenue per load actually change as far as the differential.

Right, right. I was thinking a couple of quarters ago you were able to break it out with and without fuel, at least partially. I realize the broker part kind of confuses everything.

No, I actually have it -- we can actually break that out, but that, I don't think Jim's got that readily handled -- handy. (multiple speakers) I had it by van and flat, I think, when I did my presentation. We could break that out for you, but we don't have it right now.

Okay. And did you give tax rate guidance? I know you made some comments about taxes.

It's going to be in the low 30% -- it's going to be lower in the third quarter. Somewhere in the low 30% range.

All right. So 30%, 32%, somewhere in there?

That's probably safe.

So your (multiple speakers) guidance -- go ahead.

We just continue to have some statute of limitations on the uncertain tax positions that are rolling over. Our guidance includes about $0.01 or $0.02 from the tax on a sequential quarter basis; compared to the third quarter or the fourth quarter, it's probably about $0.02.

Okay. Because I think if I do 30%, that's going to be more than a couple of pennies benefit, but I don't have the model open, so -- you feel more bullish than your guidance, and yet your tax rate would suggest that with that low of a rate, that your guidance isn't quite as bullish. Am I just reading too much into that?

I think what we're saying, Tom, is that we've got -- as we move forward, the fourth quarter has always been a quarter that's a little bit unpredictable. And what we're seeing is all positive at this point in time.

When we get back into later in the quarter, is this trend going to continue? I don't know. We're comfortable with the guidance that we've got out there at this point in time.

Okay, that's fair. I just wanted to ask that question, so, thank you.

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

Sure. Okay, thank you. And Jim, you got anything you want to say?

No, just like Henry -- like included in the earnings release, you know it -- I think, based on the trends that we've seen recently and that stability in both the pricing and the volumes on a sequential basis, I think we're cautiously optimistic looking out through the fourth quarter into 2010.

Jim or Pat, got anything? No?

All right. Well, I want to thank you for dialing in, and I look forward to talking to you on November 30 for our 2009 fourth quarter, mid-quarter update call. Thanks and have a great afternoon and rest of the evening. Thanks. Bye.

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