Oct 24, 2013
Executives
Henry H. Gerkens - Chairman, Chief Executive Officer, President, Member of Strategic Planning Committee and Member of Safety & Risk Committee Pat O'Malley - President-Landstar Carrier Group Joseph J.
Beacom - Chief Safety & Operations Officer and Vice President James B. Gattoni - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Analysts
Jason H. Seidl - Cowen Securities LLC, Research Division Allison M.
Landry - Crédit Suisse AG, Research Division Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division Jack Atkins - Stephens Inc., Research Division Justin B.
Yagerman - Deutsche Bank AG, Research Division Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division Matthew S.
Brooklier - Longbow Research LLC Kelly A. Dougherty - Macquarie Research Daniel Hultberg - Oppenheimer & Co.
Inc., Research Division Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division Matthew Young - Morningstar Inc., Research Division John G.
Larkin - Stifel, Nicolaus & Co., Inc., Research Division
Operator
Good afternoon, and welcome to Landstar System, Inc.' s Third Quarter 2013 Earnings Release Conference Call.
[Operator Instructions] 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, Chairman, President and CEO; Jim Gattoni, Executive Vice President and CFO; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; and Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr.
Henry Gerkens. Sir, you may begin.
Henry H. Gerkens
Thanks, Brad, and good afternoon and welcome to the Landstar 2013 Third Quarter Earnings Conference Call. This conference call will be limited to no more than 1 hour.
[Operator Instructions] 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 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 2012 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. In our 2013 Third Quarter Mid-Quarter Update Call, I lowered Landstar's 2013 third quarter revenue and earnings forecast.
Actual 2013 third quarter revenue finished at approximately $681 million, slightly above the lower end of our revised range of revenue guidance. Although the revenue generated in the 2013 third quarter was within our estimated range, the revenue generated in the fiscal month of September 2013 was somewhat softer than we anticipated.
Diluted earnings per share for the 2013 third quarter came in at $0.64 per diluted share and was $0.03 below the lower end of our revised guidance. The primary reason for the earnings miss was due to an unanticipated increase in insurance and claims expense.
The high insurance and claims expense in the 2013 third quarter resulted primarily from unexpected adverse development in certain case reserves. In contrast, the 2012 third quarter insurance and claims expense benefited from favorable development of case reserves and was unusually low, making the comparisons between quarters very unusual.
We typically estimate insurance and claims expense to be approximately 3.3% of BCO revenue, which represents our trailing 5-year historical average. However, in the 2013 third quarter, insurance and claims expense was 3.9% of BCO revenue or $13.4 million, whereas insurance and claims expense, as a percent of BCO revenue in the 2012 third quarter, was 2.3% or $8 million.
As we move into the 2013 fourth quarter, we project insurance and claims expense to return to a more normalized run rate of approximately 3.3% of BCO revenue. As a result of increased insurance and claims expense in the 2013 third quarter over the 2012 third quarter of $5.4 million, operating income as a percent of gross profit in the 2013 third quarter was 44% compared to 48% in the 2012 third quarter.
Jim will talk more about insurance and claims expense in his financial review a bit later. As I said, consolidated revenue in the 2013 third quarter was approximately $681 million versus approximately $717 million in the 2012 third quarter.
Total truck transportation revenue declined approximately 5% in the 2013 third quarter versus the 2012 third quarter and represented approximately 92% of consolidated revenue in the 2013 third quarter versus 93% in the 2012 third quarter. Revenue hauled by BCOs represented approximately 50% of total revenue in both the 2013 and 2012 third quarters, while total brokerage revenue was approximately 42% of consolidated revenue in the 2013 third quarter versus 43% of consolidated revenue in the 2012 third quarter.
From a load volume standpoint, total truck transportation loads hauled in the 2013 third quarter declined approximately 4% versus the 2012 third quarter, and revenue per load decreased approximately 1%. Collectively, revenue generated from all other sources decreased only slightly in the 2013 third quarter versus the 2012 third quarter.
From a new agent revenue standpoint, revenue generated from all new agent locations added over the past year amounted to approximately $17.3 million in the 2013 third quarter. Year-to-date, through the third quarter, we have added $56 million in new agent revenue.
Although we are still not at our historical run rate, new agent revenue has improved over the 2013 first and second quarter amounts. And more importantly, I expect to see continued increased new agent revenue as we move into the fourth quarter and into 2014.
Pat will expand on our new agent revenue outlook and our overall revenue shortly. Landstar again increased its available capacity providers.
Landstar's total available truck capacity providers was over 40,000 providers at the end of the 2013 third quarter. Joe will talk more about our capacity, in addition to other operating items in a bit.
I'm now going to turn the call over to Pat O'Malley, Joe Beacom and Jim Gattoni. Pat?
Pat O'Malley
Thank you, Henry. As noted by Henry, the 2013 third quarter revenue was approximately $681 million compared to the 2012 third quarter of approximately $717 million.
The top 10 revenue accounts from the third quarter 2012 declined over $40 million in the third quarter of 2013. This represented more than the entirety of the revenue shortfall in the quarter of $36.6 million.
In 2012, this small group of accounts represent an 18.6% of revenue in the quarter versus 13.7% in the 2013 third quarter. While 2 of the accounts in this segment are predominantly platformed with an emphasis in heavy/specialized transportation, the majority of the others experienced lower demand for overflow shipments due to softness in their respective industries.
What is important to note, the revenue decline in this segment of accounts is very unusual and with the exception of 1 customer, who assumed the transportation management function that was previously performed by a Landstar agent, is the result of the soft demand in these industries rather than lost market share. While transportation demand for core industrials in the United States governments remains soft, we have seen some minor improvement in business-related to alternative energy.
We continue to receive bid opportunities for energy projects and remain cautiously optimistic on the revenue potential in this segment for the balance of the year and into 2014. In spite of this minor pickup in demand, pricing in the heavy/specialized segment remains well below the previous year.
As we had mentioned, the barriers to entry into the heavy/specialized segment are significant. Cost of equipment, operator qualification and operational knowledge conspire the limit to competition.
As a reminder, approximately 37% of Landstar's truck transportation revenue is generated using unsided and platform equipment. Account and industry diversification are natural given the Landstar business model.
We are encouraged by the market share gains in the secondary and tertiary accounts served by our agents and should benefit as any economic recovery will positively impact transportation and the industrial base. As for new agent revenue.
Henry talked about our new agent revenue performance in the quarter. The revenue from new agents represented 2.6% of the total revenue.
As a percent of revenue, this is the best quarter in 2013 and closer to our historic average of 3% to 6%. As a reminder, a new agent in the 2013 third quarter represents an agent who had contracted with Landstar after July 1, 2012.
Revenue from this segment of the business increased 16% compared to the second quarter and is up 41% from the low watermark in the fourth quarter of 2012. This improvement in new agent revenue is a direct reflection of the quality and availability of new candidates, and our pipeline remains well-seated.
In addition, the number of new agents added in the third quarter of 2013 was higher than the same period in 2012. We continue to believe that challenges for small, independent brokers are many and difficult to solve without support.
Whether it's access to capital, cash flow, tight capacity or inferior systems, this segment of the industry is fertile ground to recruit productive new agents. We are confident that our recruiting strategies, business environment and systems will help us maintain momentum in adding productive new agents through the balance of the year.
Joe?
Joseph J. Beacom
Thanks, Pat. The environment for owner-operators and small fleets have been and remain as challenging through the softness of the freight environment.
This softness in general puts pressure on pricing, yet cost of truck operations, fuel tires, maintenance, et cetera, remains relatively high. We are seeing balance demand for dry van capacity and softness in demand for flatbed capacity.
Based upon the demand, pricing for dry van services is stable, while pricing is soft and somewhat volatile among the flatbed service offerings. BCO load volume in the 2013 third quarter was 1.1% lower than the 2012 third quarter, an improvement from the 2013 first quarter and second quarter, which were 5.7% and 5.3% lower than the prior-year quarters, respectively.
This progressive load volume improvement is attributed to the increase in spot market loading opportunities attractive to our BCOs. Broker carrier load volume in the 2013 third quarter was 7.5% lower than the 2012 third quarter, deteriorating from the 2013 first and second quarter, which were 3.8% higher and 4.4% lower than the prior-year quarters, respectively.
This load volume decline is attributed to several customers whose shipments were transported predominantly using broker carrier capacity. In the third quarter, Landstar was able to grow BCO account, grow improved broker carrier count, as well as active broker carrier account, achieving a total truck capacity provider network in excess of 40,000 providers.
The company's improved truck capacity provider network at the end of the third quarter exceeded the prior-year quarter by 2,341 truck capacity providers and exceeded the 2013 second quarter by 256. The number of active broker carriers, active, meaning that the carrier had hold a minimum of 1 load in the last 6 months, exceeded prior year by 697 carriers and exceeded the second quarter by 327.
Interest in Landstar from owner-operators considering BCO status remained strong based upon telephone volume into our recruiting personnel, visits to our recruiting website, lease2landstar.com, and the work history application volume that flows from those 2 activities. In general, we see the BCO recruiting outlook as challenging as owner-operators look for stability and shelter from a tough environment.
Annualized 2013 BCO turnover is less than 30%, a very respectable outcome, considering the economic environment and speaks to the strong retention programs in place. As demonstrated by the record number of approved and active broker carriers in the Landstar network, we continue to make progress building relationships with carriers, who see the opportunity to grow their business with Landstar.
Many agents have personnel dedicated to communicating the opportunities that exist within their agency to carriers, while corporately, Landstar has carrier relationship staff selling the opportunities that exist across the organization. The foundation for further growth is in finding win-win relationships with quality carriers.
Given the adhoc and unplanned nature of much of Landstar's freight mix, the size and scope of the network of capacity providers is very important in sourcing capacities across a wide range of service offerings, often within a short window of time. Upon release of a smartphone app to carriers in the third quarter, roughly 1,000 carriers have downloaded the app within the first several weeks, allowing them to find loads and provide status reporting.
Where customer freight patterns are more predictable, or freights lanes are being managed by Landstar agents, loads are compared to a database of carrier operational profiles. These profiles identify both carrier capabilities, van flat, heavy haul, et cetera and their freight needs, the objective being to determine what imbalances or inefficiencies the carrier may have that Landstar's current or future freight mix can resolve.
Whether a single load or multiple lanes, capacity relationships drive capacity growth and allow for improved account penetration as opportunities present themselves. We continue to see customers seeking reliable solutions that take into consideration a means to manage carrier selection, in-transit freight visibility and meet several service requirements.
The standards and methodology Landstar deploys to ensure the quality of capacity made available to our customers, we believe, is a competitive advantage. Landstar has proven consistently that the model is appealing to third-party capacity in any economic environment.
There's the volume and quality of freight, the freedom they have to operate their business, timely payment for services and their ability to benefit from meaningful discounts on tires, fuel and equipment. Turning to safety performance.
2012 was one of the safest years in Landstar history. Thus throughout 2013, replicating the quarter results is difficult.
DOT crash frequency in the third quarter of 2013 was a respectable 0.43 per million miles traveled, improving from the 0.47 in the 2013 second quarter, yet higher than the very low 0.41 per million miles traveled in the third quarter of 2012. Severity of accidents occurring in the third quarter of 2013 compared to the third quarter of 2012 increased slightly.
However, insurance costs in the third quarter of 2013 compared to the third quarter of 2012 were significantly higher, primarily due to unfavorable development across multiple prior-period or prior-year accident claims, as well as favorable development experienced in the 2012 third quarter. We continue to have strong participation and commitment around the company's safety programs from agents, BCOs and employees.
The company continues on pace with the implementation of its electronic logging device initiative, with approximately 30% of the BCO fleet, equipped with ELDs, and has seen the varying improvement and at CSA hours of service basic scores since its inception in September of 2012. Each of the 7 CSA basic scores for each Landstar carrier is below the threshold established by FMCSA.
As customers continue to evaluate capacity providers, we believe this level of safety and compliance performance is a competitive advantage. And looking at the CSA performance of both large national carriers and regional or smaller niche carriers, we find our performance compares very favorably.
When looking specifically at other owner-operator base fleets, we find our CSA performance compares even more favorably. Consistent with our strong safety and compliance culture, we believe we have made the long and difficult transition to the regulatory environment brought about with CSA over the last few years.
Decisions on high prepared and managed within the new regulatory environment are in place. And in reviewing the CSA performance of specifically our owner-operator base peers, it would appear we are ahead of the curve, which we see as a long-term benefit in attracting owner-operator capacity.
We currently see favorable reaction from customers, who place a priority on safety and compliance performance, and believe this will be additive in light of the additional regulation aimed at motor carriers, freight brokers and forwarders, which are on the horizon. Jim?
James B. Gattoni
Thanks, Joe. We've already covered certain information regarding the 2013 third quarter.
I'll cover various other financial information included in our third quarter release. Gross profit representing revenue, less the cost of purchase transportation and commissions to agents, was $108.9 million or 16% of revenue in the 2013 third quarter compared to $113 million or 15.8% of revenue in the 2012 third quarter.
The decrease in gross profit was generally due to lower revenue hauled on unsided platform equipment in the 2013 third quarter compared to the 2012 third quarter. The cost of purchased transportation was 76.1% of revenue in the 2013 third quarter compared to 76.4% in the 2012 third quarter.
Revenue contributed by truck brokerage carriers, which had the higher rate of purchased transportation, was 42% of revenue in the 2013 third quarter and 43% of revenue in the 2012 third quarter. The rate of purchased transportation paid to truck brokerage carriers in the 2013 third quarter was 30 basis points lower than the rate paid in the 2012 third quarter.
Commissions to agents was 7.9% of revenue in the 2013 third quarter compared to 7.8% of revenue in the 2012 third quarter. The increase in the rate of commission paid to agents was primarily due to the increase in net revenue margin, representing revenue less the cost of purchased transportation, divided by revenue, on truck brokerage, rail, air and ocean revenue during the 2013 third quarter.
Other operating costs were 5.5% of gross profit in the 2013 quarter compared to 5.7% in the 2012 quarter. This decrease was primarily due to lower maintenance costs on company-owned trailing equipment compared to the 2012 third quarter, as we replaced older trailing equipment with new equipment.
Insurance and claims costs were 12.3% of gross profit in the 2013 quarter compared to 7.1% in the 2012 quarter. The increase in insurance and claims as a percent of gross profit was primarily attributable to unfavorable development of prior-year claims of $3.6 million in the 2013 third quarter compared to a favorable development of prior-year claims in the 2012 third quarter of $1.6 million.
Also, insurance and claims expense was 3.9% of BCO revenue in the 2013 third quarter compared to a low of 2.3% at 2012 third quarter. Average insurance and claims expense, as a percent of BCO revenue of the previous 5 years, was 3.3%.
Selling, general and administrative costs were 31.4% of gross profit in the 2013 third quarter and 33.2% of gross profit in 2012 third quarter. The decrease in selling, general and administrative costs as a percent of gross profit was primarily attributable to a decrease provision for bonuses under the company's incentive compensation program in the 2013 third quarter compared to the 2012 third quarter, as a company did not achieve target operating results in the 2013 third quarter.
Depreciation and amortization was 7.2% of gross profit in the 2013 third quarter compared to 6.3% in the 2012 third quarter. This increase was due to the effect of lower gross profit in the 2013 third quarter and increased appreciation of trailing equipment, as we replaced older fully depreciated equipment with new equipment.
Investment income was $366,000 in the 2013 third quarter compared to $393,000 in the 2012 period. The effects of income tax rate was 37.7% of 2013 third quarter compared to 38.2% in the 2012 third quarter.
Looking at our balance sheet, we ended the quarter with cash and short-term investments of $132 million. 2013 third quarter year-to-date cash flow from operations was $132 million.
Cash capital expenditures was $4.9 million in the year-to-date period ended September 20, 2013. Trailing 12-month return on average shareholders’ equity was 31% and trailing 12-month return on invested capital, representing net income divided by the sum of average equity plus average, was 24%.
On September 20, 2013, shareholders' equity represent 78% of total capitalization. To you, Henry.
Henry H. Gerkens
Thanks, Jim, Pat and Joe. As stated in this morning's press release, I don't see any indication that U.S.
industrial output will significantly improve in the near term. Nor do I see any near-term significant improvement in the overall U.S.
economic condition. At this point, my best guess is that economic conditions will improve but only at a very, very, very slow pace.
In my opinion, there remains much economic uncertainty. Based on the economic uncertainty and the facts that the fourth quarter of any given year has been the most difficult quarter to forecast, our estimated range of fourth quarter 2013 revenue is a very wide range from a low of $650 million to a high of $700 million.
Based upon the above revenue range and assuming insurance and claims expense as a percentage of BCO revenue is at a level consistent with our trailing 5-year historical average, which I referred to as a normalized rate, I would anticipate diluted earnings per share for the 2013 fourth quarter to be in the range of $0.62 to $0.70 per diluted share. It should be noted that the 2012 fourth quarter diluted earnings per share amount of $0.73, included a tax benefit of $0.08 per diluted share.
No such tax benefit is included in the 2013 fourth quarter range of diluted earnings per share estimates, nor, as I stated in this morning's press release, does the range of fourth quarter EPS estimates include any effect to the impact of any potential acquisition or divestiture that may become or may be available to the company. With that, I will open it up for questions.
Operator
[Operator Instructions] And our first question will come from Jason Seidl of Cowen.
Jason H. Seidl - Cowen Securities LLC, Research Division
A couple of quick questions. Henry, you mentioned, I think, very specifically that it doesn't include any potential transactions.
Are we to read into that the transaction market is heating up for you guys?
Henry H. Gerkens
No comment on any of that statement whatsoever.
Jason H. Seidl - Cowen Securities LLC, Research Division
Okay. That's comment enough for me.
When I look at sort of the overall market, can you talk a little bit more about your dry van exposure? You said that, I believe, and just to make sure I'm not misquoting here, that it's sort of at capacity right now.
So have you seen a normalized seasonal move for this time of the year?
Henry H. Gerkens
Anyone here?
Joseph J. Beacom
I think you're referring to my comments. Jason, this is Joe.
I don't think we're at capacity on the dry van. Dry van capacity is a little more stable.
Pricing is a little bit more stable, as compared to the open side of the equipment. That was really the intent of my comment.
Jason H. Seidl - Cowen Securities LLC, Research Division
Okay. And the weakness is still persisting on the platform side of the business?
Joseph J. Beacom
Yes, it is.
Jason H. Seidl - Cowen Securities LLC, Research Division
Okay. On the brokerage front, how are you guys, in terms of finding it -- in paying existing carriers, are their rates still staying down?
Or how are you looking at your gross margins in that business right now?
James B. Gattoni
Well, Jason, as I said, this is Jim, we were 30 basis points improved over the prior year. Our rate of purchase transportation that we paid to the broker carriers, and so they're basically holding.
I mean, their rates are holding. It's what we're paying.
Jason H. Seidl - Cowen Securities LLC, Research Division
And there has been a change in that for 4Q, thus far?
James B. Gattoni
Not in a week or 2 that we anticipate, that we expect.
Operator
Your next question will come from Allison Landry of Credit Suisse.
Allison M. Landry - Crédit Suisse AG, Research Division
Following up on Jason's question on brokerage, maybe from a longer-term perspective, we've seen some pretty significant competition. There is a lot of players that are aggressively going after market share and not really focused on price.
How do you see that playing out maybe in the next couple years? And does that ultimately cause sort of a downdraft in net revenue margins for the overall industry?
Henry H. Gerkens
I think the more -- this is Henry. The more people out there, trying to compete for the same amount of trucks that are out there, I think that clearly will drive the price of the truck, if you will, higher.
I mean, that's just logical. The real question is: Is demand going to pick up as far as services?
In which case, the customer is going to be willing to pay that additional price, but logic would tell you that if more people are going to go into brokerage, and therefore, your margin should be squeezed. And I would think that with everybody jumping in brokerage, that some of the other players will not want to play in that margin squeeze game i.e., I believe while the company iron guys got into that, because of that.
They saw what happened with CH, for example, back in 2009, expanding the margins, but now everything is getting sort of tight with that, with everybody getting into that. I don't know -- we'll see how that plays out.
I think really the issue is when is the economy going to come back. But an answer to your question, yes, the more players that are after that one single truck, that's going -- that truck's going to look for the best price.
Allison M. Landry - Crédit Suisse AG, Research Division
Okay. And then, that was really helpful.
And as a follow-up question, you did mention that there was some slowdown from July and August into September. I was wondering if you could maybe just give a little bit more color on -- if there's any specific industries or end markets that were particularly weak.
Or any lanes or is there anything like that?
Henry H. Gerkens
Allison, when you go back to my third quarter, mid-quarter update, I think I have given a run-through as far as where we were June over June, prior year -- current year over prior year, then July over July, and August over August. And you saw our gradual improvement as far -- when I say improvement, I don't know -- recall the exact numbers, but it was like minus 6, minus 5, minus 3.
And we anticipate it or whatever that was -- we anticipated an improving trend, if you will, into September. On the other hand, the trend in September, basically, that didn't improve.
And therefore, that's why we finished at the lower end of our range. But the story is basically the same.
It really has been the softness in our industrial-based flatbed business that has really been the driver of that. And it just did not pick up as we thought the trend was going to indicate, coming out of -- or into September.
Allison M. Landry - Crédit Suisse AG, Research Division
Okay. And your expectations, was that based off of what your customers were telling you?
And it just turned out differently?
Henry H. Gerkens
It was really based off of what we saw the trend becoming. We were predominantly spot market, and we just -- we believe that, that's what the trend was going to be.
Some of the stuff that we anticipated for some of the cost was, yes, did not materialize.
Operator
Your next question will come from Tom Wadewitz with JPMorgan.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Henry. So maybe I could just follow up on the last question a little bit more.
So it's kind of continuing to be weakness in industrial and flatbed. Can you give a little bit more perspective?
What's -- I mean, is there some that's construction-related? Is it just -- they are like mining equipment-related -- kind of we -- I guess, heard on the CAT yesterday or how -- can you give a more flavor on what the verticals are there that are driving that weakness in flatbed and industrial?
Henry H. Gerkens
I think it really is the heavy/specialized piece of our flatbed business. The customer base that we cited before.
I mean, CAT, obviously, is a customer of ours. You've got Deere.
You've got GE, which didn't materialize as we thought it would be. But Pat, do you want to add anything else to that?
Pat O'Malley
No, I think if we go back to some of the comments about our top 10 accounts. Some of the top 10 accounts, including the one that in-sourced that business that we previously had.
That was kind of a dramatic shift in September as well. So there were a couple of large accounts that had an impact as well, in addition to the win heavy haul specialized business that we have.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Okay. And then I guess for the second question, your language in the press release, Henry, was a bit unusual in terms of just highlighting that, hey, you might do an acquisition and your guidance is excluding any impact of acquisitions.
So it's -- I guess, it draws a little bit of attention. Maybe can you talk about what type of acquisitions would be typical for you to consider?
Henry H. Gerkens
I don't think, as I said, in response to Jason's first question, I'm not going to comment on that comment whatsoever.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Right. But if you step back and say, okay, I'm not going to tell you if I'm doing one tomorrow or next week or whatever.
But what kind of historically are the types of companies that you think the...
Henry H. Gerkens
I'm not going to comment on that comment at all.
Operator
Our next question is from Jack Atkins of Stephens.
Jack Atkins - Stephens Inc., Research Division
I guess, first of all, if we could talk about just back to the month-to-month trends, could you maybe give us some hard numbers on what the loads and revenue per load was like in the month of September and also what you've seen month-to-date in October?
Henry H. Gerkens
You've got those?
James B. Gattoni
Let me take you back to the -- we'll just do load count first and the trend that we've seen since June and why we thought we saw favorable trends. Load count June over prior year June was minus 6%, in July was minus 4% and August minus 3% and in September, it jumped back to 5% over prior year September.
And then from a revenue per load, similar, you had June minus 3% on the revenue per load. Then June -- July, with the minus 2%.
August was flat and then we jump back up to negative 2% in September.
Henry H. Gerkens
So Jack, you could tell, I mean, the trend was positive. We thought things were turning.
It actually -- it went a little bit more unfavorable. That's why we were at the lower end of that range.
And as far as your question as far as what we're seeing now is quite frankly, our load volumes, truck load volume is for the first time, I've seen in a long time, is actually positive month-over-month. But on the other hand, revenue per load is down more than we would have anticipated.
And again, that has to do with some of the mix. So it gets back to my wide range of fourth quarter revenue, which is it's unpredictable, the economy is uncertain.
We've got some good things going right now. But I want to lay a wide range out there because of that uncertainty.
Jack Atkins - Stephens Inc., Research Division
Understood. And then I guess for my second question, could you maybe quantify, to some degree, the one customer that you lost in the quarter, of that top 10 customer group, and in-sourced that activity.
Could you maybe put some brackets around how big of a customer that has been on an annual basis for us, just so we kind of can understand that's going to be difficult to comp as you move to the next couple of quarters?
Henry H. Gerkens
I think that was primarily an LTL customer. So it really wasn't our major -- the bulk of that was LTL but Jim's got that.
James B. Gattoni
I want to say it's about $6 million to $8 million a quarter when he was running -- when they're running at the high.
Jack Atkins - Stephens Inc., Research Division
Okay. When did that begin to phase out, then?
So it was -- was it in the third quarter?
James B. Gattoni
About May, mid-second.
Operator
Our next question comes from Justin Yagerman of Deutsche Bank.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Henry, I get where you're coming from in terms of your exposure to the Heavy/Specialized and we did hear from CAT, but I'm trying to reconcile some of the weakness that you guys are talking about with what we're seeing in the LTL numbers and in ISM. And I mean is there anything that you've got out there that would make you feel like -- I mean it didn't sound like it, but that would make you feel like anything is changing on the margin?
Henry H. Gerkens
At this point, Justin, again, I thought things were moving in a positive direction in our mid-quarter update. And we -- it actually went back 2 steps backward.
I can say the same thing now as we enter into October, I haven't seen a positive load count for almost all this year. But right now, through 3.5 weeks, our load count is slightly positive despite some of the other stuff.
But revenue per load is a little bit down. So I'm just -- I got to tell you, I'm just leery about making a bullish-type forecast because I think there's so much uncertainty out there.
And I've seen the fourth quarter going a lot of different directions. I saw September go in a different direction than we thought.
So I don't think it would be very prudent of me to -- I think it's prudent to give a very wide range and that's where we see it right now.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Yes, I guess and I think I know what you're going to say to this, but even if I take the high end of your range for the fourth quarter and I look at what you did in the third quarter and I try to extrapolate off of seasonal numbers, it obviously gives me a different environment in the back half of the year than, I think, where street numbers are for the full year this year. And then thinking about growth off of next year, it's pretty tough to bridge where you are on an '14 basis, given where consensus is right now.
How do you feel about numbers as you look out over the next 12 to 18 months and think about where the street is on a today basis? I mean, it sounds like the numbers are tough to get to, but I'm just trying to get an idea of how you guys think about the reality of where you are?
Henry H. Gerkens
Well, couple of things. One, I do think revenue comps become a lot easier as we move into 2014 but that's little predicated also upon some sort of economy that makes some sense.
And I'm not so sure anybody can make any sense out of what's happening right now. But clearly, the comps are going to be a lot easier as we move into the fourth quarter and into the 2014.
As far as our EPS number, for example, for the fourth quarter, I have no idea what -- when we give ranges and we give estimates and I had, for example, when I give the $0.67 to $0.70, somebody revised the estimate and went to $0.71. So sometimes people don't listen to what we are saying.
And then, when you think about the fourth quarter I try to layout that last year, we had an $0.08 pickup due to really one-time type favorable tax adjustments. So if you adjust that down, you're talking $0.65 last year and I've given a range of $0.62 to $0.70 despite lower revenue.
So there's a lot of ins and outs. So it's hard for me to comment on how people factor their models and whatnot.
As far as Landstar is concerned, I think we've got it going as far as new agent revenue, the fact that our comps are better, I -- clearly, I think, we've turned the corner on new agent revenue. So I think you'll start to see that move in a northerly direction.
At some point in time, the industrial production piece is going to pick up. I'm not ready to call that happening yet, though.
That's my point.
Justin B. Yagerman - Deutsche Bank AG, Research Division
No, that's very fair. One last one, hours of service and government shut down.
Any impact in terms of what you guys are seeing in your business from either of those events?
Joseph J. Beacom
Justin, this is Joe. We continue to see really no material impact from hours of service.
There is some grumbling from the BCOs about understanding it and why do we have to do this and why do we have to do that. But short of some of grumbling from a productivity standpoint, we haven't really seen anything yet.
Justin B. Yagerman - Deutsche Bank AG, Research Division
And government shutdown in September, October?
Pat O'Malley
Justin, there was some -- this is Pat, there was some bases that were closed but due to sequestration and other things in Washington, the government business hadn't been that robust. So it was -- it wasn't all that meaningful there was some bases closed, but it didn't have a dramatic impact on Landstar.
Operator
Your next question is from Todd Fowler, KeyBanc Capital Markets.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
I guess, to Pat's comments about the performance of the top 10 accounts here in the quarter. I guess if you exclude the customer that you lost, was the performance among those accounts, was that worse than where it was in the second quarter?
And I'm also assuming that there's probably a higher revenue per load, so kind of a negative mix impact, is that the right way to think about what's going on with those accounts as well?
Pat O'Malley
Todd, this is Pat. Yes, the revenue deterioration in that group of accounts was worse in the third quarter than it was in the second quarter.
Year-over-year, the decline was greater in the third quarter over the third quarter 2012 and the second quarter of 2013 versus the second quarter of 2012.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay, that makes sense, Pat. And then as far as just kind of the mix, I mean is it right to think about that these accounts would have a higher revenue per load, given the nature of what they're moving and so the fact that they're down as well, there's kind of a negative mix impact to your business as well?
Pat O'Malley
Some of them would. That's correct, yes.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay. And the second one I had, Joe, you had made some comments about what was going on, the difference between the BCO load count being down 1% and the truck brokerage load count being down 7%.
I wasn't quite sure I understood the difference between the volume changes between those 2 subsegments in the quarter and kind of what the drivers were, why the brokerage carriers’ loads were down more than the BCO loads?
Joseph J. Beacom
The reason for that is some of the accounts that Pat was just referring to were predominantly accounts where broker carriers were used on those accounts to all the loads. So when those accounts were down and then you saw a larger decline in the broker carriers load count than you would at BCO load count so the accounts that were down being in the top 10 were predominantly accounts that utilizes broker carriers versus BCOs.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay. So there's nothing to really read into something different between, something different going on with the BCOs versus the broker carrier capacity.
It's really more of a function of what's going on with the specific accounts that they're hauling for?
Joseph J. Beacom
Absolutely correct.
Operator
Your next question is from Matt Brooklier of Longbow Research.
Matthew S. Brooklier - Longbow Research LLC
So just kind of a follow-up question. The account that took some of its business, I think it was an LTL accounts, in-house, was that predominantly within your -- within the truck brokerage volume?
Henry H. Gerkens
Correct.
Joseph J. Beacom
That is correct.
Matthew S. Brooklier - Longbow Research LLC
Okay. So that's the discrepancy we're seeing mostly the 1% and the 7% down year-over-year, that was the in-sourcing of that particular account or accounts?
Henry H. Gerkens
That is one of the accounts, correct.
Matthew S. Brooklier - Longbow Research LLC
Okay, that's helpful. And then if I look at your BCO count, you did make some progress in terms of adding to it sequentially, it’s still down on a year-over-year basis.
You talked earlier this year in terms of kind of revamping and re-energizing the overall BCO kind of recruitment effort. I'm just curious to hear if there's anything else you can do further to attempt to attract more capacity.
Do you even need to, given kind of where volumes are trending currently? Just curious to hear if you had incremental comments on kind of BCOs and where we're headed from here.
Joseph J. Beacom
Sure, Matt. This is Joe.
Last year, really, I think it was last year, early second quarter, we really tried to revamp and we put in some new initiatives and tried to re-instill the recruiting effort. It worked pretty well through the second and third quarter of last year.
We saw some decline in the fourth quarter as this happens from time-to-time and it kind of coincided with the on-board recorder initiative. And to your point, we have seen some movement this year, throughout the year, and it's been -- but it's been slow, right?
So we have not seen the quarter-over-quarter growth as we have in the past. I think it's a function of the environment, to a great degree.
And I think as that improves, hopefully, we'll see our BCO account grow. I don't think it's a function of effort.
I think it's a function of availability and just the overall kind of environment right now.
Henry H. Gerkens
And I would think, Joe, also the fact that your point as far as the rollout of the electronic on-board recorders, or ELDs, I think is now taken hold and now everybody knows that that's a requirement. And therefore, it's a little bit more accepted and I think that's why you're starting to see that move in that direction also.
Joseph J. Beacom
Yes, I would agree, that's very true. And we've seen some of our -- more of our peers also go down this path of ELDs.
So I think it becomes more of -- more moving towards the norm in the industry. I think we'll continue to kind of see those guys come back.
I think there's a lot to believe this is the place to be, but maybe they don't want to do that right now. I think that changes over time.
Matthew S. Brooklier - Longbow Research LLC
Okay. And I believe you do offer your BCOs some group discounts in terms of, like, fuel and also, I believe, on the tire side.
Is there anything else you would consider in terms of, I guess, potentially extending some financing to your BCOs in order to attract more potential capacity, i.e., would you ever think about trying to help BCOs get seated and potentially help them, I guess, actually lease the tractor at some point? Or is that something that you wouldn't want to do?
Joseph J. Beacom
We won't -- we're not going to do a lease purchase program or at least we're not looking at doing a lease purchase program type of thing where we own the truck. That isn't something that we've decided we're going to do.
We do provide financial assistance in smaller ways, though, with repairs and access to trailers and things like that. But to actually buy the tractor and lease it back, that isn't anything that is on our radar screen right now.
Henry H. Gerkens
And that's not our business model.
Matthew S. Brooklier - Longbow Research LLC
Right. I know historically it hasn't.
I was just curious to see if maybe potentially the landscape has changed but it doesn't sound like your thoughts on that particular topic have changed, so okay. I appreciate the color.
Operator
Your next question comes from Kelly Dougherty of Macquarie.
Kelly A. Dougherty - Macquarie Research
I just wanted to see if we could talk about operating margins a little. I know you had a kind of a longer-term goal to get to 50%.
And just wondering, is it a demand and pricing needs to improve or are there things within your own control that we can see over the next few quarters that should be reflected in improved operating margins?
Henry H. Gerkens
Yes, look, I think Kelly, I think at 44%, which is obviously, lower than our 48% we had in the third quarter of last year, but 44% when you think about where we came from 3 or 4 years ago, is pretty high. So 1 quarter doesn't make anything and that projection was over a 5-year period and I think that clearly is on our radar screen through synergy and other things that we're going to do.
It really boils down to having a more normalized safety performance. And again, 1 quarter on a blip doesn't make anything.
But really getting those new agents on board, bringing our BCOs on board, making sure that I can grow that gross profit because everything else below that line, the story hasn't changed. The only volatile number, as you've seen in the third quarter here is the insurance number and we continue to drive safety.
But everything else, I think, is driven to the point where we gain productivity and we gain efficiencies through our system and our people and that should drive that 50% over a longer-term period. So the fact that even though we were at 44%, which appears that we made some negative progress, it really was a blip on the radar screen from the safety standpoint.
So I'm not -- that goal is still there, and we're going to get there the same way we had said we're going to get there.
Kelly A. Dougherty - Macquarie Research
Just a quick follow-up on that 3.3% number. Has the business not changed much in -- it seems that has changed in the last 5 years.
So what gives you comfort that, that 3.3% number over the last 5 years is still a good one to use going forward?
Henry H. Gerkens
Well, it is, and Jim you can comment, but it is our 5-year trailing average. I mean, I think in the past, we've said, usually, it can be anywhere from 3-point -- or 2.5% to 3.5%.
But when you do a 5-year trailing average, it averages about 3.3%. Now obviously, you can have an accident in any given quarter that it is going to make that number in the quarter look higher.
Conversely, you can have a super safe quarter and it would be lower or you could have what we had this particular quarter, we had some case reserves that new facts came about and therefore, we booked the cases up based on where we saw those cases ultimately going to come out. But that's the historical average that we would basically go.
Jim, you want to comment on any of that?
James B. Gattoni
Yes, that's actually a very good question. Because when you think of the claims that cost us.
It's the one when generally is bodily injury. And bodily injury cost, generally, rise with medical inflation and everybody knows what medical inflation does around the country.
So it's actually -- it kind of right on point. But as you're growing -- if you look at revenue per load based on where the BCOs for the last 5, 6, 7 years, you see growth in revenue per load and growth in your cost per claim, so they kind of balance out.
So we're kind of still comfortable with where that 3.3% is. And we'll adjust it accordingly, as we look at the history and what we think is, maybe anything that might change in the risk profile in the future.
Kelly A. Dougherty - Macquarie Research
So if you look at it for shorter time periods, it's still kind of in that 3.3% range as well?
James B. Gattoni
Yes.
Kelly A. Dougherty - Macquarie Research
Like if you look at it 2 years or something like that?
James B. Gattoni
Yes. Yes, we had 2 quarters this year, it was 3.9%.
But all of last year, it was 2.7%.
Kelly A. Dougherty - Macquarie Research
Okay, great. And then just a quick one.
Are there things that you can do actively to diversify your customer exposure so it’s less concentrated, maybe to some of these segments that have had a tough time in the past, or that really is just the nature of the business that you're working with? Like, can you recruit new agents that specifically look at different end markets or anything like that?
Pat O'Malley
Well, Kelly, this is Pat. As we've mentioned in the remarks, that top 10 accounts, there's some diversification in there, 2 of those top 10 accounts are Heavy/Specialized accounts, predominantly, okay?
And what we talked about is outside of that top 10 accounts, we've seen some very good growth in our secondary and tertiary markets. The Landstar model naturally diversifies itself by bringing on, as you mentioned, new agents who have expertise or accounts that we're currently not in.
So I think the diversification just takes place naturally. And again, in those top 10 accounts, some of that is Heavy/Specialized and that's -- a big part of that is pricing, but there is a mix of accounts in there as we've mentioned and absent some overflow business on those accounts because those industries are soft, it's impacted Landstar.
And as we've talked about several times now, the one account that went from having us to manage their transportation to in-sourcing it, that too had a significant impact in the quarter.
Kelly A. Dougherty - Macquarie Research
But machinery was something like 20%, I think, last quarter. Is that still that high of a number and is there anything you can do to kind of maybe work around?
I understand the customers maybe diversified but it seems like there's kind of clusters within certain segments? Or is that just really the nature of the business that you haul?
Henry H. Gerkens
I think it's a lot of the nature of the business we haul. You got to remember, we got 36%, 37% of our business is flat but we have the largest carrier there.
I mean, when you look at our customer base, I mean, it is extremely diversified customer base with nobody over 5% of our revenue. And as we are very big in the secondary and tertiary accounts, on the other hand, the U.S.
government, which is our #1 customer was down, for example, close to $10 million quarter-to-date. All right?
So I mean those things hurt and then when you couple it in with a couple of the other customers I gave you, in that top 10, that's where we've actually felt the decline. And as Pat try to -- or said, that other than that one, I mean, this is all a temporary because of the slowdown that they're experiencing.
So therefore, there is not a lot of that overflow stuff coming back to Landstar. On the other hand, we've picked up some accounts and market share gains from the lower end or lower tier, the secondary, tertiary accounts, which is really where we're good at and what we've always done well.
The other stuff's going to come back. So I think as much as I don't -- I love to say I'm more bullish in the back, you can't be because -- what's happening is the economy is such that it's unpredictable.
And when these accounts start to come back, which they will, and what we've built on our foundation basis, I think bodes very well for us for the future. But right now, it's kind of -- it's a cautious time, I think.
Operator
You're next question comes from Scott Schneeberger of Oppenheimer.
Daniel Hultberg - Oppenheimer & Co. Inc., Research Division
This is Daniel Hultberg filling in for Scott. Just a follow-up on the previous question here.
If we would see some continued softness in machinery going into 2014, can you just highlight a few of the end markets that you might see opportunities that can mitigate that?
Pat O'Malley
Scott, this is Pat, we believe, as we said in our comments that there are some opportunities in the alternative energy markets. We think that mining, ag, are going to kind of drag into next year.
But again, they were kind of down this year. So we think that, that energy market, whether it's alternative energy or energy in and of itself, we think those markets are going to be, perhaps, opportunities for Landstar next year.
Daniel Hultberg - Oppenheimer & Co. Inc., Research Division
Okay. And also if we see this environment continuing, can you just take us around the horn what flexibility you have on the cost side to improve margins next year?
Henry H. Gerkens
Well, I think, a couple of things. You take a look at our margins, I mean, the #1 thing you're going to look at is about 60% of our business is on a fixed gross margin business.
So I mean, yes -- if I don't have revenue, I don't have a substantial amount of the cost, all right? Everybody is always impacted by slowdowns but again, even though our revenue number was at the lower end, they were impacted by some adverse insurance development.
I mean, we still generated a lot of cash, and I think that's the Landstar business model, a variable cost model, I think, protects us in a lot of different ways. But obviously, with the lack of revenue, lack of -- it's going to impact us, but I don't think we would be hurt as a guy who has the asset that he's going to carry.
We're going to take 3 more callers because we are actually pushing 3:00. We'll take 3 more.
Operator
Your next question is from Anthony Gallo of Wells Fargo.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
Question about cross-selling activities. I know in the past, there was some efforts underway to try to stimulate organic growth within the existing agent network by either introducing transportation management services or facilitating cross-selling, say, TL with LTL.
Just maybe if you could give us an update on where that is and any catalyst you might have on the horizon.
Henry H. Gerkens
I think the best opportunity that Landstar has on a cross-sell, whether it be intermodal, air, ocean, supply chain or LTL is the latter, LTL, because that's truck. And I think we've seen more success with that in a shorter period of time than anything else.
That's where that success is going to come from.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
What do you think you need to do there? Do you already have the scale and the relationships or?
Henry H. Gerkens
I think that one works with the scale and the relationships because we have a -- we've got rates in place. Our agent base, which is predominantly truck, understands truck, all of those -- they're more comfortable selling that.
And as I said, I think, on the last couple of calls, that is where I think you're going to see some movement northward.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
So it's just time and execution?
Henry H. Gerkens
Yes.
Operator
Your next question comes from Matt Young of Morningstar.
Matthew Young - Morningstar Inc., Research Division
Just to follow up on the LTL question. I think it was about 3% trucking revenue in the quarter.
Where do you guys think that could shakeout over the long term? It sounds like it's pretty good opportunity.
Obviously, all of your TL clients, your specialized clients, do LTL, to some degree?
Joseph J. Beacom
Matthew, you're absolutely right. If you think about it, just about everyone of our shippers that we handle truckload business for is probably going to have LTL.
If you think about the LTL carriers, why is Landstar one of the preferred people to help sell their services because we're in accounts where they're never going to go to. We're in the secondary, tertiary accounts and so we're able to provide that service to those accounts and competitive pricing and provide tonnage to the LTL carriers.
It's a nice mix where we have leverage in relationships on the carrier side and we have leverage from relationships on the customer side, that's kind of a nice perfect storm, if you will, for Landstar.
Matthew Young - Morningstar Inc., Research Division
Do you think you guys can get that to 10% of trucking revenue at some point, or is that kind of high or it's just too soon to say at this point?
Henry H. Gerkens
I think it's too soon to say.
Matthew Young - Morningstar Inc., Research Division
And then I guess one last, have you had to invest in any new IT infrastructure or add headcounts to source LTL capacity? I'm assuming it's a little bit different than -- a little different dynamic than TL?
Henry H. Gerkens
Very minimal, very minimal. Obviously, headcount -- a couple of headcounts but very minimal.
Our field continues to work with the agents to sell that but not dramatic at all.
Operator
Your next question comes from John Larkin of Stifel.
John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division
In any event, anything happening in the legal world that would lead you to believe that adverse development is a trend that's developing where you could see a situation where maybe some under accruals have taken place on accidents that have taken place in prior periods? Is that just an odd event that happened here in the third quarter or is that something we might see more of?
Henry H. Gerkens
John, let me give you an example and I'm not going to mention specifics or what not but one of the things that developed on us in this particular -- at the end of September was the case that came about in the year 2000.
John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division
Okay. 13 years ago?
Henry H. Gerkens
Yes.
John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division
So is that settled?
Henry H. Gerkens
Well, no. So the society we live in is a litigious society and you just never know what's going to come out of the woodwork.
John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division
I get the picture. And then a final question here that may tie all of this together, at least hopefully, it seems to me that the company has gone through a couple of different eras, maybe 3 eras.
One was sort of the owner-operator agent build-out and the integration of the IU truckload companies into what we now know as Landstar. Then there was a great revolution that you had that, gee, because we can't recruit owner/operators, it doesn't mean we can't grow.
We can also broker some of this freight that drove growth for quite a long period of time, maybe close to 10 years really. And then there was sort of maybe a third era where there was diversification into TMS warehousing, freight forwarding.
And as you sort of just suggested in your answer to Anthony's question, that's been a little bit difficult, maybe with the exception of LTL, which is maybe more of a straightforward sell for your classic agents. Is it possible that we're in need of maybe a fourth era, of sort of a new approach in order to drive growth here over the next 10 years?
Or do you think that with all the elements you have in place currently, that once the economy normalizes, that you're going to be able to continue driving growth off of this platform?
Henry H. Gerkens
Very, very, good question, strategic in nature, obviously. And I think one of the things that we've tried to move around and think about what you said about what's driven, maybe, some of the growth off for the past 10 years, which is truck, brokerage, all right, which we didn't have a lot prior to into those other eras, that's why we like the LTL piece because that's still in its infancy, although, again, we sort of like brokes [ph].
We had a little bit of that but we never really put a full effort towards that. I think that is going to drive some things for us also.
I think the other solutions that we have will always be part of the Landstar suite of services. But again, given our business model, as far as an agent-based business, which is what we're going to stay and in and promote and continue to move in that direction, I think they're predominantly truck guys.
I mean, when we can pick off intermodal people or if we can pick off air, ocean, we would do that, but predominantly we're truck. So that third element or fourth element, as you want to call it, really, I think is the LTL piece because that is what our guys really understand.
And so that is where I think you're going to see a lot of growth. That's not to say, again, you got to look at, as you well know, that the truckload industry is dominated by a lot of still, lot of small mom-and-pop people.
And I can't think of a better home for agents and or capacity than Landstar. And Landstar has developed that scale to make all of those small business constituents more successful.
And I think that, again, will add to our growth. I think right now, the economy is where it is and it's uncertain right now.
But I think that, hopefully, will free up and I think that's going to drive in the long-term Landstar's future success. We just completed our 25th year or about to complete our 25th year of operation, and we are looking forward to the next 25 years because we think Landstar will reach new heights at that point.
With that, I think that's it. We ran a little bit over time.
We apologize for people we didn't get to. The -- we did go a little bit overboard.
I think the format having Pat and Joe participate in and giving a little bit more insight and color into Landstar and its operations. And what we're thinking, I think, is very helpful to everybody on the call.
So we appreciate your indulgence. And we look forward to talking to you next time on our mid-quarter update call for the fourth quarter.
Have a great afternoon.
Operator
Thank you for joining the conference call today. Have a good afternoon.
You may disconnect your lines at this time.