Landstar System - Q2 2013
July 25, 2013
Transcript
Operator (participant)
Good afternoon, and welcome to Landstar System, Inc.'s Second Quarter 2013 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, 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 Gerkens (Chairman, President and CEO)
Thanks, Dori, and good afternoon and welcome to the Landstar 2013 Second Quarter Earnings Conference Call. This conference call will be limited to no more than one hour. In addition, please limit your questions to no more than two questions each when the question-and-answer period begins. Before we begin, let me re-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 or forward-looking statements. During this conference call, I and the 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.
During our second quarter mid-quarter update call, I stated that I anticipated that, one, revenue for the 2013 second quarter would be in a range of $660 million-$700 million. That, two, our gross profit margin would be in a range of 16%-16.2%. That, three, our operating margin would be in a range of 44%-46%, and that, four, diluted earnings per share would be in a range of $0.63-$0.68 per diluted share. Actual 2013 second quarter revenue was $679 million. Our gross profit margin was 16.1%, our operating margin was 45.7%, and diluted earnings per share was $0.66 per diluted share, all approximately at the midpoints of the revised estimated ranges.
As I said in this morning's press release, despite the choppy and soft industrial and manufacturing environment, Landstar's variable cost operating model generated a very healthy 45.7% operating margin, thus again demonstrating the strength of Landstar's operating model. Consolidated revenue in the 2013 second quarter was approximately $679 million, down approximately 8% from the revenue generated in the 2012 second quarter. As was the case for the 2013 first quarter compared to the 2012 first quarter, the decrease was largely driven by decreased revenue in certain of Landstar's industrial-based accounts.
Additionally, as I anticipated and stated in a prior conference call, total revenue generated from new agent additions continued to be below our historical new agent revenue run rate of between 3% and 6% of revenue, and only represented 2.2% of total revenue in the 2013 second quarter, the same as in the 2013 first quarter. On the positive side of that number, however, the dollar amount of new agent revenue increased 10% over the dollar amount of new agent revenue in the 2013 first quarter. From a service offering standpoint, total revenue from truck transportation for the 2013 second quarter declined 8% from the 2012 second quarter. The decline was from an approximate 5% decrease in load volume and an approximate 3% decrease in revenue per load.
Total revenue generated through our unsided platform equipment service offering in the 2013 second quarter declined 12% compared to the 2012 second quarter, 5% due to lower load volume and 7% due to lower revenue per load. Total revenue generated through our van equipment service offering was 6% lower in the 2013 second quarter versus the 2012 second quarter, due primarily to a 5% decrease in load volume. Total revenue generated from rail intermodal service declined 1% in the 2013 second quarter over the 2012 second quarter, while total revenue generated through ocean cargo and air cargo providers increased 7% quarter-over-quarter.
As it relates to truck capacity, we ended the 2013 second quarter with a total truck capacity base of 39,948 carriers, compared to 36,293 at the end of the 2012 second quarter and 39,622 at the end of the fiscal 2013 first quarter. As an update, over 2,200 electronic onboard recorders have either been ordered or installed on our BCO capacity base. Before I turn it over to Jim for his financial review, Pat O'Malley and Joe Beacom are going to add a little more color to the second quarter performance from an operating standpoint. Pat?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Thank you, Henry, and good afternoon. Henry talked about the performance of our platform business. Transportation demand for core industrials around agriculture, forestry, and mining remain muted, while alternative energy projects have gained momentum. Several customers have presented bid opportunities for projects commencing later in the year and 2014. In spite of the anticipated pickup in demand, pricing in the heavy specialized segment remains below the previous year. As we've mentioned, the barriers to entry into the heavy specialized segment are significant. Cost of equipment, operator qualification, and operational knowledge conspire to limit competition. Currently, approximately 37% of Landstar's truck transportation revenue is generated using unsighted platform equipment. During the 2013 first quarter earnings call, we provided detail around our LTL initiative.
Although Landstar has historically participated to a small degree in the LTL market, beginning in August 2011, we increased our emphasis on this service offering by implementing an easy-to-use capacity procurement tool, established standard rates with LTL carriers, and worked with our agents to identify customer opportunities. Early in the 2013 second quarter, one of Landstar's customers decided to manage their transportation business in-house. Landstar had formerly managed the customer's domestic transportation. This action adversely affected our LTL business, and volumes decreased 2% quarter-over-quarter. We remain confident in our ability to grow this segment. We continue to add quality carriers to our base of capacity providers. More agents are selling this service, and the number of customers that request account-specific pricing is increasing.
As we mentioned, most of our sales staff and many agents have a background in LTL and are comfortable selling this product. From the perspective of the LTL carrier base, Landstar's business model, diverse agent population, and large customer base represents an attractive variable cost sales channel. In addition, virtually every existing Landstar truckload customer has some LTL business. This gives Landstar and our agents an additional revenue stream inside our existing account base. Our available load trends have been improving. In order to attract capacity and cover their shipments, Landstar agents typically use our proprietary load board to post their available freight. The underlying technology enables our agents and capacity providers to quickly identify those shipments that meet their approval, commit to the shipment, and move the load. Landstar tracks the number of loads that are available each day.
For most of the first half of this year, available load levels were well below 2012. The number of available shipments in July is trending higher than any other time since we started recording this data in 2006. In general, the number of available loads reflects a pattern of loading opportunities. And finally, for our new agents, as a reminder, new agent is considered in the 2013 second quarter, represents an agent who had contracted with Landstar after April 1st, 2012. As Henry stated, new agent revenue in the 2013 second quarter was 2.2% of revenue, below the historic range of 3%-6%.
We believe the challenges for small independent brokers are many and difficult to solve without outside support, whether it's access to capital, cash flow, tight capacity, inferior systems, or assorted October 1st, 2013 mandates under the MAP-21. This segment of the population is fertile ground to recruit productive new agents. We continue to do a good job of seeding our pipeline with quality new agent prospects. Although the number of new agents added in the second quarter of 2013 declined slightly year-over-year, the average revenue per new agent per week is near an all-time high and approximately 19% greater than the previous year. We believe 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?
Joe Beacom (VP and Chief Safety and Operations Officer)
Thanks, Pat, and good afternoon. The environment for owner-operators and small fleets has been and remains challenging due to softness in the freight environment that has put pressure on pricing, yet cost of operations, fuel, tires, maintenance, et cetera, remains relatively high. We see no evidence that the pool of owner-operators is growing, which is understandable, given the more balanced demand for truck capacity thus far in 2013, and with it, flat to diminished pricing power, difficulty accessing credit, and anxiety over the regulatory landscape. Despite a soft freight environment in the second quarter, Landstar was able to grow BCO count, grow approved broker carrier count, as well as active broker carrier count. Active, meaning that the carrier has hauled a minimum of one load in the last six months.
The company's truck capacity provider network at the end of the second quarter exceeded prior year by 3,655 truck capacity providers and exceeded the first quarter by 326. Interest in Landstar from owner-operators considering BCO status remains strong based upon telephone volume into our recruiting personnel, visits to our recruiting website, leasetolandstar.com, and the work history application volume that flows from those two activities. In general, we see the BCO recruiting outlook as challenging, yet improving, as owner-operators look for stability and shelter from a tough environment. Landstar has been consistently proving that the model is appealing to third-party capacity, regardless of the operating environment, due to the volume of freight, timely payment for services, regardless of when a customer may make payment, and their ability to benefit from meaningful discounts on tires, fuel, and equipment.
2013 annualized BCO turnover is approximately 30%, a very respectable outcome considering the environment. We continue to make progress building relationships with broker carriers who see the opportunity to grow their business with Landstar. The foundation for success in growing the number of active carriers is in finding a win-win proposition. Many agents have personnel dedicated to communicating the opportunities that exist within their agency to potential carriers, while corporately, Landstar has carrier relations staff selling the numerous opportunities that exist across the organization. Ongoing examination of agent freight patterns and available loads are compared to the 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 our current or future freight mix can resolve.
This carrier freight profile is kept up to date and used operationally as we try to identify or respond to opportunities to further penetrate accounts. Whether a single load or multiple lanes, this carrier relationship, similar to a BCO relationship, is a driver of capacity growth and utilization. We continue to see customers seeking a reliable capacity solution that takes into consideration a means to manage carrier CSA performance. The standards and methodology Landstar deploys to ensure the quality of capacity made available to our customers, we believe, is a competitive advantage. Turning to safety performance. 2012 was one of the safest years in Landstar history. Thus, throughout 2013, the quarterly comparisons may prove difficult.
DOT crash frequency in the second quarter of 2013 was a respectable 0.47 per million miles traveled, yet higher than the very low 0.43 per million miles traveled in the second quarter of 2012. Severity in the second quarter of 2013, when compared to the second quarter of 2012, was worse, in part due to this increase in frequency, but primarily due to the unfavorable development of a prior year accident. We continue to have strong participation and commitment around the company's safety programs from agents, BCOs, and employees. In July, Landstar held the company's second annual BCO All-Star event and induction ceremony, where 125 new 1 million milers, eight new 2 million milers, and two new 3 million milers were honored, bringing the company's total million-miler count to 741. Jim?
Jim Gattoni (EVP and CFO)
Thanks, Joe. I'll move on and cover various financial information included on our second quarter release. Gross profit, representing revenue, less the cost of purchased transportation and commissions to agents, was $109.2 million, or 16.1% of revenue in the 2013 second quarter, compared to $116.7 million, or 15.9% of revenue in the 2012 second quarter. The decrease in gross profit was generally due to lower revenue on unsighted platform equipment in the 2013 second quarter compared to the 2012 second quarter, partially offset by an increased gross profit margin. The cost of purchased transportation was 76% of revenue in the 2013 second quarter, compared to 76.5% in the 2012 second quarter.
Revenue contributed by truck brokerage carriers, which has a higher rate of purchased transportation, was 41% of revenue in the 2013 second quarter and 42% of revenue in the 2012 second quarter. The rate of purchased transportation paid to truck brokerage carriers in the 2013 second quarter was 80 basis points lower than the rate paid in the 2012 second quarter. Commissions to agents was 7.9% of revenue in the 2013 second quarter, compared to 7.7% of revenue in the 2012 second quarter. The increase in the rate of commission paid to agents was primarily due to the increase in net revenue, representing revenue, less the cost of purchased transportation on truck brokerage revenue.
Other operating costs were 3.8% of gross profit in the 2013 quarter, compared to 4% in the 2012 quarter. This decrease was primarily attributable to lower maintenance costs on company-owned trailing equipment compared to the 2012 second quarter as we replaced older trailing equipment with new equipment. Included in other operating costs were gains on sales of trailing equipment of $1.7 million and $1.8 million in the 2013 and 2012 second quarters, respectively. Insurance and claims costs were 10.9% of gross profit in the 2013 quarter, compared to 8% in the 2012 quarter.
The increase in insurance and claims as a percent of gross profit was primarily due to unfavorable development of prior claims of $2.3 million. That was primarily attributable to one claim in the 2013 second quarter. Also, insurance and claims expense was 3.5% of BCO revenue in the 2013 second quarter, compared to a low 2.5% in the 2012 second quarter. Historically, average insurance and claims expense as a percent of BCO revenue was 3.3% over the previous five years. Selling general administrative costs were 32.7% of gross profit in the 2013 second quarter, and 32.3% of gross profit in the 2012 second quarter.
The increase in selling, general, and administrative costs as a percent of gross profit was primarily attributed to lower gross profit in the 2013 period and costs associated with the company's annual agent meeting, which was held during the second quarter of 2013, but held in the first quarter of 2012, partially offset by a decrease for provision for bonuses under the company's incentive compensation program in the 2013 second quarter, as the company did not achieve targeted operating results in the 2013 period. Depreciation and amortization was 7.2% of gross profit in the 2013 second quarter, compared to 5.7% in the 2012 second quarter.
This decrease was due to the effect of lower gross profit in the 2013 second quarter and increased depreciation of trailing equipment as we replace older, fully depreciated equipment with new equipment. In net, investment income was $3,371,000 in the 2013 quarter, compared to $405,000 in the 2012 period. The effective income tax rate was 38.1% in the 2013 second quarter, compared to 38.2% in the 2012 second quarter. Looking at our balance sheet, we ended the quarter with cash and short-term investments of $102 million. 2013 second quarter year-to-date cash flow from operations was $85 million.
During the 2013 second quarter, Landstar purchased 884,000 shares of its common stock at a total cost of $46.6 million. Currently, there are 1.1 million shares available for purchase under the previously authorized purchase program. Cash capital expenditures was $2.7 million in the 2013 first half. Trailing 12-month return on average shareholders' equity was 33%, and trailing 12-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 25%. As of July 29th, 2013, shareholders' equity represented 77% of total capitalization. Back to you, Henry.
Henry Gerkens (Chairman, President and CEO)
Thanks, Jim, Pat, and Joe. Through the first several weeks of the 2013 third quarter, excluding the week that included the extended July Fourth holiday, we have seen improved truckload volume and revenue per load trends. Although total revenue still lags that of the 2012 prior year comparable period, the trend is better, which I believe signals we have bounced off the bottom. It is still very early in the quarter, and the U.S. industrial production forecast for the balance of the year remains soft. However, I am encouraged by the recent trends in load count, the current average revenue per load amount, and our new agent revenue potential.
Considering the improving trends and counterbalancing that with the soft U.S. industrial production outlook, I currently anticipate 2013 third quarter consolidated revenue to be in a range of $670 million-$715 million, an operating margin of 46%-48%, and diluted earnings per share in a range of $0.67-$0.72 per diluted share. It should be noted that the previously mentioned estimated ranges of operating margin and diluted earnings per share for the 2013 third quarter were estimated, including the same level of insurance and claims expense as a percentage of BCO revenue as incurred in the 2013 second quarter.
Dori, in a minute, I'm going to open up for questions, and I hope everybody appreciated the sort of change in format, giving everybody a little bit, I think, insight into some of the operational and revenue. And I'm actually going to let Joe, Pat, and obviously Jim handle most of the questions. And with that, Dori, we can basically start.
Operator (participant)
Thank you. At this time, we will begin the question-and-answer session. If you would like to ask a question, please press star then one on your touchtone phone. Once again, that is star, then one to ask a question. To cancel your request, press star two. Our first question today comes from Todd Fowler with KeyBanc Capital Markets.
Todd Fowler (Managing Director)
Great. Hi, good afternoon, everyone.
Henry Gerkens (Chairman, President and CEO)
Hey, Todd.
Todd Fowler (Managing Director)
Hey, Henry. I think maybe this is a question for Pat. I'm curious, how much, if any, wind, energy revenue there was in the second quarter, and then what you have factored in, for the third quarter?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
I can't tell you, Todd, how much wind business was in the second quarter, and I can't tell you what we've factored into the third quarter. As I mentioned in my remarks, we see some of that building in terms of projects that are coming in that we're bidding on. But at this time, I wouldn't want to estimate what the third quarter is going to be.
Todd Fowler (Managing Director)
Okay
Henry Gerkens (Chairman, President and CEO)
Todd, as just a comment, I mean, I quoted before the number one customer in that particular category, and in the third quarter, I mean, that was down, and Jimmy, that was down about 56%, quarter-over-quarter, which accounted for much of the flatbed heavy haul decline. And I don't know if that gives you any color for, obviously, as Pat said, the volume, what that customer has told us, things should be picking up in the third quarter.
Todd Fowler (Managing Director)
Yeah, I guess maybe, Henry, let me ask it this way. You know, it doesn't sound like there was much contribution from wind in the second quarter. The comments about the momentum with wind and what you're seeing on the bid side, is that expected to come in in the third quarter, or is that something that we should expect, you know, later into the fourth quarter and into 2014?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
I would expect, Todd, the majority of that to be late third quarter, some fourth quarter, and then 2014.
Todd Fowler (Managing Director)
So what's in the guidance, the revenue guidance, it doesn't say that there's a lot in there, from contribution on the wind side?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
That's correct. Weather will really determine a lot of what the fourth quarter is like.
Todd Fowler (Managing Director)
Got it. Okay, that's very helpful. And then the follow-up one that I had, this is probably for Jim. On the SG&A side, I guess, if I back out the $2 million for the agent convention, that gets me to about a $34 million run rate for the quarter. Is that a good placeholder for the rest of the year based on planned incentive compensation levels?
Jim Gattoni (EVP and CFO)
Yes.
Todd Fowler (Managing Director)
Okay, good. Thanks a lot for the time. I'll turn it over.
Henry Gerkens (Chairman, President and CEO)
Thanks, Todd.
Operator (participant)
Thank you. Our next question comes from Kelly Dougherty with Macquarie. Your line is open.
Kelly Dougherty (Senior Analyst)
Hi. Thanks for taking the question. You mentioned you see improving trends, but then the revenue guidance suggests, you know, revenue could be down, you know, more than 6% at the one end. Can you help us think about that, you know, whether you're just seeing a decelerating pace or how you think about load volumes and revenue as we move through the rest of the quarter?
Henry Gerkens (Chairman, President and CEO)
I think what I've given out there is a pretty wide range. I think we did, and Jim, correct me if I'm wrong, about $720 million last year in the third quarter?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
$717 million.
Henry Gerkens (Chairman, President and CEO)
$717 million. So the upper end of that range is pretty much on target there. You've got to factor in, and I'm a little bit gun-shy because the U.S. forecast for industrial production clearly is declining. If you looked at those production forecasts back in March and look at them now in July, they've gone south. So you know, I've got to counterbalance, as I said in my comments, what we're currently seeing with what is projected to be seen. So I don't want to get ahead of myself. Jim, you want to say something?
Jim Gattoni (EVP and CFO)
Yeah, Kelly. The, if you look at the last five, six years, sequentially, third quarter over second quarter has been either 2% over, third quarter, 2% over the second quarter or 2% behind the second quarter. So it's a very, you know, they're very consistent quarter-over-quarter, comparing the sequential. If you look at the midpoint of our range, we're saying the midpoint is 2% over what we did in the second quarter, and really, that's kind of how you look at it. So we are building a little bit better third quarter sequentially than the second quarter, as you've seen historically.
Kelly Dougherty (Senior Analyst)
Okay, that, that's helpful. And then maybe can you just help us think about, you know, the impact on your revenue of some of the more favorable manufacturing reports that have come out recently? Granted, they're, they're lower than, you know, they were earlier in the year, but they're starting to tick up a little bit, you know, higher than expectations. So have you started to see that in your results? Is that what you were talking about? Or, or maybe if not, you know, is there any kind of lag that we can think about before you start to see that increased activity?
Henry Gerkens (Chairman, President and CEO)
No. The one that's fresh in my mind is Caterpillar's report, which wasn't too favorable as far as I recall. No, look, as I said before, these whole everything that you know, those revenue projections are based on what the trends we're currently seeing, which clearly are better than what we've been experiencing when you look at the daily comparable periods, and that's a clear positive sign. On the other hand, the forecasts out there are just not very, not very, not very good. And when I look at flatbed, heavy specialized, Transport Topics just put out an you know, the top 100 carrier thing, and we're clearly ranked number one in specialized and flatbed, by quite frankly, a wide margin over number two.
And when that segment goes through a cyclical downturn, which is what we've had, you know, that's going to impact us more so than probably any other carrier. So that's what we're feeling. On the other hand, we've seen, we believe it's bounced off the bottom, and we're starting an upward climb. Pat, you want to?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Kelly, one of the things that we look at is the number of quotes that we're making in our platform business. And if you look at through the first two quarters, quotes year-over-year were behind. In July, the quotes that we're doing are up about 7.5% compared to 2012. So that could be, you know, people rebuilding their supply chains. That could be the fact that they're anticipating some business, and we're currently quoting on. If you think about it from quote to move, depending upon what they're manufacturing, there could be, you know, 30, 60 days between those. So that's one item that we look at that says, "Hey, maybe this is building," but we haven't seen evidence of it right at this point. We're largely spot business on that side, and we just haven't seen it.
Kelly Dougherty (Senior Analyst)
Okay, great. Thanks very much.
Henry Gerkens (Chairman, President and CEO)
Thanks, Kelly.
Operator (participant)
Our next question comes from Justin Yagerman with Deutsche Bank.
Henry Gerkens (Chairman, President and CEO)
Hey, Justin.
Rob Salmon (VP)
Hey, Henry. Actually, it's Rob Salmon on for Justin. How are you doing?
Henry Gerkens (Chairman, President and CEO)
Okay, Rob.
Rob Salmon (VP)
You know, Henry, we had seen that one of the larger competitors in the heavy flatbed specialized segment had recently completed a restructuring in early July. Have you guys seen any sort of benefit from some of the noise that may have been going around, either from a BCO perspective or from a customer perspective as a result of that reorganization?
Henry Gerkens (Chairman, President and CEO)
No, but I'm looking at my guys to help me out here.
Joe Beacom (VP and Chief Safety and Operations Officer)
We're not seeing any, not from a recruiting standpoint. I mean, things are pretty stable, but nothing specific to, you know, anybody leaving one competitor coming over here that we've noticed.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
From the revenue generation side, Rob, we haven't seen customers flocking to us, saying that there was some problem with a provider that had been servicing that account.
Rob Salmon (VP)
Okay, that, that's helpful. I think it was more on the financial side, where that, where that had taken place. With regard to my follow-up, Landstar's obviously been doing a really good job of growing its active broker carrier capacity, but we have seen the productivity slip a little bit. It was about eight loads per truck this year, down from about nine last year, and it's been down for about three consecutive quarters. What do you think is constraining the productivity on the broker fleet? Is this more of a demand issue? Are there regulatory changes, or is this kind of pricing mismatch? Any color would be helpful.
Jim Gattoni (EVP and CFO)
On the BCO front, I think, you know, we said earlier in the call that the number of available loads in the system had lagged 2012, and I think that's probably the biggest impact driver to utilization on the BCO side. That would be my guess.
Henry Gerkens (Chairman, President and CEO)
And I would just add, as far as productivity for broker carrier, I mean, you know, loads are out there. People haul what they want to haul. We don't actively manage that.
Jim Gattoni (EVP and CFO)
No.
Rob Salmon (VP)
No, I understand. I appreciate the time, guys.
Henry Gerkens (Chairman, President and CEO)
Okay, thanks.
Operator (participant)
Our next question comes from William Greene with Morgan Stanley.
Henry Gerkens (Chairman, President and CEO)
Hey, Bill.
William Greene (Managing Director)
Hi there. You know, Henry, I want to ask a little bit of a follow-up to the sort of discussion you were having before, and it really hinges on this sort of trade-off between kind of growth, but also the margin or the returns. So one of the challenges we have when we talk about Landstar with investors, right, is that the growth's been disappointing, but that comment fails to recognize where the margins and returns are. So I don't know what the macro is going to do going forward, but if we sort of sit in this tepid kind of environment, how do you sort of feel a need that you have to do something to grow faster?
Or do you sort of feel like, no, look, this is a company built for when the economy comes back, and really what we have to focus on here is maintaining these margins and these returns at these levels, and growth will do what it's going to do. How, how do you think about that trade-off?
Henry Gerkens (Chairman, President and CEO)
Well, you know, that's an interesting comment. I mean, you know, we, I'm not going to do something, hopefully, knee-jerk, which, you know, you've seen a lot of things happen, huge multiples being paid for companies and things like that. I mean, so I think we've been, fairly consistent. I, you know, and, and, you know, we look at when you go back to a real downturn like you had in 2009, that actually was fertile ground for us, for Landstar to go out and recruit agents and whatnot. And Pat's addressed, I think, some of the quality of the agents we're currently bringing in. So as certain things slow down, it actually, over the term, will benefit Landstar as you move into future years as far as people that we get into this pipeline.
I mean, you know, our objective is, obviously, we want to grow as fast as we can. All right? But on the other hand, we're going to basically also look at profitable growth. And that's what we're trying to get to, and I think our margins, we've concentrated on trying to maintain those, and I think we've done a pretty good job. I think our variable cost model works out very well. It's an interesting question, but I think when you, when things, in this type of environment, when things get slow, it actually helps us out, I think, going forward from an agent recruiting standpoint. And Pat, as I said, addressed that in his particular comments. Pat, did you want to add anything to that?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Well, I think we're always trying to grow, but I think and be mindful of the margins, William, and I think Henry articulated that.
William Greene (Managing Director)
I guess, I'm curious what you think about the concept of maybe using those margins to, in effect, invest in the growth, right? In other words, you've already got a spread over your cost of capital that's quite good. So you could arguably invest at a lower return on capital and grow much faster if you wanted to. But it doesn't sound like that's something you want to do, because these margins and getting to these targets is kind of more critical than growth for some period.
Henry Gerkens (Chairman, President and CEO)
[audio distortion] both, Bill, I can't say one. I mean, you know, if I had my druthers, I'd be doing everything and we'd be doing both at the same time. And I, you try to manage that carefully. And I'm not saying, you know, would I sacrifice some margin for some growth that over the longer term would might benefit us? Yes. But I think you got to, as I said before, I don't think we're going to do something that just is, you know, paying 13, 14 times for a company. And you got to remember, Landstar's business model is very unique, and it's probably, there's really not one like it out there when you consider the agent piece and the third-party capacity piece.
I would not destroy anything by trying to bring something in that hurts that loyalty that we've built up with our agent models, for example, or our third-party capacity base. So we've got to be very careful as far as what you'd bring in. So it's not a matter of just, I can't just go out and do something for the sake of doing it. You go, you got to look at that also.
William Greene (Managing Director)
Yep, yep, yep. Okay, thank you very much for the time. Appreciate it.
Henry Gerkens (Chairman, President and CEO)
Yeah.
Operator (participant)
Our next question comes from Scott Schneeberger with Oppenheimer.
Henry Gerkens (Chairman, President and CEO)
Hey, Scott.
Scott Schneeberger (Managing Director)
Thanks. Hey, good evening, guys. First one, I just want to follow up on Todd's question earlier. I believe you had alluded to, back at the beginning of the year, expecting about $30 million in revenue from Wind. And what I inferred from how you answered that question, it sounds like part of the guidance reduction was out of that a bit, but also I inferred that, you know, still there, maybe it would just be trickling into 2014. Is it possible to clarify that a bit more?
Henry Gerkens (Chairman, President and CEO)
Yeah, Jim's going to clarify that, but I always like when the guidance a little bit lower. We never gave guidance for the third quarter at this point in time, and I always want to remind people that. It's the estimates that are out there. This is the first time we've given revenue guidance for the third quarter. But Jim, go ahead.
Jim Gattoni (EVP and CFO)
just happen to have the Wind numbers in my hand right now, and they just magically appeared. I could tell you, second quarter Wind number was about $6 million, compared to last year's quarter was about $20 million. First half of this year, we're running about $10 million. You know, we continue to see that. I would still say that we might hit that $30 million target.
Scott Schneeberger (Managing Director)
Okay, thanks. I appreciate that clarification. Then, following up on, you'd mentioned in prepared remarks that I believe guidance was based on the second quarter insurance and claim level, and it sounds like you had a big one-timer in there. Should, how should we infer? Is there potentially upside or maybe that one-timer carries over? Was that fully settled? Just a little more clarification on how we think about that line. Thanks.
Jim Gattoni (EVP and CFO)
Well, there's always ups and downs in the claim line, but if you look at history, it's 3.3%, whether it comes from frequency, severity of current year accidents, or development of claims from prior years, there's nothing to infer there. I mean, 3.3% is the average you use. Can we be higher than that? Yes. Can we be lower than that? Yes. It all depends on what happens during the quarter or any existing claims we have outstanding. There's really not a lot. That's why we forecast it that way. There's really no better answer.
Scott Schneeberger (Managing Director)
Okay. Thanks, guys.
Henry Gerkens (Chairman, President and CEO)
Thanks, Scott.
Operator (participant)
Our next question comes from Tom Wadewitz with JPMorgan.
Henry Gerkens (Chairman, President and CEO)
Hey, Tom.
Tom Wadewitz (Senior Analyst)
Good afternoon. Wanted to see if you could start by giving us some thoughts here on the by-month volume trends in truck. So I don't know if we want to give kind of combined or, you know, BCO and broker, but just wanted to get a sense of on the, I guess, on the load side, whether it was, you know, even growth or, excuse me, whether the decline was kind of stable through the quarter or whether it improved.
Jim Gattoni (EVP and CFO)
Total truck, which includes flat van, LTL, it's all together. April, May, June, we were compared to prior year April, May, June, it was -5%, -4%, -6%. That's a load count. -5%, -4%, -6%.
Tom Wadewitz (Senior Analyst)
Okay, and then July so far looks like what?
Jim Gattoni (EVP and CFO)
We're looking at daily load counts.
Henry Gerkens (Chairman, President and CEO)
We got daily load counts. It's kind of hard to basically say what that is, but I will tell you, we've had days where it's positive, which we haven't seen a lot of positive days. So that's clearly a good sign. But as I said, total revenue, based on what we've seen on an accumulative basis, is still lagging what we had in July. But the trend from a load count thing is getting better, and the same thing with the revenue per load. So where I can't give you a definitive answer on that, that should help you at least couch what we're trying to say here.
Tom Wadewitz (Senior Analyst)
Right. Okay. Well, and Henry, what's your view on the market in general? It seems like we've had, I guess, from the dry van or company-owned guys, as you like to call them, you know, they're pointing to, I'd say, softness in general in second quarter, both in terms of, I guess, activity and rates. I know they're not levered necessarily the same verticals, but how do you see the market playing out? Do you think that it's relatively balanced, so if we see a little pickup, you'd see the rates come back pretty quickly, or does it feel like it's kind of weaker and takes more time than that, and a bigger pickup to see the market tighten and see stronger rates?
Henry Gerkens (Chairman, President and CEO)
I think when I look at what happened with vans for at Landstar, I mean, our total revenue there was down about 6%, 5%, with load volume. Rates were just down a little bit, if you will. So I'm going to say I think things are fairly balanced, and if volume were to pick up, I think you would see those rates go higher, and actually probably pretty quickly.
Tom Wadewitz (Senior Analyst)
Right. Okay. Thank you.
Henry Gerkens (Chairman, President and CEO)
Thanks.
Operator (participant)
Our next question comes from Scott Group with Wolfe Research.
Scott Group (Managing Director)
Hey, thanks. Afternoon, guys.
Henry Gerkens (Chairman, President and CEO)
Hey.
Scott Group (Managing Director)
So I'm not sure if I missed this or not, but the LTL customer that you lost, can you quantify how big that is, and is that in brokerage or BCO? And should we think about this kind of like the substitute line haul LTL guy you lost a few years ago that was decent chunk of revenue, but pretty low margin, or is this more kind of in line margin?
Henry Gerkens (Chairman, President and CEO)
I don't recall the exact amount of LTL revenue. Jim will give it to you, but you're talking about $18 million-$17 million last year, $18 million, $17 this year. So you're only talking $1 million, but we were talking about just in LTL itself. All right? I mean, it really is not material at all to the total consolidated results, but just when you look at LTL by itself, and do you have the LTL.
Jim Gattoni (EVP and CFO)
Yeah, LTL numbers for the quarter were $19 million last year and $18 million this year.
Henry Gerkens (Chairman, President and CEO)
Yeah, so I mean, it's not.
Jim Gattoni (EVP and CFO)
The point was just that that one customer caused the decline.
Scott Group (Managing Director)
Okay, gotcha. Gotcha. Jim, I think you said that the brokerage gross margins were up 80 basis points. Can you just remind us how much they were down or what they were in second quarter a year ago? And is your sense that it's just an easy comp, or is there something where the brokerage environment has just gotten a little less competitive or just better? I guess, do you think that it's sustainable into the third quarter, seeing brokerage margins improve?
Jim Gattoni (EVP and CFO)
It was a joke.
Henry Gerkens (Chairman, President and CEO)
That was a joke, Scott, I think.
Scott Group (Managing Director)
I missed what you said, sorry.
Jim Gattoni (EVP and CFO)
Last year. I said there's never an easy comp. Last year, last year, and it's not the gross margin, it's the PT rates. It's what we're paying for purchase transportation, right? So we're, we're, this year, quarter-over-quarter is +80 basis points. Last year, it was -30 basis points. I, you know, are we probably, was last year probably more toward a higher end of the rates you pay? Yes, if that's the question.
Scott Group (Managing Director)
Do you think that's sustainable to expect improvement in the back half of the year?
Henry Gerkens (Chairman, President and CEO)
Well, go ahead.
Jim Gattoni (EVP and CFO)
Well, it depends really what happens to capacity. If it tightens up, it, it. You know, it's really about supply and demand, right? And that's what drives those rates.
Henry Gerkens (Chairman, President and CEO)
In addition to that, I mean, when you broker some of the specialized heavy haul stuff, you're paying a higher rate. And when you see that mix change in the second quarter, where that number goes down, that's going to drive the overall number to be more favorable. And if, in fact, that number starts to pick up, as Pat alluded to, in the back half of the year, I would anticipate that purchase transportation, it'll drive that up a little bit, 'cause that's more expensive.
Scott Group (Managing Director)
Okay. Yeah, that makes a lot of sense. Okay, thanks, guys.
Operator (participant)
Our next question comes from Jack Atkins with Stephens.
Jack Atkins (Research Analyst)
Good afternoon. Thanks for the time, guys.
Henry Gerkens (Chairman, President and CEO)
Hey, Jack.
Jack Atkins (Research Analyst)
Jim, just to kind of go back to your comments earlier about guidance relative to the sequential changes historically. I know you were referring to revenue, but when you look at the earnings, the average historical earnings change from the 2Q to the 3Q, I think it's typically up 10%-12%, but guidance is calling for only 2%-10% at the low end versus the high end. So I was wondering if you could maybe walk us through the puts and takes on the earnings side that drive the high end and the low end of guidance.
Jim Gattoni (EVP and CFO)
Well, if you go back to 2007, if you go sequentially, third quarter or first quarter, I take out disaster relief. You may not, because disaster relief had significant impact in when you compared third quarter to second quarter for certain years.
Jack Atkins (Research Analyst)
Sure.
Jim Gattoni (EVP and CFO)
When you look at that, 2007 was flat, 2008 was +5, 2009 was +11, 2010 was -10, 2011 was +3, and 2012 was -7. Very inconsistent when you pull that stuff out. A lot of that really truthfully gets driven by the volatility you have in insurance and incentive compensation programs. That's really what it comes down to when you're driving the gross profit changes and revenue changes down to the operating income.
Jack Atkins (Research Analyst)
Okay. So then more broadly, I guess if you think about the low end versus the high end of the earnings guidance range, could you maybe walk us through the puts and takes as far as how you get to one versus the other?
Jim Gattoni (EVP and CFO)
It all has to do with the gross profit range coming off the revenue. There's not a lot of other variables in there. Like we said, we put insurance at 3.3% of BCO revenue. We discussed the SG&A number when Todd said it's about $34 million, and the rest of the stuff kind of stays stable. So the high-end is mostly driven by the gross profit performance and revenue growth.
Henry Gerkens (Chairman, President and CEO)
Yeah, exactly right. The gross profit piece is important because it's really mixed. I mean, if you got more BCO revenue versus brokerage revenue, a lot of that stuff plays into all of that. So, I mean, but it drives from the top line to the gross profit, and then the rest of the P&L is pretty easy to understand.
Jim Gattoni (EVP and CFO)
Sequentially, one thing is, though, that I think may be missed. Everybody's aware that we had $2.3 million of convention in the second quarter, and that's going to go away. But I think what you got to focus on is we also had $1.8 million of trailer gains in the second quarter that we only anticipate a couple hundred thousand, maybe $400,000 in the third quarter. So that's kind of a drag, right? So you got to make sure you consider that when you're looking at your, you know, what your the third quarter projection.
Jack Atkins (Research Analyst)
Okay. Okay, that makes sense. Then I guess with my follow-up, just curious if you guys could comment on hours of service changes and the impact that's having, or you think it may have to the business in the third quarter and beyond.
Henry Gerkens (Chairman, President and CEO)
Joe?
Joe Beacom (VP and Chief Safety and Operations Officer)
Yeah, Jack, thus far, again, it's still a little bit early. We haven't seen much of any impact thus far, in July. And again, the first week was an extended week where you wouldn't have seen much. And then even since then, nothing notable that I can tell you we've seen.
Jack Atkins (Research Analyst)
Okay, thanks. Thanks for the time.
Jim Gattoni (EVP and CFO)
Thanks, Jack.
Operator (participant)
Our next question comes from Ben Hartford with Baird.
Henry Gerkens (Chairman, President and CEO)
Hey, Ben.
Ben Hartford (Senior Equity Research Analyst)
Guys, Jim, on the SG&A side, I know you had said that the $34 million number on a quarterly basis is a good run rate in the back half of the year. And if I look back the past three years, it's averaged about $38 million on a quarterly basis, which I assume loads in an incentive comp component, and the delta between that $38 million average and $34 million now is just incentive comp. But I wanted to get your perspective on that, and then maybe you could give us the number of what, what the incentive comp component is in 2013, and what it could have been if you had hit your targets. You see what I'm getting at?
Jim Gattoni (EVP and CFO)
Yeah, I really, you know, so you're talking about a $4 million difference. Most of it's incentive comp. I don't know what the rest of it is, to tell you the truth. It, we have ups and downs, whether it's professional fees or other things that are in there, but most of it's incentive comp. But from a target standpoint, our bonuses are about $8 million a year, $7 million-$8 million, just use eight.
Ben Hartford (Senior Equity Research Analyst)
Uh-huh.
Jim Gattoni (EVP and CFO)
So if we got it perfect, it'd be $2 million a quarter in 2013, and we haven't hit those targets through the second quarter.
Henry Gerkens (Chairman, President and CEO)
Okay, so kind of looking at $2 million-$3 million a quarter and higher SG&A, if we were to hit those targets, and that variance is incentive comp.
Jim Gattoni (EVP and CFO)
That would be true.
Ben Hartford (Senior Equity Research Analyst)
Okay. Yeah, Henry, you talked about bouncing off the bottom. Just interested in your perspective on hours of service and what we're seeing so far and what you expect to see in terms of flatbed capacity.
Henry Gerkens (Chairman, President and CEO)
Joel, how do you answer that question?
Joe Beacom (VP and Chief Safety and Operations Officer)
Yeah, Ben, thus far, we really haven't seen much impact due to the changes in hours of service. It's something that it's still a little early. You know, really, you're effectively three to four weeks in. But thus far, we haven't seen a whole lot from it. As capacity tightens up, if that were to happen in the back half of the year, you might see more impact from that. But at this point, we haven't seen anything material.
Ben Hartford (Senior Equity Research Analyst)
Okay, that's helpful. And then, Pat, maybe one last one on the new agent contributions as a percent of revenue. I think at the April event, you said that historically, it had run between 4%-6% of revenue growth, but it could run higher. I'm wondering if that's the case this year, and if so, where is it running?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
In the quarter, it's 2.2% of revenue growth, and historically, it's run anywhere between 3%-6% of revenue growth.
Ben Hartford (Senior Equity Research Analyst)
Would you expect that to normalize in the back half of 2013?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
I think, Henry, in his comments and in my prepared remarks, we made mention of that, Ben.
Ben Hartford (Senior Equity Research Analyst)
Okay, great. Thanks.
Henry Gerkens (Chairman, President and CEO)
Thanks.
Operator (participant)
Our next question comes from Matt Brooklier with Longbow Research.
Henry Gerkens (Chairman, President and CEO)
Hey, Matt.
Jim Gattoni (EVP and CFO)
Hey.
Matt Brooklier (Senior Equity Research Analyst)
Hey, thanks. Good afternoon. Henry, you talked to directionally improving truck trends in July. I was just curious to hear if that improvement is, you know, equal across your dry van and your flatbed operations, or if, you know, one of those segments is feeling a little bit better than the other?
Henry Gerkens (Chairman, President and CEO)
I get daily load count reports, and I don't have a split between flat and van, but I don't know, Pat, can you add anything to that?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
It's still the platform remains softer than the van.
Matt Brooklier (Senior Equity Research Analyst)
Okay. So that's on the load side. What about on the pricing side, is similar trends?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Similar trends, correct.
Matt Brooklier (Senior Equity Research Analyst)
Okay, that's all I got. Thanks, guys.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Thanks, Matt.
Operator (participant)
Our next question comes from David Tamberrino with Stifel.
David Tamberrino (Analyst)
Hey, thanks for taking my question this late. I was just wondering if you could break down kind of your revenue per load decrease in truck into pricing and, and maybe mix and, you know, changing length of haul for the quarter.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Well, we don't really track length of haul. It's been running anywhere from 750-800 miles the last forever. But if you want to talk about the. We gave the load count of variances month-over-month, and, like, I can give you the revenue per load from a truckload standpoint month-over-month.
David Tamberrino (Analyst)
Yeah, I mean, I had, I just didn't know if you, off the top of your head, if you guys had numbers or analysis around really, if pricing was flat or, or down, or maybe pricing was up a little bit because of the mix, revenue per load was down because you're running different, different materials, et cetera.
Henry Gerkens (Chairman, President and CEO)
I think Pat addressed the pricing on the van, on the flatbed side, is down a little bit, and I would say the van side is probably also sort of flattish.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Flattish.
David Tamberrino (Analyst)
Okay, and then just as maybe a last one, how are your Million Dollar Agents trending so far through the first half of the year?
Henry Gerkens (Chairman, President and CEO)
Pat?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Well, the schedule that we show you, David, is the previous year's Million Dollar Agents agents.
David Tamberrino (Analyst)
Mm-hmm.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
I can tell you that we have not had any departures of Million Dollar Agents of significance, and we've added agents that have produced $1 million already in revenue that are new to Landstar.
Henry Gerkens (Chairman, President and CEO)
Yeah. That schedule we show you is for the previous year.
Yeah, that's hard to track. Obviously, you know, we were down in revenue in the first quarter, down in revenue in the second quarter, so obviously, we expect some falloff in our Million Dollar Agents. On the other hand, if I look at, if you look at the top five, Pat, I think how many are up, how many are down? I think you got two or three that are up, two or three that are down.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Yeah. Uh-huh.
David Tamberrino (Analyst)
Okay. Well, thank you for the time.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
All right, thanks.
Operator (participant)
Our next question comes from Anthony Gallo with Wells Fargo.
Anthony Gallo (Managing Director)
Hi, good afternoon.
Henry Gerkens (Chairman, President and CEO)
Hi, Gallo, how are you?
Anthony Gallo (Managing Director)
I'm doing great. Thank you, Henry. I wanted to go back to Bill Greene's question, if I could. I'm kind of in agreement that the cost structure, capital returns, all look quite good. But this idea of stimulating growth in, in my mind, sort of comes down to either bringing in new agents or, allowing each agent to do more, and you touched on the introduction of LTL as one way to get agents to do more. So maybe could you just touch on some of the things that you're doing now to try and stimulate agent growth? I know you had talked in the past about, maybe facilitating end market acquisitions among agents, so maybe just a little color there would be helpful.
Henry Gerkens (Chairman, President and CEO)
Yeah, Pat, you can, you can talk about that. I mean, yeah, I know we've completed one, we've got another one, and then we've got, we've, in fact, we've got two more that are, that are being worked on, but.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
So we've done that, Anthony. We've actually executed on that, where we've helped agents acquire smaller brokers and bring them into their business. We've also converted agents over that had their own businesses, we talked about in the opening remarks, from an agent perspective. I think it's all about providing them with, you know, the correct products to sell and then the efficient manner in which to execute that business. And so if you look at what we're trying to accomplish, whether it's from introducing LTL, and then the way they execute an LTL shipment is easy. It has to be so that they can execute more shipments.
And if you look at our underlying technology, whether it's procuring capacity or it's selling the customer or it's identifying what the right price is, we do an awful lot of work behind the scenes to help them become more efficient. Because ultimately, what we have to be able to do is, if they're going to grow from $10 million to $12 million and add three people, that's a losing proposition. On the other hand, if they're going to move from, you know, $10 million to $12 million and maintain the headcount that they have, that's incentive for the agent to do that. And I think Joe properly outlined in his opening remarks some of the things we're doing from a capacity sourcing standpoint to assist them in that endeavor.
Anthony Gallo (Managing Director)
Okay, that's helpful. And then, unrelated question, can you just remind us what percent of the business right now is military? And then, I know you mentioned ag, mining, et cetera, some of the heavy equipment stuff. What percent of revenue is the heavy machinery business?
Henry Gerkens (Chairman, President and CEO)
What is the DoD piece?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
The government.
Henry Gerkens (Chairman, President and CEO)
Government.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
2.8% government.
Henry Gerkens (Chairman, President and CEO)
Government is 2.8% and actually, government was down quarter-over-quarter. Part of the decrease was due to decreased government business. And what was it? Was that it, Anthony?
The machinery piece.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
19.6%.
Henry Gerkens (Chairman, President and CEO)
Machinery is 19.6%.
Anthony Gallo (Managing Director)
Thank you, gentlemen.
Operator (participant)
Our next question comes from David Campbell with Thompson Davis & Co.
David Campbell (Partner and SVP)
Hello, everybody. I just have one question. And Pat, I think I heard you say that agent available loads were up in July, but everyone's talking about revenues going down. I may have misinterpreted what you said.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
Yeah, what we talked about is that the number of available loads that are in the system are greater in July, and then we made the statement that, in general, the number of available loads reflects a pattern of loading opportunities. So, the first half of the year, by and large, year-over-year, the available loads were down, but in July, that's trending favorably, thus the change in our load count trends.
David Campbell (Partner and SVP)
Mm-hmm. Right. But as I said, how does that, how does that equal less revenues than a year ago?
Henry Gerkens (Chairman, President and CEO)
Not all loads are picked up.
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
There's pricing differences as well, you know. Volume could remain the same, but if price is off, then your revenue is going to be down.
David Campbell (Partner and SVP)
No, I understand that, right. Right, right, right. But it is somewhat encouraging. It sounds like it.
Henry Gerkens (Chairman, President and CEO)
That's why I use the words encouraged. I am encouraged.
David Campbell (Partner and SVP)
Right. Okay, thank you.
Operator (participant)
Our next question comes from Matt Young, with Morningstar.
Henry Gerkens (Chairman, President and CEO)
Hey, Matt.
Matt Young (Senior Equity Analyst)
Good afternoon. Thanks for squeezing me in. I know it's a small piece of the business, but just was wondering what was behind or what's been behind some of the recent growth on the air and ocean side. Is that new customers? Are you seeing decent same customer growth with ocean business and so forth?
Pat O'Malley (VP and Chief Commercial and Marketing Officer)
I think from an ocean perspective, it's a couple of accounts that we won, and then a lot of our business on the ocean side is project driven. We've had a couple of nice projects along those lines, and same thing on the air. We've had a few charters this year.
Matt Young (Senior Equity Analyst)
Okay. And just curious, have you heard any hints in the air freight markets among your customers as you talk to them? Have you heard any hints of improvement or stabilization in air freight demand recently?
Henry Gerkens (Chairman, President and CEO)
No, Matt.
Matt Young (Senior Equity Analyst)
No. Okay, thanks.
Henry Gerkens (Chairman, President and CEO)
Thanks.
Operator (participant)
Our final question comes from Ryan Bouchard with Avondale Partners.
Henry Gerkens (Chairman, President and CEO)
Hey, Ryan.
Ryan Bouchard (Senior Equity Research Analyst)
Hey, guys. I'll be quick. So you said 2,200 EOBRs on BCOs now ordered or installed. Do you know kind of what that was around the end of the first quarter?
Henry Gerkens (Chairman, President and CEO)
Joe?
Joe Beacom (VP and Chief Safety and Operations Officer)
Um.
Henry Gerkens (Chairman, President and CEO)
I probably mentioned the first quarter.
Joe Beacom (VP and Chief Safety and Operations Officer)
You probably mentioned it. Yeah, I don't remember off the top of my head what it was.
Ryan Bouchard (Senior Equity Research Analyst)
Ballpark, roughly half, maybe?
Joe Beacom (VP and Chief Safety and Operations Officer)
I probably don't have that.
Ryan Bouchard (Senior Equity Research Analyst)
Okay, that's fine. And then, BCO count up 25% sequentially. Can you kind of talk about the trend in the third quarter so far now that we're a month in?
Jim Gattoni (EVP and CFO)
1,250, by the way. I just looked at my prepared comments. Looks like it was 1,250.
Ryan Bouchard (Senior Equity Research Analyst)
Okay, thank you.
Henry Gerkens (Chairman, President and CEO)
All right.
Joe Beacom (VP and Chief Safety and Operations Officer)
Yeah, BCO count in July, we are a net positive through the first three weeks. And as I said in my remarks, I mean, it's still challenging, but we're making headway and moving in the right direction. And it's positive thus far in July.
Ryan Bouchard (Senior Equity Research Analyst)
Okay. That's all I got. Thanks, guys.
Henry Gerkens (Chairman, President and CEO)
Okay. And any closing comments from anybody here?
Joe Beacom (VP and Chief Safety and Operations Officer)
No.
Henry Gerkens (Chairman, President and CEO)
Okay. Well, listen, I appreciate everybody dialing in. I think as we enter the third quarter, as I said, I am encouraged, but I think you got to keep in mind as far as what's out there from a forecast standpoint, for people who put out these forecasts, and we'll see how this all plays out. But I think as we enter the third quarter, I'm much more encouraged than I was, I guess, we ended into the second quarter. So, we'll talk to you on our mid-quarter update call for the third quarter. Have a good rest of the day, good Friday, and a good weekend. Thanks. Bye.
Operator (participant)
Thank you for joining today's conference call. Have a good afternoon. Please disconnect your lines at this time.