Good afternoon, and welcome to Landstar System Inc.’s Second Quarter Earnings Release Conference Call. All lines will be in 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 and Chief Executive Officer; Jim Gattoni, President and Chief Financial Officer; Pat O’Malley, Vice President and Chief Commercial and Marketing Officer; Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I’d like to turn the call over to Mr. Henry Gerkens. Sir, you may begin.

Thanks, Karen, and good afternoon and welcome to the Landstar 2014 second quarter earnings conference call. The call will be limited to no more than one hour. So please limit your questions to no more than two questions when the question-and-answer period begins. But again before I begin let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call I and the other members of Landstar’s management, 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 2013 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. The 2014 second quarter results were truly exceptional, as Landstar achieved historical records in just about every metric. Before I talk about our outstanding second quarter results I do want to review what I stated during our second quarter mid-quarter update call. On that call I said that I was very comfortable with the previously announced range of revenue guidance of $750 million to $800 million with a strong bias towards the upper end of that range. I further stated that I anticipated gross profit dollars to increase in a low teen range over the…

Thanks Pat. As mentioned earlier Landstar entered the 2014 second quarter with a total truck capacity provider network in excess of 43,000 providers, a significant increase in the quarter. This growth in capacity is attributable to effective recruiting and retention outreach programs and a strong freight environment. Given the ad-hoc and unplanned nature of much of Landstar’s freight mix, this size and scope of the network of capacity providers is very important in sourcing capacity across a wide range of service offerings often within a short window of time. From a truck capacity perspective we remain well positioned to support new opportunities going forward. The second quarter concluded with Landstar BCO count up 198 BCOs over the prior year period, increasing BCO truck count by more than 220 trucks. This second quarter increase is the largest in several years. BCO truck additions in the quarter were up over 12% from the 2013 second quarter while terminations were 13% fewer. Both total approved carrier count as well as active carrier count were at record levels at the end of the 2014 second quarter. The total approved carrier count increased more than 10% over the prior year period to more than 35,000 while active carrier count increased more than 14% to nearly 24,000. Active carriers are defined as those carriers who have transported shipments for Landstar in the prior six months. BCO load volume improved 4% in the 2014 second quarter compared to the prior year quarter, the result of the increase BCO truck count and a 2% improvement in BCO truck utilization. Truck utilization is defined as the number of loads divided by the average number of trucks. Loads hauled via truck brokerage capacity utilizing van, unsided and platform or LTL equipment increased 14% in the 2014 second quarter over the…

Thanks Joe, We’ve already discussed certain information regarding the 2014 second quarter. I’ll cover various other financial information including our second quarter release. Gross profit representing revenue less the cost of purchased transportation and commissions to agents was $121.6 million or 14.9% of revenue in the 2014 second quarter compared to $103.6 million or 15.4% of revenue in the 2013 quarter. The increase in gross profit was attributable to increased revenue, partially offset by a decrease in the 2014 second quarter gross profit margin. The rate of purchased transportation paid to truck brokerage carriers in the 2014 second quarter was 70 basis points higher than the rate of purchased transportation paid to truck brokerage carriers in the 2013 second quarter while the rate of commissions paid to agents on that net revenue decreased 40 basis points. Additionally approximately 30% of the decrease in the 2014 gross profit margin was due to a decrease in the percent of revenue contributed by reinsurance premiums which had no purchased transportation cost or agent commissions. Other operating costs were 5.1% of gross profit in the 2014 quarter compared to 4% in the 2013 quarter. This increase in other operating cost as a percent of gross profit was due to lower gains on sales of trailer equipment as gains on sales of trailer equipment in the 2014 second quarter were approximately $700,000.00 compared to $1.7 million in the 2013 second quarter and increase trailer maintenance and other trailering equipment cost. Insurance and claims cost were 11.4% of gross profit in both 2014 and 2013 second quarter. Although insurance and claims cost were 3.5% of BCO revenue in both the 2014 and 2013 second quarters the 2014 second quarter increased in the absolute dollar of insurance, and claims expense was attributable to unfavorable development of prior…

Thanks, Jim. Through the first several weeks of the 2014 third quarter we have seen the trends experienced in the first half of the year continue as both load volume and revenue per load continue to be at very high levels and exceeding prior year amounts. Historically the revenue generated in any third quarter of the year is similar to the revenue generated in the second quarter of that year. Given that and assuming current revenue trends continue throughout the 2014 third quarter I would anticipate 2014 third quarter revenue and diluted earnings per share to be similar to that of the 2014 second quarter. For comparison purposes Landstar generated earnings per diluted share from continuing operations of $0.62 in the 2013 third quarter on revenue of $675 million. And as I indicated based on our current forecast and the continuation of our current trends I would anticipate healthy increases over those prior year amounts. I am very optimistic as we move into the back half of the year and at this point I see no change in the positive momentum we have generated as we close in on $3 billion of annual revenue. And Carol with that we can take questions.

Thank you very much sir. At this time we will begin the question-and-answer session. (Operator Instructions). Our first question or comment comes from Bill Greene with Morgan Stanley. Your line is open. William Greene – Morgan Stanley: Hi there, good afternoon. Hey Henry and Pat maybe I can ask you to clarify a little bit more on the guidance there. So the trends continue but if we look at the second quarter trends, those were actually much better than the seasonality which suggested a sequential improvement in trend. Now I realize the first quarter had a weather effect there, but are you sort of saying you feel like at this point towards the end of the second quarter things sort of stabilized and that’s why you’re saying trends will kind of continue at that rate or is there conservatism built in there. I’m just trying to get a sense for if – kind of what’s the baseline here?

I think the baseline is when we look at what our second quarter results have always been, they’ve been consistent with the third quarter results. We did see a big pick up in June, that’s normal. The weather impact in the first quarter, I mean I sort of discount that because what we’ve seen is just a continuation of pretty good trends. And you can make a judgment call as far as whether you think these are conservative or not but what we’re saying is that we think the results are going to be very similar to what we experienced in the second quarter and those results were pretty good. So Pat, you got any other thing you want to add to that? Patrick O’Malley: No I agree.

Okay. William Greene – Morgan Stanley: Okay and then can you remind us last year hours of service obviously went into effect, are there puts and takes we need to remember in the third quarter of this year as we start lapping that, so areas of easy or tough comps that you want to remind us about?

Pat I mean if you want to…? Patrick O’Malley: Generally, I think and I think we addressed this, the general moving into this year and you’ve heard a lot of the companies talk about the hours of service that’s going to impact their productivity anywhere from 1% all the way up to as probably as high as 8%, 9%. I said from that standpoint that we didn’t think that was going to impact us to any large degree and that we potentially could benefit from that because of our ability to access capacity and I think that is really the big thing here is that Landstar historically has been able to access capacity. And what you’re seeing a lot in my opinion is people have promised capacity based on all these great computer programs and what not things and what you can’t – if you can’t deliver the capacity it doesn’t mean a lot and that’s what’s happening. And therefore I think we’re starting to get a better relationships inside certain accounts and it’s driving volume and Joe do you want to add anything to that?

Yeah Henry the one thing I want to add Bill is that if you think about much of the Landstar load offerings are ad-hoc unplanned type business and when you have as many loads in the system as we have in the system you tend not to have a productivity impact, right. It’s not like we have defined lane business and all of a sudden we can’t run a lane with one truck and now we have to try to squeeze two in there we can’t find the driver, that’s just not our model. We’ve got more loads in the system now and a few more BCOs but the loads selection for the BCO has improved significantly given there are more actions to ELD or no ELD they’ll just fine. We just – if you look and listen to our BCOs with ELD they don’t seem to be talking about a lack of productivity or a lack of ability that all the freight they want to haul and I just don’t see that changing as we go forward. William Greene – Morgan Stanley: But just to put a final point on it you’re not suggesting that, that creates a tougher comp because obviously you’ve been somewhat advantaged by this change?

No, correct. William Greene – Morgan Stanley: Okay, that’s great. Thank you for the time.

Thanks Bill.

Thank you. Robert Salmon from Deutsche Bank. Your line is open. Robert Salmon – Deutsche Bank: Hey good afternoon guys.

Hey how are you? Robert Salmon – Deutsche Bank: Good thanks, Henry with regard to your outlook when you kind of transit continue to it feels like the June trends accelerated a little bit from what was seen in the month of May, you’re indicating that it could often month of June or just off of the Q2 average overall?

It’s pretty interesting. It’s been pretty consistent into July as far as what we saw from actually the June numbers. I mean the revenue below it is high the volume increases are very good. So yeah, you can look it a bunch of different ways. I mean the July trend is pretty consistent.

And this is Jim, if you look at the comparisons year-over-year that’s one thing. But we’re saying it looks sequentially third quarter looks similar to same quarter and not really talking about growth over prior, when you look at the growth over prior year the revenue per load on truck transportation prior year the comp gets a little tougher because we start climbing rates in to the third and fourth quarter last year. So from a comp standpoint if you are looking over the prior rate the rate started to climb back in the last year. Robert Salmon – Deutsche Bank: That’s helpful I guess Jim, when I’m thinking about the balance sheet debt as a percentage of total capital has come down. It’s about 17% now historically it had been in the 30% to 40% range. How should we think about, should we think about the optimal capital structure around that 30% to 40% or do you feel kind of more comfortable at current levels. I am trying to getting your feeling about potential uses of capital if the balance sheet you guys see it as optimally a little bit more levered than where it is today.

Well you kind of know our model right, there’s three things we can do with our cash. We can pay dividends, we can purchase stock back, whether we look at acquisition opportunities and we often talk about opportunities being few and far between we do look at opportunities but there’s very few that fit into our model. So the two things you’ve got left is dividends and stock buyback. I think you’ll continue to see us do what we’ve historically done is use our cash flow to buy back stock and that’s kind of we only look at the optimal ratio on the balance sheet, we kind of focus more on being opportunistic in the marketplace and right now our balance sheet is very strong.

So there is – and we still have a 1.8 million shares authorized to repurchase. So it’s kind of same as we’ve been just right now we’re we don’t have a lot of debt on the revolver, it’s not we’re not troubled with debt on a revolver. I mean you’ve seen us run the revolver up to a $100 million for stock buybacks. It’s not that we’re starting on the sideline waiting for it just where we sit today. Robert Salmon – Deutsche Bank: Okay so then we should think about free cash flow being used and if there’s an opportunity to get more aggressive with share pull back potentially levering up a little bit that way.

Yes. Robert Salmon – Deutsche Bank: Thanks so much for the time.

Thank you. Our next question or comment is from Jason Seidl from Cowen & Company. Your line is open.

Hey Jason. Jason Seidl – Cowen & Company: Hey guys well personally I hope you guys don’t get that share pull back for years say. When I’m looking out at your guidance you mentioned that you have a $3 million charge in the current quarter based on an accident from last year? Did I hear that correctly?

That is correct. And when Jim mentioned in the unfavorable development of water it was 4.9 million, 3 million is that we came from a single accident that we had on our books at one number and when you take these things to trial, which we thought we were extremely strong in this case and those things happen. Jason Seidl – Cowen & Company: So when you say you’re expecting 3Q to look like 2Q is that excluding the look back action that you recorded or including?

That would be, the second quarter was at 3.5% of BCO, we model to be 3.5% of BCO revenue. Jason Seidl – Cowen & Company: Okay fair enough. My next question you mentioned you noted an increase in utilization we’re talking other carriers and we’re hearing that shippers have more willingness to sort of work with them now that they kind of realizing these capacity issues probably around going to be around for time. Should we expect utilization in your network to creep up in the next couple of quarters? Patrick O’Malley: Well it’s hard to say I mean right now we’re seeing a whole lot of low volume in the system and BCOs making the decisions that only they’ll make right. I think you would expect us to see year-over-year improvement as we did in the second quarter but to what extend it’s hard to say because we really don’t manage the utilization. That’s just a function of available loads and available trucks. So but right now we have got plenty of loads and truck count is moving up and obviously the rate is strong right now and that plays in as well. Jason Seidl – Cowen & Company: Okay, fair enough. Gentlemen thank you for the time as always.

Thanks, thanks Jason.

Thank you. Our next question or comment comes from Scott Group from Wolfe Research. Your line is open.

Hi, Scott. Scott Group – Wolfe Research, LLC: Hi, thanks, good afternoon guys. So wanted to get your perspective on why you think you are seeing so much better growth on the brokerage side then the BCO side in terms of volume. The comps maybe a little bit easier. I don’t know if its end market, maybe just because you got more brokerage capacity just want your perspective on that. And I’m thinking when we start modeling ‘15 should ‘15 be a year where we see another kind of big jump in brokerage volume relative to BCO or should we start thinking of more similar volume in the out years?

Scott I think historically I have always said based on the limited amount of BCOs that are, if I can use the term recruitable, is that a new word I just invented, it’s tougher to basically get that volume growth up as fast as the brokerage. So the real bottom-line is as we secure more load opportunities from our customers there is two choices. It goes to a BCO which have got, I think I said 8,500 trucks approximately run by BCOs versus I’ve got 40,000 in excess of carriers out there with – that have obviously a lot more trucks. So it stands to reason that if I can throw more volume on the system it is going to be hold disproportionately by broker carriers. And that’s really the whole rationale, just a matter how much capacity I have as far as broker-carriers versus BCOs. Scott Group – Wolfe Research, LLC: And do you think the limiting factor right now is your brokerage capacity or the growth from the customer?

Limiting capacity from what regard? Scott Group – Wolfe Research, LLC: You could have done more volume in the quarter if there was more demand from the customer or if you had more access to brokerage capacity?

I think we have access to brokerage capacity. I think it’s just a matter of – and we’ve got lot of loads in the system. I mean overall 21% or whatever was the revenue increase is pretty good. And when you look at just the load volume piece, I mean that’s pretty strong. So I don’t Pat or Joe do you have – I mean that’s kind of a question that’s kind of difficult to answer because we think we did a pretty good job. Scott Group – Wolfe Research, LLC: And I wasn’t implying that you didn’t, you obviously had great volume growth in the quarter. Patrick O’Malley: Yeah. I think I was going to say not to be flip, I think it’s hard to apologize for the revenue growth that we had in the quarter, and particularly on the volume side, Scott we are taking increasing volumes. It’s not just price but that we are winning. Clearly we have an awful lot of demand from the customer base. We talked about where the revenue came from the customer base that it was wide spread throughout different product lines and agents. And so I think the one word that I would kind of think about is the one that Henry used in the opening, and that is we are executing. And we continue to execute. And we think that this market is right for Landstar. Scott Group – Wolfe Research, LLC: Yeah, that makes sense. Just last thing on the pricing side, what’s your view of kind of same store pricing relative to mix or length of haul or do you an explanation for how you are seeing revenue per load up strong double digits right now?

Jim, you got those numbers? I mean obviously I think we had some – in the second quarter and especially as we move through the quarter, I think Pat alluded to this, I think the industrial flatbed platform business got stronger. And that obviously from a mix standpoint, is going to drive that rate or the revenue per load up but Jim maybe you got some more information on…

Yeah. If you try and do apples-to-apples our mix really is mostly whether it’s van or platform right, because a regular van load could be $1,600-$1,700 and a flatbed’s $2,400. So when you look at the pure van revenue per load we grew it from – it was 8% over prior year in first quarter, 13% over. And that’s probably apples-to-apples of where that was coming at. And if you look at the flatbed or the platform equipment we are getting growth there too in the revenue per load, it was 5% over prior year in the first quarter and grew that 11% over prior year in the second quarter. And I think what we are seeing looking forward is that growth is – that revenue per load stabilizes going forward for the next couple of months in both those van plus the flatbed services. Scott Group – Wolfe Research, LLC: Okay, that makes sense. And just did you give the breakout of how much the van volumes are up and how much the platform volumes are up?

We didn’t but we can. Van volumes over prior year were up 12%, flat load could was up 6% over prior year in the second quarter. Scott Group – Wolfe Research, LLC: Okay. Great. All right, thanks guys.

All right.

Thank you. Our next question comes from Jack Atkins from Stephens. Your line is open.

Hi, Jack. Jack Atkins – Stephens Inc.: Hi. Good afternoon, Henry. Thanks for taking my questions. So I guess just to kind of go back to Scott’s question from and may be to ask it little bit different way, I guess would you look at your load board at the end of the day, how many loads on there are not getting filled on average either because of insufficient pricing to attract capacity or just because lack of capacity in general? Does that make sense? I think we are all trying to understand what the ratio is to demand versus capacity out there.

Pat you got – I mean that’s a tough question to answer. I think you got to remember that if our agents want to get paid they’re going to cover that load. But we obviously don’t cover every load. So Pat, I don’t know if you have a… Patrick O’Malley: Yeah, Jack. I think regardless of the environment we probably don’t pick up every load that’s been offered to us. And I think this environment is no different. But I think it’s the volume of the opportunities that is much stronger, certainly in the quarter this year compared to last year. And we anticipate that continuing here in the third quarter. That’s the best answer I can give. Jack Atkins – Stephens Inc.: Okay, no. That makes sense. And then I guess from a bigger picture perspective just trying to understand what’s driving the demand side of things? 9% volume growth in truck transportation and certainly faster than the underlying domestic economic growth, and so just sort of curious from a big picture perspective what you guys think is really driving that, is it the fact that you guys are taking share from asset-based carriers who may be are capacity constrained, are you taking business from new customers or you are growing your business within your existing customer base? Just trying to understand the different puts and takes where that 9% growth is coming from?

I think Pat tried to answer that question in general when he said is the increase is a broad based and I can point to just about everything he just said as far as contributing to what’s happening. You are absolutely correct, the economic growth is not as strong as I think we might have wanted for the last several years since the 2009 recession. But I have always said that with the capacity coming out of market if you got any sort of tick up, a slight tick up, all right is going to put pressure on capacity and it becomes obviously tighter. I think then you’ve got a regulatory environment which has created even more issues. And if you go back in Landstar history whenever there is an issue for capacity Landstar performs at optimum. And that’s what happening now. And what’s interesting about it this is not just one-off where you’ve got the Katrina or you’ve got a flood somewhere where we can rush capacity. This thing is all, I mean it’s across the United States; you’ve got a tight capacity environment. And Landstar is there, and we historically been able to provide capacity whenever there has been a tight capacity environment or there is a need for that. Pat I… Patrick O’Malley: Jack it’s new customers, it’s old, it’s existing accounts, it’s that we are executing very well. We are able to aggregate an awful lot of capacity to bring solutions to our customers. They’ve recognized that. And those opportunities then have grown for Landstar. Jack Atkins – Stephens Inc.: Okay. That’s great. Thanks again for the time, and congratulations on a great quarter.

Thanks, Jack.

Our next question or comment comes from Scott Schneeberger from Oppenheimer. Your line is open.

Hey, Scott. Scott Schneeberger – Oppenheimer & Co. Inc.: Thanks. Hey, guys. I’m going to follow up on Jack’s question. Obviously you quoted 16% of total revs from the top ten, up from 14% year-over-year, so healthy in the top group, and then 62% of growth outside the top 100. I’m going to guess too that from 11 up to a 100 are pretty strong as well. The question in building off of Jack is are there few may be industrial themes that are really helping it? In the past you had the alternative energy vertical can really help or hurt a quarter. Can you elaborate on that a little bit? And any other end markets that you think are worth highlighting? Thanks.

What I love about this quarter is that it’s hard to point out one thing, because we’ve got basically as I said and it’s a broad-based approach. I think if you got the spread between I think it was the top 25 customers group, I mean, remember first quarter a lot of our growth came from the 100 first and smallest customers. I think if you look at one through 100, I think everything is pretty much equally distributed in the second quarter. So I mean you’ve got things coming back pretty nicely and I don’t know if there is anything you want to – I mean there is nothing that I can point out. I know the government increased for the first time in a long time and that was good news. But I don’t Pat, again… Patrick O’Malley: Scott and if you go back to my prepared remarks we cited three kind of the verticals, if you will, automotive, government and what we characterize like consumables were particularly strong in the quarter. But each one of the product lines were pretty strong. Scott Schneeberger – Oppenheimer & Co. Inc.: Thanks, guys. And following up on that, was kind of want to hone in on the alternative energy. That seems to ebb and flows in halves or years. Are you optimistic on that in the back half or is just everything going so well that even if good that’s just going to be a small bit piece?

I got to tell you, is that if it’s strong that’s just gravy on what we are saying. So I mean that’s the best way to answer that. Scott Schneeberger – Oppenheimer & Co. Inc.: All right. Thanks. And then one other if I could. You guys highlighted a lot about the new agents. That sounds like that’s going well I don’t recall hearing anything on $1 million agents or those on the cost. Could you just give little color on those? Thanks.

I would we track that we are on as far as our annual revenue. I mean I would anticipate obviously that our $1 million agents, this purely speculation because it’s hard to factor that in. But I would think that we would have a record number of $1 million agents. Scott Schneeberger – Oppenheimer & Co. Inc.: Okay, thanks so much guys. And well done.

Thanks.

Thank you. Our next question or comment is from Matt Brooklier from Longbow Research. Your line is open. Matthew Brooklier – Longbow Research LLC: Good afternoon. So just to clarify things, Henry, it sounds like you guys didn’t do a lot of wind energy business in 2Q?

No, we did not. Matthew Brooklier – Longbow Research LLC: Okay, and your expectations are that could potentially pick up in the second half of this year?

It could. But as I said that would be great but we are not banking on that. Matthew Brooklier – Longbow Research LLC: Okay. But I mean if it did, would be beneficial from a yield perspective given kind of the profile of that freight.

Correct. Matthew Brooklier – Longbow Research LLC: Okay, and just in a general question, the flatbed market got really tight in second quarter. Trying to get a sense for what were some of the drivers? It obviously sounds like volume picked up nicely. But I’m trying to get a sense for how may be supply constrained that market is and if anything changes the supply side of things within the platform market going forward, do carriers add more capacity? Just trying to feel out that particular market given it’s a little bit more niche. Patrick O’Malley: Matt, I think we’ve said consistently that we believe that we have a competitive advantage in that particular platform area because there is many things that conspire to limit competition, including cost of the equipment, expertise of the operator. Those are two things that really kind of work against someone bringing a lot of capacity in to that market place. So we don’t expect and don’t anticipate a lot of new entrants in to the business on that platform side. Matthew Brooklier – Longbow Research LLC: Okay, and then just last quick question here. The BCO count up nicely in second quarter. Is that just a function of Landstar having more volume at more attractive rates so that you are able to attract incremental BCOs, because right now what we are hearing from asset based trucking companies is drivers are very hard to come by. But just trying to get a sense for if it’s the freight profile I mean opportunities in the system or if you guys are doing anything differently here to recruit BCO capacity?

Well, I will tell you, Matt I mean we do a lot of different things. But really, if you boil it down it is the model and the fact that we are exclusively a third-party capacity company. We pay BCOs on a percentage. So when the prices are moving in the right direction they participate and really benefit from that on day one. 100% of fuel surcharge some of the technology that we use to deliver those to their – to [inaudible]. It’s all of the above really. This is just a terrific environment and then a strong load environment that’s clearly helpful as well. But really all of those things kind of come in to play when you are in this kind of environment. Matthew Brooklier – Longbow Research LLC: Okay, appreciate the time guys.

Thanks Matt.

Our next question or comment comes from John Larkin from Stifel. Your line is open.

Hi, John. John Larkin – Stifel, Nicolaus & Company: Hey, good morning, good afternoon gentlemen. Helpful as well, thanks for taking the questions. About three or four months ago you all rededicated yourselves to sort of the core business, the core strategy the owner-operator BCO agent approach. How much of your great success in the second quarter you attribute to that renewed focus and how much of it is just due to tightness of supply and demand in the market place?

I think it’s a combination of a lot of different things. I think with the – as I said before the sale of these supply chain companies I think, the people out in the field are refocused and that helps. I think we have got a – our agent pipeline is strong. Obviously the environment plays in to that, the regulation plays in to that. And as I said before you had a pot and put it all in when you start, I mean it’s just a very good environment for Landstar. And don’t forget with the – tying into that first comment made that whole field reorganization that we did vis-à-vis creating that third field division if you will, I don’t think we have even – I mean we’ve seen some of that benefit, but I think that’s yet to come. So I think we are positioned pretty well. But it’s a lot of different things going on. I don’t want to point to just one thing. And Pat I don’t know if you got anything that you want to add to that. Patrick O’Malley: John, clearly the environment in the market has driven some of the results. There is no question about it. But I would point you to the new agent revenue number which I think is pretty symbolic of Landstar executing very well on the core fundamentals. And that new agent revenue was up 53% when compared to the same second quarter of 2013. And I think that’s a pretty good barometer of how well we are executing and how much of it we are responsible for as opposed to how much just a general market is responsible. John Larkin – Stifel, Nicolaus & Company: Okay. Thank you for that answer. And then just a two part follow on. You said that 40% of the BCOs are equipped with ELDs have you been keeping track of the revenue productivity of those that are equipped and those that are not? And are you worried about sort of a fall-off in productivity as the entire fleet is equipped? And then secondly there are a couple of different brokerage models out there. Yours is somewhat unique as an agent-based model. Would you say that the carrier capacity is more inclined to gravitate in your direction as opposed to a more traditional broker like a Robinson or a TQL or a [Kioti]?

Do want to answer the first question? Patrick O’Malley: Yeah. We don’t currently track the revenue production of an ELD equipped BCO versus a non-ELD equipped BCO, because what we are hearing just from the guys, is they are as busy as they want to be and they are working smarter and harder and they are generally comfortable with the ELDs in our environment and it works pretty well. And because and also based on when they installed it and a host of other things it’s kind of hard to do a true ELD to non-ELD comparison, given the window of time that we’ve been using them and the fact that we are only part of way there.

And one part of John’s question any productivity losses as the fleet… Patrick O’Malley: No, I don’t see the productivity declining for the BCO as the ELD, we haven’t seen anything that would suggest that. And I think we would. I truly believe if there was a huge productivity decline I will be hearing that. We would be seeing terminations for guys who haven’t had an ELD. We are just not seeing that. And on the contrary we are seeing a lot of favorable comments that allows them to focus little bit more on running their business than on doing some of the other stuff that they – the system automates.

And as far as your last part of that piece John, I think getting back to our model of vested interest by that agent to make sure that load gets delivered, and I think that’s makes our model I think stronger than any other model out there because he doesn’t get paid a dime unless he can locate a truck to move freight. So I think as far as you’ve got a guy of 1,500 or 1,300 as far as locations out in the field right now that basically are actively working every single day to basically satisfy a customer. So as long as that customer’s being satisfied and the load is being picked up, I mean that’s the key. And that’s what I think is driving lot of our load volume growth is that where – as we’ve said before we executing on delivering. It’s not a matter of just say hey, if you got the capacity relationships and you can deliver it. And I think that’s what happening here. And that’s why I think our model is excellent in this environment. John Larkin – Stifel, Nicolaus & Company: Thank you.

Okay, thanks John.

Our next question or comment is coming from Todd Fowler from KeyBanc Capital Markets. Your line is open.

Hey, Todd. Todd Fowler – KeyBanc Capital Markets Inc.: Hey, thanks. Hey, Henry. Good afternoon. I jumped on little bit late so I apologize if I missed this, this but the $36.8 million of SG&A here in the quarter it sounds like that there was some incentive comp, is there some catch-up from the first quarter in there and I think I also there were some bad debt. Should we using the $36.8 million as the run rate going forward or is that come down because of the catch-up in the incentive comp and the bad debt here in the quarter?

As you know, as we have talked about this before, our targeted incentive comp rate would be $7 million to $8 million a year and we put up $4.7 million in the quarter and I think we disclosed that we put up $1.9 million in the first quarter. That gives us a total of 6 something, 6.5-6.6 in the first half. If we exceed our expectations as we said, we say that third quarter is going to look similar to the second quarter which would imply that you’re incentive, that your SG&A line is going to look similar to that line item with a similar number for the incentive comp. Do I anticipate a $1 million increase in my customer bad debt, no I don’t. But at this point I say $36 million to $37 million is probably a good number based on what we are projecting in the third quarter. Todd Fowler – KeyBanc Capital Markets Inc.: Okay, that helps. And so the bad debt number was $1 million for this quarter?

Higher than last year was the comment, I believe. Todd Fowler – KeyBanc Capital Markets Inc.: Okay, up a million year-over-year. Okay. And then the last one that I had was the target for 50% net operating margins, I think if we do some math and adjust for incentive comp or the bad debt here this quarter I mean you are very close getting to that. I mean are you at the run rate now where that’s kind of level that the company is operating at and what will be some other factors that could take that higher, is that just now seeing growth on top of system and the cost that you have in place?

Well I think Jim’s demonstrated the operating leveraging that this company has because really what you are taking is that gross profit dollars and dropping them down to the bottom line I think what Jim stated was that by the end of the year his belief is that at this point in time will at that 50% on an annual run rate and that wasn’t – or 70% of that being dropped down and that in theory gets too close to – will be at – don’t know that for a fact but we are going to drop 70% of the gross profit down to operating income that’s going to drive it pretty close I mean Jim, I don’t know if you want to add?

Clearly the incentive comp and the then unfavorable development on IXN if you take those out we would have been 50% more. Todd Fowler – KeyBanc Capital Markets Inc.: Right.

And you got to remember you know seasonally – seasonal softness in the first quarter we were generally like in the low 40% even in the high 30% range. So from an annual basis we took out, your back three quarters have to catch-up for the seasonality in the first quarter so do I anticipate the year being a 50% no but yeah what we have run rate like Henry says, yeah for the back half of the year would expect to be up there but we took out that you know you got to move forward to the first quarter to offset – the first quarter forward is lower, so just seasonals. Todd Fowler – KeyBanc Capital Markets Inc.: Okay. Yeah, no, all of that make sense and that’s helpful and that’s what I was looking forward. Really nice quarter, congratulations. Thanks.

Thanks Todd.

Thank you. Our next question is from Kelly Dougherty from Macquarie. Your line is open.

Good morning, Kelly. Kelly Dougherty – Macquarie: Hi, thanks. Hi. I just wanted to chat about how the current environment impacts your ability to recruit new agents. So I have to imagine in a really tight capacity situation it makes it more difficult for some of these folks to go out and go it alone so, is it the right way to think about that providing the boost to the new agent growth of the coming quarters? And then just when do you think you can kind of comfortably get that new agent revenue back into your normal 3% to 6% range?

Couple of questions, like I have said many times that when an agent needs to be successful is access the capacity and what capacity needs is load volume which we need loads. So right what you’ve got is of course what will attract agents to the Landstar System is the fact that we have got capacity and access capacity because obviously as you alluded to the environment is very tight and it makes it difficult for them to satisfy their customer’s needs so I think that that is I think a critical component of why we are able to secure the new agents. Now as far the new agent revenue 3% to 6%, the $814 million of revenue is a large, large number and we – in fact that’s a record quarter including I believe the years when we have the hurricane revenue, so it’s the largest quarter in Landstar history. So the fact that we have not 3% to 6% yet we increased the total dollars yeah, I’d like to get that number to be 3% to 6% of an $800 million number, that will be great and Pat is going to work on that but you know and he is rolling his eyes at that. But the fact of that, I think the key take away here is we have got a very good agent pipeline we have demonstrated that we bring in new agents in this environment because of our access to capacity and I would anticipate that the total revenue being generate is going to continue to increase especially when we consider the different approach with a third division because we expect some good productivity out of that so that’s a sort of a long winded answer to your question. Kelly Dougherty – Macquarie: Hi, thanks. And just one more quick one, when I think about competition in the brokerage space you obviously have a different model from the one you alluded to. Can you talk about some of the attributes where you might not have as much competition for that sweet box rates. Is it the pipe or freight that you move is it the markets you focus on or are you starting to see to increase competition you know creep into your areas as well?

Yeah, hi, competition is fine I think our model stands out and as I said I mean we’ve got hell lot of carriers or companies out that have the access to the amount of capacity we have and I think what you’ve seen is a lot of customers that might have tried to go with another carrier and they promise lower rates they can’t deliver the capacity it isn’t going to work it does get back to execution phase and we deliver capacity and that’s like the whole gamut, I don’t know, Pat, Jim?

Clearly, I think if you look at it we are going to bring a capacity solution that’s unique. We are either bringing some permanent release BCOs and we are going bring brokerage capacity I think that makes us unique in the marketplace. From an agent perspective if we provide them with the underlying support scale and system they are going to be able to source that capacity better, faster, smaller or easier than some else and then I think Joe alluded it to earlier, listen all we do is business with third-parties, or we do is business with independent contractors and so we’ve kind to build our business and our culture around that and we think that gives us better execution at this point of time. Kelly Dougherty – Macquarie: So would you say that you are starting to see increasing revenue from new customers rather than just an increase share of your current customer or people are starting to realize hey no, either I am not comfortable being able to get this capacity from elsewhere or I have been burned by them if I’m going to move as a new customer over to Landstar. So think about that just you know playing into I guess the other question about 9% volume growth versus the market, I mean how much of that is share gain?

It’s difficult, certainly we have got new customer but you know I’ll repeat what we have said earlier that this entire revenue growth it’s been broad-based it’s across many accounts, agents and product lines and so I am sure there is accounts I know there is accounts that we have taken business from others I mean I know that I am not list them here. But it’s very, very broad based and I think that’s kind of a function of the model, if you think about it, right. Kelly Dougherty – Macquarie: Okay, great. Thanks very much guys.

All right. It’s 3 o’clock we’ll take, we’ll go to 3:15 but then that’s we are going to cut it off.

Our next question or comment is from Allison Landry from Credit Suisse. Your line is open. Allison Landry – Credit Suisse: Thanks, good afternoon. I was wondering if you could just give a little bit more color on your commentary for other operating costs. You mentioned that you saw fewer sales of used trailing equipment. Can you maybe just give us a little bit of context of what you’re seeing in that market and should we expect that trend to persist for the next couple of quarters?

What we basically own and operate about 8,000 trailers mostly van trailers, the 53 foot trailers. And our plan was to turn in 1,400 trailers this year just through a typical replacement cycle and not really upgrading, adding more trailer into the fleet. When we end up in this environment, the 1,400 trailer turn-in is actually we haven’t hit our target for turning those in because obviously the number of loads getting hauled on those trailers is up and higher than what we anticipated coming into the year. So we’re holding on to those trailers a little bit longer and what that does, it drive a little bit more maintenance cost. Allison Landry – Credit Suisse: Okay.

And so do we anticipate – I anticipate we’re going to hold some trailers through the third quarter too that we otherwise would anticipate turning in. So I don’t anticipate the gains that we had seen last year on trailer equipment turn-ins. And it really because we watch and we make sure we run at about 0.9 loads per week per trailer and right now we’re still maintaining that utilization with more trailers into the fleet because there is more revenue out there. Allison Landry – Credit Suisse: Okay, and do you think – and I don’t know if it’s a little bit too early to tell but at this point would you say that it’s probably likely that you’ll hold on to the trailers again in the fourth quarter?

If volume stays where they are, we are going to turn some in but we still probably will maintain a little bit higher trailer account. We also do some short term leases due to fill in just to make it little more variable. But yeah we will hold on to trailers little bit longer. Allison Landry – Credit Suisse: Okay. And then as you…

If it stays like this. Allison Landry – Credit Suisse: Okay. Thank you for the clarification. I just want to go back to a question that Jason asked earlier. So in terms of the insurance and claims typically it’s 3.5% of BCO revenues but this quarter you had the accident. So if we exclude that it’s closer to 2.7% so I guess I am just little bit confused.

Well, Allison don’t be confused. I mean what we’re saying is that typically it’s 3.5%. Yes, we had one unfavorable development, $3 million but that happens. There are things that happen within that all the time and that’s why we try to base it’s just 3.5% because that should compass a lot of variables. And yeah, we didn’t have that $3 million whatever the calculation comes out to be, it would have been that much lower. So I mean we generally had a safe quarter but I think the issue is we had an accident that we took the trial that we had an unfavorable outcome that we actually thought we were in a pretty good shape with and we were kind of surprised. But again we’re going to repeat. I mean 3.5% is what I think everybody should be looking at BCO revenue because it just makes sense and if we don’t have favorable development or unfavorable development the number would have been lower in the quarter, that is correct. Allison Landry – Credit Suisse: Okay. So it’s more a long run average inclusive of one-time items and stuff like that. Okay.

That’s right. Allison Landry – Credit Suisse: Thank you. That’s exactly what I was looking for. Thank you for the time.

Okay, thanks.

Our next question or comment coming from Matt Young from Morningstar. Your line is open.

Hey Matt. Matthew Young – Morningstar: Good afternoon. Hi, thanks. I know we did talk about a lot on the capacity side but I just want to clarify. On the specialized heavy-haul business do you generally have to rely mostly on the BCO capacity for that or can you use third-party carriers? I guess I’m trying to see if there is any reason you could run in your capacity constrain on heavy-haul business if you just had look to BCOs?

Pat, Joe either one?

We got a – Matt this is Joe, we have a pretty good of long time experienced fleet of professional heavy-haul drivers but I guess we also have an increasingly growing amount of material capacity that has come to see Landstar as a very good place to find some quality freight. So and I think we mentioned it earlier, it’s really the quality, the agents’ relationship with the customer and his knowledge of what he is doing within the account really is what drives whether it’s a BCO with his own trailer or whether it’s a broker carrier with their own trailer. It’s really both and I would say on the carrier side that’s a growing component. Matthew Young – Morningstar: Okay. So it is both. And then one last clarification, you mentioned that in July volume increases were very good. Just to clarify that, was that year-over-year, was that sequentially you were talking about?

It’s year-over-year. Matthew Young – Morningstar: It is, okay. That’s it. Thanks.

Thanks.

Thank you. And our last question comes from Thomas Kane from Goldman Sachs. Your line is open. Thomas Kane – Goldman Sachs: Hi. Thank you. Just a quick question on the number of new agents you added in the second quarter?

We added – I don’t know off the top my head. I think it was 87 in the quarter. Thomas Kane – Goldman Sachs: Okay, great. And then based on your ongoing discussions with prospective new agents, would you be able to provide a little bit guidance as to how many new agents you expect further in the second half for the year, just sort of roughly?

Tom, that’s so hard to predict because every different small business guy has a different trigger point as far as when he decides to come over. And it just depends – so for me to say what we anticipate, we try not to actually talk about that because it’s – that’s hard to factor in. I can tell you that the pipeline is large. Thomas Kane – Goldman Sachs: Okay, that’s fair enough. Thank you very much.

Thanks, Tom.

Thank you. At this time I show no further questions. I’d like to turn the call back over to you for closing remarks.

Thanks, Karen, as I said, the quarter was outstanding. First let me go around, is there any other closing remarks from anybody here, no? Patrick O’Malley: No.

The quarter was truly an outstanding quarter. I think as I said also in my prepared remarks I mean it does come right off the heels of a pretty strong first quarter and all indications are that the back half of the year we’re going to continue with that type of performance. So with that I look forward to talking to everyone on our third quarter, mid-quarter update call. Have a great afternoon. Thanks.

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