Jim Todd: Hey, Jack, I’d be happy to. With respect to full year expectations, the stock of compensation and variable programs, you guys have heard me talk about a hypothetical $12 million reset, 2024 versus bear case 2023, based on where we closed out fourth quarter or 2023 and adding on the impact of some CEO transition. My current base case for G&A there is a $17 million headwind year-over-year. And that $17 million is pre any other, what I would call normal wage or benefit inflation. If we look at other operating costs in 2023, we had a tough year there, a very challenging year. Our contract or bad debt provision, which is one of the lumpiest line items in there, was a record and it was about $4.3 million over trailing seven year trends.
So with a cycle inflection mid-year and hopefully that truck turnover rate mean reverting, you could have a $3 million to $4 million tailwind there. And we should bring the register on hopefully a $2 million more a gain. So that’s $5 million of tailwinds on that line. Plus we should have a smaller average size of the trailer fleet and a lower average age. So that could be a little bit of M&T good guys, partially offset by some software development rollout. So that could be some tailwinds there. And then finally on depreciation, we were very disciplined in 2023 on the CapEx side, but we’re starting to take deliveries again of new van trailers. And the cost per trailer headwind there is probably about 20% to 22% as compared to pre-pandemic. So, you’ll start to see that ramp up sequentially prior second quarter.
Jack Atkins: Okay. That’s helpful, Jim. Thank you for that. I guess maybe kind of taking a step back, when, if you guys think about it, there’s been a lot of inflation in the business, Jim, to your point. And then as we kind of think about whether it’s insurance to structurally higher costs there, the technology investments that you’ve made, cargo theft is becoming a much bigger issue to your point, Jim Todd. So I guess, do you feel like that, sort of the traditional revenue splits and that it’s been sort of embedded Landstar’s business for years? You know, our still kind of the right way to kind of split the revenue moving forward? Or do you think there needs to be some changes there? Just given — you’re bearing a lot more costs today in terms of overhead to support your agents and your BCOs than you’ve had to do in the past?
Jim Todd: Not. I wouldn’t imagine we’re going to change splits. Our role here is to support net value to the agent community and the BCOs that are out there. And we always rely on the price to rise with cost rising and we still anticipate that’s going to happen. Now those costs clearly are squeezing us today, but over time, every trucking company out there is dealing with the same stuff we’re dealing with. But eventually it’s going to drive rates up to cover those costs. I just — we’re in a — we’re in this, I don’t want to call it a truck because who knows where the future brings over the next six or eight months. But, we’ve always seen it. We’ve seen the turns, right? We’ve — I’ve been here for 27 years and the pricing on truck generally catches up to the cost inflation over a year or two.
So we expect that to happen. And there’s no thought from this guy sitting here on his last call that we would adjust any of the splits to either the trucks or to the agents. It’s our business model. It’s what we do. Those costs are what we do to support the network.
Jack Atkins: Okay. Maybe just following up on that really briefly though. I mean, would you think about — historically I thought about the incremental margins in terms of incremental gross profit dollars falling to the operating income line just being about 70%, 70. Would there be any reason why that would be different in the next upcycle, Jim?
Jim Todd: I don’t believe so. Because unless you have inflationary pressures or to do what they did over the last two years, that put a lot of pressure on that 70%. But if we get back to a normalized 2% inflation and all that type of stuff, I would think that 70% would still be a valid goal in the organization. This infrastructure is built. Well, clearly over the last five or six years, my goal was to modernize the technology and give them better tools. And you know, they’re pretty far down the path there. So I would think that 70% goal would be a nice goal for 2025 given more reasonable inflationary pressures in the organization.
Jack Atkins: Okay. Thanks again for the time, Jim. Congratulations.
Jim Todd: Thanks, Jack.
Operator: Thank you. We will move to the next question coming from Ravi Shankar of Morgan Stanley. Your line is now open.
Ravi Shankar: Thank you and good morning, gentlemen. So I think there’s been a lot of questions on the BCOs, so maybe we can just shift gears a little bit. Let’s talk about insurance. I think you’ve seen a number of companies across the industry kind of point to huge inflation that area for next year. Seems like an ongoing structural issue. You guys mentioned that in your remarks. We’d love to get a little more detail here. I think you’re exposed to that kind of more than a few others. It has gone up to 5.5%. What’s the long-term future of that business? Is there anything that you guys can do or the industry needs to do to get that under control?
Jim Gattoni: Yes, to get it under control, we have to stop plaintiff’s lawyers from coming up with reasons to take money from us.
Ravi Shankar: Good luck for that.
