Landstar System Reports Third Quarter Results

JACKSONVILLE, Fla., Oct. 14 /PRNewswire-FirstCall/ -- Landstar System, Inc. (Nasdaq: LSTR) reported 2009 third quarter net income of $20.1 million, or $0.39 per diluted share, from revenue of $500.7 million. Net income for the 2008 third quarter was $32.8 million, or $0.62 per diluted share, from revenue of $732.8 million. Included in the 2008 third quarter was net income of $1.7 million, or $0.03 per diluted share, from $27.6 million of revenue for bus capacity provided for evacuation assistance related to the storms that impacted the Gulf Coast in September 2008.

Revenue hauled by third-party truck capacity providers in the third quarter of 2009 was $455.9 million, or 91 percent of revenue, compared to $646.7 million, or 88 percent of revenue, in the 2008 third quarter. Included in revenue hauled by third-party truck capacity providers in the 2009 and 2008 third quarters were $12.3 million and $41.9 million, respectively, of fuel surcharges invoiced to customers on revenue hauled by third-party truck brokerage carriers. In the 2009 and 2008 third quarters, the Company also invoiced customers $36.2 million and $92.5 million, respectively, of fuel surcharges that were passed 100 percent to third-party BCO Independent Contractors and excluded from revenue. Revenue hauled by rail, air and ocean cargo carriers was $31.1 million, or 6 percent of revenue, in the 2009 third quarter compared to $49.1 million, or 7 percent of revenue, in the 2008 third quarter.

Revenue in the thirty-nine-week period ended September 26, 2009 was $1.46 billion compared to $2.04 billion for the 2008 thirty-nine-week period. Net income for the thirty-nine-week period ended September 26, 2009 was $51.8 million, or $1.00 per diluted share, compared to net income of $86.3 million, or $1.62 per diluted share, for the thirty-nine-week period ended September 27, 2008.

Revenue hauled by third-party truck capacity providers in the 2009 thirty-nine-week period was $1.34 billion, or 91 percent of revenue, compared to $1.84 billion, or 90 percent of revenue, in the 2008 thirty-nine-week period. Included in revenue hauled by third-party truck capacity providers in the 2009 and 2008 thirty-nine week periods were $31.3 million and $109.6 million, respectively, of fuel surcharges invoiced to customers on revenue hauled by third-party truck brokerage carriers. In the 2009 and 2008 thirty-nine week periods, the Company also invoiced customers $87.7 million and $240.6 million, respectively, of fuel surcharges that were passed 100 percent to third-party BCO Independent Contractors and excluded from revenue. Revenue hauled by rail, air and ocean cargo carriers was $92.8 million, or 6 percent of revenue, in the 2009 thirty-nine-week period compared to $146.4 million, or 7 percent of revenue, in the 2008 thirty-nine-week period.

Landstar System, Inc. also announced that its Board of Directors has declared a quarterly dividend of $0.045 per share. The dividend is payable on November 27, 2009 to stockholders of record at the close of business on November 2, 2009. It is the intention of the Board of Directors to continue to pay a quarterly dividend. During the 2009 third quarter, Landstar purchased 516,000 shares of its common stock at a total cost of $17.9 million bringing the total number of common shares purchased during the thirty-nine weeks ended September 26, 2009 to 959,700 shares at a total cost of $31.7 million. Under the Company's authorized share purchase programs, the Company currently has a total of 2,040,000 shares of its common stock available for purchase.

Trailing twelve month return on average shareholders' equity remained high at 29 percent and trailing twelve month return on invested capital, net income divided by the sum of average equity plus average debt, was 21 percent.

"In the 2009 third quarter, Landstar's revenue continued to be negatively impacted by the recession in the domestic and global economies," said Landstar President and Chief Executive Officer Henry Gerkens. "As was the case in the 2009 second quarter, revenue declines were experienced across multiple sectors affecting a broad range of accounts. Notable 2009 third quarter over 2008 third quarter revenue declines continued to be generated from the U.S. Department of Defense as well as with respect to our substitute line haul service offering. On a positive note, revenue generated from the automotive sector began to improve for the first time in a couple of years.

"The number of loads hauled in the 2009 third quarter decreased only 11 percent compared to the 2008 third quarter, an improvement from the 16 percent decline experienced in the 2009 second quarter compared to the 2008 second quarter. The number of loads hauled in the 2009 third quarter increased 1 percent over the 2009 second quarter while the number of loads hauled in the 2008 third quarter was 5 percent lower than the number of loads hauled in the 2008 second quarter. I believe this is a clear indication that the decrease in demand that began during the latter part of the 2008 third quarter will provide for easing volume comparisons into the Company's 2009 fourth quarter and continuing into 2010.

"Revenue per load began to stabilize during the 2009 third quarter. On a sequential basis, average revenue per load with respect to the Company's truck transportation services in the 2009 third quarter was approximately equal to the average revenue per load in the 2009 second quarter. The general pricing environment, however, still remains somewhat challenging.

"As a direct result of Landstar's variable cost business model and other cost reduction actions taken in 2009, Landstar was able to generate an operating profit margin of 6.5 percent, despite the very difficult operating environment. Additionally, Landstar's net revenue margin, defined as revenue less purchased transportation and commissions to agents divided by revenue, was 17.7 percent, in the 2009 third quarter, up from 14.8 percent in the 2008 third quarter."

Gerkens continued, "I see a gradually improving overall freight environment, and I believe that the worst is over. I am cautiously optimistic as we close out 2009. The very difficult revenue comparisons to prior year experienced by Landstar throughout 2009 will continue to ease throughout the 2009 fourth quarter. Based on the current trends, I anticipate 2009 fourth quarter revenue to be similar to the 2009 third quarter revenue and diluted earnings per share to be within a range of $0.37 to $0.42 per diluted share."

Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 5 pm ET. To access the webcast, visit the Company's website at www.landstar.com; click on "Investor Relations" and "Webcasts," then click on "Landstar's Third Quarter 2009 Earnings Release Conference Call."

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this press release that are not based on historical facts are "forward-looking statements." This press release contains forward-looking statements, such as statements which relate to Landstar's business objectives, plans, strategies, expectations and intentions. Terms such as "anticipates," "believes," "estimates," "intention," "plans," "predicts," "may," "should," "will," the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: an increase in the frequency or severity of accidents or workers' compensation claims; unfavorable development of existing claims; dependence on independent sales agents; dependence on third-party capacity providers; disruptions or failures in our computer systems; a downturn in domestic or international economic growth or growth in the transportation sector; substantial industry competition; and other operational, financial or legal risks or uncertainties detailed in Landstar's Form 10K for the 2008 fiscal year, described in Item 1A 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.

About Landstar:

Landstar System, Inc. is a non-asset based provider of integrated supply chain solutions. Landstar delivers safe, specialized transportation, warehousing and logistics services to a broad range of customers worldwide utilizing a network of agents, third-party capacity owners and employees. All Landstar transportation companies are certified to ISO 9001:2000 quality management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market® under the symbol LSTR.

www.landstar.com

                                (Tables follow)

                          Landstar System, Inc. and Subsidiary

                            Consolidated Statements of Income

                     (Dollars in thousands, except per share amounts)

                                      (Unaudited)

                      Thirty-Nine Weeks Ended       Thirteen Weeks Ended

                      -----------------------       --------------------

                    September 26,  September 27,  September 26,  September 27,

                       2009           2008           2009           2008

                    -------------  -------------  -------------   ------------

    Revenue         $1,461,081     $2,039,232       $500,670       $732,753

    Investment

     income                954          2,686            279            817

    Costs and expenses:

     Purchased

      transportation 1,090,219      1,573,209        372,328        569,864

     Commissions

      to agents        117,735        153,857         39,484         54,267

     Other

      operating

      costs             21,749         20,814          6,911          6,874

     Insurance and

      claims            29,056         27,159         10,257          8,125

     Selling, general

      and

      administrative    99,690        105,457         33,078         34,499

     Depreciation

      and amortization  17,414         15,558          6,213          5,251

                    -------------  -------------  -------------   ------------

       Total costs

        and expenses 1,375,863      1,896,054        468,271        678,880

                    -------------  -------------  -------------   ------------

    Operating income    86,172        145,864         32,678         54,690

    Interest and

     debt expense        3,093          5,635            957          1,757

                    -------------  -------------  -------------   ------------

    Income before

     income taxes       83,079        140,229         31,721         52,933

    Income taxes        31,466         53,904         11,859         20,116

                    -------------  -------------  -------------   ------------

    Net income          51,613         86,325         19,862         32,817

    Less: Net loss

     attributable to

     the

     noncontrolling

     interest             (214)             -           (214)             -

                    -------------  -------------  -------------   ------------

    Net income

     attributable

     to Landstar

     System, Inc.

     and subsidiary    $51,827        $86,325        $20,076        $32,817

                    =============  =============  =============   ============

    Earnings per

     common share

     attributable to

     Landstar System,

     Inc. and

     subsidiary          $1.01          $1.64         $0.39           $0.62

                    =============  =============  =============   ============

    Diluted earnings

     per share

     attributable to

     Landstar

     System, Inc.

     and subsidiary      $1.01           $1.62         $0.39          $0.62

                    =============  =============  =============   ============

    Average number

     of shares

     outstanding:

      Earnings per

       common share 51,325,000     52,680,000     51,069,000     52,586,000

                    =============  =============  =============   ============

      Diluted

       earnings per

       share        51,507,000     53,142,000     51,245,000     53,028,000

                    =============  =============  =============   ============

    Dividends paid

     per common

     share             $0.1250        $0.1150        $0.0450        $0.0400

                    =============  =============  =============   ============

                          Landstar System, Inc. and Subsidiary

                               Consolidated Balance Sheets

                    (Dollars in thousands, except per share amounts)

                                      (Unaudited)

                                                    Sep. 26,        Dec. 27,

                                                      2009            2008

                                                  -------------   ------------

    ASSETS

    Current assets:

      Cash and cash equivalents                      $68,990        $98,904

      Short-term investments                          23,706         23,479

      Trade accounts receivable, less allowance

        of $7,190 and $6,230                         258,565        315,065

      Other receivables, including advances to

       independent contractors, less allowance

         of $4,808 and $4,298                          9,978         10,083

      Deferred income taxes and

       other current assets                           26,627         27,871

                                                  -------------   ------------

        Total current assets                         387,866        475,402

                                                  -------------   ------------

    Operating property, less accumulated

      depreciation and amortization of

      $119,890 and $106,635                          122,297        124,178

    Goodwill                                          57,297         31,134

    Other assets                                      50,284         32,816

                                                  -------------   ------------

    Total assets                                    $617,744       $663,530

                                                  =============   ============

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

      Cash overdraft                                 $21,219       $32,065

      Accounts payable                               110,029       105,882

      Current maturities of long-term debt            25,988        24,693

      Insurance claims                                26,039        23,545

      Accrued income taxes                            12,456        12,239

      Other current liabilities                       33,941        38,161

                                                  -------------   ------------

        Total current liabilities                    229,672       236,585

                                                  -------------   ------------

    Long-term debt, excluding

     current maturities                               49,053       111,752

    Insurance claims                                  35,667        38,278

    Deferred income taxes                             28,307        23,779

    Shareholders' equity:

      Common stock, $0.01 par value, authorized

       160,000,000 shares, issued 66,192,767

         and 66,109,547 shares                           662           661

      Additional paid-in capital                     159,581       154,533

      Retained earnings                              749,739       704,331

      Cost of 15,357,268 and 14,424,887 shares

        of common stock in treasury                 (636,349)     (605,828)

      Accumulated other

       comprehensive gain (loss)                         251          (561)

                                                  -------------   ------------

        Total Landstar System, Inc. and subsidiary

         shareholders' equity                        273,884       253,136

                                                  -------------   ------------

      Noncontrolling interest                          1,161             -

                                                  -------------   ------------

        Total shareholders' equity                   275,045       253,136

                                                  -------------   ------------

    Total liabilities and

     shareholders' equity                           $617,744      $663,530

                                                  =============   ============

                          Landstar System, Inc. and Subsidiary

                                Supplemental Information

                                        (Unaudited)

                          Thirty-Nine Weeks Ended       Thirteen Weeks Ended

                          -----------------------     ------------------------

                             Sept. 26,  Sept. 27,      Sept. 26,     Sept. 27,

                                2009       2008          2009          2008

                            ---------- ----------     ----------    ----------

    Revenue generated

     through (in thousands):

    ------------------------

      Business Capacity

       Owners (1)             $840,391 $1,070,982      $289,726      $370,787

      Truck Brokerage

       Carriers                495,661    766,262       166,182       275,928

      Rail intermodal           57,094    106,936        20,366        35,338

      Ocean cargo carriers      25,459     29,329         7,941        11,109

      Air cargo carriers        10,259     10,135         2,751         2,686

      Other (2)                 32,217     55,588        13,704        36,905

                            ---------- ----------     ----------    ----------

                            $1,461,081 $2,039,232      $500,670      $732,753

                            ========== ==========      ========      ========

    Number of loads:

    ----------------

      Business Capacity

       Owners (1)              561,840    638,330       196,840       209,250

      Truck Brokerage

       Carriers                363,000    435,250       122,980       146,280

      Rail intermodal           28,600     45,610        10,310        14,610

      Ocean cargo

       carriers                  3,920      3,990         1,330         1,400

      Air cargo carriers         6,440      5,520         1,340         1,650

                            ---------- ----------     ----------    ----------

                               963,800  1,128,700       332,800       373,190

                               =======  =========       =======       =======

    Revenue per load:

    -----------------

      Business Capacity

       Owners (1)               $1,496     $1,678        $1,472        $1,772

      Truck Brokerage

       Carriers                  1,365      1,761         1,351         1,886

      Rail intermodal            1,996      2,345         1,975         2,419

      Ocean cargo

       carriers                  6,495      7,351         5,971         7,935

      Air cargo carriers         1,593      1,836         2,053         1,628

                                                  September 26, September 27,

                                                        2009          2008

                                                     ----------    ----------

    Truck Capacity

    --------------

      Business Capacity Owners (1) (3)                    8,070         8,363

                                                     ----------    ----------

      Truck Brokerage Carriers:

           Approved and active (4)                       14,541        16,400

           Approved                                      10,576         9,120

                                                     ----------    ----------

                                                         25,117        25,520

                                                     ----------    ----------

      Total available truck capacity

       providers                                         33,187        33,883

                                                     ==========    ==========

    Agent Locations                                       1,403         1,403

    ---------------                                  ==========    ==========

    (1) Business Capacity Owners are independent contractors who provide truck

    capacity to the Company under exclusive lease arrangements.

    (2) Includes premium revenue generated by the insurance segment and

    warehousing and supply chain solutions revenue generated by the

    transportation logistics segment. Also, included in the 2008

    thirty-nine-week and thirteen-week periods was $27,638 of revenue for bus

    capacity provided for evacuation assistance related to the storms that

    impacted the Gulf Coast in the third quarter of 2008.

    (3) Trucks provided by Business Capacity Owners were 8,655 and 8,949 at

    September 26, 2009 and September 27, 2008, respectively.

    (4) Active refers to Truck Brokerage Carriers who have moved at least one

    load in the past 180 days.

SOURCE Landstar System, Inc.