EX-99.1 2 g05291exv99w1.htm EX-99.1 NEWS RELEASE DATED FEBRUARY 1, 2007 EX-99.1 News Release dated February 1, 2007
 

EXHIBIT 99.1
(Landstar Letterhead)
(Landstar address)
     
For Immediate Release
  Contact: Bob LaRose
 
  Landstar System, Inc.
 
  www.landstar.com
February 1, 2007
  904-398-9400
LANDSTAR SYSTEM REPORTS FOURTH QUARTER
DILUTED EARNINGS PER SHARE OF $.50
Jacksonville, FL — Landstar System, Inc. (NASDAQ: LSTR) reported net income for the thirteen-week period ended December 30, 2006 of $28.7 million, or $.50 per diluted share, on revenue of $611 million. Included in the 2006 fourth quarter results was $14.7 million of revenue attributable to transportation services provided primarily under a contract between Landstar Express America and the United States Department of Transportation/Federal Aviation Administration (the “FAA”). The revenue recognized under the FAA contract during the 2006 fourth quarter generated $2.4 million of operating income which, net of related income taxes, increased net income by $1.5 million or, $.03 per diluted share. Operating margin in the 2006 fourth quarter was 8.0 percent. The revenue generated under the FAA contract increased operating margin by 21 basis points in the 2006 period.
Net income for the fourteen-week period ended December 31, 2005 was $41.8 million, or $.70 per diluted share, on revenue of $800 million. Included in the 2005 fourth quarter revenue was $138.0 million of revenue related to disaster relief efforts for the various hurricanes that impacted the United States during the second half of 2005. These transportation services were provided primarily under the FAA contract. The revenue recognized under this contract during the 2005 fourth quarter generated $27.8 million of operating income which, net of related income taxes, increased net income by $16.7 million, or $.28 per diluted share.

 

 

LANDSTAR SYSTEM/2
Operating margin in the 2005 fourth quarter was 8.7 percent. The revenue generated under the FAA contract increased operating margin by 238 basis points in the 2005 period.
Landstar’s carrier group of companies generated $440 million of revenue in the thirteen-week period ended December 30, 2006, compared with revenue of $494 million in the fourteen-week period ended December 31, 2005. In the 2006 and 2005 fourth quarters, the carrier group invoiced customers $38.4 million and $45.4 million, respectively, in fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar’s global logistics group of companies generated $162 million of revenue, which included the $14.7 million related to transportation services provided primarily under the FAA contract, in the 2006 thirteen-week period compared with $298 million of revenue, which included $138.0 million related to transportation services provided primarily under the FAA contract, in the 2005 fourteen-week period.
Net income for the 2006 fiscal year was $113.1 million, or $1.93 per diluted share, compared to net income of $115.6 million, or $1.91 per diluted share for the 2005 fiscal year. Operating margin for the 2006 fiscal year was 7.6 percent compared to 7.7 percent for the 2005 fiscal year. Included in net income for the 2006 fiscal year was $14.6 million of operating income related to $100.7 million of revenue from emergency transportation services provided primarily under the FAA contract. This $14.6 million of operating income, net of related income taxes, increased net income $8.9 million, or $.15 per diluted share. Included in net income for the 2005 fiscal year was $51.9 million of operating income related to $275.9 million of revenue from emergency transportation services provided primarily under the FAA contract. This $51.9 million of operating income, net of related income taxes, increased net income $31.6 million, or $.52 per diluted share. Revenue generated under the FAA contract increased operating margin 29 basis points in the 2006 fiscal year and 137 basis points in the 2005 fiscal year.
Revenue was $2.514 billion in the fifty-two week 2006 fiscal year, compared to revenue of $2.518 billion in the fifty-three week 2005 fiscal year. Landstar’s carrier group of companies generated $1.797 billion of revenue in the 2006 fiscal year, compared with $1.692 billion in the 2005 fiscal year. In the 2006 and 2005 fiscal years, the carrier

 

 

LANDSTAR SYSTEM/3
group invoiced customers $167.8 million and $126.9 million, respectively, of fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar Global Logistics generated $683 million of revenue, which included $100.7 million of revenue related to disaster relief efforts, in the 2006 fiscal year compared with $795 million of revenue, which included $275.9 million related to disaster relief efforts in the 2005 fiscal year.
Landstar System, Inc. also announced that its Board of Directors has declared a quarterly dividend of $0.03 per share. The dividend is payable on February 28, 2007 to stockholders of record at the close of business on February 13, 2007. It is the intention of the Board of Directors to continue to pay a quarterly dividend on a go forward basis.
Commenting on Landstar’s 2006 fourth quarter performance, Landstar President and CEO Henry Gerkens said, “Despite lower than anticipated revenue, Landstar was able to generate earnings per diluted share of $.50 per share. The 2006/2005 fourth quarter comparison is very unusual as the 2005 fourth quarter included an estimated $50 million of revenue attributable to an extra week in the 2005 period and $123 million of additional revenue generated under the FAA contract. These two unique factors combined with soft demand, excess capacity and lower freight rates made the fourth quarter of 2006 even more challenging. However, once again the power of Landstar’s non-asset based variable cost business model combined with the financial benefits attributable to our long term commitment to safety generated better than anticipated operating results and strong earnings per diluted share.”
“Trailing twelve month return on average shareholders’ equity remained high at 45 percent and return on invested capital, net income divided by the sum of average equity plus average debt, was 30 percent. During the 2006 fourth quarter, Landstar purchased 1,039,299 shares of its common stock at a total cost of $41,895,000, bringing the total number of shares purchased during 2006 to 3,697,726 at a total cost of $156,492,000,” Gerkens said. “The Company may purchase up to an additional 827,501 shares of common stock under its authorized share repurchase program.”

 

 

LANDSTAR SYSTEM/4
“In 2006 Landstar used its free cash flow to purchase over $156 million of Landstar common stock and to reduce debt by $37.7 million. Landstar ended 2006 with cash and short term investments of $113 million. It is Landstar’s intention to continue to use its free cash flow to enhance shareholder value.”
Gerkens continued, “January of any given year is typically the slowest month of the year. Through January 2007, I have seen little change in the operating environment experienced in the second half of the 2006 fourth quarter, and that is soft demand, over capacity and downward pressure on price. I am anticipating that this environment will continue throughout the first part of 2007 and will gradually improve as the year goes on. In addition, the 2006 first quarter and full year results included $35.4 million and $100.7 million, respectively, of revenue generated under the FAA contract. We are not forecasting any such revenue in 2007 even though the contract has been extended through June 30, 2007 and the FAA has an option to extend the contract for the balance of the year. Given the above, I anticipate revenue for the first quarter of 2007 as compared to the first quarter of 2006, which included $35.4 million of FAA revenue, to be down slightly, while revenue growth for the full 2007 fiscal year versus 2006, which included $100.7 million of FAA revenue, to be in the mid single digits. I anticipate Landstar’s earnings for the 2007 first quarter to be within a range of $.37 to $.43 per diluted share and I anticipate diluted earnings per share for the 2007 full fiscal year to be within a range of $1.95 to $2.20 per share.”
Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2 pm ET. To access the webcast, visit the company’s website at www.landstar.com. Click on Investors and then the webcast icon.
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:

 

 

LANDSTAR SYSTEM/5
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 2005 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. delivers safe, specialized transportation and logistics services to a broad range of customers world-wide. The Company identifies and fulfills shippers’ needs through the coordination of individual businesses comprised of independent sales agents and third-party transportation capacity providers. Landstar’s carrier group, which is comprised of Landstar Gemini, Inc., Landstar Inway, Inc., Landstar Ligon, Inc., Landstar Ranger, Inc. and Landstar Carrier Services, Inc., delivers excellence in complete over-the-road transportation services. Landstar’s global logistics group, which is comprised of Landstar Global Logistics, Inc. and its subsidiaries Landstar Express America, Inc. and Landstar Logistics, Inc., provides international and domestic multimodal (over-the-road, air, ocean and rail) transportation, expedited, contract logistics and warehousing services. All Landstar operating 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.
(tables follow)

 

 

LANDSTAR SYSTEM/6
Landstar System, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
                                 
    Fiscal Year Ended   Fiscal Quarter Ended
    Dec 30,   Dec 31,   Dec 30,   Dec 31,
    2006   2005   2006   2005
Revenue
   $ 2,513,756     $ 2,517,828     $ 611,279     $ 800,442  
Investment income
     4,250       2,695       1,661       608  
 
                                
Costs and expenses:
                                
Purchased transportation
     1,890,755       1,880,431       460,344       594,415  
Commissions to agents
     199,775       203,730       50,081       68,041  
Other operating costs
     45,700       36,709       8,575       9,309  
Insurance and claims
     39,522       50,166       9,292       15,316  
Selling, general and administrative (1)
     134,239       140,345       31,430       40,422  
Depreciation and amortization
     16,796       15,920       4,566       3,994  
 
                                
 
                                
Total costs and expenses (1)
     2,326,787       2,327,301       564,288       731,497  
 
                                
 
                                
Operating income (1)
     191,219       193,222       48,652       69,553  
Interest and debt expense
     6,821       4,744       1,871       1,550  
 
                                
 
                                
Income before income taxes (1)
     184,398       188,478       46,781       68,003  
Income taxes (1)
     71,313       72,880       18,091       26,216  
 
                                
 
                                
Net income (1)
   $ 113,085     $ 115,598     $ 28,690     $ 41,787  
 
                                
 
                                
Earnings per common share (1)
   $ 1.95     $ 1.95     $ 0.51     $ 0.71  
 
                                
 
                                
Diluted earnings per share (1)
   $ 1.93     $ 1.91     $ 0.50     $ 0.70  
 
                                
 
                                
Average number of shares outstanding:
                                
Earnings per common share
     57,854,000       59,199,000       56,728,000       58,610,000  
 
                                
Diluted earnings per share (1)
     58,654,000       60,413,000       57,328,000       59,737,000  
 
                                
 
                                
Dividends paid per common share
   $ 0.110     $ 0.050     $ 0.030     $ 0.025  
 
                                
 
(1)   On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standard No. 123R, Share-Based Payment (“FAS 123R”), under the modified retrospective method. The adoption of FAS 123R resulted in the recognition of a $6,908,000 pretax charge for the fiscal year ended December 30, 2006, which net of related income tax benefits, reduced net income by $4,739,000, or $.08 per common share ($.08 per diluted share). In the fiscal quarter ended December 30, 2006, the implementation of FAS 123R resulted in the recognition of a $1,783,000 pretax charge, which net of related income tax benefits, reduced net income by $1,225,000, or $.02 per common share ($.02 per diluted share).
 
    In the fiscal year ended December 31, 2005, the implementation of FAS 123R resulted in the recognition of a $6,260,000 pretax charge, which net of related income tax benefits, reduced net income by $4,358,000, or $.07 per common share ($.07 per diluted share). In the fiscal quarter ended December 31, 2005, the implementation of FAS 123R resulted in the recognition of a $1,742,000 pretax charge, which net of related income tax benefits, reduced net income by $1,173,000, or $.02 per common share ($.02 per diluted share).

 

 

LANDSTAR SYSTEM/7
Landstar System, Inc.
Selected Segment Information
(Dollars in thousands)
(Unaudited)
                                 
    Fiscal Year Ended   Fiscal Quarter Ended
    Dec 30,   Dec 31,   Dec 30,   Dec 31,
    2006   2005   2006   2005
External Revenue
                                
 
                                
Carrier segment
   $ 1,796,616     $ 1,691,668     $ 439,836     $ 494,054  
Global Logistics segment
     682,542       795,136       162,462       298,367  
Insurance segment
     34,598       31,024       8,981       8,021  
 
                                
 
                                
External revenue
   $ 2,513,756     $ 2,517,828     $ 611,279     $ 800,442  
 
                                
 
                                
Operating Income
                                
 
                                
Carrier segment (1)
   $ 181,550     $ 169,882     $ 44,152     $ 56,903  
Global Logistics segment (1)
     31,433       60,115       6,080       26,712  
Insurance segment
     35,673       19,374       11,617       1,677  
Other (1)
     (57,437 )     (56,149 )     (13,197 )     (15,739 )
 
                                
 
                                
Operating income (1)
   $ 191,219     $ 193,222     $ 48,652     $ 69,553  
 
                                
 
(1)   Amounts for the periods ended December 31, 2005, have been adjusted to reflect the provisions of Statement of Financial Accounting Standard No. 123R, Share-based Payment, under the modified retrospective method implemented by the Company January 1, 2006.

 

 

LANDSTAR SYSTEM/8
Landstar System, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
                 
    Dec 30,   Dec 31,
    2006   2005
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 91,491     $ 29,398  
Short-term investments
     21,548       20,693  
Trade accounts receivable, less allowance of $4,834 and $4,655
     318,983       534,274  
Other receivables, including advances to independent contractors, less allowance of $4,512 and $4,342
     14,198       11,384  
Deferred income taxes and other current assets (1)
     25,142       21,106  
 
                
Total current assets (1)
     471,362       616,855  
 
                
 
                
Operating property, less accumulated depreciation and amortization of $77,938 and $68,561
     110,957       89,131  
Goodwill
     31,134       31,134  
Other assets
     33,198       28,694  
 
                
Total assets (1)
   $ 646,651     $ 765,814  
 
                
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Cash overdraft
   $ 25,435     $ 29,829  
Accounts payable
     122,313       164,509  
Current maturities of long-term debt
     18,730       12,122  
Insurance claims
     25,238       27,887  
Accrued compensation
     11,993       20,299  
Other current liabilities
     46,485       44,850  
 
                
Total current liabilities
     250,194       299,496  
 
                
Long-term debt, excluding current maturities
     110,591       154,851  
Insurance claims
     36,232       37,840  
Deferred income taxes
     19,360       17,938  
 
                
Shareholders’ equity:
                
Common stock, $.01 par value, authorized 160,000,000 shares, issued 64,993,143 and 64,151,902 shares
     650       642  
Additional paid-in capital (1)
     108,020       84,532  
Retained earnings (1)
     499,273       392,549  
Cost of 9,028,009 and 5,344,883 shares of common stock in treasury
     (377,662 )     (221,776 )
Accumulated other comprehensive loss
     (7 )     (211 )
Note receivable arising from exercise of stock options
     —       (47 )
 
                
Total shareholders’ equity (1)
     230,274       255,689  
 
                
Total liabilities and shareholders’ equity (1)
   $ 646,651     $ 765,814  
 
                
 
(1)   Amounts as of December 31, 2005, have been adjusted to reflect the provisions of Statement of Financial Accounting Standard No. 123R, Share-based Payment, under the modified retrospective method implemented by the Company January 1, 2006.

 

 

LANDSTAR SYSTEM/9
Landstar System, Inc.
Supplemental Information
(Unaudited)
                                 
    Fiscal Year Ended   Fiscal Quarter Ended
    Dec 30,   Dec 31,   Dec 30,   Dec 31,
    2006   2005   2006   2005
Carrier Segment
                                
External revenue generated through (in thousands):
                                
Business Capacity Owners (1)
   $ 1,270,649     $ 1,249,159     $ 306,389     $ 342,578  
Other third party truck capacity providers
     525,967       442,509       133,447       151,476  
 
                                
 
   $ 1,796,616     $ 1,691,668     $ 439,836     $ 494,054  
 
                                
 
                                
Revenue per revenue mile
   $ 2.02     $ 1.92     $ 2.02     $ 2.11  
 
                                
Revenue per load
   $ 1,621     $ 1,542     $ 1,647     $ 1,704  
 
                                
Average length of haul (miles)
     803       804       814       806  
 
                                
Number of loads
     1,108,000       1,097,000       267,000       290,000  
 
                                
 
                                
Global Logistics Segment
                                
External revenue generated through (in thousands):
                                
Business Capacity Owners (1)(2)
   $ 103,588     $ 159,273     $ 25,280     $ 67,765  
Other third party truck capacity providers
     396,141       439,604       93,395       154,235  
Rail, Air, Ocean and Bus Carriers (3)
     182,813       196,259       43,787       76,367  
 
                                
 
   $ 682,542     $ 795,136     $ 162,462     $ 298,367  
 
                                
 
                                
Revenue per load (4)
   $ 1,504     $ 1,555     $ 1,589     $ 1,724  
 
                                
Number of loads (4)
     387,000       334,000       93,000       93,000  
 
                                
                 
    As of   As of
    Dec 30,   Dec 31,
    2006   2005
Capacity
                
Business Capacity Owners (1)(5)
     8,516       8,011  
 
                
Other third party truck capacity providers:
                
Approved and active (6)
     15,247       14,014  
Approved
     8,574       8,497  
 
                
 
     23,821       22,511  
 
                
Total available truck capacity providers
     32,337       30,522  
 
                
 
                
Agent Locations
     1,345       1,150  
 
                
 
(1)   Business Capacity Owners are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.
 
(2)   Includes revenue generated through Carrier Segment Business Capacity Owners.
 
(3)   Included in the 2006 fiscal year and fiscal quarter periods was $25,067,000 and $2,035,000, respectively, of revenue attributable to buses provided under the FAA contract. Included in the 2005 fiscal year and fiscal quarter periods was $44,007,000 and $19,536,000, respectively, of revenue attributable to buses provided under the FAA contract.
 
(4)   Number of loads and revenue per load exclude the effect of revenue derived from transportation services provided under the FAA contract.
 
(5)   Trucks provided by business capacity owners were 9,205 and 8,728, respectively.
 
(6)   Active refers to other third party truck capacity providers who have moved at least one load in the past 180 days.