UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 19, 2006

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)		021238 (Commission File Number)		06-1313069 (I.R.S. Employer Identification No.)
13410 Sutton Park Drive South, Jacksonville, Florida (Address of principal executive offices)				32224 (Zip Code)

(904) 398-9400
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition

On October 19, 2006, Landstar System, Inc. issued a press release announcing results for the third quarter of fiscal 2006. A copy of the press release is attached hereto as Exhibit 99.1.

In the press release attached hereto as Exhibit 99.1, Landstar provided the following information that may be deemed non-GAAP financial measures: (1) percentage change in consolidated revenue for the fiscal quarter ended September 30, 2006, as compared to the fiscal quarter ended September 24, 2005, exclusive of revenue related to emergency transportation services provided primarily under the FAA Contract; (2) operating margin for the fiscal quarter ended September 30, 2006, excluding emergency transportation services provided primarily under the FAA Contract and (3) with respect to the fiscal periods ended September 30, 2006 and September 24, 2005, revenue per load for the global logistics segment, excluding revenue and loads related to emergency transportation services provided primarily under the FAA Contract.

Each of the foregoing financial measures should be considered in addition to, and not as a substitute for, the corresponding GAAP financial information also presented in the press release.

Management believes that it is appropriate to present this financial information for the following reasons: (1) disclosure of these matters will allow investors to better understand the underlying trends in Landstar’s financial condition and results of operations; (2) this information will facilitate comparisons by investors of Landstar’s results as compared to the results of peer companies; (3) a significant portion of the emergency transportation services previously provided under the FAA Contract were provided on the basis of a daily rate for the use of transportation equipment in question, and therefore load and per load information is not necessarily available or appropriate for a significant portion of the related revenue; and (4) management considers this financial information in its decision making.

The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 9.01 Financial Statements and Exhibits

Exhibits

     99.1 News Release dated October 19, 2006 of Landstar System, Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 99.1

For Immediate Release		Contact: Bob LaRose
		Landstar System, Inc.
		www.landstar.com
October 19, 2006		904-398-9400

LANDSTAR SYSTEM REPORTS THIRD QUARTER
DILUTED EARNINGS PER SHARE OF $.53

Jacksonville, FL — Landstar System, Inc. (NASDAQ: LSTR) reported net income for the 2006 third quarter of $30.6 million, or $.53 per diluted share, on revenue of $649 million. Included in the 2006 third quarter results was $29.7 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 third quarter generated $4.5 million of operating income which, net of related income taxes, increased net income by $2.8 million or, $.05 per diluted share. Operating margin in the 2006 third quarter was 8.0 percent. The revenue generated under the FAA contract increased operating margin by 35 basis points in the 2006 period.

Net income for the 2005 third quarter was $34.6 million, or $.58 per diluted share on revenue of $676 million. Included in the 2005 third quarter revenue was $129.8 million of revenue related to disaster relief efforts for the various hurricanes that impacted the United States during the quarter. These transportation services were provided primarily under the FAA contract. The revenue recognized under this contract during the 2005 third quarter generated $22.7 million of operating income which, net of related income taxes, increased net income by $14.0 million, or $.23 per diluted share.

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Landstar’s carrier group of companies generated $461 million of revenue in the 2006 third quarter, compared with revenue of $414 million in the 2005 third quarter. In the 2006 and 2005 third quarters, the carrier group invoiced customers $48.9 million and $32.2 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, comprised of Landstar Express America and Landstar Logistics, generated $180 million of revenue, which included the $29.7 million related to transportation services provided under the FAA contract, in the 2006 third quarter compared with $254 million of revenue, which included $129.8 million related to transportation services provided primarily under the FAA contract, in the 2005 third quarter. Operating margin in the 2005 third quarter was 8.5 percent. The revenue generated under the FAA contract increased operating margin by 213 basis points in the 2005 period.

Net income for the thirty-nine-week period ended September 30, 2006 was $84.4 million, or $1.43 per diluted share, compared to net income of $73.8 million, or $1.22 per diluted share for the 2005 thirty-nine-week period ended September 24, 2005. Included in net income for the 2006 thirty-nine-week period was $12.2 million of operating income related to $86.0 million of revenue from transportation services provided under the FAA contract. This $12.2 million of operating income, net of related income taxes, increased net income $7.5 million, or $.13 per diluted share. Included in net income for the 2005 thirty-nine-week period was $24.2 million of operating income related to the $137.9 million of revenue from transportation services provided primarily under the FAA contract. This $24.2 million of operating income, net of related income taxes, increased net income $14.9 million, or $.25 per diluted share. Revenue was $1,902 million in the 2006 thirty-nine-week period, compared to revenue of $1,717 million in the corresponding 2005 period. Landstar’s carrier group of companies generated $1,357 million of revenue in the thirty-nine-week period ended September 30, 2006, compared with $1,198 million in the thirty-nine-week period ended September 24, 2005. In the 2006 and 2005 thirty-nine-week periods, the carrier group invoiced customers $129.4 million and $81.5 million, respectively, of fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar’s global logistics group of companies generated $520 million of revenue, which

LANDSTAR SYSTEM/3

included the $86.0 million related to transportation relief services provided primarily under the FAA contract, in the 2006 thirty-nine-week period compared with $497 million of revenue, which included $137.9 million related to transportation services provided primarily under the FAA contract, in the comparable 2005 period.

Landstar System, Inc. also announced that its Board of Directors has declared its second quarterly dividend of $0.03 per share. The dividend is payable on November 30, 2006, to stockholders of record at the close of business on November 10, 2006. It is the intention of the Board of Directors to continue to pay a quarterly dividend going forward.

Commenting on Landstar’s 2006 third quarter performance, Landstar President and CEO Henry Gerkens said, “Landstar has delivered another quarter of strong growth in our core business, as consolidated revenue exclusive of revenue generated under Landstar Express America’s contract with the FAA increased 13.4 percent. Operating margin, exclusive of the effect of revenue generated under the FAA contract, increased 123 basis points to 7.6 percent.”

Continuing, Gerkens said, “During the quarter Landstar continued the rollout of its warehousing initiative. We have executed contracts providing Landstar a warehousing presence in 25 markets. We have also begun to service our second warehouse customer. Also during the quarter, we increased the total number of approved truck capacity providers by over 700.”

“Trailing twelve month return on average equity remained high at 51 percent and return on invested capital, net income divided by the sum of average equity plus average debt, was 34 percent. During the 2006 third quarter, Landstar purchased 1,415,479 shares of its common stock at a total cost of $59,903,000, bringing the total number shares purchased during 2006 to 2,658,427 at a total cost of $114,597,000,” Gerkens said. “The Company may purchase up to an additional 1,866,800 shares of common stock under its authorized share repurchase program.”

LANDSTAR SYSTEM/4

“The ongoing execution of our share purchase program combined with the Board of Directors’ declaration of the quarterly dividend reflects both the ability of the Landstar business model to generate free cash flow and the Board’s commitment to returning value to the Company’s stockholders.”

Continuing, Gerkens said, “When evaluating Landstar’s 2006 fourth quarter guidance, it should be noted that revenue for the 2005 fourth quarter included approximately $138 million of revenue attributable to transportation services provided under the FAA contract. In addition, Landstar’s 2005 fiscal year was a 53 week year. Thus, the 2005 fourth quarter was a fourteen-week period, running from September 25, 2005 through December 31, 2005, versus the 2006 fourth quarter which is a thirteen-week period, running from October 1, 2006 through December 30, 2006. I estimate the extra week in the 2005 fourth quarter represented approximately $50 million of revenue. Based upon anticipated business levels, I estimate consolidated revenue for the 2006 fourth quarter to be in a range of $675 million to $715 million, including an estimated $12 million of transportation services that have been requested to be provided under the FAA contract. In addition, making no further assumption as to revenue generated under the FAA contract and including an anticipated charge of approximately $.02 per diluted share attributable to the adoption of Statement of Financial Accounting Standard No. 123R, Share-Based Payment, I estimate earnings for the fourth quarter of 2006 to be within a range of $.47 to $.53 per diluted 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 and expectations. Terms such as “anticipates,” “believes,” “estimates,” “plans,” “predicts,” “may,” “should,” “will,” the negative thereof and similar expressions, are intended to identify forward-looking statements. Such statements are by nature

LANDSTAR SYSTEM/5

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 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 services to a broad range of customers worldwide. 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)

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Landstar System, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)

		Thirty Nine Weeks Ended								Thirteen Weeks Ended
		Sept 30,				Sept 24,				Sept 30,				Sept 24,
		2006				2005				2006				2005
Revenue		$	1,902,477			$	1,717,386			$	649,197			$	676,070
Investment income			2,589				2,087				1,337				852
Costs and expenses:
Purchased transportation			1,430,411				1,286,016				486,102				502,924
Commissions to agents			149,694				135,689				52,173				53,650
Other operating costs			37,125				27,400				14,837				10,785
Insurance and claims			30,230				34,850				9,656				11,946
Selling, general and administrative (1)			102,809				99,923				31,885				36,072
Depreciation and amortization			12,230				11,926				4,180				3,998
Total costs and expenses (1)			1,762,499				1,595,804				598,833				619,375
Operating income (1)			142,567				123,669				51,701				57,547
Interest and debt expense			4,950				3,194				1,808				1,205
Income before income taxes (1)			137,617				120,475				49,893				56,342
Income taxes (1)			53,222				46,664				19,313				21,773
Net income (1)		$	84,395			$	73,811			$	30,580			$	34,569
Earnings per common share (1)		$	1.45			$	1.24			$	0.53			$	0.59
Diluted earnings per share (1)		$	1.43			$	1.22			$	0.53			$	0.58
Average number of shares outstanding:
Earnings per common share			58,229,000				59,416,000				57,287,000				58,494,000
Diluted earnings per share (1)			59,155,000				60,660,000				57,948,000				59,526,000
Dividends paid per common share		$	0.080			$	0.025			$	0.030			$	0.025

LANDSTAR SYSTEM/7

Landstar System, Inc.
Selected Segment Information
(Dollars in thousands)
(Unaudited)

		Thirty Nine Weeks Ended								Thirteen Weeks Ended
		Sept 30,				Sept 24,				Sept 30,				Sept 24,
		2006				2005				2006				2005
External Revenue
Carrier segment		$	1,356,780			$	1,197,614			$	460,847			$	414,093
Global Logistics segment			520,080				496,769				179,613				254,181
Insurance segment			25,617				23,003				8,737				7,796
External revenue		$	1,902,477			$	1,717,386			$	649,197			$	676,070
Operating Income
Carrier segment (1)		$	137,398			$	112,979			$	49,334			$	42,700
Global Logistics segment (1)			25,353				33,403				8,331				24,261
Insurance segment			24,056				17,697				8,967				6,069
Other (1)			(44,240	)			(40,410	)			(14,931	)			(15,483	)
Operating income (1)		$	142,567			$	123,669			$	51,701			$	57,547

LANDSTAR SYSTEM/8

Landstar System, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)

		Sept 30,				Dec 31,
		2006				2005
ASSETS
Current assets:
Cash and cash equivalents		$	82,819			$	29,398
Short-term investments			21,162				20,693
Trade accounts receivable, less allowance of $5,550 and $4,655			357,482				534,274
Other receivables, including advances to independent contractors, less allowance of $5,024 and $4,342			18,827				11,384
Deferred income taxes and other current assets (1)			30,289				21,106
Total current assets (1)			510,579				616,855
Operating property, less accumulated depreciation and amortization of $76,885 and $68,561			103,346				89,131
Goodwill			31,134				31,134
Other assets			33,556				28,694
Total assets (1)		$	678,615			$	765,814
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft		$	29,495			$	29,829
Accounts payable			141,419				164,509
Current maturities of long-term debt			16,860				12,122
Insurance claims			26,526				27,887
Other current liabilities			57,249				65,149
Total current liabilities			271,549				299,496
Long-term debt, excluding current maturities			110,250				154,851
Insurance claims			38,295				37,840
Deferred income taxes			18,139				17,938
Shareholders’ equity:
Common stock, $.01 par value, authorized 160,000,000 shares, issued 64,858,208 and 64,151,902 shares			649				642
Additional paid-in capital (1)			103,225				84,532
Retained earnings (1)			472,292				392,549
Cost of 7,988,710 and 5,344,883 shares of common stock in treasury			(335,767	)			(221,776	)
Accumulated other comprehensive loss			(17	)			(211	)
Note receivable arising from exercise of stock options			—				(47	)
Total shareholders’ equity (1)			240,382				255,689
Total liabilities and shareholders’ equity (1)		$	678,615			$	765,814

LANDSTAR SYSTEM/9

Landstar System, Inc.
Supplemental Information
(Unaudited)

		Thirty Nine Weeks Ended								Thirteen Weeks Ended
		Sept 30,				Sept 24,				Sept 30,				Sept 24,
		2006				2005				2006				2005
Carrier Segment
External revenue generated through (in thousands):
Business Capacity Owners (1)		$	964,260			$	906,581			$	323,664			$	307,359
Other third party truck capacity providers			392,520				291,033				137,183				106,734
		$	1,356,780			$	1,197,614			$	460,847			$	414,093
Revenue per revenue mile		$	2.02			$	1.85			$	2.05			$	1.92
Revenue per load		$	1,613			$	1,484			$	1,652			$	1,545
Average length of haul (miles)			800				803				807				806
Number of loads			841,000				807,000				279,000				268,000
Global Logistics Segment
External revenue generated through (in thousands):
Business Capacity Owners (1) (2)		$	78,308			$	91,508			$	31,145			$	56,173
Other third party truck capacity providers			302,746				285,369				104,445				130,704
Rail, Air, Ocean and Bus Carriers (3)			139,026				119,892				44,023				67,304
		$	520,080			$	496,769			$	179,613			$	254,181
Revenue per load (4)		$	1,482			$	1,489			$	1,428			$	1,498
Number of loads (4)			294,000				241,000				105,000				83,000

		As of				As of
		Sept 30,				Sept 24,
		2006				2005
Capacity
Business Capacity Owners (1) (5)			8,463				7,846
Other third party truck capacity providers:
Approved and active (6)			14,604				13,328
Approved			8,009				8,178
			22,613				21,506
Total available truck capacity providers			31,076				29,352
Agent Locations			1,291				1,131