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) February 1, 2007

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware		021238		06-1313069
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

13410 Sutton Park Drive South, Jacksonville, Florida		32224
(Address of principal executive offices)		(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 February 1, 2007, Landstar System, Inc. issued a press release announcing results for the fourth 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 a non-GAAP financial measure: with respect to the fiscal periods ended December 30, 2006 and December 31, 2005, revenue per load for the global logistics segment, excluding revenue and loads related to emergency transportation services provided primarily under a contract between Landstar Express America, Inc. and the United States Department of Transportation/Federal Aviation Administration (the “FAA Contract”).

The foregoing financial measure 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 February 1, 2007 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.

RCL/ac

EXHIBIT 99.1

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.

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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

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

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

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