Landstar System Reports Record Second Quarter Earnings Per Diluted Share of $0.53 and Raises its Quarterly Dividend 25 Percent
JACKSONVILLE, Fla., July 19 /PRNewswire-FirstCall/ -- Landstar System, Inc. (Nasdaq: LSTR) reported net income for the thirteen-week period ended June 30, 2007 of $29.7 million, or $0.53 per diluted share, compared to net income of $29.5 million, or $0.50 per diluted share, for the 2006 second quarter. Revenue for the second quarter of 2007 was $633 million compared to $643 million for the 2006 second quarter. Included in the 2006 second quarter was $21 million of revenue for transportation services provided under the contract between Landstar Express America and the United States Department of Transportation/Federal Aviation Administration (the "FAA"). There was no revenue generated under the FAA contract in the 2007 second quarter. Revenue under the FAA contract in the 2006 second quarter generated $2.6 million of operating income which, net of related income taxes, increased net income by $1.6 million or, $0.03 per diluted share. Operating margin in the 2007 second quarter was 7.8 percent, compared to 7.7 percent in the 2006 second quarter. The revenue generated under the FAA contract increased operating margin by 16 basis points in the 2006 second quarter.
Landstar's carrier group of companies generated $470 million of revenue in the thirteen-week period ended June 30, 2007, compared with revenue of $468 million in the thirteen-week period ended July 1, 2006. In the 2007 and 2006 second quarters, the carrier group invoiced customers $43.7 million and $46.7 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 $153 million of revenue in the 2007 thirteen-week period compared with $167 million of revenue, which included $21 million related to transportation services provided primarily under the FAA contract, in the 2006 thirteen-week period.
Net income for the twenty-six-week period ended June 30, 2007 was $51.3 million, or $0.91 per diluted share, on revenue of $1.210 billion compared to net income of $53.8 million, or $0.90 per diluted share, on revenue of $1.253 billion in the 2006 twenty-six-week period. Included in the 2007 and 2006 twenty-six-week periods were $3 million and $56 million, respectively, of revenue for transportation services provided primarily under the FAA contract. The revenue recognized under the FAA contract generated $1.0 million and $7.6 million of operating income in the 2007 and 2006 twenty-six weeks, respectively, which net of related income taxes, increased net income in the 2007 twenty-six-week period by $0.6 million, or $0.01 per diluted share, and increased net income by $4.7 million, or $0.08 per diluted share, in the 2006 twenty-six-week period. In addition, operating income in the 2007 twenty-six week period included a $5.0 million charge for the estimated cost of one severe accident that occurred during the first quarter of 2007. This charge, net of related income tax benefits, reduced net income in the 2007 twenty-six- week period by $3.1 million, or $0.05 per diluted share.
Landstar's carrier group of companies generated $894 million of revenue in the twenty-six week period ended June 30, 2007, compared with $896 million in the twenty-six week period ended July 1, 2006. In the 2007 and 2006 twenty- six week periods, the carrier group invoiced customers $77.4 and $80.5 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 $297 million of revenue, which included $3 million related to transportation services primarily under the FAA contract, in the 2007 twenty-six week period compared with $340 million of revenue, which included $56 million related to the transportation services provided primarily under the FAA contract, in the 2006 twenty-six week period.
Landstar System, Inc. announced that its Board of Directors has declared a quarterly dividend of $0.0375 per share. This represents a 25 percent increase in the Company's quarterly dividend. The dividend is payable on August 31, 2007 to stockholders of record at the close of business on August 10, 2007. It is the intention of the Board of Directors to continue to pay a quarterly dividend.
Landstar System, Inc. also announced that its Board of Directors appointed Mr. Michael A. Henning as a new member of the Board of Directors. Mr. Henning spent most of his career at the accounting firm of Ernst & Young in various capacities, including as Chief Executive Officer at Ernst & Young International and Deputy Chairman of the Firm.
"I am pleased with the performance of the Landstar business model in the 2007 second quarter," said Landstar President and Chief Executive Officer Henry Gerkens. "Operating margin increased 16 basis points over the 2006 second quarter, and an additional 16 basis points, excluding the effect of revenue and operating income generated under the FAA contract in 2006. Diluted earnings per share increased to $0.53, and represented an increase of approximately 13 percent over the 2006 second quarter, excluding the effect of the revenue generated under the FAA contract in 2006. Revenue, excluding the $21 million of revenue generated under the FAA contract in the 2006 second quarter, increased approximately 2 percent over prior year despite an inconsistent freight environment."
"Landstar continues to generate outstanding returns. Trailing twelve month return on average shareholders' equity remained high at 46 percent and return on invested capital, net income divided by the sum of average equity plus average debt, was 32 percent. During the 2007 second quarter, Landstar purchased 950,763 shares of its common stock at a total cost of $44,169,000 bringing the total number of common shares purchased in the first half of 2007 to 1,506,715 at a total cost of $67,754,000. The Company may purchase an additional 1,320,786 shares of its common stock under its authorized share purchase program."
Gerkens continued, "The third quarter of 2006 included $30 million in revenue generated under the FAA contract. We estimate in the 2007 third quarter approximately $1.0 million of such revenue. Based upon current business levels, no change in the current freight environment, and excluding FAA revenue from both the 2007 and 2006 third quarter, I anticipate revenue to increase in a mid single digit range quarter over quarter. Diluted earnings per share in the 2006 third quarter was $0.53, which included $0.05 per diluted share from the revenue recognized under the FAA contract. Based upon our current revenue forecast, I anticipate diluted earnings per share for the third quarter of 2007 to be within a range of $0.50 to $0.55 per diluted share."
Commenting on the appointment of Michael Henning to Landstar's Board of Directors, Gerkens said, "We are pleased to have Michael join us as an independent director. His international experience will be of great benefit as we continue to look at opportunities for global expansion."
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 "Investor Relations" and "Webcasts", then click on "Landstar's Second Quarter 2007 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 2006 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 subsidiary Landstar Express America, 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(R) under the symbol LSTR.
(Tables follow) Landstar System, Inc. Consolidated Statements of Income (Dollars in thousands, except per share amounts) (Unaudited) Twenty Six Weeks Ended Thirteen Weeks Ended June 30, July 1, June 30, July 1, 2007 2006 2007 2006 Revenue $1,209,601 $1,253,280 $632,952 $643,238 Investment income 2,997 1,252 1,257 873 Costs and expenses: Purchased transportation 912,835 944,309 478,777 486,059 Commissions to agents 97,404 97,521 50,772 50,510 Other operating costs 13,222 22,288 7,716 10,220 Insurance and claims 29,559 20,574 12,019 9,022 Selling, general and administrative 63,920 70,924 30,755 35,088 Depreciation and amortization 9,279 8,050 4,662 3,957 Total costs and expenses 1,126,219 1,163,666 584,701 594,856 Operating income 86,379 90,866 49,508 49,255 Interest and debt expense 2,700 3,142 1,108 1,292 Income before income taxes 83,679 87,724 48,400 47,963 Income taxes 32,405 33,909 18,730 18,498 Net income $51,274 $53,815 $29,670 $29,465 Earnings per common share $0.92 $0.92 $0.53 $0.50 Diluted earnings per share $0.91 $0.90 $0.53 $0.50 Average number of shares outstanding: Earnings per common share 55,761,000 58,700,000 55,597,000 58,499,000 Diluted earnings per share 56,328,000 59,665,000 56,191,000 59,287,000 Dividends paid per common share $0.060 $0.050 $0.030 $0.025 Landstar System, Inc. Selected Segment Information (Dollars in thousands) (Unaudited) Twenty Six Weeks Ended Thirteen Weeks Ended June 30, July 1, June 30, July 1, 2007 2006 2007 2006 External Revenue Carrier segment $893,961 $895,933 $470,387 $467,620 Global Logistics segment 297,209 340,467 153,344 167,042 Insurance segment 18,431 16,880 9,221 8,576 External revenue $1,209,601 $1,253,280 $632,952 $643,238 Operating Income Carrier segment $89,878 $88,064 $48,469 $47,493 Global Logistics segment 8,016 17,022 3,328 8,295 Insurance segment 14,009 15,089 10,650 8,413 Other (25,524) (29,309) (12,939) (14,946) Operating income $86,379 $90,866 $49,508 $49,255 Landstar System, Inc. Consolidated Balance Sheets (Dollars in thousands, except per share amounts) (Unaudited) June 30, Dec 30, 2007 2006 ASSETS Current assets: Cash and cash equivalents $56,162 $91,491 Short-term investments 20,741 21,548 Trade accounts receivable, less allowance of $4,939 and $4,834 311,125 318,983 Other receivables, including advances to independent contractors, less allowance of $4,694 and $4,512 13,919 14,198 Deferred income taxes and other current assets 31,840 25,142 Total current assets 433,787 471,362 Operating property, less accumulated depreciation and amortization of $80,274 and $77,938 118,067 110,957 Goodwill 31,134 31,134 Other assets 36,395 33,198 Total assets $619,383 $646,651 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdraft $28,067 $25,435 Accounts payable 128,611 122,313 Current maturities of long-term debt 20,097 18,730 Insurance claims 27,364 25,238 Other current liabilities 49,967 58,478 Total current liabilities 254,106 250,194 Long-term debt, excluding current maturities 76,535 110,591 Insurance claims 41,790 36,232 Deferred income taxes 21,154 19,360 Shareholders' equity: Common stock, $.01 par value, authorized 160,000,000 shares, issued 65,410,393 and 64,993,143 shares 654 650 Additional paid-in capital 123,360 108,020 Retained earnings 547,192 499,273 Cost of 10,534,724 and 9,028,009 shares of common stock in treasury (445,416) (377,662) Accumulated other comprehensive income (loss) 8 (7) Total shareholders' equity 225,798 230,274 Total liabilities and shareholders' equity $619,383 $646,651 Landstar System, Inc. Supplemental Information (Unaudited) Twenty Six Weeks Ended Thirteen Weeks Ended June 30, July 1, June 30, July 1, 2007 2006 2007 2006 Carrier Segment External revenue generated through (in thousands): Business Capacity Owners(1) $639,656 $640,596 $340,258 $336,803 Other third party truck capacity providers 254,305 255,337 130,129 130,817 $893,961 $895,933 $470,387 $467,620 Revenue per revenue mile $2.00 $2.00 $2.02 $2.01 Revenue per load $1,591 $1,594 $1,611 $1,607 Average length of haul (miles) 794 797 796 800 Number of loads 562,000 562,000 292,000 291,000 Global Logistics Segment External revenue generated through (in thousands): Business Capacity Owners (1)(2) $52,185 $47,163 $25,344 $22,331 Other third party truck capacity providers 165,895 198,301 85,942 97,674 Rail, Air, Ocean and Bus Carriers(3) 79,129 95,003 42,058 47,037 $297,209 $340,467 $153,344 $167,042 Revenue per load(4) $1,506 $1,504 $1,460 $1,507 Number of loads(4) 195,000 189,000 105,000 97,000 As of As of June 30, July 1, 2007 2006 Capacity Business Capacity Owners(1)(5) 8,431 8,347 Other third party truck capacity providers: Approved and active(6) 15,100 14,034 Approved 8,700 7,977 23,800 22,011 Total available truck capacity providers 32,231 30,358 Agent Locations 1,381 1,249 (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 2007 and 2006 twenty six week periods was $481,000 and $19,438,000, respectively, of revenue attributable to buses provided under the FAA contract. Included in the 2006 thirteen week period was $8,582,000 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 9,036 and 9,047, respectively. (6) Active refers to other third party truck capacity providers who have moved at least one load in the past 180 days.
SOURCE Landstar System, Inc.
CONTACT:
Jim Gattoni of Landstar System, Inc.,
+1-904-398-9400
Web site: http://www.landstar.com
(LSTR)