Landstar System Reports Third Quarter Results

JACKSONVILLE, Fla., Oct. 24, 2013

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2013 third quarter was $627.5 million, or 92 percent of revenue.  Truck transportation revenue hauled via van trailing equipment and unsided/platform equipment represented 59 percent and 38 percent, respectively, of truck transportation revenue in the 2013 third quarter compared to 56 percent and 41 percent, respectively, in the 2012 third quarter.  Less-than-truckload revenue was 3 percent of truck transportation revenue in both the 2013 and 2012 third quarters.  Revenue hauled by rail, air and ocean cargo carriers was $38.8 million in the 2013 third quarter.

Commenting on Landstar's 2013 third quarter performance, Landstar Chairman, President and CEO, Henry Gerkens said, "Revenue in the 2013 third quarter was equal to revenue reported in the Company's 2013 second quarter and at the low-end of the 2013 third quarter revenue guidance provided in our 2013 third quarter mid-quarter update call on August 29th.  Gradual improvement in revenue trends experienced in July and August slowed into September, primarily from a lower than expected number of loads and revenue per load on truck transportation revenue.  During the 2013 third quarter, and consistent with the first half of 2013 compared to the first half of 2012, the Company experienced softness in both the number of loads and revenue per load from revenue hauled on unsided/platform equipment compared to the 2012 third quarter.  Gross profit margin in the 2013 third quarter was in-line with our previously issued guidance; however, operating margin of 43.9 percent was lower than anticipated and was almost entirely  the result of higher than expected insurance and claims expense reported in the 2013 third quarter. The Company's typical historical practice for each quarter is to forecast insurance and claims expense to be equal to Landstar's trailing five year historical average of insurance and claims expense as a percentage of BCO revenue."

"The amount of insurance and claims expense recorded in the 2013 third quarter was much higher than that historical average as a result of increased loss reserve levels.  On the other hand, 2012 third quarter insurance and claims expense as a percentage of BCO revenue was well below that historical five year average due to favorable development of prior year claims.    The unusually large variance in insurance and claims expense in the 2013 third quarter over the 2012 third quarter had a significant unanticipated negative impact on the quarter over quarter comparison of operating income, operating income margin and diluted earnings per share."

Gerkens continued, "The U.S. economy continues to experience very slow growth.  During the first several weeks of October, revenue per load on the Company's truck transportation revenue continues to be lower than prior year, generally due to softness in the unsided/platform service offering.  In particular, the Company has experienced weaker demand for its heavy/specialized services throughout 2013 compared to 2012.  Currently, we do not believe we have seen signs that point to a significant change in U.S. industrial output in the near term.  We also note that there has recently been a great deal of acquisition and divestiture activity in markets in which the Company competes, as well as the transportation sector more generally, and that historically, the Company has looked to be opportunistic but prudent when engaging in acquisition and/or divestiture activity.  In light of this activity, we regularly evaluate acquisition and divestiture opportunities available to us, including in the near term."

"Based on current trends, and assuming insurance and claims expense for the 2013 fourth quarter based on a five year historical average of insurance and claims expense as a percentage of BCO revenue, I anticipate revenue to be in a range of $650 million to $700 million and diluted earnings per share to be within a range of $0.62 to $0.70.  Also, it should be noted that favorable resolutions of various tax matters lowered the Company's effective tax rate in the 2012 fourth quarter.  Those favorable resolutions of tax matters contributed approximately $0.08 per diluted share to the $0.73 diluted earnings per share reported in the 2012 fourth quarter.  No such tax benefits are anticipated in the 2013 fourth quarter.  Also, consistent with our historical practices, our range of estimates on 2013 fourth quarter revenue and diluted earnings per share also does not give effect to the impact of any potential acquisition or divestiture that may be or become available to the Company."

Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2:00 pm ET.  To access the webcast, visit the Company's website at www.landstar.com; click on "Investor Relations" and "Webcasts," then click on "Third Quarter 2013 Earnings Release Conference Call."