Landstar System (LSTR) 8-K Landstar System Reports Third Quarter Results

Exhibit 99.1

For Immediate Release	Contact: Jim Gattoni
	Landstar System, Inc.
	www.landstar.com
October 24, 2013	904-398-9400

LANDSTAR SYSTEM REPORTS THIRD QUARTER RESULTS

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported 2013 third quarter net income of $29.2 million, or $0.64 per diluted share, on revenue of $680.5 million. Gross profit margin, representing gross profit (gross profit defined as revenue less the cost of purchased transportation and commissions to agents) divided by revenue, was 16.0 percent and operating margin, representing operating income divided by gross profit, was 43.9 percent. The lower than anticipated operating margin and diluted earnings per share amounts were almost entirely the result of unexpectedly high insurance and claims expense in the 2013 third quarter.

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

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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.”

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“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.”

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,” “expects,” “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 other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third-party capacity providers; decreased demand for transportation services;

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substantial industry competition; disruptions or failures in our computer systems; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; catastrophic loss of a Company facility; acquired businesses; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2012 fiscal year, described in Item 1A Risk Factors, and in 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. is a worldwide, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation logistics services to a broad range of customers utilizing a network of agents, third-party capacity owners and employees. All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2008 environmental, health, safety and security 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. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

	Thirty Nine Weeks Ended				Thirteen Weeks Ended
	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
Revenue	$	1,988,182	$	2,102,164	$	680,521	$	717,168
Investment income		1,111		1,185		366		393
Costs and expenses:
Purchased transportation		1,510,984		1,603,865		517,955		548,162
Commissions to agents		156,480		162,728		53,651		56,036
Other operating costs, net of gains on asset dispositions		15,557		17,635		6,031		6,447
Insurance and claims		37,040		28,411		13,386		8,010
Selling, general and administrative		105,220		113,916		34,244		37,455
Depreciation and amortization		22,833		20,476		7,840		7,072
Total costs and expenses		1,848,114		1,947,031		633,107		663,182
Operating income		141,179		156,318		47,780		54,379
Interest and debt expense		2,367		2,312		856		818
Income before income taxes		138,812		154,006		46,924		53,561
Income taxes		52,360		58,203		17,678		20,460
Net income	$	86,452	$	95,803	$	29,246	$	33,101
Earnings per common share	$	1.87	$	2.05	$	0.64	$	0.71
Diluted earnings per share	$	1.87	$	2.04	$	0.64	$	0.71
Average number of shares outstanding:
Earnings per common share		46,156,000		46,775,000		45,708,000		46,614,000
Diluted earnings per share		46,323,000		46,964,000		45,856,000		46,732,000
Dividends paid per common share	$	—	$	0.170	$	—	$	0.060

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Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

	Sept. 28 2013			Dec. 29, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	97,552		$	74,284
Short-term investments		34,568			35,528
Trade accounts receivable, less allowance of $8,252 and $8,650		394,796			408,787
Other receivables, including advances to independent contractors, less allowance of $3,955 and $4,657		77,169			55,278
Deferred income taxes and other current assets		18,983			18,067
Total current assets		623,068			591,944
Operating property, less accumulated depreciation and amortization of $157,901 and $158,999		184,441			158,953
Goodwill		57,470			57,470
Other assets		85,953			71,054
Total assets	$	950,932		$	879,421
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft	$	26,894		$	33,647
Accounts payable		194,134			188,981
Current maturities of long-term debt		27,347			19,016
Insurance claims		89,877			64,509
Other current liabilities		32,922			38,186
Total current liabilities		371,174			344,339
Long-term debt, excluding current maturities		90,709			95,125
Insurance claims		23,119			21,896
Deferred income taxes and other non-current liabilities		42,669			38,607
Shareholders’ equity:
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,013,297 and 66,859,864 shares		670			669
Additional paid-in capital		178,952			173,976
Retained earnings		1,129,408			1,042,956
Cost of 21,296,347 and 20,411,736 shares of common stock in treasury		(886,135	)		(839,517	)
Accumulated other comprehensive income		366			1,370
Total shareholders’ equity		423,261			379,454
Total liabilities and shareholders’ equity	$	950,932		$	879,421

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Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

	Thirty Nine Weeks Ended				Thirteen Weeks Ended
	September 28, 2013		September 29, 2012		September 28, 2013		September 29, 2012
Revenue generated through (in thousands):
Business Capacity Owners(1)	$	987,914	$	1,057,109	$	342,366	$	355,861
Truck Brokerage Carriers		837,005		886,532		285,183		307,600
Rail intermodal		55,450		55,002		18,762		18,782
Ocean and air cargo carriers		65,082		60,227		20,061		20,100
Other(2)		42,731		43,294		14,149		14,825
	$	1,988,182	$	2,102,164	$	680,521	$	717,168
Number of loads:
Business Capacity Owners(1)		591,200		616,200		198,830		201,050
Truck Brokerage Carriers		495,240		510,360		163,500		176,760
Rail intermodal		22,100		22,290		7,710		7,470
Ocean and air cargo carriers		12,370		11,760		4,330		3,850
		1,120,910		1,160,610		374,370		389,130
Revenue per load:
Business Capacity Owners(1)	$	1,671	$	1,716	$	1,722	$	1,770
Truck Brokerage Carriers		1,690		1,737		1,744		1,740
Rail intermodal		2,509		2,468		2,433		2,514
Ocean and air cargo carriers		5,261		5,121		4,633		5,221
					September 28, 2013		September 29, 2012
Truck Capacity Providers
Business Capacity Owners(1) (3)						7,890		8,074
Truck Brokerage Carriers:
Approved and active(4)						21,171		20,474
Approved						11,143		9,315
						32,314		29,789
Total available truck capacity providers						40,204		37,863

(1) Business Capacity Owners are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.

(2) Includes premium revenue generated by the insurance segment and warehousing and transportation management fee revenue generated by the transportation logistics segment.

(3) Trucks provided by Business Capacity Owners were 8,410 and 8,596 at September 28, 2013 and September 29, 2012, respectively.

(4) Active refers to Truck Brokerage Carriers who have moved at least one load in the past 180 days.