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Landstar System Inc. Reports Operating Results (10-Q)

April 30, 2010 | About:

10qk

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Landstar System Inc. (LSTR) filed Quarterly Report for the period ended 2010-03-27.

Landstar System Inc. has a market cap of $2.3 billion; its shares were traded at around $45.77 with a P/E ratio of 31.1 and P/S ratio of 1.1. The dividend yield of Landstar System Inc. stocks is 0.4%. Landstar System Inc. had an annual average earning growth of 11.8% over the past 10 years.LSTR is in the portfolios of Chuck Royce of Royce& Associates, Ron Baron of Baron Funds, RS Investment Management, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

In the Companys 2009 fiscal third quarter, the Company completed the acquisitions of (i) National Logistics Management Co. (together with a limited liability company and certain corporate subsidiaries and affiliates, NLM) and (ii) A3 Integration LLC (A3i) through A3i Acquisition LLC, an entity of which the Company owns 100% of the non-voting, preferred interests and 75% of the voting, common equity interests. A3i is a wholly-owned subsidiary of A3i Acquisition. These two acquisitions are referred to herein collectively as the Recent Acquisitions. NLM and A3i offer customers technology-based supply chain solutions and other value-added services on a fee-for-service basis. NLM and A3i are herein referred to as the Acquired Entities. The results of operations from NLM and A3i are presented as part of the Companys transportation logistics segment. Transportation management fees represented 1% of the Companys transportation logistics segment revenue in the thirteen-week period ended March 27, 2010.

The transportation logistics segment provides a wide range of transportation services and supply chain solutions. Transportation services offered by the Company include truckload and less-than-truckload transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, project cargo and customs brokerage. Supply chain solutions are based on advanced technology solutions offered by the Company and include integrated multi-modal solutions, outsourced logistics, supply chain engineering and warehousing. Also, supply chain solutions can be delivered through a software-as-a-service model. Industries serviced by the transportation logistics segment include automotive products, paper, lumber and building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics, ammunition and explosives and military hardware. In addition, the transportation logistics segment provides transportation services to other transportation companies, including logistics and less-than-truckload service providers. Each of the independent commission sales agents has the opportunity to market all of the services provided by the transportation logistics segment. Freight transportation services are typically charged to customers on a per shipment basis for the physical transportation of freight. Supply chain solution customers are generally charged fees for the services provided. Revenue recognized by the transportation logistics segment when providing capacity to customers to haul their freight is referred to herein as transportation services revenue and revenue for freight management services recognized on a fee-for-service basis is referred to herein as transportation management fees. During the thirteen weeks ended March 27, 2010, transportation services revenue hauled by BCO Independent Contractors, Truck Brokerage Carriers, rail intermodal, ocean cargo carriers and air cargo carriers represented 53%, 41%, 3%, 1%, and 1%, respectively, of the Companys transportation logistics segment revenue.

Revenue for the 2010 thirteen-week period was $548,088,000, an increase of $78,841,000, or 16.8%, compared to the 2009 thirteen-week period. Revenue increased $79,681,000, or 17.3%, at the transportation logistics segment. The increase in revenue at the transportation logistics segment was primarily attributable to an 18% increase in the number of loads hauled, partly offset by a lower revenue per load amount of approximately 2%. Revenue hauled by BCO Independent Contractors, Truck Brokerage Carriers and ocean cargo carriers increased 9%, 34% and 3%, respectively, partially offset by decreased revenue hauled by rail intermodal carriers and air cargo carriers of 24% and 15%, respectively. Included in the 2010 thirteen-week period was $5,085,000 of transportation management fees related to the Acquired Entities. The number of loads in the 2010 period hauled by BCO Independent Contractors, Truck Brokerage Carriers and ocean cargo carriers increased 16%, 27% and 18%, respectively, compared to the 2009 period, while the number of loads hauled by rail intermodal carriers and air cargo carriers decreased 28% and 54%, respectively, over the same period. Revenue per load for loads hauled by Truck Brokerage Carriers, rail intermodal carriers and air cargo carriers increased approximately 5%, 7% and 86%, respectively, compared to the 2009 period. Revenue per load for loads hauled by BCO Independent Contractors and ocean cargo carriers decreased approximately 6% and 12%, respectively, compared to the 2009 period. The increase in revenue per load on Truck Brokerage Carrier revenue was partly attributable to increased fuel surcharges identified separately in billings to customers in the 2010 period compared to the 2009 period. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $18,959,000 and $9,776,000 in the 2010 and 2009 periods, respectively. Fuel surcharges billed to customers on revenue hauled by BCO Independent Contractors are excluded from revenue.

Purchased transportation was 76.1% and 74.9% of revenue in the 2010 and 2009 thirteen-week periods, respectively. The increase in purchased transportation as a percentage of revenue was primarily attributable to increased revenue hauled by Truck Brokerage Carriers, which tends to have a higher cost of purchased transportation, and increased rates of purchased transportation paid to Truck Brokerage Carriers. Commissions to agents were 7.4% of revenue in the 2010 period and 8.1% of revenue in the 2009 period. The decrease in commissions to agents as a percentage of revenue was primarily attributable to decreased gross profit on revenue hauled by Truck Brokerage Carriers. Other operating costs were 1.4% and 1.6% of revenue in the 2010 and 2009 periods, respectively. The decrease in other operating costs as a percentage of revenue was primarily attributable to the effect of increased revenue and lower trailing equipment rental costs in the 2010 period, partly offset by $834,000 of other operating costs of the Acquired Entities in the 2010 period. Insurance and claims were 2.2% of revenue in the 2010 period and 1.9% of revenue in the 2009 period. The increase in insurance and claims as a percentage of revenue was primarily due to increased cost of cargo claims and increased frequency and severity of commercial trucking claims in the 2010 period. Selling, general and administrative costs were 6.7% of revenue in the 2010 period and 7.3% of revenue in the 2009 period. The decrease in selling, general and administrative costs as a percentage of revenue was primarily attributable to the effect of increased revenue and a decreased provision for customer bad debt, partially offset by a $2,400,000 provision for bonuses under the Companys incentive compensation programs in the 2010 period compared to no provision in the 2009 period and $3,944,000 of selling, general and administrative costs of the Acquired Entities in the 2010 period. Depreciation and amortization was 1.1% of revenue in the 2010 period compared with 1.2% in the 2009 period. The decrease in depreciation and amortization as a percentage of revenue was primarily due to the effect of increased revenue.

Interest and debt expense was 0.2% of revenue in the 2010 thirteen-week period, compared to 0.3% in the 2009 period. The decrease in interest and debt expense as a percentage of revenue was primarily attributable to the effect of increased revenue and lower average borrowings on the Companys senior credit facility.

Equity was $279,878,000, or 72% of total capitalization (defined as long-term debt including current maturities plus equity), at March 27, 2010, compared to $268,151,000, or 74% of total capitalization, at December 26, 2009. The increase in equity was primarily a result of net income and the effect of the exercises of stock options during the period, partially offset by the purchase of 120,171 shares of the Companys common stock at a total cost of $4,507,000 and dividends paid by the Company.

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