Landstar posts higher 3Q net income

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Landstar System Inc. today, Oct. 14, reported net income in the 2010 third quarter of $21.8 million on revenue of $623 million. Under the terms of the purchase agreement by which the company acquired National Logistics Management Co. in July 2009, Landstar agreed to pay an additional purchase price contingent upon the achievement by NLM of certain levels of earnings through 2014. Landstar recently agreed with the prior owner of NLM to buy out the company’s contingent payment obligations in exchange for a total payment of $3.8 million. Excluding the one-time charge of $3.8 million, net income was $24.2 million. Net income in the 2009 third quarter was $20.1 million on revenue of $501 million.

Truck transportation revenue hauled by business capacity owners and truck brokerage carriers was $573.5 million, or 92 percent of revenue, compared to $455.9 million, or 91 percent of revenue. Included in revenue hauled by truck brokerage carriers in the 2010 and 2009 third quarters were $20.3 million and $12.3 million, respectively, of fuel surcharges invoiced to customers. In the 2010 and 2009 third quarters, the company also invoiced customers $48.5 million and $36.2 million, respectively, of fuel surcharges that were passed 100 percent to business capacity owners and excluded from revenue. Revenue hauled by rail, air and ocean cargo carriers was $36.2 million, or six percent of revenue, compared to $31.1 million, or six percent of revenue. Transportation management fee revenue generated by the supply chain solutions companies was $4.3 million, or one percent of revenue, compared to $3.7 million, or one percent of revenue.

Revenue increased 24 percent due to stronger pricing and an increase in the number of loads hauled by business capacity owners, truck brokerage carriers and air and ocean carriers, said Henry Gerkens, chairman, president and chief executive officer of the Jacksonville, Fla.-based company. “The total number of truck transportation loads hauled in the 2010 third quarter increased 10 percent,” Gerkens said. “Additionally, from a pricing standpoint, revenue per load for truck transportation in the 2010 third quarter increased 14 percent.”

Net revenue, defined as revenue less the cost of purchased transportation and commissions to agents, increased 13 percent and, excluding the impact of the one-time charge, operating income increased 21 percent. During the quarter, Landstar purchased 745,220 shares of its common stock at a total cost of $29.6 million. Under the company’s authorized share purchase program, the company currently has a total of 2 million shares of its common stock available for purchase.

Gerkens said the total number of loads hauled in September and early October has been impacted negatively by a significant reduction in the number of loads hauled under the company’s less-than-truckload substitute line-haul service offering. “I expect that trend to continue throughout the company’s 2010 fourth quarter,” said Gerkens, who currently anticipates LTL substitute line-haul revenue to represent only five percent of total 2010 fourth-quarter revenue compared to 13 percent in the prior-year quarter.

“Otherwise, I see moderately increased load volume compared to the 2009 fourth quarter and a strong pricing environment due to tight capacity,” he said. “Assuming current trends continue throughout the 2010 fourth quarter, including the estimated decline in fourth-quarter less-than-truckload substitute line-haul revenue, I would expect 2010 fourth-quarter revenue to be within a range of $580 million to $620 million and net revenue to be in a range of $97 million to $104 million. It also should be noted that the fourth quarter has been the most unpredictable of any quarter in each of the previous five years.”