January 28, 2004 Jacksonville, FL - Landstar System, Inc. (NASDAQ: LSTR) reported 2003 record fourth quarter net income of $15.1 million, or $.49 per diluted share, compared to net income of $14.5 million, or $.44 per diluted share, in the 2002 fourth quarter. Revenue was a record $434.0 million for the thirteen-week period ended December 27, 2003, compared with $394.0 million for the thirteen-week period ended December 28, 2002. Landstar's carrier group of companies generated $326.1 million of revenue in the 2003 fourth quarter compared with $299.4 million in the 2002 fourth quarter. In the 2003 and 2002 fourth quarters, the carrier group invoiced customers $8.7 million and $5.5 million, respectively, of fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar's multimodal services group of companies generated revenue of $100.7 million in the 2003 fourth quarter compared with $87.7 million in the 2002 fourth quarter.
Net income for the 2003 fiscal year was a record $50.7 million, or $1.59 per diluted share. The 2003 fiscal year included $4.2 million of costs to defend and settle the Gulf Bridge lawsuit. These costs, net of related income tax benefits, reduced net income in the 2003 fiscal year by $2.7 million, or $.08 per diluted share. Excluding the costs related to this litigation, net income was $53.4 million, or $1.67 per diluted share, compared to net income of $49.2 million, or $1.47 per diluted share, in the prior year. Revenue in the 2003 fiscal year was a record $1.597 billion, compared to revenue of $1.507 billion in the 2002 year. Landstar's carrier group of companies generated $1.227 billion of revenue in the 2003 full year compared with $1.178 billion in 2002. In the 2003 and 2002 fiscal years, the carrier group invoiced customers $35.1 million and $11.8 million, respectively, of fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar's multimodal services group of companies generated $341.2 million of revenue in the 2003 fiscal year compared with $300.7 million in 2002.
"I am extremely pleased with Landstar's 2003 fourth quarter and full year performance," said Landstar Chairman and CEO Jeff Crowe. "Consolidated revenue increased by more than 10 percent to the highest fourth quarter revenue in Landstar history. Compared to the 2002 fourth quarter, consolidated brokerage revenue increased 18.6 percent, rail intermodal revenue increased 8.6 percent and revenue hauled by Landstar BCOs increased 8.6 percent. Diluted earnings per share in the fourth quarter of 2003 increased 11 percent over the fourth quarter of 2002. Operating margin declined .3 percent in the 2003 fourth quarter compared to the 2002 fourth quarter as adverse claims experience offset an improvement in selling, general and administrative expense," Crowe said. "Revenue for the full year increased 6 percent as consolidated brokerage revenue increased 26 percent. Excluding the cost of the Gulf Bridge litigation, we increased full year diluted earnings per share by almost 14 percent. Our operating margin for the full 2003 fiscal year was 5.3 percent. Excluding the $4,150,000 cost of the Gulf Bridge litigation, it was 5.6 percent, the same as the 2002 operating margin."
"Trailing twelve-month return on average equity remained high at 35 percent and return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. During 2003, we purchased 1,255,051 shares of common stock at a total cost of $73,844,000, as we used the cash generating power of our variable cost business model to enhance shareholder value. The Company has the ability to purchase an additional 1,380,140 shares of its common stock under its authorized share repurchase program."
Continuing, Crowe said, "From a revenue standpoint, we are off to a very good start in 2004 and based upon the current level of business activity, I anticipate the revenue increase in the 2004 first quarter over the 2003 first quarter to be in the range of 6 to 10 percent and in the range of 8 to 12 percent for the 2004 full year." "In the first weeks of 2004, a truck operated by a Landstar BCO was involved in a very serious accident resulting in fatalities. We are still in the process of obtaining the facts concerning this incident and evaluating the potential financial cost of this claim to Landstar. While our evaluation is still preliminary, and investigation continues, it is possible that the ultimate resolution of this claim could result in a charge ranging anywhere from $5 million up to an amount equal to our $10 million self-insured retention amount. A $10 million pre-tax charge would reduce first quarter and full year earnings by approximately $.20 per diluted share. Without predicting the cost, if any, of the ultimate resolution of this claim, but assuming it was equal to Landstar's $10 million self-insured retention, I would anticipate Landstar's earnings for the first quarter of 2004 to be within a range of $.15 to $.21 per diluted share and earnings for the full 2004 fiscal year to be within a range of $1.65 to $1.75 per diluted share."
Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2 p.m. ET. To access the webcast, visit the Company's website at www.landstar.com. Click on Investors and then the webcast icon.
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 and expectations. Terms such as "anticipates," "believes," "estimates," "plans," "predicts," "may," "could", "should," "will," the negative thereof and similar expressions, including any such expressions with respect to our level of comfort with analyst estimates, 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 accident claims; dependence on independent sales agents; dependence on third party capacity providers; disruptions or failures in our computer systems; a downturn in domestic economic growth or growth in the transportation sector; and substantial industry competition. 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.
Landstar's carrier group is comprised of Landstar Gemini, Inc., Landstar Inway, Inc., Landstar Ligon, Inc. and Landstar Ranger, Inc. and delivers excellence in complete over-the-road transportation services. Landstar's multimodal group is comprised of Landstar Express America, Inc. and Landstar Logistics, Inc., providing expedited, contract logistics and intermodal transportation services. All Landstar operating companies are certified to ISO 9001:2000 quality management system standards. Landstar System, Inc.'s common stock trades on The NASDAQ Stock Market® under the symbol LSTR.