Landstar System (LSTR)
Q4 2012 Earnings Call
January 31, 2013 2:00 pm ET
Executives
Henry H. Gerkens - Chairman, Chief Executive Officer, President, Member of Safety & Risk Committee and Member of Strategic Planning Committee
James B. Gattoni - Chief Financial Officer, Principal Accounting Officer and Vice President
Pat O'Malley - President-Landstar Carrier Group
Joseph J. Beacom - Chief Safety & Operations Officer and Vice President
Analysts
Nathan Brochmann - William Blair & Company L.L.C., Research Division
Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
William J. Greene - Morgan Stanley, Research Division
Justin B. Yagerman - Deutsche Bank AG, Research Division
Christopher J. Ceraso - Crédit Suisse AG, Research Division
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division
Scott H. Group - Wolfe Trahan & Co.
Thomas S. Albrecht - BB&T Capital Markets, Research Division
David P. Campbell - Thompson, Davis & Company
John G. Larkin - Stifel, Nicolaus & Co., Inc., Research Division
Matthew S. Brooklier - Longbow Research LLC
Matthew Young - Morningstar Inc., Research Division
Ryan T. Bouchard - Avondale Partners, LLC, Research Division
Presentation
Operator
Good afternoon, and welcome to the Landstar System Inc.'s Year-End 2012 Earnings Release Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time.
Joining us today from Landstar are Henry Gerkens, Chairman, President and CEO; Jim Gattoni, Executive Vice President and CFO; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; and Joe Beacom, Vice President and Chief Safety and Operations Officer.
Now I would like to turn the call over to Mr. Henry Gerkens. Sir, you may begin.
Henry H. Gerkens
Thanks, Dory. Good afternoon, and welcome to the Landstar 2012 Fourth Quarter and Year-End Earnings Conference Call. This conference call will be limited to no matter than 1 hour. [Operator Instructions] Before we begin, let me read the following statements.
The following in the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, I, and other members of Landstar's management team, may make certain statements containing forward-looking statements, such as statements which relate to Landstar's business objectives, plans, strategies and expectations.
Such statements are, by nature, subject to uncertainties and risks including, but not limited to, the operational, financial and legal risks detailed in Landstar's Form 10-K for the 2011 fiscal year described in the section Risk Factors and 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.
2012 was a record-setting year for Landstar as revenue finished just shy of $2.8 billion and diluted earnings per share was $2.77 per diluted share, both metrics, the best in Landstar history. Operating income was $206 million, 12% above that of the prior year, and represented 46.2% of gross profit. Yes, 2012 was a very good year.
Keep in mind that the fiscal year 2012 was a 52-week year whereas the 2011 fiscal year was a 53-week year, which makes our record revenue and earnings per diluted share performance even more impressive. As you may recall, our goals set after the 2009 recession was to be at a 45% annual operating margin within a 3- to 5-year time frame. As we move into the future, Landstar's objective is to continue to increase gross profit dollars and drop that increase to the bottom line, thereby improving our operating margin.
As stated in this morning's press release, Landstar new operating margin goal is to be at a 50% operating margin within a 3- to 5-year time horizon. To accomplish this goal, one of our objectives is to drop at least 70% of the incremental gross profit dollars to operating income. Increased gross profit dollars, effective cost management, continued safety improvement and increased productivity of our capacity and agent base through technology improvement will be the formula to get to our new goal.
Let me now address the 2012 fourth quarter results. As I said in the 2012 third quarter conference call and, again, on our fourth quarter mid-quarter update call, it is important to keep 3 points in mind when looking at the 2012 fourth quarter when compared to the 2011 fourth quarter.
Point one was that the 2011 fourth quarter included an extra week, which I estimate added approximately $25 million to $30 million in additional revenue and approximately $0.06 to diluted earnings per share, thus making absolute comparisons between the 2012 fourth quarter to the 2011 fourth quarter very difficult if not impossible.
Point two was that the 2011 fourth quarter also included a $0.03 per diluted share increase from a favorable tax benefit. As pointed out in this morning's press release, the 2012 fourth quarter included an $0.08 per diluted share increase from a favorable tax benefit.
So if you take these 2 items together and add up the estimated favorable impact to each quarter, you are looking at an estimated $0.08 per diluted share effect on the 2012 fourth quarter earnings per share versus an estimated $0.09 per diluted share effect on the 2011 fourth quarter.
Finally, the third point was that the fourth quarter of any year has historically been the most difficult to forecast. The 2012 fourth quarter was no different. Revenue for the 2012 13-week fiscal fourth quarter was approximately $691 million compared to $718 million in the 2011 14-week fiscal fourth quarter. As I said before, the extra week in the 2011 period makes the 2012 quarter versus the 2011 quarter just about the incomparable.
There were 61 full workdays in the 2012 quarter versus 66 full workdays in the 2011 quarter. On a per full workday basis, loads per day transported via truck were 3.2% higher in the 2012 fourth quarter versus the 2011 fourth quarter. Overall, it was the best Landstar fourth quarter consolidated revenue performance for any 13-week fourth quarter in Landstar's 25-year history.
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