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Landstar System Reports Fourth Quarter Diluted Earnings per Share of $.50

JACKSONVILLE, Fla., Feb. 1 /PRNewswire-FirstCall/ -- Landstar System, Inc. (Nasdaq: LSTR) reported net income for the thirteen-week period ended December 30, 2006 of $28.7 million, or $.50 per diluted share, on revenue of $611 million. Included in the 2006 fourth quarter results was $14.7 million of revenue attributable to transportation services provided primarily under a contract between Landstar Express America and the United States Department of Transportation/Federal Aviation Administration (the "FAA"). The revenue recognized under the FAA contract during the 2006 fourth quarter generated $2.4 million of operating income which, net of related income taxes, increased net income by $1.5 million or, $.03 per diluted share. Operating margin in the 2006 fourth quarter was 8.0 percent. The revenue generated under the FAA contract increased operating margin by 21 basis points in the 2006 period.

Net income for the fourteen-week period ended December 31, 2005 was $41.8 million, or $.70 per diluted share, on revenue of $800 million. Included in the 2005 fourth quarter revenue was $138.0 million of revenue related to disaster relief efforts for the various hurricanes that impacted the United States during the second half of 2005. These transportation services were provided primarily under the FAA contract. The revenue recognized under this contract during the 2005 fourth quarter generated $27.8 million of operating income which, net of related income taxes, increased net income by $16.7 million, or $.28 per diluted share.

Operating margin in the 2005 fourth quarter was 8.7 percent. The revenue generated under the FAA contract increased operating margin by 238 basis points in the 2005 period.

Landstar's carrier group of companies generated $440 million of revenue in the thirteen-week period ended December 30, 2006, compared with revenue of $494 million in the fourteen-week period ended December 31, 2005. In the 2006 and 2005 fourth quarters, the carrier group invoiced customers $38.4 million and $45.4 million, respectively, in fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar's global logistics group of companies generated $162 million of revenue, which included the $14.7 million related to transportation services provided primarily under the FAA contract, in the 2006 thirteen-week period compared with $298 million of revenue, which included $138.0 million related to transportation services provided primarily under the FAA contract, in the 2005 fourteen-week period.

Net income for the 2006 fiscal year was $113.1 million, or $1.93 per diluted share, compared to net income of $115.6 million, or $1.91 per diluted share for the 2005 fiscal year. Operating margin for the 2006 fiscal year was 7.6 percent compared to 7.7 percent for the 2005 fiscal year. Included in net income for the 2006 fiscal year was $14.6 million of operating income related to $100.7 million of revenue from emergency transportation services provided primarily under the FAA contract. This $14.6 million of operating income, net of related income taxes, increased net income $8.9 million, or $.15 per diluted share. Included in net income for the 2005 fiscal year was $51.9 million of operating income related to $275.9 million of revenue from emergency transportation services provided primarily under the FAA contract. This $51.9 million of operating income, net of related income taxes, increased net income $31.6 million, or $.52 per diluted share. Revenue generated under the FAA contract increased operating margin 29 basis points in the 2006 fiscal year and 137 basis points in the 2005 fiscal year.

Revenue was $2.514 billion in the fifty-two week 2006 fiscal year, compared to revenue of $2.518 billion in the fifty-three week 2005 fiscal year. Landstar's carrier group of companies generated $1.797 billion of revenue in the 2006 fiscal year, compared with $1.692 billion in the 2005 fiscal year. In the 2006 and 2005 fiscal years, the carrier group invoiced customers $167.8 million and $126.9 million, respectively, of fuel surcharges that were passed on 100 percent to business capacity owners and excluded from revenue. Landstar Global Logistics generated $683 million of revenue, which included $100.7 million of revenue related to disaster relief efforts, in the 2006 fiscal year compared with $795 million of revenue, which included $275.9 million related to disaster relief efforts in the 2005 fiscal year.

Landstar System, Inc. also announced that its Board of Directors has declared a quarterly dividend of $0.03 per share. The dividend is payable on February 28, 2007 to stockholders of record at the close of business on February 13, 2007. It is the intention of the Board of Directors to continue to pay a quarterly dividend on a go forward basis.

Commenting on Landstar's 2006 fourth quarter performance, Landstar President and CEO Henry Gerkens said, "Despite lower than anticipated revenue, Landstar was able to generate earnings per diluted share of $.50 per share. The 2006/2005 fourth quarter comparison is very unusual as the 2005 fourth quarter included an estimated $50 million of revenue attributable to an extra week in the 2005 period and $123 million of additional revenue generated under the FAA contract. These two unique factors combined with soft demand, excess capacity and lower freight rates made the fourth quarter of 2006 even more challenging. However, once again the power of Landstar's non-asset based variable cost business model combined with the financial benefits attributable to our long term commitment to safety generated better than anticipated operating results and strong earnings per diluted share."

"Trailing twelve month return on average shareholders' equity remained high at 45 percent and return on invested capital, net income divided by the sum of average equity plus average debt, was 30 percent. During the 2006 fourth quarter, Landstar purchased 1,039,299 shares of its common stock at a total cost of $41,895,000, bringing the total number of shares purchased during 2006 to 3,697,726 at a total cost of $156,492,000," Gerkens said. "The Company may purchase up to an additional 827,501 shares of common stock under its authorized share repurchase program."

"In 2006 Landstar used its free cash flow to purchase over $156 million of Landstar common stock and to reduce debt by $37.7 million. Landstar ended 2006 with cash and short term investments of $113 million. It is Landstar's intention to continue to use its free cash flow to enhance shareholder value."

Gerkens continued, "January of any given year is typically the slowest month of the year. Through January 2007, I have seen little change in the operating environment experienced in the second half of the 2006 fourth quarter, and that is soft demand, over capacity and downward pressure on price. I am anticipating that this environment will continue throughout the first part of 2007 and will gradually improve as the year goes on. In addition, the 2006 first quarter and full year results included $35.4 million and $100.7 million, respectively, of revenue generated under the FAA contract. We are not forecasting any such revenue in 2007 even though the contract has been extended through June 30, 2007 and the FAA has an option to extend the contract for the balance of the year. Given the above, I anticipate revenue for the first quarter of 2007 as compared to the first quarter of 2006, which included $35.4 million of FAA revenue, to be down slightly, while revenue growth for the full 2007 fiscal year versus 2006, which included $100.7 million of FAA revenue, to be in the mid single digits. I anticipate Landstar's earnings for the 2007 first quarter to be within a range of $.37 to $.43 per diluted share and I anticipate diluted earnings per share for the 2007 full fiscal year to be within a range of $1.95 to $2.20 per share."

Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2 pm 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, expectations and intentions. Terms such as "anticipates," "believes," "estimates," "intention," "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 workers' compensation claims; unfavorable development of existing claims; dependence on independent sales agents; dependence on third party capacity providers; disruptions or failures in our computer systems; a downturn in domestic or international economic growth or growth in the transportation sector; substantial industry competition; and other operational, financial or legal risks or uncertainties detailed in Landstar's Form 10K for the 2005 fiscal year, described in Item 1A 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.

About Landstar:

Landstar System, Inc. delivers safe, specialized transportation and logistics services to a broad range of customers world-wide. The Company identifies and fulfills shippers' needs through the coordination of individual businesses comprised of independent sales agents and third-party transportation capacity providers. Landstar's carrier group, which is comprised of Landstar Gemini, Inc., Landstar Inway, Inc., Landstar Ligon, Inc., Landstar Ranger, Inc. and Landstar Carrier Services, Inc., delivers excellence in complete over-the-road transportation services. Landstar's global logistics group, which is comprised of Landstar Global Logistics, Inc. and its subsidiaries Landstar Express America, Inc. and Landstar Logistics, Inc., provides international and domestic multimodal (over-the-road, air, ocean and rail) transportation, expedited, contract logistics and warehousing services. All Landstar operating companies are certified to ISO 9001:2000 quality management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market(R) under the symbol LSTR.



                              Landstar System, Inc.
                        Consolidated Statements of Income
                 (Dollars in thousands, except per share amounts)
                                   (Unaudited)


                                 Fiscal Year Ended       Fiscal Quarter Ended
                                 Dec 30,     Dec 31,     Dec 30,     Dec 31,
                                  2006        2005        2006        2005

    Revenue                    $2,513,756  $2,517,828    $611,279    $800,442
    Investment income               4,250       2,695       1,661         608

    Costs and expenses:
      Purchased transportation  1,890,755   1,880,431     460,344     594,415
      Commissions to agents       199,775     203,730      50,081      68,041
      Other operating costs        45,700      36,709       8,575       9,309
      Insurance and claims         39,522      50,166       9,292      15,316
      Selling, general and
       administrative (1)         134,239     140,345      31,430      40,422
      Depreciation and
       amortization                16,796      15,920       4,566       3,994

         Total costs and
          expenses  (1)         2,326,787   2,327,301     564,288     731,497

    Operating income (1)          191,219     193,222      48,652      69,553
    Interest and debt expense       6,821       4,744       1,871       1,550

    Income before income
     taxes (1)                    184,398     188,478      46,781      68,003
    Income taxes (1)               71,313      72,880      18,091      26,216

    Net income (1)               $113,085    $115,598     $28,690     $41,787


    Earnings per common
     share (1)                      $1.95       $1.95       $0.51       $0.71

    Diluted earnings per
     share (1)                      $1.93       $1.91       $0.50       $0.70

    Average number of shares
     outstanding:
      Earnings per common
       share                   57,854,000  59,199,000  56,728,000  58,610,000
      Diluted earnings per
       share (1)               58,654,000  60,413,000  57,328,000  59,737,000

    Dividends paid per common
     share                         $0.110      $0.050      $0.030      $0.025


    (1) On January 1, 2006, the Company adopted the provisions of Statement of
    Financial Accounting Standard No. 123R, Share-Based Payment ("FAS 123R"),
    under the modified retrospective method. The adoption of FAS 123R resulted
    in the recognition of a $6,908,000 pretax charge for the fiscal year ended
    December 30, 2006, which net of related income tax benefits, reduced net
    income by $4,739,000, or $.08 per common share ($.08 per diluted share).
    In the fiscal quarter ended December 30, 2006, the implementation of FAS
    123R resulted in the recognition of a $1,783,000 pretax charge, which net
    of related income tax benefits, reduced net income by $1,225,000, or $.02
    per common share ($.02 per diluted share).
        In the fiscal year ended December 31, 2005, the implementation of FAS
    123R resulted in the recognition of a $6,260,000 pretax charge, which net
    of related income tax benefits, reduced net income by $4,358,000, or $.07
    per common share ($.07 per diluted share).  In the fiscal quarter ended
    December 31, 2005, the implementation of FAS 123R resulted in the
    recognition of a $1,742,000 pretax charge, which net of related income tax
    benefits, reduced net income by $1,173,000, or $.02 per common share ($.02
    per diluted share).



                              Landstar System, Inc.
                           Selected Segment Information
                              (Dollars in thousands)
                                   (Unaudited)


                                     Fiscal Year Ended    Fiscal Quarter Ended
                                     Dec 30,     Dec 31,    Dec 30,   Dec 31,
                                      2006        2005       2006      2005

     External Revenue

     Carrier segment               $1,796,616  $1,691,668  $439,836  $494,054
     Global Logistics segment         682,542     795,136   162,462   298,367
     Insurance segment                 34,598      31,024     8,981     8,021

       External revenue            $2,513,756  $2,517,828  $611,279  $800,442



     Operating Income

     Carrier segment (1)             $181,550    $169,882   $44,152   $56,903
     Global Logistics segment (1)      31,433      60,115     6,080    26,712
     Insurance segment                 35,673      19,374    11,617     1,677
     Other (1)                        (57,437)    (56,149)  (13,197)  (15,739)

       Operating income (1)          $191,219    $193,222   $48,652   $69,553


    (1) Amounts for the periods ended December 31, 2005, have been adjusted to
    reflect the provisions of Statement of Financial Accounting Standard No.
    123R, Share-based Payment, under the modified retrospective method
    implemented by the Company January 1, 2006.



                              Landstar System, Inc.
                           Consolidated Balance Sheets
                 (Dollars in thousands, except per share amounts)
                                   (Unaudited)


                                                   Dec 30,            Dec 31,
                                                     2006               2005
    ASSETS
    Current assets:
      Cash and cash equivalents                    $91,491            $29,398
      Short-term investments                        21,548             20,693
      Trade accounts receivable, less
       allowance of $4,834 and $4,655              318,983            534,274
      Other receivables, including advances
       to independent contractors, less
       allowance of $4,512 and $4,342               14,198             11,384
      Deferred income taxes and other
       current assets (1)                           25,142             21,106
        Total current assets (1)                   471,362            616,855

    Operating property, less accumulated
     depreciation and amortization of
     $77,938 and $68,561                           110,957             89,131
    Goodwill                                        31,134             31,134
    Other assets                                    33,198             28,694
    Total assets (1)                              $646,651           $765,814

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Cash overdraft                               $25,435            $29,829
      Accounts payable                             122,313            164,509
      Current maturities of long-term debt          18,730             12,122
      Insurance claims                              25,238             27,887
      Accrued compensation                          11,993             20,299
      Other current liabilities                     46,485             44,850
        Total current liabilities                  250,194            299,496

    Long-term debt, excluding current maturities   110,591            154,851
    Insurance claims                                36,232             37,840
    Deferred income taxes                           19,360             17,938

    Shareholders' equity:
      Common stock, $.01 par value, authorized
       160,000,000 shares, issued 64,993,143
       and 64,151,902 shares                           650                642
      Additional paid-in capital (1)               108,020             84,532
      Retained earnings (1)                        499,273            392,549
      Cost of 9,028,009 and 5,344,883 shares
       of common stock in treasury                (377,662)          (221,776)
      Accumulated other comprehensive loss              (7)              (211)
      Note receivable arising from exercise
       of stock options                                  -                (47)
        Total shareholders' equity (1)             230,274            255,689
    Total liabilities and shareholders'
     equity (1)                                   $646,651           $765,814


    (1) Amounts as of December 31, 2005, have been adjusted to reflect the
    provisions of Statement of Financial Accounting Standard No. 123R, Share-
    based Payment, under the modified retrospective method implemented by the
    Company January 1, 2006.



                                Landstar System, Inc.
                              Supplemental Information
                                     (Unaudited)


                                     Fiscal Year Ended    Fiscal Quarter Ended
                                    Dec 30,     Dec 31,    Dec 30,   Dec 31,
                                      2006        2005       2006      2005
    Carrier Segment
       External revenue generated
        through (in thousands):
            Business Capacity
             Owners (1)            $1,270,649  $1,249,159  $306,389  $342,578
            Other third party
             truck capacity
             providers                525,967     442,509   133,447   151,476
                                   $1,796,616  $1,691,668  $439,836  $494,054

       Revenue per revenue mile         $2.02       $1.92     $2.02     $2.11
       Revenue per load                $1,621      $1,542    $1,647    $1,704
       Average length of haul
        (miles)                           803         804       814       806
       Number of loads              1,108,000   1,097,000   267,000   290,000

    Global Logistics Segment
       External revenue generated
        through (in thousands):
            Business Capacity
             Owners (1) (2)          $103,588    $159,273   $25,280   $67,765
            Other third party
             truck capacity
             providers                396,141     439,604    93,395   154,235
            Rail, Air, Ocean and
             Bus Carriers (3)         182,813     196,259    43,787    76,367
                                     $682,542    $795,136  $162,462  $298,367

       Revenue per load (4)            $1,504      $1,555    $1,589    $1,724
       Number of loads (4)            387,000     334,000    93,000    93,000


                                        As of       As of
                                       Dec 30,     Dec 31,
                                        2006        2005
    Capacity
       Business Capacity
        Owners (1) (5)                  8,516       8,011
       Other third party truck
        capacity providers:
            Approved and active (6)    15,247      14,014
            Approved                    8,574       8,497
                                       23,821      22,511
       Total available truck
        capacity providers             32,337      30,522

    Agent Locations                     1,345       1,150


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

    (2) Includes revenue generated through Carrier Segment Business Capacity
    Owners.

    (3) Included in the 2006 fiscal year and fiscal quarter periods was
    $25,067,000 and $2,035,000, respectively, of revenue attributable to buses
    provided under the FAA contract. Included in the 2005 fiscal year and
    fiscal quarter periods was $44,007,000 and $19,536,000, respectively, of
    revenue attributable to buses provided under the FAA contract.

    (4) Number of loads and revenue per load exclude the effect of revenue
    derived from transportation services provided under the FAA contract.

    (5) Trucks provided by business capacity owners were 9,205 and 8,728,
    respectively.

    (6) Active refers to other third party truck capacity providers who have
    moved at least one load in the past 180 days.

SOURCE Landstar System, Inc.

CONTACT:
Bob LaRose
of Landstar System, Inc.
1-904-398-9400
Web site: http://www.landstar.com