Henry H. GerkensThanks, Terry, and good afternoon, and welcome to the Landstar 2011 Third Quarter Earnings Conference Call. This call will be limited to one hour. In addition, please limit your questions to no more than 2 questions each when the question-and-answer period begins. Before we begin, let me read the following statements. The following is a 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 call, I, and other members of Landstar's management 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 2010 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. The 2011 third quarter was another outstanding quarter for Landstar as earnings per share increased a remarkable 45% over the 2010 third quarter, and 31% if one were to exclude from the 2010 third quarter, the charge for the buyout of the contingent payment obligation in connection with the 2009 acquisition of NLM. It was the seventh consecutive quarter of impressive results. Tracking back to the first quarter of 2010, Landstar has now increased its earnings per share on a quarter over prior year quarter basis in the range of 26% to 40%, excluding the one-time buyout charge recorded in the 2010 third quarter, quite a performance over the past 7 quarters by any measure.
But more importantly, Landstar's future outlook continues to be one of strong performance. Back to the current quarter.In our 2011 third quarter mid-quarter update call, I stated that I expected 2011 third quarter Landstar results to be pretty much in line with the consensus of analyst estimates as reported by FIRST CALL. Actual third quarter 2011 earnings per share was $0.64 per share compared to $0.44 per share in the 2010 third quarter, and $0.02 above the consensus of analysts' estimates. And it was the second consecutive quarter of record quarterly earnings per share. Actual third quarter 2011 operating margin was 44.7%, up from 35.6% in the 2010 third quarter, and up from 39.4% in the 2010 third quarter if you exclude the previously mentioned buyout charge recorded in the 2010 third quarter. It was also up from the 2011 second quarter operating margin of 43.6%. As I've said many times before, Landstar's operating leverage comes from its ability to grow revenue and gross profit dollars from its safety performance and its ability to control costs. We continue to drive our model and we have yet to leverage and take full advantage of our supply chain technology. Over the next several years, I anticipate Landstar would create even more operating leverage as additional revenue is added over our cost structure. Consolidated revenue in the 2011 third quarter was approximately $684 million, up approximately 10% from the revenue generated in the 2010 third quarter. This increase was net of a $31 million or 65% decline in revenue from our low-margin substitute line haul service offering. The decline in substitute line haul revenue has been factored in to all of our prior guidance. Substitute line haul revenue represented only 2.5% of consolidated revenue in the 2011 third quarter versus 7.8% in the 2010 third quarter. Excluding substitute line haul revenue from both the 2011 and 2010 quarters, all other revenue increased a healthy 16%. Read the rest of this transcript for free on seekingalpha.com