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CST: 18/11/2019 05:35:48   

Landstar System Reports Third Quarter Revenue of $1.012 Billion and Diluted Earnings per Share of $1.35

25 Days ago

JACKSONVILLE, Fla., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $1.35 in the 2019 third quarter on revenue of $1.012 billion. Landstar reported diluted earnings per share of $1.63 on revenue of $1.202 billion in the 2018 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $152.6 million in the 2019 third quarter compared to $171.3 million in the 2018 third quarter. Operating margin, representing operating income divided by gross profit, was 46.3 percent in the 2019 third quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 third quarter was $932.2 million, or 92 percent of revenue, compared to $1.118 billion, or 93 percent of revenue, in the 2018 third quarter. Truckload transportation revenue hauled via van equipment in the 2019 third quarter was $575.0 million compared to $717.0 million in the 2018 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 third quarter was $331.8 million compared to $375.7 million in the 2018 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $59.3 million, or 6 percent of revenue, in the 2019 third quarter compared to $65.7 million, or 5 percent of revenue, in the 2018 third quarter.

Trailing twelve-month return on average shareholders’ equity was 34 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 29 percent. Landstar purchased approximately 175,000 shares of its common stock during the 2019 third quarter at an aggregate cost of approximately $18.8 million. Currently, the Company is authorized to purchase up to approximately 1,151,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of September 28, 2019, the Company had $316 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on December 6, 2019, to stockholders of record as of the close of business on November 12, 2019. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“The current macroeconomic environment made for challenging comparisons against our record 2018 third quarter performance,” said Landstar President and Chief Executive Officer Jim Gattoni. “Softer demand, driven by slowing production in the U.S. manufacturing sector, and more readily available capacity drove Landstar’s truck rates and volumes below prior year levels in the 2019 third quarter. Overall, 2019 third quarter revenue was 16 percent below revenue of the 2018 third quarter, mostly due to a 13 percent decrease in revenue per load on loads hauled via truck and a 5 percent decrease in truck loadings. While truck revenue per load has been below prior year levels throughout 2019, truck load volumes have more recently slowed with softening demand. Truck load volumes in the 2019 third quarter fell 5 percent as compared to the 2018 third quarter, a larger decrease than the low single digit decrease anticipated in the Company’s third quarter earnings guidance issued on July 24, 2019 as part of the Company’s 2019 second quarter earnings release.”

“In our second quarter earnings release, we provided third quarter revenue guidance of $1.01 billion to $1.06 billion and third quarter diluted earnings per share guidance of $1.48 to $1.54. On September 11, 2019, we disclosed in a Form 8-K and further explained at a webcast investor conference the next day that, based on overall market conditions and the adverse financial impact of a tragic vehicular accident involving Landstar that occurred during the 2019 third quarter, we would be near the bottom end of revenue guidance and would not achieve the bottom end of the range for earnings per diluted share provided on July 24, 2019. Revenue in the 2019 third quarter was at the low end of our previously issued guidance while diluted earnings per share fell far below our guidance, mostly due to higher insurance and claims costs than we anticipated in our initial estimate. Third quarter guidance included insurance and claims costs at 3.6 percent of BCO revenue, whereas actual insurance and claims costs were 5.1 percent of BCO revenue in the 2019 third quarter.”

Gattoni continued, “Through the first few weeks of October, the number of loads hauled via truck was below the corresponding period of 2018 in a high single-digit percentage range. I expect that trend to continue during the remainder of the 2019 fourth quarter. Accordingly, I expect the number of loads hauled via truck in the 2019 fourth quarter to be below the number of loads hauled by truck in the 2018 fourth quarter in a high single-digit percentage range. Pricing for our truck services was fairly stable on a sequential month-to-month basis during the 2019 third quarter, continuing a trend that began in the middle of the 2019 second quarter. I expect pricing to remain stable through the 2019 fourth quarter given current demand and assuming little change in the level of truck capacity available in the marketplace. Given the slowing pricing environment experienced in the 2018 fourth quarter, year-over-year comparisons should therefore ease a bit in the 2019 fourth quarter. Assuming the current macroeconomic environment continues throughout the remainder of the fourth quarter, I expect 2019 fourth quarter truck revenue per load to be lower than the 2018 fourth quarter in a high single-digit percentage range. I anticipate revenue for the 2019 fourth quarter to be in a range of $970 million to $1.02 billion. Assuming that estimated range of revenue and insurance and claims expense at 3.6 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past five years, I would anticipate 2019 fourth quarter diluted earnings per share to be in a range of $1.40 to $1.46 per share.”

Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 a.m. ET. To access the webcast, visit the Company’s website at www.landstar.com; click on “Investor Relations” and “Webcasts,” then click on “Landstar’s Third Quarter 2019 Earnings Release Conference Call.”

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,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “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 other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; U.S. foreign trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; catastrophic loss of a Company facility; intellectual property; unclaimed property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2018 fiscal year, described in Item 1A Risk Factors, and in 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 the Company undertakes no obligation to publicly update or revise any forward-looking statements.

About Landstar:
Landstar System, Inc. is a worldwide, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. Landstar transportation services companies are certified to ISO 9001:2015 quality management system standards and RC14001:2015 environmental, health, safety and security management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market® under the symbol LSTR.

(Tables follow)

                   
Landstar System, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
                   
                   
      Thirty Nine Weeks Ended   Thirteen Weeks Ended
      September 28,   September 29,   September 28,   September 29,
        2019       2018       2019     2018  
                                 
Revenue   $ 3,089,698     $ 3,432,793     $ 1,011,658   $ 1,202,081  
Investment income     3,736       2,754       1,315     1,002  
                                 
Costs and expenses:                              
  Purchased transportation     2,365,646       2,658,710       774,520     931,473  
  Commissions to agents     257,862       275,828       84,568     99,304  
  Other operating costs, net of gains/losses on asset sales/dispositions     28,531       24,176       10,431     8,966  
  Insurance and claims     55,248       57,718       23,969     18,819  
  Selling, general and administrative     120,717       140,948       38,152     46,699  
  Depreciation and amortization     33,045       32,520       10,695     10,754  
                                 
  Total costs and expenses     2,861,049       3,189,900       942,335     1,116,015  
                                 
Operating income     232,385       245,647       70,638     87,068  
Interest and debt expense     2,278       2,455       764     816  
                                 
Income before income taxes     230,107       243,192       69,874     86,252  
Income taxes     52,452       56,279       16,619     19,304  
                                 
Net income     177,655       186,913       53,255     66,948  
Less: Net loss attributable to noncontrolling interest     (17 )     (112 )     -     (37 )
Net income attributable to Landstar System,                              
  Inc. and subsidiary   $ 177,672     $ 187,025     $ 53,255   $ 66,985  
                                 
Earnings per common share attributable to                              
  Landstar System, Inc. and subsidiary   $ 4.45     $ 4.50     $ 1.35   $ 1.63  
                                 
Diluted earnings per share attributable to                              
  Landstar System, Inc. and subsidiary   $ 4.45     $ 4.50     $ 1.35   $ 1.63  
                                 
Average number of shares outstanding:                              
  Earnings per common share     39,891,000       41,530,000       39,566,000     41,101,000  
  Diluted earnings per share     39,891,000       41,576,000       39,566,000     41,137,000  
                                 
Dividends per common share   $ 0.515     $ 0.465     $ 0.185   $ 0.165  
                                 
                                 


Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
             
                     
        September 28,   December 29,
          2019       2018  
ASSETS              
Current assets:              
  Cash and cash equivalents $ 284,434     $ 199,736  
  Short-term investments   31,596       40,058  
  Trade accounts receivable, less allowance              
    of $7,296 and $6,413   598,415       691,604  
  Other receivables, including advances to independent              
    contractors, less allowance of $8,593 and $6,216   25,384       23,744  
  Other current assets   30,921       16,287  
    Total current assets   970,750       971,429  
                     
Operating property, less accumulated depreciation              
  and amortization of $274,000 and $250,153   270,430       284,032  
Goodwill   38,232       38,232  
Other assets   106,319       86,871  
Total assets $ 1,385,731     $ 1,380,564  
                     
LIABILITIES AND EQUITY              
Current liabilities:              
  Cash overdraft $ 44,625     $ 55,339  
  Accounts payable   285,442       314,134  
  Current maturities of long-term debt   39,375       43,561  
  Insurance claims   51,320       40,176  
  Accrued compensation   10,477       29,489  
  Contractor escrow   25,521       25,202  
  Other current liabilities   26,996       27,917  
    Total current liabilities   483,756       535,818  
                     
Long-term debt, excluding current maturities   61,390       84,864  
Insurance claims   33,024       30,429  
Deferred income taxes and other non-current liabilities   51,586       40,320  
                     
Equity
             
Landstar System, Inc. and subsidiary shareholders' equity              
  Common stock, $0.01 par value, authorized 160,000,000              
    shares, issued 68,072,834 and 67,870,962 shares   681       679  
  Additional paid-in capital   225,937       226,852  
  Retained earnings   1,998,362       1,841,279  
  Cost of 28,609,926 and 27,755,001 shares of common              
    stock in treasury   (1,465,284 )     (1,376,111 )
  Accumulated other comprehensive loss   (3,721 )     (5,875 )
    Total Landstar System, Inc. and subsidiary shareholders'              
      equity   755,975       686,824  
Noncontrolling interest   -       2,309  
    Total equity   755,975       689,133  
Total liabilities and equity $ 1,385,731     $ 1,380,564  
                     


 
Landstar System, Inc. and Subsidiary 
Supplemental Information
(Unaudited)
   
 
          Thirty Nine Weeks Ended     Thirteen Weeks Ended
          September 28,   September 29,     September 28, September 29,
            2019       2018         2019       2018  
Revenue generated through (in thousands):                                  
                                     
  Truck transportation                                  
    Truckload:                                  
      Van equipment   $ 1,799,421     $ 2,086,523       $ 575,042     $ 717,047  
      Unsided/platform equipment     980,615       1,039,784         331,787       375,739  
    Less-than-truckload     73,475       76,448         25,367       25,500  
      Total truck transportation     2,853,511       3,202,755         932,196       1,118,286  
  Rail intermodal     87,555       96,026         28,970       34,439  
  Ocean and air cargo carriers     89,258       82,719         30,365       31,213  
  Other (1)     59,374       51,293         20,127       18,143  
          $ 3,089,698     $ 3,432,793       $ 1,011,658     $ 1,202,081  
                                         
  Revenue on loads hauled via BCO Independent Contractors (2)                                  
    included in total truck transportation   $ 1,390,135     $ 1,519,344       $ 466,207     $ 520,391  
                                         
Number of loads:                                  
                                         
  Truck transportation                                  
    Truckload:                                  
      Van equipment     1,014,572       1,045,322         327,671       353,456  
      Unsided/platform equipment     391,112       388,759         130,192       133,425  
    Less-than-truckload     115,616       106,639         41,067       35,969  
      Total truck transportation     1,521,300       1,540,720         498,930       522,850  
  Rail intermodal     35,370       40,260         11,490       13,420  
  Ocean and air cargo carriers     22,150       21,250         7,340       8,220  
            1,578,820       1,602,230         517,760       544,490  
                                         
  Loads hauled via BCO Independent Contractors (2)                                  
    included in total truck transportation     722,870       717,470         239,210       236,580  
                                         
Revenue per load:                                  
                                         
  Truck transportation                                  
    Truckload:                                  
      Van equipment   $ 1,774     $ 1,996       $ 1,755     $ 2,029  
      Unsided/platform equipment     2,507       2,675         2,548       2,816  
    Less-than-truckload     636       717         618       709  
      Total truck transportation     1,876       2,079         1,868       2,139  
  Rail intermodal     2,475       2,385         2,521       2,566  
  Ocean and air cargo carriers     4,030       3,893         4,137       3,797  
                                         
  Revenue per load on loads hauled via BCO Independent Contractors (2)   $ 1,923     $ 2,118       $ 1,949     $ 2,200  
                                         
Revenue by capacity type (as a % of total revenue);                                  
                                         
  Truck capacity providers:                                  
    BCO Independent Contractors (2)     45 %     44 %       46 %     43 %
    Truck Brokerage Carriers     47 %     49 %       46 %     50 %
  Rail intermodal     3 %     3 %       3 %     3 %
  Ocean and air cargo carriers     3 %     2 %       3 %     3 %
  Other     2 %     1 %       2 %     2 %
                                         
                                         
                            September 28,   September 29,
                              2019       2018  
Truck Capacity Providers                                  
                                         
  BCO Independent Contractors (2)                       9,738       9,751  
  Truck Brokerage Carriers:                                  
    Approved and active (3)                       39,963       40,151  
    Other approved                       16,984       16,803  
                              56,947       56,954  
  Total available truck capacity providers                       66,685       66,705  
                                         
  Trucks provided by BCO Independent Contractors (2)                       10,441       10,443  
                                         
(1) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro
                       
(2) BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.
                       
(3) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.
                       
Contact:  Kevin Stout
Landstar System, Inc.
www.landstar.com
904-398-9400

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