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

10/23/19

04:15 PM EDT

3Q 2019 Presentation Slides 1.5 MB

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 StoutLandstar System, Inc.www.landstar.com
904-398-9400

Source: Landstar System, Inc.