UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 24, 2013
LANDSTAR SYSTEM, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 021238 | 06-1313069 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
| 13410 Sutton Park Drive South, Jacksonville, Florida | 32224 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(904) 398-9400
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On October 24, 2013, Landstar System, Inc. issued a press release announcing results for the third quarter of fiscal 2013. A copy of the press release is attached hereto as Exhibit 99.1.
The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits
Exhibits
| 99.1 | News Release dated October 24, 2013 of Landstar System, Inc. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LANDSTAR SYSTEM, INC. | ||||||
| Date: October 24, 2013 | By: | /s/ James B. Gattoni | ||||
| Name: James B. Gattoni | ||||||
| Title: Executive Vice President and Chief Financial Officer | ||||||
Exhibit 99.1
| For Immediate Release | Contact: Jim Gattoni | |
| Landstar System, Inc. | ||
| www.landstar.com | ||
| October 24, 2013 | 904-398-9400 |
LANDSTAR SYSTEM REPORTS THIRD QUARTER RESULTS
Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported 2013 third quarter net income of $29.2 million, or $0.64 per diluted share, on revenue of $680.5 million. Gross profit margin, representing gross profit (gross profit defined as revenue less the cost of purchased transportation and commissions to agents) divided by revenue, was 16.0 percent and operating margin, representing operating income divided by gross profit, was 43.9 percent. The lower than anticipated operating margin and diluted earnings per share amounts were almost entirely the result of unexpectedly high insurance and claims expense in the 2013 third quarter.
Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2013 third quarter was $627.5 million, or 92 percent of revenue. Truck transportation revenue hauled via van trailing equipment and unsided/platform equipment represented 59 percent and 38 percent, respectively, of truck transportation revenue in the 2013 third quarter compared to 56 percent and 41 percent, respectively, in the 2012 third quarter. Less-than-truckload revenue was 3 percent of truck transportation revenue in both the 2013 and 2012 third quarters. Revenue hauled by rail, air and ocean cargo carriers was $38.8 million in the 2013 third quarter.
Commenting on Landstar’s 2013 third quarter performance, Landstar Chairman, President and CEO, Henry Gerkens said, “Revenue in the 2013 third quarter was equal to revenue reported in the Company’s 2013 second quarter and at the low-end of the 2013 third quarter revenue guidance provided in our 2013 third quarter mid-quarter update call on August 29th. Gradual improvement in revenue trends experienced in
LANDSTAR SYSTEM/ 2
July and August slowed into September, primarily from a lower than expected number of loads and revenue per load on truck transportation revenue. During the 2013 third quarter, and consistent with the first half of 2013 compared to the first half of 2012, the Company experienced softness in both the number of loads and revenue per load from revenue hauled on unsided/platform equipment compared to the 2012 third quarter. Gross profit margin in the 2013 third quarter was in-line with our previously issued guidance; however, operating margin of 43.9 percent was lower than anticipated and was almost entirely the result of higher than expected insurance and claims expense reported in the 2013 third quarter. The Company’s typical historical practice for each quarter is to forecast insurance and claims expense to be equal to Landstar’s trailing five year historical average of insurance and claims expense as a percentage of BCO revenue.”
“The amount of insurance and claims expense recorded in the 2013 third quarter was much higher than that historical average as a result of increased loss reserve levels. On the other hand, 2012 third quarter insurance and claims expense as a percentage of BCO revenue was well below that historical five year average due to favorable development of prior year claims. The unusually large variance in insurance and claims expense in the 2013 third quarter over the 2012 third quarter had a significant unanticipated negative impact on the quarter over quarter comparison of operating income, operating income margin and diluted earnings per share.”
Gerkens continued, “The U.S. economy continues to experience very slow growth. During the first several weeks of October, revenue per load on the Company’s truck transportation revenue continues to be lower than prior year, generally due to softness in the unsided/platform service offering. In particular, the Company has experienced weaker demand for its heavy/specialized services throughout 2013 compared to 2012. Currently, we do not believe we have seen signs that point to a significant change in U.S. industrial output in the near term. We also note that there has recently been a great deal of acquisition and divestiture activity in markets in which the Company competes, as well as the transportation sector more generally, and that historically, the Company has looked to be opportunistic but prudent when engaging in acquisition and/or divestiture activity. In light of this activity, we regularly evaluate acquisition and divestiture opportunities available to us, including in the near term.”
LANDSTAR SYSTEM/ 3
“Based on current trends, and assuming insurance and claims expense for the 2013 fourth quarter based on a five year historical average of insurance and claims expense as a percentage of BCO revenue, I anticipate revenue to be in a range of $650 million to $700 million and diluted earnings per share to be within a range of $0.62 to $0.70. Also, it should be noted that favorable resolutions of various tax matters lowered the Company’s effective tax rate in the 2012 fourth quarter. Those favorable resolutions of tax matters contributed approximately $0.08 per diluted share to the $0.73 diluted earnings per share reported in the 2012 fourth quarter. No such tax benefits are anticipated in the 2013 fourth quarter. Also, consistent with our historical practices, our range of estimates on 2013 fourth quarter revenue and diluted earnings per share also does not give effect to the impact of any potential acquisition or divestiture that may be or become available to the Company.”
Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2:00 pm ET. To access the webcast, visit the Company’s website at www.landstar.com; click on “Investor Relations” and “Webcasts,” then click on “Third Quarter 2013 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, expectations and intentions. Terms such as “anticipates,” “believes,” “estimates,” “expects,” “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 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;
LANDSTAR SYSTEM/ 4
substantial industry competition; disruptions or failures in our computer systems; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; catastrophic loss of a Company facility; acquired businesses; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2012 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 Landstar 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 logistics services to a broad range of customers utilizing a network of agents, third-party capacity owners and employees. All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2008 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/ 5
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, 2013 |
September 29, 2012 |
September 28, 2013 |
September 29, 2012 |
|||||||||||||
| Revenue |
$ | 1,988,182 | $ | 2,102,164 | $ | 680,521 | $ | 717,168 | ||||||||
| Investment income |
1,111 | 1,185 | 366 | 393 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Purchased transportation |
1,510,984 | 1,603,865 | 517,955 | 548,162 | ||||||||||||
| Commissions to agents |
156,480 | 162,728 | 53,651 | 56,036 | ||||||||||||
| Other operating costs, net of gains on asset dispositions |
15,557 | 17,635 | 6,031 | 6,447 | ||||||||||||
| Insurance and claims |
37,040 | 28,411 | 13,386 | 8,010 | ||||||||||||
| Selling, general and administrative |
105,220 | 113,916 | 34,244 | 37,455 | ||||||||||||
| Depreciation and amortization |
22,833 | 20,476 | 7,840 | 7,072 | ||||||||||||
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| Total costs and expenses |
1,848,114 | 1,947,031 | 633,107 | 663,182 | ||||||||||||
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| Operating income |
141,179 | 156,318 | 47,780 | 54,379 | ||||||||||||
| Interest and debt expense |
2,367 | 2,312 | 856 | 818 | ||||||||||||
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| Income before income taxes |
138,812 | 154,006 | 46,924 | 53,561 | ||||||||||||
| Income taxes |
52,360 | 58,203 | 17,678 | 20,460 | ||||||||||||
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| Net income |
$ | 86,452 | $ | 95,803 | $ | 29,246 | $ | 33,101 | ||||||||
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| Earnings per common share |
$ | 1.87 | $ | 2.05 | $ | 0.64 | $ | 0.71 | ||||||||
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| Diluted earnings per share |
$ | 1.87 | $ | 2.04 | $ | 0.64 | $ | 0.71 | ||||||||
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| Average number of shares outstanding: |
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| Earnings per common share |
46,156,000 | 46,775,000 | 45,708,000 | 46,614,000 | ||||||||||||
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| Diluted earnings per share |
46,323,000 | 46,964,000 | 45,856,000 | 46,732,000 | ||||||||||||
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| Dividends paid per common share |
$ | — | $ | 0.170 | $ | — | $ | 0.060 | ||||||||
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LANDSTAR SYSTEM/ 6
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
| Sept. 28 2013 |
Dec. 29, 2012 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 97,552 | $ | 74,284 | ||||
| Short-term investments |
34,568 | 35,528 | ||||||
| Trade accounts receivable, less allowance of $8,252 and $8,650 |
394,796 | 408,787 | ||||||
| Other receivables, including advances to independent contractors, less allowance of $3,955 and $4,657 |
77,169 | 55,278 | ||||||
| Deferred income taxes and other current assets |
18,983 | 18,067 | ||||||
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| Total current assets |
623,068 | 591,944 | ||||||
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| Operating property, less accumulated depreciation and amortization of $157,901 and $158,999 |
184,441 | 158,953 | ||||||
| Goodwill |
57,470 | 57,470 | ||||||
| Other assets |
85,953 | 71,054 | ||||||
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| Total assets |
$ | 950,932 | $ | 879,421 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Cash overdraft |
$ | 26,894 | $ | 33,647 | ||||
| Accounts payable |
194,134 | 188,981 | ||||||
| Current maturities of long-term debt |
27,347 | 19,016 | ||||||
| Insurance claims |
89,877 | 64,509 | ||||||
| Other current liabilities |
32,922 | 38,186 | ||||||
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| Total current liabilities |
371,174 | 344,339 | ||||||
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| Long-term debt, excluding current maturities |
90,709 | 95,125 | ||||||
| Insurance claims |
23,119 | 21,896 | ||||||
| Deferred income taxes and other non-current liabilities |
42,669 | 38,607 | ||||||
| Shareholders’ equity: |
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| Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,013,297 and 66,859,864 shares |
670 | 669 | ||||||
| Additional paid-in capital |
178,952 | 173,976 | ||||||
| Retained earnings |
1,129,408 | 1,042,956 | ||||||
| Cost of 21,296,347 and 20,411,736 shares of common stock in treasury |
(886,135 | ) | (839,517 | ) | ||||
| Accumulated other comprehensive income |
366 | 1,370 | ||||||
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| Total shareholders’ equity |
423,261 | 379,454 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 950,932 | $ | 879,421 | ||||
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LANDSTAR SYSTEM/ 7
Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
| Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
| September 28, 2013 |
September 29, 2012 |
September 28, 2013 |
September 29, 2012 |
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| Revenue generated through (in thousands): |
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| Business Capacity Owners (1) |
$ | 987,914 | $ | 1,057,109 | $ | 342,366 | $ | 355,861 | ||||||||
| Truck Brokerage Carriers |
837,005 | 886,532 | 285,183 | 307,600 | ||||||||||||
| Rail intermodal |
55,450 | 55,002 | 18,762 | 18,782 | ||||||||||||
| Ocean and air cargo carriers |
65,082 | 60,227 | 20,061 | 20,100 | ||||||||||||
| Other (2) |
42,731 | 43,294 | 14,149 | 14,825 | ||||||||||||
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| $ | 1,988,182 | $ | 2,102,164 | $ | 680,521 | $ | 717,168 | |||||||||
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| Number of loads: |
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| Business Capacity Owners (1) |
591,200 | 616,200 | 198,830 | 201,050 | ||||||||||||
| Truck Brokerage Carriers |
495,240 | 510,360 | 163,500 | 176,760 | ||||||||||||
| Rail intermodal |
22,100 | 22,290 | 7,710 | 7,470 | ||||||||||||
| Ocean and air cargo carriers |
12,370 | 11,760 | 4,330 | 3,850 | ||||||||||||
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| 1,120,910 | 1,160,610 | 374,370 | 389,130 | |||||||||||||
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| Revenue per load: |
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| Business Capacity Owners (1) |
$ | 1,671 | $ | 1,716 | $ | 1,722 | $ | 1,770 | ||||||||
| Truck Brokerage Carriers |
1,690 | 1,737 | 1,744 | 1,740 | ||||||||||||
| Rail intermodal |
2,509 | 2,468 | 2,433 | 2,514 | ||||||||||||
| Ocean and air cargo carriers |
5,261 | 5,121 | 4,633 | 5,221 | ||||||||||||
| September 28, 2013 |
September 29, 2012 |
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| Truck Capacity Providers |
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| Business Capacity Owners (1) (3) |
7,890 | 8,074 | ||||||||||||||
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| Truck Brokerage Carriers: |
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| Approved and active (4) |
21,171 | 20,474 | ||||||||||||||
| Approved |
11,143 | 9,315 | ||||||||||||||
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| 32,314 | 29,789 | |||||||||||||||
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| Total available truck capacity providers |
40,204 | 37,863 | ||||||||||||||
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| (1) | Business Capacity Owners are independent contractors who provide truck capacity to the Company under exclusive lease arrangements. |
| (2) | Includes premium revenue generated by the insurance segment and warehousing and transportation management fee revenue generated by the transportation logistics segment. |
| (3) | Trucks provided by Business Capacity Owners were 8,410 and 8,596 at September 28, 2013 and September 29, 2012, respectively. |
| (4) | Active refers to Truck Brokerage Carriers who have moved at least one load in the past 180 days. |