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Landstar System Reports Second Quarter Revenue Of $775 Million And Diluted Earnings Per Share Of $0.76

JACKSONVILLE, Fla., July 20, 2016 /PRNewswire/ -- Landstar System, Inc. (NASDAQ: LSTR) reported second quarter diluted earnings per share of $0.76 on revenue of $775 million in the 2016 second quarter.  Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims, in the 2016 second quarter, the highest quarterly insurance and claims cost over the past 6 years.  Landstar reported diluted earnings per share of $0.92 on revenue of $868 million in the 2015 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.0 million in the 2016 second quarter compared to $130.8 million in the 2015 second quarter.  Operating margin, representing operating income divided by gross profit, was 43.9 percent in the 2016 second quarter.

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2016 second quarter was $718.5 million, or 93 percent of revenue, compared to $809.2 million, or 93 percent of revenue, in the 2015 second quarter.  Truckload transportation revenue hauled via van equipment in the 2016 second quarter was $458.0 million compared to $496.9 million in the 2015 second quarter.  Truckload transportation revenue hauled via unsided/platform equipment in the 2016 second quarter was $242.0 million compared to $291.0 million in the 2015 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $45.1 million, or 6 percent of revenue, in the 2016 second quarter compared to $48.1 million, or 6 percent of revenue, in the 2015 second quarter.

Trailing twelve-month return on average shareholders' equity was 29 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 23 percent.  Landstar purchased approximately 423,000 shares of its common stock during the first half of 2016 at an aggregate cost of $26.5 million.  Currently, there are approximately 1,386,000 shares of the Company's common stock available for purchase under Landstar's authorized share purchase program.  As of June 25, 2016, the Company had $215 million in cash and short term investments and $214 million available for borrowings under the Company's senior credit facility.

In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.09 per share payable on August 26, 2016, to stockholders of record as of the close of business on August 8, 2016.  This quarterly dividend includes a 12.5 percent increase to the amount of the Company's quarterly dividend declared following each of the prior four quarters. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar's 2016 second quarter, Landstar's President and CEO Jim Gattoni said, "On April 20th, we provided second quarter revenue guidance of $770 million to $820 million and second quarter diluted earnings per share guidance of $0.80 to $0.85. On June 8th, I updated both our revenue and diluted earnings per share guidance by indicating at a webcast investor conference available to the public that I was more comfortable at the lower end of both the revenue and diluted earnings per share guidance. Revenue of $775 million for the second quarter was in-line with our updated guidance. Diluted earnings per share of $0.76 for the second quarter was below the low end of the updated guidance due to an increase in estimated insurance and claims costs, as a result of a severe accident that occurred at the end of the second quarter."

Gattoni continued, "Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment. During the 2015 second quarter, we hauled over 13,000 truckloads via unsided/platform equipment for a project on behalf of a customer in the automotive sector, generating $27 million of revenue in the 2015 second quarter. Excluding the loadings related to that project we experienced a slight increase in loads hauled via truck over the 2015 second quarter. However, Landstar's truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft. Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the Company operates much of its business. Additionally, the average cost of a gallon of diesel fuel was approximately 20 percent lower during the 2016 second quarter compared to the 2015 second quarter putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers. As such, revenue per load on loads hauled via truck was 9 percent lower in the 2016 second quarter compared to the 2015 second quarter."

Gattoni further commented, "The number of loads hauled via truck in the 2016 second quarter decreased 2 percent from the 2015 second quarter, driven by a 9 percent decrease in the number of loads hauled via unsided/platform equipment, entirely due to the 2015 automotive sector project, partially offset by a 1 percent increase in the number of loads hauled via van equipment.  Landstar achieved an 11 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 second quarter over the 2015 second quarter. The softer pricing environment and increased insurance and claims expense drove the 2016 second quarter operating margin down to 43.9 percent, from 50.5 percent in the 2015 second quarter."

Gattoni continued, "Third quarter 2016 over third quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company's 2015 third quarter included approximately $35 million in revenue from approximately 20,000 loads hauled via truck related to that project. The project was completed at the end of 2015. Historically, revenue in the Company's third fiscal quarter has been relatively consistent with revenue generated in the Company's second fiscal quarter. Revenue per load on loads hauled via truck in the Company's third quarter has been slightly ahead of the second quarter while the number of loads hauled via truck in the third quarter is typically slightly below the second quarter. Through the first few weeks of July, we have experienced the normal seasonal uptick in revenue per load on loads hauled via truck. Also, the number of loads hauled via truck during the first few weeks of July is trending with the historical second quarter to third quarter pattern. As such, I expect 2016 third quarter revenue to be similar to the Company's 2016 second quarter revenue. Assuming insurance and claims costs in the 2016 third quarter are approximately 3.2 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past 5 years, I would expect diluted earnings per share to be in a range of $0.79 to $0.84 in the 2016 third quarter."

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 Second Quarter 2016 Earnings Release Conference Call."

This earnings announcement, as well as an accompanying slide presentation, is available through the Company's website at http://investor.landstar.com under "Presentations" and on a Form 8-K filed with the Securities and Exchange Commission.

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; substantial industry competition; disruptions or failures in the Company's computer systems; cyber incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; 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 2015 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 logistics services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees.  All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2013 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.

Landstar logo

 (Tables follow)

 


Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

































Twenty Six Weeks Ended


Thirteen Weeks Ended







June 25,


June 27,


June 25,


June 27,







2016


2015


2016


2015














Revenue




$        1,486,867


$         1,630,763


$          775,223


$       868,383

Investment income



743


693


363


339














Costs and expenses:











Purchased transportation


1,129,743


1,254,730


589,415


667,577


Commissions to agents


123,931


129,816


64,839


70,032


Other operating costs, net of gains on asset sales/dispositions


13,992


15,670


6,585


7,981


Insurance and claims



30,307


27,108


16,094


12,312


Selling, general and administrative


71,519


74,986


36,905


37,738


Depreciation and amortization


17,093


14,068


8,655


7,049
















Total costs and expenses


1,386,585


1,516,378


722,493


802,689














Operating income



101,025


115,078


53,093


66,033

Interest and debt expense



1,777


1,494


888


713














Income before income taxes


99,248


113,584


52,205


65,320

Income taxes 




37,750


43,098


19,891


24,849














Net income




$            61,498


$             70,486


$           32,314


$         40,471



























Earnings per common share


$                1.45


$                 1.59


$               0.77


$             0.92














Diluted earnings per share



$                1.45


$                 1.59


$               0.76


$             0.92














Average number of shares outstanding:










Earnings per common share  


42,315,000


44,240,000


42,235,000


43,892,000


Diluted earnings per share


42,424,000


44,397,000


42,357,000


44,033,000














Dividends per common share


$                0.16


$                 0.14


$               0.08


$             0.07

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)




























June 25,


December 26,








2016


2015

ASSETS







Current assets:








Cash and cash equivalents



$      153,370


$      114,520


Short-term investments



61,528


48,823


Trade accounts receivable, less allowance






of $5,092 and $4,327



402,362


462,699


Other receivables, including advances to independent






contractors, less allowance of $4,755 and $4,143

18,584


18,472


Other current assets



20,608


11,604



Total current assets



656,452


656,118











Operating property, less accumulated depreciation







and amortization of $187,774 and $182,591

236,177


225,927

Goodwill





31,134


31,134

Other assets




60,994


78,339

Total assets




$      984,757


$      991,518











LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:








Cash overdraft




$        30,355


$        35,609


Accounts payable



191,247


223,709


Current maturities of long-term debt


42,209


42,499


Insurance claims



26,135


19,757


Other current liabilities



44,642


47,963



Total current liabilities



334,588


369,537











Long-term debt, excluding current maturities

76,724


81,793

Insurance claims




23,042


21,477

Deferred income taxes and other non-current liabilities

53,148


52,474











Shareholders' equity:







Common stock, $0.01 par value, authorized 160,000,000 






shares, issued 67,504,785 and 67,391,616 shares

675


674


Additional paid-in capital



197,503


195,841


Retained earnings



1,444,691


1,389,975


Cost of 25,397,002 and 24,972,079 shares of common






stock in treasury



(1,143,360)


(1,116,765)


Accumulated other comprehensive loss

(2,254)


(3,488)



Total shareholders' equity



497,255


466,237

Total liabilities and shareholders' equity 

$      984,757


$      991,518

 


Landstar System, Inc. and Subsidiary


Supplemental Information


(Unaudited)
































Twenty Six Weeks Ended



Thirteen Weeks Ended






June 25,


June 27,



June 25,


June 27,






2016


2015



2016


2015

Revenue generated through (in thousands):
























Truck transportation












Truckload:













Van equipment


$     886,195


$     946,598



$     458,002


$      496,910




Unsided/platform equipment


451,430


530,515



242,008


291,032



Less-than-truckload


35,927


40,956



18,450


21,258




Total truck transportation


1,373,552


1,518,069



718,460


809,200


Rail intermodal


52,337


49,522



26,229


26,341


Ocean and air cargo carriers


37,710


41,410



18,902


21,778


Other (1)   


23,268


21,762



11,632


11,064






$  1,486,867


$  1,630,763



$     775,223


$      868,383















Revenue on loads hauled via BCO Independent Contractors (2)












included in total truck transportation


$     707,652


$     752,030



$     373,374


$      401,705














Number of loads:
























Truck transportation












Truckload:













Van equipment


556,119


544,714



287,079


285,762




Unsided/platform equipment


219,034


229,452



116,292


127,286



Less-than-truckload


55,727


54,904



28,829


28,912




Total truck transportation


830,880


829,070



432,200


441,960


Rail intermodal


24,180


20,680



12,150


11,200


Ocean and air cargo carriers


9,780


8,620



5,220


4,490






864,840


858,370



449,570


457,650















Loads hauled via BCO Independent Contractors (2)












included in total truck transportation


414,660


406,230



216,990


214,930














Revenue per load:
























Truck transportation












Truckload:













Van equipment


$          1,594


$          1,738



$         1,595


$          1,739




Unsided/platform equipment


2,061


2,312



2,081


2,286



Less-than-truckload


645


746



640


735




Total truck transportation


1,653


1,831



1,662


1,831


Rail intermodal


2,164


2,395



2,159


2,352


Ocean and air cargo carriers


3,856


4,804



3,621


4,850















Revenue per load on loads hauled via BCO Independent Contractors (2)


$          1,707


$          1,851



$         1,721


$          1,869














Revenue by capacity type (as a % of total revenue);
























Truck capacity providers:












BCO Independent Contractors (2)


48%


46%



48%


46%



Truck Brokerage Carriers


45%


47%



45%


47%


Rail intermodal


4%


3%



3%


3%


Ocean and air cargo carriers


3%


3%



2%


3%


Other



2%


1%



2%


1%





































June 25,


June 27,











2016


2015

Truck Capacity Providers
























BCO Independent Contractors (2)







8,856


8,726


Truck Brokerage Carriers:











     Approved and active (3)







30,137


28,387


     Other approved







15,594


13,126











45,731


41,513


Total available truck capacity providers







54,587


50,239















Trucks provided by BCO Independent Contractors (2)







9,462


9,308



























(1) Includes primarily premium revenue generated by the insurance segment.














(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 have moved at least one load in the 180 days immediately preceeding the fiscal quarter end.

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SOURCE Landstar System, Inc.

Kevin Stout, Landstar System, Inc., 904-398-9400