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Landstar System Reports 2020 First Quarter Results and Its Response to the COVID-19 Pandemic
04:15 PM EDT

JACKSONVILLE, Fla., April 22, 2020 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $1.04 in the 2020 first quarter on revenue of $927.6 million. Landstar reported diluted earnings per share of $1.58 on revenue of $1.033 billion in the 2019 first quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $142.9 million in the 2020 first quarter compared to $155.6 million in the 2019 first quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2020 first quarter was $854.6 million, or 92 percent of revenue, compared to $953.1 million, or 92 percent of revenue, in the 2019 first quarter. Truckload transportation revenue hauled via van equipment in the 2020 first quarter was $545.3 million compared to $619.0 million in the 2019 first quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 first quarter was $286.3 million compared to $310.7 million in the 2019 first quarter. Revenue hauled by rail, air and ocean cargo carriers was $54.7 million, or 6 percent of revenue, in the 2020 first quarter compared to $60.7 million, or 6 percent of revenue, in the 2019 first quarter.

During the 2020 first quarter Landstar generated $99.2 million in operating cash flow, spent $5.8 million in cash capital expenditures and paid $86.3 million in dividends.  Additionally, Landstar purchased 1,178,970 shares of its common stock during the 2020 first quarter at an aggregate cost of approximately $116.0 million. Currently, the Company is authorized to purchase up to 1,821,030 shares of the Company’s common stock under Landstar’s previously announced share purchase program.  Also, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on May 29, 2020, to stockholders of record as of the close of business on May 7, 2020.  It is currently the intention of the Board to pay dividends on a quarterly basis going forward. 

“Overall, I was pleased with the 2020 first quarter financial results given the somewhat balanced freight environment and difficult comparisons to the record 2019 first quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni.  “Landstar performed as we anticipated until the final week of the quarter.  Through the first twelve weeks of the quarter, the week-to-week trends in the number of loads hauled and revenue per load on loads hauled via truck were consistent with our expectations based on historical experience.  In fact, as the quarter progressed, we began to see signs that demand was improving as year-over-year comparisons eased.  Unfortunately, these positive signs were completely extinguished by the impact of the coronavirus (COVID-19) pandemic.  Dispatched truck load volume in the final week of the 2020 first quarter decreased significantly from the previous week as a result of actions taken by governmental authorities and businesses to reduce the spread of the coronavirus.  Shelter-at-home mandates and closing of manufacturing facilities significantly affected demand for transportation by many industry segments we service.  We expect those conditions to persist throughout the 2020 second quarter.  Accordingly, we believe our 2020 first quarter results and operating trends will in no way provide any indication regarding what our financial results may be with respect to Landstar’s 2020 second quarter.”

Gattoni continued, “Although it is unclear as to the duration and depth of impact the coronavirus will have on the freight transportation industry, we believe Landstar is in a good position operationally and financially to withstand the most significant and rapid decline of the U.S. economy in recent history.  Operationally, the decentralized nature of the Landstar model, where independent agents provide truck dispatch, freight tracking, trailer management and numerous other operational functions from over 1,200 agent locations throughout North America, provides a clear advantage in an environment where social distancing can disrupt centralized business structures.  Landstar employees, however, who service agents, BCOs and other third party capacity providers via administrative and operational support, are centralized in two primary Company locations.  In order to protect the health and well-being of all Landstar employees and their families, reduce the risk of community spread within our two primary office locations and substantially limit the potential for disruption in our administrative and operational functions, during March we transitioned over 800 of Landstar’s 1,200 corporate employees based in the United States to work-at-home.  We now have over 1,000 Landstar employees working remotely.  That transformation has been highly successful.”

“During the 2020 second quarter, we do not expect to take any drastic cost reduction measures that would disrupt our ability to service Landstar’s customers, agents, BCOs or other third party capacity providers or slow the progress on our technology initiatives,” Gattoni said.  “Additionally, we have undertaken to provide additional financial support to Landstar’s agents and BCOs during this crisis.  These initiatives will impact the Company’s earnings in the 2020 second quarter.  Most notably, for each load delivered by a BCO with a confirmed delivery date from April 1 through April 30, 2020, Landstar will pay an extra $50 to each of the BCO hauling the load and the Landstar agent dispatching the load.  We estimate Landstar BCOs will deliver between 60,000 and 70,000 loads in April of 2020.  Also, if a Landstar BCO tests positive for COVID-19 or is placed under a mandatory quarantine by a public health authority, Landstar will provide up to $2,000 to the affected BCO.” 

“In this highly unpredictable economic environment, we will not be providing revenue and earnings guidance for the 2020 second quarter.  Nevertheless, as an example of how Landstar’s variable cost business model would react under certain unfavorable assumptions, it is worth noting that if one were to assume a 20% to 30% decrease in revenue in the 2020 second quarter as compared to the 2019 second quarter, plus taking into account the $100 per load cost of the additional purchased transportation and commissions to agents payable with respect to loads anticipated to be delivered by BCOs in the month of April, diluted earnings per share would be expected to be in a range of $0.70 to $0.85.  This in no way should be interpreted as any sort of guidance, but rather a demonstration of the resiliency of the Landstar model, and that Landstar’s ability to generate earnings is somewhat insulated from the possible effects of a prolonged recession.  Additionally, in the event that current market conditions persist, it is possible that Landstar will provide additional financial pandemic relief to its agents and/or BCOs during the 2020 second quarter which could impact the Company’s earnings.”

“Our overarching goals throughout this crisis are to preserve the culture and strength of the Landstar network while keeping the participants in our network safe.  We expect near-term revenue and earnings to be significantly adversely impacted by the current economic environment, but ultimately expect to generate sufficient operating cash flow to pay all members of our network in a timely manner, pay the regular quarterly dividend, fund our technology initiatives and pay finance lease obligations.  We will be prudent in our approach to share purchases over the next few months as the depth and duration of the crisis becomes clearer.  We ended the 2020 first quarter with $211 million in cash and short-term investments with undrawn revolver capacity under our senior credit facility of $216 million (with the ability to increase to $366 million).  Although we expect the COVID-19 pandemic to have a significant adverse impact on our results of operations in the 2020 second quarter, we expect our financial position to remain strong throughout this unprecedented time.”

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; click on “Investor Relations” and “Webcasts,” then click on “Landstar’s First Quarter 2020 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: the impact of the coronavirus (COVID-19) pandemic; 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 2019 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)
            Thirteen Weeks Ended
            March 28,   March 30,
              2020     2019  
Revenue       $ 927,566   $ 1,033,000  
Investment income       1,167     1,138  
Costs and expenses:          
  Purchased transportation     709,257     791,755  
  Commissions to agents       75,376     85,671  
  Other operating costs, net of gains on asset sales/dispositions     8,306     8,239  
  Insurance and claims       24,957     14,993  
  Selling, general and administrative     45,327     41,268  
  Depreciation and amortization     11,505     11,316  
    Total costs and expenses     874,728     953,242  
Operating income         54,005     80,896  
Interest and debt expense       952     805  
Income before income taxes     53,053     80,091  
Income taxes         12,158     16,791  
Net income         40,895     63,300  
Less: Net loss attributable to noncontrolling interest     -     (17 )
Net income attributable to Landstar System,        
  Inc. and subsidiary     $ 40,895   $ 63,317  
Earnings per common share attributable to        
  Landstar System, Inc. and subsidiary   $ 1.04   $ 1.58  
Diluted earnings per share attributable to        
  Landstar System, Inc. and subsidiary   $ 1.04   $ 1.58  
Average number of shares outstanding:        
  Earnings per common share     39,254,000     40,161,000  
  Diluted earnings per share     39,254,000     40,166,000  
Dividends per common share   $ 0.185   $ 0.165  


Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
              March 28,   December 28,
                2020       2019  
Current assets:            
  Cash and cash equivalents     $ 177,224     $ 319,515  
  Short-term investments       33,627       32,901  
  Trade accounts receivable, less allowance      
    of $8,536 and $7,284       562,528       588,549  
  Other receivables, including advances to independent      
    contractors, less allowance of $8,847 and $7,667   35,153       35,553  
  Other current assets       7,624       21,370  
    Total current assets       816,156       997,888  
Operating property, less accumulated depreciation      
    and amortization of $286,593 and $280,849     276,663       285,855  
Goodwill           37,182       38,508  
Other assets         106,432       105,460  
Total assets       $ 1,236,433     $ 1,427,711  
Current liabilities:            
  Cash overdraft       $ 36,002     $ 53,878  
  Accounts payable       272,175       271,996  
  Current maturities of long-term debt     39,944       42,632  
  Insurance claims       50,773       44,532  
  Dividends payable       -       78,947  
  Contractor escrow       24,517       24,902  
  Other current liabilities       41,420       36,017  
    Total current liabilities       464,831       552,904  
Long-term debt, excluding current maturities   61,977       70,212  
Insurance claims         33,456       33,575  
Deferred income taxes and other non-current liabilities   49,074       49,551  
Shareholders' equity:          
  Common stock, $0.01 par value, authorized 160,000,000      
    shares, issued 68,167,482 and 68,083,419 shares   682       681  
  Additional paid-in capital       224,973       226,123  
  Retained earnings       1,995,018       1,962,161  
  Cost of 29,796,974 and 28,609,926 shares of common      
    stock in treasury       (1,581,885 )     (1,465,284 )
  Accumulated other comprehensive loss   (11,693 )     (2,212 )
    Total shareholders' equity       627,095       721,469  
Total liabilities and shareholders' equity   $ 1,236,433     $ 1,427,711  


Landstar System, Inc. and Subsidiary
Supplemental Information
          Thirteen Weeks Ended
          March 28,   March 30,
            2020       2019  
Revenue generated through (in thousands):        
  Truck transportation        
      Van equipment   $ 545,307     $ 619,014  
      Unsided/platform equipment     286,328       310,721  
    Less-than-truckload     22,941       23,376  
      Total truck transportation     854,576       953,111  
  Rail intermodal     28,129       30,015  
  Ocean and air cargo carriers     26,587       30,669  
  Other (1)     18,274       19,205  
          $ 927,566     $ 1,033,000  
  Revenue on loads hauled via BCO Independent Contractors (2)        
    included in total truck transportation   $ 431,279     $ 449,308  
Number of loads:        
  Truck transportation        
      Van equipment     315,345       341,821  
      Unsided/platform equipment     120,589       125,170  
    Less-than-truckload     38,356       35,309  
      Total truck transportation     474,290       502,300  
  Rail intermodal     11,540       12,460  
  Ocean and air cargo carriers     7,070       7,510  
            492,900       522,270  
  Loads hauled via BCO Independent Contractors (2)        
    included in total truck transportation     233,400       234,850  
Revenue per load:        
  Truck transportation        
      Van equipment   $ 1,729     $ 1,811  
      Unsided/platform equipment     2,374       2,482  
    Less-than-truckload     598       662  
      Total truck transportation     1,802       1,897  
  Rail intermodal     2,438       2,409  
  Ocean and air cargo carriers     3,761       4,084  
  Revenue per load on loads hauled via BCO Independent Contractors (2)   $ 1,848     $ 1,913  
Revenue by capacity type (as a % of total revenue);        
  Truck capacity providers:        
    BCO Independent Contractors (2)     46 %     43 %
    Truck Brokerage Carriers     46 %     49 %
  Rail intermodal     3 %     3 %
  Ocean and air cargo carriers     3 %     3 %
  Other       2 %     2 %
          March 28,   March 30,
            2020       2019  
Truck Capacity Providers        
  BCO Independent Contractors (2)     9,444       9,911  
  Truck Brokerage Carriers:        
  Approved and active (3)     38,879       40,404  
  Other approved     16,657       18,659  
            55,536       59,063  
  Total available truck capacity providers     64,980       68,974  
  Trucks provided by BCO Independent Contractors (2)     10,112       10,637  
(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,

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Source: Landstar System, Inc.