Landstar System Reports Diluted Earnings per Share of $0.89 on Record Second Quarter Revenue of $870 Million

07/26/17

04:15 PM EDT

2Q 2017 Presentation Slides 2.6 MB

JACKSONVILLE, Fla., July 26, 2017 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported diluted earnings per share of $0.89 on record second quarter revenue of $870 million in the 2017 second quarter. Landstar reported diluted earnings per share of $0.76 on revenue of $775 million in the 2016 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was a second quarter record of $132.6 million in the 2017 second quarter compared to $121.0 million in the 2016 second quarter. Operating margin, representing operating income divided by gross profit, was 46.0 percent in the 2017 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2017 second quarter was $815.6 million, or 94 percent of revenue, compared to $718.5 million, or 93 percent of revenue, in the 2016 second quarter. Truckload transportation revenue hauled via van equipment in the 2017 second quarter was $509.1 million compared to $458.0 million in the 2016 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2017 second quarter was $283.5 million compared to $242.0 million in the 2016 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $43.1 million, or 5 percent of revenue, in the 2017 second quarter compared to $45.1 million, or 6 percent of revenue, in the 2016 second quarter.

Trailing twelve-month return on average shareholders’ equity was 27 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. Currently, there are approximately 1,036,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program. As of July 1, 2017, the Company had $273 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 $0.10 per share payable on September 1, 2017, to stockholders of record as of the close of business on August 14, 2017. This quarterly dividend includes an 11 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 2017 second quarter, Landstar’s President and CEO Jim Gattoni said, “I am very pleased with Landstar’s performance in the 2017 second quarter. On April 26^th, we provided second quarter revenue guidance of $820 million to $870 million and second quarter diluted earnings per share guidance of $0.84 to $0.89. Revenue and diluted earnings per share for the 2017 second quarter both came in at the top end of guidance. Revenue of $870 million was a second quarter record and represented growth of 12 percent over the 2016 second quarter. Diluted earnings per share of $0.89 grew 17 percent over the 2016 second quarter.”

Gattoni continued, “The number of loads hauled via truck in the 2017 second quarter increased 10 percent over the 2016 second quarter, driven by a 10 percent increase in the number of loads hauled via van equipment, an 8 percent increase in the number of loads hauled via unsided/platform equipment and a 20 percent increase in less-than-truckload volume. The number of loads hauled via truck in the second quarter of 2017 was a second quarter record. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 5 percent lower in the 2017 second quarter compared to the 2016 second quarter, due to continued softness in rail intermodal volume.”

Gattoni further commented, “As expected, the pricing environment for our truckload services continued to show slow improvement in the 2017 second quarter, as industry-wide truck capacity is firming in certain regions, especially with respect to flatbed loads. As a result, revenue per load on loads hauled via truck was 3 percent higher in the 2017 second quarter compared to the 2016 second quarter. The percentage change in year-over-year revenue per load on loads hauled via truck was consistent each month during the quarter. 2017 second quarter operating margin was 46.0 percent, in line with our historical second quarter operating margin.”

Gattoni continued, “Historically, revenue in the Company’s third fiscal quarter has been relatively consistent with revenue generated in the Company’s second fiscal quarter. We typically have experienced revenue per load on loads hauled via truck in the Company’s third quarter as slightly ahead of the second quarter while the number of loads hauled via truck in the third quarter as 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 2017 third quarter revenue to be similar to the Company’s 2017 second quarter revenue. Assuming insurance and claims costs in the 2017 third quarter are approximately 3.3 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 $0.88 to $0.93 in the 2017 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 2017 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; 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 2016 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.

(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
	July 1,		June 25,		July 1,		June 25,
	2017		2016		2017		2016

Revenue	$	1,651,342	$	1,486,867	$	870,434	$	775,223
Investment income	1,022		743		608		363

Costs and expenses:
Purchased transportation	1,263,111		1,129,743		667,588		589,415
Commissions to agents	134,080		123,931		70,282		64,839
Other operating costs, net of gains on asset sales/dispositions	14,400		13,992		7,503		6,585
Insurance and claims	28,406		30,307		13,893		16,094
Selling, general and administrative	79,184		71,519		40,861		36,905
Depreciation and amortization	19,831		17,093		9,897		8,655

Total costs and expenses	1,539,012		1,386,585		810,024		722,493

Operating income	113,352		101,025		61,018		53,093
Interest and debt expense	1,902		1,777		819		888

Income before income taxes	111,450		99,248		60,199		52,205
Income taxes	41,557		37,750		22,689		19,891

Net income	$	69,893	$	61,498	$	37,510	32,314


Earnings per common share	$	1.67	$	1.45	$	0.89	$	0.77

Diluted earnings per share	$	1.66	$	1.45	$	0.89	$	0.76

Average number of shares outstanding:
Earnings per common share	41,907,000		42,315,000		41,935,000		42,235,000
Diluted earnings per share	42,004,000		42,424,000		42,010,000		42,357,000

Dividends per common share	$	0.18	$	0.16	$	0.09	$	0.08

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)

				July 1,			December 31,
				2017			2016
ASSETS
Current assets:
	Cash and cash equivalents			$	222,102		$	178,897
	Short-term investments			51,167			66,560
	Trade accounts receivable, less allowance
		of $5,311 and $5,161		480,467			463,102
	Other receivables, including advances to independent
		contractors, less allowance of $6,049 and $5,523		20,518			18,567
	Other current assets			19,291			10,281
		Total current assets		793,545			737,407

Operating property, less accumulated depreciation
			and amortization of $202,050 and $190,374	259,346			272,843
Goodwill				31,134			31,134
Other assets				75,249			55,207
Total assets				$	1,159,274		$	1,096,591

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft			$	34,145		$	36,251
	Accounts payable			224,928			219,409
	Current maturities of long-term debt			41,356			45,047
	Insurance claims			29,077			26,121
	Other current liabilities			56,998			53,483
		Total current liabilities		386,504			380,311

Long-term debt, excluding current maturities				77,639			93,257
Insurance claims				30,402			26,883
Deferred income taxes and other non-current liabilities				55,239			53,583

Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 67,696,487 and 67,585,675 shares		677			676
	Additional paid-in capital			203,410			199,414
	Retained earnings			1,575,342			1,512,993
	Cost of 25,749,493 and 25,747,541 shares of common
		stock in treasury		(1,167,600		)	(1,167,437		)
	Accumulated other comprehensive loss			(2,339		)	(3,089		)
		Total shareholders' equity		609,490			542,557
Total liabilities and shareholders' equity				$	1,159,274		$	1,096,591

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)

				Twenty Six Weeks Ended						Thirteen Weeks Ended
				July 1,			June 25,			July 1,			June 25,
				2017			2016			2017			2016
Revenue generated through (in thousands):

	Truck transportation
		Truckload:
			Van equipment	$	978,918		$	886,195		$	509,135		$	458,002
			Unsided/platform equipment		520,658			451,430			283,481			242,008
		Less-than-truckload			42,799			35,927			22,942			18,450
			Total truck transportation		1,542,375			1,373,552			815,558			718,460
	Rail intermodal				44,357			52,337			21,515			26,229
	Ocean and air cargo carriers				41,185			37,710			21,595			18,902
	Other ⁽¹⁾				23,425			23,268			11,766			11,632
				$	1,651,342		$	1,486,867		$	870,434		$	775,223

	Revenue on loads hauled via BCO Independent Contractors ⁽²⁾
		included in total truck transportation		$	776,085		$	707,652		$	411,177		$	373,374

Number of loads:

	Truck transportation
		Truckload:
			Van equipment		613,565			556,119			315,499			287,079
			Unsided/platform equipment		236,427			219,034			125,242			116,292
		Less-than-truckload			64,508			55,727			34,589			28,829
			Total truck transportation		914,500			830,880			475,330			432,200
	Rail intermodal				20,960			24,180			10,310			12,150
	Ocean and air cargo carriers				11,940			9,780			6,210			5,220
					947,400			864,840			491,850			449,570

	Loads hauled via BCO Independent Contractors ⁽²⁾
		included in total truck transportation			453,860			414,660			235,630			216,990

Revenue per load:

	Truck transportation
		Truckload:
			Van equipment	$	1,595		$	1,594		$	1,614		$	1,595
			Unsided/platform equipment		2,202			2,061			2,263			2,081
		Less-than-truckload			663			645			663			640
			Total truck transportation		1,687			1,653			1,716			1,662
	Rail intermodal				2,116			2,164			2,087			2,159
	Ocean and air cargo carriers				3,449			3,856			3,477			3,621

	Revenue per load on loads hauled via BCO Independent Contractors ⁽²⁾			$	1,710		$	1,707		$	1,745		$	1,721

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

	Truck capacity providers:
		BCO Independent Contractors ⁽²⁾			47	%		48	%		47	%		48	%
		Truck Brokerage Carriers			46	%		45	%		46	%		45	%
	Rail intermodal				3	%		4	%		2	%		3	%
	Ocean and air cargo carriers				2	%		3	%		2	%		2	%
	Other				1	%		2	%		1	%		2	%


										July 1,			June 25,
										2017			2016
Truck Capacity Providers

	BCO Independent Contractors ⁽²⁾										8,818			8,856
	Truck Brokerage Carriers:
	Approved and active ⁽³⁾										31,636			30,137
	Other approved										15,381			15,594
											47,017			45,731
	Total available truck capacity providers										55,835			54,587

	Trucks provided by BCO Independent Contractors ⁽²⁾										9,404			9,462


(1) Includes primarily reinsurance 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 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

Landstar System