Landstar System Reports Record Quarterly Revenue of $1.183 Billion and Record Second Quarter Diluted Earnings Per Share of $1.51

07/25/18

04:15 PM EDT

2Q 2018 Presentation Slides 1.5 MB

JACKSONVILLE, Fla., July 25, 2018 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported record quarterly revenue of $1.183 billion in the 2018 second quarter, a 36 percent increase over the $870 million revenue reported in the 2017 second quarter. Net income of $62.5 million and diluted earnings per share of $1.51 were each second quarter records and increased 67 percent and 70 percent, respectively, over net income and diluted earnings per share in the 2017 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2018 second quarter was $171.4 million, 29 percent above the 2017 second quarter, while 2018 second quarter operating income was $83.4 million, 37 percent above the 2017 second quarter. Gross profit and operating income in the 2018 second quarter were both all-time quarterly records.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2018 second quarter was $1.105 billion, or 93 percent of revenue, compared to $815.6 million, or 94 percent of revenue, in the 2017 second quarter. Truckload transportation revenue hauled via van equipment in the 2018 second quarter was $713.3 million compared to $509.1 million in the 2017 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2018 second quarter was $364.7 million compared to $283.5 million in the 2017 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $60.3 million, or 5 percent of revenue, in the 2018 second quarter compared to $43.1 million, or 5 percent of revenue, in the 2017 second quarter.

Landstar purchased approximately 986,000 shares of its common stock during the 2018 second quarter at an aggregate cost of approximately $104.0 million. Currently, the Company is authorized to purchase up to an additional 2,000,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of June 30, 2018, the Company had $189 million in cash and short term investments and $216 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 $0.165 per share payable on August 31, 2018, to stockholders of record as of the close of business on August 13, 2018. This quarterly dividend includes a 10 percent increase to the amount of the Company’s regular quarterly dividend declared following each of the prior two quarters. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“I am extremely pleased with the financial performance of the Landstar model during the 2018 second quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “The 2018 second quarter established all-time Landstar quarterly records for revenue, gross profit and operating income while diluted earnings per share was a second quarter record. The Company also set new all-time Landstar records for trucks provided by BCOs with 10,155 as of the end of the quarter and net truck additions in a single quarter with the net addition of 287 trucks in the second quarter.”

Gattoni continued, “Demand for our services was strong throughout the 2018 first half. The number of loads hauled via truck in the 2018 second quarter was an all-time quarterly record and increased 11 percent over the 2017 second quarter, driven by a 13 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 an 8 percent increase in less-than-truckload volume. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 23 percent higher in the 2018 second quarter compared to the 2017 second quarter, primarily due to a 32 percent increase in rail intermodal volume.”

Gattoni further commented, “As expected, the pricing environment for our truckload services continued to be very strong in the 2018 second quarter, as industry-wide truck capacity continued to be very tight. Revenue per load on loads hauled via van equipment increased 25 percent over the 2017 second quarter and revenue per load on loads hauled via unsided/platform equipment increased 19 percent over the 2017 second quarter. As a result, revenue per load on loads hauled via truck was 22 percent higher than the 2017 second quarter.”

Gattoni continued, “Through the first few weeks of July our truck load volumes continue to reflect strong demand. I expect that demand to continue through the 2018 third quarter and, therefore, expect the number of loads hauled via truck in the 2018 third quarter to approximate the number of loads hauled in the 2018 second quarter. My expectation is that pricing conditions for truck services in the 2018 third quarter will continue to be very strong with little change in the level of demand or available truck capacity. Assuming those conditions remain, I expect 2018 third quarter truck revenue per load to be higher than the 2017 third quarter in a 19 to 22 percent range. I anticipate record revenue for the 2018 third quarter in a range of $1.175 billion to $1.225 billion. Assuming that range of estimated revenue and insurance and claims expense at 3.5 percent of projected BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past five years, I would anticipate record diluted earnings per share in the 2018 third quarter in a range of $1.58 to $1.64 per share compared to $1.01 per diluted share 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 2018 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 2017 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)


			Twenty Six Weeks Ended					Thirteen Weeks Ended
			June 30,			July 1,		June 30,			July 1,
			2018			2017		2018			2017

Revenue			$	2,230,712		$	1,651,342	$	1,182,786		$	870,434
Investment income				1,752			1,022		891			608

Costs and expenses:
	Purchased transportation			1,727,237			1,263,111		916,940			667,588
	Commissions to agents			176,524			134,080		94,399			70,282
	Other operating costs, net of gains on asset sales/dispositions			15,210			14,400		7,606			7,503
	Insurance and claims			38,899			28,406		21,539			13,893
	Selling, general and administrative			94,249			79,184		48,998			40,861
	Depreciation and amortization			21,766			19,831		10,769			9,897

		Total costs and expenses		2,073,885			1,539,012		1,100,251			810,024

Operating income				158,579			113,352		83,426			61,018
Interest and debt expense				1,639			1,902		839			819

Income before income taxes				156,940			111,450		82,587			60,199
Income taxes				36,975			41,557		20,095			22,689

Net income				119,965			69,893		62,492			37,510
Less: Net loss attributable to noncontrolling interest				(75	)		-		(31	)		-
Net income attributable to Landstar System,
	Inc. and subsidiary		$	120,040		$	69,893	$	62,523		$	37,510

Earnings per common share attributable to
	Landstar System, Inc. and subsidiary		$	2.88		$	1.67	$	1.51		$	0.89

Diluted earnings per share attributable to
	Landstar System, Inc. and subsidiary		$	2.87		$	1.66	$	1.51		$	0.89

Average number of shares outstanding:
	Earnings per common share			41,744,000			41,907,000		41,450,000			41,935,000
	Diluted earnings per share			41,795,000			42,004,000		41,491,000			42,010,000

Dividends per common share			$	0.30		$	0.18	$	0.15		$	0.09

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


			June 30,			December 30,
			2018			2017
ASSETS
Current assets:
	Cash and cash equivalents		$	148,641		$	242,416
	Short-term investments			40,323			48,928
	Trade accounts receivable, less allowance
		of $6,549 and $6,131		688,961			631,164
	Other receivables, including advances to independent
		contractors, less allowance of $6,495 and $6,012		20,737			24,301
	Other current assets			29,553			14,394
		Total current assets		928,215			961,203

Operating property, less accumulated depreciation
		and amortization of $232,760 and $218,700		256,096			276,011
Goodwill				38,704			39,065
Other assets				85,880			76,181
Total assets			$	1,308,895		$	1,352,460

LIABILITIES AND EQUITY
Current liabilities:
	Cash overdraft		$	45,365		$	42,242
	Accounts payable			311,768			285,132
	Current maturities of long-term debt			38,869			42,051
	Insurance claims			42,546			38,919
	Dividends payable			-			62,985
	Accrued compensation			19,041			30,103
	Other current liabilities			51,285			47,211
		Total current liabilities		508,874			548,643

Long-term debt, excluding current maturities				65,093			83,062
Insurance claims				30,205			30,141
Deferred income taxes and other non-current liabilities				43,790			36,737

Equity
Landstar System, Inc. and subsidiary shareholders' equity
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 67,847,692 and 67,740,380 shares		678			677
	Additional paid-in capital			216,328			209,599
	Retained earnings			1,719,475			1,611,158
	Cost of 26,754,810 and 25,749,493 shares of common
		stock in treasury		(1,273,489	)		(1,167,600	)
	Accumulated other comprehensive loss			(5,284	)		(3,162	)
		Total Landstar System, Inc. and subsidiary shareholders'
		equity		657,708			650,672
Noncontrolling interest				3,225			3,205
		Total equity		660,933			653,877
Total liabilities and equity			$	1,308,895		$	1,352,460

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


				Twenty Six Weeks Ended						Thirteen Weeks Ended
				June 30,			July 1,			June 30,			July 1,
				2018			2017			2018			2017
Revenue generated through (in thousands):

	Truck transportation
		Truckload:
			Van equipment	$	1,369,476		$	978,918		$	713,341		$	509,135
			Unsided/platform equipment		664,045			520,658			364,676			283,481
		Less-than-truckload			50,948			42,799			27,364			22,942
			Total truck transportation		2,084,469			1,542,375			1,105,381			815,558
	Rail intermodal				61,587			44,357			32,295			21,515
	Ocean and air cargo carriers				51,506			41,185			28,029			21,595
	Other ⁽¹⁾				33,150			23,425			17,081			11,766
				$	2,230,712		$	1,651,342		$	1,182,786		$	870,434

	Revenue on loads hauled via BCO Independent Contractors ⁽²⁾
		included in total truck transportation		$	998,953		$	776,085		$	527,803		$	411,177

Number of loads:

	Truck transportation
		Truckload:
			Van equipment		691,866			613,565			354,947			315,499
			Unsided/platform equipment		255,334			236,427			135,543			125,242
		Less-than-truckload			70,670			64,508			37,250			34,589
			Total truck transportation		1,017,870			914,500			527,740			475,330
	Rail intermodal				26,840			20,960			13,560			10,310
	Ocean and air cargo carriers				13,030			11,940			6,700			6,210
					1,057,740			947,400			548,000			491,850

	Loads hauled via BCO Independent Contractors ⁽²⁾
		included in total truck transportation			480,890			453,860			247,710			235,630

Revenue per load:

	Truck transportation
		Truckload:
			Van equipment	$	1,979		$	1,595		$	2,010		$	1,614
			Unsided/platform equipment		2,601			2,202			2,690			2,263
		Less-than-truckload			721			663			735			663
			Total truck transportation		2,048			1,687			2,095			1,716
	Rail intermodal				2,295			2,116			2,382			2,087
	Ocean and air cargo carriers				3,953			3,449			4,183			3,477

	Revenue per load on loads hauled via BCO Independent Contractors ⁽²⁾			$	2,077		$	1,710		$	2,131		$	1,745

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

	Truck capacity providers:
		BCO Independent Contractors ⁽²⁾			45	%		47	%		45	%		47	%
		Truck Brokerage Carriers			49	%		46	%		49	%		46	%
	Rail intermodal				3	%		3	%		3	%		2	%
	Ocean and air cargo carriers				2	%		2	%		2	%		2	%
	Other				1	%		1	%		1	%		1	%

										June 30,			July 1,
										2018			2017
Truck Capacity Providers

	BCO Independent Contractors ⁽²⁾										9,501			8,818
	Truck Brokerage Carriers:
	Approved and active ⁽³⁾										37,045			31,636
	Other approved										15,406			15,381
											52,451			47,017
	Total available truck capacity providers										61,952			55,835

	Trucks provided by BCO Independent Contractors ⁽²⁾										10,155			9,404

(1) Includes primarily reinsurance premium revenue generated by the insurance segment and, during the 2018 fiscal year and quarter, 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 Stout
Landstar System, Inc.
www.landstar.com
904-398-9400

Source: Landstar System, Inc.