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Landstar System Reports Record Quarterly Revenue of $1.052 Billion, Record Quarterly Diluted Earnings Per Share and an Increased Quarterly Dividend
01/31/18
04:15 PM EST

JACKSONVILLE, Fla., Jan. 31, 2018 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported net income of $64.8 million, or $1.54 per diluted share, in the 2017 fourth quarter on record revenue of $1.052 billion. Included in net income in the 2017 fourth quarter are one-time tax benefits of approximately $19.5 million, or $0.46 per diluted share, related to the Company’s reasonable estimate of the change in future tax rates on net deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017. Excluding the impact of the revaluation of the deferred tax liabilities, the Company’s 2017 fourth quarter net income was $45.2 million and diluted earnings per share was $1.08, each of which would also have been quarterly records from continuing operations.

Revenue for the 2017 fourth quarter represented the first quarter in the Company’s history to surpass $1 billion.  The Company also established new quarterly records for gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) and operating income in the 2017 fourth quarter.  Gross profit was $149.7 million and operating income was $70.0 million in the 2017 fourth quarter.  Operating margin, representing operating income divided by gross profit, was 46.8 percent in the 2017 fourth quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2017 fourth quarter was $967.5 million, or 92 percent of revenue, compared to $832.2 million, or 93 percent of revenue, in the 2016 fourth quarter.  Truckload transportation revenue hauled via van equipment in the 2017 fourth quarter was $634.4 million compared to $548.4 million in the 2016 fourth quarter.  Truckload transportation revenue hauled via unsided/platform equipment in the 2017 fourth quarter was $309.5 million compared to $263.3 million in the 2016 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $68.0 million, or
6 percent of revenue, in the 2017 fourth quarter compared to $48.7 million, or 5 percent of revenue, in the 2016 fourth quarter. 

Fiscal year 2017 return on average shareholders’ equity was 29 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 24 percent.  As previously disclosed, the Company announced that on December 11, 2017, its Board of Directors increased the number of shares of its common stock that the Company is authorized to purchase under its stock purchase program to 3,000,000 and also that its Board declared a special one-time cash dividend in the amount of $1.50 per share, that was paid on January 26, 2018, to stockholders of record as of the close of business on January 12, 2018. Currently, there are 3,000,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program.  In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.15 per share payable on March 16, 2018 to stockholders of record at the close of business on February 19, 2018.  This represents a 50 percent increase to the Company’s previous quarterly dividend. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar’s 2017 fourth quarter results, Landstar’s President and CEO Jim Gattoni said, “The 2017 fourth quarter was a historic quarter for the Company as it represented the first quarter ever that the Company exceeded $1 billion in revenue. The Company also set quarterly records in the 2017 fourth quarter for many other financial metrics. Revenue, gross profit, operating income, net income and diluted earnings per share were all quarterly records. The number of loads hauled via truck in the fourth quarter of 2017 was also an all-time Landstar quarterly record. 2017 fourth quarter revenue, gross profit, operating income, net income and diluted earnings per share grew 18%, 13%, 10%, 64% and 64%, respectively, over the 2016 fourth quarter despite the 2016 fourth quarter having one additional week of operations. Excluding the impact of the revaluation of the deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017, net income and diluted earnings per share grew 14% and 15%, respectively, over the 2016 fourth quarter.”

Gattoni continued, “The number of loads hauled via truck in the 2017 fourth quarter increased 3 percent over the 2016 fourth quarter, driven by a 2 percent increase in the number of loads hauled via van equipment, a 4 percent increase in the number of loads hauled via unsided/platform equipment and a 9 percent increase in LTL volume. As previously disclosed in the Company’s 2017 third quarter earnings press release dated October 25, 2017, the 2016 fourth quarter included an extra week and, in 2016, Christmas day fell on a Sunday, making the week including Christmas in 2016 more productive than years when Christmas falls on a weekday, as in 2017 when Christmas fell on a Monday. We estimate that the extra week, plus the increased productivity due to the timing of Christmas, added approximately 30,000 loads to the 2016 fourth quarter. Excluding these loads, we estimate that the number of loads hauled via truck in the 2017 fourth quarter exceeded the 2016 fourth quarter by approximately 10 percent. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the fourth quarter increased 9 percent over the 2016 fourth quarter.”

Gattoni further stated, “The pricing environment for our truckload services was strong throughout the 2017 fourth quarter. Industry-wide truck capacity was tight throughout the quarter resulting in year-over-prior-year increases in revenue per load on loads hauled via truck of 11 percent, 14 percent and 14 percent as compared to October, November and December of 2016, respectively.”

Gattoni further commented, “Landstar’s financial performance in fiscal year 2017 was the best in the Company’s history. Landstar set many annual financial and operational high water marks in 2017, including revenue, gross profit, operating income, net income, diluted earnings per share, truck loads and year end truck count provided by BCOs. Revenue in fiscal 2017 was approximately $3.6 billion, an annual record. Gross profit in 2017 was $544 million, also an annual record. Record revenue and gross profit in 2017 was provided on the strength of approximately 1,903,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. Operating income in 2017 was an annual record of $244 million and represented year-over-year growth of 9 percent. Diluted earnings per share in 2017 was an annual record of $4.21 and represented year-over-year growth of 30 percent. Excluding the impact of the revaluation of the deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017, the Company’s fiscal year 2017 diluted earnings per share was $3.75, which also would have been an annual record. The year-over-year earnings growth rates are particularly impressive given a significant increase in the provision for incentive compensation in 2017 and the fact that 2016 had one additional week of operations compared to 2017. These 2017 achievements speak to the strength and depth of the Landstar network and ability to execute.  I am extremely pleased by our continued organic load volume growth and our ability to continue to attract productive agents and capacity to the network.”

Gattoni further commented, “With respect to near term performance, during the first three weeks of 2018, we are experiencing growth in the number of loads hauled via truck in the high single-digit percentage range over the 2017 first quarter.  I expect that trend to continue throughout the 2018 first quarter.  As it pertains to revenue per load on loads hauled via truck, rates continue to be strong and I do not expect a significant change in the rate environment over the balance of the 2018 first quarter.  As such, I expect revenue per load on loads hauled via truck in the 2018 first quarter to increase in a mid-teen percentage range over the 2017 first quarter.  Assuming the current environment continues throughout the 2018 first quarter, I anticipate revenue for the 2018 first quarter to be in a range of $925 million to $975 million.  Assuming that range of estimated revenue, I would anticipate 2018 first quarter diluted earnings per share to be in a range of $1.22 to $1.27 per share. The estimated range of diluted earnings per share assumes insurance and claims costs at 3.5 percent of BCO revenue, representing the historical annual average of insurance and claims costs to BCO revenue over the previous 5 years, and an annual effective income tax rate of approximately 24.5 percent, prior to any discrete items that may occur in 2018.”

Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 am 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 Fourth 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; acquired business and noncontrolling interests 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. 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)
                 
                 
    Fiscal Years Ended   Fiscal Quarters Ended
    December 30,   December 31,   December 30,   December 31,
    2017   2016   2017   2016
                 
Revenue   $   3,646,364     $   3,167,634   $   1,051,592     $   892,829
Investment income       2,498         1,502       765         402
                 
Costs and expenses:                
Purchased transportation       2,805,109         2,415,663       815,171         684,918
Commissions to agents       297,410         264,205       86,732         75,130
Other operating costs, net of gains/losses on asset sales/dispositions       28,687         29,702       6,190         8,218
Insurance and claims       62,545         57,280       16,212         14,485
Selling, general and administrative       170,583         143,239       47,404         37,028
Depreciation and amortization       40,560         35,796       10,599         9,687
                 
Total costs and expenses       3,404,894         2,945,885       982,308         829,466
                 
Operating income       243,968         223,251       70,049         63,765
Interest and debt expense       3,166         3,794       607         1,069
                 
Income before income taxes       240,802         219,457       69,442         62,696
Income taxes       63,806         82,107       4,759         23,122
                 
Net income       176,996         137,350       64,683         39,574
Less: Net loss attributable to noncontrolling interest       (92 )       -       (69 )       -
Net income attributable to Landstar System,                
Inc. and subsidiary   $   177,088     $   137,350   $   64,752     $   39,574
                 
Earnings per common share attributable to                
Landstar System, Inc. and subsidiary   $   4.22     $   3.26   $   1.54     $   0.95
                 
Diluted earnings per share attributable to                
Landstar System, Inc. and subsidiary   $   4.21     $   3.25   $   1.54     $   0.94
                 
Average number of shares outstanding:                
Earnings per common share        41,938,000         42,112,000       41,981,000         41,805,000
Diluted earnings per share       42,024,000         42,236,000       42,054,000         41,938,000
                 
Dividends per common share   $   1.88     $   0.34   $   1.60     $   0.09
                 

 

 
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
       
       
  December 30,   December 31,
  2017   2016
ASSETS      
Current assets:      
Cash and cash equivalents $   242,416     $   178,897  
Short-term investments     48,928         66,560  
Trade accounts receivable, less allowance      
of $6,131 and $5,161     631,164         463,102  
Other receivables, including advances to independent      
contractors, less allowance of $6,012 and $5,523     24,301         18,567  
Other current assets     14,394         10,281  
Total current assets     961,203         737,407  
       
Operating property, less accumulated depreciation      
and amortization of $218,700 and $190,374     276,011         272,843  
Goodwill     39,065         31,134  
Other assets     76,181         55,207  
Total assets $   1,352,460     $   1,096,591  
       
LIABILITIES AND EQUITY      
Current liabilities:      
Cash overdraft $   42,242     $   36,251  
Accounts payable     285,132         219,409  
Current maturities of long-term debt     42,051         45,047  
Insurance claims     38,919         26,121  
Dividends payable     62,985         -   
Accrued compensation     30,103         7,769  
Other current liabilities     47,211         45,714  
Total current liabilities     548,643         380,311  
       
Long-term debt, excluding current maturities     83,062         93,257  
Insurance claims     30,141         26,883  
Deferred income taxes and other non-current liabilities     36,737         53,583  
       
Equity      
Landstar System, Inc. and subsidiary shareholders' equity      
Common stock, $0.01 par value, authorized 160,000,000      
shares, issued 67,740,380 and 67,585,675 shares     677         676  
Additional paid-in capital     209,599         199,414  
Retained earnings     1,611,158         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     (3,162 )       (3,089 )
Total Landstar System, Inc. and subsidiary shareholders'      
equity     650,672         542,557  
Noncontrolling interest     3,205         -   
Total equity     653,877         542,557  
Total liabilities and equity $   1,352,460     $   1,096,591  
       

 

 
Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
               
               
  Fiscal Years Ended     Fiscal Quarters Ended
  December 30,   December 31,     December 30,   December 31,
  2017   2016     2017   2016
Revenue generated through (in thousands):                    
               
Truck transportation              
Truckload:              
Van equipment $ 2,163,832     $ 1,900,406       $ 634,430     $ 548,426  
Unsided/platform equipment     1,134,660         963,649           309,466         263,280  
Less-than-truckload     89,041         74,530           23,644         20,464  
Total truck transportation   3,387,533       2,938,585         967,540       832,170  
Rail intermodal     96,416         103,721           27,846         26,734  
Ocean and air cargo carriers     110,898         78,513           40,190         22,013  
Other (1)      51,517         46,815           16,016         11,912  
  $   3,646,364     $   3,167,634       $   1,051,592     $   892,829  
                     
Revenue on loads hauled via BCO Independent Contractors (2)              
included in total truck transportation $ 1,655,026     $ 1,488,925       $ 443,462     $ 402,077  
               
Number of loads:              
               
Truck transportation              
Truckload:              
Van equipment   1,282,632       1,179,183         339,738       331,975  
Unsided/platform equipment   487,652       451,686         124,716       120,460  
Less-than-truckload   132,776       115,521         34,036       31,205  
 Total truck transportation   1,903,060       1,746,390         498,490       483,640  
Rail intermodal   45,000       48,820         12,960       12,700  
Ocean and air cargo carriers   25,420       20,690         7,270       5,780  
    1,973,480       1,815,900         518,720       502,120  
                     
Loads hauled via BCO Independent Contractors (2)              
included in total truck transportation   916,190       865,430         229,360       234,550  
               
Revenue per load:              
               
Truck transportation              
Truckload:              
Van equipment $   1,687     $   1,612       $   1,867     $   1,652  
Unsided/platform equipment     2,327         2,133           2,481         2,186  
Less-than-truckload     671         645           695         656  
Total truck transportation     1,780         1,683           1,941         1,721  
Rail intermodal     2,143         2,125           2,149         2,105  
Ocean and air cargo carriers     4,363         3,795           5,528         3,808  
               
Revenue per load on loads hauled via BCO Independent Contractors (2) $   1,806     $   1,720       $   1,933     $   1,714  
               
Revenue by capacity type (as a % of total revenue);              
               
Truck capacity providers:              
BCO Independent Contractors (2)   45 %     47 %       42 %     45 %
Truck Brokerage Carriers   48 %     46 %       50 %     48 %
Rail intermodal   3 %     3 %       3 %     3 %
Ocean and air cargo carriers   3 %     2 %       4 %     2 %
Other   1 %     1 %       2 %     1 %
               
               
          December 30,   December 31,
            2017       2016  
Truck Capacity Providers              
               
BCO Independent Contractors (2)             9,087         8,824  
Truck Brokerage Carriers:              
Approved and active (3)             34,243         31,471  
Other approved             15,691         15,982  
              49,934         47,453  
Total available truck capacity providers             59,021         56,277  
               
Trucks provided by BCO Independent Contractors (2)             9,696         9,439  
               
               
(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

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Source: Landstar System, Inc.