JACKSONVILLE, Fla., Oct. 23, 2019 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $1.35 in the 2019 third quarter on revenue of $1.012 billion. Landstar reported diluted earnings per share of $1.63 on revenue of $1.202 billion in the 2018 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $152.6 million in the 2019 third quarter compared to $171.3 million in the 2018 third quarter. Operating margin, representing operating income divided by gross profit, was 46.3 percent in the 2019 third quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 third quarter was $932.2 million, or 92 percent of revenue, compared to $1.118 billion, or 93 percent of revenue, in the 2018 third quarter. Truckload transportation revenue hauled via van equipment in the 2019 third quarter was $575.0 million compared to $717.0 million in the 2018 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 third quarter was $331.8 million compared to $375.7 million in the 2018 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $59.3 million, or 6 percent of revenue, in the 2019 third quarter compared to $65.7 million, or 5 percent of revenue, in the 2018 third quarter.

Trailing twelve-month return on average shareholders’ equity was 34 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 29 percent. Landstar purchased approximately 175,000 shares of its common stock during the 2019 third quarter at an aggregate cost of approximately $18.8 million. Currently, the Company is authorized to purchase up to approximately 1,151,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of September 28, 2019, the Company had $316 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on December 6, 2019, to stockholders of record as of the close of business on November 12, 2019. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“The current macroeconomic environment made for challenging comparisons against our record 2018 third quarter performance,” said Landstar President and Chief Executive Officer Jim Gattoni. “Softer demand, driven by slowing production in the U.S. manufacturing sector, and more readily available capacity drove Landstar’s truck rates and volumes below prior year levels in the 2019 third quarter. Overall, 2019 third quarter revenue was 16 percent below revenue of the 2018 third quarter, mostly due to a 13 percent decrease in revenue per load on loads hauled via truck and a 5 percent decrease in truck loadings. While truck revenue per load has been below prior year levels throughout 2019, truck load volumes have more recently slowed with softening demand. Truck load volumes in the 2019 third quarter fell 5 percent as compared to the 2018 third quarter, a larger decrease than the low single digit decrease anticipated in the Company’s third quarter earnings guidance issued on July 24, 2019 as part of the Company’s 2019 second quarter earnings release.”

“In our second quarter earnings release, we provided third quarter revenue guidance of $1.01 billion to $1.06 billion and third quarter diluted earnings per share guidance of $1.48 to $1.54. On September 11, 2019, we disclosed in a Form 8-K and further explained at a webcast investor conference the next day that, based on overall market conditions and the adverse financial impact of a tragic vehicular accident involving Landstar that occurred during the 2019 third quarter, we would be near the bottom end of revenue guidance and would not achieve the bottom end of the range for earnings per diluted share provided on July 24, 2019. Revenue in the 2019 third quarter was at the low end of our previously issued guidance while diluted earnings per share fell far below our guidance, mostly due to higher insurance and claims costs than we anticipated in our initial estimate. Third quarter guidance included insurance and claims costs at 3.6 percent of BCO revenue, whereas actual insurance and claims costs were 5.1 percent of BCO revenue in the 2019 third quarter.”

Gattoni continued, “Through the first few weeks of October, the number of loads hauled via truck was below the corresponding period of 2018 in a high single-digit percentage range. I expect that trend to continue during the remainder of the 2019 fourth quarter. Accordingly, I expect the number of loads hauled via truck in the 2019 fourth quarter to be below the number of loads hauled by truck in the 2018 fourth quarter in a high single-digit percentage range. Pricing for our truck services was fairly stable on a sequential month-to-month basis during the 2019 third quarter, continuing a trend that began in the middle of the 2019 second quarter. I expect pricing to remain stable through the 2019 fourth quarter given current demand and assuming little change in the level of truck capacity available in the marketplace. Given the slowing pricing environment experienced in the 2018 fourth quarter, year-over-year comparisons should therefore ease a bit in the 2019 fourth quarter. Assuming the current macroeconomic environment continues throughout the remainder of the fourth quarter, I expect 2019 fourth quarter truck revenue per load to be lower than the 2018 fourth quarter in a high single-digit percentage range. I anticipate revenue for the 2019 fourth quarter to be in a range of $970 million to $1.02 billion. Assuming that estimated range of revenue and insurance and claims expense at 3.6 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past five years, I would anticipate 2019 fourth quarter diluted earnings per share to be in a range of $1.40 to $1.46 per share.”

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 Third Quarter 2019 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 2018 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)
          
          
   Thirty Nine Weeks Ended Thirteen Weeks Ended
   September 28, September 29, September 28, September 29,
    2019   2018   2019  2018 
                 
Revenue $3,089,698  $3,432,793  $1,011,658 $1,202,081 
Investment income  3,736   2,754   1,315  1,002 
                 
Costs and expenses:               
 Purchased transportation  2,365,646   2,658,710   774,520  931,473 
 Commissions to agents  257,862   275,828   84,568  99,304 
 Other operating costs, net of gains/losses on asset sales/dispositions  28,531   24,176   10,431  8,966 
 Insurance and claims  55,248   57,718   23,969  18,819 
 Selling, general and administrative  120,717   140,948   38,152  46,699 
 Depreciation and amortization  33,045   32,520   10,695  10,754 
                 
 Total costs and expenses  2,861,049   3,189,900   942,335  1,116,015 
                 
Operating income  232,385   245,647   70,638  87,068 
Interest and debt expense  2,278   2,455   764  816 
                 
Income before income taxes  230,107   243,192   69,874  86,252 
Income taxes  52,452   56,279   16,619  19,304 
                 
Net income  177,655   186,913   53,255  66,948 
Less: Net loss attributable to noncontrolling interest  (17)  (112)  -  (37)
Net income attributable to Landstar System,               
 Inc. and subsidiary $177,672  $187,025  $53,255 $66,985 
                 
Earnings per common share attributable to               
 Landstar System, Inc. and subsidiary $4.45  $4.50  $1.35 $1.63 
                 
Diluted earnings per share attributable to               
 Landstar System, Inc. and subsidiary $4.45  $4.50  $1.35 $1.63 
                 
Average number of shares outstanding:               
 Earnings per common share  39,891,000   41,530,000   39,566,000  41,101,000 
 Diluted earnings per share  39,891,000   41,576,000   39,566,000  41,137,000 
                 
Dividends per common share $0.515  $0.465  $0.185 $0.165 
                 
                 


Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
       
           
    September 28, December 29,
     2019   2018 
ASSETS       
Current assets:       
 Cash and cash equivalents$284,434  $199,736 
 Short-term investments 31,596   40,058 
 Trade accounts receivable, less allowance       
  of $7,296 and $6,413 598,415   691,604 
 Other receivables, including advances to independent       
  contractors, less allowance of $8,593 and $6,216 25,384   23,744 
 Other current assets 30,921   16,287 
  Total current assets 970,750   971,429 
           
Operating property, less accumulated depreciation       
 and amortization of $274,000 and $250,153 270,430   284,032 
Goodwill 38,232   38,232 
Other assets 106,319   86,871 
Total assets$1,385,731  $1,380,564 
           
LIABILITIES AND EQUITY       
Current liabilities:       
 Cash overdraft$44,625  $55,339 
 Accounts payable 285,442   314,134 
 Current maturities of long-term debt 39,375   43,561 
 Insurance claims 51,320   40,176 
 Accrued compensation 10,477   29,489 
 Contractor escrow 25,521   25,202 
 Other current liabilities 26,996   27,917 
  Total current liabilities 483,756   535,818 
           
Long-term debt, excluding current maturities 61,390   84,864 
Insurance claims 33,024   30,429 
Deferred income taxes and other non-current liabilities 51,586   40,320 
           
Equity
       
Landstar System, Inc. and subsidiary shareholders' equity       
 Common stock, $0.01 par value, authorized 160,000,000       
  shares, issued 68,072,834 and 67,870,962 shares 681   679 
 Additional paid-in capital 225,937   226,852 
 Retained earnings 1,998,362   1,841,279 
 Cost of 28,609,926 and 27,755,001 shares of common       
  stock in treasury (1,465,284)  (1,376,111)
 Accumulated other comprehensive loss (3,721)  (5,875)
  Total Landstar System, Inc. and subsidiary shareholders'       
   equity 755,975   686,824 
Noncontrolling interest -   2,309 
  Total equity 755,975   689,133 
Total liabilities and equity$1,385,731  $1,380,564 
           


 
Landstar System, Inc. and Subsidiary 
Supplemental Information
(Unaudited)
  
 
     Thirty Nine Weeks Ended  Thirteen Weeks Ended
     September 28, September 29,  September 28,September 29,
      2019   2018    2019   2018 
Revenue generated through (in thousands):                 
                   
 Truck transportation                 
  Truckload:                 
   Van equipment $1,799,421  $2,086,523   $575,042  $717,047 
   Unsided/platform equipment  980,615   1,039,784    331,787   375,739 
  Less-than-truckload  73,475   76,448    25,367   25,500 
   Total truck transportation  2,853,511   3,202,755    932,196   1,118,286 
 Rail intermodal  87,555   96,026    28,970   34,439 
 Ocean and air cargo carriers  89,258   82,719    30,365   31,213 
 Other (1)  59,374   51,293    20,127   18,143 
     $3,089,698  $3,432,793   $1,011,658  $1,202,081 
                     
 Revenue on loads hauled via BCO Independent Contractors (2)                 
  included in total truck transportation $1,390,135  $1,519,344   $466,207  $520,391 
                     
Number of loads:                 
                     
 Truck transportation                 
  Truckload:                 
   Van equipment  1,014,572   1,045,322    327,671   353,456 
   Unsided/platform equipment  391,112   388,759    130,192   133,425 
  Less-than-truckload  115,616   106,639    41,067   35,969 
   Total truck transportation  1,521,300   1,540,720    498,930   522,850 
 Rail intermodal  35,370   40,260    11,490   13,420 
 Ocean and air cargo carriers  22,150   21,250    7,340   8,220 
      1,578,820   1,602,230    517,760   544,490 
                     
 Loads hauled via BCO Independent Contractors (2)                 
  included in total truck transportation  722,870   717,470    239,210   236,580 
                     
Revenue per load:                 
                     
 Truck transportation                 
  Truckload:                 
   Van equipment $1,774  $1,996   $1,755  $2,029 
   Unsided/platform equipment  2,507   2,675    2,548   2,816 
  Less-than-truckload  636   717    618   709 
   Total truck transportation  1,876   2,079    1,868   2,139 
 Rail intermodal  2,475   2,385    2,521   2,566 
 Ocean and air cargo carriers  4,030   3,893    4,137   3,797 
                     
 Revenue per load on loads hauled via BCO Independent Contractors (2) $1,923  $2,118   $1,949  $2,200 
                     
Revenue by capacity type (as a % of total revenue);                 
                     
 Truck capacity providers:                 
  BCO Independent Contractors (2)  45%  44%   46%  43%
  Truck Brokerage Carriers  47%  49%   46%  50%
 Rail intermodal  3%  3%   3%  3%
 Ocean and air cargo carriers  3%  2%   3%  3%
 Other  2%  1%   2%  2%
                     
                     
              September 28, September 29,
               2019   2018 
Truck Capacity Providers                 
                     
 BCO Independent Contractors (2)           9,738   9,751 
 Truck Brokerage Carriers:                 
  Approved and active (3)           39,963   40,151 
  Other approved           16,984   16,803 
               56,947   56,954 
 Total available truck capacity providers           66,685   66,705 
                     
 Trucks provided by BCO Independent Contractors (2)           10,441   10,443 
                     
(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.