Landstar System Reports Second Quarter Revenue of $1.374B and Second Quarter Diluted Earnings Per Share of $1.85


JACKSONVILLE, Fla., July 26, 2023 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported diluted earnings per share (“DEPS”) of $1.85 in the 2023 second quarter on revenue of $1.374 billion. Landstar reported DEPS of $3.05 on revenue of $1.975 billion in the 2022 second quarter.

Gross profit in the 2023 second quarter was $139.7 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2023 second quarter was $198.2 million. Gross profit in the 2022 second quarter was $208.1 million and variable contribution in the 2022 second quarter was $267.5 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2023 and 2022 second quarters and year-to-date periods are provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 37% and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 34%. The Company is currently authorized to purchase up to 2,910,339 shares of the Company’s common stock under its previously announced share purchase programs. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.33 per share payable on August 25, 2023, to stockholders of record as of the close of business on August 10, 2023. This quarterly dividend includes a $0.03 per share increase, or 10%, over the amount of the Company’s regular 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.  

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2023 second quarter was $1,246.9 million, or 91% of revenue, compared to $1,747.2 million, or 88% of revenue, in the 2022 second quarter. Truckload transportation revenue hauled via van equipment in the 2023 second quarter was $703.0 million, compared to $1,026.9 million in the 2022 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2023 second quarter was $394.8 million, compared to $474.3 million in the 2022 second quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2023 second quarter was $118.0 million, compared to $209.1 million in the 2022 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $100.7 million, or 7% of revenue, in the 2023 second quarter, compared to $202.3 million, or 10% of revenue, in the 2022 second quarter.

“Landstar’s business model performed well in the 2023 second quarter considering the challenging freight environment,” said Landstar President and Chief Executive Officer Jim Gattoni. “After a record-setting 2022, we entered 2023 knowing we would face very difficult year-over-year comparisons, especially during the first two fiscal quarters. On top of these tough comparisons and contrary to typical seasonal patterns common to the freight transportation industry, the domestic freight environment softened sequentially from the 2023 first fiscal quarter to the 2023 second fiscal quarter. Reflective of these tough dynamics, the number of loads hauled via truck in the 2023 second quarter decreased by 16% compared to the 2022 second quarter. On a sequential basis compared to the 2023 first quarter, we estimate that truck load volumes in the 2023 second quarter underperformed seasonal historical patterns experienced during pre-pandemic periods by 9%.   The atypical sequential decrease in demand for truck load services also caused additional downward pressure on rates, especially in the spot market where the Company primarily operates. As a result, revenue per load on loads hauled via truck in the 2023 second quarter decreased 15% compared to the 2022 second quarter. We estimate that truck revenue per load during the quarter underperformed sequential historical patterns experienced during pre-pandemic periods by 6%.”

Gattoni further commented, “Through the first several weeks of July, the number of loads hauled via truck has trended below historical, pre-pandemic second quarter to the beginning of third quarter sequential patterns, while truck revenue per load has thus far trended slightly below these historical, pre-pandemic sequential patterns. Assuming that these trends continue, I expect revenue per load on loads hauled via truck to be in a range of 10% to 12% below the 2022 third quarter and the number of loads hauled via truck to be in a range of 16% to 18% below the 2022 third quarter. As such, I anticipate revenue for the 2023 third quarter to be in a range of $1.275 billion to $1.325 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2023 third quarter, I would anticipate DEPS to be in a range of $1.65 to $1.75. The anticipated range of DEPS for the 2023 third quarter includes estimated insurance and claims costs of approximately 5.4% of BCO revenue. These costs were 5.5% of BCO revenue over the first half of 2023. The anticipated range of DEPS for the 2023 third quarter also reflects an estimated effective income tax rate of 24.5%.”

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 2023 Earnings Release Conference Call.”

About Landstar:
Landstar System, Inc., a Fortune 500 company, is a worldwide, technology-enabled, 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.

Non-GAAP Financial Measures:
In this earnings release and accompanying financial disclosures, the Company provides the following information that may be deemed a non-GAAP financial measure: variable contribution and variable contribution margin. The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a shipment-by-shipment level attributable to our transportation network of third-party capacity providers and independent agents in order to provide services to our customers. The Company also believes that it is appropriate to present each of the financial measures that may be deemed a non-GAAP financial measure, as referred to above, for the following reasons: (1) disclosure of these matters will allow investors to better understand the underlying trends in the Company’s financial condition and results of operations; (2) this information will facilitate comparisons by investors of the Company’s results as compared to the results of peer companies; and (3) management considers this financial information in its decision making.

Forward Looking Statements Disclaimer:
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 Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2022 fiscal year; 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. trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; potential changes in taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2022 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Q for the 2023 first fiscal quarter, 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.


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, 
       2023   2022  2023   2022 
              
Revenue   $2,809,532  $3,945,663 $1,373,857  $1,975,064 
Investment income   3,852   1,307  2,484   586 
              
Costs and expenses:          
 Purchased transportation  2,154,491   3,096,018  1,053,197   1,545,688 
 Commissions to agents  248,153   311,634  122,478   161,856 
 Other operating costs, net of gains on asset sales/dispositions  25,840   21,522  13,462   10,381 
 Insurance and claims   57,431   64,820  29,784   34,052 
 Selling, general and administrative  108,096   111,680  54,529   58,967 
 Depreciation and amortization  30,139   28,045  14,941   14,288 
              
  Total costs and expenses  2,624,150   3,633,719  1,288,391   1,825,232 
              
Operating income   189,234   313,251  87,950   150,418 
Interest and debt (income) expense  (1,033)  2,228  (307)  1,105 
              
Income before income taxes  190,267   311,023  88,257   149,313 
Income taxes    45,513   73,629  21,698   36,758 
              
Net income   $144,754  $237,394 $66,559  $112,555 
              
Diluted earnings per share $4.03  $6.39 $1.85  $3.05 
              
Average diluted shares outstanding  35,962,000   37,162,000  35,941,000   36,905,000 
              
Dividends per common share $0.60  $0.50 $0.30  $0.25 
              


Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
          
          
       July 1, December 31,
        2023   2022 
ASSETS       
Current assets:      
 Cash and cash equivalents  $360,528  $339,581 
 Short-term investments   58,574   53,955 
 Trade accounts receivable, less allowance   
  of $12,715 and $12,121   848,839   967,793 
 Other receivables, including advances to independent   
  contractors, less allowance of $13,673 and $10,579 64,079   56,235 
 Other current assets   41,667   21,826 
  Total current assets   1,373,687   1,439,390 
          
Operating property, less accumulated depreciation   
   and amortization of $417,364 and $393,274 297,066   314,990 
Goodwill     42,166   41,220 
Other assets    124,846   136,279 
Total assets   $1,837,765  $1,931,879 
          
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities:     
 Cash overdraft  $57,216  $92,953 
 Accounts payable   478,688   527,372 
 Current maturities of long-term debt 31,560   36,175 
 Insurance claims   45,160   50,836 
 Dividends payable   -   71,854 
 Other current liabilities   80,202   98,945 
  Total current liabilities   692,826   878,135 
          
Long-term debt, excluding current maturities 53,149   67,225 
Insurance claims   57,240   58,268 
Deferred income taxes and other non-current liabilities 40,989   41,030 
          
Shareholders' equity:     
 Common stock, $0.01 par value, authorized 160,000,000   
  shares, issued 68,497,324 and 68,382,310 685   684 
 Additional paid-in capital   253,486   258,487 
 Retained earnings   2,759,128   2,635,960 
 Cost of 32,550,852 and 32,455,300 shares of common   
  stock in treasury   (2,009,327)  (1,992,886)
 Accumulated other comprehensive loss (10,411)  (15,024)
  Total shareholders' equity   993,561   887,221 
Total liabilities and shareholders' equity$1,837,765  $1,931,879 
          


 Landstar System, Inc. and Subsidiary
 Supplemental Information
 (Unaudited)
             
             
     Twenty Six Weeks Ended  Thirteen Weeks Ended
     July 1, June 25,  July 1, June 25,
      2023   2022    2023   2022 
Revenue generated through (in thousands):         
             
 Truck transportation         
  Truckload:         
   Van equipment $1,458,124  $2,108,143   $703,041  $1,026,938 
   Unsided/platform equipment  772,336   883,032    394,772   474,274 
  Less-than-truckload  62,673   70,651    31,115   36,931 
  Other truck transportation (1)    277,520   436,656    118,017   209,055 
   Total truck transportation  2,570,653   3,498,482    1,246,945   1,747,198 
 Rail intermodal  50,889   86,110    25,232   43,422 
 Ocean and air cargo carriers  136,534   310,904    75,441   158,847 
 Other (2)     51,456   50,167    26,239   25,597 
     $2,809,532  $3,945,663   $1,373,857  $1,975,064 
             
 Revenue on loads hauled via BCO Independent Contractors (3)         
  included in total truck transportation $1,034,881  $1,415,963   $515,355  $688,389 
             
Number of loads:         
             
 Truck transportation         
  Truckload:         
   Van equipment  655,036   763,750    323,082   387,482 
   Unsided/platform equipment  263,185   279,345    135,613   147,516 
  Less-than-truckload  93,066   96,828    46,874   48,985 
  Other truck transportation (1)    110,373   166,747    52,311   80,817 
   Total truck transportation  1,121,660   1,306,670    557,880   664,800 
 Rail intermodal  15,390   24,220    7,630   11,590 
 Ocean and air cargo carriers  16,750   22,890    8,310   11,330 
      1,153,800   1,353,780    573,820   687,720 
             
 Loads hauled via BCO Independent Contractors (3)            
  included in total truck transportation  463,910   527,830    231,360   265,590 
             
Revenue per load:         
             
 Truck transportation         
  Truckload:         
   Van equipment $2,226  $2,760   $2,176  $2,650 
   Unsided/platform equipment  2,935   3,161    2,911   3,215 
  Less-than-truckload  673   730    664   754 
  Other truck transportation (1)    2,514   2,619    2,256   2,587 
   Total truck transportation  2,292   2,677    2,235   2,628 
 Rail intermodal  3,307   3,555    3,307   3,747 
 Ocean and air cargo carriers  8,151   13,583    9,078   14,020 
             
 Revenue per load on loads hauled via BCO Independent Contractors (3) $2,231  $2,683   $2,228  $2,592 
             
Revenue by capacity type (as a % of total revenue):         
             
 Truck capacity providers:         
  BCO Independent Contractors (3)  37%  36%   38%  35%
  Truck Brokerage Carriers  55%  53%   53%  54%
 Rail intermodal  2%  2%   2%  2%
 Ocean and air cargo carriers  5%  8%   5%  8%
 Other   2%  1%   2%  1%
             
             
          July 1, June 25,
           2023   2022 
Truck Capacity Providers         
             
 BCO Independent Contractors (3)       9,748   11,023 
 Truck Brokerage Carriers:         
  Approved and active (4)         58,303   70,649 
      Other approved       29,503   29,454 
           87,806   100,103 
 Total available truck capacity providers       97,554   111,126 
             
 Trucks provided by BCO Independent Contractors (3)       10,548   11,887 
             
(1) Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.
             
(2) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.
             
(3) BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.  
             
(4) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.  
             


Landstar System, Inc. and Subsidiary
Reconciliation of Gross Profit to Variable Contribution
(Dollars in thousands)
(Unaudited)
             
             
      Twenty Six Weeks Ended Thirteen Weeks Ended
      July 1, June 25, July 1, June 25,
       2023   2022   2023   2022 
             
Revenue   $2,809,532  $3,945,663  $1,373,857  $1,975,064 
             
Costs of revenue:         
  Purchased transportation  2,154,491   3,096,018   1,053,197   1,545,688 
  Commissions to agents  248,153   311,634   122,478   161,856 
             
 Variable costs of revenue  2,402,644   3,407,652   1,175,675   1,707,544 
             
  Trailing equipment depreciation  16,519   18,363   8,150   9,280 
  Information technology costs (1)  13,493   9,039   6,742   4,993 
  Insurance-related costs (2)  58,382   66,441   30,122   34,786 
  Other operating costs  25,840   21,522   13,462   10,381 
             
 Other costs of revenue  114,234   115,365   58,476   59,440 
             
 Total costs of revenue  2,516,878   3,523,017   1,234,151   1,766,984 
             
Gross profit   $292,654  $422,646  $139,706  $208,080 
             
Gross profit margin   10.4%  10.7%  10.2%  10.5%
             
 Plus: other costs of revenue  114,234   115,365   58,476   59,440 
             
Variable contribution  $406,888  $538,011  $198,182  $267,520 
             
Variable contribution margin  14.5%  13.6%  14.4%  13.5%
                 
(1) Includes costs of revenue incurred related to internally developed software including ASC 350-40 amortization, implementation costs, hosting costs and other support costs utilized to support the Company’s independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company's Consolidated Statements of Income.
                 
(2) Primarily includes (i) insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight; (ii) the related cost of claims incurred under those programs; and (iii) brokerage commissions and other fees incurred relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by the Company, which are included in selling, general and administrative in the Company’s Consolidated Statements of Income.

 

 

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