Landstar System Reports Fourth Quarter Revenue of $1.675B and Fourth Quarter Diluted Earnings Per Share of $2.60


JACKSONVILLE, Fla., Feb. 01, 2023 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported diluted earnings per share (“DEPS”) of $2.60 in the 2022 fourteen-week fourth quarter on revenue of $1.675 billion. Landstar reported diluted earnings per share of $2.99 on revenue of $1.945 billion in the 2021 thirteen-week fourth quarter.

The Company’s fiscal year ends each year on the last Saturday in December. As such, the Company’s 2022 fourth quarter ended on December 31st and included fourteen weeks of operations, whereas the 2021 fourth quarter ended on December 25th and included thirteen weeks. As the week following Christmas tends to reflect less demand for the Company’s freight transportation services as compared to the rest of December, we estimate the extra week in 2022 contributed revenue of approximately $65 million.

Gross profit in the 2022 fourth quarter was $180.0 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2022 fourth quarter was $234.0 million. Gross profit in the 2021 fourth quarter was $209.8 million and variable contribution in the 2021 fourth quarter was $263.3 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2022 and 2021 fourth quarters and full fiscal years are provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 50 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 44 percent. The Company is currently authorized to purchase up to 3,000,000 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 $0.30 per share payable on March 10, 2023, to stockholders of record as of the close of business on February 13, 2023. 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 2022 fourth quarter was $1,533.6 million, or 92 percent of revenue, compared to $1,744.8 million, or 90 percent of revenue, in the 2021 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2022 fourth quarter was $869.8 million, compared to $1,023.8 million in the 2021 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2022 fourth quarter was $423.4 million, compared to $436.7 million in the 2021 fourth quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2022 fourth quarter was $204.0 million, compared to $252.4 million in the 2021 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $115.1 million, or 7 percent of revenue, in the 2022 fourth quarter, compared to $174.6 million, or 9 percent of revenue, in the 2021 fourth quarter.

“The current macroeconomic environment made for challenging comparisons against our record 2021 fourth quarter performance despite the extra week of operations in the 2022 fourth quarter,” said Landstar President and Chief Executive Officer Jim Gattoni. “Softer demand during a weaker than typical peak season resulted in more readily available truck capacity and truck rates and volumes below the record prior year levels. The number of loads hauled via truck decreased 5.5% as compared to the 2021 fourth quarter, below the low end of our fourth quarter guidance issued in our 2022 third quarter earnings release on October 19, 2022. Revenue per load on loads hauled via truck decreased 7% as compared to the 2021 fourth quarter, at the low end of the 2022 fourth quarter guidance. In addition, revenue generated in the aggregate via rail, air and ocean cargo carriers was below the estimated amount included in the fourth quarter guidance.”

Gattoni further stated, “As expected, even with a challenging 2022 fourth quarter, Landstar’s fiscal year financial performance in 2022 was the best in the Company’s history. Revenue in fiscal year 2022 was approximately $7.4 billion, an annual record, and was approximately $900 million higher than the previous record set in 2021. Gross profit and variable contribution in fiscal year 2022 were $788 million and $1.018 billion, respectively, both also representing new annual records. Operating income in fiscal year 2022 was an annual record of $571 million and represented year-over-year growth of 13%. Diluted earnings per share in fiscal year 2022 was an annual record of $11.76, an increase of $1.78, or 18 percent, from our prior fiscal year record of $9.98 in 2021.”

Gattoni continued, “Landstar’s financial performance in 2022, coming off a record-setting 2021 fiscal year, was truly outstanding. The Company’s 2022 achievements speak to the strength and resiliency of the Landstar network and the power of our unique agent and capacity network to execute. I am extremely pleased by our organic annual load volume growth and our continuing ability to attract productive agents and capacity to the network. We now enter 2023 looking forward to another exciting year for the Company, its employees, and the thousands of business owners who participate in the Landstar network.”

As it pertains to the 2023 first quarter, we begin the year with a much softer freight environment as compared to the beginning of 2022. Accordingly, we enter 2023 with very difficult quarter over prior year quarter comparisons. 2022 first quarter truck revenue per load was an all-time Landstar high and truck load volume was the second highest quarterly volume in Company history, lower only than the 2021 fourth quarter. We ended 2022 with fourth quarter truck revenue per load 11 percent below the 2022 first quarter. That lower truck revenue per load will certainly carry forward into the 2023 first quarter along with the expectation that we experience a normal seasonal decrease in rates from the fourth quarter to the first quarter in a mid-single digit percentage range.

Also, in the 2022 first quarter, revenue hauled via rail, air and ocean cargo carriers was near an all-time high of $195 million. We expect that revenue hauled via these non-trucking modes in the 2023 first quarter to be $100 million to $120 million below the 2022 first quarter.

Gattoni further commented, “With respect to recent trends, the number of loads hauled via truck has been 10 to 12 percent below the corresponding period of 2022 and overall truck revenue per load has been 15 to 17 percent below the corresponding period of 2022. Prior to the onset of the pandemic in 2020, truck revenue per load typically experienced, on average, a mid-single digit percentage range seasonal decrease from the fourth quarter to the immediately following first quarter. Thus far through the first four weeks of January 2023, truck revenue per load has trended reasonably in-line with pre-pandemic historical fourth quarter to first quarter sequential patterns. As such, I anticipate revenue for the 2023 first quarter to be in a range of $1.40 billion to $1.45 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2023 first quarter, I would anticipate DEPS to be in a range of $2.05 to $2.15. This range of DEPS includes insurance and claims expense estimated at 4.5 percent of BCO revenue.”

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 Fourth Quarter 2022 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; changes in fuel 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 2021 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Qs for the 2022 first and second fiscal quarters, 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)
        
        
 Fiscal Years Ended Fiscal Quarters Ended
 December 31, December 25, December 31, December 25,
 2022 2021 2022 2021
        
Revenue$7,436,562 $6,537,568 $1,674,767 $1,945,017
Investment income 3,162  2,857  1,139  719
        
Costs and expenses:       
Purchased transportation 5,804,017  5,114,667  1,291,676  1,531,470
Commissions to agents 614,865  507,209  149,106  150,212
Other operating costs, net of gains on asset sales/dispositions 45,192  36,531  10,314  9,414
Insurance and claims 125,835  105,463  29,570  30,265
Selling, general and administrative 221,279  221,278  56,080  62,558
Depreciation and amortization 57,453  49,609  14,826  13,077
        
Total costs and expenses 6,868,641  6,034,757  1,551,572  1,796,996
        
Operating income 571,083  505,668  124,334  148,740
Interest and debt expense 3,620  3,976  345  1,002
        
Income before income taxes 567,463  501,692  123,989  147,738
Income taxes 136,549  120,168  30,687  34,423
        
Net income$430,914 $381,524 $93,302 $113,315
        
Diluted earnings per share$11.76 $9.98 $2.60 $2.99
        
Average diluted shares outstanding 36,633,000  38,235,000  35,930,000  37,917,000
        
Dividends per common share$3.10 $2.92 $2.30 $2.25
        


    
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
    
    
 December 31, December 25,
 2022 2021
ASSETS   
Current assets:   
Cash and cash equivalents$339,581  $215,522 
Short-term investments 53,955   35,778 
Trade accounts receivable, less allowance   
of $12,121 and $7,074 967,793   1,154,314 
Other receivables, including advances to independent   
contractors, less allowance of $10,579 and $8,125 56,235   101,124 
Other current assets 21,826   16,162 
Total current assets 1,439,390   1,522,900 
    
Operating property, less accumulated depreciation   
and amortization of $393,274 and $344,099 314,990   317,386 
Goodwill 41,220   40,768 
Other assets 136,279   164,411 
Total assets$1,931,879  $2,045,465 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities:   
Cash overdraft$92,953  $116,478 
Accounts payable 527,372   604,130 
Current maturities of long-term debt 36,175   36,561 
Insurance claims 50,836   46,896 
Dividends payable 71,854   75,387 
Other current liabilities 98,945   130,531 
Total current liabilities 878,135   1,009,983 
    
Long-term debt, excluding current maturities 67,225   75,243 
Insurance claims 58,268   49,509 
Deferred income taxes and other non-current liabilities 41,030   48,720 
    
Shareholders' equity:   
Common stock, $0.01 par value, authorized 160,000,000   
shares, issued 68,382,310 and 68,232,975 684   682 
Additional paid-in capital 258,487   255,148 
Retained earnings 2,635,960   2,317,184 
Cost of 32,455,300 and 30,539,235 shares of common   
stock in treasury (1,992,886)  (1,705,601)
Accumulated other comprehensive loss (15,024)  (5,403)
Total shareholders' equity 887,221   862,010 
Total liabilities and shareholders' equity$1,931,879  $2,045,465 
    


Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
 
        
 Fiscal Years Ended Fiscal Quarters Ended
 December 31, December 25, December 31, December 25,
 2022 2021 2022 2021
Revenue generated through (in thousands):       
        
Truck transportation       
Truckload:       
Van equipment$3,892,085  $3,525,830  $869,788  $1,023,805 
Unsided/platform equipment 1,760,357   1,549,037   423,401   436,679 
Less-than-truckload 142,438   117,505   36,444   31,954 
Other truck transportation (1) 835,959   770,846   203,958   252,374 
Total truck transportation 6,630,839   5,963,218   1,533,591   1,744,812 
Rail intermodal 145,017   159,974   31,255   39,434 
Ocean and air cargo carriers 558,986   327,160   83,830   135,209 
Other (2) 101,720   87,216   26,091   25,562 
 $7,436,562  $6,537,568  $1,674,767  $1,945,017 
        
Revenue on loads hauled via BCO Independent Contractors (3) included in total truck transportation$2,636,036  $2,612,188  $592,264  $712,875 
        
Number of loads:       
        
Truck transportation       
Truckload:       
Van equipment 1,496,247   1,422,734   365,984   385,218 
Unsided/platform equipment 558,530   521,891   138,094   140,297 
Less-than-truckload 191,233   183,975   48,493   48,937 
Other truck transportation (1) 320,790   300,710   77,449   92,308 
Total truck transportation 2,566,800   2,429,310   630,020   666,760 
Rail intermodal 40,710   52,310   8,770   11,890 
Ocean and air cargo carriers 41,850   41,450   7,440   11,800 
  2,649,360   2,523,070   646,230   690,450 
        
        
Loads hauled via BCO Independent Contractors (3) included in total truck transportation 1,027,480   1,039,630   250,230   266,360 
        
Revenue per load:       
        
Truck transportation       
Truckload:       
Van equipment$2,601  $2,478  $2,377  $2,658 
Unsided/platform equipment 3,152   2,968   3,066   3,113 
Less-than-truckload 745   639   752   653 
Other truck transportation (1) 2,606   2,563   2,633   2,734 
Total truck transportation 2,583   2,455   2,434   2,617 
Rail intermodal 3,562   3,058   3,564   3,317 
Ocean and air cargo carriers 13,357   7,893   11,267   11,458 
        
Revenue per load on loads hauled via BCO Independent Contractors (3)$2,566  $2,513  $2,367  $2,676 
        
Revenue by capacity type (as a % of total revenue):       
        
Truck capacity providers:       
BCO Independent Contractors (3) 35%  40%  35%  37%
Truck Brokerage Carriers 54%  51%  56%  53%
Rail intermodal 2%  2%  2%  2%
Ocean and air cargo carriers 8%  5%  5%  7%
Other 1%  1%  2%  1%
        
        
     December 31, December 25,
     2022 2021
Truck Capacity Providers       
        
BCO Independent Contractors (3)     10,393   11,057 
Truck Brokerage Carriers:       
Approved and active (4)     66,745   64,476 
Other approved     30,999   25,870 
      97,744   90,346 
Total available truck capacity providers     108,137   101,403 
        
Trucks provided by BCO Independent Contractors (3)     11,281   11,864 
        
        
(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)
        
        
 Fiscal Years Ended Fiscal Quarters Ended
 December 31, December 25, December 31, December 25,
 2022 2021 2022 2021
        
Revenue$7,436,562  $6,537,568  $1,674,767  $1,945,017 
        
Costs of revenue:       
Purchased transportation 5,804,017   5,114,667   1,291,676   1,531,470 
Commissions to agents 614,865   507,209   149,106   150,212 
        
Variable costs of revenue 6,418,882   5,621,876   1,440,782   1,681,682 
        
Trailing equipment depreciation 36,653   35,204   8,893   8,842 
Information technology costs (1) 19,834   13,560   5,966   4,026 
Insurance-related costs (2) 127,605   109,387   28,784   31,212 
Other operating costs 45,192   36,531   10,314   9,414 
        
Other costs of revenue 229,284   194,682   53,957   53,494 
        
Total costs of revenue 6,648,166   5,816,558   1,494,739   1,735,176 
        
Gross profit$788,396  $721,010  $180,028  $209,841 
        
Gross profit margin 10.6%  11.0%  10.7%  10.8%
        
Plus: other costs of revenue 229,284   194,682   53,957   53,494 
        
Variable contribution$1,017,680  $915,692  $233,985  $263,335 
        
Variable contribution margin 13.7%  14.0%  14.0%  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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