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Landstar System Reports Record Quarterly Revenue of $1.202 Billion and Record Quarterly Diluted Earnings Per Share of $1.63

JACKSONVILLE, Fla., Oct. 24, 2018 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported record quarterly revenue of $1.202 billion in the 2018 third quarter, a 27 percent increase over revenue of $943 million reported in the 2017 third quarter. Net income of $67.0 million and diluted earnings per share of $1.63 were also quarterly records and increased 58 percent and 61 percent, respectively, over net income and diluted earnings per share in the 2017 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2018 third quarter was $171.3 million, 22 percent above the 2017 third quarter, while 2018 third quarter operating income was $87.1 million, 44 percent above the 2017 third quarter. Operating income in the 2018 third quarter was an all-time quarterly record, while gross profit was a third quarter record, second all-time only to the Company’s 2018 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2018 third quarter was $1.118 billion, or 93 percent of revenue, compared to $877.6 million, or 93 percent of revenue, in the 2017 third quarter. Truckload transportation revenue hauled via van equipment in the 2018 third quarter was $717.0 million compared to $550.5 million in the 2017 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2018 third quarter was $375.7 million compared to $304.5 million in the 2017 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $65.7 million, or 5 percent of revenue, in the 2018 third quarter compared to $53.7 million, or 6 percent of revenue, in the 2017 third quarter.

Landstar did not purchase any shares of its common stock during the 2018 third quarter. 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 September 29, 2018, the Company had $254 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 December 7, 2018, to stockholders of record as of the close of business on November 13, 2018. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“I am extremely pleased with Landstar’s financial performance during the 2018 third quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “The 2018 third quarter established all-time Landstar quarterly records for revenue, operating income and diluted earnings per share while gross profit was a third quarter record. The Company also set new all-time Landstar records for trucks provided by BCOs with 10,443 as of the end of the quarter and net truck additions in a single quarter with the net addition of 288 trucks in the third quarter.”

Gattoni continued, “Demand for our services continued to be strong in the 2018 third quarter. The number of loads hauled via truck in the 2018 third quarter was a third quarter record and increased 7 percent over the 2017 third quarter, driven by a 7 percent increase in the number of loads hauled via van equipment, a 5 percent increase in the number of loads hauled via unsided/platform equipment and a 5 percent increase in less-than-truckload volume. Excluding the approximately 16,000 truckloads hauled by Landstar in September 2017 related to the storms that impacted the southeastern U.S. and Texas, truckload volumes increased 10 percent over the 2017 third quarter. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 25 percent higher in the 2018 third quarter compared to the 2017 third quarter, primarily due to a 21 percent increase in rail intermodal volume and a 46 percent increase in ocean volume.”

Gattoni further commented, “As expected, the pricing environment for our truckload services continued to be very strong in the 2018 third quarter, as industry-wide truck capacity continued to be tight. Revenue per load on loads hauled via van equipment increased 21 percent over the 2017 third quarter and revenue per load on loads hauled via unsided/platform equipment increased 17 percent over the 2017 third quarter. As a result, revenue per load on loads hauled via truck was 19 percent higher than the 2017 third quarter.”

Gattoni continued, “Revenue per load and the number of loads hauled via truck in the first few weeks of October continue to significantly exceed the rates and volume of the same period of 2017, however, at a more modest pace than experienced during the first three quarters of 2018. Accordingly, we expect truck revenue per load in the 2018 fourth quarter to exceed prior year fourth quarter in an upper single digit percentage range. The anticipated deceleration in the growth in truck revenue per load is the result of: 1) a more difficult quarter over prior year quarter comparison, as truck revenue per load in the 2017 fourth quarter experienced atypical significant increases on a sequential monthly basis during the quarter and 2) truck revenue per load in the first few weeks of October 2018 is trending slightly below normal seasonal patterns. The number of loads hauled via truck in the first few weeks of October is trending above the same period of 2017 in a high single digit percentage range. We expect that trend to continue and therefore expect the number of loads hauled via truck in the 2018 fourth quarter to exceed the 2017 fourth quarter in an eight to ten percent range. Assuming recent trends continue, I anticipate record revenue for the 2018 fourth quarter in a range of $1.180 billion to $1.230 billion, which would represent growth of 12 percent to 17 percent above our record 2017 fourth quarter. 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 fourth quarter in a range of $1.56 to $1.62. As a reminder, the 2017 fourth quarter diluted earnings per share of $1.54 included the effect of one-time tax benefits of $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.”

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 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.

                       
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 29,   September 30,   September 29,   September 30,  
          2018       2017       2018       2017    
                       
Revenue       $ 3,432,793     $ 2,594,772     $ 1,202,081     $ 943,430    
Investment income       2,754       1,733       1,002       711    
                       
Costs and expenses:                    
Purchased transportation     2,658,710       1,989,938       931,473       726,827    
Commissions to agents     275,828       210,678       99,304       76,598    
Other operating costs, net of gains on asset sales/dispositions     24,176       22,497       8,966       8,097    
Insurance and claims       57,718       46,333       18,819       17,927    
Selling, general and administrative     140,948       123,179       46,699       43,995    
Depreciation and amortization     32,520       29,961       10,754       10,130    
                       
Total costs and expenses     3,189,900       2,422,586       1,116,015       883,574    
                       
Operating income       245,647       173,919       87,068       60,567    
Interest and debt expense       2,455       2,559       816       657    
                       
Income before income taxes     243,192       171,360       86,252       59,910    
Income taxes         56,279       59,047       19,304       17,490    
                       
Net income         186,913       112,313       66,948       42,420    
Less: Net loss attributable to noncontrolling interest     (112 )     (23 )     (37 )     (23 )  
Net income attributable to Landstar System,                  
Inc. and subsidiary     $ 187,025     $ 112,336     $ 66,985     $ 42,443    
                       
Earnings per common share attributable to                  
Landstar System, Inc. and subsidiary   $ 4.50     $ 2.68     $ 1.63     $ 1.01    
                       
Diluted earnings per share attributable to                  
Landstar System, Inc. and subsidiary   $ 4.50     $ 2.67     $ 1.63     $ 1.01    
                       
Average number of shares outstanding:                  
Earnings per common share     41,530,000       41,924,000       41,101,000       41,957,000    
Diluted earnings per share     41,576,000       42,013,000       41,137,000       42,028,000    
                       
Dividends per common share   $ 0.465     $ 0.280     $ 0.165     $ 0.100    
                       


Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
             
             
        September 29,   December 30,
          2018       2017  
ASSETS            
Current assets:            
Cash and cash equivalents     $   213,974     $   242,416  
Short-term investments         40,203         48,928  
Trade accounts receivable, less allowance      
of $6,173 and $6,131         702,183         631,164  
Other receivables, including advances to independent      
contractors, less allowance of $6,188 and $6,012     18,586         24,301  
Other current assets         24,191         14,394  
Total current assets         999,137         961,203  
             
Operating property, less accumulated depreciation      
and amortization of $241,321 and $218,700     268,011         276,011  
Goodwill           38,560         39,065  
Other assets           85,004         76,181  
Total assets       $   1,390,712     $   1,352,460  
             
LIABILITIES AND EQUITY          
Current liabilities:            
Cash overdraft       $   39,759     $   42,242  
Accounts payable         313,728         285,132  
Current maturities of long-term debt       40,960         42,051  
Insurance claims         43,268         38,919  
Dividends payable         -          62,985  
Accrued compensation         23,908         30,103  
Other current liabilities         53,553         47,211  
Total current liabilities         515,176         548,643  
             
Long-term debt, excluding current maturities     72,887         83,062  
Insurance claims           30,775         30,141  
Deferred income taxes and other non-current liabilities     45,664         36,737  
             
Equity            
Landstar System, Inc. and subsidiary shareholders' equity      
Common stock, $0.01 par value, authorized 160,000,000       
shares, issued 67,869,378 and 67,740,380 shares     679         677  
Additional paid-in capital         221,563         209,599  
Retained earnings         1,779,680         1,611,158  
Cost of 26,755,001 and 25,749,493 shares of common      
stock in treasury         (1,273,512 )       (1,167,600 )
Accumulated other comprehensive loss     (4,569 )       (3,162 )
Total Landstar System, Inc. and subsidiary shareholders'      
equity           723,841         650,672  
Noncontrolling interest         2,369         3,205  
Total equity           726,210         653,877  
Total liabilities and equity      $   1,390,712     $   1,352,460  
             


Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
                     
                     
    Thirty Nine Weeks Ended     Thirteen Weeks Ended  
    September 29,   September 30,     September 29,   September 30,  
      2018       2017         2018       2017    
Revenue generated through (in thousands):                    
                     
Truck transportation                    
Truckload:                    
Van equipment   $   2,086,523     $   1,529,402       $   717,047     $   550,484    
Unsided/platform equipment       1,039,784         825,194           375,739         304,536    
Less-than-truckload       76,448         65,397           25,500         22,598    
Total truck transportation       3,202,755         2,419,993           1,118,286         877,618    
Rail intermodal       96,026         68,570           34,439         24,213    
Ocean and air cargo carriers       82,719         70,708           31,213         29,523    
Other (1)        51,293         35,501           18,143         12,076    
    $   3,432,793     $   2,594,772       $   1,202,081     $   943,430    
                     
Revenue on loads hauled via BCO Independent Contractors (2)                    
included in total truck transportation   $   1,519,344     $   1,211,564       $   520,391     $   435,479    
                     
Number of loads:                    
                     
Truck transportation                    
Truckload:                    
Van equipment     1,045,322       942,894         353,456       329,329    
Unsided/platform equipment     388,759       362,936         133,425       126,509    
Less-than-truckload     106,639       98,740         35,969       34,232    
Total truck transportation     1,540,720       1,404,570         522,850       490,070    
Rail intermodal     40,260       32,040         13,420       11,080    
Ocean and air cargo carriers     21,250       18,150         8,220       6,210    
      1,602,230       1,454,760         544,490       507,360    
                     
Loads hauled via BCO Independent Contractors (2)                    
included in total truck transportation     717,470       686,830         236,580       232,970    
                     
Revenue per load:                    
                     
Truck transportation                    
Truckload:                    
Van equipment   $   1,996     $   1,622       $   2,029     $   1,672    
Unsided/platform equipment       2,675         2,274           2,816         2,407    
Less-than-truckload       717         662           709         660    
Total truck transportation       2,079         1,723           2,139         1,791    
Rail intermodal       2,385         2,140           2,566         2,185    
Ocean and air cargo carriers       3,893         3,896           3,797         4,754    
                     
Revenue per load on loads hauled via BCO Independent Contractors (2) $   2,118     $   1,764       $   2,200     $   1,869    
                     
Revenue by capacity type (as a % of total revenue):                    
                     
Truck capacity providers:                    
BCO Independent Contractors (2)     44 %     47 %       43 %     46 %  
Truck Brokerage Carriers     49 %     47 %       50 %     47 %  
Rail intermodal     3 %     3 %       3 %     3 %  
Ocean and air cargo carriers     2 %     3 %       3 %     3 %  
Other      1 %     1 %       2 %     1 %  
                     
                     
              September 29,   September 30,  
                2018       2017    
Truck Capacity Providers                    
                     
BCO Independent Contractors (2)                 9,751         8,939    
Truck Brokerage Carriers:                    
  Approved and active (3)                 40,151         32,925    
  Other approved                 16,803         15,138    
                  56,954         48,063    
Total available truck capacity providers                 66,705         57,002    
                     
Trucks provided by BCO Independent Contractors (2)                 10,443         9,548    
                     
                     
(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.   
   
Contact: Kevin Stout
Landstar System, Inc.
www.landstar.com
904-398-9400

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