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Landstar System Reports Fourth Quarter Revenue of $994.9 Million and Diluted Earnings Per Share of $1.27

JACKSONVILLE, Fla., Jan. 29, 2020 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $1.27 in the 2019 fourth quarter on revenue of $994.9 million. Revenue in the 2019 fourth quarter was at the mid-point of the Company’s guidance issued on October 23, 2019, while diluted earnings per share was below the low-end of the guidance of $1.40. As further described later in this press release, the shortfall in diluted earnings per share to our guidance was entirely attributable to insurance and claims costs in the quarter, well above the insurance and claims costs anticipated as part of the October 23, 2019 earnings guidance. Landstar reported diluted earnings per share of $1.68 on revenue of $1.182 billion in the 2018 fourth quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 fourth quarter was $911.8 million, or 92 percent of revenue, compared to $1.078 billion, or 91 percent of revenue, in the 2018 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2019 fourth quarter was $571.8 million compared to $705.0 million in the 2018 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 fourth quarter was $315.2 million compared to $346.6 million in the 2018 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $63.0 million, or 6 percent of revenue, in the 2019 fourth quarter compared to $84.8 million, or 7 percent of revenue, in the 2018 fourth quarter.

Trailing twelve-month return on average shareholders’ equity was 31 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 27 percent. Landstar purchased approximately 849,000 shares of its common stock during fiscal year 2019 at an aggregate cost of approximately $88.6 million. As previously disclosed by the Company in a Form 8-K filed with the Securities and Exchange Commission on December 10, 2019, 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 by 1,849,068 and declared a special one-time cash dividend in the amount of $2.00 per share that was paid on January 24, 2020, to stockholders of record as of the close of business on January 10, 2020. Currently, Landstar is authorized to purchase up to a total of 3,000,000 shares of the Company’s common stock under its share purchase programs. In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on March 13, 2020, to stockholders of record as of the close of business on February 17, 2020. It is currently the intention of the Board to pay dividends on a quarterly basis going forward. As of December 28, 2019, the Company had $352 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility.

“As expected, the macroeconomic environment during the 2019 fourth quarter made for challenging comparisons against our record 2018 fourth quarter performance,” said Landstar President and Chief Executive Officer Jim Gattoni. “Soft demand, driven by slowing production in the U.S. manufacturing sector, and more readily available truck capacity drove Landstar’s truck rates and volumes below prior year levels in the 2019 fourth quarter. Overall, 2019 fourth quarter revenue was 16 percent below 2018 fourth quarter revenue, mostly due to a 9 percent decrease in revenue per load on loads hauled via truck and a 7 percent decrease in truck loadings. The Company’s fourth quarter earnings guidance issued on October 23, 2019 anticipated fourth quarter diluted earnings per share of $1.40 to $1.46 reflecting insurance and claims costs at 3.6 percent of estimated fourth quarter BCO revenue. Diluted earnings per share fell below our guidance, entirely due to higher insurance and claims costs than we anticipated in our initial estimate. During the 2019 fourth quarter, we incurred $7.2 million of unfavorable development of prior year claims that drove actual insurance and claims costs to 5.7 percent of BCO revenue in the quarter.”

Gattoni further commented, “Landstar’s financial performance in 2018 was by far the best in the Company’s history, making for very difficult comparisons in 2019. We experienced year-over-year declines in both truck volumes and price for much of 2019, and revenue for fiscal year 2019 was 11% below that of fiscal year 2018. Nevertheless, 2019 was still the second best financial year in the Company’s history after 2018, with 2019 revenue, gross profit, operating income and diluted earnings per share each representing the second highest annual amount achieved in Landstar history.”

Gattoni continued, “January of any given year is typically the slowest month of the year. Through the first several weeks of January, there has been little change in the macroeconomic environment experienced throughout 2019, characterized by soft demand, weakness in the U.S. manufacturing sector, and readily available truck capacity. Additionally, the 2019 first quarter was seasonally the strongest quarter of 2019, setting the stage for a difficult quarter-over-prior-year-quarter comparison heading into the first quarter of 2020. I expect these conditions to result in earnings in the 2020 first quarter to be well below that of the 2019 first quarter.  From a revenue standpoint, the number of loads hauled via truck in the first few weeks of 2020 was below the corresponding period of the prior year in a mid-single digit percentage range, somewhat similar to the year-over-prior-year percentage decrease experienced in the 2019 fourth quarter. Revenue per load on loads hauled via truck in the first few weeks of January was below the same period of the prior year in a mid-single digit percentage range, a slight improvement to the year-over-prior-year percentage decrease experienced in the 2019 fourth quarter. I expect the volume and pricing trends experienced in the first few weeks of January to continue through the first quarter. As such, I anticipate revenue for the 2020 first quarter to be in a range of $915 million to $965 million.”

Gattoni added that, “In early January, a BCO with a motor carrier subsidiary of the Company was involved in a tragic vehicular accident involving a fatality. The Company is still in the process of obtaining all the facts concerning this incident and, as such, it is too soon to estimate the ultimate financial exposure of this tragic accident. Current facts as known to us indicate that it is probable this accident will adversely impact the financial results of the Company’s 2020 first quarter. It is highly likely that, once all facts are determined, the estimated ultimate cost of this tragic accident will reduce first quarter diluted earnings per share to an amount below the low-end of the Company’s 2020 first quarter diluted earnings per share guidance. While our evaluation is still preliminary and our investigation continues, the Company’s pre-tax loss exposure at the time of this accident included our $5 million self-insured retention and up to $3.5 million relating to aggregate losses above our self-insured retention during an annual policy year (May 1 to April 30).  Additional insurance and claims expense of $8.5 million in the 2020 first quarter would result in a charge of $0.16 per diluted share.”

Gattoni concluded, “Based on the range of revenue estimated for the 2020 first quarter and excluding the cost of the ultimate resolution of this recent tragic accident, I would anticipate diluted earnings per share to be in a range of $1.10 to $1.20. This range of diluted earnings per share includes insurance and claims expense estimated at 4.0 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past three years.”

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 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)
 
  Fiscal Years Ended     Fiscal Quarters Ended
  December 28,     December 29,     December 28,   December 29,
  2019     2018     2019   2018
                   
Revenue $ 4,084,577     $ 4,615,144     $ 994,879   $ 1,182,351
Investment income 5,041     3,816     1,305   1,062
                   
Costs and expenses:                  
Purchased transportation 3,127,474     3,569,961     761,828   911,251
Commissions to agents 342,226     378,002     84,364   102,174
Other operating costs, net of gains/losses on asset sales/dispositions 37,274     31,803     8,743   7,627
Insurance and claims 80,319     75,677     25,071   17,959
Selling, general and administrative 158,953     188,212     38,236   47,264
Depreciation and amortization 44,468     43,570     11,423   11,050
                   
Total costs and expenses 3,790,714     4,287,225     929,665   1,097,325
                   
Operating income 298,904     331,735     66,519   86,088
Interest and debt expense 3,141     3,354     863   899
                   
Income before income taxes 295,763     328,381     65,656   85,189
Income taxes 68,060     73,168     15,608   16,889
                   
Net income 227,703     255,213     50,048   68,300
Less: Net (loss)/income attributable to noncontrolling interest (17 )   (68 )   -   44
Net income attributable to                  
Landstar System, Inc. and subsidiary $ 227,720     $ 255,281     $ 50,048   $ 68,256
                   
Earnings per common share attributable to                  
Landstar System, Inc. and subsidiary $ 5.72     $ 6.19     $ 1.27   $ 1.69
                   
Diluted earnings per share attributable to                  
Landstar System, Inc. and subsidiary $ 5.72     $ 6.18     $ 1.27   $ 1.68
                   
Average number of shares outstanding:                  
Earnings per common share 39,786,000     41,273,000     39,472,000   40,501,000
Diluted earnings per share 39,786,000     41,310,000     39,472,000   40,514,000
                   
Dividends per common share $ 2.700     $ 0.630     $ 2.185   $ 0.165
                   


 
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
 
  December 28,     December 29,  
  2019     2018  
ASSETS          
Current assets:          
Cash and cash equivalents $   319,515     $   199,736  
Short-term investments   32,901       40,058  
Trade accounts receivable, less allowance          
of $7,284 and $6,413   588,549       691,604  
Other receivables, including advances to independent          
contractors, less allowance of $7,667 and $6,216   35,553       23,744  
Other current assets   21,370       16,287  
Total current assets   997,888       971,429  
           
Operating property, less accumulated depreciation          
and amortization of $280,849 and $250,153   285,855       284,032  
Goodwill   38,508       38,232  
Other assets   105,460       86,871  
Total assets $   1,427,711     $   1,380,564  
           
LIABILITIES AND EQUITY          
Current liabilities:          
Cash overdraft $   53,878     $   55,339  
Accounts payable   271,996       314,134  
Current maturities of long-term debt   42,632       43,561  
Insurance claims   44,532       40,176  
Dividends payable   78,947       -   
Accrued compensation   9,884       29,489  
Other current liabilities   51,035       53,119  
Total current liabilities   552,904       535,818  
           
Long-term debt, excluding current maturities   70,212       84,864  
Insurance claims   33,575       30,429  
Deferred income taxes and other non-current liabilities   49,551       40,320  
           
Equity          
Landstar System, Inc. and subsidiary shareholders' equity          
Common stock, $0.01 par value, authorized 160,000,000           
shares, issued 68,083,419 and 67,870,962 shares   681       679  
Additional paid-in capital   226,123       226,852  
Retained earnings   1,962,161       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   (2,212 )     (5,875 )
Total Landstar System, Inc. and subsidiary shareholders'          
equity   721,469       686,824  
Noncontrolling interest   -        2,309  
Total equity   721,469       689,133  
Total liabilities and equity  $   1,427,711     $   1,380,564  
           


 
Landstar System, Inc. and Subsidiary 
Supplemental Information
(Unaudited)
 
  Fiscal Years Ended     Fiscal Quarters Ended  
  December 28,     December 29,     December 28,     December 29,  
  2019     2018     2019     2018  
Revenue generated through (in thousands):                      
                       
Truck transportation                      
Truckload:                      
Van equipment $   2,371,188     $   2,791,494     $   571,767     $   704,971  
Unsided/platform equipment   1,295,817       1,386,387       315,202       346,603  
Less-than-truckload   98,324       102,531       24,849       26,083  
Total truck transportation   3,765,329       4,280,412       911,818       1,077,657  
Rail intermodal   118,305       128,976       30,750       32,950  
Ocean and air cargo carriers   121,485       134,577       32,227       51,858  
Other (1)    79,458       71,179       20,084       19,886  
  $   4,084,577     $   4,615,144     $   994,879     $   1,182,351  
                       
Revenue on loads hauled via BCO Independent Contractors (2)                      
included in total truck transportation $   1,831,752     $   2,001,665     $   441,617     $   482,321  
                       
Number of loads:                      
                       
Truck transportation                      
Truckload:                      
Van equipment 1,337,089     1,398,388     322,517     353,066  
Unsided/platform equipment 513,579     516,613     122,467     127,854  
Less-than-truckload 155,592     145,269     39,976     38,630  
Total truck transportation 2,006,260     2,060,270     484,960     519,550  
Rail intermodal 47,590     53,030     12,220     12,770  
Ocean and air cargo carriers 30,110     28,970     7,960     7,720  
  2,083,960     2,142,270     505,140     540,040  
                       
Loads hauled via BCO Independent Contractors (2)                      
included in total truck transportation 954,990     949,330     232,120     231,860  
                       
Revenue per load:                      
                       
Truck transportation                      
Truckload:                      
Van equipment $   1,773     $   1,996     $   1,773     $   1,997  
Unsided/platform equipment   2,523       2,684       2,574       2,711  
Less-than-truckload   632       706       622       675  
Total truck transportation   1,877       2,078       1,880       2,074  
Rail intermodal   2,486       2,432       2,516       2,580  
Ocean and air cargo carriers   4,035       4,645       4,049       6,717  
                       
Revenue per load on loads hauled via BCO Independent Contractors (2) $   1,918     $   2,109     $   1,903     $   2,080  
                       
Revenue by capacity type (as a % of total revenue);                      
                       
Truck capacity providers:                      
BCO Independent Contractors (2) 45 %   43 %   44 %   41 %
Truck Brokerage Carriers 47 %   49 %   47 %   50 %
Rail intermodal 3 %   3 %   3 %   3 %
Ocean and air cargo carriers 3 %   3 %   3 %   4 %
Other 2 %   2 %   2 %   2 %
                       
                       
              December 28,     December 29,  
              2019     2018  
Truck Capacity Providers                      
                       
BCO Independent Contractors (2)               9,554       9,884  
Truck Brokerage Carriers:                      
Approved and active (3)               39,497       41,069  
Other approved               16,820       17,985  
                56,317       59,054  
Total available truck capacity providers               65,871       68,938  
                       
Trucks provided by BCO Independent Contractors (2)               10,243       10,599  
                       
(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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