JACKSONVILLE, Fla., July 24, 2019 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported record second quarter diluted earnings per share of $1.53 in the 2019 second quarter on revenue of $1.045 billion. Landstar reported diluted earnings per share of $1.51 on revenue of $1.183 billion in the 2018 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $158.0 million in the 2019 second quarter compared to $171.4 million in the 2018 second quarter. Operating margin, representing operating income divided by gross profit, was 51.2 percent in the 2019 second quarter.
Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 second quarter was $968.2 million, or 93 percent of revenue, compared to $1.105 billion, or 93 percent of revenue, in the 2018 second quarter. Truckload transportation revenue hauled via van equipment in the 2019 second quarter was $605.4 million compared to $713.3 million in the 2018 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 second quarter was $338.1 million compared to $364.7 million in the 2018 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $56.8 million, or 5 percent of revenue, in the 2019 second quarter compared to $60.3 million, or 5 percent of revenue, in the 2018 second quarter.
Trailing twelve-month return on average shareholders’ equity was 37 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 32 percent. Landstar purchased approximately 550,000 shares of its common stock during the 2019 second quarter at an aggregate cost of approximately $56.8 million. Currently, the Company is authorized to purchase up to approximately 1,326,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of June 29, 2019, the Company had $285 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 August 30, 2019, to stockholders of record as of the close of business on August 12, 2019. This quarterly dividend includes a 12 percent increase to 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.
“Landstar’s business model performed very well in the 2019 second quarter given the significant change in U.S. freight dynamics from 2018 to 2019,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “We entered 2019 knowing we would face very difficult year-over-year comparisons after a record setting 2018. Plus, in late 2018, we began to experience decelerating rates of growth in both truck revenue per load and truck loads that continued through the first quarter of 2019. The freight environment softened further from the 2019 first quarter to the 2019 second quarter, putting additional downward pressure on rates, especially in the spot market where the Company primarily operates. Although demand for freight services has slowed and capacity has become more readily available as compared to 2018, I believe we continue to be in a relatively healthy freight environment. In Landstar’s 2019 first quarter earnings release on April 24, we provided second quarter revenue guidance of $1.075 billion to $1.125 billion and second quarter diluted earnings per share guidance of $1.56 to $1.62. On June 5, we disclosed in a Form 8-K and further explained at a webcast investor conference later that day that, based on recent market conditions, and, in particular, a comparatively challenging pricing environment with respect to the Company’s truckload services, we may not achieve the bottom end of the range of estimates for revenue and earnings per diluted share we provided on April 24, 2019. Revenue and diluted earnings per share for the 2019 second quarter were below the bottom end of the guidance issued on April 24, 2019 largely due to actual truckload rates below our original expectations, beginning in the month of May. Nonetheless, diluted earnings per share were $1.53 in the 2019 second quarter, the highest second quarter diluted earnings per share in Landstar history, as lower top-line numbers were offset by lower costs, showing the strength of Landstar’s variable cost model.”
Gattoni continued, “On April 24, Landstar provided volume guidance for the 2019 second quarter indicating that truck volumes would be approximately equal to the number of loads hauled by truck in the 2018 second quarter. The number of loads hauled via truck in the 2019 second quarter decreased 1 percent from the 2018 second quarter, driven entirely by a 3 percent decrease in the number of loads hauled via van equipment. The aggregate number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 8 percent lower in the 2019 second quarter compared to the 2018 second quarter.”
Gattoni further commented, “As I referred to above, the pricing environment for our truck services continued to drive truckload rates in the 2019 second quarter below the 2018 second quarter, as industry-wide truck capacity was more readily available than during the 2018 second quarter. The Company’s guidance issued on April 24, 2019 called for a decrease in revenue per load on loads hauled via truck in a high single-digit percentage range from the 2018 second quarter. Revenue per load on loads hauled via truck was below the prior year comparable period by 8 percent, 11 percent and 13 percent for April, May and June, respectively. Revenue per load on loads hauled via van equipment decreased 13 percent from the 2018 second quarter and revenue per load on loads hauled via unsided/platform equipment decreased 7 percent from the 2018 second quarter. As a result, revenue per load on loads hauled via truck was 11 percent lower in the 2019 second quarter than the 2018 second quarter.”
Gattoni continued, “Through the first few weeks of July, the number of loads hauled via truck was slightly behind the number of loads hauled in the corresponding period of 2018. I expect that trend to continue during the remainder of the 2019 third quarter. Accordingly, I expect the number of loads hauled via truck in the 2019 third quarter to be below the number of loads hauled by truck in the 2018 third quarter in a low single-digit percentage range. My expectation is that pricing conditions for truck services experienced during the 2019 second quarter will continue through the 2019 third quarter with little change in the level of truck capacity available in the marketplace. Assuming those capacity market conditions continue throughout the rest of the third quarter, I expect 2019 third quarter truck revenue per load to be lower than the 2018 third quarter in a low double-digit percentage range. I anticipate revenue for the 2019 third quarter to be in a range of $1.01 billion to $1.06 billion. Assuming that range of estimated revenue and insurance and claims expense at 3.6 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past five years, I would anticipate 2019 third quarter diluted earnings per share to be in a range of $1.48 to $1.54 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 Second 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) | |||||||||||||||||||
| Twenty Six Weeks Ended | Thirteen Weeks Ended | ||||||||||||||||||
| June 29, | June 30, | June 29, | June 30, | ||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| Revenue | $ | 2,078,040 | $ | 2,230,712 | $ | 1,045,040 | $ | 1,182,786 | |||||||||||
| Investment income | 2,421 | 1,752 | 1,283 | 891 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||
| Purchased transportation | 1,591,126 | 1,727,237 | 799,371 | 916,940 | |||||||||||||||
| Commissions to agents | 173,294 | 176,524 | 87,623 | 94,399 | |||||||||||||||
| Other operating costs, net of gains on asset sales/dispositions | 18,100 | 15,210 | 9,861 | 7,606 | |||||||||||||||
| Insurance and claims | 31,279 | 38,899 | 16,286 | 21,539 | |||||||||||||||
| Selling, general and administrative | 82,565 | 94,249 | 41,297 | 48,998 | |||||||||||||||
| Depreciation and amortization | 22,350 | 21,766 | 11,034 | 10,769 | |||||||||||||||
| Total costs and expenses | 1,918,714 | 2,073,885 | 965,472 | 1,100,251 | |||||||||||||||
| Operating income | 161,747 | 158,579 | 80,851 | 83,426 | |||||||||||||||
| Interest and debt expense | 1,514 | 1,639 | 709 | 839 | |||||||||||||||
| Income before income taxes | 160,233 | 156,940 | 80,142 | 82,587 | |||||||||||||||
| Income taxes | 35,833 | 36,975 | 19,042 | 20,095 | |||||||||||||||
| Net income | 124,400 | 119,965 | 61,100 | 62,492 | |||||||||||||||
| Less: Net loss attributable to noncontrolling interest | (17 | ) | (75 | ) | - | (31 | ) | ||||||||||||
| Net income attributable to Landstar System, | |||||||||||||||||||
| Inc. and subsidiary | $ | 124,417 | $ | 120,040 | $ | 61,100 | $ | 62,523 | |||||||||||
| Earnings per common share attributable to | |||||||||||||||||||
| Landstar System, Inc. and subsidiary | $ | 3.11 | $ | 2.88 | $ | 1.53 | $ | 1.51 | |||||||||||
| Diluted earnings per share attributable to | |||||||||||||||||||
| Landstar System, Inc. and subsidiary | $ | 3.11 | $ | 2.87 | $ | 1.53 | $ | 1.51 | |||||||||||
| Average number of shares outstanding: | |||||||||||||||||||
| Earnings per common share | 40,053,000 | 41,744,000 | 39,945,000 | 41,450,000 | |||||||||||||||
| Diluted earnings per share | 40,053,000 | 41,795,000 | 39,945,000 | 41,491,000 | |||||||||||||||
| Dividends per common share | $ | 0.330 | $ | 0.300 | $ | 0.165 | $ | 0.150 | |||||||||||
| Landstar System, Inc. and Subsidiary | |||||||||||||
| Consolidated Balance Sheets | |||||||||||||
| (Dollars in thousands, except per share amounts) | |||||||||||||
| (Unaudited) | |||||||||||||
| June 29, | December 29, | ||||||||||||
| 2019 | 2018 | ||||||||||||
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 250,212 | $ | 199,736 | |||||||||
| Short-term investments | 35,138 | 40,058 | |||||||||||
| Trade accounts receivable, less allowance | |||||||||||||
| of $6,744 and $6,413 | 594,122 | 691,604 | |||||||||||
| Other receivables, including advances to independent | |||||||||||||
| contractors, less allowance of $7,729 and $6,216 | 27,212 | 23,744 | |||||||||||
| Other current assets | 32,619 | 16,287 | |||||||||||
| Total current assets | 939,303 | 971,429 | |||||||||||
| Operating property, less accumulated depreciation | |||||||||||||
| and amortization of $264,910 and $250,153 | 269,246 | 284,032 | |||||||||||
| Goodwill | 38,407 | 38,232 | |||||||||||
| Other assets | 101,737 | 86,871 | |||||||||||
| Total assets | $ | 1,348,693 | $ | 1,380,564 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Cash overdraft | $ | 43,620 | $ | 55,339 | |||||||||
| Accounts payable | 285,569 | 314,134 | |||||||||||
| Current maturities of long-term debt | 39,194 | 43,561 | |||||||||||
| Insurance claims | 41,254 | 40,176 | |||||||||||
| Accrued compensation | 11,372 | 29,489 | |||||||||||
| Contractor escrow | 25,530 | 25,202 | |||||||||||
| Other current liabilities | 27,711 | 27,917 | |||||||||||
| Total current liabilities | 474,250 | 535,818 | |||||||||||
| Long-term debt, excluding current maturities | 65,573 | 84,864 | |||||||||||
| Insurance claims | 31,016 | 30,429 | |||||||||||
| Deferred income taxes and other non-current liabilities | 49,554 | 40,320 | |||||||||||
| Equity | |||||||||||||
| Landstar System, Inc. and subsidiary shareholders' equity | |||||||||||||
| Common stock, $0.01 par value, authorized 160,000,000 | |||||||||||||
| shares, issued 68,064,877 and 67,870,962 shares | 681 | 679 | |||||||||||
| Additional paid-in capital | 224,550 | 226,852 | |||||||||||
| Retained earnings | 1,952,439 | 1,841,279 | |||||||||||
| Cost of 28,435,182 and 27,755,001 shares of common | |||||||||||||
| stock in treasury | (1,446,425 | ) | (1,376,111 | ) | |||||||||
| Accumulated other comprehensive loss | (2,945 | ) | (5,875 | ) | |||||||||
| Total Landstar System, Inc. and subsidiary shareholders' | |||||||||||||
| equity | 728,300 | 686,824 | |||||||||||
| Noncontrolling interest | - | 2,309 | |||||||||||
| Total equity | 728,300 | 689,133 | |||||||||||
| Total liabilities and equity | $ | 1,348,693 | $ | 1,380,564 | |||||||||
| Landstar System, Inc. and Subsidiary | ||||||||||||||||||||
| Supplemental Information | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Twenty Six Weeks Ended | Thirteen Weeks Ended | |||||||||||||||||||
| June 29, | June 30, | June 29, | June 30, | |||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
| Revenue generated through (in thousands): | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | $ | 1,224,379 | $ | 1,369,476 | $ | 605,365 | $ | 713,341 | ||||||||||||
| Unsided/platform equipment | 648,828 | 664,045 | 338,107 | 364,676 | ||||||||||||||||
| Less-than-truckload | 48,108 | 50,948 | 24,732 | 27,364 | ||||||||||||||||
| Total truck transportation | 1,921,315 | 2,084,469 | 968,204 | 1,105,381 | ||||||||||||||||
| Rail intermodal | 58,585 | 61,587 | 28,570 | 32,295 | ||||||||||||||||
| Ocean and air cargo carriers | 58,893 | 51,506 | 28,224 | 28,029 | ||||||||||||||||
| Other (1) | 39,247 | 33,150 | 20,042 | 17,081 | ||||||||||||||||
| $ | 2,078,040 | $ | 2,230,712 | $ | 1,045,040 | $ | 1,182,786 | |||||||||||||
| Revenue on loads hauled via BCO Independent Contractors (2) | ||||||||||||||||||||
| included in total truck transportation | $ | 923,928 | $ | 998,953 | $ | 474,620 | $ | 527,803 | ||||||||||||
| Number of loads: | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | 686,901 | 691,866 | 345,080 | 354,947 | ||||||||||||||||
| Unsided/platform equipment | 260,920 | 255,334 | 135,750 | 135,543 | ||||||||||||||||
| Less-than-truckload | 74,549 | 70,670 | 39,240 | 37,250 | ||||||||||||||||
| Total truck transportation | 1,022,370 | 1,017,870 | 520,070 | 527,740 | ||||||||||||||||
| Rail intermodal | 23,880 | 26,840 | 11,420 | 13,560 | ||||||||||||||||
| Ocean and air cargo carriers | 14,810 | 13,030 | 7,300 | 6,700 | ||||||||||||||||
| 1,061,060 | 1,057,740 | 538,790 | 548,000 | |||||||||||||||||
| Loads hauled via BCO Independent Contractors (2) | ||||||||||||||||||||
| included in total truck transportation | 483,660 | 480,890 | 248,810 | 247,710 | ||||||||||||||||
| Revenue per load: | ||||||||||||||||||||
| Truck transportation | ||||||||||||||||||||
| Truckload: | ||||||||||||||||||||
| Van equipment | $ | 1,782 | $ | 1,979 | $ | 1,754 | $ | 2,010 | ||||||||||||
| Unsided/platform equipment | 2,487 | 2,601 | 2,491 | 2,690 | ||||||||||||||||
| Less-than-truckload | 645 | 721 | 630 | 735 | ||||||||||||||||
| Total truck transportation | 1,879 | 2,048 | 1,862 | 2,095 | ||||||||||||||||
| Rail intermodal | 2,453 | 2,295 | 2,502 | 2,382 | ||||||||||||||||
| Ocean and air cargo carriers | 3,977 | 3,953 | 3,866 | 4,183 | ||||||||||||||||
| Revenue per load on loads hauled via BCO Independent Contractors (2) | $ | 1,910 | $ | 2,077 | $ | 1,908 | $ | 2,131 | ||||||||||||
| Revenue by capacity type (as a % of total revenue); | ||||||||||||||||||||
| Truck capacity providers: | ||||||||||||||||||||
| BCO Independent Contractors (2) | 44 | % | 45 | % | 45 | % | 45 | % | ||||||||||||
| Truck Brokerage Carriers | 48 | % | 49 | % | 47 | % | 49 | % | ||||||||||||
| Rail intermodal | 3 | % | 3 | % | 3 | % | 3 | % | ||||||||||||
| Ocean and air cargo carriers | 3 | % | 2 | % | 3 | % | 2 | % | ||||||||||||
| Other | 2 | % | 1 | % | 2 | % | 1 | % | ||||||||||||
| June 29, | June 30, | |||||||||||||||||||
| 2019 | 2018 | |||||||||||||||||||
| Truck Capacity Providers | ||||||||||||||||||||
| BCO Independent Contractors (2) | 9,879 | 9,501 | ||||||||||||||||||
| Truck Brokerage Carriers: | ||||||||||||||||||||
| Approved and active (3) | 40,097 | 37,045 | ||||||||||||||||||
| Other approved | 17,790 | 15,406 | ||||||||||||||||||
| 57,887 | 52,451 | |||||||||||||||||||
| Total available truck capacity providers | 67,766 | 61,952 | ||||||||||||||||||
| Trucks provided by BCO Independent Contractors (2) | 10,587 | 10,155 | ||||||||||||||||||
| (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. | ||||||||||||||||||||