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 income5,041  3,816  1,305 1,062
          
Costs and expenses:         
Purchased transportation3,127,474  3,569,961  761,828 911,251
Commissions to agents342,226  378,002  84,364 102,174
Other operating costs, net of gains/losses on asset sales/dispositions37,274  31,803  8,743 7,627
Insurance and claims80,319  75,677  25,071 17,959
Selling, general and administrative158,953  188,212  38,236 47,264
Depreciation and amortization44,468  43,570  11,423 11,050
          
Total costs and expenses3,790,714  4,287,225  929,665 1,097,325
          
Operating income298,904  331,735  66,519 86,088
Interest and debt expense3,141  3,354  863 899
          
Income before income taxes295,763  328,381  65,656 85,189
Income taxes68,060  73,168  15,608 16,889
          
Net income227,703  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 share39,786,000  41,273,000  39,472,000 40,501,000
Diluted earnings per share39,786,000  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 equipment1,337,089  1,398,388  322,517  353,066 
Unsided/platform equipment513,579  516,613  122,467  127,854 
Less-than-truckload155,592  145,269  39,976  38,630 
Total truck transportation2,006,260  2,060,270  484,960  519,550 
Rail intermodal47,590  53,030  12,220  12,770 
Ocean and air cargo carriers30,110  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 transportation954,990  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 Carriers47% 49% 47% 50%
Rail intermodal3% 3% 3% 3%
Ocean and air cargo carriers3% 3% 3% 4%
Other2% 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.

            

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