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.

Contact:  Kevin Stout
Landstar System, Inc.
www.landstar.com
904-398-9400

Source: Landstar System, Inc.

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