Landstar System Reports Second Quarter Revenue of $824 Million and Diluted Earnings Per Share of $0.63

07/22/20

04:15 PM EDT

2Q 2020 Presentation Slides 1.5 MB

JACKSONVILLE, Fla., July 22, 2020 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $0.63 in the 2020 second quarter on revenue of $824 million. Included in the Company’s 2020 second quarter financial results were:

approximately $12.6 million, or $0.25 per diluted share, in payments made to the Company’s BCOs and agents in April and May under the Company’s previously disclosed pandemic relief incentive program;
a charge of approximately $2.6 million, or $0.05 per diluted share, due to the impairment of certain assets associated with Landstar’s Mexico operation relating to a decrease of business within Mexico; and
approximately $2.3 million, or $0.05 per diluted share, due to higher third party insurance company premiums incurred in May and June for commercial trucking liability coverage following the Company’s May 1st annual insurance renewal. The higher premiums incurred in the 2020 second quarter reflected a pro rata portion of an annual increase of $14.0 million in the fixed component of the Company’s insurance and claims expense for the period from May 1, 2020 to April 30, 2021, in connection with severe tightening of capacity in insurance markets offering coverage to the truck transportation industry.

Landstar reported diluted earnings per share of $1.53 on revenue of $1.045 billion in the 2019 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $113.1 million in the 2020 second quarter, inclusive of the impact of the special pandemic relief payments made to the Company’s BCOs and agents in April and May of 2020. Gross profit was $158.0 million in the 2019 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2020 second quarter was $753.3 million, or 91 percent of revenue, compared to $968.2 million, or 93 percent of revenue, in the 2019 second quarter. Truckload transportation revenue hauled via van equipment in the 2020 second quarter was $483.0 million compared to $605.4 million in the 2019 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 second quarter was $247.4 million compared to $338.1 million in the 2019 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $53.8 million, or 7 percent of revenue, in the 2020 second quarter compared to $56.8 million, or 5 percent of revenue, in the 2019 second quarter.

During the 2020 second quarter, Landstar generated $99.2 million in operating cash flow and paid $7.1 million in dividends. Landstar did not purchase any shares of its common stock during the 2020 second quarter and currently is authorized to purchase up to 1,821,030 shares of the Company’s common stock under Landstar’s previously announced share purchase program. As of June 27, 2020, the Company had $282 million in cash and short term investments with undrawn revolver capacity under our senior credit facility of $216 million (with the ability to increase to $366 million with the accordion feature included in our senior credit facility). Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.21 per share payable on August 28, 2020, to stockholders of record as of the close of business on August 10, 2020. This quarterly dividend includes a $0.025 per share increase, or 13.5 percent, over the amount of the Company’s regular quarterly dividend declared following each of the prior four quarters. The $0.025 per share increase is the largest increase in the Company’s regularly scheduled quarterly dividend in the Company’s history. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“Overall, the resiliency of Landstar’s variable cost business model performed as expected given the unprecedented economic decline caused by the coronavirus (COVID-19) pandemic,” said Landstar’s President and Chief Executive Officer, Jim Gattoni. “We entered the 2020 second quarter knowing we would face a very soft freight demand environment as a result of actions taken by governmental authorities and businesses to reduce the spread of COVID-19. As anticipated, demand for freight services slowed significantly and capacity became readily available during the Company’s 2020 second quarter, especially in the spot market where the Company primarily operates. The number of loads and revenue per load on loads hauled via truck in the 2020 second quarter decreased 16 percent and 7 percent, respectively, from the 2019 second quarter. The number of loads hauled via truck was below the prior year comparable period by 21 percent, 21 percent and 9 percent for April, May and June, respectively. Revenue per load on loads hauled via truck was below the prior year comparable period by 6 percent, 9 percent and 6 percent in April, May and June, respectively.”

Gattoni further commented, “The 2020 second quarter presented operating conditions and challenges unlike any other quarter in Landstar’s history. Nevertheless, Landstar did not take any drastic cost reduction measures that could have disrupted our ability to service Landstar’s customers, agents, BCOs or other third party capacity providers or slow the progress on our technology initiatives. Also, as previously disclosed, Landstar instituted a pandemic relief incentive program as of the beginning of April for BCOs and agents. Under the program, Landstar paid an extra $50 to each of the BCO hauling the load and the Landstar agent dispatching the load for each load delivered by a BCO with a confirmed delivery date in April. The pandemic relief program was subsequently extended through the month of May. The Company’s 2020 second quarter results included a total of approximately $12.6 million of these pandemic relief incentive payments to BCOs and agents. Revenue decreased 21 percent and gross profit decreased 28 percent in the Company’s 2020 second quarter compared to the 2019 second quarter. Exclusive of the impact of the pandemic relief program, gross profit decreased 20 percent in the 2020 second quarter compared to the prior year period.”

Gattoni continued, “Although the ultimate impact that the coronavirus pandemic will have on the freight transportation industry continues to be unpredictable, we believe Landstar remains in a solid operational and financial position as we enter the third quarter. Through the first few weeks of July, the number of loads and revenue per load on loads hauled via truck have moved beyond the peak declines of April and May. Both the number of loads and revenue per load on loads hauled via truck in the first few weeks of July were below the corresponding period of 2019 in mid single-digit percentage ranges. Assuming current demand conditions persist, I expect the number of loads hauled via truck in the 2020 third quarter to be below the number of loads hauled by truck in the 2019 third quarter in a mid single-digit percentage range. My expectation is that pricing conditions for truck services in the 2020 third quarter will be slightly improved as compared to the 2020 second 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 2020 third quarter truck revenue per load to be lower than the 2019 third quarter in a mid single-digit percentage range. Based on those expectations, I would anticipate revenue for the 2020 third quarter to be in a range of $885 million to $935 million. Assuming that range of estimated revenue and insurance and claims expense at 4.8 percent of BCO revenue (which reflects the significant increase in insurance premiums previously described), I would anticipate 2020 third quarter diluted earnings per share to be in a range of $1.11 to $1.17 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 2020 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: the impact of the coronavirus (COVID-19) pandemic; 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 2019 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)


	Twenty Six Weeks Ended					Thirteen Weeks Ended
	June 27,		June 29,			June 27,		June 29,
	2020		2019			2020		2019

Revenue	$	1,751,080	$	2,078,040		$	823,514	$	1,045,040
Investment income		2,002		2,421			835		1,283

Costs and expenses:
Purchased transportation		1,344,390		1,591,126			635,133		799,371
Commissions to agents		150,642		173,294			75,266		87,623
Other operating costs, net of gains on asset sales/dispositions		15,674		18,100			7,368		9,861
Insurance and claims		44,708		31,279			19,751		16,286
Selling, general and administrative		85,928		82,565			40,601		41,297
Depreciation and amortization		22,972		22,350			11,467		11,034
Impairment of intangible and other assets		2,582		-			2,582		-

Total costs and expenses		1,666,896		1,918,714			792,168		965,472

Operating income		86,186		161,747			32,181		80,851
Interest and debt expense		1,928		1,514			976		709

Income before income taxes		84,258		160,233			31,205		80,142
Income taxes		19,109		35,833			6,951		19,042

Net income		65,149		124,400			24,254		61,100
Less: Net loss attributable to noncontrolling interest		-		(17	)		-		-
Net income attributable to Landstar System,Inc. and subsidiary	$	65,149	$	124,417		$	24,254	$	61,100

Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	1.68	$	3.11		$	0.63	$	1.53

Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	1.68	$	3.11		$	0.63	$	1.53

Average number of shares outstanding:
Earnings per common share		38,816,000		40,053,000			38,379,000		39,945,000
Diluted earnings per share		38,816,000		40,053,000			38,379,000		39,945,000

Dividends per common share	$	0.370	$	0.330		$	0.185	$	0.165

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)


	June 27,			December 28,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	245,471		$	319,515
Short-term investments		36,274			32,901
Trade accounts receivable, less allowance of $8,580 and $7,284		489,182			588,549
Other receivables, including advances to independent contractors, less allowance of $9,241 and $7,667		27,861			35,553
Other current assets		41,564			21,370
Total current assets		840,352			997,888

Operating property, less accumulated depreciation and amortization of $288,055 and $280,849		284,794			285,855
Goodwill		40,071			38,508
Other assets		106,893			105,460
Total assets	$	1,272,110		$	1,427,711

LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft	$	35,534		$	53,878
Accounts payable		273,324			271,996
Current maturities of long-term debt		38,219			42,632
Insurance claims		53,764			44,532
Dividends payable		-			78,947
Contractor escrow		25,774			24,902
Other current liabilities		46,845			36,017
Total current liabilities		473,460			552,904

Long-term debt, excluding current maturities		60,152			70,212
Insurance claims		34,762			33,575
Deferred income taxes and other non-current liabilities		54,615			49,551

Shareholders' equity:
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,176,787 and 68,083,419 shares		682			681
Additional paid-in capital		225,332			226,123
Retained earnings		2,012,173			1,962,161
Cost of 29,797,328 and 28,609,926 shares of common stock in treasury		(1,581,921	)		(1,465,284	)
Accumulated other comprehensive loss		(7,145	)		(2,212	)
Total shareholders' equity		649,121			721,469
Total liabilities and shareholders' equity	$	1,272,110		$	1,427,711

Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 27,			June 29,			June 27,			June 29,
	2020			2019			2020			2019
Revenue generated through (in thousands):

Truck transportation
Truckload:
Van equipment	$	1,028,334		$	1,224,379		$	483,027		$	605,365
Unsided/platform equipment		533,716			648,828			247,388			338,107
Less-than-truckload		45,859			48,108			22,918			24,732
Total truck transportation		1,607,909			1,921,315			753,333			968,204
Rail intermodal		51,315			58,585			23,186			28,570
Ocean and air cargo carriers		57,250			58,893			30,663			28,224
Other ⁽¹⁾		34,606			39,247			16,332			20,042
	$	1,751,080		$	2,078,040		$	823,514		$	1,045,040

Revenue on loads hauled via BCO Independent Contractors⁽²⁾included in total truck transportation	$	809,779		$	923,928		$	378,500		$	474,620

Number of loads:

Truck transportation
Truckload:
Van equipment		600,519			686,901			285,174			345,080
Unsided/platform equipment		231,122			260,920			110,533			135,750
Less-than-truckload		78,079			74,549			39,723			39,240
Total truck transportation		909,720			1,022,370			435,430			520,070
Rail intermodal		21,510			23,880			9,970			11,420
Ocean and air cargo carriers		14,430			14,810			7,360			7,300
		945,660			1,061,060			452,760			538,790

Loads hauled via BCO Independent Contractors⁽²⁾included in total truck transportation		443,830			483,660			210,430			248,810

Revenue per load:

Truck transportation
Truckload:
Van equipment	$	1,712		$	1,782		$	1,694		$	1,754
Unsided/platform equipment		2,309			2,487			2,238			2,491
Less-than-truckload		587			645			577			630
Total truck transportation		1,767			1,879			1,730			1,862
Rail intermodal		2,386			2,453			2,326			2,502
Ocean and air cargo carriers		3,967			3,977			4,166			3,866

Revenue per load on loads hauled via BCO Independent Contractors⁽²⁾	$	1,825		$	1,910		$	1,799		$	1,908

Revenue by capacity type (as a % of total revenue);

Truck capacity providers:
BCO Independent Contractors⁽²⁾		46	%		44	%		46	%		45	%
Truck Brokerage Carriers		46	%		48	%		46	%		47	%
Rail intermodal		3	%		3	%		3	%		3	%
Ocean and air cargo carriers		3	%		3	%		4	%		3	%
Other		2	%		2	%		2	%		2	%

							June 27,			June 29,
							2020			2019
Truck Capacity Providers

BCO Independent Contractors⁽²⁾								9,632			9,879
Truck Brokerage Carriers:
Approved and active ⁽³⁾								37,600			40,097
Other approved								16,365			17,790
								53,965			57,887
Total available truck capacity providers								63,597			67,766

Trucks provided by BCO Independent Contractors⁽²⁾								10,299			10,587

(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.