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Landstar System, Inc.$106.34$.60.57%

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 Landstar System Reports Record Fourth Quarter Revenue of $1.182 Billion and All-Time Quarterly Record Diluted Earnings Per Share of $1.68
   Wednesday, January 30, 2019 4:15:00 PM ET

JACKSONVILLE, Fla., Jan. 30, 2019 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported record fourth quarter revenue of $1.182 billion in the 2018 fourth quarter, a 12 percent increase over revenue of $1.052 billion reported in the 2017 fourth quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2018 fourth quarter was $168.9 million, 13 percent above the 2017 fourth quarter, while 2018 fourth quarter operating income was $86.1 million, 23 percent above the 2017 fourth quarter. Operating income and gross profit in the 2018 fourth quarter were also each fourth quarter records.

Income before income taxes of $85.2 million was a fourth quarter record and increased approximately 23 percent over the 2017 fourth quarter. Diluted earnings per share in the 2018 fourth quarter was $1.68, an all-time quarterly record, compared to $1.54 in the 2017 fourth quarter.  Quarter over prior year quarter comparisons of net income and diluted earnings per share for the 2018 and 2017 fourth quarters as reported are not meaningful, mostly due to the effect of the enactment of the Tax Cuts and Jobs Act in December 2017. Net income and diluted earnings per share in the 2018 and 2017 fourth quarters were both favorably impacted by the Tax Cuts and Jobs Act, which reduced the corporate tax rate from 35 percent to 21 percent effective for fiscal 2018, and various other tax items. The Company had previously estimated that its annual effective income tax rate would be 24.5 percent in fiscal year 2018 and 37.8 percent in fiscal year 2017. However, the Company’s actual effective income tax rates in the 2018 and 2017 fourth quarters were 19.8 percent and 6.9 percent, respectively. Of most significance in driving this decrease, were one-time tax benefits of approximately $19.5 million included in net income in the 2017 fourth quarter, or $0.46 per diluted share, related to the Company’s reasonable estimate of the change in future tax rates on net deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2018 fourth quarter was $1.078 billion, or 91 percent of revenue, compared to $967.5 million, or 92 percent of revenue, in the 2017 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2018 fourth quarter was $705.0 million compared to $634.4 million in the 2017 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2018 fourth quarter was $346.6 million compared to $309.5 million in the 2017 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $84.8 million, or 7 percent of revenue, in the 2018 fourth quarter compared to $68.0 million, or 6 percent of revenue, in the 2017 fourth quarter.

Landstar purchased 1,000,000 shares of its common stock during the 2018 fourth quarter at an aggregate cost of approximately $102.6 million. Landstar purchased 2,000,000 shares of its common stock during fiscal year 2018 at an aggregate cost of approximately $208.1 million. On January 23, 2019, the Board of Directors authorized the Company to purchase up to 1,000,000 additional shares of its common stock, par value $0.01 per share, from time to time in the open market and in privately negotiated transactions under its existing share purchase program. Currently, Landstar is authorized to purchase up to a total of 2,000,000 shares of the Company’s common stock under its share purchase program. In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.165 per share payable on March 15, 2019, to stockholders of record as of the close of business on February 18, 2019. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.  As of December 29, 2018, the Company had $240 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility.

“I am very pleased with Landstar’s financial performance during the 2018 fourth quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “The 2018 fourth quarter established fourth quarter records for revenue, gross profit and operating income, while diluted earnings per share was an all-time quarterly record. The Company also set a new all-time Landstar record for trucks provided by BCOs with 10,599 as of the end of the quarter.”

Gattoni continued, “Demand for our services continued to be strong in the 2018 fourth quarter. The number of loads hauled via truck was a fourth quarter record and increased 4 percent over a very robust 2017 fourth quarter, driven by a 4 percent increase in the number of loads hauled via van equipment, a 3 percent increase in the number of loads hauled via unsided/platform equipment and a 13 percent increase in less-than-truckload volume. The deceleration in the year-over-year percentage growth rate in truck volumes for the 2018 fourth quarter compared to that experienced in the first three quarters of 2018 was mostly due to seasonal softness in the fourth quarter of 2018, as sequential growth was below recent historical trends.”

Gattoni further commented, “As expected, the pricing environment for our truckload services continued to be strong during the 2018 fourth quarter.  Similar to truck volumes, however, we experienced a decelerating percentage growth rate in revenue per load on a year-over-year basis compared to the growth rates experienced in the first three quarters of 2018. The price deceleration was due to a much tougher year-over-year comparison applicable to the 2018 fourth quarter and seasonal softness that began at the end of the 2018 third quarter. Revenue per load on loads hauled via van equipment increased 7 percent over the 2017 fourth quarter and revenue per load on loads hauled via unsided/platform equipment increased 9 percent over the 2017 fourth quarter. As a result, revenue per load on loads hauled via truck was 7 percent higher than the 2017 fourth quarter.”

Gattoni continued, “Landstar’s financial performance in fiscal year 2018 was by far the best in the Company’s history. Landstar set many annual financial and operational high water marks in 2018, including revenue, gross profit, operating income, net income, diluted earnings per share, truck loads and year end truck count provided by BCOs. Revenue in fiscal 2018 was approximately $4.6 billion, an annual record, and was approximately $969 million higher than the previous record set in 2017. Gross profit in 2018 was $667 million, also an annual record. Record revenue and gross profit in 2018 was provided on the strength of approximately 2,060,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. Operating income in 2018 was an annual record of $332 million and represented year-over-year growth of 36 percent. Diluted earnings per share in 2018 was an annual record of $6.18. These 2018 achievements speak to the strength and depth of the Landstar network and our ability to execute.  I am extremely pleased by our continued organic load volume growth and our ability to attract productive agents and capacity to the network.”

Gattoni further commented, “With respect to near term performance, during the first four weeks of 2019, year-over-year growth in the number of loads hauled via truck is trending slightly higher than the comparable period of 2018. As such, I expect loads hauled via truck in the 2019 first quarter to grow in a low single-digit percentage range over the 2018 first quarter. As it pertains to revenue per load on loads hauled via truck, the 2018 first quarter was one of very few first quarters in Landstar history that experienced an increase in truck revenue per load from the preceding fourth quarter. In the four years prior to 2018, truck revenue per load decreased seasonally on average 7 percent from the fourth quarter to the immediately following first quarter. We expect a more normal seasonal trend in the 2019 first quarter as rates appear to have stabilized through the first four weeks of January. As such, I expect revenue per load on loads hauled via truck in the 2019 first quarter to decrease in a low single-digit percentage range from the 2018 first quarter. Assuming the current environment continues throughout the 2019 first quarter, I anticipate revenue for the 2019 first quarter to be in a range of $1.025 billion to $1.075 billion. Assuming that range of estimated revenue, I would anticipate 2019 first quarter diluted earnings per share to be in a range of $1.51 to $1.57 per share. This estimated range of diluted earnings per share assumes insurance and claims costs at 3.6 percent of BCO revenue, representing the historical annual average of insurance and claims costs to BCO revenue over the preceding five years, and an effective income tax rate of approximately 21.1 percent, which represents the Company’s annual estimated effective income tax rate of 24.2 percent, net of a discrete item related to equity compensation specific to the 2019 first quarter.”

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 2018 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 2017 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 29, December 30, December 29, December 30,
    2018 2017 2018 2017
           
Revenue $4,615,144  $3,646,364  $1,182,351 $1,051,592 
Investment income  3,816   2,498   1,062  765 
           
Costs and expenses:        
 Purchased transportation  3,569,961   2,805,109   911,251  815,171 
 Commissions to agents  378,002   297,410   102,174  86,732 
 Other operating costs, net of gains/losses on asset sales/dispositions  31,803   28,687   7,627  6,190 
 Insurance and claims  75,677   62,545   17,959  16,212 
 Selling, general and administrative  188,212   170,583   47,264  47,404 
 Depreciation and amortization  43,570   40,560   11,050  10,599 
           
  Total costs and expenses  4,287,225   3,404,894   1,097,325  982,308 
           
Operating income  331,735   243,968   86,088  70,049 
Interest and debt expense  3,354   3,166   899  607 
           
Income before income taxes  328,381   240,802   85,189  69,442 
Income taxes  73,168   63,806   16,889  4,759 
           
Net income  255,213   176,996   68,300  64,683 
Less: Net loss/income attributable to noncontrolling interest  (68)  (92)  44  (69)
Net income attributable to Landstar System,        
 Inc. and subsidiary $255,281  $177,088  $68,256 $64,752 
           
Earnings per common share attributable to        
 Landstar System, Inc. and subsidiary $6.19  $4.22  $1.69 $1.54 
           
Diluted earnings per share attributable to        
 Landstar System, Inc. and subsidiary $6.18  $4.21  $1.68 $1.54 
           
Average number of shares outstanding:        
 Earnings per common share  41,273,000   41,938,000   40,501,000  41,981,000 
 Diluted earnings per share  41,310,000   42,024,000   40,514,000  42,054,000 
           
Dividends per common share $0.630  $1.880  $0.165 $1.600 
           


 

       
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
       
       
    December 29, December 30,
    2018 2017
ASSETS   
Current assets:   
 Cash and cash equivalents$199,736  $242,416 
 Short-term investments 40,058   48,928 
 Trade accounts receivable, less allowance   
  of $6,413 and $6,131 691,604   631,164 
 Other receivables, including advances to independent   
  contractors, less allowance of $6,216 and $6,012 23,744   24,301 
 Other current assets 16,287   14,394 
  Total current assets 971,429   961,203 
       
Operating property, less accumulated depreciation   
   and amortization of $250,153 and $218,700 284,032   276,011 
Goodwill  38,232   39,065 
Other assets 86,871   76,181 
Total assets$1,380,564  $1,352,460 
       
LIABILITIES AND EQUITY   
Current liabilities:   
 Cash overdraft$55,339  $42,242 
 Accounts payable 314,134   285,132 
 Current maturities of long-term debt 43,561   42,051 
 Insurance claims 40,176   38,919 
 Dividends payable -   62,985 
 Accrued compensation 29,489   30,103 
 Other current liabilities 53,119   47,211 
  Total current liabilities 535,818   548,643 
       
Long-term debt, excluding current maturities 84,864   83,062 
Insurance claims 30,429   30,141 
Deferred income taxes and other non-current liabilities 40,320   36,737 
       
Equity    
Landstar System, Inc. and subsidiary shareholders' equity   
 Common stock, $0.01 par value, authorized 160,000,000   
  shares, issued 67,870,962 and 67,740,380 shares 679   677 
 Additional paid-in capital 226,852   209,599 
 Retained earnings 1,841,279   1,611,158 
 Cost of 27,755,001 and 25,749,493 shares of common   
  stock in treasury (1,376,111)  (1,167,600)
 Accumulated other comprehensive loss (5,875)  (3,162)
  Total Landstar System, Inc. and subsidiary shareholders'   
   equity 686,824   650,672 
Noncontrolling interest 2,309   3,205 
  Total equity 689,133   653,877 
Total liabilities and equity$1,380,564  $1,352,460 
       

 

  
 Landstar System, Inc. and Subsidiary
 Supplemental Information
 (Unaudited)
             
             
     Fiscal Years Ended  Fiscal Quarters Ended
     December 29, December 30,  December 29, December 30,
     2018 2017  2018 2017
Revenue generated through (in thousands):         
             
 Truck transportation         
  Truckload:         
   Van equipment $2,791,494  $2,163,832   $704,971  $634,430 
   Unsided/platform equipment  1,386,387   1,134,660    346,603   309,466 
  Less-than-truckload  102,531   89,041    26,083   23,644 
   Total truck transportation  4,280,412   3,387,533    1,077,657   967,540 
 Rail intermodal  128,976   96,416    32,950   27,846 
 Ocean and air cargo carriers  134,577   110,898    51,858   40,190 
 Other (1)  71,179   51,517    19,886   16,016 
     $4,615,144  $3,646,364   $1,182,351  $1,051,592 
             
 Revenue on loads hauled via BCO Independent Contractors (2)         
  included in total truck transportation $2,001,665  $1,655,026   $482,321  $443,462 
             
Number of loads:         
             
 Truck transportation         
  Truckload:         
   Van equipment  1,398,388   1,282,632    353,066   339,738 
   Unsided/platform equipment  516,613   487,652    127,854   124,716 
  Less-than-truckload  145,269   132,776    38,630   34,036 
   Total truck transportation  2,060,270   1,903,060    519,550   498,490 
 Rail intermodal  53,030   45,000    12,770   12,960 
 Ocean and air cargo carriers  28,970   25,420    7,720   7,270 
      2,142,270   1,973,480    540,040   518,720 
             
 Loads hauled via BCO Independent Contractors (2)         
  included in total truck transportation  949,330   916,190    231,860   229,360 
             
Revenue per load:         
             
 Truck transportation         
  Truckload:         
   Van equipment $1,996  $1,687   $1,997  $1,867 
   Unsided/platform equipment  2,684   2,327    2,711   2,481 
  Less-than-truckload  706   671    675   695 
   Total truck transportation  2,078   1,780    2,074   1,941 
 Rail intermodal  2,432   2,143    2,580   2,149 
 Ocean and air cargo carriers  4,645   4,363    6,717   5,528 
             
 Revenue per load on loads hauled via BCO Independent Contractors (2)$2,109  $1,806   $2,080  $1,933 
             
Revenue by capacity type (as a % of total revenue);         
             
 Truck capacity providers:         
  BCO Independent Contractors (2)  43%  45%   41%  42%
  Truck Brokerage Carriers  49%  48%   50%  50%
 Rail intermodal  3%  3%   3%  3%
 Ocean and air cargo carriers  3%  3%   4%  4%
 Other   2%  1%   2%  2%
             
             
          December 29, December 30,
          2018 2017
Truck Capacity Providers         
             
 BCO Independent Contractors (2)       9,884   9,087 
 Truck Brokerage Carriers:         
  Approved and active (3)       41,069   34,243 
  Other approved       17,985   15,691 
           59,054   49,934 
 Total available truck capacity providers       68,938   59,021 
             
 Trucks provided by BCO Independent Contractors (2)       10,599   9,696 
             
             
(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 StoutLandstar System, Inc.www.landstar.com 904-398-9400

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Source: Landstar System, Inc.


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