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Landstar System, Inc.$98.25$.55.56%

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 Landstar System Reports Third Quarter Revenue Of $788 Million And Diluted Earnings Per Share Of $0.86
   Wednesday, October 19, 2016 4:15:00 PM ET

Landstar System, Inc. (LSTR ) reported third quarter diluted earnings per share of $0.86 on revenue of $788 million in the 2016 third quarter. Landstar reported diluted earnings per share of $0.90 on revenue of $842 million in the 2015 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.8 million in the 2016 third quarter compared to $126.8 million in the 2015 third quarter. Operating margin, representing operating income divided by gross profit, was 48.0 percent in the 2016 third quarter.

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2016 third quarter was $732.9 million, or 93 percent of revenue, compared to $779.8 million, or 93 percent of revenue, in the 2015 third quarter. Truckload transportation revenue hauled via van equipment in the 2016 third quarter was $465.8 million compared to $466.2 million in the 2015 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 third quarter was $248.9 million compared to $293.3 million in the 2015 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $43.4 million, or 6 percent of revenue, in the 2016 third quarter compared to $50.5 million, or 6 percent of revenue, in the 2015 third quarter.

Trailing twelve-month return on average shareholders’ equity was 28 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. During the 2016 third quarter, Landstar purchased 350,000 shares of its common stock at an aggregate cost of $24.0 million bringing the total number of common shares purchased during the thirty-nine weeks ended September 24, 2016 to 773,000 shares at an aggregate cost of $50.5 million. Currently, there are approximately 1,036,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program. As of September 24, 2016, the Company had $227 million in cash and short term investments and $214 million available for borrowings under the Company’s senior credit facility.

In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.09 per share payable on December 2, 2016, to stockholders of record as of the close of business on November 8, 2016. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar’s 2016 third quarter, Landstar’s President and CEO Jim Gattoni said, "Diluted earnings per share was $0.86 in the 2016 third quarter, the second highest third quarter diluted earnings per share in Landstar history, second only to 2015 third quarter record diluted earnings per share of $0.90. Revenue was $788 million with gross profit of $121.8 million in the 2016 third quarter, the second highest third quarter gross profit in Landstar history, second only to 2015 third quarter record gross profit of $126.8 million. 2015 third quarter revenue was a record $842 million and included $35 million of revenue from a project on behalf of a customer in the automotive sector. That project was completed at the end of 2015. Overall, we continued to have difficult year-over-year comparisons to 2015 driven mostly by tougher overall industry conditions in 2016 and revenue from the previously referenced automotive project in 2015."

Gattoni continued, "Landstar executed well when considering the softness in U.S. manufacturing and more readily available truck capacity in 2016. Given this environment, Landstar managed a 4 percent increase in the number of loads hauled via truck in the 2016 third quarter over the 2015 third quarter, when excluding approximately 20,000 truckloads hauled via unsided/platform equipment for the automotive project in the 2015 third quarter.

Overall, the number of loads hauled via truck in the 2016 third quarter decreased 1 percent from the 2015 third quarter. This overall decrease in volume was driven by a 6 percent increase in the number of loads hauled via van equipment, offset by a 14 percent decrease in the number of loads hauled via unsided/platform equipment. Excluding the loadings related to the automotive project, Landstar experienced a 1 percent increase in the number of loads hauled via unsided/platform equipment. Landstar also achieved a 4 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 third quarter over the 2015 third quarter."

Gattoni further continued, "Revenue per load on loads hauled via truck in the 2016 third quarter was 5 percent below the 2015 third quarter. This represents a sequential improvement, however, as revenue per load on loads hauled via truck in the 2016 first quarter compared to the 2015 first quarter and in the 2016 second quarter compared to the 2015 second quarter decreased 10 percent and 9 percent, respectively. The reduction in the percentage shortfall in revenue per load on loads hauled via truck in the 2016 third quarter was due to an increase in revenue per load in the 2016 third quarter compared to the 2016 second quarter that was slightly ahead of recent second quarter to third quarter trends, coupled with weaker revenue per load in the 2015 third quarter as compared to the first half of 2015. Additionally, the average cost of a gallon of diesel fuel was approximately 10 percent lower during the 2016 third quarter compared to the 2015 third quarter putting additional pressure on pricing, especially as it related to loads hauled via truck brokerage carriers. The softer pricing environment contributed to the decline in the 2016 third quarter operating margin, which was 48.0 percent, compared to 50.4 percent in the 2015 third quarter."

Commenting on Landstar’s 2016 fourth quarter, Gattoni stated, "I expect the slow growth environment we have experienced during the first three quarters of 2016 to continue through the 2016 fourth quarter. As was the case in our 2016 second and third quarters, fourth quarter 2016 over fourth quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company’s 2015 fourth quarter included approximately $38 million in revenue from approximately 19,000 loads hauled via truck related to that project. Through the first few weeks of October, we have experienced the normal seasonal pattern for revenue per load on loads hauled via truck and, therefore, I anticipate revenue per load on loads hauled via truck to be below prior year’s fourth quarter in a mid-single digit range, consistent with the 2016 third quarter compared to the 2015 third quarter. Landstar’s fiscal year ends on the last Saturday of the calendar year, which this year is December 31, 2016, resulting in fiscal year 2016 representing a 53 week period. As such, the Company’s 2016 fourth quarter includes an extra week of operations. The number of loads hauled via truck during the first few weeks of October is trending slightly ahead of the historical third quarter to fourth quarter trend. Assuming that trend continues, and given the extra week in the 2016 fourth quarter, I would expect the number of loads hauled via truck in the 2016 fourth quarter to exceed the 2015 fourth quarter in a low-single digit range. As such, I expect 2016 fourth quarter revenue to be in a range of $800 million to $850 million. Assuming insurance and claims costs in the 2016 fourth quarter are approximately 3.2 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past 5 years, I would expect diluted earnings per share to be in a range of $0.85 to $0.90 in the 2016 fourth 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 Third Quarter 2016 Earnings Release Conference Call."

This earnings announcement, as well as an accompanying slide presentation, is available through the Company’s website at http://investor.landstar.com under "Presentations" and on a Form 8-K filed with the Securities and Exchange Commission.

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; 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; catastrophic loss of a Company facility; intellectual property; unclaimed property; regulations focused on diesel emissions and other air quality matters; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2015 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 logistics services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2013 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.

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(Tables follow)

Landstar System, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
                                                                         Thirty Nine Weeks Ended                        Thirteen Weeks Ended
                                                                         September 24,          September 26,           September 24,         September 26,
                                                                         2016                   2015                    2016                  2015
Revenue                                                                  $        2,274,805     $         2,472,489     $          787,938    $       841,726
Investment income                                                        1,100                  1,043                   357                   350
Costs and expenses:
        Purchased transportation                                         1,730,745              1,900,313               601,002               645,583
        Commissions to agents                                            189,075                199,113                 65,144                69,297
        Other operating costs, net of gains on asset sales/dispositions  21,484                 24,388                  7,492                 8,718
        Insurance and claims                                             42,795                 37,610                  12,488                10,502
        Selling, general and administrative                              106,211                111,797                 34,692                36,811
        Depreciation and amortization                                    26,109                 21,253                  9,016                 7,185
                        Total costs and expenses                         2,116,419              2,294,474               729,834               778,096
Operating income                                                         159,486                179,058                 58,461                63,980
Interest and debt expense                                                2,725                  2,208                   948                   714
Income before income taxes                                               156,761                176,850                 57,513                63,266
Income taxes                                                             58,985                 67,016                  21,235                23,918
Net income                                                               $            97,776    $           109,834     $           36,278    $         39,348
Earnings per common share                                                $                2.32  $                 2.50  $               0.86  $             0.91
Diluted earnings per share                                               $                2.31  $                 2.49  $               0.86  $             0.90
Average number of shares outstanding:
        Earnings per common share                                        42,223,000             43,975,000              42,039,000            43,446,000
        Diluted earnings per share                                       42,341,000             44,134,000              42,170,000            43,607,000
Dividends per common share                                               $                0.25  $                 0.22  $               0.09  $             0.08
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
                                                                              September 24,    December 26,
                                                                              2016             2015
ASSETS
Current assets:
        Cash and cash equivalents                                             $      170,805   $      114,520
        Short-term investments                                                56,679           48,823
        Trade accounts receivable, less allowance
                 of $4,881 and $4,327                                         409,047          462,699
        Other receivables, including advances to independent
                 contractors, less allowance of $4,871 and $4,143             17,091           18,472
        Other current assets                                                  15,188           11,604
                 Total current assets                                         668,810          656,118
Operating property, less accumulated depreciation
                           and amortization of $187,566 and $182,591          261,943          225,927
Goodwill                                                                      31,134           31,134
Other assets                                                                  65,871           78,339
Total assets                                                                  $   1,027,758    $      991,518
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
        Cash overdraft                                                        $        27,725  $        35,609
        Accounts payable                                                      201,872          223,709
        Current maturities of long-term debt                                  44,784           42,499
        Insurance claims                                                      27,941           19,757
        Other current liabilities                                             48,027           47,963
                 Total current liabilities                                    350,349          369,537
Long-term debt, excluding current maturities                                  90,817           81,793
Insurance claims                                                              23,765           21,477
Deferred income taxes and other non-current liabilities                       56,097           52,474
Shareholders’ equity:
        Common stock, $0.01 par value, authorized 160,000,000
                 shares, issued 67,522,281 and 67,391,616 shares              675              674
        Additional paid-in capital                                            198,736          195,841
        Retained earnings                                                     1,477,179        1,389,975
        Cost of 25,747,002 and 24,972,079 shares of common
                 stock in treasury                                            (1,167,391)      (1,116,765)
        Accumulated other comprehensive loss                                  (2,469)          (3,488)
                 Total shareholders’ equity                                   506,730          466,237
Total liabilities and shareholders’ equity                                    $   1,027,758    $      991,518
             Landstar System, Inc. and Subsidiary
             Supplemental Information
             (Unaudited)
                                                                                       Thirty Nine Weeks Ended              Thirteen Weeks Ended
                                                                                       September 24,     September 26,      September 24,    September 26,
                                                                                       2016              2015               2016             2015
Revenue generated through (in thousands):
             Truck transportation
                                    Truckload:
                                                           Van equipment               $  1,351,980      $  1,412,824       $     465,785    $      466,226
                                                           Unsided/platform equipment  700,369           823,767            248,939          293,252
                                    Less-than-truckload                                54,066            61,297             18,139           20,341
                                                           Total truck transportation  2,106,415         2,297,888          732,863          779,819
             Rail intermodal                                                           76,987            76,688             24,650           27,166
             Ocean and air cargo carriers                                              56,500            64,725             18,790           23,315
             Other (1)                                                                 34,903            33,188             11,635           11,426
                                                                                       $  2,274,805      $  2,472,489       $     787,938    $      841,726
             Revenue on loads hauled via BCO Independent Contractors (2)
                                    included in total truck transportation             $  1,086,848      $  1,140,870       $     379,196    $      388,840
Number of loads:
             Truck transportation
                                    Truckload:
                                                           Van equipment               847,208           820,223            291,089          275,509
                                                           Unsided/platform equipment  331,226           359,769            112,192          130,317
                                    Less-than-truckload                                84,316            83,838             28,589           28,934
                                                           Total truck transportation  1,262,750         1,263,830          431,870          434,760
             Rail intermodal                                                           36,120            32,350             11,940           11,670
             Ocean and air cargo carriers                                              14,910            13,320             5,130            4,700
                                                                                       1,313,780         1,309,500          448,940          451,130
             Loads hauled via BCO Independent Contractors (2)
                                    included in total truck transportation             630,880           616,410            216,220          210,180
Revenue per load:
             Truck transportation
                                    Truckload:
                                                           Van equipment               $          1,596  $          1,722   $         1,600  $          1,692
                                                           Unsided/platform equipment  2,114             2,290              2,219            2,250
                                    Less-than-truckload                                641               731                634              703
                                                           Total truck transportation  1,668             1,818              1,697            1,794
             Rail intermodal                                                           2,131             2,371              2,064            2,328
             Ocean and air cargo carriers                                              3,789             4,859              3,663            4,961
             Revenue per load on loads hauled via BCO Independent Contractors (2)      $          1,723  $          1,851   $         1,754  $          1,850
Revenue by capacity type (as a % of total revenue);
             Truck capacity providers:
                                    BCO Independent Contractors (2)                    48%               46%                48%              46%
                                    Truck Brokerage Carriers                           45%               47%                45%              46%
             Rail intermodal                                                           3%                3%                 3%               3%
             Ocean and air cargo carriers                                              2%                3%                 2%               3%
             Other                                                                     2%                1%                 1%               1%
                                                                                                                            September 24,    September 26,
                                                                                                                            2016             2015
Truck Capacity Providers
             BCO Independent Contractors (2)                                                                                8,889            8,869
             Truck Brokerage Carriers:
             Approved and active (3)                                                                                        30,860           29,127
             Other approved                                                                                                 15,691           13,813
                                                                                                                            46,551           42,940
             Total available truck capacity providers                                                                       55,440           51,809
             Trucks provided by BCO Independent Contractors (2)                                                             9,510            9,441
(1) Includes primarily premium revenue generated by the insurance segment.
(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 have moved at least one load in the 180 days immediately preceeding the fiscal quarter end.

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To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/landstar-system-reports-third-quarter-revenue-of-788-million-and-diluted-earnings-per-share-of-086-300347695.html

SOURCE Landstar System, Inc.

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