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Landstar System, Inc.$98.25$.55.56%

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 Landstar System Reports Record First Quarter Revenue of $781 Million and Record First Quarter Diluted Earnings Per Share of $0.77
   Wednesday, April 26, 2017 4:15:10 PM ET

Landstar System, Inc. (LSTR ) reported record first quarter diluted earnings per share of $0.77 in the 2017 first quarter, on record first quarter revenue of $781 million. Landstar reported diluted earnings per share of $0.69 on revenue of $712 million in the 2016 first quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.6 million, a record first quarter gross profit, in the 2017 first quarter compared to $112.2 million in the 2016 first quarter. Operating margin, representing operating income divided by gross profit, was 43.0 percent in the 2017 first quarter.

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2017 first quarter was $726.8 million, or 93 percent of revenue, compared to $655.1 million, or 92 percent of revenue, in the 2016 first quarter. Truckload transportation revenue hauled via van equipment in the 2017 first quarter was $470.0 million compared to $428.2 million in the 2016 first quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2017 first quarter was $237.2 million compared to $209.4 million in the 2016 first quarter. Revenue hauled by rail, air and ocean cargo carriers was $42.4 million, or 5 percent of revenue, in the 2017 first quarter compared to $44.9 million, or 6 percent of revenue, in the 2016 first quarter.

Trailing twelve-month return on average shareholders’ equity was 27 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. 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 April 1, 2017, the Company had $278 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 June 2, 2017, to stockholders of record as of the close of business on May 11, 2017. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

"Diluted earnings per share was $0.77 in the 2017 first quarter, the highest first quarter diluted earnings per share in Landstar history. Revenue was $781 million with gross profit of $121.6 million in the 2017 first quarter, both being first quarter records. The number of loads hauled via truck during the 2017 first quarter was also higher than any first quarter in Landstar history. Given the soft demand environment and readily available truck capacity during the quarter, I am extremely pleased with the execution of the Landstar model," said Landstar’s President and Chief Executive Officer, Jim Gattoni.

Gattoni continued, "The number of loads hauled via truck in the 2017 first quarter increased 10 percent over the 2016 first quarter, driven by an 11 percent increase in the number of loads hauled via van equipment, an 8 percent increase in the number of loads hauled via unsided/platform equipment and an 11 percent increase in less-than-truckload volume. The number of loads hauled via unsided/platform equipment benefited from a 9 percent increase in the number of heavy/specialized loads, which comprised approximately 14 percent of Landstar’s unsided/platform loads in the 2017 first quarter. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 1 percent lower in the 2017 first quarter compared to the 2016 first quarter, due to softness in rail intermodal volume."

Gattoni further commented, "As expected, the pricing environment for our truckload services continued to be soft in the 2017 first quarter, as industry-wide truck capacity continued to be readily available. However, the percentage change in year-over-year revenue per load on loads hauled via truck improved each month. Moreover, in February, the Company experienced its first year-over-year monthly increase in truck revenue per load in two years. As a result, revenue per load on loads hauled via truck was 1 percent higher in the 2017 first quarter compared to the 2016 first quarter. First quarter operating margin is typically lower than that of the following three quarters. Despite the soft pricing environment, 2017 first quarter operating margin was 43.0 percent, in line with seasonal historical first quarter operating margin, and diluted earnings per share in the 2017 first quarter increased 12 percent over the 2016 first quarter."

Gattoni continued, "We have experienced consistent load growth in loads hauled via truck throughout the 2017 first quarter and into the first several weeks of April. I expect that trend to continue and therefore expect the number of loads hauled via truck in the 2017 second quarter to increase in a mid to upper single digit range over the 2016 second quarter. My expectation is that pricing conditions for truck services in the 2017 second quarter will continue to be soft with little change in the level of available truck capacity. Assuming those truck conditions remain, I expect 2017 second quarter truck revenue per load to be higher than the 2016 second quarter in a low single digit percentage range. I anticipate revenue for the 2017 second quarter to be in a range of $820 million to $870 million and, assuming that range of estimated revenue and normalized insurance and claims expense, I would anticipate 2017 second quarter diluted earnings per share to be in a range of $0.84 to $0.89 per share compared to $0.76 per diluted share in the 2016 second 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 First Quarter 2017 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 2016 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(R) under the symbol LSTR.

Landstar System, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
                                                                         Thirteen Weeks Ended
                                                                         April 1,         March 26,
                                                                         2017             2016
Revenue                                                                  $    780,908     $    711,644
Investment income                                                             414              380
Costs and expenses:
        Purchased transportation                                              595,523          540,328
        Commissions to agents                                                 63,798           59,092
        Other operating costs, net of gains on asset sales/dispositions       6,897            7,407
        Insurance and claims                                                  14,513           14,213
        Selling, general and administrative                                   38,323           34,614
        Depreciation and amortization                                         9,934            8,438
                        Total costs and expenses                              728,988          664,092
Operating income                                                              52,334           47,932
Interest and debt expense                                                     1,083            889
Income before income taxes                                                    51,251           47,043
Income taxes                                                                  18,868           17,859
Net income                                                               $    32,383      $    29,184
Earnings per common share                                                $    0.77        $    0.69
Diluted earnings per share                                               $    0.77        $    0.69
Average number of shares outstanding:
        Earnings per common share                                             41,879,000       42,395,000
        Diluted earnings per share                                            41,998,000       42,489,000
Dividends per common share                                               $    0.09        $    0.08
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
                                                                              April 1,            December 31,
                                                                              2017                2016
ASSETS
Current assets:
        Cash and cash equivalents                                             $   215,468         $    178,897
        Short-term investments                                                    62,058               66,560
        Trade accounts receivable, less allowance
                 of $5,524 and $5,161                                             439,510              463,102
        Other receivables, including advances to independent
                 contractors, less allowance of $5,706 and $5,523                 23,875               18,567
        Other current assets                                                      8,095                10,281
                 Total current assets                                             749,006              737,407
Operating property, less accumulated depreciation
                           and amortization of $195,581 and $190,374              263,375              272,843
Goodwill                                                                          31,134               31,134
Other assets                                                                      62,627               55,207
Total assets                                                                  $   1,106,142       $    1,096,591
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
        Cash overdraft                                                        $   29,373          $    36,251
        Accounts payable                                                          200,675              219,409
        Current maturities of long-term debt                                      42,909               45,047
        Insurance claims                                                          28,859               26,121
        Accrued income taxes                                                      19,430               5,437
        Other current liabilities                                                 47,391               48,046
                 Total current liabilities                                        368,637              380,311
Long-term debt, excluding current maturities                                      82,987               93,257
Insurance claims                                                                  27,847               26,883
Deferred income taxes and other non-current liabilities                           52,928               53,583
Shareholders’ equity:
        Common stock, $0.01 par value, authorized 160,000,000
                 shares, issued 67,671,338 and 67,585,675 shares                  677                  676
        Additional paid-in capital                                                201,948              199,414
        Retained earnings                                                         1,541,606            1,512,993
        Cost of 25,749,493 and 25,747,541 shares of common
                 stock in treasury                                                (1,167,600 )         (1,167,437 )
        Accumulated other comprehensive loss                                      (2,888     )         (3,089     )
                 Total shareholders’ equity                                       573,743              542,557
Total liabilities and shareholders’ equity                                    $   1,106,142       $    1,096,591
             Landstar System, Inc. and Subsidiary
             Supplemental Information
             (Unaudited)
                                                                                     Thirteen Weeks Ended
                                                                                     April 1,                 March 26,
                                                                                     2017                     2016
Revenue generated through (in thousands):
             Truck transportation
                                   Truckload:
                                                         Van equipment               $          469,783       $          428,193
                                                         Unsided/platform equipment             237,177                  209,422
                                   Less-than-truckload                                          19,857                   17,477
                                                         Total truck transportation             726,817                  655,092
             Rail intermodal                                                                    22,842                   26,108
             Ocean and air cargo carriers                                                       19,590                   18,808
             Other                                                                              11,659                   11,636
                                                                                     $          780,908       $          711,644
             Revenue on loads hauled via BCO Independent Contractors
                                   included in total truck transportation            $          364,908       $          334,278
Number of loads:
             Truck transportation
                                   Truckload:
                                                         Van equipment                          298,066                  269,040
                                                         Unsided/platform equipment             111,185                  102,742
                                   Less-than-truckload                                          29,919                   26,898
                                                         Total truck transportation             439,170                  398,680
             Rail intermodal                                                                    10,650                   12,030
             Ocean and air cargo carriers                                                       5,730                    4,560
                                                                                                455,550                  415,270
             Loads hauled via BCO Independent Contractors
                                   included in total truck transportation                       218,230                  197,670
Revenue per load:
             Truck transportation
                                   Truckload:
                                                         Van equipment               $          1,576         $          1,592
                                                         Unsided/platform equipment             2,133                    2,038
                                   Less-than-truckload                                          664                      650
                                                         Total truck transportation             1,655                    1,643
             Rail intermodal                                                                    2,145                    2,170
             Ocean and air cargo carriers                                                       3,419                    4,125
             Revenue per load on loads hauled via BCO Independent Contractors        $          1,672         $          1,691
Revenue by capacity type (as a % of total revenue);
             Truck capacity providers:
                                   BCO Independent Contractors                                  47         %             47         %
                                   Truck Brokerage Carriers                                     46         %             45         %
             Rail intermodal                                                                    3          %             4          %
             Ocean and air cargo carriers                                                       3          %             3          %
             Other                                                                              1          %             2          %
                                                                                     April 1,                 March 26,
                                                                                     2017                     2016
Truck Capacity Providers
             BCO Independent Contractors                                                        8,772                    8,889
             Truck Brokerage Carriers:
             Approved and active                                                                31,566                   29,523
             Other approved                                                                     15,889                   15,748
                                                                                                47,455                   45,271
             Total available truck capacity providers                                           56,227                   54,160
             Trucks provided by BCO Independent Contractors                                     9,370                    9,497
(1) Includes primarily reinsurance 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 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

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