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Landstar System, Inc.$103.85($1.15)(1.10%)

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 Landstar System Reports Diluted Earnings per Share of $0.89 on Record Second Quarter Revenue of $870 Million
   Wednesday, July 26, 2017 4:17:49 PM ET

Landstar System, Inc. (LSTR ) reported diluted earnings per share of $0.89 on record second quarter revenue of $870 million in the 2017 second quarter. Landstar reported diluted earnings per share of $0.76 on revenue of $775 million in the 2016 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was a second quarter record of $132.6 million in the 2017 second quarter compared to $121.0 million in the 2016 second quarter. Operating margin, representing operating income divided by gross profit, was 46.0 percent in the 2017 second quarter.

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2017 second quarter was $815.6 million, or 94 percent of revenue, compared to $718.5 million, or 93 percent of revenue, in the 2016 second quarter. Truckload transportation revenue hauled via van equipment in the 2017 second quarter was $509.1 million compared to $458.0 million in the 2016 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2017 second quarter was $283.5 million compared to $242.0 million in the 2016 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $43.1 million, or 5 percent of revenue, in the 2017 second quarter compared to $45.1 million, or 6 percent of revenue, in the 2016 second 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 July 1, 2017, the Company had $273 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 $0.10 per share payable on September 1, 2017, to stockholders of record as of the close of business on August 14, 2017. This quarterly dividend includes an 11 percent increase to the amount of the Company’s 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.

Commenting on Landstar’s 2017 second quarter, Landstar’s President and CEO Jim Gattoni said, "I am very pleased with Landstar’s performance in the 2017 second quarter. On April 26, we provided second quarter revenue guidance of $820 million to $870 million and second quarter diluted earnings per share guidance of $0.84 to $0.89. Revenue and diluted earnings per share for the 2017 second quarter both came in at the top end of guidance. Revenue of $870 million was a second quarter record and represented growth of 12 percent over the 2016 second quarter. Diluted earnings per share of $0.89 grew 17 percent over the 2016 second quarter."

Gattoni continued, "The number of loads hauled via truck in the 2017 second quarter increased 10 percent over the 2016 second quarter, driven by a 10 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 a 20 percent increase in less-than-truckload volume. The number of loads hauled via truck in the second quarter of 2017 was a second quarter record. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 5 percent lower in the 2017 second quarter compared to the 2016 second quarter, due to continued softness in rail intermodal volume."

Gattoni further commented, "As expected, the pricing environment for our truckload services continued to show slow improvement in the 2017 second quarter, as industry-wide truck capacity is firming in certain regions, especially with respect to flatbed loads. As a result, revenue per load on loads hauled via truck was 3 percent higher in the 2017 second quarter compared to the 2016 second quarter. The percentage change in year-over-year revenue per load on loads hauled via truck was consistent each month during the quarter. 2017 second quarter operating margin was 46.0 percent, in line with our historical second quarter operating margin."

Gattoni continued, "Historically, revenue in the Company’s third fiscal quarter has been relatively consistent with revenue generated in the Company’s second fiscal quarter. We typically have experienced revenue per load on loads hauled via truck in the Company’s third quarter as slightly ahead of the second quarter while the number of loads hauled via truck in the third quarter as slightly below the second quarter. Through the first few weeks of July, we have experienced the normal seasonal uptick in revenue per load on loads hauled via truck. Also, the number of loads hauled via truck during the first few weeks of July is trending with the historical second quarter to third quarter pattern. As such, I expect 2017 third quarter revenue to be similar to the Company’s 2017 second quarter revenue. Assuming insurance and claims costs in the 2017 third quarter are approximately 3.3 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 $0.88 to $0.93 in the 2017 third 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 Second Quarter 2017 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; 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.

(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
                                                                 July 1,          June 25,         July 1,        June 25,
                                                                 2017             2016             2017           2016
Revenue                                                          $     1,651,342  $     1,486,867  $     870,434  $     775,223
Investment income                                                1,022            743              608            363
Costs and expenses:
Purchased transportation                                         1,263,111        1,129,743        667,588        589,415
Commissions to agents                                            134,080          123,931          70,282         64,839
Other operating costs, net of gains on asset sales/dispositions  14,400           13,992           7,503          6,585
Insurance and claims                                             28,406           30,307           13,893         16,094
Selling, general and administrative                              79,184           71,519           40,861         36,905
Depreciation and amortization                                    19,831           17,093           9,897          8,655
Total costs and expenses                                         1,539,012        1,386,585        810,024        722,493
Operating income                                                 113,352          101,025          61,018         53,093
Interest and debt expense                                        1,902            1,777            819            888
Income before income taxes                                       111,450          99,248           60,199         52,205
Income taxes                                                     41,557           37,750           22,689         19,891
Net income                                                       $     69,893     $     61,498     $     37,510   32,314
Earnings per common share                                        $     1.67       $     1.45       $     0.89     $     0.77
Diluted earnings per share                                       $     1.66       $     1.45       $     0.89     $     0.76
Average number of shares outstanding:
Earnings per common share                                        41,907,000       42,315,000       41,935,000     42,235,000
Diluted earnings per share                                       42,004,000       42,424,000       42,010,000     42,357,000
Dividends per common share                                       $     0.18       $     0.16       $     0.09     $     0.08
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
                                                                           July 1,              December 31,
                                                                           2017                 2016
ASSETS
Current assets:
        Cash and cash equivalents                                          $     222,102        $     178,897
        Short-term investments                                             51,167               66,560
        Trade accounts receivable, less allowance
                  of $5,311 and $5,161                                     480,467              463,102
        Other receivables, including advances to independent
                  contractors, less allowance of $6,049 and $5,523         20,518               18,567
        Other current assets                                               19,291               10,281
                  Total current assets                                     793,545              737,407
Operating property, less accumulated depreciation
                            and amortization of $202,050 and $190,374      259,346              272,843
Goodwill                                                                   31,134               31,134
Other assets                                                               75,249               55,207
Total assets                                                               $     1,159,274      $     1,096,591
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
        Cash overdraft                                                     $     34,145         $     36,251
        Accounts payable                                                   224,928              219,409
        Current maturities of long-term debt                               41,356               45,047
        Insurance claims                                                   29,077               26,121
        Other current liabilities                                          56,998               53,483
                  Total current liabilities                                386,504              380,311
Long-term debt, excluding current maturities                               77,639               93,257
Insurance claims                                                           30,402               26,883
Deferred income taxes and other non-current liabilities                    55,239               53,583
Shareholders’ equity:
        Common stock, $0.01 par value, authorized 160,000,000
                  shares, issued 67,696,487 and 67,585,675 shares          677                  676
        Additional paid-in capital                                         203,410              199,414
        Retained earnings                                                  1,575,342            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                               (2,339          )    (3,089          )
                  Total shareholders’ equity                               609,490              542,557
Total liabilities and shareholders’ equity                                 $     1,159,274      $     1,096,591
             Landstar System, Inc. and Subsidiary
             Supplemental Information
             (Unaudited)
                                                                                Twenty Six Weeks Ended                       Thirteen Weeks Ended
                                                                                July 1,                June 25,              July 1,            June 25,
                                                                                2017                   2016                  2017               2016
Revenue generated through (in thousands):
             Truck transportation
                                Truckload:
                                                    Van equipment               $         978,918      $       886,195       $       509,135    $      458,002
                                                    Unsided/platform equipment            520,658              451,430               283,481           242,008
                                Less-than-truckload                                       42,799               35,927                22,942            18,450
                                                    Total truck transportation            1,542,375            1,373,552             815,558           718,460
             Rail intermodal                                                              44,357               52,337                21,515            26,229
             Ocean and air cargo carriers                                                 41,185               37,710                21,595            18,902
             Other                                                                        23,425               23,268                11,766            11,632
                                                                                $         1,651,342    $       1,486,867     $       870,434    $      775,223
             Revenue on loads hauled via BCO Independent Contractors
                                included in total truck transportation          $         776,085      $       707,652       $       411,177    $      373,374
Number of loads:
             Truck transportation
                                Truckload:
                                                    Van equipment                         613,565              556,119               315,499           287,079
                                                    Unsided/platform equipment            236,427              219,034               125,242           116,292
                                Less-than-truckload                                       64,508               55,727                34,589            28,829
                                                    Total truck transportation            914,500              830,880               475,330           432,200
             Rail intermodal                                                              20,960               24,180                10,310            12,150
             Ocean and air cargo carriers                                                 11,940               9,780                 6,210             5,220
                                                                                          947,400              864,840               491,850           449,570
             Loads hauled via BCO Independent Contractors
                                included in total truck transportation                    453,860              414,660               235,630           216,990
Revenue per load:
             Truck transportation
                                Truckload:
                                                    Van equipment               $         1,595        $       1,594         $       1,614      $      1,595
                                                    Unsided/platform equipment            2,202                2,061                 2,263             2,081
                                Less-than-truckload                                       663                  645                   663               640
                                                    Total truck transportation            1,687                1,653                 1,716             1,662
             Rail intermodal                                                              2,116                2,164                 2,087             2,159
             Ocean and air cargo carriers                                                 3,449                3,856                 3,477             3,621
             Revenue per load on loads hauled via BCO Independent Contractors   $         1,710        $       1,707         $       1,745      $      1,721
Revenue by capacity type (as a % of total revenue);
             Truck capacity providers:
                                BCO Independent Contractors                               47        %          48        %           47      %         48      %
                                Truck Brokerage Carriers                                  46        %          45        %           46      %         45      %
             Rail intermodal                                                              3         %          4         %           2       %         3       %
             Ocean and air cargo carriers                                                 2         %          3         %           2       %         2       %
             Other                                                                        1         %          2         %           1       %         2       %
                                                                                                                             July 1,            June 25,
                                                                                                                             2017               2016
Truck Capacity Providers
             BCO Independent Contractors                                                                                             8,818             8,856
             Truck Brokerage Carriers:
             Approved and active                                                                                                     31,636            30,137
             Other approved                                                                                                          15,381            15,594
                                                                                                                                     47,017            45,731
             Total available truck capacity providers                                                                                55,835            54,587
             Trucks provided by BCO Independent Contractors                                                                          9,404             9,462
(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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