LSTR
$130.26
Landstar System
($.10)
(.08%)
Earnings Details
3rd Quarter September 2020
Wednesday, October 21, 2020 4:15:00 PM
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Summary

Landstar System Guides Above Estimates

Landstar System (LSTR) reported 3rd Quarter September 2020 earnings of $1.61 per share on revenue of $1.1 billion. The consensus earnings estimate was $1.43 per share on revenue of $996.3 million. Revenue grew 7.3% on a year-over-year basis.

The company said it expects fourth quarter earnings of $1.61 to $1.71 per share on revenue of $1.15 billion to $1.20 billion. The current consensus earnings estimate is $1.40 per share on revenue of $1.02 billion for the quarter ending December 31, 2020.

Landstar System Inc is an asset-light provider of integrated transportation management solutions. Its segments include the transportation logistics segment and the insurance segment.

Results
Reported Earnings
$1.61
Earnings Whisper
-
Consensus Estimate
$1.43
Reported Revenue
$1.09 Bil
Revenue Estimate
$996.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Landstar System Reports Third Quarter Revenue of $1.086 Billion and Diluted Earnings Per Share of $1.61

JACKSONVILLE, Fla., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported revenue of $1.086 billion, an increase of approximately 7% over revenue of $1.012 billion reported in the 2019 third quarter. Diluted earnings per share of $1.61 in the 2020 third quarter represented an increase of approximately 19% over diluted earnings per share of $1.35 in the 2019 third quarter. 2020 third quarter diluted earnings per share was the second highest third quarter diluted earnings per share in the Company’s history, behind only the 2018 third quarter diluted earnings per share of $1.63. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $160.9 million in the 2020 third quarter, an increase of approximately 5% compared to $152.6 million in the 2019 third quarter. Operating margin, representing operating income divided by gross profit, was 51.2 percent in the 2020 third quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2020 third quarter was $1.006 billion, or 93 percent of revenue, compared to $932.2 million, or 92 percent of revenue, in the 2019 third quarter. Truckload transportation revenue hauled via van equipment in the 2020 third quarter was $666.6 million compared to $575.0 million in the 2019 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 third quarter was $314.5 million compared to $331.8 million in the 2019 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $62.2 million, or 6 percent of revenue, in the 2020 third quarter compared to $59.3 million, or 6 percent of revenue, in the 2019 third quarter.

Trailing twelve-month return on average shareholders’ equity was 26 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 22 percent. Landstar did not purchase any shares of its common stock during the 2020 third 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 September 26, 2020, the Company had $258 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility, with the ability to increase that amount of borrowings to $366 million using the facility’s accordion feature. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.21 per share payable on December 4, 2020, to stockholders of record as of the close of business on November 10, 2020. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“Landstar entered the third quarter of 2020 facing one of the most unpredictable and challenging freight environments in the Company’s history,” said Landstar President and Chief Executive Officer Jim Gattoni. “In our second quarter earnings release dated July 22, 2020, we provided third quarter guidance anticipating a decrease in a mid single-digit range on a year-over-year basis for both truck volume and price. Through the first few weeks of fiscal July, the number of loads and revenue per load on loads hauled via truck were each below the corresponding period of 2019 in a mid single-digit percentage range. We closed fiscal July with truckload volumes and revenue per load on loads hauled via truck down only 1% and 2%, respectively, compared to fiscal July 2019. In the first week of the Company’s fiscal August period, the number of loads and revenue per load on loads hauled via truck both turned positive on a weekly basis compared to the corresponding week of 2019. Landstar continued to experience gradual improvement in the number of loads and revenue per load on loads hauled via truck on a sequential basis through August 2020. Moreover, on a year-over-year basis, the number of loads and revenue per load on loads hauled via truck in fiscal August 2020 in comparison to fiscal August 2019 increased by 2% and 5%, respectively.”

Gattoni continued, “In our second quarter earnings release, we provided third quarter revenue guidance of $885 million to $935 million and third quarter diluted earnings per share guidance of $1.11 to $1.17. On September 9, 2020, we disclosed in a Form 8-K filed with the SEC and further explained at a webcast investor conference the next day that based on overall market conditions, we expected 2020 third quarter revenue to be in a range of $1.02 billion to $1.06 billion and diluted earnings per share for the 2020 third quarter to be in a range of $1.40 to $1.46. Our updated guidance provided on September 9, 2020, reflected our expectation that the number of loads and revenue per load on loads hauled via truck for the 2020 third quarter would be above the 2019 third quarter in a low single-digit range. The number of loads and revenue per load on loads hauled via truck for fiscal September 2020 continued to improve from August 2020 on a sequential basis beyond our expectations, particularly with respect to the demand for services provided by van equipment, and exceeded fiscal September 2019 amounts by 7% and 10%, respectively. Overall, truck load volumes increased in the 2020 third quarter by 3% as compared to the 2019 third quarter, and truck revenue per load increased by 5% as compared to the 2019 third quarter. Ultimately, revenue in the 2020 third quarter was $1.086 billion and diluted earnings per share for the 2020 third quarter was $1.61. The achievement of both revenue and diluted earnings per share in excess of our updated guidance was primarily the result of the further sequential increases in the number of loads and revenue per load on loads hauled via truck from September 9th through the end of the fiscal month.”

Gattoni continued, “The Company’s variable cost business model, highly diversified customer base and geographically dispersed network of independent agents and third-party truck capacity provides resiliency and flexibility in any demand environment. While U.S. manufacturing production continued to lag prior year levels, the agent network capitalized on opportunities with new customers and executed by sourcing truck capacity for shippers experiencing rapid volume growth and/or supply chain disruption. During the 2020 third quarter, approved and active third-party truck carrier count increased approximately 10 percent compared to the 2020 second quarter to over 41,000 carriers. Additionally, the Company net added 272 trucks provided by BCOs in the third quarter.”

Gattoni further stated, “Through the first few weeks of October 2020, the number of loads hauled via truck was above the corresponding period of 2019 in a high single-digit percentage range. I expect that trend to continue during the remainder of the 2020 fourth quarter. Accordingly, I expect the number of loads hauled via truck in the 2020 fourth quarter to be above the number of loads hauled by truck in the 2019 fourth quarter in a high single-digit percentage range. Based on our current macroeconomic outlook, I expect pricing to remain strong and relatively stable through the 2020 fourth quarter given current demand and assuming little change in the level of truck capacity available in the marketplace. Assuming the current macroeconomic environment continues throughout the remainder of the fourth quarter, I expect 2020 fourth quarter truck revenue per load to be higher than the 2019 fourth quarter in a low double-digit percentage range. I anticipate revenue for the 2020 fourth quarter to be in a range of $1.150 billion to $1.200 billion.”

Earlier this month, the Company announced a new initiative relating to the reorganization of its regional field operations centers throughout the United States in support of its BCO network. It is the intent of the Company that this network of field operations centers will further support the Company’s continual efforts in recruiting and retaining the best truck owner-operators in our industry. In connection with this initiative, the Company expects to record a liability of approximately $15.0 million in its 2020 fourth quarter relating to anticipated buyouts of certain incentive commission arrangements with several of its independent sales agents due to the Company’s discontinuation of a BCO recruitment and retention program formerly involving those agents. This charge is expected to decrease 2020 fourth quarter diluted earnings per share by approximately $0.29. These incentive commission arrangements to agents to recruit and retain BCOs reduced gross profit by almost $10 million a year in recent years.

Gattoni concluded, “Assuming the estimated range of revenue for the 2020 fourth quarter described above, the anticipated charge for the expected buyouts of certain agent commission arrangements, and insurance and claims expense at 4.8 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past five years (adjusted to reflect the recent significant increase in insurance premiums covered in the Company’s second quarter earnings release), I would anticipate 2020 fourth quarter diluted earnings per share to be in a range of $1.32 to $1.42 per share. Excluding the one-time cost of $0.29 per diluted share related to the anticipated buyouts of the incentive commission arrangements, 2020 fourth quarter diluted earnings per share guidance would be $1.61 to $1.71.”

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 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)
             
             
      Thirty Nine Weeks Ended Thirteen Weeks Ended
      September 26, September 28, September 26, September 28,
       2020  2019   2020  2019
             
Revenue   $2,836,626 $3,089,698  $1,085,546 $1,011,658
Investment income   2,716  3,736   714  1,315
             
Costs and expenses:         
 Purchased transportation  2,183,143  2,365,646   838,753  774,520
 Commissions to agents  236,490  257,862   85,848  84,568
 Other operating costs, net of gains/losses on asset sales/dispositions  23,035  28,531   7,361  10,431
 Insurance and claims   66,563  55,248   21,855  23,969
 Selling, general and administrative  124,779  120,717   38,851  38,152
 Depreciation and amortization  34,212  33,045   11,240  10,695
 Impairment of intangible and other assets  2,582  -   -  -
             
  Total costs and expenses  2,670,804  2,861,049   1,003,908  942,335
             
Operating income   168,538  232,385   82,352  70,638
Interest and debt expense   2,936  2,278   1,008  764
             
Income before income taxes  165,602  230,107   81,344  69,874
Income taxes    38,567  52,452   19,458  16,619
             
Net income    127,035  177,655   61,886  53,255
Less: Net loss attributable to noncontrolling interest  -  (17)  -  -
Net income attributable to Landstar System,        
 Inc. and subsidiary  $127,035 $177,672  $61,886 $53,255
             
Earnings per common share attributable to        
 Landstar System, Inc. and subsidiary $3.28 $4.45  $1.61 $1.35
             
Diluted earnings per share attributable to        
 Landstar System, Inc. and subsidiary $3.28 $4.45  $1.61 $1.35
             
Average number of shares outstanding:        
 Earnings per common share  38,673,000  39,891,000   38,386,000  39,566,000
 Diluted earnings per share  38,673,000  39,891,000   38,386,000  39,566,000
             
Dividends per common share $0.580 $0.515  $0.210 $0.185
             

        

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)   
(Unaudited)       
          
          
       September 26, December 28,
        2020   2019 
ASSETS       
Current assets:      
 Cash and cash equivalents  $218,554  $319,515 
 Short-term investments   39,068   32,901 
 Trade accounts receivable, less allowance    
  of $8,120 and $7,284   637,908   588,549 
 Other receivables, including advances to independent   
  contractors, less allowance of $8,827 and $7,667 40,550   35,553 
 Other current assets   27,989   21,370 
  Total current assets   964,069   997,888 
          
Operating property, less accumulated depreciation   
   and amortization of $291,159 and $280,849 279,495   285,855 
Goodwill     40,251   38,508 
Other assets    108,390   105,460 
Total assets   $1,392,205  $1,427,711 
          
LIABILITIES AND EQUITY     
Current liabilities:      
 Cash overdraft   $47,459  $53,878 
 Accounts payable    339,798   271,996 
 Current maturities of long-term debt   34,723   42,632 
 Insurance claims    46,019   44,532 
 Dividends payable    -   78,947 
 Contractor escrow   28,345   24,902 
 Other current liabilities   47,206   36,017 
  Total current liabilities   543,550   552,904 
          
Long-term debt, excluding current maturities   52,570   70,212 
Insurance claims    36,344   33,575 
Deferred income taxes and other non-current liabilities 54,107   49,551 
          
Shareholders' equity:      
 Common stock, $0.01 par value, authorized 160,000,000   
  shares, issued 68,181,418 and 68,083,419 shares 682   681 
 Additional paid-in capital   226,878   226,123 
 Retained earnings    2,065,999   1,962,161 
 Cost of 29,797,639 and 28,609,926 shares of common   
  stock in treasury   (1,581,961)  (1,465,284)
 Accumulated other comprehensive loss   (5,964)  (2,212)
  Total shareholders' equity   705,634   721,469 
Total liabilities and shareholders' equity  $1,392,205  $1,427,711 
          


 Landstar System, Inc. and Subsidiary
 Supplemental Information
 (Unaudited)
             
     Thirty Nine Weeks Ended  Thirteen Weeks Ended
     September 26, September 28,  September 26, September 28,
      2020  2019   2020  2019
Revenue generated through (in thousands):         
             
 Truck transportation         
  Truckload:         
   Van equipment $1,694,916  $1,799,421   $666,582  $575,042 
   Unsided/platform equipment  848,187   980,615    314,471   331,787 
  Less-than-truckload  70,984   73,475    25,125   25,367 
   Total truck transportation  2,614,087   2,853,511    1,006,178   932,196 
 Rail intermodal  81,747   87,555    30,432   28,970 
 Ocean and air cargo carriers  89,002   89,258    31,752   30,365 
 Other (1)  51,790   59,374    17,184   20,127 
     $2,836,626  $3,089,698   $1,085,546  $1,011,658 
             
 Revenue on loads hauled via BCO Independent Contractors (2)         
  included in total truck transportation $1,312,003  $1,390,135   $502,224  $466,207 
             
Number of loads:         
             
 Truck transportation         
  Truckload:         
   Van equipment  946,117   1,014,572    345,598   327,671 
   Unsided/platform equipment  356,670   391,112    125,548   130,192 
  Less-than-truckload  119,533   115,616    41,454   41,067 
   Total truck transportation  1,422,320   1,521,300    512,600   498,930 
 Rail intermodal  33,410   35,370    11,900   11,490 
 Ocean and air cargo carriers  22,720   22,150    8,290   7,340 
      1,478,450   1,578,820    532,790   517,760 
             
 Loads hauled via BCO Independent Contractors (2)         
  included in total truck transportation  693,860   722,870    250,030   239,210 
             
Revenue per load:         
             
 Truck transportation         
  Truckload:         
   Van equipment $1,791  $1,774   $1,929  $1,755 
   Unsided/platform equipment  2,378   2,507    2,505   2,548 
  Less-than-truckload  594   636    606   618 
   Total truck transportation  1,838   1,876    1,963   1,868 
 Rail intermodal  2,447   2,475    2,557   2,521 
 Ocean and air cargo carriers  3,917   4,030    3,830   4,137 
             
 Revenue per load on loads hauled via BCO Independent Contractors (2) $1,891  $1,923   $2,009  $1,949 
             
Revenue by capacity type (as a % of total revenue);         
             
 Truck capacity providers:         
  BCO Independent Contractors (2)  46%  45%   46%  46%
  Truck Brokerage Carriers  46%  47%   46%  46%
 Rail intermodal  3%  3%   3%  3%
 Ocean and air cargo carriers  3%  3%   3%  3%
 Other   2%  2%   2%  2%
             
          September 26, September 28,
           2020   2019 
Truck Capacity Providers         
             
 BCO Independent Contractors (2)       9,866   9,738 
 Truck Brokerage Carriers:         
 Approved and active (3)       41,246   39,963 
 Other approved       22,181   16,984 
           63,427   56,947 
 Total available truck capacity providers       73,293   66,685 
             
 Trucks provided by BCO Independent Contractors (2)       10,571   10,441 
             
(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.com904-398-9400

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Source: Landstar System, Inc.