Exhibit 99.1

 

LOGO

 

For Immediate Release

   Contact: Kevin Stout
   Landstar System, Inc.
   www.landstar.com

July 24, 2019

   904-398-9400

LANDSTAR SYSTEM REPORTS SECOND QUARTER

REVENUE OF $1.045 BILLION AND RECORD SECOND QUARTER DILUTED EARNINGS PER SHARE OF $1.53

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported record second quarter diluted earnings per share of $1.53 in the 2019 second quarter on revenue of $1.045 billion. Landstar reported diluted earnings per share of $1.51 on revenue of $1.183 billion in the 2018 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $158.0 million in the 2019 second quarter compared to $171.4 million in the 2018 second quarter. Operating margin, representing operating income divided by gross profit, was 51.2 percent in the 2019 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 second quarter was $968.2 million, or 93 percent of revenue, compared to $1.105 billion, or 93 percent of revenue, in the 2018 second quarter. Truckload transportation revenue hauled via van equipment in the 2019 second quarter was $605.4 million compared to $713.3 million in the 2018 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 second quarter was $338.1 million compared to $364.7 million in the 2018 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $56.8 million, or 5 percent of revenue, in the 2019 second quarter compared to $60.3 million, or 5 percent of revenue, in the 2018 second quarter.


LANDSTAR SYSTEM/ 2

 

Trailing twelve-month return on average shareholders’ equity was 37 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 32 percent. Landstar purchased approximately 550,000 shares of its common stock during the 2019 second quarter at an aggregate cost of approximately $56.8 million. Currently, the Company is authorized to purchase up to approximately 1,326,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of June 29, 2019, the Company had $285 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on August 30, 2019, to stockholders of record as of the close of business on August 12, 2019. This quarterly dividend includes a 12 percent increase to the amount of the Company’s regular 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.

“Landstar’s business model performed very well in the 2019 second quarter given the significant change in U.S. freight dynamics from 2018 to 2019,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “We entered 2019 knowing we would face very difficult year-over-year comparisons after a record setting 2018. Plus, in late 2018, we began to experience decelerating rates of growth in both truck revenue per load and truck loads that continued through the first quarter of 2019. The freight environment softened further from the 2019 first quarter to the 2019 second quarter, putting additional downward pressure on rates, especially in the spot market where the Company primarily operates. Although demand for freight services has slowed and capacity has become more readily available as compared to 2018, I believe we continue to be in a relatively healthy freight environment. In Landstar’s 2019 first quarter earnings release on April 24, we provided second quarter revenue guidance of $1.075 billion to $1.125 billion and second quarter diluted earnings per share guidance of $1.56 to $1.62. On June 5, we disclosed in a Form 8-K and further explained at a webcast investor conference later that day that, based on recent market conditions, and, in particular, a comparatively challenging pricing environment with respect to the Company’s truckload services, we may not achieve the bottom end of the range of estimates for revenue and earnings per diluted share we provided on April 24, 2019. Revenue and diluted earnings per share for the 2019 second quarter were below the bottom end of the guidance issued on April 24, 2019 largely due to actual truckload rates below our original expectations, beginning in the month of May.


LANDSTAR SYSTEM/ 3

 

Nonetheless, diluted earnings per share were $1.53 in the 2019 second quarter, the highest second quarter diluted earnings per share in Landstar history, as lower top-line numbers were offset by lower costs, showing the strength of Landstar’s variable cost model.”

Gattoni continued, “On April 24, Landstar provided volume guidance for the 2019 second quarter indicating that truck volumes would be approximately equal to the number of loads hauled by truck in the 2018 second quarter. The number of loads hauled via truck in the 2019 second quarter decreased 1 percent from the 2018 second quarter, driven entirely by a 3 percent decrease in the number of loads hauled via van equipment. The aggregate number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 8 percent lower in the 2019 second quarter compared to the 2018 second quarter.”

Gattoni further commented, “As I referred to above, the pricing environment for our truck services continued to drive truckload rates in the 2019 second quarter below the 2018 second quarter, as industry-wide truck capacity was more readily available than during the 2018 second quarter. The Company’s guidance issued on April 24, 2019 called for a decrease in revenue per load on loads hauled via truck in a high single-digit percentage range from the 2018 second quarter. Revenue per load on loads hauled via truck was below the prior year comparable period by 8 percent, 11 percent and 13 percent for April, May and June, respectively. Revenue per load on loads hauled via van equipment decreased 13 percent from the 2018 second quarter and revenue per load on loads hauled via unsided/platform equipment decreased 7 percent from the 2018 second quarter. As a result, revenue per load on loads hauled via truck was 11 percent lower in the 2019 second quarter than the 2018 second quarter.”

Gattoni continued, “Through the first few weeks of July, the number of loads hauled via truck was slightly behind the number of loads hauled in the corresponding period of 2018. I expect that trend to continue during the remainder of the 2019 third quarter. Accordingly, I expect the number of loads hauled via truck in the 2019 third quarter to be below the number of loads hauled by truck in the 2018 third quarter in a low single-digit percentage range. My expectation is that pricing conditions for truck services experienced during the 2019 second quarter will continue through the 2019 third quarter with little change in the level of truck capacity available in the marketplace. Assuming those capacity market


LANDSTAR SYSTEM/ 4

 

conditions continue throughout the rest of the third quarter, I expect 2019 third quarter truck revenue per load to be lower than the 2018 third quarter in a low double-digit percentage range. I anticipate revenue for the 2019 third quarter to be in a range of $1.01 billion to $1.06 billion. Assuming that range of estimated revenue and insurance and claims expense at 3.6 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past five years, I would anticipate 2019 third quarter diluted earnings per share to be in a range of $1.48 to $1.54 per share.”

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 2019 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 2018 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.


LANDSTAR SYSTEM/ 5

 

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)


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Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     Twenty Six Weeks Ended     Thirteen Weeks Ended  
     June 29,
2019
    June 30,
2018
    June 29,
2019
     June 30,
2018
 

Revenue

   $ 2,078,040     $ 2,230,712     $ 1,045,040      $ 1,182,786  

Investment income

     2,421       1,752       1,283        891  

Costs and expenses:

         

Purchased transportation

     1,591,126       1,727,237       799,371        916,940  

Commissions to agents

     173,294       176,524       87,623        94,399  

Other operating costs, net of gains on asset sales/dispositions

     18,100       15,210       9,861        7,606  

Insurance and claims

     31,279       38,899       16,286        21,539  

Selling, general and administrative

     82,565       94,249       41,297        48,998  

Depreciation and amortization

     22,350       21,766       11,034        10,769  
  

 

 

   

 

 

   

 

 

    

 

 

 

Total costs and expenses

     1,918,714       2,073,885       965,472        1,100,251  
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     161,747       158,579       80,851        83,426  

Interest and debt expense

     1,514       1,639       709        839  
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     160,233       156,940       80,142        82,587  

Income taxes

     35,833       36,975       19,042        20,095  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

     124,400       119,965       61,100        62,492  

Less: Net loss attributable to noncontrolling interest

     (17     (75     —          (31
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income attributable to Landstar System, Inc. and subsidiary

   $ 124,417     $ 120,040     $ 61,100      $ 62,523  
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per common share attributable to Landstar System, Inc. and subsidiary

   $ 3.11     $ 2.88     $ 1.53      $ 1.51  
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted earnings per share attributable to Landstar System, Inc. and subsidiary

   $ 3.11     $ 2.87     $ 1.53      $ 1.51  
  

 

 

   

 

 

   

 

 

    

 

 

 

Average number of shares outstanding:

         

Earnings per common share

     40,053,000       41,744,000       39,945,000        41,450,000  
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted earnings per share

     40,053,000       41,795,000       39,945,000        41,491,000  
  

 

 

   

 

 

   

 

 

    

 

 

 

Dividends per common share

   $ 0.330     $ 0.300     $ 0.165      $ 0.150  
  

 

 

   

 

 

   

 

 

    

 

 

 


LANDSTAR SYSTEM/ 7

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     June 29,     December 29,  
     2019     2018  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 250,212     $ 199,736  

Short-term investments

     35,138       40,058  

Trade accounts receivable, less allowance of $6,744 and $6,413

     594,122       691,604  

Other receivables, including advances to independent contractors, less allowance of $7,729 and $6,216

     27,212       23,744  

Other current assets

     32,619       16,287  
  

 

 

   

 

 

 

Total current assets

     939,303       971,429  
  

 

 

   

 

 

 

Operating property, less accumulated depreciation and amortization of $264,910 and $250,153

     269,246       284,032  

Goodwill

     38,407       38,232  

Other assets

     101,737       86,871  
  

 

 

   

 

 

 

Total assets

   $ 1,348,693     $ 1,380,564  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Cash overdraft

   $ 43,620     $ 55,339  

Accounts payable

     285,569       314,134  

Current maturities of long-term debt

     39,194       43,561  

Insurance claims

     41,254       40,176  

Accrued compensation

     11,372       29,489  

Contractor escrow

     25,530       25,202  

Other current liabilities

     27,711       27,917  
  

 

 

   

 

 

 

Total current liabilities

     474,250       535,818  
  

 

 

   

 

 

 

Long-term debt, excluding current maturities

     65,573       84,864  

Insurance claims

     31,016       30,429  

Deferred income taxes and other non-current liabilities

     49,554       40,320  

Equity

    

Landstar System, Inc. and subsidiary shareholders’ equity

    

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,064,877 and 67,870,962 shares

     681       679  

Additional paid-in capital

     224,550       226,852  

Retained earnings

     1,952,439       1,841,279  

Cost of 28,435,182 and 27,755,001 shares of common stock in treasury

     (1,446,425     (1,376,111

Accumulated other comprehensive loss

     (2,945     (5,875
  

 

 

   

 

 

 

Total Landstar System, Inc. and subsidiary shareholders’ equity

     728,300       686,824  
  

 

 

   

 

 

 

Noncontrolling interest

     —         2,309  
  

 

 

   

 

 

 

Total equity

     728,300       689,133  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,348,693     $ 1,380,564  
  

 

 

   

 

 

 


LANDSTAR SYSTEM/ 8

 

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

 

     Twenty Six Weeks Ended     Thirteen Weeks Ended  
     June 29,     June 30,     June 29,     June 30,  
     2019     2018     2019     2018  

Revenue generated through (in thousands):

        

Truck transportation

        

Truckload:

        

Van equipment

   $ 1,224,379     $ 1,369,476     $ 605,365     $ 713,341  

Unsided/platform equipment

     648,828       664,045       338,107       364,676  

Less-than-truckload

     48,108       50,948       24,732       27,364  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     1,921,315       2,084,469       968,204       1,105,381  

Rail intermodal

     58,585       61,587       28,570       32,295  

Ocean and air cargo carriers

     58,893       51,506       28,224       28,029  

Other (1)

     39,247       33,150       20,042       17,081  
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,078,040     $ 2,230,712     $ 1,045,040     $ 1,182,786  
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation

   $ 923,928     $ 998,953     $ 474,620     $ 527,803  

Number of loads:

        

Truck transportation

        

Truckload:

        

Van equipment

     686,901       691,866       345,080       354,947  

Unsided/platform equipment

     260,920       255,334       135,750       135,543  

Less-than-truckload

     74,549       70,670       39,240       37,250  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     1,022,370       1,017,870       520,070       527,740  

Rail intermodal

     23,880       26,840       11,420       13,560  

Ocean and air cargo carriers

     14,810       13,030       7,300       6,700  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,061,060       1,057,740       538,790       548,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loads hauled via BCO Independent Contractors (2) included in total truck transportation

     483,660       480,890       248,810       247,710  

Revenue per load:

        

Truck transportation

        

Truckload:

        

Van equipment

   $ 1,782     $ 1,979     $ 1,754     $ 2,010  

Unsided/platform equipment

     2,487       2,601       2,491       2,690  

Less-than-truckload

     645       721       630       735  

Total truck transportation

     1,879       2,048       1,862       2,095  

Rail intermodal

     2,453       2,295       2,502       2,382  

Ocean and air cargo carriers

     3,977       3,953       3,866       4,183  

Revenue per load on loads hauled via BCO Independent Contractors (2)

   $ 1,910     $ 2,077     $ 1,908     $ 2,131  

Revenue by capacity type (as a % of total revenue);

        

Truck capacity providers:

        

BCO Independent Contractors (2)

     44     45     45     45

Truck Brokerage Carriers

     48     49     47     49

Rail intermodal

     3     3     3     3

Ocean and air cargo carriers

     3     2     3     2

Other

     2     1     2     1
                 June 29,     June 30,  
                 2019     2018  

Truck Capacity Providers

        

BCO Independent Contractors (2)

         9,879       9,501  
      

 

 

   

 

 

 

Truck Brokerage Carriers:

        

Approved and active (3)

         40,097       37,045  

Other approved

         17,790       15,406  
      

 

 

   

 

 

 
         57,887       52,451  
      

 

 

   

 

 

 

Total available truck capacity providers

         67,766       61,952  
      

 

 

   

 

 

 

Trucks provided by BCO Independent Contractors (2)

         10,587       10,155  

 

(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.

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