Exhibit 99.1

 

LOGO

 

For Immediate Release    Contact: Kevin Stout
   Landstar System, Inc.
   www.landstar.com
January 29, 2020    904-398-9400

LANDSTAR SYSTEM REPORTS FOURTH QUARTER

REVENUE OF $994.9 MILLION AND

DILUTED EARNINGS PER SHARE OF $1.27

Jacksonville, FL - Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share of $1.27 in the 2019 fourth quarter on revenue of $994.9 million. Revenue in the 2019 fourth quarter was at the mid-point of the Company’s guidance issued on October 23, 2019, while diluted earnings per share was below the low-end of the guidance of $1.40. As further described later in this press release, the shortfall in diluted earnings per share to our guidance was entirely attributable to insurance and claims costs in the quarter, well above the insurance and claims costs anticipated as part of the October 23, 2019 earnings guidance. Landstar reported diluted earnings per share of $1.68 on revenue of $1.182 billion in the 2018 fourth quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 fourth quarter was $911.8 million, or 92 percent of revenue, compared to $1.078 billion, or 91 percent of revenue, in the 2018 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2019 fourth quarter was $571.8 million compared to $705.0 million in the 2018 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 fourth quarter was $315.2 million compared to $346.6 million in the 2018 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $63.0 million, or 6 percent of revenue, in the 2019 fourth quarter compared to $84.8 million, or 7 percent of revenue, in the 2018 fourth quarter.


LANDSTAR SYSTEM/2

 

Trailing twelve-month return on average shareholders’ equity was 31 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 27 percent. Landstar purchased approximately 849,000 shares of its common stock during fiscal year 2019 at an aggregate cost of approximately $88.6 million. As previously disclosed by the Company in a Form 8-K filed with the Securities and Exchange Commission on December 10, 2019, its Board of Directors increased the number of shares of its common stock that the Company is authorized to purchase under its stock purchase program by 1,849,068 and declared a special one-time

cash dividend in the amount of $2.00 per share that was paid on January 24, 2020, to stockholders of record as of the close of business on January 10, 2020. Currently, Landstar is authorized to purchase up to a total of 3,000,000 shares of the Company’s common stock under its share purchase programs. In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on March 13, 2020, to stockholders of record as of the close of business on February 17, 2020. It is currently the intention of the Board to pay dividends on a quarterly basis going forward. As of December 28, 2019, the Company had $352 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility.

“As expected, the macroeconomic environment during the 2019 fourth quarter made for challenging comparisons against our record 2018 fourth quarter performance,” said Landstar President and Chief Executive Officer Jim Gattoni. “Soft demand, driven by slowing production in the U.S. manufacturing sector, and more readily available truck capacity drove Landstar’s truck rates and volumes below prior year levels in the 2019 fourth quarter. Overall, 2019 fourth quarter revenue was 16 percent below 2018 fourth quarter revenue, mostly due to a 9 percent decrease in revenue per load on loads hauled via truck and a 7 percent decrease in truck loadings. The Company’s fourth quarter earnings guidance issued on October 23, 2019 anticipated fourth quarter diluted earnings per share of $1.40 to $1.46 reflecting insurance and claims costs at 3.6 percent of estimated fourth quarter BCO revenue. Diluted earnings per share fell below our guidance, entirely due to higher insurance and claims costs than we anticipated in our initial estimate. During the 2019 fourth quarter, we incurred $7.2 million of unfavorable development of prior year claims that drove actual insurance and claims costs to 5.7 percent of BCO revenue in the quarter.”


LANDSTAR SYSTEM/3

 

Gattoni further commented, “Landstar’s financial performance in 2018 was by far the best in the Company’s history, making for very difficult comparisons in 2019. We experienced year-over-year declines in both truck volumes and price for much of 2019, and revenue for fiscal year 2019 was 11% below that of fiscal year 2018. Nevertheless, 2019 was still the second best financial year in the Company’s history after 2018, with 2019 revenue, gross profit, operating income and diluted earnings per share each representing the second highest annual amount achieved in Landstar history.”

Gattoni continued, “January of any given year is typically the slowest month of the year. Through the first several weeks of January, there has been little change in the macroeconomic environment experienced throughout 2019, characterized by soft demand, weakness in the U.S. manufacturing sector, and readily available truck capacity. Additionally, the 2019 first quarter was seasonally the strongest quarter of 2019, setting the stage for a difficult quarter-over-prior-year-quarter comparison heading into the first quarter of 2020. I expect these conditions to result in earnings in the 2020 first quarter to be well below that of the 2019 first quarter. From a revenue standpoint, the number of loads hauled via truck in the first few weeks of 2020 was below the corresponding period of the prior year in a mid-single digit percentage range, somewhat similar to the year-over-prior-year percentage decrease experienced in the 2019 fourth quarter. Revenue per load on loads hauled via truck in the first few weeks of January was below the same period of the prior year in a mid-single digit percentage range, a slight improvement to the year-over-prior-year percentage decrease experienced in the 2019 fourth quarter. I expect the volume and pricing trends experienced in the first few weeks of January to continue through the first quarter. As such, I anticipate revenue for the 2020 first quarter to be in a range of $915 million to $965 million.”

Gattoni added that, “In early January, a BCO with a motor carrier subsidiary of the Company was involved in a tragic vehicular accident involving a fatality. The Company is still in the process of obtaining all the facts concerning this incident and, as such, it is too soon to estimate the ultimate financial exposure of this tragic accident. Current facts


LANDSTAR SYSTEM/4

 

as known to us indicate that it is probable this accident will adversely impact the financial results of the Company’s 2020 first quarter. It is highly likely that, once all facts are determined, the estimated ultimate cost of this tragic accident will reduce first quarter diluted earnings per share to an amount below the low-end of the Company’s 2020 first quarter diluted earnings per share guidance. While our evaluation is still preliminary and our investigation continues, the Company’s pre-tax loss exposure at the time of this accident included our $5 million self-insured retention and up to $3.5 million relating to aggregate losses above our self-insured retention during an annual policy year (May 1 to April 30). Additional insurance and claims expense of $8.5 million in the 2020 first quarter would result in a charge of $0.16 per diluted share.”

Gattoni concluded, “Based on the range of revenue estimated for the 2020 first quarter and excluding the cost of the ultimate resolution of this recent tragic accident, I would anticipate diluted earnings per share to be in a range of $1.10 to $1.20. This range of diluted earnings per share includes insurance and claims expense estimated at 4.0 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past three years.”

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 Fourth 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


LANDSTAR SYSTEM/5

 

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.

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)


LANDSTAR SYSTEM/6

 

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     Fiscal Years Ended     Fiscal Quarters Ended  
     December 28,     December 29,     December 28,      December 29,  
     2019     2018     2019      2018  

Revenue

   $ 4,084,577     $ 4,615,144     $ 994,879      $ 1,182,351  

Investment income

     5,041       3,816       1,305        1,062  

Costs and expenses:

         

Purchased transportation

     3,127,474       3,569,961       761,828        911,251  

Commissions to agents

     342,226       378,002       84,364        102,174  

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

     37,274       31,803       8,743        7,627  

Insurance and claims

     80,319       75,677       25,071        17,959  

Selling, general and administrative

     158,953       188,212       38,236        47,264  

Depreciation and amortization

     44,468       43,570       11,423        11,050  
  

 

 

   

 

 

   

 

 

    

 

 

 

Total costs and expenses

     3,790,714       4,287,225       929,665        1,097,325  
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     298,904       331,735       66,519        86,088  

Interest and debt expense

     3,141       3,354       863        899  
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     295,763       328,381       65,656        85,189  

Income taxes

     68,060       73,168       15,608        16,889  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

     227,703       255,213       50,048        68,300  

Less: Net (loss)/income attributable to noncontrolling interest

     (17     (68     —          44  
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income attributable to Landstar System, Inc. and subsidiary

   $ 227,720     $ 255,281     $ 50,048      $ 68,256  
  

 

 

   

 

 

   

 

 

    

 

 

 

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

   $ 5.72     $ 6.19     $ 1.27      $ 1.69  
  

 

 

   

 

 

   

 

 

    

 

 

 

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

   $ 5.72     $ 6.18     $ 1.27      $ 1.68  
  

 

 

   

 

 

   

 

 

    

 

 

 

Average number of shares outstanding:

         

Earnings per common share

     39,786,000       41,273,000       39,472,000        40,501,000  
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted earnings per share

     39,786,000       41,310,000       39,472,000        40,514,000  
  

 

 

   

 

 

   

 

 

    

 

 

 

Dividends per common share

   $ 2.700     $ 0.630     $ 2.185      $ 0.165  
  

 

 

   

 

 

   

 

 

    

 

 

 


LANDSTAR SYSTEM/7

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     December 28,     December 29,  
     2019     2018  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 319,515     $ 199,736  

Short-term investments

     32,901       40,058  

Trade accounts receivable, less allowance of $7,284 and $6,413

     588,549       691,604  

Other receivables, including advances to independent contractors, less allowance of $7,667 and $6,216

     35,553       23,744  

Other current assets

     21,370       16,287  
  

 

 

   

 

 

 

Total current assets

     997,888       971,429  
  

 

 

   

 

 

 

Operating property, less accumulated depreciation and amortization of $280,849 and $250,153

     285,855       284,032  

Goodwill

     38,508       38,232  

Other assets

     105,460       86,871  
  

 

 

   

 

 

 

Total assets

   $ 1,427,711     $ 1,380,564  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Cash overdraft

   $ 53,878     $ 55,339  

Accounts payable

     271,996       314,134  

Current maturities of long-term debt

     42,632       43,561  

Insurance claims

     44,532       40,176  

Dividends payable

     78,947       —    

Accrued compensation

     9,884       29,489  

Other current liabilities

     51,035       53,119  
  

 

 

   

 

 

 

Total current liabilities

     552,904       535,818  
  

 

 

   

 

 

 

Long-term debt, excluding current maturities

     70,212       84,864  

Insurance claims

     33,575       30,429  

Deferred income taxes and other non-current liabilities

     49,551       40,320  

Equity

    

Landstar System, Inc. and subsidiary shareholders’ equity

    

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,083,419 and 67,870,962 shares

     681       679  

Additional paid-in capital

     226,123       226,852  

Retained earnings

     1,962,161       1,841,279  

Cost of 28,609,926 and 27,755,001 shares of common stock in treasury

     (1,465,284     (1,376,111

Accumulated other comprehensive loss

     (2,212     (5,875
  

 

 

   

 

 

 

Total Landstar System, Inc. and subsidiary shareholders’ equity

     721,469       686,824  
  

 

 

   

 

 

 

Noncontrolling interest

     —         2,309  
  

 

 

   

 

 

 

Total equity

     721,469       689,133  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,427,711     $ 1,380,564  
  

 

 

   

 

 

 


LANDSTAR SYSTEM/8

 

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

 

     Fiscal Years Ended     Fiscal Quarters Ended  
     December 28,     December 29,     December 28,     December 29,  
     2019     2018     2019     2018  
Revenue generated through (in thousands):         

Truck transportation

        

Truckload:

        

Van equipment

   $ 2,371,188     $ 2,791,494     $ 571,767     $ 704,971  

Unsided/platform equipment

     1,295,817       1,386,387       315,202       346,603  

Less-than-truckload

     98,324       102,531       24,849       26,083  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     3,765,329       4,280,412       911,818       1,077,657  

Rail intermodal

     118,305       128,976       30,750       32,950  

Ocean and air cargo carriers

     121,485       134,577       32,227       51,858  

Other (1)

     79,458       71,179       20,084       19,886  
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 4,084,577     $ 4,615,144     $ 994,879     $ 1,182,351  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1,831,752     $ 2,001,665     $ 441,617     $ 482,321  
Number of loads:         

Truck transportation

        

Truckload:

        

Van equipment

     1,337,089       1,398,388       322,517       353,066  

Unsided/platform equipment

     513,579       516,613       122,467       127,854  

Less-than-truckload

     155,592       145,269       39,976       38,630  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     2,006,260       2,060,270       484,960       519,550  

Rail intermodal

     47,590       53,030       12,220       12,770  

Ocean and air cargo carriers

     30,110       28,970       7,960       7,720  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,083,960       2,142,270       505,140       540,040  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     954,990       949,330       232,120       231,860  
Revenue per load:         

Truck transportation

        

Truckload:

        

Van equipment

   $ 1,773     $ 1,996     $ 1,773     $ 1,997  

Unsided/platform equipment

     2,523       2,684       2,574       2,711  

Less-than-truckload

     632       706       622       675  

Total truck transportation

     1,877       2,078       1,880       2,074  

Rail intermodal

     2,486       2,432       2,516       2,580  

Ocean and air cargo carriers

     4,035       4,645       4,049       6,717  

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

   $ 1,918     $ 2,109     $ 1,903     $ 2,080  
Revenue by capacity type (as a % of total revenue);         

Truck capacity providers:

        

BCO Independent Contractors (2)

     45     43     44     41

Truck Brokerage Carriers

     47     49     47     50

Rail intermodal

     3     3     3     3

Ocean and air cargo carriers

     3     3     3     4

Other

     2     2     2     2
                 December 28,     December 29,  
                 2019     2018  
Truck Capacity Providers         

BCO Independent Contractors (2)

         9,554       9,884  
      

 

 

   

 

 

 

Truck Brokerage Carriers:

        

Approved and active (3)

         39,497       41,069  

Other approved

         16,820       17,985  
      

 

 

   

 

 

 
         56,317       59,054  
      

 

 

   

 

 

 

Total available truck capacity providers

         65,871       68,938  
      

 

 

   

 

 

 

Trucks provided by BCO Independent Contractors (2)

         10,243       10,599  

 

(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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