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.
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.”
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 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 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, 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, 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, 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); |
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Truck capacity providers: |
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|
|
|
|
|
|
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 |
% |
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December 28, |
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December 29, |
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2019 |
|
|
2018 |
|
Truck Capacity
Providers |
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|
BCO Independent Contractors (2) |
|
|
|
|
|
|
9,554 |
|
|
9,884 |
|
Truck Brokerage Carriers: |
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Approved and active (3) |
|
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|
|
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|
39,497 |
|
|
41,069 |
|
Other approved |
|
|
|
|
|
|
16,820 |
|
|
17,985 |
|
|
|
|
|
|
|
|
56,317 |
|
|
59,054 |
|
Total available truck capacity providers |
|
|
|
|
|
|
65,871 |
|
|
68,938 |
|
|
|
|
|
|
|
|
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|
Trucks provided by BCO Independent Contractors (2) |
|
|
|
|
|
|
10,243 |
|
|
10,599 |
|
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|
|
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|
(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 Stout
Landstar System, Inc.
www.landstar.com
904-398-9400
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