Landstar System Reports Second Quarter Revenue of $824 Million and Diluted Earnings Per Share of $0.63
July 22 2020 - 4:15PM
Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per
share of $0.63 in the 2020 second quarter on revenue of $824
million. Included in the Company’s 2020 second quarter financial
results were:
- approximately $12.6 million, or
$0.25 per diluted share, in payments made to the Company’s BCOs and
agents in April and May under the Company’s previously disclosed
pandemic relief incentive program;
- a charge of approximately $2.6
million, or $0.05 per diluted share, due to the impairment of
certain assets associated with Landstar’s Mexico operation relating
to a decrease of business within Mexico; and
- approximately $2.3 million, or
$0.05 per diluted share, due to higher third party insurance
company premiums incurred in May and June for commercial trucking
liability coverage following the Company’s May 1st annual insurance
renewal. The higher premiums incurred in the 2020 second
quarter reflected a pro rata portion of an annual increase of $14.0
million in the fixed component of the Company’s insurance and
claims expense for the period from May 1, 2020 to April 30, 2021,
in connection with severe tightening of capacity in insurance
markets offering coverage to the truck transportation
industry.
Landstar reported diluted earnings per share of
$1.53 on revenue of $1.045 billion in the 2019 second quarter.
Gross profit (defined as revenue less the cost of purchased
transportation and commissions to agents) was $113.1 million in the
2020 second quarter, inclusive of the impact of the special
pandemic relief payments made to the Company’s BCOs and agents in
April and May of 2020. Gross profit was $158.0 million in the 2019
second quarter.
Truck transportation revenue hauled by
independent business capacity owners (“BCOs”) and truck brokerage
carriers in the 2020 second quarter was $753.3 million, or 91
percent of revenue, compared to $968.2 million, or 93 percent of
revenue, in the 2019 second quarter. Truckload transportation
revenue hauled via van equipment in the 2020 second quarter was
$483.0 million compared to $605.4 million in the 2019 second
quarter. Truckload transportation revenue hauled via
unsided/platform equipment in the 2020 second quarter was $247.4
million compared to $338.1 million in the 2019 second quarter.
Revenue hauled by rail, air and ocean cargo carriers was $53.8
million, or 7 percent of revenue, in the 2020 second quarter
compared to $56.8 million, or 5 percent of revenue, in the 2019
second quarter.
During the 2020 second quarter, Landstar
generated $99.2 million in operating cash flow and paid $7.1
million in dividends. Landstar did not purchase any shares of its
common stock during the 2020 second 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 June 27, 2020, the Company had $282 million in cash
and short term investments with undrawn revolver capacity under our
senior credit facility of $216 million (with the ability to
increase to $366 million with the accordion feature included in our
senior credit facility). Landstar also announced today that its
Board of Directors has declared a quarterly dividend of $0.21 per
share payable on August 28, 2020, to stockholders of record as of
the close of business on August 10, 2020. This quarterly dividend
includes a $0.025 per share increase, or 13.5 percent, over the
amount of the Company’s regular quarterly dividend declared
following each of the prior four quarters. The $0.025 per share
increase is the largest increase in the Company’s regularly
scheduled quarterly dividend in the Company’s history. It is
currently the intention of the Board to pay dividends on a
quarterly basis going forward.
“Overall, the resiliency of Landstar’s variable
cost business model performed as expected given the unprecedented
economic decline caused by the coronavirus (COVID-19) pandemic,”
said Landstar’s President and Chief Executive Officer, Jim Gattoni.
“We entered the 2020 second quarter knowing we would face a very
soft freight demand environment as a result of actions taken by
governmental authorities and businesses to reduce the spread of
COVID-19. As anticipated, demand for freight services slowed
significantly and capacity became readily available during the
Company’s 2020 second quarter, especially in the spot market where
the Company primarily operates. The number of loads and revenue per
load on loads hauled via truck in the 2020 second quarter decreased
16 percent and 7 percent, respectively, from the 2019 second
quarter. The number of loads hauled via truck was below the prior
year comparable period by 21 percent, 21 percent and 9 percent for
April, May and June, respectively. Revenue per load on loads hauled
via truck was below the prior year comparable period by 6 percent,
9 percent and 6 percent in April, May and June, respectively.”
Gattoni further commented, “The 2020 second
quarter presented operating conditions and challenges unlike any
other quarter in Landstar’s history. Nevertheless, Landstar did not
take any drastic cost reduction measures that could have disrupted
our ability to service Landstar’s customers, agents, BCOs or other
third party capacity providers or slow the progress on our
technology initiatives. Also, as previously disclosed, Landstar
instituted a pandemic relief incentive program as of the beginning
of April for BCOs and agents. Under the program, Landstar paid
an extra $50 to each of the BCO hauling the load and
the Landstar agent dispatching the load for each load
delivered by a BCO with a confirmed delivery date in April. The
pandemic relief program was subsequently extended through the month
of May. The Company’s 2020 second quarter results included a total
of approximately $12.6 million of these pandemic relief incentive
payments to BCOs and agents. Revenue decreased 21 percent and gross
profit decreased 28 percent in the Company’s 2020 second quarter
compared to the 2019 second quarter. Exclusive of the impact of the
pandemic relief program, gross profit decreased 20 percent in the
2020 second quarter compared to the prior year period.”
Gattoni continued, “Although the ultimate impact
that the coronavirus pandemic will have on the freight
transportation industry continues to be unpredictable, we
believe Landstar remains in a solid operational and
financial position as we enter the third quarter. Through the first
few weeks of July, the number of loads and revenue per load on
loads hauled via truck have moved beyond the peak declines of April
and May. Both the number of loads and revenue per load on loads
hauled via truck in the first few weeks of July were below the
corresponding period of 2019 in mid single-digit percentage ranges.
Assuming current demand conditions persist, I expect the number of
loads hauled via truck in the 2020 third quarter to be below the
number of loads hauled by truck in the 2019 third quarter in a mid
single-digit percentage range. My expectation is that pricing
conditions for truck services in the 2020 third quarter will be
slightly improved as compared to the 2020 second quarter with
little change in the level of truck capacity available in the
marketplace. Assuming those capacity market conditions continue
throughout the rest of the third quarter, I expect 2020 third
quarter truck revenue per load to be lower than the 2019 third
quarter in a mid single-digit percentage range. Based on those
expectations, I would anticipate revenue for the 2020 third quarter
to be in a range of $885 million to $935 million. Assuming that
range of estimated revenue and insurance and claims expense at 4.8
percent of BCO revenue (which reflects the significant increase in
insurance premiums previously described), I would anticipate 2020
third quarter diluted earnings per share to be in a range of $1.11
to $1.17 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 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty Six Weeks Ended |
|
Thirteen Weeks Ended |
|
June 27, |
|
June 29, |
|
June 27, |
|
June 29, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Revenue |
$ |
1,751,080 |
|
$ |
2,078,040 |
|
|
$ |
823,514 |
|
$ |
1,045,040 |
Investment income |
|
2,002 |
|
|
2,421 |
|
|
|
835 |
|
|
1,283 |
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
Purchased transportation |
|
1,344,390 |
|
|
1,591,126 |
|
|
|
635,133 |
|
|
799,371 |
Commissions to agents |
|
150,642 |
|
|
173,294 |
|
|
|
75,266 |
|
|
87,623 |
Other operating costs, net of gains on asset
sales/dispositions |
|
15,674 |
|
|
18,100 |
|
|
|
7,368 |
|
|
9,861 |
Insurance and claims |
|
44,708 |
|
|
31,279 |
|
|
|
19,751 |
|
|
16,286 |
Selling, general and administrative |
|
85,928 |
|
|
82,565 |
|
|
|
40,601 |
|
|
41,297 |
Depreciation and amortization |
|
22,972 |
|
|
22,350 |
|
|
|
11,467 |
|
|
11,034 |
Impairment of intangible and other assets |
|
2,582 |
|
|
- |
|
|
|
2,582 |
|
|
- |
|
|
|
|
|
|
|
|
Total costs and expenses |
|
1,666,896 |
|
|
1,918,714 |
|
|
|
792,168 |
|
|
965,472 |
|
|
|
|
|
|
|
|
Operating income |
|
86,186 |
|
|
161,747 |
|
|
|
32,181 |
|
|
80,851 |
Interest and debt expense |
|
1,928 |
|
|
1,514 |
|
|
|
976 |
|
|
709 |
|
|
|
|
|
|
|
|
Income before income taxes |
|
84,258 |
|
|
160,233 |
|
|
|
31,205 |
|
|
80,142 |
Income taxes |
|
19,109 |
|
|
35,833 |
|
|
|
6,951 |
|
|
19,042 |
|
|
|
|
|
|
|
|
Net income |
|
65,149 |
|
|
124,400 |
|
|
|
24,254 |
|
|
61,100 |
Less: Net
loss attributable to noncontrolling interest |
|
- |
|
|
(17 |
) |
|
|
- |
|
|
- |
Net income attributable to Landstar System,Inc. and subsidiary |
$ |
65,149 |
|
$ |
124,417 |
|
|
$ |
24,254 |
|
$ |
61,100 |
|
|
|
|
|
|
|
|
Earnings per
common share attributable to Landstar System, Inc. and
subsidiary |
$ |
1.68 |
|
$ |
3.11 |
|
|
$ |
0.63 |
|
$ |
1.53 |
|
|
|
|
|
|
|
|
Diluted
earnings per share attributable to Landstar System, Inc. and
subsidiary |
$ |
1.68 |
|
$ |
3.11 |
|
|
$ |
0.63 |
|
$ |
1.53 |
|
|
|
|
|
|
|
|
Average
number of shares outstanding: |
|
|
|
|
|
|
|
Earnings per common share |
|
38,816,000 |
|
|
40,053,000 |
|
|
|
38,379,000 |
|
|
39,945,000 |
Diluted earnings per share |
|
38,816,000 |
|
|
40,053,000 |
|
|
|
38,379,000 |
|
|
39,945,000 |
|
|
|
|
|
|
|
|
Dividends per common share |
$ |
0.370 |
|
$ |
0.330 |
|
|
$ |
0.185 |
|
$ |
0.165 |
|
|
|
|
|
|
|
|
Landstar
System, Inc. and Subsidiary |
Consolidated
Balance Sheets |
(Dollars in
thousands, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
June 27, |
|
December 28, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
245,471 |
|
|
$ |
319,515 |
|
Short-term investments |
|
36,274 |
|
|
|
32,901 |
|
Trade accounts receivable, less allowance of $8,580 and $7,284 |
|
489,182 |
|
|
|
588,549 |
|
Other receivables, including advances to independent contractors,
less allowance of $9,241 and $7,667 |
|
27,861 |
|
|
|
35,553 |
|
Other current assets |
|
41,564 |
|
|
|
21,370 |
|
Total current assets |
|
840,352 |
|
|
|
997,888 |
|
|
|
|
|
Operating property, less accumulated depreciation and amortization
of $288,055 and $280,849 |
|
284,794 |
|
|
|
285,855 |
|
Goodwill |
|
40,071 |
|
|
|
38,508 |
|
Other assets |
|
106,893 |
|
|
|
105,460 |
|
Total assets |
$ |
1,272,110 |
|
|
$ |
1,427,711 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Current liabilities: |
|
|
|
Cash overdraft |
$ |
35,534 |
|
|
$ |
53,878 |
|
Accounts payable |
|
273,324 |
|
|
|
271,996 |
|
Current maturities of long-term debt |
|
38,219 |
|
|
|
42,632 |
|
Insurance claims |
|
53,764 |
|
|
|
44,532 |
|
Dividends payable |
|
- |
|
|
|
78,947 |
|
Contractor escrow |
|
25,774 |
|
|
|
24,902 |
|
Other current liabilities |
|
46,845 |
|
|
|
36,017 |
|
Total current liabilities |
|
473,460 |
|
|
|
552,904 |
|
|
|
|
|
Long-term debt, excluding current maturities |
|
60,152 |
|
|
|
70,212 |
|
Insurance claims |
|
34,762 |
|
|
|
33,575 |
|
Deferred income taxes and other non-current liabilities |
|
54,615 |
|
|
|
49,551 |
|
|
|
|
|
Shareholders' equity: |
|
|
|
Common stock, $0.01 par value, authorized 160,000,000 shares,
issued 68,176,787 and 68,083,419 shares |
|
682 |
|
|
|
681 |
|
Additional paid-in capital |
|
225,332 |
|
|
|
226,123 |
|
Retained earnings |
|
2,012,173 |
|
|
|
1,962,161 |
|
Cost of 29,797,328 and 28,609,926 shares of common stock in
treasury |
|
(1,581,921 |
) |
|
|
(1,465,284 |
) |
Accumulated other comprehensive loss |
|
(7,145 |
) |
|
|
(2,212 |
) |
Total shareholders' equity |
|
649,121 |
|
|
|
721,469 |
|
Total liabilities and shareholders' equity |
$ |
1,272,110 |
|
|
$ |
1,427,711 |
|
|
|
|
|
Landstar
System, Inc. and Subsidiary |
Supplemental
Information |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Twenty Six Weeks Ended |
|
Thirteen Weeks Ended |
|
June 27, |
|
June 29, |
|
June 27, |
|
June 29, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue generated through (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Truck transportation |
|
|
|
|
|
|
|
Truckload: |
|
|
|
|
|
|
|
Van equipment |
$ |
1,028,334 |
|
|
$ |
1,224,379 |
|
|
$ |
483,027 |
|
|
$ |
605,365 |
|
Unsided/platform equipment |
|
533,716 |
|
|
|
648,828 |
|
|
|
247,388 |
|
|
|
338,107 |
|
Less-than-truckload |
|
45,859 |
|
|
|
48,108 |
|
|
|
22,918 |
|
|
|
24,732 |
|
Total truck transportation |
|
1,607,909 |
|
|
|
1,921,315 |
|
|
|
753,333 |
|
|
|
968,204 |
|
Rail intermodal |
|
51,315 |
|
|
|
58,585 |
|
|
|
23,186 |
|
|
|
28,570 |
|
Ocean and air cargo carriers |
|
57,250 |
|
|
|
58,893 |
|
|
|
30,663 |
|
|
|
28,224 |
|
Other (1) |
|
34,606 |
|
|
|
39,247 |
|
|
|
16,332 |
|
|
|
20,042 |
|
|
$ |
1,751,080 |
|
|
$ |
2,078,040 |
|
|
$ |
823,514 |
|
|
$ |
1,045,040 |
|
|
|
|
|
|
|
|
|
Revenue on loads hauled via BCO Independent
Contractors(2) included in total truck transportation |
$ |
809,779 |
|
|
$ |
923,928 |
|
|
$ |
378,500 |
|
|
$ |
474,620 |
|
|
|
|
|
|
|
|
|
Number of loads: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Truck transportation |
|
|
|
|
|
|
|
Truckload: |
|
|
|
|
|
|
|
Van equipment |
|
600,519 |
|
|
|
686,901 |
|
|
|
285,174 |
|
|
|
345,080 |
|
Unsided/platform equipment |
|
231,122 |
|
|
|
260,920 |
|
|
|
110,533 |
|
|
|
135,750 |
|
Less-than-truckload |
|
78,079 |
|
|
|
74,549 |
|
|
|
39,723 |
|
|
|
39,240 |
|
Total truck transportation |
|
909,720 |
|
|
|
1,022,370 |
|
|
|
435,430 |
|
|
|
520,070 |
|
Rail intermodal |
|
21,510 |
|
|
|
23,880 |
|
|
|
9,970 |
|
|
|
11,420 |
|
Ocean and air cargo carriers |
|
14,430 |
|
|
|
14,810 |
|
|
|
7,360 |
|
|
|
7,300 |
|
|
|
945,660 |
|
|
|
1,061,060 |
|
|
|
452,760 |
|
|
|
538,790 |
|
|
|
|
|
|
|
|
|
Loads hauled via BCO Independent Contractors(2) included in
total truck transportation |
|
443,830 |
|
|
|
483,660 |
|
|
|
210,430 |
|
|
|
248,810 |
|
|
|
|
|
|
|
|
|
Revenue per load: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Truck transportation |
|
|
|
|
|
|
|
Truckload: |
|
|
|
|
|
|
|
Van equipment |
$ |
1,712 |
|
|
$ |
1,782 |
|
|
$ |
1,694 |
|
|
$ |
1,754 |
|
Unsided/platform equipment |
|
2,309 |
|
|
|
2,487 |
|
|
|
2,238 |
|
|
|
2,491 |
|
Less-than-truckload |
|
587 |
|
|
|
645 |
|
|
|
577 |
|
|
|
630 |
|
Total truck transportation |
|
1,767 |
|
|
|
1,879 |
|
|
|
1,730 |
|
|
|
1,862 |
|
Rail intermodal |
|
2,386 |
|
|
|
2,453 |
|
|
|
2,326 |
|
|
|
2,502 |
|
Ocean and air cargo carriers |
|
3,967 |
|
|
|
3,977 |
|
|
|
4,166 |
|
|
|
3,866 |
|
|
|
|
|
|
|
|
|
Revenue per load on loads hauled via BCO Independent
Contractors(2) |
$ |
1,825 |
|
|
$ |
1,910 |
|
|
$ |
1,799 |
|
|
$ |
1,908 |
|
|
|
|
|
|
|
|
|
Revenue by capacity type (as a % of total revenue); |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Truck capacity providers: |
|
|
|
|
|
|
|
BCO Independent Contractors(2) |
|
46 |
% |
|
|
44 |
% |
|
|
46 |
% |
|
|
45 |
% |
Truck Brokerage Carriers |
|
46 |
% |
|
|
48 |
% |
|
|
46 |
% |
|
|
47 |
% |
Rail intermodal |
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
Ocean and air cargo carriers |
|
3 |
% |
|
|
3 |
% |
|
|
4 |
% |
|
|
3 |
% |
Other |
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, |
|
June 29, |
|
|
|
|
|
2020 |
|
2019 |
Truck Capacity Providers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BCO Independent Contractors(2) |
|
|
|
|
|
9,632 |
|
|
|
9,879 |
|
Truck Brokerage Carriers: |
|
|
|
|
|
|
|
Approved and active (3) |
|
|
|
|
|
37,600 |
|
|
|
40,097 |
|
Other approved |
|
|
|
|
|
16,365 |
|
|
|
17,790 |
|
|
|
|
|
|
|
53,965 |
|
|
|
57,887 |
|
Total available truck capacity providers |
|
|
|
|
|
63,597 |
|
|
|
67,766 |
|
|
|
|
|
|
|
|
|
Trucks provided by BCO Independent Contractors(2) |
|
|
|
10,299 |
|
|
|
10,587 |
|
|
|
|
|
|
|
|
|
(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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