GlobeNewswire Inc | Oct 21, 2020 04:15PM EDT

October 21, 2020

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 Companys 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 Companys common stock under Landstars 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 Companys senior credit facility, with the ability to increase that amount of borrowings to $366 million using the facilitys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys website at www.landstar.com; click on Investor Relations and Webcasts, then click on Landstars 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 Landstars 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 Companys 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 Landstars 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 SubsidiaryConsolidated 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 $ 1,011,658Investment 2,716 3,736 714 1,315income Costs and expenses: Purchased 2,183,143 2,365,646 838,753 774,520 transportation Commissions to 236,490 257,862 85,848 84,568 agents Other operating costs, net of 23,035 28,531 7,361 10,431 gains/losses on asset sales /dispositions Insurance 66,563 55,248 21,855 23,969 and claims Selling, general and 124,779 120,717 38,851 38,152 administrative Depreciation and 34,212 33,045 11,240 10,695 amortization Impairment of intangible and 2,582 - - - other assets Total costs and 2,670,804 2,861,049 1,003,908 942,335 expenses Operating 168,538 232,385 82,352 70,638incomeInterest and 2,936 2,278 1,008 764debt expense Income before 165,602 230,107 81,344 69,874income taxesIncome 38,567 52,452 19,458 16,619taxes Net 127,035 177,655 61,886 53,255incomeLess: Net lossattributable to - (17 ) - -noncontrollinginterestNet incomeattributable to Landstar System, Inc. and $ 127,035 $ 177,672 $ 61,886 $ 53,255 subsidiary Earnings percommon share attributable to Landstar System, Inc. $ 3.28 $ 4.45 $ 1.61 $ 1.35 and subsidiary Diluted earningsper share attributable to Landstar System, Inc. $ 3.28 $ 4.45 $ 1.61 $ 1.35 and subsidiary Average number ofshares outstanding: Earnings per 38,673,000 39,891,000 38,386,000 39,566,000 common share Diluted earnings per 38,673,000 39,891,000 38,386,000 39,566,000 share Dividends per $ 0.580 $ 0.515 $ 0.210 $ 0.185common share



Landstar System, Inc. and SubsidiaryConsolidated Balance Sheets(Dollars in thousands, except per share amounts)(Unaudited) September 26, December 28, 2020 2019ASSETS 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 40,550 35,553 $8,827 and $7,667 Other current assets 27,989 21,370 Total current assets 964,069 997,888 Operating property, less accumulated depreciation and amortization of $291,159 279,495 285,855 and $280,849Goodwill 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 34,723 42,632 long-term debt 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 52,570 70,212 maturitiesInsurance claims 36,344 33,575 Deferred income taxes and other 54,107 49,551 non-current liabilities Shareholders' equity: Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,181,418 and 682 681 68,083,419 shares 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 (5,964 ) (2,212 ) comprehensive loss Total shareholders' equity 705,634 721,469 Total liabilities and $ 1,392,205 $ 1,427,711 shareholders' equity

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