GlobeNewswire Inc | Jul 22, 2020 04:15PM EDT

July 22, 2020

JACKSONVILLE, Fla., July 22, 2020 (GLOBE NEWSWIRE) -- 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 Companys 2020 second quarter financial results were:

-- approximately $12.6 million, or $0.25 per diluted share, in payments made to the Companys BCOs and agents in April and May under the Companys 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 Landstars 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 Companys 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 Companys 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 Companys 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 Companys common stock under Landstars 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 Companys regular quarterly dividend declared following each of the prior four quarters. The $0.025 per share increase is the largest increase in the Companys regularly scheduled quarterly dividend in the Companys history. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Overall, the resiliency of Landstars variable cost business model performed as expected given the unprecedented economic decline caused by the coronavirus (COVID-19) pandemic, said Landstars 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 Companys 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 Landstars history. Nevertheless, Landstar did not take any drastic cost reduction measures that could have disrupted our ability to service Landstars 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, Landstarpaid an extra$50to each of the BCO hauling the load and theLandstaragent 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 Companys 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 Companys 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 believeLandstarremains 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 Companys website at www.landstar.com; click on Investor Relations and Webcasts, then click on Landstars 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 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) 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 $ 1,045,040Investment 2,002 2,421 835 1,283income Costs and expenses:Purchased 1,344,390 1,591,126 635,133 799,371transportationCommissions to 150,642 173,294 75,266 87,623agentsOtheroperatingcosts, net of 15,674 18,100 7,368 9,861gains on assetsales/dispositionsInsurance and 44,708 31,279 19,751 16,286claimsSelling,general and 85,928 82,565 40,601 41,297administrativeDepreciationand 22,972 22,350 11,467 11,034amortizationImpairment ofintangible and 2,582 - 2,582 -other assets Total costs 1,666,896 1,918,714 792,168 965,472and expenses Operating 86,186 161,747 32,181 80,851incomeInterest and 1,928 1,514 976 709debt expense Income before 84,258 160,233 31,205 80,142income taxesIncome taxes 19,109 35,833 6,951 19,042 Net income 65,149 124,400 24,254 61,100Less: Net lossattributableto - (17 ) - -noncontrollinginterestNet incomeattributableto Landstar $ 65,149 $ 124,417 $ 24,254 $ 61,100System,Inc.and subsidiary Earnings percommon shareattributable $ 1.68 $ 3.11 $ 0.63 $ 1.53to LandstarSystem, Inc.and subsidiary Dilutedearnings pershareattributable $ 1.68 $ 3.11 $ 0.63 $ 1.53to LandstarSystem, Inc.and subsidiary Average numberof shares outstanding:Earnings per 38,816,000 40,053,000 38,379,000 39,945,000common shareDilutedearnings per 38,816,000 40,053,000 38,379,000 39,945,000share Dividends per $ 0.370 $ 0.330 $ 0.185 $ 0.165common share



Landstar System, Inc. and SubsidiaryConsolidated Balance Sheets(Dollars in thousands, except per share amounts)(Unaudited) June 27, December 28, 2020 2019ASSETS Current assets: Cash and cash equivalents $ 245,471 $ 319,515 Short-term investments 36,274 32,901 Trade accounts receivable, less allowance 489,182 588,549 of $8,580 and $7,284Other receivables, including advances toindependent contractors, less allowance of 27,861 35,553 $9,241 and $7,667Other current assets 41,564 21,370 Total current assets 840,352 997,888 Operating property, less accumulateddepreciation and amortization of $288,055 284,794 285,855 and $280,849Goodwill 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 60,152 70,212 maturitiesInsurance claims 34,762 33,575 Deferred income taxes and other 54,615 49,551 non-current liabilities Shareholders' equity: Common stock, $0.01 par value, authorized160,000,000 shares, issued 68,176,787 and 682 681 68,083,419 sharesAdditional 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 (1,581,921 ) (1,465,284 )of common stock in treasury 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 SubsidiarySupplemental Information(Unaudited) Twenty Six Weeks Ended Thirteen Weeks Ended June 27, June 29, June 27, June 29, 2020 2019 2020 2019Revenue generatedthrough (in thousands): Truck transportationTruckload: Van equipment $ 1,028,334 $ 1,224,379 $ 483,027 $ 605,365 Unsided/platform 533,716 648,828 247,388 338,107 equipmentLess-than-truckload 45,859 48,108 22,918 24,732 Total truck 1,607,909 1,921,315 753,333 968,204 transportationRail intermodal 51,315 58,585 23,186 28,570 Ocean and air cargo 57,250 58,893 30,663 28,224 carriersOther ^(1) 34,606 39,247 16,332 20,042 $ 1,751,080 $ 2,078,040 $ 823,514 $ 1,045,040 Revenue on loadshauled via BCOIndependentContractors^(2) $ 809,779 $ 923,928 $ 378,500 $ 474,620 included in totaltrucktransportation Number of loads: Truck transportationTruckload: Van equipment 600,519 686,901 285,174 345,080 Unsided/platform 231,122 260,920 110,533 135,750 equipmentLess-than-truckload 78,079 74,549 39,723 39,240 Total truck 909,720 1,022,370 435,430 520,070 transportationRail intermodal 21,510 23,880 9,970 11,420 Ocean and air cargo 14,430 14,810 7,360 7,300 carriers 945,660 1,061,060 452,760 538,790 Loads hauled viaBCO IndependentContractors^(2) 443,830 483,660 210,430 248,810 included in totaltrucktransportation Revenue per load: Truck transportationTruckload: Van equipment $ 1,712 $ 1,782 $ 1,694 $ 1,754 Unsided/platform 2,309 2,487 2,238 2,491 equipmentLess-than-truckload 587 645 577 630 Total truck 1,767 1,879 1,730 1,862 transportationRail intermodal 2,386 2,453 2,326 2,502 Ocean and air cargo 3,967 3,977 4,166 3,866 carriers Revenue per load onloads hauled via $ 1,825 $ 1,910 $ 1,799 $ 1,908 BCO IndependentContractors^(2) Revenue by capacity type (as a % of total revenue); Truck capacity providers:BCO Independent 46 % 44 % 46 % 45 %Contractors^(2)Truck Brokerage 46 % 48 % 46 % 47 %CarriersRail intermodal 3 % 3 % 3 % 3 %Ocean and air cargo 3 % 3 % 4 % 3 %carriersOther 2 % 2 % 2 % 2 % June 27, June 29, 2020 2019Truck Capacity Providers BCO Independent 9,632 9,879 Contractors^(2)Truck Brokerage Carriers:Approved and active 37,600 40,097 ^(3)Other approved 16,365 17,790 53,965 57,887 Total availabletruck capacity 63,597 67,766 providers Trucks provided by BCO Independent 10,299 10,587 Contractors^(2) (1) Includes primarily reinsurance premium revenue generated by the insurancesegment and intra-Mexico transportation services revenue generated by LandstarMetro. (2) BCO Independent Contractors are independent contractors who provide truckcapacity to the Company under exclusive lease arrangements. (3) Active refers to Truck Brokerage Carriers who moved at least one load inthe 180 days immediately preceding the fiscal quarter end.

Contact: Kevin StoutLandstar System, Inc.www.landstar.com904-398-9400