LANDSTAR SYSTEM, INC. JACKSONVILLE, Fla., July 20, 2016 /PRNewswire/ -- Landstar System, Inc. (NASDAQ: LSTR) reported second quarter diluted earnings per share of $0.76 on revenue of $775 million in the 2016 second quarter. Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims, in the 2016 second quarter, the highest quarterly insurance and claims cost over the past 6 years. Landstar reported diluted earnings per share of $0.92 on revenue of $868 million in the 2015 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.0 million in the 2016 second quarter compared to $130.8 million in the 2015 second quarter. Operating margin, representing operating income divided by gross profit, was 43.9 percent in the 2016 second quarter.
Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2016 second quarter was $718.5 million, or 93 percent of revenue, compared to $809.2 million, or 93 percent of revenue, in the 2015 second quarter. Truckload transportation revenue hauled via van equipment in the 2016 second quarter was $458.0 million compared to $496.9 million in the 2015 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 second quarter was $242.0 million compared to $291.0 million in the 2015 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $45.1 million, or 6 percent of revenue, in the 2016 second quarter compared to $48.1 million, or 6 percent of revenue, in the 2015 second quarter.
Trailing twelve-month return on average shareholders' equity was 29 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 23 percent. Landstar purchased approximately 423,000 shares of its common stock during the first half of 2016 at an aggregate cost of $26.5 million. Currently, there are approximately 1,386,000 shares of the Company's common stock available for purchase under Landstar's authorized share purchase program. As of June 25, 2016, the Company had $215 million in cash and short term investments and $214 million available for borrowings under the Company's senior credit facility.
In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.09 per share payable on August 26, 2016, to stockholders of record as of the close of business on August 8, 2016. This quarterly dividend includes a 12.5 percent increase to the amount of the Company's quarterly dividend declared following each of the prior four quarters. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.
Commenting on Landstar's 2016 second quarter, Landstar's President and CEO Jim Gattoni said, "On April 20(th), we provided second quarter revenue guidance of $770 million to $820 million and second quarter diluted earnings per share guidance of $0.80 to $0.85. On June 8(th), I updated both our revenue and diluted earnings per share guidance by indicating at a webcast investor conference available to the public that I was more comfortable at the lower end of both the revenue and diluted earnings per share guidance. Revenue of $775 million for the second quarter was in-line with our updated guidance. Diluted earnings per share of $0.76 for the second quarter was below the low end of the updated guidance due to an increase in estimated insurance and claims costs, as a result of a severe accident that occurred at the end of the second quarter."
Gattoni continued, "Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment. During the 2015 second quarter, we hauled over 13,000 truckloads via unsided/platform equipment for a project on behalf of a customer in the automotive sector, generating $27 million of revenue in the 2015 second quarter. Excluding the loadings related to that project we experienced a slight increase in loads hauled via truck over the 2015 second quarter. However, Landstar's truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft. Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the Company operates much of its business. Additionally, the average cost of a gallon of diesel fuel was approximately 20 percent lower during the 2016 second quarter compared to the 2015 second quarter putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers. As such, revenue per load on loads hauled via truck was 9 percent lower in the 2016 second quarter compared to the 2015 second quarter."
Gattoni further commented, "The number of loads hauled via truck in the 2016 second quarter decreased 2 percent from the 2015 second quarter, driven by a 9 percent decrease in the number of loads hauled via unsided/platform equipment, entirely due to the 2015 automotive sector project, partially offset by a 1 percent increase in the number of loads hauled via van equipment. Landstar achieved an 11 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 second quarter over the 2015 second quarter. The softer pricing environment and increased insurance and claims expense drove the 2016 second quarter operating margin down to 43.9 percent, from 50.5 percent in the 2015 second quarter."
Gattoni continued, "Third quarter 2016 over third quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company's 2015 third quarter included approximately $35 million in revenue from approximately 20,000 loads hauled via truck related to that project. The project was completed at the end of 2015. Historically, revenue in the Company's third fiscal quarter has been relatively consistent with revenue generated in the Company's second fiscal quarter. Revenue per load on loads hauled via truck in the Company's third quarter has been slightly ahead of the second quarter while the number of loads hauled via truck in the third quarter is typically slightly below the second quarter. Through the first few weeks of July, we have experienced the normal seasonal uptick in revenue per load on loads hauled via truck. Also, the number of loads hauled via truck during the first few weeks of July is trending with the historical second quarter to third quarter pattern. As such, I expect 2016 third quarter revenue to be similar to the Company's 2016 second quarter revenue. Assuming insurance and claims costs in the 2016 third quarter are approximately 3.2 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past 5 years, I would expect diluted earnings per share to be in a range of $0.79 to $0.84 in the 2016 third quarter."
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 2016 Earnings Release Conference Call."
This earnings announcement, as well as an accompanying slide presentation, is available through the Company's website at http://investor.landstar.com under "Presentations" and on a Form 8-K filed with the Securities and Exchange Commission.
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; substantial industry competition; disruptions or failures in the Company's computer systems; cyber incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; 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 2015 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 logistics services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2013 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.
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(Tables follow)
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 25, June 27, June 25, June 27,
2016 2015 2016 2015
---- ---- ---- ----
Revenue $1,486,867 $1,630,763 $775,223 $868,383
Investment income 743 693 363 339
Costs and expenses:
Purchased
transportation 1,129,743 1,254,730 589,415 667,577
Commissions to
agents 123,931 129,816 64,839 70,032
Other operating
costs, net of
gains on asset
sales/
dispositions 13,992 15,670 6,585 7,981
Insurance and
claims 30,307 27,108 16,094 12,312
Selling, general
and
administrative 71,519 74,986 36,905 37,738
Depreciation and
amortization 17,093 14,068 8,655 7,049
Total costs
and
expenses 1,386,585 1,516,378 722,493 802,689
--------- --------- ------- -------
Operating income 101,025 115,078 53,093 66,033
Interest and debt expense 1,777 1,494 888 713
----- ----- --- ---
Income before income taxes 99,248 113,584 52,205 65,320
Income taxes 37,750 43,098 19,891 24,849
------ ------ ------ ------
Net income $61,498 $70,486 $32,314 $40,471
======= ======= ======= =======
Earnings per common share $1.45 $1.59 $0.77 $0.92
===== ===== ===== =====
Diluted earnings per share $1.45 $1.59 $0.76 $0.92
===== ===== ===== =====
Average number of shares outstanding:
Earnings per
common share 42,315,000 44,240,000 42,235,000 43,892,000
Diluted earnings
per share 42,424,000 44,397,000 42,357,000 44,033,000
Dividends per common share $0.16 $0.14 $0.08 $0.07
===== ===== ===== =====
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
June 25, December 26,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash
equivalents $153,370 $114,520
Short-term
investments 61,528 48,823
Trade accounts
receivable, less
allowance
of $5,092 and
$4,327 402,362 462,699
Other receivables,
including advances to
independent
contractors, less
allowance of $4,755
and $4,143 18,584 18,472
Other current
assets 20,608 11,604
Total current
assets 656,452 656,118
------- -------
Operating property, less accumulated depreciation
and
amortization
of $187,774
and $182,591 236,177 225,927
Goodwill 31,134 31,134
Other assets 60,994 78,339
Total assets $984,757 $991,518
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash
overdraft $30,355 $35,609
Accounts payable 191,247 223,709
Current maturities
of long-term debt 42,209 42,499
Insurance claims 26,135 19,757
Other current
liabilities 44,642 47,963
Total current
liabilities 334,588 369,537
------- -------
Long-term debt, excluding current maturities 76,724 81,793
Insurance claims 23,042 21,477
Deferred income taxes and other non-current
liabilities 53,148 52,474
Shareholders' equity:
Common stock, $0.01 par
value, authorized
160,000,000
shares, issued
67,504,785 and
67,391,616 shares 675 674
Additional paid-
in capital 197,503 195,841
Retained earnings 1,444,691 1,389,975
Cost of 25,397,002 and
24,972,079 shares of
common
stock in
treasury (1,143,360) (1,116,765)
Accumulated other
comprehensive loss (2,254) (3,488)
Total
shareholders'
equity 497,255 466,237
------- -------
Total liabilities and shareholders' equity $984,757 $991,518
======== ========
Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
Twenty Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
June 25, June 27, June 25, June 27,
2016 2015 2016 2015
---- ---- ---- ----
Revenue generated through (in thousands):
-----------------------------------------
Truck transportation
Truckload:
Van equipment $886,195 $946,598 $458,002 $496,910
Unsided/platform equipment 451,430 530,515 242,008 291,032
Less-than-truckload 35,927 40,956 18,450 21,258
------ ------ ------ ------
Total truck transportation 1,373,552 1,518,069 718,460 809,200
Rail intermodal 52,337 49,522 26,229 26,341
Ocean and air cargo
carriers 37,710 41,410 18,902 21,778
Other (1) 23,268 21,762 11,632 11,064
$1,486,867 $1,630,763 $775,223 $868,383
========== ========== ======== ========
Revenue on loads hauled
via BCO Independent
Contractors (2)
included in total
truck
transportation $707,652 $752,030 $373,374 $401,705
Number of loads:
----------------
Truck transportation
Truckload:
Van equipment 556,119 544,714 287,079 285,762
Unsided/platform equipment 219,034 229,452 116,292 127,286
Less-than-truckload 55,727 54,904 28,829 28,912
------ ------ ------ ------
Total truck transportation 830,880 829,070 432,200 441,960
Rail intermodal 24,180 20,680 12,150 11,200
Ocean and air cargo
carriers 9,780 8,620 5,220 4,490
864,840 858,370 449,570 457,650
======= ======= ======= =======
Loads hauled via BCO
Independent Contractors
(2)
included in total
truck
transportation 414,660 406,230 216,990 214,930
Revenue per load:
-----------------
Truck transportation
Truckload:
Van equipment $1,594 $1,738 $1,595 $1,739
Unsided/platform equipment 2,061 2,312 2,081 2,286
Less-than-truckload 645 746 640 735
Total truck transportation 1,653 1,831 1,662 1,831
Rail intermodal 2,164 2,395 2,159 2,352
Ocean and air cargo
carriers 3,856 4,804 3,621 4,850
Revenue per load on
loads hauled via BCO
Independent Contractors
(2) $1,707 $1,851 $1,721 $1,869
Revenue by capacity type (as a % of total revenue);
---------------------------------------------------
Truck capacity
providers:
BCO Independent
Contractors (2) 48% 46% 48% 46%
Truck Brokerage
Carriers 45% 47% 45% 47%
Rail intermodal 4% 3% 3% 3%
Ocean and air cargo
carriers 3% 3% 2% 3%
Other 2% 1% 2% 1%
June 25, June 27,
2016 2015
---- ----
Truck Capacity Providers
------------------------
BCO Independent
Contractors (2) 8,856 8,726
Truck Brokerage
Carriers:
Approved and active (3) 30,137 28,387
Other approved 15,594 13,126
45,731 41,513
------ ------
Total available truck
capacity providers 54,587 50,239
Trucks provided by BCO
Independent Contractors
(2) 9,462 9,308
(1) Includes primarily premium revenue generated by the insurance segment.
(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 have moved at least one load in the 180 days immediately preceeding the fiscal quarter end.
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SOURCE Landstar System, Inc.
