LANDSTAR SYSTEM, INC. JACKSONVILLE, Fla., Oct. 19, 2016 /PRNewswire/ -- Landstar System, Inc. (NASDAQ: LSTR) reported third quarter diluted earnings per share of $0.86 on revenue of $788 million in the 2016 third quarter. Landstar reported diluted earnings per share of $0.90 on revenue of $842 million in the 2015 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.8 million in the 2016 third quarter compared to $126.8 million in the 2015 third quarter. Operating margin, representing operating income divided by gross profit, was 48.0 percent in the 2016 third quarter.
Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2016 third quarter was $732.9 million, or 93 percent of revenue, compared to $779.8 million, or 93 percent of revenue, in the 2015 third quarter. Truckload transportation revenue hauled via van equipment in the 2016 third quarter was $465.8 million compared to $466.2 million in the 2015 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 third quarter was $248.9 million compared to $293.3 million in the 2015 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $43.4 million, or 6 percent of revenue, in the 2016 third quarter compared to $50.5 million, or 6 percent of revenue, in the 2015 third quarter.
Trailing twelve-month return on average shareholders' equity was 28 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. During the 2016 third quarter, Landstar purchased 350,000 shares of its common stock at an aggregate cost of $24.0 million bringing the total number of common shares purchased during the thirty-nine weeks ended September 24, 2016 to 773,000 shares at an aggregate cost of $50.5 million. Currently, there are approximately 1,036,000 shares of the Company's common stock available for purchase under Landstar's authorized share purchase program. As of September 24, 2016, the Company had $227 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 December 2, 2016, to stockholders of record as of the close of business on November 8, 2016. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.
Commenting on Landstar's 2016 third quarter, Landstar's President and CEO Jim Gattoni said, "Diluted earnings per share was $0.86 in the 2016 third quarter, the second highest third quarter diluted earnings per share in Landstar history, second only to 2015 third quarter record diluted earnings per share of $0.90. Revenue was $788 million with gross profit of $121.8 million in the 2016 third quarter, the second highest third quarter gross profit in Landstar history, second only to 2015 third quarter record gross profit of $126.8 million. 2015 third quarter revenue was a record $842 million and included $35 million of revenue from a project on behalf of a customer in the automotive sector. That project was completed at the end of 2015. Overall, we continued to have difficult year-over-year comparisons to 2015 driven mostly by tougher overall industry conditions in 2016 and revenue from the previously referenced automotive project in 2015."
Gattoni continued, "Landstar executed well when considering the softness in U.S. manufacturing and more readily available truck capacity in 2016. Given this environment, Landstar managed a 4 percent increase in the number of loads hauled via truck in the 2016 third quarter over the 2015 third quarter, when excluding approximately 20,000 truckloads hauled via unsided/platform equipment for the automotive project in the 2015 third quarter.
Overall, the number of loads hauled via truck in the 2016 third quarter decreased 1 percent from the 2015 third quarter. This overall decrease in volume was driven by a 6 percent increase in the number of loads hauled via van equipment, offset by a 14 percent decrease in the number of loads hauled via unsided/platform equipment. Excluding the loadings related to the automotive project, Landstar experienced a 1 percent increase in the number of loads hauled via unsided/platform equipment. Landstar also achieved a 4 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 third quarter over the 2015 third quarter."
Gattoni further continued, "Revenue per load on loads hauled via truck in the 2016 third quarter was 5 percent below the 2015 third quarter. This represents a sequential improvement, however, as revenue per load on loads hauled via truck in the 2016 first quarter compared to the 2015 first quarter and in the 2016 second quarter compared to the 2015 second quarter decreased 10 percent and 9 percent, respectively. The reduction in the percentage shortfall in revenue per load on loads hauled via truck in the 2016 third quarter was due to an increase in revenue per load in the 2016 third quarter compared to the 2016 second quarter that was slightly ahead of recent second quarter to third quarter trends, coupled with weaker revenue per load in the 2015 third quarter as compared to the first half of 2015. Additionally, the average cost of a gallon of diesel fuel was approximately 10 percent lower during the 2016 third quarter compared to the 2015 third quarter putting additional pressure on pricing, especially as it related to loads hauled via truck brokerage carriers. The softer pricing environment contributed to the decline in the 2016 third quarter operating margin, which was 48.0 percent, compared to 50.4 percent in the 2015 third quarter."
Commenting on Landstar's 2016 fourth quarter, Gattoni stated, "I expect the slow growth environment we have experienced during the first three quarters of 2016 to continue through the 2016 fourth quarter. As was the case in our 2016 second and third quarters, fourth quarter 2016 over fourth quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company's 2015 fourth quarter included approximately $38 million in revenue from approximately 19,000 loads hauled via truck related to that project. Through the first few weeks of October, we have experienced the normal seasonal pattern for revenue per load on loads hauled via truck and, therefore, I anticipate revenue per load on loads hauled via truck to be below prior year's fourth quarter in a mid-single digit range, consistent with the 2016 third quarter compared to the 2015 third quarter. Landstar's fiscal year ends on the last Saturday of the calendar year, which this year is December 31, 2016, resulting in fiscal year 2016 representing a 53 week period. As such, the Company's 2016 fourth quarter includes an extra week of operations. The number of loads hauled via truck during the first few weeks of October is trending slightly ahead of the historical third quarter to fourth quarter trend. Assuming that trend continues, and given the extra week in the 2016 fourth quarter, I would expect the number of loads hauled via truck in the 2016 fourth quarter to exceed the 2015 fourth quarter in a low-single digit range. As such, I expect 2016 fourth quarter revenue to be in a range of $800 million to $850 million. Assuming insurance and claims costs in the 2016 fourth 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 $0.85 to $0.90 in the 2016 fourth 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 Third 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 and other information security 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; regulations focused on diesel emissions and other air quality matters; 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)
Thirty Nine Weeks Ended Thirteen Weeks Ended
----------------------- --------------------
September 24, September 26, September 24, September 26,
2016 2015 2016 2015
---- ---- ---- ----
Revenue $2,274,805 $2,472,489 $787,938 $841,726
Investment income 1,100 1,043 357 350
Costs and expenses:
Purchased transportation 1,730,745 1,900,313 601,002 645,583
Commissions to agents 189,075 199,113 65,144 69,297
Other operating costs, net of
gains on asset sales/
dispositions 21,484 24,388 7,492 8,718
Insurance and claims 42,795 37,610 12,488 10,502
Selling, general and
administrative 106,211 111,797 34,692 36,811
Depreciation and amortization 26,109 21,253 9,016 7,185
Total costs and expenses 2,116,419 2,294,474 729,834 778,096
--------- --------- ------- -------
Operating income 159,486 179,058 58,461 63,980
Interest and debt expense 2,725 2,208 948 714
----- ----- --- ---
Income before income taxes 156,761 176,850 57,513 63,266
Income taxes 58,985 67,016 21,235 23,918
------ ------ ------ ------
Net income $97,776 $109,834 $36,278 $39,348
======= ======== ======= =======
Earnings per common share $2.32 $2.50 $0.86 $0.91
===== ===== ===== =====
Diluted earnings per share $2.31 $2.49 $0.86 $0.90
===== ===== ===== =====
Average number of shares outstanding:
Earnings per common share 42,223,000 43,975,000 42,039,000 43,446,000
Diluted earnings per share 42,341,000 44,134,000 42,170,000 43,607,000
Dividends per common share $0.25 $0.22 $0.09 $0.08
===== ===== ===== =====
Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
September 24, December 26,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash
equivalents $170,805 $114,520
Short-term
investments 56,679 48,823
Trade accounts
receivable, less
allowance
of $4,881 and
$4,327 409,047 462,699
Other receivables,
including advances to
independent
contractors, less
allowance of $4,871
and $4,143 17,091 18,472
Other current
assets 15,188 11,604
Total current
assets 668,810 656,118
------- -------
Operating property, less accumulated depreciation
and amortization
of $187,566 and
$182,591 261,943 225,927
Goodwill 31,134 31,134
Other assets 65,871 78,339
Total assets $1,027,758 $991,518
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash
overdraft $27,725 $35,609
Accounts payable 201,872 223,709
Current maturities
of long-term debt 44,784 42,499
Insurance claims 27,941 19,757
Other current
liabilities 48,027 47,963
Total current
liabilities 350,349 369,537
------- -------
Long-term debt, excluding current maturities 90,817 81,793
Insurance claims 23,765 21,477
Deferred income taxes and other non-current
liabilities 56,097 52,474
Shareholders' equity:
Common stock, $0.01 par
value, authorized
160,000,000
shares, issued
67,522,281 and
67,391,616 shares 675 674
Additional paid-
in capital 198,736 195,841
Retained earnings 1,477,179 1,389,975
Cost of 25,747,002 and
24,972,079 shares of
common
stock in
treasury (1,167,391) (1,116,765)
Accumulated other
comprehensive loss (2,469) (3,488)
Total
shareholders'
equity 506,730 466,237
------- -------
Total liabilities and shareholders' equity $1,027,758 $991,518
========== ========
Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
Thirty Nine Weeks Ended Thirteen Weeks Ended
----------------------- --------------------
September 24, September 26, September 24, September 26,
2016 2015 2016 2015
---- ---- ---- ----
Revenue generated through (in thousands):
-----------------------------------------
Truck transportation
Truckload:
Van equipment $1,351,980 $1,412,824 $465,785 $466,226
Unsided/platform equipment 700,369 823,767 248,939 293,252
Less-than-truckload 54,066 61,297 18,139 20,341
------ ------ ------ ------
Total truck transportation 2,106,415 2,297,888 732,863 779,819
Rail intermodal 76,987 76,688 24,650 27,166
Ocean and air cargo carriers 56,500 64,725 18,790 23,315
Other (1) 34,903 33,188 11,635 11,426
$2,274,805 $2,472,489 $787,938 $841,726
========== ========== ======== ========
Revenue on loads hauled via BCO
Independent Contractors (2)
included in total truck
transportation $1,086,848 $1,140,870 $379,196 $388,840
Number of loads:
----------------
Truck transportation
Truckload:
Van equipment 847,208 820,223 291,089 275,509
Unsided/platform equipment 331,226 359,769 112,192 130,317
Less-than-truckload 84,316 83,838 28,589 28,934
------ ------ ------ ------
Total truck transportation 1,262,750 1,263,830 431,870 434,760
Rail intermodal 36,120 32,350 11,940 11,670
Ocean and air cargo carriers 14,910 13,320 5,130 4,700
1,313,780 1,309,500 448,940 451,130
========= ========= ======= =======
Loads hauled via BCO Independent
Contractors (2)
included in total truck
transportation 630,880 616,410 216,220 210,180
Revenue per load:
-----------------
Truck transportation
Truckload:
Van equipment $1,596 $1,722 $1,600 $1,692
Unsided/platform equipment 2,114 2,290 2,219 2,250
Less-than-truckload 641 731 634 703
Total truck transportation 1,668 1,818 1,697 1,794
Rail intermodal 2,131 2,371 2,064 2,328
Ocean and air cargo carriers 3,789 4,859 3,663 4,961
Revenue per load on loads hauled via
BCO Independent Contractors (2) $1,723 $1,851 $1,754 $1,850
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% 46%
Rail intermodal 3% 3% 3% 3%
Ocean and air cargo carriers 2% 3% 2% 3%
Other 2% 1% 1% 1%
September 24, September 26,
2016 2015
---- ----
Truck Capacity Providers
------------------------
BCO Independent Contractors (2) 8,889 8,869
Truck Brokerage Carriers:
Approved and active (3) 30,860 29,127
Other approved 15,691 13,813
46,551 42,940
------ ------
Total available truck capacity
providers 55,440 51,809
Trucks provided by BCO Independent
Contractors (2) 9,510 9,441
(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.
