Landstar System Reports All-Time Quarterly Record Diluted Earnings Per Share of $2.40 in the 2021 Second Quarter

Rhea-AI Summary

Landstar System, Inc. (LSTR) achieved record net income of $92.3 million, or $2.40 per diluted share, in Q2 2021, with total revenue of $1.571 billion. This marks a significant increase from $24.3 million in net income on $824 million revenue in Q2 2020. Gross profit also hit a record at $220.8 million. Compared to Q1 2021, revenue rose by $283 million, with truckload revenue constituting 92% of total revenue. A quarterly dividend of $0.25 per share was declared, marking a 19% increase. Expectations for Q3 2021 forecast continued strong performance with revenue projected between $1.55 billion to $1.60 billion.

Positive

• Record Q2 2021 net income of $92.3 million, a significant increase from previous year.
• Total revenue reached $1.571 billion, marking a robust growth compared to $824 million in Q2 2020.
• Gross profit set a new record at $220.8 million, up from $113.1 million in Q2 2020.
• Truckload revenue increased by 92% compared to Q2 2020, contributing significantly to total revenue.
• Quarterly dividend increased by 19%, the largest hike in company history.

Negative

• Increased estimates for insurance and claims costs due to historical trends may impact future earnings.
• Expected lower truckload volume in Q3 compared to Q2, which could affect revenue.

JACKSONVILLE, Fla., July 21, 2021 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported all-time quarterly record net income of $92.3 million, or $2.40 per diluted share, in the 2021 second quarter, on record quarterly revenue of $1.571 billion. Landstar reported net income of $24.3 million, or $0.63 per diluted share, on $824 million of revenue in the 2020 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) also reached an all-time quarterly record of $220.8 million in the 2021 second quarter compared to $113.1 million in the 2020 second quarter. Given the significant adverse impact of the COVID-19 pandemic on the U.S. economy and the Company’s financial results during the 2020 second quarter, quarter-over-prior-year-quarter comparisons are not meaningful. Comparing the 2021 second quarter to the 2021 first quarter, however, puts into context the strength of our 2021 second quarter financial performance. 2021 first quarter revenue was the second highest quarterly revenue in Landstar history and 2021 first quarter gross profit established a new all-time quarterly record. In the 2021 second quarter compared to the 2021 first quarter, revenue increased $283 million and gross profit increased approximately $32 million. These amounts of growth in revenue and gross profit from the 2021 first quarter to the 2021 second quarter were each all-time first to second quarter records.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2021 second quarter was $1.444 billion, or 92 percent of revenue, compared to $753 million, or 91 percent of revenue, in the 2020 second quarter. Truckload transportation revenue hauled via van equipment in the 2021 second quarter was $970.9 million compared to $483.0 million in the 2020 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2021 second quarter was $444.3 million compared to $247.4 million in the 2020 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $104.6 million, or 7 percent of revenue, in the 2021 second quarter compared to $53.8 million, or 7 percent of revenue, in the 2020 second quarter.

Trailing twelve-month return on average shareholders’ equity was 41 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 36 percent. During the 2021 second quarter, Landstar purchased 150,000 shares of its common stock at an aggregate cost of approximately $23.8 million. The Company is currently authorized to purchase up to 1,671,030 additional shares of the Company’s common stock under its previously announced share purchase program. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.25 per share payable on August 27, 2021, to stockholders of record as of the close of business on August 9, 2021. This quarterly dividend includes a $0.04 per share increase, or 19 percent, over the amount of the Company’s regular quarterly dividend declared following each of the prior four quarters. The $0.04 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.

“Following a record-breaking 2021 first quarter, Landstar’s 2021 second quarter set a new standard as the best quarterly financial performance in our history. 2021 second quarter revenue, gross profit, net income and diluted earnings per share each set all-time quarterly records. 2021 second quarter operating margin, representing operating income divided by gross profit, was 55.4 percent, also an all-time quarterly record,” said Landstar President and CEO Jim Gattoni. “Our truckload volume in the second quarter exceeded the 2021 first quarter by over 12 percent, the second largest first quarter to second quarter increase in over 10 years. This outperformance was particularly impressive considering we were following an already record-setting first quarter. We attribute this strong demand to an ongoing, broad-based economic recovery, with particular strength in consumer spending, that has been a big driver of freight activity.”

Gattoni continued, “Revenue from truck loads hauled via van equipment exceeded the 2020 second quarter by 101 percent and was also 60 percent above the corresponding period from 2019. Revenue from truck loads hauled via unsided/platform equipment exceeded the 2020 second quarter by 80 percent and was 31 percent above the same period in 2019. Consumer demand for durable goods, building products, and e-commerce, which were strong in the first quarter of 2021, continued to drive record quarterly van revenue, while revenue generated via unsided/platform equipment benefitted from growth in the U.S. metals and machinery sectors. For revenue generated via van equipment in the 2021 second quarter compared to the 2020 second quarter, the number of loads (volume) and revenue per load (rate) increased 43 percent and 40 percent, respectively, while the growth in volume and rate compared to the same period in 2019 was 19 percent and 35 percent, respectively. Revenue from truck loads hauled via unsided/platform equipment continued to improve in comparison to the softer conditions that existed throughout most of 2020. The number of loads (volume) and revenue per load (rate) on loads hauled via unsided/platform equipment in the 2021 second quarter exceeded the 2020 second quarter by 35 percent and 33 percent, respectively, and were higher than the corresponding period in 2019 by 10 percent and 19 percent, respectively.”  

Gattoni further stated, “In our 2021 first quarter earnings release on April 21, 2021, we provided second quarter revenue guidance of $1.40 billion to $1.45 billion and second quarter diluted earnings per share guidance of $2.20 to $2.30. On May 28, 2021, we revised our initial guidance based on trends in volume and rates through the first seven weeks of the second quarter. Our updated 2021 second quarter guidance issued on May 28^th reflected our expectation that revenue per load on loads hauled via truck would exceed the 2021 first quarter in a high single-digit percentage range and the number of loads hauled via truck in the 2021 second quarter would exceed the 2021 first quarter in a low double-digit percentage range. Actual revenue per load on loads hauled via truck in the 2021 second quarter compared to the 2021 first quarter increased 7.5 percent and the number of loads hauled via truck in the 2021 second quarter compared to the 2021 first quarter increased 12.5 percent, each in-line with our May 28^th revised guidance and as summarized in the following chart:

		% growth vs. first quarter 2021
Second Quarter 2021		Original Guidance		Revised Guidance		Actual
Truck revenue per load		4%-6%		High single digit		7.5%
Number of truck loads		4%-6%		Low double digit		12.5%

Based on our expectations as to truck load volume and pricing, our May 28^th updated guidance anticipated that revenue and diluted earnings per share would each be slightly above the high end of our previously issued 2021 second quarter guidance. Actual 2021 second quarter revenue was $1.571 billion and diluted earnings per share was $2.40, both generally in-line with our May 28^th updated guidance.”

Gattoni continued, “As we’ve discussed, our second quarter year-over-prior-year revenue and diluted earnings per share comparisons were not meaningful due to the adverse impact the COVID-19 pandemic had on the Company’s 2020 second quarter financial results. As we look to the 2021 third quarter, comparisons to prior year should begin to normalize as the adverse impact of the COVID-19 pandemic on the Company’s financial results significantly receded during the 2020 third quarter. While our year-over-year comparisons will be more challenging, our outlook for the 2021 third quarter is for continued solid performance on the expectation that broad-based economic strength will support a strong freight environment for the near future. In addition, we will likely continue to be in a capacity-constrained environment, which should continue to support elevated revenue per truck load in the third quarter.”  

“Historically, revenue in the Company’s third fiscal quarter has been relatively consistent with revenue generated in the Company’s second fiscal quarter.  We also typically see our revenue per load on loads hauled via truck in the third quarter to be slightly higher than the second quarter, and the number of loads hauled via truck in the third quarter to be slightly below the second quarter. Through the first few weeks of July, revenue per load on loads hauled via truck and the number of loads hauled via truck are trending fairly consistent with historical second quarter to third quarter sequential patterns. I expect these trends to continue and as such, I anticipate revenue for the 2021 third quarter to be in a range of $1.55 billion to $1.60 billion.” 

“Based on the range of revenue estimated and assuming insurance and claims costs of 4.6 percent of BCO revenue, I would anticipate diluted earnings per share to be in a range of $2.20 to $2.30 in the 2021 third quarter. As it relates to our third quarter estimate of insurance and claims costs, these costs were 3.8 percent of BCO revenue over the first half of 2021. Our third quarter estimate reflects an increased estimate of insurance and claims costs due to the potential reversion of claim costs to be more in line with historical trends over a longer period of time, increased premiums relating to auto liability coverage that we are paying to third party insurance companies and increased severity we have already experienced during the first several weeks of July as compared to the 2021 first half, mostly due to a small number of specific incidents.”

Gattoni concluded, “Landstar’s first half performance has been outstanding. The Company’s agent family is executing on all cylinders and we continue to add qualified truck capacity to the network. Given the exceptional performance by Landstar through the first half, 2021 is well on its way to be a record setting year.”

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 2021 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; 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 2020 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 26,			June 27,			June 26,			June 27,
	2021			2020			2021			2020
Revenue	$	2,858,252		$	1,751,080		$	1,570,718		$	823,514
Investment income		1,432			2,002			748			835
Costs and expenses:
Purchased transportation		2,226,526			1,344,390			1,228,241			635,133
Commissions to agents		221,702			150,642			121,693			75,266
Other operating costs, net of gains on asset sales/dispositions		16,545			15,674			8,903			7,368
Insurance and claims		45,629			44,708			24,124			19,751
Selling, general and administrative		99,522			85,928			54,114			40,601
Depreciation and amortization		24,244			22,972			12,143			11,467
Impairment of intangible and other assets		-			2,582			-			2,582
Total costs and expenses		2,634,168			1,666,896			1,449,218			792,168
Operating income		225,516			86,186			122,248			32,181
Interest and debt expense		2,009			1,928			967			976
Income before income taxes		223,507			84,258			121,281			31,205
Income taxes		53,973			19,109			28,987			6,951
Net income	$	169,534		$	65,149		$	92,294		$	24,254
Diluted earnings per share	$	4.41		$	1.68		$	2.40		$	0.63
Average diluted shares outstanding		38,403,000			38,816,000			38,402,000			38,379,000
Dividends per common share	$	0.420		$	0.370		$	0.210		$	0.185

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
			June 26,				December 26,
				2021				2020
ASSETS
Current assets:
	Cash and cash equivalents		$	186,404			$	249,354
	Short-term investments			52,560				41,375
	Trade accounts receivable, less allowance
		of $6,199 and $8,670		902,950				764,169
	Other receivables, including advances to independent
		contractors, less allowance of $6,843 and $7,239		49,819				134,757
	Other current assets			41,533				18,520
		Total current assets		1,233,266				1,208,175
Operating property, less accumulated depreciation
and amortization of $321,181 and $299,407				281,016				296,996
Goodwill				40,973				40,949
Other assets				147,958				107,679
Total assets			$	1,703,213			$	1,653,799
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft		$	70,554			$	74,748
	Accounts payable			481,711				380,505
	Current maturities of long-term debt			30,450				35,415
	Insurance claims			41,854				149,774
	Dividends payable			-				76,770
	Other current liabilities			95,646				88,925
		Total current liabilities		720,215				806,137
Long-term debt, excluding current maturities				51,181				65,359
Insurance claims				43,053				38,867
Deferred income taxes and other non-current liabilities				58,591				51,601
Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,229,880 and 68,183,702		682				682
	Additional paid-in capital			238,422				228,875
	Retained earnings			2,199,637				2,046,238
	Cost of 29,954,081 and 29,797,639 shares of common
		stock in treasury		(1,606,716	)			(1,581,961	)
	Accumulated other comprehensive loss			(1,852	)			(1,999	)
		Total shareholders' equity		830,173				691,835
Total liabilities and shareholders' equity			$	1,703,213			$	1,653,799

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)
					Twenty Six Weeks Ended									Thirteen Weeks Ended
					June 26,				June 27,					June 26,				June 27,
						2021				2020					2021				2020
Revenue generated through (in thousands):
	Truck transportation
		Truckload:
			Van equipment		$	1,798,061			$	1,028,334				$	970,874			$	483,027
			Unsided/platform equipment			784,883				533,716					444,251				247,388
		Less-than-truckload				54,732				45,859					29,062				22,918
			Total truck transportation			2,637,676				1,607,909					1,444,187				753,333
	Rail intermodal					76,068				51,315					44,360				23,186
	Ocean and air cargo carriers					107,840				57,250					60,240				30,663
	Other (1)					36,668				34,606					21,931				16,332
					$	2,858,252			$	1,751,080				$	1,570,718			$	823,514
	Revenue on loads hauled via BCO Independent Contractors (2)
		included in total truck transportation			$	1,209,056			$	809,779				$	648,942			$	378,500
Number of loads:
	Truck transportation
		Truckload:
			Van equipment			777,921				600,519					409,048				285,174
			Unsided/platform equipment			275,754				231,122					149,489				110,533
		Less-than-truckload				85,095				78,079					44,403				39,723
			Total truck transportation			1,138,770				909,720					602,940				435,430
	Rail intermodal					26,800				21,510					15,100				9,970
	Ocean and air cargo carriers					19,460				14,430					10,230				7,360
						1,185,030				945,660					628,270				452,760
	Loads hauled via BCO Independent Contractors (2)
		included in total truck transportation				510,150				443,830					264,200				210,430
Revenue per load:
	Truck transportation
		Truckload:
			Van equipment		$	2,311			$	1,712				$	2,373			$	1,694
			Unsided/platform equipment			2,846				2,309					2,972				2,238
		Less-than-truckload				643				587					655				577
			Total truck transportation			2,316				1,767					2,395				1,730
	Rail intermodal					2,838				2,386					2,938				2,326
	Ocean and air cargo carriers					5,542				3,967					5,889				4,166
	Revenue per load on loads hauled via BCO Independent Contractors (2)				$	2,370			$	1,825				$	2,456			$	1,799
Revenue by capacity type (as a % of total revenue);
	Truck capacity providers:
		BCO Independent Contractors (2)				42	%			46	%				41	%			46	%
		Truck Brokerage Carriers				50	%			46	%				51	%			46	%
	Rail intermodal					3	%			3	%				3	%			3	%
	Ocean and air cargo carriers					4	%			3	%				4	%			4	%
	Other					1	%			2	%				1	%			2	%
														June 26,				June 27,
															2021				2020
Truck Capacity Providers
	BCO Independent Contractors (2)														10,778				9,632
	Truck Brokerage Carriers:
		Approved and active (3)													53,891				37,600
		Other approved													24,098				16,365
															77,989				53,965
	Total available truck capacity providers														88,767				63,597
	Trucks provided by BCO Independent Contractors (2)														11,557				10,299
(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.

FAQ

What were Landstar's earnings results for Q2 2021?

Landstar reported net income of $92.3 million, or $2.40 per diluted share, for Q2 2021.

How did Landstar's revenue in Q2 2021 compare to Q2 2020?

Revenue increased significantly to $1.571 billion in Q2 2021 from $824 million in Q2 2020.

What is Landstar's outlook for Q3 2021?

Landstar projects Q3 2021 revenue between $1.55 billion and $1.60 billion.

Did Landstar increase its dividend in 2021?

Yes, Landstar declared a quarterly dividend of $0.25 per share, a 19% increase over prior amounts.