Landstar System Reports Third Quarter Revenue of $1.086 Billion and Diluted Earnings Per Share of $1.61

Rhea-AI Summary

Landstar System reported revenue of $1.086 billion for Q3 2020, up 7% year-over-year from $1.012 billion in Q3 2019. Diluted earnings per share (EPS) rose by 19% to $1.61, marking the second-highest EPS for a third quarter in company history. Gross profit increased to $160.9 million, a 5% rise. Truck transportation revenue was 93% of total revenue, achieving notable growth in truckload transportation up 3%. However, the company anticipates a one-time charge of $15 million in Q4 due to reorganization efforts, affecting EPS by approximately $0.29.

Positive

• Q3 2020 revenue reached $1.086 billion, a 7% increase year-over-year.
• Diluted EPS for Q3 2020 rose to $1.61, up 19% from Q3 2019.
• Gross profit increased by 5% to $160.9 million in Q3 2020.
• Truck transportation revenue comprised 93% of total revenue, with truckload revenue up 3% year-over-year.
• Board declared a quarterly dividend of $0.21 per share payable on December 4, 2020.

Negative

• Anticipated one-time charge of $15 million in Q4 due to BCO recruitment program changes, reducing Q4 EPS by approximately $0.29.

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

        

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

	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				2019
Revenue generated through (in thousands):
	Truck transportation
		Truckload:
			Van equipment		$	1,694,916			$	1,799,421				$	666,582			$	575,042
			Unsided/platform equipment			848,187				980,615					314,471				331,787
		Less-than-truckload				70,984				73,475					25,125				25,367
			Total truck transportation			2,614,087				2,853,511					1,006,178				932,196
	Rail intermodal					81,747				87,555					30,432				28,970
	Ocean and air cargo carriers					89,002				89,258					31,752				30,365
	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 transportation			$	1,312,003			$	1,390,135				$	502,224			$	466,207
Number of loads:
	Truck transportation
		Truckload:
			Van equipment			946,117				1,014,572					345,598				327,671
			Unsided/platform equipment			356,670				391,112					125,548				130,192
		Less-than-truckload				119,533				115,616					41,454				41,067
			Total truck transportation			1,422,320				1,521,300					512,600				498,930
	Rail intermodal					33,410				35,370					11,900				11,490
	Ocean and air cargo carriers					22,720				22,150					8,290				7,340
						1,478,450				1,578,820					532,790				517,760
	Loads hauled via BCO Independent Contractors (2)
		included in total truck transportation				693,860				722,870					250,030				239,210
Revenue per load:
	Truck transportation
		Truckload:
			Van equipment		$	1,791			$	1,774				$	1,929			$	1,755
			Unsided/platform equipment			2,378				2,507					2,505				2,548
		Less-than-truckload				594				636					606				618
			Total truck transportation			1,838				1,876					1,963				1,868
	Rail intermodal					2,447				2,475					2,557				2,521
	Ocean and air cargo carriers					3,917				4,030					3,830				4,137
	Revenue per load on loads hauled via BCO Independent Contractors (2)				$	1,891			$	1,923				$	2,009			$	1,949
Revenue by capacity type (as a % of total revenue);
	Truck capacity providers:
		BCO Independent Contractors (2)				46	%			45	%				46	%			46	%
		Truck Brokerage Carriers				46	%			47	%				46	%			46	%
	Rail intermodal					3	%			3	%				3	%			3	%
	Ocean and air cargo carriers					3	%			3	%				3	%			3	%
	Other					2	%			2	%				2	%			2	%
														September 26,				September 28,
															2020				2019
Truck Capacity Providers
	BCO Independent Contractors (2)														9,866				9,738
	Truck Brokerage Carriers:
	Approved and active (3)														41,246				39,963
	Other approved														22,181				16,984
															63,427				56,947
	Total available truck capacity providers														73,293				66,685
	Trucks provided by BCO Independent Contractors (2)														10,571				10,441
(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 Q3 2020?

Landstar reported Q3 2020 revenue of $1.086 billion and diluted earnings per share of $1.61.

How does Landstar's Q3 2020 performance compare to Q3 2019?

Compared to Q3 2019, Landstar's revenue increased by 7% and diluted EPS grew by 19%.

What is Landstar's outlook for Q4 2020?

Landstar anticipates Q4 2020 revenue between $1.150 billion and $1.200 billion, with diluted EPS guidance of $1.32 to $1.42, impacted by a one-time charge.

What strategic changes is Landstar implementing based on the Q3 2020 report?

Landstar is reorganizing its regional field operations centers to enhance support for its independent contractors and improve recruitment efforts.

What dividends has Landstar declared recently?

Landstar's Board declared a quarterly dividend of $0.21 per share, payable on December 4, 2020.