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Landstar System Reports 2020 First Quarter Results and Its Response to the COVID-19 Pandemic

JACKSONVILLE, Fla., April 22, 2020 (GLOBE NEWSWIRE) -- Landstar System, Inc. (LSTR) reported diluted earnings per share of $1.04 in the 2020 first quarter on revenue of $927.6 million. Landstar reported diluted earnings per share of $1.58 on revenue of $1.033 billion in the 2019 first quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $142.9 million in the 2020 first quarter compared to $155.6 million in the 2019 first quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2020 first quarter was $854.6 million, or 92 percent of revenue, compared to $953.1 million, or 92 percent of revenue, in the 2019 first quarter. Truckload transportation revenue hauled via van equipment in the 2020 first quarter was $545.3 million compared to $619.0 million in the 2019 first quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 first quarter was $286.3 million compared to $310.7 million in the 2019 first quarter. Revenue hauled by rail, air and ocean cargo carriers was $54.7 million, or 6 percent of revenue, in the 2020 first quarter compared to $60.7 million, or 6 percent of revenue, in the 2019 first quarter.

During the 2020 first quarter Landstar generated $99.2 million in operating cash flow, spent $5.8 million in cash capital expenditures and paid $86.3 million in dividends. Additionally, Landstar purchased 1,178,970 shares of its common stock during the 2020 first quarter at an aggregate cost of approximately $116.0 million. Currently, the Company is authorized to purchase up to 1,821,030 shares of the Company’s common stock under Landstar’s previously announced share purchase program. Also, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on May 29, 2020, to stockholders of record as of the close of business on May 7, 2020. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“Overall, I was pleased with the 2020 first quarter financial results given the somewhat balanced freight environment and difficult comparisons to the record 2019 first quarter,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “Landstar performed as we anticipated until the final week of the quarter. Through the first twelve weeks of the quarter, the week-to-week trends in the number of loads hauled and revenue per load on loads hauled via truck were consistent with our expectations based on historical experience. In fact, as the quarter progressed, we began to see signs that demand was improving as year-over-year comparisons eased. Unfortunately, these positive signs were completely extinguished by the impact of the coronavirus (COVID-19) pandemic. Dispatched truck load volume in the final week of the 2020 first quarter decreased significantly from the previous week as a result of actions taken by governmental authorities and businesses to reduce the spread of the coronavirus. Shelter-at-home mandates and closing of manufacturing facilities significantly affected demand for transportation by many industry segments we service. We expect those conditions to persist throughout the 2020 second quarter. Accordingly, we believe our 2020 first quarter results and operating trends will in no way provide any indication regarding what our financial results may be with respect to Landstar’s 2020 second quarter.”

Gattoni continued, “Although it is unclear as to the duration and depth of impact the coronavirus will have on the freight transportation industry, we believe Landstar is in a good position operationally and financially to withstand the most significant and rapid decline of the U.S. economy in recent history. Operationally, the decentralized nature of the Landstar model, where independent agents provide truck dispatch, freight tracking, trailer management and numerous other operational functions from over 1,200 agent locations throughout North America, provides a clear advantage in an environment where social distancing can disrupt centralized business structures. Landstar employees, however, who service agents, BCOs and other third party capacity providers via administrative and operational support, are centralized in two primary Company locations. In order to protect the health and well-being of all Landstar employees and their families, reduce the risk of community spread within our two primary office locations and substantially limit the potential for disruption in our administrative and operational functions, during March we transitioned over 800 of Landstar’s 1,200 corporate employees based in the United States to work-at-home. We now have over 1,000 Landstar employees working remotely. That transformation has been highly successful.”

“During the 2020 second quarter, we do not expect to take any drastic cost reduction measures that would disrupt our ability to service Landstar’s customers, agents, BCOs or other third party capacity providers or slow the progress on our technology initiatives,” Gattoni said. “Additionally, we have undertaken to provide additional financial support to Landstar’s agents and BCOs during this crisis. These initiatives will impact the Company’s earnings in the 2020 second quarter. Most notably, for each load delivered by a BCO with a confirmed delivery date from April 1 through April 30, 2020, Landstar will pay an extra $50 to each of the BCO hauling the load and the Landstar agent dispatching the load. We estimate Landstar BCOs will deliver between 60,000 and 70,000 loads in April of 2020. Also, if a Landstar BCO tests positive for COVID-19 or is placed under a mandatory quarantine by a public health authority, Landstar will provide up to $2,000 to the affected BCO.”

“In this highly unpredictable economic environment, we will not be providing revenue and earnings guidance for the 2020 second quarter. Nevertheless, as an example of how Landstar’s variable cost business model would react under certain unfavorable assumptions, it is worth noting that if one were to assume a 20% to 30% decrease in revenue in the 2020 second quarter as compared to the 2019 second quarter, plus taking into account the $100 per load cost of the additional purchased transportation and commissions to agents payable with respect to loads anticipated to be delivered by BCOs in the month of April, diluted earnings per share would be expected to be in a range of $0.70 to $0.85. This in no way should be interpreted as any sort of guidance, but rather a demonstration of the resiliency of the Landstar model, and that Landstar’s ability to generate earnings is somewhat insulated from the possible effects of a prolonged recession. Additionally, in the event that current market conditions persist, it is possible that Landstar will provide additional financial pandemic relief to its agents and/or BCOs during the 2020 second quarter which could impact the Company’s earnings.”

“Our overarching goals throughout this crisis are to preserve the culture and strength of the Landstar network while keeping the participants in our network safe. We expect near-term revenue and earnings to be significantly adversely impacted by the current economic environment, but ultimately expect to generate sufficient operating cash flow to pay all members of our network in a timely manner, pay the regular quarterly dividend, fund our technology initiatives and pay finance lease obligations. We will be prudent in our approach to share purchases over the next few months as the depth and duration of the crisis becomes clearer. We ended the 2020 first quarter with $211 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). Although we expect the COVID-19 pandemic to have a significant adverse impact on our results of operations in the 2020 second quarter, we expect our financial position to remain strong throughout this unprecedented time.”

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 First 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.

(Tables follow)

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

Thirteen Weeks Ended

March 28,

March 30,

2020

2019

Revenue

$

927,566

$

1,033,000

Investment income

1,167

1,138

Costs and expenses:

Purchased transportation

709,257

791,755

Commissions to agents

75,376

85,671

Other operating costs, net of gains on asset sales/dispositions

8,306

8,239

Insurance and claims

24,957

14,993

Selling, general and administrative

45,327

41,268

Depreciation and amortization

11,505

11,316

Total costs and expenses

874,728

953,242

Operating income

54,005

80,896

Interest and debt expense

952

805

Income before income taxes

53,053

80,091

Income taxes

12,158

16,791

Net income

40,895

63,300

Less: Net loss attributable to noncontrolling interest

-

(17

)

Net income attributable to Landstar System,

Inc. and subsidiary

$

40,895

$

63,317

Earnings per common share attributable to

Landstar System, Inc. and subsidiary

$

1.04

$

1.58

Diluted earnings per share attributable to

Landstar System, Inc. and subsidiary

$

1.04

$

1.58

Average number of shares outstanding:

Earnings per common share

39,254,000

40,161,000

Diluted earnings per share

39,254,000

40,166,000

Dividends per common share

$

0.185

$

0.165


Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

March 28,

December 28,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

177,224

$

319,515

Short-term investments

33,627

32,901

Trade accounts receivable, less allowance

of $8,536 and $7,284

562,528

588,549

Other receivables, including advances to independent

contractors, less allowance of $8,847 and $7,667

35,153

35,553

Other current assets

7,624

21,370

Total current assets

816,156

997,888

Operating property, less accumulated depreciation

and amortization of $286,593 and $280,849

276,663

285,855

Goodwill

37,182

38,508

Other assets

106,432

105,460

Total assets

$

1,236,433

$

1,427,711

LIABILITIES AND EQUITY

Current liabilities:

Cash overdraft

$

36,002

$

53,878

Accounts payable

272,175

271,996

Current maturities of long-term debt

39,944

42,632

Insurance claims

50,773

44,532

Dividends payable

-

78,947

Contractor escrow

24,517

24,902

Other current liabilities

41,420

36,017

Total current liabilities

464,831

552,904

Long-term debt, excluding current maturities

61,977

70,212

Insurance claims

33,456

33,575

Deferred income taxes and other non-current liabilities

49,074

49,551

Shareholders' equity:

Common stock, $0.01 par value, authorized 160,000,000

shares, issued 68,167,482 and 68,083,419 shares

682

681

Additional paid-in capital

224,973

226,123

Retained earnings

1,995,018

1,962,161

Cost of 29,796,974 and 28,609,926 shares of common

stock in treasury

(1,581,885

)

(1,465,284

)

Accumulated other comprehensive loss

(11,693

)

(2,212

)

Total shareholders' equity

627,095

721,469

Total liabilities and shareholders' equity

$

1,236,433

$

1,427,711


Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

Thirteen Weeks Ended

March 28,

March 30,

2020

2019

Revenue generated through (in thousands):

Truck transportation

Truckload:

Van equipment

$

545,307

$

619,014

Unsided/platform equipment

286,328

310,721

Less-than-truckload

22,941

23,376

Total truck transportation

854,576

953,111

Rail intermodal

28,129

30,015

Ocean and air cargo carriers

26,587

30,669

Other (1)

18,274

19,205

$

927,566

$

1,033,000

Revenue on loads hauled via BCO Independent Contractors (2)

included in total truck transportation

$

431,279

$

449,308

Number of loads:

Truck transportation

Truckload:

Van equipment

315,345

341,821

Unsided/platform equipment

120,589

125,170

Less-than-truckload

38,356

35,309

Total truck transportation

474,290

502,300

Rail intermodal

11,540

12,460

Ocean and air cargo carriers

7,070

7,510

492,900

522,270

Loads hauled via BCO Independent Contractors (2)

included in total truck transportation

233,400

234,850

Revenue per load:

Truck transportation

Truckload:

Van equipment

$

1,729

$

1,811

Unsided/platform equipment

2,374

2,482

Less-than-truckload

598

662

Total truck transportation

1,802

1,897

Rail intermodal

2,438

2,409

Ocean and air cargo carriers

3,761

4,084

Revenue per load on loads hauled via BCO Independent Contractors (2)

$

1,848

$

1,913

Revenue by capacity type (as a % of total revenue);

Truck capacity providers:

BCO Independent Contractors (2)

46

%

43

%

Truck Brokerage Carriers

46

%

49

%

Rail intermodal

3

%

3

%

Ocean and air cargo carriers

3

%

3

%

Other

2

%

2

%

March 28,

March 30,

2020

2019

Truck Capacity Providers

BCO Independent Contractors (2)

9,444

9,911

Truck Brokerage Carriers:

Approved and active (3)

38,879

40,404

Other approved

16,657

18,659

55,536

59,063

Total available truck capacity providers

64,980

68,974

Trucks provided by BCO Independent Contractors (2)

10,112

10,637

(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.


Contact: Kevin Stout
Landstar System, Inc.
www.landstar.com
904-398-9400