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EX-99.2 - EXHIBIT 99.2 - LANDSTAR SYSTEM INCd444270dex992.htm
8-K - FORM 8-K - LANDSTAR SYSTEM INCd444270d8k.htm

Exhibit 99.1

 

LOGO

 

For Immediate Release    Contact: Kevin Stout
   Landstar System, Inc.
   www.landstar.com
January 31, 2018    904-398-9400

LANDSTAR SYSTEM REPORTS RECORD QUARTERLY REVENUE

OF $1.052 BILLION, RECORD QUARTERLY DILUTED EARNINGS PER SHARE

AND AN INCREASED QUARTERLY DIVIDEND

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported net income of $64.8 million, or $1.54 per diluted share, in the 2017 fourth quarter on record revenue of $1.052 billion. Included in net income in the 2017 fourth quarter are one-time tax benefits of approximately $19.5 million, or $0.46 per diluted share, related to the Company’s reasonable estimate of the change in future tax rates on net deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017. Excluding the impact of the revaluation of the deferred tax liabilities, the Company’s 2017 fourth quarter net income was $45.2 million and diluted earnings per share was $1.08, each of which would also have been quarterly records from continuing operations.

Revenue for the 2017 fourth quarter represented the first quarter in the Company’s history to surpass $1 billion. The Company also established new quarterly records for gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) and operating income in the 2017 fourth quarter. Gross profit was $149.7 million and operating income was $70.0 million in the 2017 fourth quarter. Operating margin, representing operating income divided by gross profit, was 46.8 percent in the 2017 fourth quarter.


LANDSTAR SYSTEM/2

 

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2017 fourth quarter was $967.5 million, or 92 percent of revenue, compared to $832.2 million, or 93 percent of revenue, in the 2016 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2017 fourth quarter was $634.4 million compared to $548.4 million in the 2016 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2017 fourth quarter was $309.5 million compared to $263.3 million in the 2016 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $68.0 million, or 6 percent of revenue, in the 2017 fourth quarter compared to $48.7 million, or 5 percent of revenue, in the 2016 fourth quarter.

Fiscal year 2017 return on average shareholders’ equity was 29 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 24 percent. As previously disclosed, the Company announced that on December 11, 2017, its Board of Directors increased the number of shares of its common stock that the Company is authorized to purchase under its stock purchase program to 3,000,000 and also that its Board declared a special one-time cash dividend in the amount of $1.50 per share, that was paid on January 26, 2018, to stockholders of record as of the close of business on January 12, 2018. Currently, there are 3,000,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program. In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.15 per share payable on March 16, 2018 to stockholders of record at the close of business on February 19, 2018. This represents a 50 percent increase to the Company’s previous quarterly dividend. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar’s 2017 fourth quarter results, Landstar’s President and CEO Jim Gattoni said, “The 2017 fourth quarter was a historic quarter for the Company as it represented the first quarter ever that the Company exceeded $1 billion in revenue. The Company also set quarterly records in the 2017 fourth quarter for many other financial metrics. Revenue, gross profit, operating income, net income and diluted earnings per share were all quarterly records. The number of loads hauled via truck in the fourth quarter of 2017 was also an all-time Landstar quarterly record. 2017 fourth quarter revenue, gross profit, operating income, net income and diluted earnings per share


LANDSTAR SYSTEM/3

 

grew 18%, 13%, 10%, 64% and 64%, respectively, over the 2016 fourth quarter despite the 2016 fourth quarter having one additional week of operations. Excluding the impact of the revaluation of the deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017, net income and diluted earnings per share grew 14% and 15%, respectively, over the 2016 fourth quarter.”

Gattoni continued, “The number of loads hauled via truck in the 2017 fourth quarter increased 3 percent over the 2016 fourth quarter, driven by a 2 percent increase in the number of loads hauled via van equipment, a 4 percent increase in the number of loads hauled via unsided/platform equipment and a 9 percent increase in LTL volume. As previously disclosed in the Company’s 2017 third quarter earnings press release dated October 25, 2017, the 2016 fourth quarter included an extra week and, in 2016, Christmas day fell on a Sunday, making the week including Christmas in 2016 more productive than years when Christmas falls on a weekday, as in 2017 when Christmas fell on a Monday. We estimate that the extra week, plus the increased productivity due to the timing of Christmas, added approximately 30,000 loads to the 2016 fourth quarter. Excluding these loads, we estimate that the number of loads hauled via truck in the 2017 fourth quarter exceeded the 2016 fourth quarter by approximately 10 percent. The number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the fourth quarter increased 9 percent over the 2016 fourth quarter.”

Gattoni further stated, “The pricing environment for our truckload services was strong throughout the 2017 fourth quarter. Industry-wide truck capacity was tight throughout the quarter resulting in year-over-prior-year increases in revenue per load on loads hauled via truck of 11 percent, 14 percent and 14 percent as compared to October, November and December of 2016, respectively.”

Gattoni further commented, “Landstar’s financial performance in fiscal year 2017 was the best in the Company’s history. Landstar set many annual financial and operational high water marks in 2017, including revenue, gross profit, operating income, net income, diluted earnings per share, truck loads and year end truck count provided by BCOs. Revenue in fiscal 2017 was approximately $3.6 billion, an annual record. Gross profit in 2017 was $544 million, also an annual record. Record revenue and gross profit


LANDSTAR SYSTEM/4

 

in 2017 was provided on the strength of approximately 1,903,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. Operating income in 2017 was an annual record of $244 million and represented year-over-year growth of 9 percent. Diluted earnings per share in 2017 was an annual record of $4.21 and represented year-over-year growth of 30 percent. Excluding the impact of the revaluation of the deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017, the Company’s fiscal year 2017 diluted earnings per share was $3.75, which also would have been an annual record. The year-over-year earnings growth rates are particularly impressive given a significant increase in the provision for incentive compensation in 2017 and the fact that 2016 had one additional week of operations compared to 2017. These 2017 achievements speak to the strength and depth of the Landstar network and ability to execute. I am extremely pleased by our continued organic load volume growth and our ability to continue to attract productive agents and capacity to the network.”

Gattoni further commented, “With respect to near term performance, during the first three weeks of 2018, we are experiencing growth in the number of loads hauled via truck in the high single-digit percentage range over the 2017 first quarter. I expect that trend to continue throughout the 2018 first quarter. As it pertains to revenue per load on loads hauled via truck, rates continue to be strong and I do not expect a significant change in the rate environment over the balance of the 2018 first quarter. As such, I expect revenue per load on loads hauled via truck in the 2018 first quarter to increase in a mid-teen percentage range over the 2017 first quarter. Assuming the current environment continues throughout the 2018 first quarter, I anticipate revenue for the 2018 first quarter to be in a range of $925 million to $975 million. Assuming that range of estimated revenue, I would anticipate 2018 first quarter diluted earnings per share to be in a range of $1.22 to $1.27 per share. The estimated range of diluted earnings per share assumes insurance and claims costs at 3.5 percent of BCO revenue, representing the historical annual average of insurance and claims costs to BCO revenue over the previous 5 years, and an annual effective income tax rate of approximately 24.5 percent, prior to any discrete items that may occur in 2018.”


LANDSTAR SYSTEM/5

 

Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 am 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 Fourth Quarter 2017 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; 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; acquired business and noncontrolling interests and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2016 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.


LANDSTAR SYSTEM/6

 

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. 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.

(Tables follow)


LANDSTAR SYSTEM/7

 

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     Fiscal Years Ended      Fiscal Quarters Ended  
     December 30,     December 31,      December 30,     December 31,  
     2017     2016      2017     2016  

Revenue

   $ 3,646,364     $ 3,167,634      $ 1,051,592     $ 892,829  

Investment income

     2,498       1,502        765       402  

Costs and expenses:

         

Purchased transportation

     2,805,109       2,415,663        815,171       684,918  

Commissions to agents

     297,410       264,205        86,732       75,130  

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

     28,687       29,702        6,190       8,218  

Insurance and claims

     62,545       57,280        16,212       14,485  

Selling, general and administrative

     170,583       143,239        47,404       37,028  

Depreciation and amortization

     40,560       35,796        10,599       9,687  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total costs and expenses

     3,404,894       2,945,885        982,308       829,466  
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

     243,968       223,251        70,049       63,765  

Interest and debt expense

     3,166       3,794        607       1,069  
  

 

 

   

 

 

    

 

 

   

 

 

 

Income before income taxes

     240,802       219,457        69,442       62,696  

Income taxes

     63,806       82,107        4,759       23,122  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

     176,996       137,350        64,683       39,574  

Less: Net loss attributable to noncontrolling interest

     (92     —          (69     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income attributable to Landstar System, Inc. and subsidiary

   $ 177,088     $ 137,350      $ 64,752     $ 39,574  
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per common share attributable to Landstar System, Inc. and subsidiary

   $ 4.22     $ 3.26      $ 1.54     $ 0.95  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted earnings per share attributable to Landstar System, Inc. and subsidiary

   $ 4.21     $ 3.25      $ 1.54     $ 0.94  
  

 

 

   

 

 

    

 

 

   

 

 

 

Average number of shares outstanding:

         

Earnings per common share

     41,938,000       42,112,000        41,981,000       41,805,000  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted earnings per share

     42,024,000       42,236,000        42,054,000       41,938,000  
  

 

 

   

 

 

    

 

 

   

 

 

 

Dividends per common share

   $ 1.88     $ 0.34      $ 1.60     $ 0.09  
  

 

 

   

 

 

    

 

 

   

 

 

 


LANDSTAR SYSTEM/8

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

 

     December 30,     December 31,  
     2017     2016  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 242,416     $ 178,897  

Short-term investments

     48,928       66,560  

Trade accounts receivable, less allowance of $6,131 and $5,161

     631,164       463,102  

Other receivables, including advances to independent contractors, less allowance of $6,012 and $5,523

     24,301       18,567  

Other current assets

     14,394       10,281  
  

 

 

   

 

 

 

Total current assets

     961,203       737,407  
  

 

 

   

 

 

 

Operating property, less accumulated depreciation and amortization of $218,700 and $190,374

     276,011       272,843  

Goodwill

     39,065       31,134  

Other assets

     76,181       55,207  
  

 

 

   

 

 

 

Total assets

   $ 1,352,460     $ 1,096,591  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Cash overdraft

   $ 42,242     $ 36,251  

Accounts payable

     285,132       219,409  

Current maturities of long-term debt

     42,051       45,047  

Insurance claims

     38,919       26,121  

Dividends payable

     62,985       —    

Accrued compensation

     30,103       7,769  

Other current liabilities

     47,211       45,714  
  

 

 

   

 

 

 

Total current liabilities

     548,643       380,311  
  

 

 

   

 

 

 

Long-term debt, excluding current maturities

     83,062       93,257  

Insurance claims

     30,141       26,883  

Deferred income taxes and other non-current liabilities

     36,737       53,583  

Equity

    

Landstar System, Inc. and subsidiary shareholders’ equity

    

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,740,380 and 67,585,675 shares

     677       676  

Additional paid-in capital

     209,599       199,414  

Retained earnings

     1,611,158       1,512,993  

Cost of 25,749,493 and 25,747,541 shares of common stock in treasury

     (1,167,600     (1,167,437

Accumulated other comprehensive loss

     (3,162     (3,089
  

 

 

   

 

 

 

Total Landstar System, Inc. and subsidiary shareholders’ equity

     650,672       542,557  
  

 

 

   

 

 

 

Noncontrolling interest

     3,205       —    
  

 

 

   

 

 

 

Total equity

     653,877       542,557  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,352,460     $ 1,096,591  
  

 

 

   

 

 

 


LANDSTAR SYSTEM/9

 

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

 

     Fiscal Years Ended     Fiscal Quarters Ended  
     December 30,     December 31,     December 30,     December 31,  
     2017     2016     2017     2016  

Revenue generated through (in thousands):

        

Truck transportation

        

Truckload:

        

Van equipment

   $ 2,163,832     $ 1,900,406     $ 634,430     $ 548,426  

Unsided/platform equipment

     1,134,660       963,649       309,466       263,280  

Less-than-truckload

     89,041       74,530       23,644       20,464  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     3,387,533       2,938,585       967,540       832,170  

Rail intermodal

     96,416       103,721       27,846       26,734  

Ocean and air cargo carriers

     110,898       78,513       40,190       22,013  

Other (1)

     51,517       46,815       16,016       11,912  
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 3,646,364     $ 3,167,634     $ 1,051,592     $ 892,829  
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation

   $ 1,655,026     $ 1,488,925     $ 443,462     $ 402,077  

Number of loads:

        

Truck transportation

        

Truckload:

        

Van equipment

     1,282,632       1,179,183       339,738       331,975  

Unsided/platform equipment

     487,652       451,686       124,716       120,460  

Less-than-truckload

     132,776       115,521       34,036       31,205  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total truck transportation

     1,903,060       1,746,390       498,490       483,640  

Rail intermodal

     45,000       48,820       12,960       12,700  

Ocean and air cargo carriers

     25,420       20,690       7,270       5,780  
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,973,480       1,815,900       518,720       502,120  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loads hauled via BCO Independent Contractors (2) included in total truck transportation

     916,190       865,430       229,360       234,550  

Revenue per load:

        

Truck transportation

        

Truckload:

        

Van equipment

   $ 1,687     $ 1,612     $ 1,867     $ 1,652  

Unsided/platform equipment

     2,327       2,133       2,481       2,186  

Less-than-truckload

     671       645       695       656  

Total truck transportation

     1,780       1,683       1,941       1,721  

Rail intermodal

     2,143       2,125       2,149       2,105  

Ocean and air cargo carriers

     4,363       3,795       5,528       3,808  

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

   $ 1,806     $ 1,720     $ 1,933     $ 1,714  

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

        

Truck capacity providers:

        

BCO Independent Contractors (2)

     45     47     42     45

Truck Brokerage Carriers

     48     46     50     48

Rail intermodal

     3     3     3     3

Ocean and air cargo carriers

     3     2     4     2

Other

     1     1     2     1
                 December 30,     December 31,  
                 2017     2016  

Truck Capacity Providers

        

BCO Independent Contractors (2)

         9,087       8,824  
      

 

 

   

 

 

 

Truck Brokerage Carriers:

        

Approved and active (3)

         34,243       31,471  

Other approved

         15,691       15,982  
      

 

 

   

 

 

 
         49,934       47,453  
      

 

 

   

 

 

 

Total available truck capacity providers

         59,021       56,277  
      

 

 

   

 

 

 

Trucks provided by BCO Independent Contractors (2)

         9,696       9,439  

 

(1) Includes primarily reinsurance 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 moved at least one load in the 180 days immediately preceding the fiscal quarter end.