Landstar System Reports Third Quarter Results

24 Oct, 2013, 07:50 ET from Landstar System, Inc.

JACKSONVILLE, Fla., Oct. 24, 2013 /PRNewswire/ -- Landstar System, Inc. (NASDAQ: LSTR) reported 2013 third quarter net income of $29.2 million, or $0.64 per diluted share, on revenue of $680.5 million. Gross profit margin, representing gross profit (gross profit defined as revenue less the cost of purchased transportation and commissions to agents) divided by revenue, was 16.0 percent and operating margin, representing operating income divided by gross profit, was 43.9 percent.  The lower than anticipated operating margin and diluted earnings per share amounts were almost entirely the result of unexpectedly high insurance and claims expense in the 2013 third quarter.   

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2013 third quarter was $627.5 million, or 92 percent of revenue.  Truck transportation revenue hauled via van trailing equipment and unsided/platform equipment represented 59 percent and 38 percent, respectively, of truck transportation revenue in the 2013 third quarter compared to 56 percent and 41 percent, respectively, in the 2012 third quarter.  Less-than-truckload revenue was 3 percent of truck transportation revenue in both the 2013 and 2012 third quarters.  Revenue hauled by rail, air and ocean cargo carriers was $38.8 million in the 2013 third quarter.

Commenting on Landstar's 2013 third quarter performance, Landstar Chairman, President and CEO, Henry Gerkens said, "Revenue in the 2013 third quarter was equal to revenue reported in the Company's 2013 second quarter and at the low-end of the 2013 third quarter revenue guidance provided in our 2013 third quarter mid-quarter update call on August 29th.  Gradual improvement in revenue trends experienced in July and August slowed into September, primarily from a lower than expected number of loads and revenue per load on truck transportation revenue.  During the 2013 third quarter, and consistent with the first half of 2013 compared to the first half of 2012, the Company experienced softness in both the number of loads and revenue per load from revenue hauled on unsided/platform equipment compared to the 2012 third quarter.  Gross profit margin in the 2013 third quarter was in-line with our previously issued guidance; however, operating margin of 43.9 percent was lower than anticipated and was almost entirely  the result of higher than expected insurance and claims expense reported in the 2013 third quarter. The Company's typical historical practice for each quarter is to forecast insurance and claims expense to be equal to Landstar's trailing five year historical average of insurance and claims expense as a percentage of BCO revenue."

"The amount of insurance and claims expense recorded in the 2013 third quarter was much higher than that historical average as a result of increased loss reserve levels.  On the other hand, 2012 third quarter insurance and claims expense as a percentage of BCO revenue was well below that historical five year average due to favorable development of prior year claims.    The unusually large variance in insurance and claims expense in the 2013 third quarter over the 2012 third quarter had a significant unanticipated negative impact on the quarter over quarter comparison of operating income, operating income margin and diluted earnings per share."

Gerkens continued, "The U.S. economy continues to experience very slow growth.  During the first several weeks of October, revenue per load on the Company's truck transportation revenue continues to be lower than prior year, generally due to softness in the unsided/platform service offering.  In particular, the Company has experienced weaker demand for its heavy/specialized services throughout 2013 compared to 2012.  Currently, we do not believe we have seen signs that point to a significant change in U.S. industrial output in the near term.  We also note that there has recently been a great deal of acquisition and divestiture activity in markets in which the Company competes, as well as the transportation sector more generally, and that historically, the Company has looked to be opportunistic but prudent when engaging in acquisition and/or divestiture activity.  In light of this activity, we regularly evaluate acquisition and divestiture opportunities available to us, including in the near term."

"Based on current trends, and assuming insurance and claims expense for the 2013 fourth quarter based on a five year historical average of insurance and claims expense as a percentage of BCO revenue, I anticipate revenue to be in a range of $650 million to $700 million and diluted earnings per share to be within a range of $0.62 to $0.70.  Also, it should be noted that favorable resolutions of various tax matters lowered the Company's effective tax rate in the 2012 fourth quarter.  Those favorable resolutions of tax matters contributed approximately $0.08 per diluted share to the $0.73 diluted earnings per share reported in the 2012 fourth quarter.  No such tax benefits are anticipated in the 2013 fourth quarter.  Also, consistent with our historical practices, our range of estimates on 2013 fourth quarter revenue and diluted earnings per share also does not give effect to the impact of any potential acquisition or divestiture that may be or become available to the Company."

Landstar will provide a live webcast of its quarterly earnings conference call this afternoon at 2:00 pm ET.  To access the webcast, visit the Company's website at www.landstar.com; click on "Investor Relations" and "Webcasts," then click on "Third Quarter 2013 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, expectations and intentions.  Terms such as "anticipates," "believes," "estimates," "expects," "plans," "predicts," "may," "should," "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 our computer systems; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; catastrophic loss of a Company facility; acquired businesses; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar's Form 10K for the 2012 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 Landstar 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 owners and employees. All Landstar transportation services companies are certified to ISO 9001:2008 quality management system standards and RC14001:2008 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 28,

September 29

September 28,

September 29,

2013

2012

2013

2012

Revenue

$  1,988,182

$         2,102,164

$          680,521

$       717,168

Investment income

1,111

1,185

366

393

Costs and expenses:

Purchased transportation

1,510,984

1,603,865

517,955

548,162

Commissions to agents

156,480

162,728

53,651

56,036

Other operating costs, net of gains on asset dispositions

15,557

17,635

6,031

6,447

Insurance and claims

37,040

28,411

13,386

8,010

Selling, general and administrative

105,220

113,916

34,244

37,455

Depreciation and amortization

22,833

20,476

7,840

7,072

Total costs and expenses

1,848,114

1,947,031

633,107

663,182

Operating income

141,179

156,318

47,780

54,379

Interest and debt expense

2,367

2,312

856

818

Income before income taxes

138,812

154,006

46,924

53,561

Income taxes 

52,360

58,203

17,678

20,460

Net income

$            86,452

$             95,803

$           29,246

$         33,101

Earnings per common share

$                1.87

$                 2.05

$               0.64

$             0.71

Diluted earnings per share

$                1.87

$                 2.04

$               0.64

$             0.71

Average number of shares outstanding:

Earnings per common share  

46,156,000

46,775,000

45,708,000

46,614,000

Diluted earnings per share

46,323,000

46,964,000

45,856,000

46,732,000

Dividends paid per common share

$                   -

$               0.170

$                  -

$           0.060

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

Sept. 28,

Dec. 29,

2013

2012

ASSETS

Current assets:

Cash and cash equivalents

$        97,552

$        74,284

Short-term investments

34,568

35,528

Trade accounts receivable, less allowance

of $8,252 and $8,650

394,796

408,787

Other receivables, including advances to independent

contractors, less allowance of $3,955 and $4,657

77,169

55,278

Deferred income taxes and other current assets

18,983

18,067

Total current assets

623,068

591,944

Operating property, less accumulated depreciation

and amortization of $157,901 and $158,999

184,441

158,953

Goodwill

57,470

57,470

Other assets

85,953

71,054

Total assets

$      950,932

$      879,421

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Cash overdraft

$        26,894

$        33,647

Accounts payable

194,134

188,981

Current maturities of long-term debt

27,347

19,016

Insurance claims

89,877

64,509

Other current liabilities

32,922

38,186

Total current liabilities

371,174

344,339

Long-term debt, excluding current maturities

90,709

95,125

Insurance claims

23,119

21,896

Deferred income taxes and other non-current liabilities

42,669

38,607

Shareholders' equity:

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

shares, issued 67,013,297 and 66,859,864 shares

670

669

Additional paid-in capital

178,952

173,976

Retained earnings

1,129,408

1,042,956

Cost of 21,296,347 and 20,411,736 shares of common

stock in treasury

(886,135)

(839,517)

Accumulated other comprehensive income

366

1,370

Total shareholders' equity

423,261

379,454

Total liabilities and shareholders' equity 

$      950,932

$      879,421

 

 

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 28,

September 29,

September 28,

September 29,

2013

2012

2013

2012

Revenue generated through (in thousands):

Business Capacity Owners (1)

$     987,914

$  1,057,109

$     342,366

$      355,861

Truck Brokerage Carriers

837,005

886,532

285,183

307,600

Rail intermodal

55,450

55,002

18,762

18,782

Ocean and air cargo carriers

65,082

60,227

20,061

20,100

Other (2)   

42,731

43,294

14,149

14,825

$  1,988,182

$  2,102,164

$     680,521

$      717,168

Number of loads:

Business Capacity Owners (1)

591,200

616,200

198,830

201,050

Truck Brokerage Carriers

495,240

510,360

163,500

176,760

Rail intermodal

22,100

22,290

7,710

7,470

Ocean and air cargo carriers

12,370

11,760

4,330

3,850

1,120,910

1,160,610

374,370

389,130

Revenue per load:

Business Capacity Owners (1)

$          1,671

$          1,716

$         1,722

$          1,770

Truck Brokerage Carriers

1,690

1,737

1,744

1,740

Rail intermodal

2,509

2,468

2,433

2,514

Ocean and air cargo carriers

5,261

5,121

4,633

5,221

September 28,

September 29,

2013

2012

Truck Capacity Providers

Business Capacity Owners (1) (3)

7,890

8,074

Truck Brokerage Carriers:

     Approved and active (4)

21,171

20,474

     Approved

11,143

9,315

32,314

29,789

Total available truck capacity providers

40,204

37,863

(1) Business Capacity Owners are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.

(2) Includes premium revenue generated by the insurance segment and warehousing and transportation management fee revenue generated by the transportation logistics segment.

(3) Trucks provided by Business Capacity Owners were 8,410 and 8,596 at September 28, 2013 and September 29, 2012, respectively.

(4) Active refers to Truck Brokerage Carriers who have moved at least one load in the past 180 days.

 

SOURCE Landstar System, Inc.



RELATED LINKS

http://www.landstar.com