Landstar System Reports Third Quarter Results

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.



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