Landstar System's Q1 earnings climbed 3.2% year-over-year to record US$27.6M as revenue rose 10.5% to record US$688.2M; company's board of directors declares dividend of US$0.06/share, payable May 30 to stockholders of record as of May 8

JACKSONVILLE, Florida , April 24, 2014 (press release) – Landstar System, Inc. (LSTR) reported record first quarter net income of $27.6 million, or $0.61 per diluted share, on record first quarter revenue of $688 million in the 2014 first quarter. Landstar reported net income from continuing operations of $25.8 million, or $0.55 per diluted share, on revenue from continuing operations of $623 million in the 2013 first quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $105 million in the 2014 first quarter compared to $96 million in gross profit from continuing operations in the 2013 first quarter. Operating margin, representing operating income divided by gross profit, was 42.7 percent in the 2014 first quarter.           

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2014 first quarter was $645.2 million, or 94 percent of revenue, compared to $574.7 million, or 92 percent of revenue from continuing operations, in the 2013 first quarter.  Revenue hauled by rail, air and ocean cargo carriers was $33.5 million, or 5 percent of revenue, in the 2014 first quarter compared to $39.1 million, or 6 percent of revenue from continuing operations, in the 2013 first quarter. 
Trailing twelve-month return on average shareholder's equity was 35 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 28 percent.  As of March 29, 2014, the Company had $150 million in cash and short term investments. As of March 29, 2014, there was $192 million available for borrowing under the Company's senior credit facility.  Landstar purchased approximately 637,000 shares of its common stock during the 2014 first quarter at an aggregate cost of $37.1 million. Currently, there are approximately 2,131,000 shares of the Company's common stock available for purchase under Landstar's authorized share purchase program.  In addition, Landstar announced that its Board of Directors has declared a quarterly dividend of $0.06 per share payable on May 30, 2014 to stockholders of record at the close of business on May 8, 2014.  It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

"I am extremely pleased with the Company's 2014 first quarter performance," said Landstar Chairman and CEO Henry Gerkens. "2014 first quarter revenue, gross profit, operating income, net income, and diluted earnings per share were all first quarter records. Strength in demand for truck transportation services that began in the 2013 fourth quarter increased as we moved through the 2014 first quarter. Significant growth in revenue hauled via van equipment outpaced the growth in revenue hauled via unsided/platform equipment, though I believe that the growth in revenue hauled via unsided/platform equipment was slightly reduced due to the harsh weather experienced in January and February. Overall, the number of loads hauled via truck in the 2014 first quarter increased 4 percent over the 2013 first quarter while revenue per load increased 8 percent over the same period. It should also be noted that 2014 first quarter diluted earnings per share was negatively impacted compared to 2013 first quarter diluted earnings per share from continuing operations by approximately $0.03 per diluted share due to the fact that the Company's annual agent meeting was held in the 2014 first quarter compared to 2013, when it was held in the second quarter. In addition, no provision for incentive compensation was included in the 2013 first quarter, whereas, a provision for incentive compensation of approximately $0.03 per diluted share was recorded in the 2014 first quarter. Operating margin in the first quarter is typically lower than the operating margin of any other quarter. In the 2014 first quarter, operating margin on a quarter over prior year quarter comparison was negatively impacted by the timing of the agent convention and provision for incentive compensation, although in-line with the operating margin anticipated in our previously issued guidance."

Gerkens continued, "As I mentioned earlier, the underlying increase in demand that began in the 2013 fourth quarter accelerated as we moved through the 2014 first quarter.  The increase in underlying demand combined with an industry-wide reduction in truck productivity, reflecting regulatory changes and severe weather that impacted the country during the 2014 first quarter, created supply chain disruption, tightening capacity and increasing spot rates. As we move into the second quarter, I expect that normal uptick in seasonal freight patterns will continue to drive strong demand for our truck services.  Supporting this expectation, demand for the Company's truck services accelerated during the first few weeks of the April fiscal period. During this period, the rate of growth in both the number of loads hauled and revenue per load on truck transportation revenue as compared to the comparable period of the prior year has exceeded the rate of growth experienced in the 2014 first quarter compared to the 2013 first quarter. Based on current trends, I anticipate 2014 second quarter revenue to be within a range of $750 million to $800 million. I also anticipate diluted earnings per share in the 2014 second quarter to be in a range of $0.73 to $0.78."

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 "Landstar's First Quarter 2014 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," "projects," "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 2013 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.

(Tables follow)

 

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

                 
                 
           

Thirteen Weeks Ended

           

March 29,

 

March 30,

           

2014

 

2013

                 

Revenue

     

$          688,197

 

$       622,880

Investment income

   

363

 

374

                 

Costs and expenses:

         
 

Purchased transportation

 

530,031

 

477,496

 

Commissions to agents

 

52,704

 

49,032

 

Other operating costs, net of gains on asset dispositions

 

6,586

 

5,240

 

Insurance and claims

   

11,857

 

11,763

 

Selling, general and administrative

 

35,600

 

31,477

 

Depreciation and amortization

 

6,768

 

6,438

                 
   

Total costs and expenses

 

643,546

 

581,446

                 

Operating income

   

45,014

 

41,808

Interest and debt expense

   

768

 

740

                 

Income from continuing operations before income taxes

 

44,246

 

41,068

Income taxes 

     

16,608

 

15,317

Income from continuing operations

 

27,638

 

25,751

                 

Income from discontinued operations, net of income taxes

 

-

 

1,029

                 

Net income

     

$           27,638

 

$         26,780

                 
                 

Earnings per common share:

       

   Income from continuing operations

 

$               0.61

 

$             0.55

   Income from discontinued operations

 

-

 

0.02

   Earnings per common share

 

0.61

 

0.58

                 

Diluted earnings per share:

         

   Income from continuing operations

 

$               0.61

 

$             0.55

   Income from discontinued operations

 

-

 

0.02

   Diluted earnings per share

 

0.61

 

0.57

                 

Average number of shares outstanding:

       
 

Earnings per common share  

 

45,407,000

 

46,507,000

 

Diluted earnings per share

 

45,596,000

 

46,722,000

                 

Dividends per common share

 

$               0.06

 

$                -

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

                   
                   
             

March 29,

 

Dec. 28,

             

2014

 

2013

ASSETS

           

Current assets:

           
 

Cash and cash equivalents

   

$      114,166

 

$      180,302

 

Short-term investments

   

35,560

 

34,939

 

Trade accounts receivable, less allowance

     
   

of $3,594 and $3,773

   

411,545

 

378,732

 

Other receivables, including advances to independent

     
   

contractors, less allowance of $4,212 and $4,253

81,986

 

73,903

 

Deferred income taxes and other current assets

14,778

 

14,592

   

Total current assets

   

658,035

 

682,468

                   

Operating property, less accumulated depreciation

     
   

     and amortization of $160,307 and $157,985

171,717

 

177,329

Goodwill

       

31,134

 

31,134

Other assets

     

83,236

 

79,765

Total assets

     

$      944,122

 

$      970,696

                   

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Current liabilities:

           
 

Cash overdraft

     

$        21,179

 

$        27,780

 

Accounts payable

   

171,085

 

157,796

 

Current maturities of long-term debt

 

27,685

 

27,567

 

Insurance claims

   

93,790

 

92,280

 

Other current liabilities

   

62,308

 

70,237

   

Total current liabilities

   

376,047

 

375,660

                   

Long-term debt, excluding current maturities

61,599

 

73,938

Insurance claims

     

23,912

 

24,171

Deferred income taxes and other non-current liabilities

39,387

 

42,446

                   

Shareholders' equity:

         
 

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

     
   

shares, issued 67,121,124 and 67,017,858 shares

671

 

670

 

Additional paid-in capital

   

180,979

 

179,807

 

Retained earnings

   

1,197,962

 

1,173,044

 

Cost of 22,168,803 and 21,528,693 shares of common

     
   

stock in treasury

   

(936,101)

 

(899,028)

 

Accumulated other comprehensive loss

(334)

 

(12)

   

Total shareholders' equity

   

443,177

 

454,481

Total liabilities and shareholders' equity 

$      944,122

 

$      970,696

 

 

Landstar System, Inc. and Subsidiary

 

Supplemental Information

 

(Unaudited)

             
             
       

Thirteen Weeks Ended

       

March 29,

 

March 30,

       

2014

 

2013

Revenue generated through (in thousands):

         
             
 

Business Capacity Owners (1)

   

$     343,652

 

$      304,049

 

Truck Brokerage Carriers

   

301,513

 

270,641

 

Rail intermodal

   

16,495

 

18,011

 

Ocean and air cargo carriers

   

17,016

 

21,103

 

Other (2)   

   

9,521

 

9,076

       

$     688,197

 

$      622,880

             
             

Number of loads:

         
             
 

Business Capacity Owners (1)

   

198,870

 

187,770

 

Truck Brokerage Carriers

   

165,450

 

163,960

 

Rail intermodal

   

6,410

 

7,020

 

Ocean and air cargo carriers

   

3,890

 

3,970

       

374,620

 

362,720

             
             

Revenue per load:

         
             
 

Business Capacity Owners (1)

   

$         1,728

 

$          1,619

 

Truck Brokerage Carriers

   

1,822

 

1,651

 

Rail intermodal

   

2,573

 

2,566

 

Ocean and air cargo carriers

   

4,374

 

5,316

             
             
       

March 29,

 

March 30,

       

2014

 

2013

Truck Capacity Providers

         
             
 

Business Capacity Owners (1) (3)

   

7,922

 

7,851

 

Truck Brokerage Carriers:

         
 

     Approved and active (4)

   

21,588

 

20,571

 

     Approved

   

11,291

 

11,200

       

32,879

 

31,771

 

Total available truck capacity providers

   

40,801

 

39,622

 

(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 revenue generated

          by the transportation logistics segment.           

 

(3) Trucks provided by Business Capacity Owners were 8,424 and 8,348 at March 29, 2014 and

          March 30, 2013, respectively.           

 

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


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