Landstar System's Q1 earnings equal to year-ago quarter at US$26.8M as revenue falls to US$628.3M from US$649.0M; company anticipates yearly drop in Q2 revenue amid soft April demand for truck services

JACKSONVILLE, Florida , April 25, 2013 (press release) – Landstar System, Inc. (LSTR) reported 2013 first quarter diluted earnings per share of $0.57 from net income of $26.8 million, equaling the record first quarter net income and diluted earnings per share that were achieved in the 2012 first quarter.  Operating margin, representing operating income divided by gross profit (gross profit defined as revenue less the cost of purchased transportation and commissions to agents) was 42.3 percent in the 2013 first quarter compared to 40.8 percent in the 2012 first quarter.  Revenue for the 2013 first quarter was the second highest first quarter revenue in Landstar history at $628.3 million compared to $649.0 million in the 2012 first quarter.  Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2013 first quarter was $574.7 million, or 91 percent of revenue, compared to $600.2 million, or 92 percent of revenue, in the 2012 first quarter.  Revenue hauled by rail, air and ocean cargo carriers was $39.1 million, or 6 percent of revenue, in the 2013 first quarter compared to $35.1 million, or 5 percent of revenue, in the 2012 first quarter. 

The resiliency of Landstar's variable cost business model continues to generate outstanding returns and provide a strong balance sheet.  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 27 percent.  As of March 30, 2013, the Company had $139.8 million in cash and short term investments and $25 million in borrowings outstanding under its senior credit facility. As of March 30, 2013, there was $167 million available for borrowing under the Company's senior credit facility. Currently, there are 1,992,000 shares of the Company's common stock available for purchase under Landstar's authorized share purchase program.

Commenting on Landstar's 2013 first quarter performance, Landstar Chairman, President and CEO, Henry Gerkens said,  "Diluted earnings per share was $0.57 in the 2013 first quarter, matching the first quarter record of $0.57, which was set last year.  Operating margin in the 2013 first quarter of 42.3 percent was the highest first quarter operating margin in Landstar history. The Company's annual agent meeting was held in the 2013 second quarter versus in the 2012 first quarter, which resulted in a favorable comparison of the 2013 first quarter operating margin to the 2012 first quarter operating margin. From a revenue standpoint, revenue in the 2013 first quarter was the second highest first quarter revenue in Landstar history.  Demand for the Company's truck services was choppy throughout the 2013 first quarter due in large part to inclement weather. Additionally, the 2013 first quarter had 2 fewer full work days than the 2012 first quarter. In general, Landstar experienced softness throughout the 2013 first quarter in both the number of loads and revenue per load on loads hauled via truck with much of the softness coming from revenue hauled on heavy/specialized platform equipment."

Gerkens continued, "Demand for the Company's truck services continued to be soft during the first few weeks of April. Based on current trends, I anticipate 2013 second quarter revenue to be below revenue for the 2012 second quarter, similar to the shortfall experienced in the 2013 first quarter over the 2012 first quarter. Diluted earnings per share in the 2013 second quarter will be negatively impacted when compared to the 2012 second quarter by approximately $0.03 per diluted share related to the Company's annual agent meeting held in April 2013, as described above. In addition, estimated insurance and claims expense for the 2013 second quarter, calculated using a historical 5 year average of insurance and claims expense as a percentage of BCO revenue, is projected to be higher than insurance and claims expense in the 2012 second quarter. Including the $0.03 per diluted share charge for the Company's annual agent meeting and what amounts to a normalized insurance and claims expense, I anticipate diluted earnings per share to be within a range of $0.68 to $0.73 for the 2013 second quarter."

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 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," "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 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 non-asset based provider of integrated supply chain solutions.  Landstar delivers safe, specialized transportation and logistics services to a broad range of customers worldwide 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 30,

 

March 31,

           

2013

 

2012

                 

Revenue

     

$          628,321

 

$       649,023

Investment income

   

374

 

387

                 

Costs and expenses:

         
 

Purchased transportation

 

476,605

 

492,922

 

Commissions to agents

 

49,088

 

50,232

 

Other operating costs, net of gains on asset dispositions

 

5,325

 

6,472

 

Insurance and claims

   

11,806

 

11,095

 

Selling, general and administrative

 

35,226

 

38,799

 

Depreciation and amortization

 

7,183

 

6,740

                 
   

Total costs and expenses

 

585,233

 

606,260

                 

Operating income

   

43,462

 

43,150

Interest and debt expense

   

740

 

724

                 

Income before income taxes

 

42,722

 

42,426

Income taxes 

     

15,942

 

15,579

                 

Net income

     

$           26,780

 

$         26,847

                 
                 

Earnings per common share

 

$               0.58

 

$             0.57

                 

Diluted earnings per share

   

$               0.57

 

$             0.57

                 

Average number of shares outstanding:

       
 

Earnings per common share  

 

46,507,000

 

46,800,000

 

Diluted earnings per share

 

46,722,000

 

47,061,000

                 

Dividends paid per common share

 

$                  -

 

$           0.055

 

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

                   
                   
             

Mar. 30,

 

Dec. 29,

             

2013

 

2012

ASSETS

           

Current assets:

           
 

Cash and cash equivalents

   

$        90,782

 

$        74,284

 

Short-term investments

   

48,974

 

35,528

 

Trade accounts receivable, less allowance

     
   

of $8,333 and $8,650

   

378,931

 

408,787

 

Other receivables, including advances to independent

     
   

contractors, less allowance of $4,227 and $4,657

64,017

 

55,278

 

Deferred income taxes and other current assets

14,629

 

18,067

   

Total current assets

   

597,333

 

591,944

                   

Operating property, less accumulated depreciation

     
   

      and amortization of $161,007 and $158,999

161,459

 

158,953

Goodwill

       

57,470

 

57,470

Other assets

     

68,772

 

71,054

Total assets

     

$      885,034

 

$      879,421

                   

LIABILITIES AND SHAREHOLDERS' EQUITY

     

Current liabilities:

           
 

Cash overdraft

     

$        27,385

 

$        33,647

 

Accounts payable

   

179,014

 

188,981

 

Current maturities of long-term debt

 

20,673

 

19,016

 

Insurance claims

   

65,857

 

64,509

 

Other current liabilities

   

41,890

 

38,186

   

Total current liabilities

   

334,819

 

344,339

                   

Long-term debt, excluding current maturities

82,448

 

95,125

Insurance claims

     

21,427

 

21,896

Deferred income taxes and other non-current liabilities

38,538

 

38,607

                   

Shareholders' equity:

         
 

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

     
   

shares, issued 66,973,215 and 66,859,864 shares

670

 

669

 

Additional paid-in capital

   

175,841

 

173,976

 

Retained earnings

   

1,069,736

 

1,042,956

 

Cost of 20,412,020 and 20,411,736 shares of common

     
   

stock in treasury

   

(839,532)

 

(839,517)

 

Accumulated other comprehensive income

1,087

 

1,370

   

Total shareholders' equity

   

407,802

 

379,454

Total liabilities and shareholders' equity 

$      885,034

 

$      879,421

 

 

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

 
 
             
             
       

Thirteen Weeks Ended

       

March 30,

 

March 31,

       

2013

 

2012

Revenue generated through (in thousands):

         
             
 

Business Capacity Owners (1)

   

$     304,049

 

$      329,362

 

Truck Brokerage Carriers

   

270,641

 

270,842

 

Rail intermodal

   

18,011

 

17,382

 

Ocean and air cargo carriers

   

21,103

 

17,669

 

Other (2)   

   

14,517

 

13,768

       

$     628,321

 

$      649,023

             
             

Number of loads:

         
             
 

Business Capacity Owners (1)

   

187,770

 

199,200

 

Truck Brokerage Carriers

   

163,960

 

158,030

 

Rail intermodal

   

7,020

 

7,160

 

Ocean and air cargo carriers

   

3,970

 

3,980

       

362,720

 

368,370

             
             

Revenue per load:

         
             
 

Business Capacity Owners (1)

   

$         1,619

 

$          1,653

 

Truck Brokerage Carriers

   

1,651

 

1,714

 

Rail intermodal

   

2,566

 

2,428

 

Ocean and air cargo carriers

   

5,316

 

4,439

             
             
       

March 30,

 

March 31,

       

2013

 

2012

Truck Capacity Providers

         
             
 

Business Capacity Owners (1) (3)

   

7,851

 

7,825

 

Truck Brokerage Carriers:

         
 

     Approved and active (4)

   

20,571

 

18,946

 

     Approved

   

11,200

 

9,382

       

31,771

 

28,328

 

Total available truck capacity providers

   

39,622

 

36,153

             
             
             
             

(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 8,348 and 8,350 at March 30, 2013 and 

March 31, 2012, respectively.

         
             

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


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