Landstar System Reports Record Quarterly Revenue of $893 Million and Record Quarterly Diluted Earnings Per Share From Continuing Operations of $0.94
Source: Nasdaq GlobeNewswire / 01 Feb 2017 16:16:11 America/New_York
JACKSONVILLE, Fla., Feb. 01, 2017 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported net income of $39.6 million, or $0.94 per diluted share, in the 2016 fourteen-week fourth quarter on revenue of $893 million. Landstar reported net income of $37.9 million, or $0.88 per diluted share, on revenue of $849 million in the 2015 thirteen-week fourth quarter. Revenue for the 2016 fourth quarter was the highest quarterly revenue in Landstar history while diluted earnings per share for the 2016 fourth quarter was the highest quarterly diluted earnings per share from continuing operations in Landstar history. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $132.8 million in the 2016 fourth quarter compared to $126.4 million in gross profit in the 2015 fourth quarter. Operating income was $63.8 million in the 2016 fourth quarter and operating margin, representing operating income divided by gross profit, was 48.0 percent.
The Company’s fiscal year ends each year on the last Saturday in December. As such, the Company’s 2016 fourth quarter included fourteen weeks of operations whereas the 2015 fourth quarter included thirteen weeks. We estimate the extra week in 2016 contributed revenue of approximately $36 million. In comparison, however, the 2015 fourth quarter included $38 million of revenue from a special project for a customer in the automotive sector. That project ended at year end 2015.
Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2016 fourth quarter was $832.2 million, or 93 percent of revenue, compared to $786.4 million, or 93 percent of revenue, in the 2015 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2016 fourth quarter was $548.4 million compared to $481.4 million in the 2015 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 fourth quarter was $263.3 million compared to $285.6 million in the 2015 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $48.7 million, or 5 percent of revenue, in the 2016 fourth quarter compared to $50.6 million, or 6 percent of revenue, in the 2015 fourth quarter.
Return on average shareholders’ equity was 28 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 22 percent in fiscal year 2016. Landstar purchased approximately 773,000 shares of its common stock during the fiscal year ended December 31, 2016 at an aggregate cost of $50.5 million. Currently, there are approximately 1,036,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program. As of December 31, 2016, the Company had $245 million in cash and short term investments and $214 million available for borrowing under the Company’s senior credit facility.
In addition, Landstar announced that its Board of Directors has declared a quarterly dividend of $0.09 per share payable on March 17, 2017 to stockholders of record at the close of business on February 20, 2017. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.
Commenting on Landstar’s 2016 fourth quarter results, Landstar’s President and CEO Jim Gattoni said, “I am very pleased with Landstar’s performance in the 2016 fourth quarter given the challenges of a low growth macro environment and more readily available capacity. Diluted earnings per share was $0.94 in the 2016 fourth quarter, the highest quarterly diluted earnings per share in Landstar history, other than the fourth quarter of 2013 when we had a significant, one-time gain on the sale of our former supply chain companies. 2016 fourth quarter revenue was $893 million, the highest quarterly revenue in Landstar history. Moreover, gross profit of $132.8 million in the 2016 fourth quarter was the highest quarterly Landstar gross profit in any quarter over the last ten years.”
Gattoni continued, “The number of loads hauled via truck in the 2016 fourth quarter increased 11 percent over the 2015 fourth quarter, while the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers increased 6 percent over the 2015 fourth quarter. There are a few factors impacting the comparison of the number of loads hauled via truck in the 2016 fourth quarter compared to the 2015 fourth quarter. As previously mentioned, the 2016 fourth quarter included an extra week. Additionally, in 2016, Christmas day fell on a Sunday whereas in 2015 it fell on a Friday, making the week prior to Christmas in 2016 more productive than the comparable week of 2015. 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, while the special project for the automotive customer that ended at the end of 2015 added 19,000 loads hauled via unsided/platform equipment to the 2015 fourth quarter. Excluding these items, we estimate the number of loads hauled via truck in the 2016 fourth quarter exceeded the 2015 fourth quarter by approximately 8 percent. As expected, revenue per load on loads hauled via truck was 4 percent lower in the 2016 fourth quarter as compared to the 2015 fourth quarter, mostly due to a somewhat softer freight environment and the impact of more readily available truck capacity.”
Gattoni further stated, “Landstar executed well throughout fiscal year 2016 despite the tough industrial macro conditions and more readily available truck capacity that, along with the $100 million in revenue (51,000 loads hauled via truck) from the special project in 2015, made for difficult year-over-year comparisons. Revenue for 2016 was approximately $3.2 billion and gross profit was approximately $488 million, the second highest annual gross profit in Landstar history behind only 2015. Revenue in 2016 was provided on the strength of approximately 1,746,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. These fiscal year 2016 achievements speak to the strength and depth of the Landstar network and ability to execute in almost any environment. I am pleased by our continued organic load volume growth and our ability to continue to attract productive agents and capacity to the network.”
Gattoni continued, “The impact of potential changes in 2017 to U.S. trade, tax and other economic policies on the domestic and global economies contribute to a highly unpredictable environment for our industry. As such, I will not be providing annual revenue or earnings guidance for fiscal year 2017. As it pertains to anticipated costs and expenses, however, there are several specific assumptions we wish to highlight with respect to the 2017 fiscal year:
- We continue to invest in the agent network and, as previously disclosed, are currently underway in a multi-year project aimed at increasing efficiencies, primarily through technology, at both Landstar and across all of our agent offices. We believe this initiative will support growth in the years to come. We expect the cost of this project to be in the range of $6.5 million to $9.5 million, or approximately $0.10 to $0.15 per diluted share, in fiscal year 2017. The cost of this initiative was $6.6 million in 2016, or $0.10 per diluted share.
- We estimate that the costs of insurance and claims will approximate our historical average of 3.3 percent of BCO revenue.
- We expect higher depreciation expense in 2017 as we have grown our trailer fleet and our trailer fleet is newer than it has been in recent years.
- Certain bonus targets under the Company’s incentive compensation plan were not achieved in 2016, as operating income and earnings per share targets were not met. The achievement of a one-time target bonus payment in 2017 would result in approximately $7 million of bonus expense that was not included in 2016, and we could exceed that amount if we exceed our 2017 targets.
- We have assumed no changes to the applicable U.S. statutory corporate income tax rate and, therefore, assume an effective income tax rate for the Company of 38.2 percent for 2017.”
Gattoni further commented, “With respect to near term performance, during the first three weeks of the 2017 first quarter, we are experiencing growth in the number of loads hauled via truck, but at a somewhat lower rate as compared to the quarter-over-quarter volume growth rates experienced during the 2016 fourth quarter. I expect the number of loads hauled via truck in the 2017 first quarter to increase in a mid to high-single digit range over the 2016 first quarter. As it pertains to revenue per load on loads hauled via truck, rates appear to have stabilized over the last several months and I do not expect a significant change in the rate environment over the balance of the 2017 first quarter. As such, I expect revenue per load on loads hauled via truck in the 2017 first quarter to be equal to or slightly below the 2016 first quarter. Assuming the current environment continues throughout the 2017 first quarter, I anticipate revenue for the 2017 first quarter to be in a range of $725 million to $775 million. Assuming that range of estimated revenue and no material changes with respect to the expense assumptions set forth above, I would anticipate 2017 first quarter diluted earnings per share to be in a range of $0.70 to $0.75 per share. We believe that the potential changes to U.S. trade, tax and other economic policies will lead to a very interesting time for our industry. Regardless of the changes that may occur, Landstar’s variable cost business model performs well in almost any environment and I would expect Landstar to outperform industry fundamentals in the years ahead.”
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 2016 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,” “assumes,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “would,” “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 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; catastrophic loss of a Company facility; intellectual property; unclaimed property; regulations focused on diesel emissions and other air quality matters; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2015 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, 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. All 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.
Landstar System, Inc. and Subsidiary Consolidated Statements of Income (Dollars in thousands, except per share amounts) (Unaudited) Fiscal Years Ended Fiscal Quarters Ended December 31, December 26, December 31, December 26, 2016 2015 2016 2015 Revenue $ 3,167,634 $ 3,321,091 $ 892,829 $ 848,602 Investment income 1,502 1,396 402 353 Costs and expenses: Purchased transportation 2,415,663 2,551,343 684,918 651,030 Commissions to agents 264,205 270,260 75,130 71,147 Other operating costs, net of gains/losses on asset sales/dispositions 29,702 31,618 8,218 7,230 Insurance and claims 57,280 48,754 14,485 11,144 Selling, general and administrative 143,239 149,704 37,028 37,907 Depreciation and amortization 35,796 29,102 9,687 7,849 Total costs and expenses 2,945,885 3,080,781 829,466 786,307 Operating income 223,251 241,706 63,765 62,648 Interest and debt expense 3,794 2,949 1,069 741 Income before income taxes 219,457 238,757 62,696 61,907 Income taxes 82,107 91,068 23,122 24,052 Net income $ 137,350 $ 147,689 $ 39,574 $ 37,855 Earnings per common share $ 3.26 $ 3.38 $ 0.95 $ 0.89 Diluted earnings per share $ 3.25 $ 3.37 $ 0.94 $ 0.88 Average number of shares outstanding: Earnings per common share 42,112,000 43,664,000 41,805,000 42,729,000 Diluted earnings per share 42,236,000 43,813,000 41,938,000 42,849,000 Dividends per common share $ 0.34 $ 0.30 $ 0.09 $ 0.08 Landstar System, Inc. and Subsidiary Consolidated Balance Sheets (Dollars in thousands, except per share amounts) (Unaudited) December 31, December 26, 2016 2015 ASSETS Current assets: Cash and cash equivalents $ 178,897 $ 114,520 Short-term investments 66,560 48,823 Trade accounts receivable, less allowance of $5,161 and $4,327 463,102 462,699 Other receivables, including advances to independent contractors, less allowance of $5,523 and $4,143 18,567 18,472 Other current assets 10,281 11,604 Total current assets 737,407 656,118 Operating property, less accumulated depreciation and amortization of $190,374 and $182,591 272,843 225,927 Goodwill 31,134 31,134 Other assets 55,207 78,339 Total assets $ 1,096,591 $ 991,518 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdraft $ 36,251 $ 35,609 Accounts payable 219,409 223,709 Current maturities of long-term debt 45,047 42,499 Insurance claims 26,121 19,757 Other current liabilities 53,483 47,963 Total current liabilities 380,311 369,537 Long-term debt, excluding current maturities 93,257 81,793 Insurance claims 26,883 21,477 Deferred income taxes and other non-current liabilities 53,583 52,474 Shareholders' equity: Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,585,675 and 67,391,616 shares 676 674 Additional paid-in capital 199,414 195,841 Retained earnings 1,512,993 1,389,975 Cost of 25,747,541 and 24,972,079 shares of common stock in treasury (1,167,437 ) (1,116,765 ) Accumulated other comprehensive loss (3,089 ) (3,488 ) Total shareholders' equity 542,557 466,237 Total liabilities and shareholders' equity $ 1,096,591 $ 991,518 Landstar System, Inc. and Subsidiary Supplemental Information (Unaudited) Fiscal Years Ended Fiscal Quarters Ended December 31, December 26, December 31, December 26, 2016 2015 2016 2015 Revenue generated through (in thousands): Truck transportation Truckload: Van equipment $ 1,900,406 $ 1,894,221 $ 548,426 $ 481,397 Unsided/platform equipment 963,649 1,109,356 263,280 285,589 Less-than-truckload 74,530 80,687 20,464 19,390 Total truck transportation 2,938,585 3,084,264 832,170 786,376 Rail intermodal 103,721 105,347 26,734 28,659 Ocean and air cargo carriers 78,513 86,664 22,013 21,939 Other (1) 46,815 44,816 11,912 11,628 $ 3,167,634 $ 3,321,091 $ 892,829 $ 848,602 Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation $ 1,488,925 $ 1,522,513 $ 402,077 $ 381,643 Number of loads: Truck transportation Truckload: Van equipment 1,179,183 1,102,654 331,975 282,431 Unsided/platform equipment 451,686 485,993 120,460 126,224 Less-than-truckload 115,521 112,363 31,205 28,525 Total truck transportation 1,746,390 1,701,010 483,640 437,180 Rail intermodal 48,820 45,060 12,700 12,710 Ocean and air cargo carriers 20,690 18,060 5,780 4,740 1,815,900 1,764,130 502,120 454,630 Loads hauled via BCO Independent Contractors (2) included in total truck transportation 865,430 826,600 234,550 210,190 Revenue per load: Truck transportation Truckload: Van equipment $ 1,612 $ 1,718 $ 1,652 $ 1,704 Unsided/platform equipment 2,133 2,283 2,186 2,263 Less-than-truckload 645 718 656 680 Total truck transportation 1,683 1,813 1,721 1,799 Rail intermodal 2,125 2,338 2,105 2,255 Ocean and air cargo carriers 3,795 4,799 3,808 4,628 Revenue per load on loads hauled via BCO Independent Contractors (2) $ 1,720 $ 1,842 $ 1,714 $ 1,816 Revenue by capacity type (as a % of total revenue); Truck capacity providers: BCO Independent Contractors (2) 47 % 46 % 45 % 45 % Truck Brokerage Carriers 46 % 47 % 48 % 48 % Rail intermodal 3 % 3 % 3 % 3 % Ocean and air cargo carriers 2 % 3 % 2 % 3 % Other 1 % 1 % 1 % 1 % December 31, December 26, 2016 2015 Truck Capacity Providers BCO Independent Contractors (2) 8,824 8,907 Truck Brokerage Carriers: Approved and active (3) 31,471 29,728 Other approved 15,982 14,715 47,453 44,443 Total available truck capacity providers 56,277 53,350 Trucks provided by BCO Independent Contractors (2) 9,439 9,500 (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.
Contact: Kevin Stout Landstar System, Inc. www.landstar.com 904-398-9400