EX-99.1 2 d267887dex991.htm NEWS RELEASE

Exhibit 99.1

For Immediate Release |  | Contact: Kevin Stout
|  | Landstar System, Inc.
|  | www.landstar.com
October 19, 2016 |  | 904-398-9400

LANDSTAR SYSTEM REPORTS THIRD QUARTER REVENUE OF $788 MILLION

AND DILUTED EARNINGS PER SHARE OF $0.86

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported third quarter diluted earnings per share of $0.86 on revenue of $788 million in the 2016 third quarter. Landstar reported diluted earnings per share of $0.90 on revenue of $842 million in the 2015 third quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.8 million in the 2016 third quarter compared to $126.8 million in the 2015 third quarter. Operating margin, representing operating income divided by gross profit, was 48.0 percent in the 2016 third quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2016 third quarter was $732.9 million, or 93 percent of revenue, compared to $779.8 million, or 93 percent of revenue, in the 2015 third quarter. Truckload transportation revenue hauled via van equipment in the 2016 third quarter was $465.8 million compared to $466.2 million in the 2015 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 third quarter was $248.9 million compared to $293.3 million in the 2015 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $43.4 million, or 6 percent of revenue, in the 2016 third quarter compared to $50.5 million, or 6 percent of revenue, in the 2015 third quarter.

Trailing twelve-month return on average shareholders’ equity was 28 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 22 percent. During the 2016 third quarter,

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Landstar purchased 350,000 shares of its common stock at an aggregate cost of $24.0 million bringing the total number of common shares purchased during the thirty-nine weeks ended September 24, 2016 to 773,000 shares 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 September 24, 2016, the Company had $227 million in cash and short term investments and $214 million available for borrowings under the Company’s senior credit facility.

In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.09 per share payable on December 2, 2016, to stockholders of record as of the close of business on November 8, 2016. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar’s 2016 third quarter, Landstar’s President and CEO Jim Gattoni said, “Diluted earnings per share was $0.86 in the 2016 third quarter, the second highest third quarter diluted earnings per share in Landstar history, second only to 2015 third quarter record diluted earnings per share of $0.90. Revenue was $788 million with gross profit of $121.8 million in the 2016 third quarter, the second highest third quarter gross profit in Landstar history, second only to 2015 third quarter record gross profit of $126.8 million. 2015 third quarter revenue was a record $842 million and included $35 million of revenue from a project on behalf of a customer in the automotive sector. That project was completed at the end of 2015. Overall, we continued to have difficult year-over-year comparisons to 2015 driven mostly by tougher overall industry conditions in 2016 and revenue from the previously referenced automotive project in 2015.”

Gattoni continued, “Landstar executed well when considering the softness in U.S. manufacturing and more readily available truck capacity in 2016. Given this environment, Landstar managed a 4 percent increase in the number of loads hauled via truck in the 2016 third quarter over the 2015 third quarter, when excluding approximately 20,000 truckloads hauled via unsided/platform equipment for the automotive project in the 2015 third quarter.

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Overall, the number of loads hauled via truck in the 2016 third quarter decreased 1 percent from the 2015 third quarter. This overall decrease in volume was driven by a 6 percent increase in the number of loads hauled via van equipment, offset by a 14 percent decrease in the number of loads hauled via unsided/platform equipment. Excluding the loadings related to the automotive project, Landstar experienced a 1 percent increase in the number of loads hauled via unsided/platform equipment. Landstar also achieved a 4 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 third quarter over the 2015 third quarter.”

Gattoni further continued, “Revenue per load on loads hauled via truck in the 2016 third quarter was 5 percent below the 2015 third quarter. This represents a sequential improvement, however, as revenue per load on loads hauled via truck in the 2016 first quarter compared to the 2015 first quarter and in the 2016 second quarter compared to the 2015 second quarter decreased 10 percent and 9 percent, respectively. The reduction in the percentage shortfall in revenue per load on loads hauled via truck in the 2016 third quarter was due to an increase in revenue per load in the 2016 third quarter compared to the 2016 second quarter that was slightly ahead of recent second quarter to third quarter trends, coupled with weaker revenue per load in the 2015 third quarter as compared to the first half of 2015. Additionally, the average cost of a gallon of diesel fuel was approximately 10 percent lower during the 2016 third quarter compared to the 2015 third quarter putting additional pressure on pricing, especially as it related to loads hauled via truck brokerage carriers. The softer pricing environment contributed to the decline in the 2016 third quarter operating margin, which was 48.0 percent, compared to 50.4 percent in the 2015 third quarter.”

Commenting on Landstar’s 2016 fourth quarter, Gattoni stated, “I expect the slow growth environment we have experienced during the first three quarters of 2016 to continue through the 2016 fourth quarter. As was the case in our 2016 second and third quarters, fourth quarter 2016 over fourth quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company’s 2015 fourth quarter included approximately $38 million in revenue from

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approximately 19,000 loads hauled via truck related to that project. Through the first few weeks of October, we have experienced the normal seasonal pattern for revenue per load on loads hauled via truck and, therefore, I anticipate revenue per load on loads hauled via truck to be below prior year’s fourth quarter in a mid-single digit range, consistent with the 2016 third quarter compared to the 2015 third quarter. Landstar’s fiscal year ends on the last Saturday of the calendar year, which this year is December 31, 2016, resulting in fiscal year 2016 representing a 53 week period. As such, the Company’s 2016 fourth quarter includes an extra week of operations. The number of loads hauled via truck during the first few weeks of October is trending slightly ahead of the historical third quarter to fourth quarter trend. Assuming that trend continues, and given the extra week in the 2016 fourth quarter, I would expect the number of loads hauled via truck in the 2016 fourth quarter to exceed the 2015 fourth quarter in a low-single digit range. As such, I expect 2016 fourth quarter revenue to be in a range of $800 million to $850 million. Assuming insurance and claims costs in the 2016 fourth quarter are approximately 3.2 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past 5 years, I would expect diluted earnings per share to be in a range of $0.85 to $0.90 in the 2016 fourth quarter.”

Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 a.m. 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 Third 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,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative

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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.

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 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.

(Tables follow)

LANDSTAR SYSTEM/6

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 24, 2016 |  |  | September 26, 2015 |  |  | September 24, 2016 |  |  | September 26, 2015 |
Revenue |  | $ | 2,274,805 |  |  | $ | 2,472,489 |  |  | $ | 787,938 |  |  | $ | 841,726 |
Investment income |  |  | 1,100 |  |  |  | 1,043 |  |  |  | 357 |  |  |  | 350 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchased transportation |  |  | 1,730,745 |  |  |  | 1,900,313 |  |  |  | 601,002 |  |  |  | 645,583 |
Commissions to agents |  |  | 189,075 |  |  |  | 199,113 |  |  |  | 65,144 |  |  |  | 69,297 |
Other operating costs, net of gains on asset sales/dispositions |  |  | 21,484 |  |  |  | 24,388 |  |  |  | 7,492 |  |  |  | 8,718 |
Insurance and claims |  |  | 42,795 |  |  |  | 37,610 |  |  |  | 12,488 |  |  |  | 10,502 |
Selling, general and administrative |  |  | 106,211 |  |  |  | 111,797 |  |  |  | 34,692 |  |  |  | 36,811 |
Depreciation and amortization |  |  | 26,109 |  |  |  | 21,253 |  |  |  | 9,016 |  |  |  | 7,185 |
Total costs and expenses |  |  | 2,116,419 |  |  |  | 2,294,474 |  |  |  | 729,834 |  |  |  | 778,096 |
Operating income |  |  | 159,486 |  |  |  | 179,058 |  |  |  | 58,461 |  |  |  | 63,980 |
Interest and debt expense |  |  | 2,725 |  |  |  | 2,208 |  |  |  | 948 |  |  |  | 714 |
Income before income taxes |  |  | 156,761 |  |  |  | 176,850 |  |  |  | 57,513 |  |  |  | 63,266 |
Income taxes |  |  | 58,985 |  |  |  | 67,016 |  |  |  | 21,235 |  |  |  | 23,918 |
Net income |  | $ | 97,776 |  |  | $ | 109,834 |  |  | $ | 36,278 |  |  | $ | 39,348 |
Earnings per common share |  | $ | 2.32 |  |  | $ | 2.50 |  |  | $ | 0.86 |  |  | $ | 0.91 |
Diluted earnings per share |  | $ | 2.31 |  |  | $ | 2.49 |  |  | $ | 0.86 |  |  | $ | 0.90 |
Average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings per common share |  |  | 42,223,000 |  |  |  | 43,975,000 |  |  |  | 42,039,000 |  |  |  | 43,446,000 |
Diluted earnings per share |  |  | 42,341,000 |  |  |  | 44,134,000 |  |  |  | 42,170,000 |  |  |  | 43,607,000 |
Dividends per common share |  | $ | 0.25 |  |  | $ | 0.22 |  |  | $ | 0.09 |  |  | $ | 0.08 |

LANDSTAR SYSTEM/7

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

|  | September 24, 2016 |  |  | December 26, 2015 |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 170,805 |  |  | $ | 114,520 |
Short-term investments |  |  | 56,679 |  |  |  | 48,823 |
Trade accounts receivable, less allowance of $4,881 and $4,327 |  |  | 409,047 |  |  |  | 462,699 |
Other receivables, including advances to independent contractors, less allowance of $4,871 and $4,143 |  |  | 17,091 |  |  |  | 18,472 |
Other current assets |  |  | 15,188 |  |  |  | 11,604 |
Total current assets |  |  | 668,810 |  |  |  | 656,118 |
Operating property, less accumulated depreciation and amortization of $187,566 and $182,591 |  |  | 261,943 |  |  |  | 225,927 |
Goodwill |  |  | 31,134 |  |  |  | 31,134 |
Other assets |  |  | 65,871 |  |  |  | 78,339 |
Total assets |  | $ | 1,027,758 |  |  | $ | 991,518 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Cash overdraft |  | $ | 27,725 |  |  | $ | 35,609 |
Accounts payable |  |  | 201,872 |  |  |  | 223,709 |
Current maturities of long-term debt |  |  | 44,784 |  |  |  | 42,499 |
Insurance claims |  |  | 27,941 |  |  |  | 19,757 |
Other current liabilities |  |  | 48,027 |  |  |  | 47,963 |
Total current liabilities |  |  | 350,349 |  |  |  | 369,537 |
Long-term debt, excluding current maturities |  |  | 90,817 |  |  |  | 81,793 |
Insurance claims |  |  | 23,765 |  |  |  | 21,477 |
Deferred income taxes and other non-current liabilities |  |  | 56,097 |  |  |  | 52,474 |
Shareholders’ equity: |  |  |  |  |  |  |  |
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,522,281 and 67,391,616 shares |  |  | 675 |  |  |  | 674 |
Additional paid-in capital |  |  | 198,736 |  |  |  | 195,841 |
Retained earnings |  |  | 1,477,179 |  |  |  | 1,389,975 |
Cost of 25,747,002 and 24,972,079 shares of common stock in treasury |  |  | (1,167,391 | ) |  |  | (1,116,765 | )
Accumulated other comprehensive loss |  |  | (2,469 | ) |  |  | (3,488 | )
Total shareholders’ equity |  |  | 506,730 |  |  |  | 466,237 |
Total liabilities and shareholders’ equity |  | $ | 1,027,758 |  |  | $ | 991,518 |

LANDSTAR SYSTEM/8

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

|  | Thirty Nine Weeks Ended |  |  | Thirteen Weeks Ended |
|  | September 24, 2016 |  |  | September 26, 2015 |  |  | September 24, 2016 |  |  | September 26, 2015 |
Revenue generated through (in thousands): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truck transportation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truckload: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Van equipment |  | $ | 1,351,980 |  |  | $ | 1,412,824 |  |  | $ | 465,785 |  |  | $ | 466,226 |
Unsided/platform equipment |  |  | 700,369 |  |  |  | 823,767 |  |  |  | 248,939 |  |  |  | 293,252 |
Less-than-truckload |  |  | 54,066 |  |  |  | 61,297 |  |  |  | 18,139 |  |  |  | 20,341 |
Total truck transportation |  |  | 2,106,415 |  |  |  | 2,297,888 |  |  |  | 732,863 |  |  |  | 779,819 |
Rail intermodal |  |  | 76,987 |  |  |  | 76,688 |  |  |  | 24,650 |  |  |  | 27,166 |
Ocean and air cargo carriers |  |  | 56,500 |  |  |  | 64,725 |  |  |  | 18,790 |  |  |  | 23,315 |
Other (1) |  |  | 34,903 |  |  |  | 33,188 |  |  |  | 11,635 |  |  |  | 11,426 |
|  | $ | 2,274,805 |  |  | $ | 2,472,489 |  |  | $ | 787,938 |  |  | $ | 841,726 |
Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation |  | $ | 1,086,848 |  |  | $ | 1,140,870 |  |  | $ | 379,196 |  |  | $ | 388,840 |
Number of loads: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truck transportation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truckload: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Van equipment |  |  | 847,208 |  |  |  | 820,223 |  |  |  | 291,089 |  |  |  | 275,509 |
Unsided/platform equipment |  |  | 331,226 |  |  |  | 359,769 |  |  |  | 112,192 |  |  |  | 130,317 |
Less-than-truckload |  |  | 84,316 |  |  |  | 83,838 |  |  |  | 28,589 |  |  |  | 28,934 |
Total truck transportation |  |  | 1,262,750 |  |  |  | 1,263,830 |  |  |  | 431,870 |  |  |  | 434,760 |
Rail intermodal |  |  | 36,120 |  |  |  | 32,350 |  |  |  | 11,940 |  |  |  | 11,670 |
Ocean and air cargo carriers |  |  | 14,910 |  |  |  | 13,320 |  |  |  | 5,130 |  |  |  | 4,700 |
|  |  | 1,313,780 |  |  |  | 1,309,500 |  |  |  | 448,940 |  |  |  | 451,130 |
Loads hauled via BCO Independent Contractors (2) included in total truck transportation |  |  | 630,880 |  |  |  | 616,410 |  |  |  | 216,220 |  |  |  | 210,180 |
Revenue per load: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truck transportation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truckload: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Van equipment |  | $ | 1,596 |  |  | $ | 1,722 |  |  | $ | 1,600 |  |  | $ | 1,692 |
Unsided/platform equipment |  |  | 2,114 |  |  |  | 2,290 |  |  |  | 2,219 |  |  |  | 2,250 |
Less-than-truckload |  |  | 641 |  |  |  | 731 |  |  |  | 634 |  |  |  | 703 |
Total truck transportation |  |  | 1,668 |  |  |  | 1,818 |  |  |  | 1,697 |  |  |  | 1,794 |
Rail intermodal |  |  | 2,131 |  |  |  | 2,371 |  |  |  | 2,064 |  |  |  | 2,328 |
Ocean and air cargo carriers |  |  | 3,789 |  |  |  | 4,859 |  |  |  | 3,663 |  |  |  | 4,961 |
Revenue per load on loads hauled via BCO Independent Contractors (2) |  | $ | 1,723 |  |  | $ | 1,851 |  |  | $ | 1,754 |  |  | $ | 1,850 |
Revenue by capacity type (as a % of total revenue); |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Truck capacity providers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BCO Independent Contractors (2) |  |  | 48 | % |  |  | 46 | % |  |  | 48 | % |  |  | 46 | %
Truck Brokerage Carriers |  |  | 45 | % |  |  | 47 | % |  |  | 45 | % |  |  | 46 | %
Rail intermodal |  |  | 3 | % |  |  | 3 | % |  |  | 3 | % |  |  | 3 | %
Ocean and air cargo carriers |  |  | 2 | % |  |  | 3 | % |  |  | 2 | % |  |  | 3 | %
Other |  |  | 2 | % |  |  | 1 | % |  |  | 1 | % |  |  | 1 | %
|  |  |  |  |  |  |  | September 24, |  |  | September 26, |
|  |  |  |  |  |  |  | 2016 |  |  | 2015 |
Truck Capacity Providers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
BCO Independent Contractors (2) |  |  |  |  |  |  |  |  |  |  | 8,889 |  |  |  | 8,869 |
Truck Brokerage Carriers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Approved and active (3) |  |  |  |  |  |  |  |  |  |  | 30,860 |  |  |  | 29,127 |
Other approved |  |  |  |  |  |  |  |  |  |  | 15,691 |  |  |  | 13,813 |
|  |  |  |  |  |  |  |  |  |  | 46,551 |  |  |  | 42,940 |
Total available truck capacity providers |  |  |  |  |  |  |  |  |  |  | 55,440 |  |  |  | 51,809 |
Trucks provided by BCO Independent Contractors (2) |  |  |  |  |  |  |  |  |  |  | 9,510 |  |  |  | 9,441 |

(1) | Includes primarily 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 have moved at least one load in the 180 days immediately preceeding the fiscal quarter end.