Landstar System Reports Record Fourth Quarter Revenue of $1.182 Billion and All-Time Quarterly Record Diluted Earnings Per Share of $1.68

Globe Newswire 30-Jan-2019 4:15 PM

JACKSONVILLE, Fla., Jan. 30, 2019 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported record fourth quarter revenue of $1.182 billion in the 2018 fourth quarter, a 12 percent increase over revenue of $1.052 billion reported in the 2017 fourth quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2018 fourth quarter was $168.9 million, 13 percent above the 2017 fourth quarter, while 2018 fourth quarter operating income was $86.1 million, 23 percent above the 2017 fourth quarter. Operating income and gross profit in the 2018 fourth quarter were also each fourth quarter records.

Income before income taxes of $85.2 million was a fourth quarter record and increased approximately 23 percent over the 2017 fourth quarter. Diluted earnings per share in the 2018 fourth quarter was $1.68, an all-time quarterly record, compared to $1.54 in the 2017 fourth quarter.  Quarter over prior year quarter comparisons of net income and diluted earnings per share for the 2018 and 2017 fourth quarters as reported are not meaningful, mostly due to the effect of the enactment of the Tax Cuts and Jobs Act in December 2017. Net income and diluted earnings per share in the 2018 and 2017 fourth quarters were both favorably impacted by the Tax Cuts and Jobs Act, which reduced the corporate tax rate from 35 percent to 21 percent effective for fiscal 2018, and various other tax items. The Company had previously estimated that its annual effective income tax rate would be 24.5 percent in fiscal year 2018 and 37.8 percent in fiscal year 2017. However, the Company's actual effective income tax rates in the 2018 and 2017 fourth quarters were 19.8 percent and 6.9 percent, respectively. Of most significance in driving this decrease, were one-time tax benefits of approximately $19.5 million included in net income in the 2017 fourth quarter, or $0.46 per diluted share, related to the Company's reasonable estimate of the change in future tax rates on net deferred tax liabilities as a result of the enactment of the Tax Cuts and Jobs Act in December 2017.

Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2018 fourth quarter was $1.078 billion, or 91 percent of revenue, compared to $967.5 million, or 92 percent of revenue, in the 2017 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2018 fourth quarter was $705.0 million compared to $634.4 million in the 2017 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2018 fourth quarter was $346.6 million compared to $309.5 million in the 2017 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $84.8 million, or 7 percent of revenue, in the 2018 fourth quarter compared to $68.0 million, or 6 percent of revenue, in the 2017 fourth quarter.

Landstar purchased 1,000,000 shares of its common stock during the 2018 fourth quarter at an aggregate cost of approximately $102.6 million. Landstar purchased 2,000,000 shares of its common stock during fiscal year 2018 at an aggregate cost of approximately $208.1 million. On January 23, 2019, the Board of Directors authorized the Company to purchase up to 1,000,000 additional shares of its common stock, par value $0.01 per share, from time to time in the open market and in privately negotiated transactions under its existing share purchase program. Currently, Landstar is authorized to purchase up to a total of 2,000,000 shares of the Company's common stock under its share purchase program. In addition, Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.165 per share payable on March 15, 2019, to stockholders of record as of the close of business on February 18, 2019. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.  As of December 29, 2018, the Company had $240 million in cash and short term investments and $216 million available for borrowings under the Company's senior credit facility.

"I am very pleased with Landstar's financial performance during the 2018 fourth quarter," said Landstar's President and Chief Executive Officer Jim Gattoni. "The 2018 fourth quarter established fourth quarter records for revenue, gross profit and operating income, while diluted earnings per share was an all-time quarterly record. The Company also set a new all-time Landstar record for trucks provided by BCOs with 10,599 as of the end of the quarter."

Gattoni continued, "Demand for our services continued to be strong in the 2018 fourth quarter. The number of loads hauled via truck was a fourth quarter record and increased 4 percent over a very robust 2017 fourth quarter, driven by a 4 percent increase in the number of loads hauled via van equipment, a 3 percent increase in the number of loads hauled via unsided/platform equipment and a 13 percent increase in less-than-truckload volume. The deceleration in the year-over-year percentage growth rate in truck volumes for the 2018 fourth quarter compared to that experienced in the first three quarters of 2018 was mostly due to seasonal softness in the fourth quarter of 2018, as sequential growth was below recent historical trends."

Gattoni further commented, "As expected, the pricing environment for our truckload services continued to be strong during the 2018 fourth quarter.  Similar to truck volumes, however, we experienced a decelerating percentage growth rate in revenue per load on a year-over-year basis compared to the growth rates experienced in the first three quarters of 2018. The price deceleration was due to a much tougher year-over-year comparison applicable to the 2018 fourth quarter and seasonal softness that began at the end of the 2018 third quarter. Revenue per load on loads hauled via van equipment increased 7 percent over the 2017 fourth quarter and revenue per load on loads hauled via unsided/platform equipment increased 9 percent over the 2017 fourth quarter. As a result, revenue per load on loads hauled via truck was 7 percent higher than the 2017 fourth quarter."

Gattoni continued, "Landstar's financial performance in fiscal year 2018 was by far the best in the Company's history. Landstar set many annual financial and operational high water marks in 2018, including revenue, gross profit, operating income, net income, diluted earnings per share, truck loads and year end truck count provided by BCOs. Revenue in fiscal 2018 was approximately $4.6 billion, an annual record, and was approximately $969 million higher than the previous record set in 2017. Gross profit in 2018 was $667 million, also an annual record. Record revenue and gross profit in 2018 was provided on the strength of approximately 2,060,000 loads hauled via truck capacity, the highest number of loads hauled via truck in any year in Landstar history. Operating income in 2018 was an annual record of $332 million and represented year-over-year growth of 36 percent. Diluted earnings per share in 2018 was an annual record of $6.18. These 2018 achievements speak to the strength and depth of the Landstar network and our ability to execute.  I am extremely pleased by our continued organic load volume growth and our ability to attract productive agents and capacity to the network."

Gattoni further commented, "With respect to near term performance, during the first four weeks of 2019, year-over-year growth in the number of loads hauled via truck is trending slightly higher than the comparable period of 2018. As such, I expect loads hauled via truck in the 2019 first quarter to grow in a low single-digit percentage range over the 2018 first quarter. As it pertains to revenue per load on loads hauled via truck, the 2018 first quarter was one of very few first quarters in Landstar history that experienced an increase in truck revenue per load from the preceding fourth quarter. In the four years prior to 2018, truck revenue per load decreased seasonally on average 7 percent from the fourth quarter to the immediately following first quarter. We expect a more normal seasonal trend in the 2019 first quarter as rates appear to have stabilized through the first four weeks of January. As such, I expect revenue per load on loads hauled via truck in the 2019 first quarter to decrease in a low single-digit percentage range from the 2018 first quarter. Assuming the current environment continues throughout the 2019 first quarter, I anticipate revenue for the 2019 first quarter to be in a range of $1.025 billion to $1.075 billion. Assuming that range of estimated revenue, I would anticipate 2019 first quarter diluted earnings per share to be in a range of $1.51 to $1.57 per share. This estimated range of diluted earnings per share assumes insurance and claims costs at 3.6 percent of BCO revenue, representing the historical annual average of insurance and claims costs to BCO revenue over the preceding five years, and an effective income tax rate of approximately 21.1 percent, which represents the Company's annual estimated effective income tax rate of 24.2 percent, net of a discrete item related to equity compensation specific to the 2019 first 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 Fourth Quarter 2018 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 and expectations. Terms such as "anticipates," "believes," "estimates," "intention," "expects," "plans," "predicts," "may," "should," "could," "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; U.S. foreign trade relationships; 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; regulations focused on diesel emissions and other air quality matters; catastrophic loss of a Company facility; intellectual property; unclaimed property; and other operational, financial or legal risks or uncertainties detailed in Landstar's Form 10K for the 2017 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 services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. Landstar transportation services companies are certified to ISO 9001:2015 quality management system standards and RC14001:2015 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.

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Contact:  Kevin Stout
Landstar System, Inc.
www.landstar.com
904-398-9400