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Landstar System Reports Record Second Quarter Revenue of $1.975B and Diluted Earnings Per Share of $3.05

Published: 2022-07-20 20:15:00 ET
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JACKSONVILLE, Fla., July 20, 2022 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported revenue of $1.975 billion in the 2022 second quarter, a 26 percent increase over revenue of $1.571 billion in the 2021 second quarter; quarterly net income of $112.6 million, an increase of 22 percent over net income of $92.3 million in the 2021 second quarter; and quarterly diluted earnings per share (“DEPS”) of $3.05, an increase of 27 percent compared to $2.40 in the 2021 second quarter. 2022 second quarter revenue, net income and DEPS each established new all-time second quarter records for Landstar.

Gross profit in the 2022 second quarter was $208.1 million, a second quarter record and 19 percent above 2021 second quarter gross profit of $174.8 million. Variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2022 second quarter also reached a second quarter record of $267.5 million, 21 percent above 2021 second quarter variable contribution of $220.8 million. A reconciliation of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2022 and 2021 second quarters and year-to-date periods is provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 52 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 46 percent. Landstar continues to return significant amounts of capital to stockholders through the Company’s stock purchase program and dividends. During the 2022 second quarter, Landstar purchased approximately 703,000 shares of its common stock at an aggregate cost of $103.3 million, bringing the total number of common shares purchased during the twenty-six weeks ended June 25, 2022 to 1,397,000 shares at an aggregate cost of approximately $212.6 million. The Company is currently authorized to purchase up to an additional 1,603,239 shares of the Company’s common stock under its previously announced share purchase program.  

Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.30 per share payable on August 26, 2022, to stockholders of record as of the close of business on August 8, 2022. This quarterly dividend includes a $0.05 per share increase, or 20 percent, over the amount of the Company’s regular quarterly dividend declared following each of the prior four quarters. The $0.05 per share increase is the largest increase in the Company’s regularly scheduled quarterly dividend in the Company’s history. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Also, as previously disclosed in a Form 8-K filed with the SEC on July 8, 2022, Landstar entered into a Second Amended and Restated Credit Agreement, dated July 1, 2022, with a bank syndicate led by J.P. Morgan Chase that, among other things, extended the termination date of the credit facility to July 2027, and increased the size of the facility from $250 million to $300 million (with an “accordion” feature providing for possible increase up to an aggregate amount of $600 million). As of June 25, 2022, Landstar had no outstanding borrowings under its revolving credit facility.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2022 second quarter was $1,747.2 million, or 88 percent of revenue, compared to $1,444.2 million, or 92 percent of revenue, in the 2021 second quarter. Truckload transportation revenue hauled via van equipment in the 2022 second quarter was $1,026.9 million, compared to $854.5 million in the 2021 second quarter, an increase of 20 percent. Truckload transportation revenue hauled via unsided/platform equipment in the 2022 second quarter was $474.3 million, compared to $391.9 million in the 2021 second quarter, an increase of 21 percent. Revenue from other truck transportation, which is largely related to power-only services, in the 2022 second quarter was $209.1 million, compared to $168.7 million in the 2021 second quarter, an increase of 24 percent. Revenue hauled by rail, air and ocean cargo carriers was $202.3 million, or 10 percent of revenue, in the 2022 second quarter, compared to $104.6 million, or 7 percent of revenue, in the 2021 second quarter, an increase of 93 percent.

“Customer demand for our freight transportation services remained strong during the 2022 second quarter,” said Landstar President and CEO Jim Gattoni. “The number of loads hauled via truck in the 2022 second quarter increased 10 percent over the 2021 second quarter. Although slightly below the low end of our second quarter 2022 guidance issued in our 2022 first quarter earnings release on April 20, 2022, truck load volume growth continued to be impressive given tough year-over-year comparisons and an overall shift of consumer spending from goods to services. Similarly, revenue per truck load in the 2022 second quarter was 10 percent above the 2021 second quarter and remained very strong compared to historical levels. Revenue per load on loads hauled via truck also came in below our April 20 second quarter guidance, mostly due to a deceleration in the rate of year-over-year growth beginning in May. Truck revenue per load decreased approximately 4 percent sequentially from April to May, which was not anticipated in the 2022 second quarter guidance. It should also be noted that the year-over-year increase in revenue per truck load was partly impacted by a 6 percent decrease in the average length of haul in the 2022 second quarter compared to the 2021 second quarter.”

Gattoni continued, “Landstar’s business model continued to perform well during the 2022 second quarter. The Company achieved a 27 percent increase in DEPS on a 26 percent increase in revenue, in both cases as compared to the 2021 second quarter. DEPS was 5 percent below the low-end of the second quarter guidance we provided on April 20, 2022. In addition to the impact of the shortfalls versus expectations in truck loads and revenue per load discussed above, Landstar also experienced higher than expected insurance and claims cost of 4.9 percent of BCO revenue in the 2022 second quarter, driven mostly by two tragic vehicular accidents that occurred during the quarter.”

Gattoni further commented, “There is a lot of unease regarding U.S. economic conditions as we head into the third quarter. On a macroeconomic level, the record low level of consumer confidence and high level of inflation being reported along with possible further action by the Federal Reserve to address inflation at the risk of causing further recessionary pressure all add significant uncertainty to the performance of the overall domestic freight environment. Additionally, comparisons to prior year results become more challenging for Landstar as we move through the back half of 2022, given the strength our business experienced during the back half of fiscal year 2021. Historically, in most years truck revenue per load in July has slightly exceeded that of June. Through the first several weeks of July, overall truck revenue per load has been fairly consistent with the truck revenue per load we experienced in fiscal May and June 2022. Given the current operating environment, I view Landstar’s relatively stable revenue per load since May as a positive. Given this backdrop and recent revenue trends, I expect truck revenue per load in the 2022 third quarter to be essentially equal to that of the 2021 third quarter and the number of loads hauled via truck to increase over the 2021 third quarter in a range of 3 percent to 5 percent. As such, I anticipate revenue for the 2022 third quarter to be in a range of $1.80 billion to $1.85 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2022 third quarter, I would anticipate DEPS to be in a range of $2.75 to $2.85. This range of DEPS includes insurance and claims expense estimated at 4.2 percent of BCO revenue.”

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 Second Quarter 2022 Earnings Release Conference Call.”

About Landstar:Landstar System, Inc., a Fortune 500 company, is a worldwide, technology-enabled, 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.

Non-GAAP Financial Measures:In this earnings release and accompanying financial disclosures, the Company provides the following information that may be deemed a non-GAAP financial measure: variable contribution and variable contribution margin. The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a shipment-by-shipment level attributable to our transportation network of third-party capacity providers and independent agents in order to provide services to our customers. The Company also believes that it is appropriate to present each of the financial measures that may be deemed a non-GAAP financial measure, as referred to above, for the following reasons: (1) disclosure of these matters will allow investors to better understand the underlying trends in the Company’s financial condition and results of operations; (2) this information will facilitate comparisons by investors of the Company’s results as compared to the results of peer companies; and (3) management considers this financial information in its decision making.

Forward Looking Statements Disclaimer: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: the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2021 fiscal year; the impact of the coronavirus (COVID-19) pandemic; 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. 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; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2021 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Q for the 2022 first fiscal quarter, 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. and Subsidiary 
Consolidated Statements of Income 
(Dollars in thousands, except per share amounts) 
(Unaudited) 
              
              
      Twenty Six Weeks Ended Thirteen Weeks Ended 
      June 25, June 26, June 25, June 26, 
      2022 2021 2022 2021 
              
Revenue   $3,945,663 $2,858,252 $1,975,064 $1,570,718 
Investment income   1,307  1,432  586  748 
              
Costs and expenses:          
 Purchased transportation  3,096,018  2,226,526  1,545,688  1,228,241 
 Commissions to agents  311,634  221,702  161,856  121,693 
 Other operating costs, net of gains on asset sales/dispositions  21,522  16,545  10,381  8,903 
 Insurance and claims   64,820  45,629  34,052  24,124 
 Selling, general and administrative  111,680  99,522  58,967  54,114 
 Depreciation and amortization  28,045  24,244  14,288  12,143 
              
  Total costs and expenses  3,633,719  2,634,168  1,825,232  1,449,218 
              
Operating income   313,251  225,516  150,418  122,248 
Interest and debt expense  2,228  2,009  1,105  967 
              
Income before income taxes  311,023  223,507  149,313  121,281 
Income taxes    73,629  53,973  36,758  28,987 
              
Net income   $237,394 $169,534 $112,555 $92,294 
              
Diluted earnings per share $6.39 $4.41 $3.05 $2.40 
              
Average diluted shares outstanding  37,162,000  38,403,000  36,905,000  38,402,000 
              
Dividends per common share $0.50 $0.42 $0.25 $0.21 
              

               
Landstar System, Inc. and Subsidiary 
Consolidated Balance Sheets 
(Dollars in thousands, except per share amounts) 
(Unaudited) 
           
       June 25, December 25, 
       2022 2021 
ASSETS        
Current assets:       
 Cash and cash equivalents  $78,220  $215,522  
 Short-term investments   41,549   35,778  
 Trade accounts receivable, less allowance    
  of $9,940 and $7,074   1,216,518   1,154,314  
 Other receivables, including advances to independent    
  contractors, less allowance of $9,856 and $8,125 114,794   101,124  
 Other current assets   54,190   16,162  
  Total current assets   1,505,271   1,522,900  
           
Operating property, less accumulated depreciation and amortization of $369,344 and $344,099 314,191   317,386  
Goodwill     40,977   40,768  
Other assets    156,628   164,411  
Total assets   $2,017,067  $2,045,465  
           
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:      
 Cash overdraft  $113,603  $116,478  
 Accounts payable   670,534   604,130  
 Current maturities of long-term debt 36,827   36,561  
 Insurance claims   53,971   46,896  
 Dividends payable   -   75,387  
 Other current liabilities   102,956   130,531  
  Total current liabilities   977,891   1,009,983  
           
Long-term debt, excluding current maturities 73,999   75,243  
Insurance claims   53,303   49,509  
Deferred income taxes and other non-current liabilities 55,004   48,720  
           
Shareholders' equity:      
 Common stock, $0.01 par value, authorized 160,000,000    
  shares, issued 68,376,934 and 68,232,975 684   682  
 Additional paid-in capital   252,045   255,148  
 Retained earnings   2,535,997   2,317,184  
 Cost of 31,946,616 and 30,539,235 shares of common    
  stock in treasury   (1,919,535)  (1,705,601) 
 Accumulated other comprehensive loss (12,321)  (5,403) 
  Total shareholders' equity   856,870   862,010  
Total liabilities and shareholders' equity$2,017,067  $2,045,465  
           

          
 Landstar System, Inc. and Subsidiary
 Supplemental Information
 (Unaudited)
             
     Twenty Six Weeks Ended  Thirteen Weeks Ended
     June 25, June 26,  June 25, June 26,
      2022   2021    2022   2021 
Revenue generated through (in thousands):         
             
 Truck transportation         
  Truckload:         
   Van equipment $2,108,143  $1,583,911   $1,026,938  $854,509 
   Unsided/platform equipment  883,032   689,378    474,274   391,893 
  Less-than-truckload  70,651   54,732    36,931   29,062 
      436,656   309,655    209,055   168,723 
   Total truck transportation  3,498,482   2,637,676    1,747,198   1,444,187 
 Rail intermodal  86,110   76,068    43,422   44,360 
 Ocean and air cargo carriers  310,904   107,840    158,847   60,240 
      50,167   36,668    25,597   21,931 
     $3,945,663  $2,858,252   $1,975,064  $1,570,718 
             
             
  included in total truck transportation $1,415,963  $1,209,056   $688,389  $648,942 
             
Number of loads:         
             
 Truck transportation         
  Truckload:         
   Van equipment  763,750   678,253    387,482   357,041 
   Unsided/platform equipment  279,345   248,262    147,516   133,999 
  Less-than-truckload  96,828   85,095    48,985   44,403 
      166,747   127,160    80,817   67,497 
   Total truck transportation  1,306,670   1,138,770    664,800   602,940 
 Rail intermodal  24,220   26,800    11,590   15,100 
 Ocean and air cargo carriers  22,890   19,460    11,330   10,230 
      1,353,780   1,185,030    687,720   628,270 
             
             
  included in total truck transportation  527,830   510,150    265,590   264,200 
             
Revenue per load:         
             
 Truck transportation         
  Truckload:         
   Van equipment $2,760  $2,335   $2,650  $2,393 
   Unsided/platform equipment  3,161   2,777    3,215   2,925 
  Less-than-truckload  730   643    754   655 
      2,619   2,435    2,587   2,500 
   Total truck transportation  2,677   2,316    2,628   2,395 
 Rail intermodal  3,555   2,838    3,747   2,938 
 Ocean and air cargo carriers  13,583   5,542    14,020   5,889 
             
     $2,683  $2,370   $2,592  $2,456 
             
Revenue by capacity type (as a % of total revenue):         
             
 Truck capacity providers:         
      36%  42%   35%  41%
  Truck Brokerage Carriers  53%  50%   54%  51%
 Rail intermodal  2%  3%   2%  3%
 Ocean and air cargo carriers  8%  4%   8%  4%
 Other   1%  1%   1%  1%
             
          June 25, June 26,
           2022   2021 
Truck Capacity Providers         
             
           11,023   10,778 
 Truck Brokerage Carriers:         
           70,649   53,891 
      Other approved       29,454   24,098 
           100,103   77,989 
 Total available truck capacity providers       111,126   88,767 
             
           11,887   11,557 
             
(1) Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.
             
             
(2) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.
             
(3) BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.  
             
(4) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.  
             

                
Landstar System, Inc. and Subsidiary   
Reconciliation of Gross Profit to Variable Contribution   
(Dollars in thousands)   
(Unaudited)   
                
      Twenty Six Weeks Ended Thirteen Weeks Ended   
      June 25, June 26, June 25, June 26,   
       2022   2021   2022   2021    
                
Revenue   $3,945,663  $2,858,252  $1,975,064  $1,570,718    
                
Costs of revenue:            
  Purchased transportation  3,096,018   2,226,526   1,545,688   1,228,241    
  Commissions to agents  311,634   221,702   161,856   121,693    
                
 Variable costs of revenue  3,407,652   2,448,228   1,707,544   1,349,934    
                
  Trailing equipment depreciation  18,363   17,747   9,280   8,840    
  Information technology costs (1)  9,039   6,084   4,993   3,146    
  Insurance-related costs (2)  66,441   47,673   34,786   25,051    
  Other operating costs  21,522   16,545   10,381   8,903    
                
 Other costs of revenue  115,365   88,049   59,440   45,940    
                
 Total costs of revenue  3,523,017   2,536,277   1,766,984   1,395,874    
                
Gross profit   $422,646  $321,975  $208,080  $174,844    
                
Gross profit margin   10.7%  11.3%  10.5%  11.1%   
                
 Plus: other costs of revenue  115,365   88,049   59,440   45,940    
                
Variable contribution  $538,011  $410,024  $267,520  $220,784    
                
Variable contribution margin  13.6%  14.3%  13.5%  14.1%   
                
(1)Includes costs of revenue incurred related to internally developed software including ASC 350-40 amortization, implementation costs, hosting costs and other support costs utilized to support the Company's independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company's Consolidated Statements of Income.  
                
(2)Primarily includes (i) insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight; (ii) the related cost of claims incurred under those programs; and (iii) brokerage commissions and other fees incurred relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by the Company, which are included in selling, general and administrative in the Company's Consolidated Statements of Income.  
   

Contacts: Jim Gattoni (CEO)Jim Todd (CFO)Landstar System, Inc.www.landstar.com904-398-9400

 

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Source: Landstar System, Inc.