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

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  
    Other truck transportation (1)     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  
  Other (2)        50,167       36,668         25,597       21,931  
          $ 3,945,663     $ 2,858,252       $ 1,975,064     $ 1,570,718  
                         
  Revenue on loads hauled via BCO Independent Contractors (3)                  
    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  
    Other truck transportation (1)       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  
                         
  Loads hauled via BCO Independent Contractors (3)                  
    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  
    Other truck transportation (1)       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  
                         
  Revenue per load on loads hauled via BCO Independent Contractors (3)   $ 2,683     $ 2,370       $ 2,592     $ 2,456  
                         
Revenue by capacity type (as a % of total revenue):                  
                         
  Truck capacity providers:                  
    BCO Independent Contractors (3)     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                  
                         
  BCO Independent Contractors (3)               11,023       10,778  
  Truck Brokerage Carriers:                  
  Approved and active (4)                  70,649       53,891  
  Other approved               29,454       24,098  
                      100,103       77,989  
  Total available truck capacity providers               111,126       88,767  
                         
  Trucks provided by BCO Independent Contractors (3)                  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.    
     

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