Landstar System Reports Fourth Quarter Revenue of $1.204B and Earnings Per Share of $1.62

Bay Street

9 months ago

JACKSONVILLE, Fla., Jan. 31, 2024 (GLOBE NEWSWIRE) — Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported basic and diluted earnings per share (“EPS”) of $1.62 in the 2023 thirteen-week fourth quarter on revenue of $1.204 billion. Landstar reported EPS of $2.60 on revenue of $1.675 billion in the 2022 fourteen-week fourth quarter.

The Company’s fiscal year ends each year on the last Saturday in December. As such, the Company’s 2022 fourth quarter ended on December 31^st and included fourteen weeks of operations, whereas the 2023 fourth quarter ended on December 30^th and included thirteen weeks of operations. We estimate the extra week in 2022 contributed revenue of approximately $65 million.

Gross profit in the 2023 fourth quarter was $124.6 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2023 fourth quarter was $178.1 million. Gross profit in the 2022 fourth quarter was $180.0 million and variable contribution in the 2022 fourth quarter was $234.0 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2023 and 2022 fourth quarters and full fiscal years are provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 27% and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 25%. The Company is currently authorized to purchase up to 3,000,000 shares of the Company’s common stock under its previously announced share purchase programs. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.33 per share payable on March 8, 2024, to stockholders of record as of the close of business on February 12, 2024. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2023 fourth quarter was $1,085.1 million, or 90% of revenue, compared to $1,533.6 million, or 92% of revenue, in the 2022 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2023 fourth quarter was $618.6 million, compared to $869.8 million in the 2022 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2023 fourth quarter was $339.9 million, compared to $423.4 million in the 2022 fourth quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2023 fourth quarter was $99.7 million, compared to $204.0 million in the 2022 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $88.6 million, or 7% of revenue, in the 2023 fourth quarter, compared to $115.1 million, or 7% of revenue, in the 2022 fourth quarter.

“As expected, the soft macro-freight environment experienced throughout 2023 continued through the 2023 fourth quarter. The soft macro-freight environment, along with the additional operating week in the 2022 fourth quarter, made for challenging 2023 fourth quarter to 2022 fourth quarter comparisons,” said Landstar President and Chief Executive Officer Jim Gattoni. “The continuation of soft demand, driven by continued weakness in the U.S. manufacturing sector and a weaker than typical peak season, plus the continuation of a loose truck capacity market drove Landstar’s truck revenue per load and volumes in the 2023 fourth quarter below prior year levels. The number of loads hauled via truck declined 22% as compared to the 2022 fourth quarter, at the low end of the Company’s guidance included as part of the Company’s 2023 third quarter earnings release on October 25, 2023, while truck revenue per load declined 10% as compared to the 2022 fourth quarter, below the low end of the Company’s previously issued guidance.”

Gattoni continued, “Landstar’s financial performance in 2023, coming off back-to-back record setting years in 2022 and 2021 was admirable, considering the very difficult freight transportation backdrop. The Company’s performance during the downcycle in freight markets experienced in 2023 speaks to the strength and resiliency of the Landstar network and the power of our unique agent and capacity network. The Company’s balance sheet continues to be very strong, with cash and short term investments of approximately $541 million as of December 30, 2023. Cash flow from operations was $394 million during fiscal year 2023. The Company is well positioned to capitalize when freight market fundamentals improve.”

Gattoni further commented, “Typically, revenue in the first quarter is expected to be lower than the revenue of the immediately preceding fourth quarter. Through the first several weeks of January, the number of loads hauled via truck and truck revenue per load have each trended reasonably in-line with historical, pre-pandemic end of fourth quarter to the beginning of first quarter sequential patterns. Assuming a continuation of these recent trends, I expect revenue per load on loads hauled via truck to be in a range of 8% to 10% below the 2023 first quarter and the number of loads hauled via truck to be in a range of 14% to 16% below the 2023 first quarter. As such, I anticipate revenue for the 2024 first quarter to be in a range of $1.10 billion to $1.15 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2024 first quarter, I would anticipate EPS to be in a range of $1.25 to $1.35. The anticipated range of EPS for the 2024 first quarter includes estimated insurance and claims costs of approximately 5.5% of BCO revenue. These costs were 5.7% of BCO revenue during fiscal year 2023. The anticipated range of EPS for the 2024 first quarter also reflects an estimated effective income tax rate of 24.5%.”

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 2023 Earnings Release Conference Call.”

About Landstar:
Landstar System, Inc., a Fortune 500 company, is a 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 2023 fiscal year; 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; potential changes in 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 2022 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Q for the 2023 first and third fiscal quarters, 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)

			Fiscal Years Ended					Fiscal Quarters Ended
			December 30,			December 31,		December 30,			December 31,
				2023		2022			2023		2022

Revenue			$	5,303,322		$	7,436,562	$	1,204,445		$	1,674,767
Investment income				10,141			3,162		3,267			1,139

Costs and expenses:
	Purchased transportation			4,068,262			5,804,017		927,028			1,291,676
	Commissions to agents			462,668			614,865		99,271			149,106
	Other operating costs, net of gains on asset sales/dispositions			54,191			45,192		13,193			10,314
	Insurance and claims			114,241			125,835		27,270			29,570
	Selling, general and administrative			211,799			221,279		52,728			56,080
	Depreciation and amortization			58,153			57,453		13,655			14,826

		Total costs and expenses		4,969,314			6,868,641		1,133,145			1,551,572

Operating income				344,149			571,083		74,567			124,334
Interest and debt (income) expense				(3,946	)		3,620		(1,867	)		345

Income before income taxes				348,095			567,463		76,434			123,989
Income taxes				83,701			136,549		18,447			30,687

Net income			$	264,394		$	430,914	$	57,987		$	93,302

Basic and diluted earnings per share			$	7.36		$	11.76	$	1.62		$	2.60

Average basic and diluted shares outstanding				35,920,000			36,633,000		35,804,000			35,930,000

Dividends per common share			$	3.26		$	3.10	$	2.33		$	2.30

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)


				December 30,			December 31,
					2023			2022
ASSETS
Current assets:
	Cash and cash equivalents			$	481,043		$	339,581
	Short-term investments				59,661			53,955
	Trade accounts receivable, less allowance
		of $11,738 and $12,121			743,762			967,793
	Other receivables, including advances to independent
		contractors, less allowance of $14,010 and $10,579			43,339			56,235
	Other current assets				24,936			21,826
		Total current assets			1,352,741			1,439,390

Operating property, less accumulated depreciation
			and amortization of $436,682 and $393,274		284,300			314,990
Goodwill					42,275			41,220
Other assets					122,530			136,279
Total assets				$	1,801,846		$	1,931,879

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Cash overdraft			$	61,541		$	92,953
	Accounts payable				395,980			527,372
	Current maturities of long-term debt				27,876			36,175
	Insurance claims				41,825			50,836
	Dividends payable				71,433			71,854
	Other current liabilities				76,569			98,945
		Total current liabilities			675,224			878,135

Long-term debt, excluding current maturities					43,264			67,225
Insurance claims					58,922			58,268
Deferred income taxes and other non-current liabilities					40,513			41,030

Shareholders’ equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,497,324 and 68,382,310			685			684
	Additional paid-in capital				254,642			258,487
	Retained earnings				2,783,645			2,635,960
	Cost of 32,780,651 and 32,455,300 shares of common
		stock in treasury			(2,048,184	)		(1,992,886	)
	Accumulated other comprehensive loss				(6,865	)		(15,024	)
		Total shareholders’ equity			983,923			887,221
Total liabilities and shareholders’ equity				$	1,801,846		$	1,931,879

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)

				Fiscal Years Ended						Fiscal Quarters Ended
				December 30,			December 31,			December 30,			December 31,
					2023			2022			2023			2022
Revenue generated through (in thousands):

	Truck transportation
		Truckload:
			Van equipment	$	2,742,281		$	3,892,085		$	618,588		$	869,788
			Unsided/platform equipment		1,490,393			1,760,357			339,910			423,401
		Less-than-truckload			117,683			142,438			26,913			36,444
		Other truck transportation ⁽¹⁾			479,173			835,959			99,702			203,958
			Total truck transportation		4,829,530			6,630,839			1,085,113			1,533,591
	Rail intermodal				98,297			145,017			24,344			31,255
	Ocean and air cargo carriers				266,638			558,986			64,280			83,830
	Other ⁽²⁾				108,857			101,720			30,708			26,091
				$	5,303,322		$	7,436,562		$	1,204,445		$	1,674,767

	Revenue on loads hauled via BCO Independent Contractors ⁽³⁾
		included in total truck transportation		$	1,998,408		$	2,636,036		$	454,774		$	592,264

Number of loads:

	Truck transportation
		Truckload:
			Van equipment		1,259,578			1,496,247			292,711			365,984
			Unsided/platform equipment		504,765			558,530			115,294			138,094
		Less-than-truckload			175,650			191,233			41,070			48,493
		Other truck transportation ⁽¹⁾			201,407			320,790			44,295			77,449
			Total truck transportation		2,141,400			2,566,800			493,370			630,020
	Rail intermodal				29,620			40,710			7,470			8,770
	Ocean and air cargo carriers				32,820			41,850			7,440			7,440
					2,203,840			2,649,360			508,280			646,230

	Loads hauled via BCO Independent Contractors ⁽³⁾
		included in total truck transportation			898,610			1,027,480			209,350			250,230

Revenue per load:

	Truck transportation
		Truckload:
			Van equipment	$	2,177		$	2,601		$	2,113		$	2,377
			Unsided/platform equipment		2,953			3,152			2,948			3,066
		Less-than-truckload			670			745			655			752
		Other truck transportation ⁽¹⁾			2,379			2,606			2,251			2,633
			Total truck transportation		2,255			2,583			2,199			2,434
	Rail intermodal				3,319			3,562			3,259			3,564
	Ocean and air cargo carriers				8,124			13,357			8,640			11,267

	Revenue per load on loads hauled via BCO Independent Contractors ⁽³⁾			$	2,224		$	2,566		$	2,172		$	2,367

Revenue by capacity type (as a % of total revenue):

	Truck capacity providers:
		BCO Independent Contractors ⁽³⁾			38	%		35	%		38	%		35	%
		Truck Brokerage Carriers			53	%		54	%		52	%		56	%
	Rail intermodal				2	%		2	%		2	%		2	%
	Ocean and air cargo carriers				5	%		8	%		5	%		5	%
	Other				2	%		1	%		3	%		2	%


										December 30,			December 31,
											2023			2022
Truck Capacity Providers

	BCO Independent Contractors ⁽³⁾										9,024			10,393
	Truck Brokerage Carriers:
	Approved and active ⁽⁴⁾										49,111			66,745
	Other approved										27,524			30,999
											76,635			97,744
	Total available truck capacity providers										85,659			108,137

	Trucks provided by BCO Independent Contractors ⁽³⁾										9,809			11,281

_{⁽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)

			Fiscal Years Ended						Fiscal Quarters Ended
			December 30,			December 31,			December 30,			December 31,
				2023			2022			2023			2022

Revenue			$	5,303,322		$	7,436,562		$	1,204,445		$	1,674,767

Costs of revenue:
		Purchased transportation		4,068,262			5,804,017			927,028			1,291,676
		Commissions to agents		462,668			614,865			99,271			149,106

	Variable costs of revenue			4,530,930			6,418,882			1,026,299			1,440,782

		Trailing equipment depreciation		31,319			36,653			7,079			8,893
		Information technology costs ⁽¹⁾		25,486			19,834			5,695			5,966
		Insurance-related costs ⁽²⁾		116,069			127,605			27,585			28,784
		Other operating costs		54,191			45,192			13,193			10,314

	Other costs of revenue			227,065			229,284			53,552			53,957

	Total costs of revenue			4,757,995			6,648,166			1,079,851			1,494,739

Gross profit			$	545,327		$	788,396		$	124,594		$	180,028

Gross profit margin				10.3	%		10.6	%		10.3	%		10.7	%

	Plus: other costs of revenue			227,065			229,284			53,552			53,957

Variable contribution			$	772,392		$	1,017,680		$	178,146		$	233,985

Variable contribution margin				14.6	%		13.7	%		14.8	%		14.0	%

_{⁽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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