Landstar System (LSTR) 8-K Landstar System Reports Second Quarter Revenue of $775 Million

Exhibit 99.1

For Immediate Release	Contact: Kevin Stout
	Landstar System, Inc.
	www.landstar.com
July 20, 2016	904-398-9400

LANDSTAR SYSTEM REPORTS SECOND QUARTER REVENUE OF $775 MILLION

AND DILUTED EARNINGS PER SHARE OF $0.76

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported second quarter diluted earnings per share of $0.76 on revenue of $775 million in the 2016 second quarter. Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims, in the 2016 second quarter, the highest quarterly insurance and claims cost over the past 6 years. Landstar reported diluted earnings per share of $0.92 on revenue of $868 million in the 2015 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $121.0 million in the 2016 second quarter compared to $130.8 million in the 2015 second quarter. Operating margin, representing operating income divided by gross profit, was 43.9 percent in the 2016 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2016 second quarter was $718.5 million, or 93 percent of revenue, compared to $809.2 million, or 93 percent of revenue, in the 2015 second quarter. Truckload transportation revenue hauled via van equipment in the 2016 second quarter was $458.0 million compared to $496.9 million in the 2015 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2016 second quarter was $242.0 million compared to $291.0 million in the 2015 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $45.1 million, or 6 percent of revenue, in the 2016 second quarter compared to $48.1 million, or 6 percent of revenue, in the 2015 second quarter.

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Trailing twelve-month return on average shareholders’ equity was 29 percent and trailing twelve-month return on invested capital, net income divided by the sum of average equity plus average debt, was 23 percent. Landstar purchased approximately 423,000 shares of its common stock during the first half of 2016 at an aggregate cost of $26.5 million. Currently, there are approximately 1,386,000 shares of the Company’s common stock available for purchase under Landstar’s authorized share purchase program. As of June 25, 2016, the Company had $215 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 August 26, 2016, to stockholders of record as of the close of business on August 8, 2016. This quarterly dividend includes a 12.5 percent increase to the amount of the Company’s quarterly dividend declared following each of the prior four quarters. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Commenting on Landstar’s 2016 second quarter, Landstar’s President and CEO Jim Gattoni said, “On April 20^th, we provided second quarter revenue guidance of $770 million to $820 million and second quarter diluted earnings per share guidance of $0.80 to $0.85. On June 8^th, I updated both our revenue and diluted earnings per share guidance by indicating at a webcast investor conference available to the public that I was more comfortable at the lower end of both the revenue and diluted earnings per share guidance. Revenue of $775 million for the second quarter was in-line with our updated guidance. Diluted earnings per share of $0.76 for the second quarter was below the low end of the updated guidance due to an increase in estimated insurance and claims costs, as a result of a severe accident that occurred at the end of the second quarter.”

Gattoni continued, “Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment. During the 2015 second quarter, we hauled over 13,000 truckloads via unsided/platform equipment for a project on behalf of a customer in the automotive sector, generating $27 million of revenue in the 2015

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second quarter. Excluding the loadings related to that project we experienced a slight increase in loads hauled via truck over the 2015 second quarter. However, Landstar’s truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft. Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the Company operates much of its business. Additionally, the average cost of a gallon of diesel fuel was approximately 20 percent lower during the 2016 second quarter compared to the 2015 second quarter putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers. As such, revenue per load on loads hauled via truck was 9 percent lower in the 2016 second quarter compared to the 2015 second quarter.”

Gattoni further commented, “The number of loads hauled via truck in the 2016 second quarter decreased 2 percent from the 2015 second quarter, driven by a 9 percent decrease in the number of loads hauled via unsided/platform equipment, entirely due to the 2015 automotive sector project, partially offset by a 1 percent increase in the number of loads hauled via van equipment. Landstar achieved an 11 percent increase in the number of loads hauled via railroads, ocean cargo carriers and air cargo carriers in the 2016 second quarter over the 2015 second quarter. The softer pricing environment and increased insurance and claims expense drove the 2016 second quarter operating margin down to 43.9 percent, from 50.5 percent in the 2015 second quarter.”

Gattoni continued, “Third quarter 2016 over third quarter 2015 revenue comparisons will include the effects of revenue derived from the automotive project previously referenced. The Company’s 2015 third quarter included approximately $35 million in revenue from approximately 20,000 loads hauled via truck related to that project. The project was completed at the end of 2015. Historically, revenue in the Company’s third fiscal quarter has been relatively consistent with revenue generated in the Company’s second fiscal quarter. Revenue per load on loads hauled via truck in the Company’s third quarter has been slightly ahead of the second quarter while the number of loads hauled via truck in the third quarter is typically slightly below the second quarter.

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Through the first few weeks of July, we have experienced the normal seasonal uptick in revenue per load on loads hauled via truck. Also, the number of loads hauled via truck during the first few weeks of July is trending with the historical second quarter to third quarter pattern. As such, I expect 2016 third quarter revenue to be similar to the Company’s 2016 second quarter revenue. Assuming insurance and claims costs in the 2016 third 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 $0.79 to $0.84 in the 2016 third 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 Second 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 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 incidents; dependence on key vendors; changes in fuel taxes;

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status of independent contractors; regulatory and legislative changes; 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 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)

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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, 2016		June 27, 2015		June 25, 2016		June 27, 2015
Revenue	$	1,486,867	$	1,630,763	$	775,223	$	868,383
Investment income		743		693		363		339
Costs and expenses:
Purchased transportation		1,129,743		1,254,730		589,415		667,577
Commissions to agents		123,931		129,816		64,839		70,032
Other operating costs, net of gains on asset sales/dispositions		13,992		15,670		6,585		7,981
Insurance and claims		30,307		27,108		16,094		12,312
Selling, general and administrative		71,519		74,986		36,905		37,738
Depreciation and amortization		17,093		14,068		8,655		7,049
Total costs and expenses		1,386,585		1,516,378		722,493		802,689
Operating income		101,025		115,078		53,093		66,033
Interest and debt expense		1,777		1,494		888		713
Income before income taxes		99,248		113,584		52,205		65,320
Income taxes		37,750		43,098		19,891		24,849
Net income	$	61,498	$	70,486	$	32,314	$	40,471
Earnings per common share	$	1.45	$	1.59	$	0.77	$	0.92
Diluted earnings per share	$	1.45	$	1.59	$	0.76	$	0.92
Average number of shares outstanding:
Earnings per common share		42,315,000		44,240,000		42,235,000		43,892,000
Diluted earnings per share		42,424,000		44,397,000		42,357,000		44,033,000
Dividends per common share	$	0.16	$	0.14	$	0.08	$	0.07

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Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

	June 25, 2016			December 26, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	153,370		$	114,520
Short-term investments		61,528			48,823
Trade accounts receivable, less allowance of $5,092 and $4,327		402,362			462,699
Other receivables, including advances to independent contractors, less allowance of $4,755 and $4,143		18,584			18,472
Other current assets		20,608			11,604
Total current assets		656,452			656,118
Operating property, less accumulated depreciation and amortization of $187,774 and $182,591		236,177			225,927
Goodwill		31,134			31,134
Other assets		60,994			78,339
Total assets	$	984,757		$	991,518
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdraft	$	30,355		$	35,609
Accounts payable		191,247			223,709
Current maturities of long-term debt		42,209			42,499
Insurance claims		26,135			19,757
Other current liabilities		44,642			47,963
Total current liabilities		334,588			369,537
Long-term debt, excluding current maturities		76,724			81,793
Insurance claims		23,042			21,477
Deferred income taxes and other non-current liabilities		53,148			52,474
Shareholders’ equity:
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,504,785 and 67,391,616 shares		675			674
Additional paid-in capital		197,503			195,841
Retained earnings		1,444,691			1,389,975
Cost of 25,397,002 and 24,972,079 shares of common stock in treasury		(1,143,360	)		(1,116,765	)
Accumulated other comprehensive loss		(2,254	)		(3,488	)
Total shareholders’ equity		497,255			466,237
Total liabilities and shareholders’ equity	$	984,757		$	991,518

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Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 25, 2016			June 27, 2015			June 25, 2016			June 27, 2015
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	886,195		$	946,598		$	458,002		$	496,910
Unsided/platform equipment		451,430			530,515			242,008			291,032
Less-than-truckload		35,927			40,956			18,450			21,258
Total truck transportation		1,373,552			1,518,069			718,460			809,200
Rail intermodal		52,337			49,522			26,229			26,341
Ocean and air cargo carriers		37,710			41,410			18,902			21,778
Other(1)		23,268			21,762			11,632			11,064
	$	1,486,867		$	1,630,763		$	775,223		$	868,383
Revenue on loads hauled via BCO Independent Contractors(2) included in total truck transportation	$	707,652		$	752,030		$	373,374		$	401,705
Number of loads:
Truck transportation
Truckload:
Van equipment		556,119			544,714			287,079			285,762
Unsided/platform equipment		219,034			229,452			116,292			127,286
Less-than-truckload		55,727			54,904			28,829			28,912
Total truck transportation		830,880			829,070			432,200			441,960
Rail intermodal		24,180			20,680			12,150			11,200
Ocean and air cargo carriers		9,780			8,620			5,220			4,490
		864,840			858,370			449,570			457,650
Loads hauled via BCO Independent Contractors(2) included in total truck transportation		414,660			406,230			216,990			214,930
Revenue per load:
Truck transportation
Truckload:
Van equipment	$	1,594		$	1,738		$	1,595		$	1,739
Unsided/platform equipment		2,061			2,312			2,081			2,286
Less-than-truckload		645			746			640			735
Total truck transportation		1,653			1,831			1,662			1,831
Rail intermodal		2,164			2,395			2,159			2,352
Ocean and air cargo carriers		3,856			4,804			3,621			4,850
Revenue per load on loads hauled via BCO Independent Contractors(2)	$	1,707		$	1,851		$	1,721		$	1,869
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	%		47	%
Rail intermodal		4	%		3	%		3	%		3	%
Ocean and air cargo carriers		3	%		3	%		2	%		3	%
Other		2	%		1	%		2	%		1	%
							June 25, 2016			June 27, 2015
Truck Capacity Providers
BCO Independent Contractors(2)								8,856			8,726
Truck Brokerage Carriers:
Approved and active(3)								30,137			28,387
Other approved								15,594			13,126
								45,731			41,513
Total available truck capacity providers								54,587			50,239
Trucks provided by BCO Independent Contractors(2)								9,462			9,308

(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.