Landstar System (LSTR) 8-K Landstar System Reports Third Quarter Revenue of $1.086 Billion

Exhibit 99.1

For Immediate Release	Contact: Kevin Stout
	Landstar System, Inc.
	www.landstar.com
October 21, 2020	904-398-9400

LANDSTAR SYSTEM REPORTS THIRD QUARTER REVENUE OF $1.086 BILLION

AND DILUTED EARNINGS PER SHARE OF $1.61

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported revenue of $1.086 billion, an increase of approximately 7% over revenue of $1.012 billion reported in the 2019 third quarter. Diluted earnings per share of $1.61 in the 2020 third quarter represented an increase of approximately 19% over diluted earnings per share of $1.35 in the 2019 third quarter. 2020 third quarter diluted earnings per share was the second highest third quarter diluted earnings per share in the Company’s history, behind only the 2018 third quarter diluted earnings per share of $1.63. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $160.9 million in the 2020 third quarter, an increase of approximately 5% compared to $152.6 million in the 2019 third quarter. Operating margin, representing operating income divided by gross profit, was 51.2 percent in the 2020 third quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2020 third quarter was $1.006 billion, or 93 percent of revenue, compared to $932.2 million, or 92 percent of revenue, in the 2019 third quarter. Truckload transportation revenue hauled via van equipment in the 2020 third quarter was $666.6 million compared to $575.0 million in the 2019 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 third quarter was $314.5 million compared to $331.8 million in the 2019 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $62.2 million, or 6 percent of revenue, in the 2020 third quarter compared to $59.3 million, or 6 percent of revenue, in the 2019 third quarter.

LANDSTAR SYSTEM/2

Trailing twelve-month return on average shareholders’ equity was 26 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 22 percent. Landstar did not purchase any shares of its common stock during the 2020 third quarter and currently is authorized to purchase up to 1,821,030 shares of the Company’s common stock under Landstar’s previously announced share purchase program. As of September 26, 2020, the Company had $258 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility, with the ability to increase that amount of borrowings to $366 million using the facility’s accordion feature. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.21 per share payable on December 4, 2020, to stockholders of record as of the close of business on November 10, 2020. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

“Landstar entered the third quarter of 2020 facing one of the most unpredictable and challenging freight environments in the Company’s history,” said Landstar President and Chief Executive Officer Jim Gattoni. “In our second quarter earnings release dated July 22, 2020, we provided third quarter guidance anticipating a decrease in a mid single-digit range on a year-over-year basis for both truck volume and price. Through the first few weeks of fiscal July, the number of loads and revenue per load on loads hauled via truck were each below the corresponding period of 2019 in a mid single-digit percentage range. We closed fiscal July with truckload volumes and revenue per load on loads hauled via truck down only 1% and 2%, respectively, compared to fiscal July 2019. In the first week of the Company’s fiscal August period, the number of loads and revenue per load on loads hauled via truck both turned positive on a weekly basis compared to the corresponding week of 2019. Landstar continued to experience gradual improvement in the number of loads and revenue per load on loads hauled via truck on a sequential basis through August 2020. Moreover, on a year-over-year basis, the number of loads and revenue per load on loads hauled via truck in fiscal August 2020 in comparison to fiscal August 2019 increased by 2% and 5%, respectively.”

LANDSTAR SYSTEM/3

Gattoni continued, “In our second quarter earnings release, we provided third quarter revenue guidance of $885 million to $935 million and third quarter diluted earnings per share guidance of $1.11 to $1.17. On September 9, 2020, we disclosed in a Form 8-K filed with the SEC and further explained at a webcast investor conference the next day that based on overall market conditions, we expected 2020 third quarter revenue to be in a range of $1.02 billion to $1.06 billion and diluted earnings per share for the 2020 third quarter to be in a range of $1.40 to $1.46. Our updated guidance provided on September 9, 2020, reflected our expectation that the number of loads and revenue per load on loads hauled via truck for the 2020 third quarter would be above the 2019 third quarter in a low single-digit range. The number of loads and revenue per load on loads hauled via truck for fiscal September 2020 continued to improve from August 2020 on a sequential basis beyond our expectations, particularly with respect to the demand for services provided by van equipment, and exceeded fiscal September 2019 amounts by 7% and 10%, respectively. Overall, truck load volumes increased in the 2020 third quarter by 3% as compared to the 2019 third quarter, and truck revenue per load increased by 5% as compared to the 2019 third quarter. Ultimately, revenue in the 2020 third quarter was $1.086 billion and diluted earnings per share for the 2020 third quarter was $1.61. The achievement of both revenue and diluted earnings per share in excess of our updated guidance was primarily the result of the further sequential increases in the number of loads and revenue per load on loads hauled via truck from September 9th through the end of the fiscal month.”

Gattoni continued, “The Company’s variable cost business model, highly diversified customer base and geographically dispersed network of independent agents and third-party truck capacity provides resiliency and flexibility in any demand environment. While U.S. manufacturing production continued to lag prior year levels, the agent network capitalized on opportunities with new customers and executed by sourcing truck capacity for shippers experiencing rapid volume growth and/or supply chain disruption. During the 2020 third quarter, approved and active third-party truck carrier count increased approximately 10 percent compared to the 2020 second quarter to over 41,000 carriers. Additionally, the Company net added 272 trucks provided by BCOs in the third quarter.”

LANDSTAR SYSTEM/4

Gattoni further stated, “Through the first few weeks of October 2020, the number of loads hauled via truck was above the corresponding period of 2019 in a high single-digit percentage range. I expect that trend to continue during the remainder of the 2020 fourth quarter. Accordingly, I expect the number of loads hauled via truck in the 2020 fourth quarter to be above the number of loads hauled by truck in the 2019 fourth quarter in a high single-digit percentage range. Based on our current macroeconomic outlook, I expect pricing to remain strong and relatively stable through the 2020 fourth quarter given current demand and assuming little change in the level of truck capacity available in the marketplace. Assuming the current macroeconomic environment continues throughout the remainder of the fourth quarter, I expect 2020 fourth quarter truck revenue per load to be higher than the 2019 fourth quarter in a low double-digit percentage range. I anticipate revenue for the 2020 fourth quarter to be in a range of $1.150 billion to $1.200 billion.”

Earlier this month, the Company announced a new initiative relating to the reorganization of its regional field operations centers throughout the United States in support of its BCO network. It is the intent of the Company that this network of field operations centers will further support the Company’s continual efforts in recruiting and retaining the best truck owner-operators in our industry. In connection with this initiative, the Company expects to record a liability of approximately $15.0 million in its 2020 fourth quarter relating to anticipated buyouts of certain incentive commission arrangements with several of its independent sales agents due to the Company’s discontinuation of a BCO recruitment and retention program formerly involving those agents. This charge is expected to decrease 2020 fourth quarter diluted earnings per share by approximately $0.29. These incentive commission arrangements to agents to recruit and retain BCOs reduced gross profit by almost $10 million a year in recent years.

Gattoni concluded, “Assuming the estimated range of revenue for the 2020 fourth quarter described above, the anticipated charge for the expected buyouts of certain agent commission arrangements, and insurance and claims expense at 4.8 percent of BCO revenue, representing average insurance and claims costs as a percentage of BCO revenue over the past five years (adjusted to reflect the recent significant increase in insurance premiums covered in the Company’s second quarter earnings release), I would anticipate 2020 fourth quarter diluted earnings per share to be in a range of $1.32 to $1.42 per share. Excluding the one-time cost of $0.29 per diluted share related to the anticipated buyouts of the incentive commission arrangements, 2020 fourth quarter diluted earnings per share guidance would be $1.61 to $1.71.”

LANDSTAR SYSTEM/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 Third Quarter 2020 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: 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. 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 2019 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.

LANDSTAR SYSTEM/6

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.

(Tables follow)

LANDSTAR SYSTEM/7    

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

	Thirty Nine Weeks Ended					Thirteen Weeks Ended
	September 26,		September 28,			September 26,		September 28,
	2020		2019			2020		2019
Revenue	$	2,836,626	$	3,089,698		$	1,085,546	$	1,011,658
Investment income		2,716		3,736			714		1,315
Costs and expenses:
Purchased transportation		2,183,143		2,365,646			838,753		774,520
Commissions to agents		236,490		257,862			85,848		84,568
Other operating costs, net of gains/losses on asset sales/dispositions		23,035		28,531			7,361		10,431
Insurance and claims		66,563		55,248			21,855		23,969
Selling, general and administrative		124,779		120,717			38,851		38,152
Depreciation and amortization		34,212		33,045			11,240		10,695
Impairment of intangible and other assets		2,582		—			—		—
Total costs and expenses		2,670,804		2,861,049			1,003,908		942,335
Operating income		168,538		232,385			82,352		70,638
Interest and debt expense		2,936		2,278			1,008		764
Income before income taxes		165,602		230,107			81,344		69,874
Income taxes		38,567		52,452			19,458		16,619
Net income		127,035		177,655			61,886		53,255
Less: Net loss attributable to noncontrolling interest		—		(17	)		—		—
Net income attributable to Landstar System, Inc. and subsidiary	$	127,035	$	177,672		$	61,886	$	53,255
Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	3.28	$	4.45		$	1.61	$	1.35
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	3.28	$	4.45		$	1.61	$	1.35
Average number of shares outstanding:
Earnings per common share		38,673,000		39,891,000			38,386,000		39,566,000
Diluted earnings per share		38,673,000		39,891,000			38,386,000		39,566,000
Dividends per common share	$	0.580	$	0.515		$	0.210	$	0.185

LANDSTAR SYSTEM/8

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

	September 26,			December 28,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	218,554		$	319,515
Short-term investments		39,068			32,901
Trade accounts receivable, less allowance of $8,120 and $7,284		637,908			588,549
Other receivables, including advances to independent contractors, less allowance of $8,827 and $7,667		40,550			35,553
Other current assets		27,989			21,370
Total current assets		964,069			997,888
Operating property, less accumulated depreciation and amortization of $291,159 and $280,849		279,495			285,855
Goodwill		40,251			38,508
Other assets		108,390			105,460
Total assets	$	1,392,205		$	1,427,711
LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft	$	47,459		$	53,878
Accounts payable		339,798			271,996
Current maturities of long-term debt		34,723			42,632
Insurance claims		46,019			44,532
Dividends payable		—			78,947
Contractor escrow		28,345			24,902
Other current liabilities		47,206			36,017
Total current liabilities		543,550			552,904
Long-term debt, excluding current maturities		52,570			70,212
Insurance claims		36,344			33,575
Deferred income taxes and other non-current liabilities		54,107			49,551
Shareholders’ equity:
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,181,418 and 68,083,419 shares		682			681
Additional paid-in capital		226,878			226,123
Retained earnings		2,065,999			1,962,161
Cost of 29,797,639 and 28,609,926 shares of common stock in treasury		(1,581,961	)		(1,465,284	)
Accumulated other comprehensive loss		(5,964	)		(2,212	)
Total shareholders’ equity		705,634			721,469
Total liabilities and shareholders’ equity	$	1,392,205		$	1,427,711

LANDSTAR SYSTEM/9    

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

	Thirty Nine Weeks Ended						Thirteen Weeks Ended
	September 26,			September 28,			September 26,			September 28,
	2020			2019			2020			2019
Revenue generated through (in thousands):
Truck transportation Truckload:
Van equipment	$	1,694,916		$	1,799,421		$	666,582		$	575,042
Unsided/platform equipment		848,187			980,615			314,471			331,787
Less-than-truckload		70,984			73,475			25,125			25,367
Total truck transportation		2,614,087			2,853,511			1,006,178			932,196
Rail intermodal		81,747			87,555			30,432			28,970
Ocean and air cargo carriers		89,002			89,258			31,752			30,365
Other (1)		51,790			59,374			17,184			20,127
	$	2,836,626		$	3,089,698		$	1,085,546		$	1,011,658
Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation	$	1,312,003		$	1,390,135		$	502,224		$	466,207
Number of loads:
Truck transportation Truckload:
Van equipment		946,117			1,014,572			345,598			327,671
Unsided/platform equipment		356,670			391,112			125,548			130,192
Less-than-truckload		119,533			115,616			41,454			41,067
Total truck transportation		1,422,320			1,521,300			512,600			498,930
Rail intermodal		33,410			35,370			11,900			11,490
Ocean and air cargo carriers		22,720			22,150			8,290			7,340
		1,478,450			1,578,820			532,790			517,760
Loads hauled via BCO Independent Contractors (2) included in total truck transportation		693,860			722,870			250,030			239,210
Revenue per load:
Truck transportation Truckload:
Van equipment	$	1,791		$	1,774		$	1,929		$	1,755
Unsided/platform equipment		2,378			2,507			2,505			2,548
Less-than-truckload		594			636			606			618
Total truck transportation		1,838			1,876			1,963			1,868
Rail intermodal		2,447			2,475			2,557			2,521
Ocean and air cargo carriers		3,917			4,030			3,830			4,137
Revenue per load on loads hauled via BCO Independent Contractors (2)	$	1,891		$	1,923		$	2,009		$	1,949
Revenue by capacity type (as a % of total revenue);
Truck capacity providers:
BCO Independent Contractors (2)		46	%		45	%		46	%		46	%
Truck Brokerage Carriers		46	%		47	%		46	%		46	%
Rail intermodal		3	%		3	%		3	%		3	%
Ocean and air cargo carriers		3	%		3	%		3	%		3	%
Other		2	%		2	%		2	%		2	%
							September 26,			September 28,
							2020			2019
Truck Capacity Providers
BCO Independent Contractors (2)								9,866			9,738
Truck Brokerage Carriers:
Approved and active (3)								41,246			39,963
Other approved								22,181			16,984
								63,427			56,947
Total available truck capacity providers								73,293			66,685
Trucks provided by BCO Independent Contractors (2)								10,571			10,441

(1) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.    

(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 moved at least one load in the 180 days immediately preceding the fiscal quarter end.