JACKSONVILLE, Fla. — Landstar System Inc. (NASDAQ: LSTR) reported revenue of $824 million for the second quarter of 2020, along with diluted earnings per share of 63 cents. That’s a 21% drop from the $1,045 million recorded during the second quarter of 2019 with diluted earnings per share of $1.53.
Gross profit (revenue less the cost of purchased transportation and commissions to agents) was $113.1 million during the second quarter this year, inclusive of the impact of the special pandemic relief payments made to Landstar’s business capacity owners (BCOs) and agents in April and May of 2020. Gross profit was $158.0 million in the second quarter of 2019.
“Overall, the resiliency of Landstar’s variable-cost business model performed as expected, given the unprecedented economic decline caused by the (COVID-19) pandemic,” said Jim Gattoni, president and CEO of Landstar. “We entered the 2020 second quarter knowing we would face a very soft freight demand environment as a result of actions taken by governmental authorities and businesses to reduce the spread of COVID-19. As anticipated, demand for freight services slowed significantly and capacity became readily available during the company’s 2020 second quarter, especially in the spot market where the company primarily operates.”
According to Gattoni, the number of loads and revenue per load on loads hauled by truck in the second quarter of this year decreased 16% and 7%, respectively, from the same time period last year. The number of loads hauled by truck during April, May and June of 2020 also dropped, 21% for both April and May, and 9% for June. In addition, revenue per loads hauled by truck dropped compared to 2019: by 6% in April and June, and by 9% in May.
Truck transportation revenue hauled by independent BCOs and truck brokerage carriers in the second quarter of 2020 was $753.3 million (91% of revenue), compared to $968.2 million (93% of revenue) in 2019. Truckload transportation revenue hauled via van equipment during the second quarter was $483.0 million, down from $605.4 million in the 2019. Truckload transportation revenue hauled via unsided/platform equipment in the 2020 quarter was $247.4 million, down from $338.1 million in 2019. Revenue hauled by rail, air and ocean cargo carriers was $53.8 million (7% of revenue) in the 2020 quarter, compared to $56.8 million (5% of revenue) in the 2019.
“The 2020 second quarter presented operating conditions and challenges unlike any other quarter in Landstar’s history. Nevertheless, Landstar did not take any drastic cost reduction measures that could have disrupted our ability to service Landstar’s customers, agents, BCOs or other third-party capacity providers or slow the progress on our technology initiatives,” Gattoni continued.
In April the company instituted a pandemic-relief incentive program for its BCOs and agents. Under the program, Landstar paid an extra $50 to each BCO hauling a load as well as to each Landstar agent dispatching the load for every load delivered by a BCO with a confirmed delivery date in April. The program was extended through May. Landstar’s second-quarter report reflects about $12.6 million of payments issued under the program. The company’s gross profit dropped 28% compared to 2019, or 20% excluding the financial impact of the pandemic-relief program, Gattoni noted.
During this year’s second quarter, Landstar generated $99.2 million in operating cash flow and paid $7.1 million in dividends. Landstar did not purchase any shares of its common stock during the 2020 second quarter and currently is authorized to purchase up to 1,821,030 shares of the common stock under the company’s share purchase program. As of June 27, the company had $282 million in cash and short-term investments with undrawn revolver capacity under its senior credit facility of $216 million (with the ability to increase to $366 million with the accordion feature included in the company’s senior credit facility).
“Although the ultimate impact that the (COVID-19) pandemic will have on the freight transportation industry continues to be unpredictable, we believe Landstar remains in a solid operational and financial position as we enter the third quarter,” Gattoni said.