8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 24, 2019

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware	021238	06-1313069
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
13410 Sutton Park Drive South, Jacksonville, Florida		32224
(Address of principal executive offices)		(Zip Code)

(904) 398-9400

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LSTR	NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02 Results of Operations and Financial Condition

On July 24, 2019, Landstar System, Inc. (“Landstar” or the “Company”) issued a press release announcing results for the second quarter of fiscal 2019. A copy of the press release is attached hereto as Exhibit 99.1.

The information contained in Item 7.01 concerning the presentation to Landstar investors is hereby incorporated into this Item 2.02 by reference.

The information furnished under Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 7.01 Regulation FD Disclosure

A slide presentation, dated July 24, 2019, is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The slide presentation provides information that may be referred to by the Company on its conference call with investors scheduled to occur on July 25, 2019 in connection with the Company’s release of results for the second quarter of fiscal 2019.

The information furnished under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 9.01 Financial Statements and Exhibits

Exhibits

99.1	News Release dated July 24, 2019 of Landstar System, Inc.
99.2	Slide Presentation dated July 24, 2019 of Landstar System, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LANDSTAR SYSTEM, INC.
Date: July 24, 2019	By:	/s/ L. Kevin Stout
	Name:	L. Kevin Stout
	Title:	Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

For Immediate Release	Contact: Kevin Stout
	Landstar System, Inc.
	www.landstar.com
July 24, 2019	904-398-9400

LANDSTAR SYSTEM REPORTS SECOND QUARTER

REVENUE OF $1.045 BILLION AND RECORD SECOND QUARTER DILUTED EARNINGS PER SHARE OF $1.53

Jacksonville, FL – Landstar System, Inc. (NASDAQ: LSTR) reported record second quarter diluted earnings per share of $1.53 in the 2019 second quarter on revenue of $1.045 billion. Landstar reported diluted earnings per share of $1.51 on revenue of $1.183 billion in the 2018 second quarter. Gross profit (defined as revenue less the cost of purchased transportation and commissions to agents) was $158.0 million in the 2019 second quarter compared to $171.4 million in the 2018 second quarter. Operating margin, representing operating income divided by gross profit, was 51.2 percent in the 2019 second quarter.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2019 second quarter was $968.2 million, or 93 percent of revenue, compared to $1.105 billion, or 93 percent of revenue, in the 2018 second quarter. Truckload transportation revenue hauled via van equipment in the 2019 second quarter was $605.4 million compared to $713.3 million in the 2018 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2019 second quarter was $338.1 million compared to $364.7 million in the 2018 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $56.8 million, or 5 percent of revenue, in the 2019 second quarter compared to $60.3 million, or 5 percent of revenue, in the 2018 second quarter.

LANDSTAR SYSTEM/ 2

Trailing twelve-month return on average shareholders’ equity was 37 percent and trailing twelve-month return on invested capital, representing net income divided by the sum of average equity plus average debt, was 32 percent. Landstar purchased approximately 550,000 shares of its common stock during the 2019 second quarter at an aggregate cost of approximately $56.8 million. Currently, the Company is authorized to purchase up to approximately 1,326,000 shares of the Company’s common stock under Landstar’s previously announced share purchase programs. As of June 29, 2019, the Company had $285 million in cash and short term investments and $216 million available for borrowings under the Company’s senior credit facility. Landstar also announced today that its Board of Directors has declared a quarterly dividend of $0.185 per share payable on August 30, 2019, to stockholders of record as of the close of business on August 12, 2019. This quarterly dividend includes a 12 percent increase to the amount of the Company’s regular 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.

“Landstar’s business model performed very well in the 2019 second quarter given the significant change in U.S. freight dynamics from 2018 to 2019,” said Landstar’s President and Chief Executive Officer Jim Gattoni. “We entered 2019 knowing we would face very difficult year-over-year comparisons after a record setting 2018. Plus, in late 2018, we began to experience decelerating rates of growth in both truck revenue per load and truck loads that continued through the first quarter of 2019. The freight environment softened further from the 2019 first quarter to the 2019 second quarter, putting additional downward pressure on rates, especially in the spot market where the Company primarily operates. Although demand for freight services has slowed and capacity has become more readily available as compared to 2018, I believe we continue to be in a relatively healthy freight environment. In Landstar’s 2019 first quarter earnings release on April 24, we provided second quarter revenue guidance of $1.075 billion to $1.125 billion and second quarter diluted earnings per share guidance of $1.56 to $1.62. On June 5, we disclosed in a Form 8-K and further explained at a webcast investor conference later that day that, based on recent market conditions, and, in particular, a comparatively challenging pricing environment with respect to the Company’s truckload services, we may not achieve the bottom end of the range of estimates for revenue and earnings per diluted share we provided on April 24, 2019. Revenue and diluted earnings per share for the 2019 second quarter were below the bottom end of the guidance issued on April 24, 2019 largely due to actual truckload rates below our original expectations, beginning in the month of May.

LANDSTAR SYSTEM/ 3

Nonetheless, diluted earnings per share were $1.53 in the 2019 second quarter, the highest second quarter diluted earnings per share in Landstar history, as lower top-line numbers were offset by lower costs, showing the strength of Landstar’s variable cost model.”

Gattoni continued, “On April 24, Landstar provided volume guidance for the 2019 second quarter indicating that truck volumes would be approximately equal to the number of loads hauled by truck in the 2018 second quarter. The number of loads hauled via truck in the 2019 second quarter decreased 1 percent from the 2018 second quarter, driven entirely by a 3 percent decrease in the number of loads hauled via van equipment. The aggregate number of loads hauled via railroads, ocean cargo carriers and air cargo carriers was 8 percent lower in the 2019 second quarter compared to the 2018 second quarter.”

Gattoni further commented, “As I referred to above, the pricing environment for our truck services continued to drive truckload rates in the 2019 second quarter below the 2018 second quarter, as industry-wide truck capacity was more readily available than during the 2018 second quarter. The Company’s guidance issued on April 24, 2019 called for a decrease in revenue per load on loads hauled via truck in a high single-digit percentage range from the 2018 second quarter. Revenue per load on loads hauled via truck was below the prior year comparable period by 8 percent, 11 percent and 13 percent for April, May and June, respectively. Revenue per load on loads hauled via van equipment decreased 13 percent from the 2018 second quarter and revenue per load on loads hauled via unsided/platform equipment decreased 7 percent from the 2018 second quarter. As a result, revenue per load on loads hauled via truck was 11 percent lower in the 2019 second quarter than the 2018 second quarter.”

Gattoni continued, “Through the first few weeks of July, the number of loads hauled via truck was slightly behind the number of loads hauled in the corresponding period of 2018. I expect that trend to continue during the remainder of the 2019 third quarter. Accordingly, I expect the number of loads hauled via truck in the 2019 third quarter to be below the number of loads hauled by truck in the 2018 third quarter in a low single-digit percentage range. My expectation is that pricing conditions for truck services experienced during the 2019 second quarter will continue through the 2019 third quarter with little change in the level of truck capacity available in the marketplace. Assuming those capacity market

LANDSTAR SYSTEM/ 4

conditions continue throughout the rest of the third quarter, I expect 2019 third quarter truck revenue per load to be lower than the 2018 third quarter in a low double-digit percentage range. I anticipate revenue for the 2019 third quarter to be in a range of $1.01 billion to $1.06 billion. Assuming that range of estimated revenue and insurance and claims expense at 3.6 percent of BCO revenue, representing average insurance and claims costs as a percent of BCO revenue over the past five years, I would anticipate 2019 third quarter diluted earnings per share to be in a range of $1.48 to $1.54 per share.”

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 2019 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: 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 2018 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/ 5

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/ 6

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 29, 2019			June 30, 2018			June 29, 2019		June 30, 2018
Revenue	$	2,078,040		$	2,230,712		$	1,045,040	$	1,182,786
Investment income		2,421			1,752			1,283		891
Costs and expenses:
Purchased transportation		1,591,126			1,727,237			799,371		916,940
Commissions to agents		173,294			176,524			87,623		94,399
Other operating costs, net of gains on asset sales/dispositions		18,100			15,210			9,861		7,606
Insurance and claims		31,279			38,899			16,286		21,539
Selling, general and administrative		82,565			94,249			41,297		48,998
Depreciation and amortization		22,350			21,766			11,034		10,769
Total costs and expenses		1,918,714			2,073,885			965,472		1,100,251
Operating income		161,747			158,579			80,851		83,426
Interest and debt expense		1,514			1,639			709		839
Income before income taxes		160,233			156,940			80,142		82,587
Income taxes		35,833			36,975			19,042		20,095
Net income		124,400			119,965			61,100		62,492
Less: Net loss attributable to noncontrolling interest		(17	)		(75	)		—		(31	)
Net income attributable to Landstar System, Inc. and subsidiary	$	124,417		$	120,040		$	61,100	$	62,523
Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	3.11		$	2.88		$	1.53	$	1.51
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	3.11		$	2.87		$	1.53	$	1.51
Average number of shares outstanding:
Earnings per common share		40,053,000			41,744,000			39,945,000		41,450,000
Diluted earnings per share		40,053,000			41,795,000			39,945,000		41,491,000
Dividends per common share	$	0.330		$	0.300		$	0.165	$	0.150

LANDSTAR SYSTEM/ 7

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

	June 29,			December 29,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	250,212		$	199,736
Short-term investments		35,138			40,058
Trade accounts receivable, less allowance of $6,744 and $6,413		594,122			691,604
Other receivables, including advances to independent contractors, less allowance of $7,729 and $6,216		27,212			23,744
Other current assets		32,619			16,287
Total current assets		939,303			971,429
Operating property, less accumulated depreciation and amortization of $264,910 and $250,153		269,246			284,032
Goodwill		38,407			38,232
Other assets		101,737			86,871
Total assets	$	1,348,693		$	1,380,564
LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft	$	43,620		$	55,339
Accounts payable		285,569			314,134
Current maturities of long-term debt		39,194			43,561
Insurance claims		41,254			40,176
Accrued compensation		11,372			29,489
Contractor escrow		25,530			25,202
Other current liabilities		27,711			27,917
Total current liabilities		474,250			535,818
Long-term debt, excluding current maturities		65,573			84,864
Insurance claims		31,016			30,429
Deferred income taxes and other non-current liabilities		49,554			40,320
Equity
Landstar System, Inc. and subsidiary shareholders’ equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,064,877 and 67,870,962 shares		681			679
Additional paid-in capital		224,550			226,852
Retained earnings		1,952,439			1,841,279
Cost of 28,435,182 and 27,755,001 shares of common stock in treasury		(1,446,425	)		(1,376,111	)
Accumulated other comprehensive loss		(2,945	)		(5,875	)
Total Landstar System, Inc. and subsidiary shareholders’ equity		728,300			686,824
Noncontrolling interest		—			2,309
Total equity		728,300			689,133
Total liabilities and equity	$	1,348,693		$	1,380,564

LANDSTAR SYSTEM/ 8

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 29,			June 30,			June 29,			June 30,
	2019			2018			2019			2018
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	1,224,379		$	1,369,476		$	605,365		$	713,341
Unsided/platform equipment		648,828			664,045			338,107			364,676
Less-than-truckload		48,108			50,948			24,732			27,364
Total truck transportation		1,921,315			2,084,469			968,204			1,105,381
Rail intermodal		58,585			61,587			28,570			32,295
Ocean and air cargo carriers		58,893			51,506			28,224			28,029
Other (1)		39,247			33,150			20,042			17,081
	$	2,078,040		$	2,230,712		$	1,045,040		$	1,182,786
Revenue on loads hauled via BCO Independent Contractors (2) included in total truck transportation	$	923,928		$	998,953		$	474,620		$	527,803
Number of loads:
Truck transportation
Truckload:
Van equipment		686,901			691,866			345,080			354,947
Unsided/platform equipment		260,920			255,334			135,750			135,543
Less-than-truckload		74,549			70,670			39,240			37,250
Total truck transportation		1,022,370			1,017,870			520,070			527,740
Rail intermodal		23,880			26,840			11,420			13,560
Ocean and air cargo carriers		14,810			13,030			7,300			6,700
		1,061,060			1,057,740			538,790			548,000
Loads hauled via BCO Independent Contractors (2) included in total truck transportation		483,660			480,890			248,810			247,710
Revenue per load:
Truck transportation
Truckload:
Van equipment	$	1,782		$	1,979		$	1,754		$	2,010
Unsided/platform equipment		2,487			2,601			2,491			2,690
Less-than-truckload		645			721			630			735
Total truck transportation		1,879			2,048			1,862			2,095
Rail intermodal		2,453			2,295			2,502			2,382
Ocean and air cargo carriers		3,977			3,953			3,866			4,183
Revenue per load on loads hauled via BCO Independent Contractors (2)	$	1,910		$	2,077		$	1,908		$	2,131
Revenue by capacity type (as a % of total revenue);
Truck capacity providers:
BCO Independent Contractors (2)		44	%		45	%		45	%		45	%
Truck Brokerage Carriers		48	%		49	%		47	%		49	%
Rail intermodal		3	%		3	%		3	%		3	%
Ocean and air cargo carriers		3	%		2	%		3	%		2	%
Other		2	%		1	%		2	%		1	%
							June 29,			June 30,
							2019			2018
Truck Capacity Providers
BCO Independent Contractors (2)								9,879			9,501
Truck Brokerage Carriers:
Approved and active (3)								40,097			37,045
Other approved								17,790			15,406
								57,887			52,451
Total available truck capacity providers								67,766			61,952
Trucks provided by BCO Independent Contractors (2)								10,587			10,155

(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.

EX-99.2

July 24, 2019 Landstar System, Inc. Earnings Conference Call Second Quarter 2019 Date Published: 07/24/2019 Exhibit 99.2

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements made during this presentation that are not based on historical facts are “forward looking statements.” During this presentation, I may make certain statements, containing forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Such statements are by nature subject to uncertainties and risks, including but not limited to: the operational, financial and legal risks detailed in Landstar’s Form 10-K for the 2018 fiscal year, described in the section Risk Factors, and 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 Landstar undertakes no obligation to publicly update or revise any forward-looking statements. Date Published: 07/24/2019

Model Definition Landstar 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. Date Published: 07/24/2019

The Network Landstar Employees Approx. 1,200 Agents Approx. 1,300 Customers 25,000+ Capacity 68,000+ 2018 Results $4.6 billion in revenue 2.1 million loadings 608 million dollar agents 10,599 BCO trucks (2018 year-end) 59,054 Carriers (2018 year-end) 16,000+ Trailers (2018 year-end) Date Published: 07/24/2019

Percentage of Revenue 2Q18 2Q19 Truck Transportation Truckload Van equipment 60% 58% Unsided/platform equipment 31% 32% Less-than-truckload 2% 2% Rail intermodal 3% 3% Ocean and air cargo 2% 3% Transportation Management Services Date Published: 07/24/2019

Percentage change in rate is calculated on a revenue per load basis. Percentage change in volume is calculated on the number of loads hauled. Revenue ($’s in thousands) Date Published: 07/24/2019 Quarter Year-to-Date

Van Equipment Unsided/Platform Equipment Truckload Loadings and Revenue per Load (Excludes LTL) Date Published: 04/24/2019 The Company’s fiscal year ends each year on the last Saturday in December and, as such, the Company’s 2018 and 2017 fourth quarters included thirteen weeks of operations whereas the 2016 fourth quarter included fourteen weeks.

As a Percentage of Revenue 2Q18 2Q19 Quarter over Prior Year Quarter Growth Consumer Durables 22.8 24.6 -5% Machinery 14.5 14.7 -10% Automotive 8.0 7.2 -21% Building Products 9.5 9.6 -11% Metals 6.9 6.5 -18% AA&E, Hazmat 9.0 9.2 -10% Foodstuffs 5.6 3.8 -41% Energy 2.3 3.0 16% Other 21.4 21.4 -12% Transportation Revenue 100.0 100.0 -12% Industries Served Date Published: 07/24/2019

14.5% 15.1% Gross profit equals revenue less the cost of purchased transportation and commissions to agents. Gross profit margin equals gross profit divided by revenue. Revenue on transactions with a fixed gross profit margin was 52% and 51% of revenue in the 2018 and 2019 year-to-date periods, respectively, and 51% of revenue in both the 2018 and 2019 second quarters. Gross Profit (1) and Gross Profit Margin (2) ($’s in thousands) Date Published: 07/24/2019 Quarter Year-to-Date 14.7% 15.1%

50.5% 48.4% 4 Operating margin equals operating income divided by gross profit. Operating Income and Operating Margin (1) ($’s in thousands) Date Published: 07/24/2019 Quarter Year-to-Date 48.7% 51.2% 48.5% 10 51.6%

Date Published: 07/24/2019 Truck Capacity Data (All information is provided as of the end of the period)

(1) Net cash is defined as cash and cash equivalents plus short term investments less outstanding debt. Date Published: 07/24/2019 Key Balance Sheet and Cash Flow Statistics ($’s in thousands)

Free Cash Flow (1) , Stock Purchases and Dividends Date Published: 07/24/2019 (In Thousands) (1) Free cash flow is defined as cash flow from operations less capital expenditures, each set forth on the prior slide.

Date Published: 07/24/2019