Landstar System Inc. (NASDAQ:LSTR) Q3 2015 Earnings Conference Call Transcript

Oct 22, 2015 • 05:00 pm ET

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Landstar System Inc. (NASDAQ:LSTR) Q3 2015 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good afternoon and welcome to Landstar System Incorporated's Third Quarter 2015 Earnings Release Conference Call. All lines will be in a listen-only mode until the formal question-and-answer session. Today's call is being recorded. If you have any objections, you may disconnect at this time.

Joining us today from Landstar are Mr. Jim Gattoni, President and CEO; Mr. Kevin Stout, VP and CFO; Mr. Pat O'Malley, VP and Chief Commercial and Marketing Officer; Mr. Joe Beacom, VP and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. Jim Gattoni. Sir, you may begin.

Executive
Jim Gattoni

Thank you. Good afternoon and welcome to Landstar's 2015 third-quarter earnings conference call. This conference call will be limited to one hour. Due to a high level of participation on these calls, I am requesting that each participant had a two question limit. Time permitting, we can circle back for additional questions.

(Forward-Looking Cautionary Statements)

Before I go into my more detailed prepared remarks, let me touch on a few third quarter highlights. The number of loads hauled via truck increased 8% over the 2014 third quarter on strong demand for van and LTL services. Excluding a significant award for flatbed services that began in April 2015, core unsided/platform loading slowed into the third quarter and heavy specialized services continued to be soft.

Revenue per load on loads hauled via truck was 6% lower than the 2014 third quarter. We attribute that decrease to lower diesel fuel prices, a slight decrease in the average length of haul, and somewhat softer demand. Gross profit margin was 15.1% compared to 14.8% in the 2014 third quarter, mostly due to a lower rate of purchased transportation paid to truck brokerage carriers.

Now for my more detailed comments. Revenue for the 2015 third quarter was $842 million, at the lower end of the range of previously issued guidance of $830 million to $880 million. Revenue in 2015 third quarter increased 3% over the 2014 third quarter. The increase was a result of increased truck revenue, up 2%, and a 21% increase in rail, air and ocean revenue.

The increase in truck revenue was driven by an 8% increase in the number of loads hauled via truck over the 2014 third quarter, partly offset by a 6% decrease in revenue per load on loads hauled via truck. Overall revenue per load was negatively impacted by the effect of lower diesel fuel prices on loads hauled via truck brokerage carriers. Revenue hauled via truck brokerage carriers comprised 50% of truck revenue in the 2015 third quarter.

As it relates to revenue per load compared to the prior year, rates held relatively stable throughout the 2015 third quarter. Revenue per load on loads hauled via BCO capacity, which excludes the effect of fuel surcharges billed to customers, was only 2% below prior year's third quarter. That decrease was mostly due to a slightly shorter length of haul in the 2015 period. Revenue per load on loads hauled via broker