Landstar System, Inc. (NASDAQ:LSTR)
February 28, 2013 2:00 pm ET
Henry H. Gerkens - Chairman, Chief Executive Officer, President, Member of Safety & Risk Committee and Member of Strategic Planning Committee
Good afternoon, and welcome to Landstar System, Inc.'s First Mid-Quarter 2013 Conference Call. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar is Henry Gerkens, Chairman, President and CEO.
I would now like to turn the call over to Mr. Gherkins. Sir, you may begin.
Henry H. Gerkens
Thanks and good afternoon, and welcome to the Landstar 2013 first quarter mid-quarter update conference call.
Before we start this mid-quarter update, let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, 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 2012 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.
As a reminder, let me review how our mid-quarter update call works. There is no question-and-answer period during this call. The purpose of this call is to provide a brief update on the 2013 first quarter. The call will last approximately 5 minutes.
To repeat what I always state during a first quarter mid-quarter update call, it is important to understand the relationship the first quarter of any year has to the rest of the year. The first quarter of any year is typically Landstar's slowest quarter and the first 2 months are typically the slowest within the first quarter. As such, operating margin, operating income and diluted earnings per share are typically lower in the first quarter of any given year compared to each of the remaining 3 quarters.
During our 2012 fourth quarter and year end conference call, I stated that truck transportation revenue load count trends experienced in January 2013, compared to January 2012, were choppy. And as with our December load volume, we're below our internal expectations. I also stated that revenue per load was virtually flat with the prior year.
Coming into the year, I knew the beginning of the year revenue comps would be challenging as revenue in January and February 2012 was the best revenue performance for any combined January and February in Landstar history. January closed with consolidated revenue approximately 5% below that of the prior year, January, despite being the second best January revenue performance in Landstar history. February revenue trends are better, and I anticipate February revenue to finish approximately only 3% lower than that of the prior year February. And, like the revenue generated in January 2013, I anticipate revenue in February 2013 to be the second best February revenue performance in Landstar history.
In my opinion, economic and industry indicators appear to be inconsistent. From Landstar's perspective, revenue from certain flatbed and other industrial-based accounts has been a little softer than I anticipated. In addition, weather in the first 2 months of 2013 has been more of a negative factor than in the first 2 months of 2012. The inclement weather experienced during the first 2 months of 2013, the lingering uncertainty surrounding the U.S. economy, and factoring in the difficult revenue comparisons for January and February to begin with, have all added up to a slower start to the 2013 first quarter when compared to the 2012 first quarter. It is, however, the second best start to any Landstar first quarter ever.
I do anticipate revenue to begin to accelerate in March and throughout the balance of the 2013 year. With the extension of the renewable production tax credit, I expect revenue from the power generation related accounts to begin to re-accelerate later this year. I also believe revenue from the other industrial base accounts that have been weak in January and February, will begin to rebound in March and increase as we move throughout the balance of the year.
Although truck revenue per load is projected to be slightly lower on a January-February 2013 over January-February 2012 basis, I believe we could start to see this metric improve as we move beyond the first quarter, as economic and freight conditions gradually improve and become more stable. All that being said, no one really knows the effect the so-called sequester will have on economic conditions, although most believe it will have a somewhat negative impact.
Revenue from business with the U.S. government for the 2012 full year, represented approximately only 3.6% of total revenue versus approximately 5% in the 2011 year, and higher amounts in prior years. I anticipate that percentage will again decline somewhat in 2013 as a result of government cutbacks, but not to any material degree.
From a capacity standpoint, Landstar BCO count in the first quarter of 2013 has declined somewhat consistent with seasonal patterns. Currently, there have been 1,250 electronic onboard recorders installed in BCO trucks, with another 350 ordered pending installation and activation. Our broker carrier count remains strong.
From a new agent standpoint, our pipeline of quality productive agents is strong. I anticipate a stronger 2013 recruiting class than we had in 2012.
As it relates to the 2013 first quarter, and as I have said before, historically, March is the strongest month of any first quarter, and how March goes ultimately determines how the quarter ends up. This year will be no different. Assuming an anticipated improvement in the revenue trends experienced in January and February of 2013, I continue to believe that the first quarter 2013 results will be similar to that of the 2012 first quarter, although revenue for the 2013 first quarter will likely be a little shy of the 2012 first quarter revenue and as such, diluted earnings per share could also be a little shy of the 2012 first quarter diluted earnings per share amount.
But as I said, it all depends on how much March rebounds. Despite the slow start to the year, I believe Landstar will finish strong. Our revenue goal for the 2013 full year remains to surpass the $3 billion mark in revenue.
Thank you for your time and I look forward to talking to you again on our first quarter earnings conference call.
Have a great afternoon.
Thank you for joining the conference call today. Have a good afternoon. Please disconnect your lines at this time.
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