What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-07-31 compared with 2020-05-01 · 237 added, 106 removed, 246 unchanged (58% of the section changed)

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an increase in the frequency or severity of accidents or other claims;

unfavorable development of existing accident claims;

development of existing accident claims;

dependence on third party insurance companies;

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(together, referred to herein as “Landstar” or the “Company”), is a worldwide asset-light provider of integrated transportation management solutions.

The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to enterprise-wide solutions to manage all of a customer’s transportation needs.

The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to comprehensive third party logistics solutions to meet all of a customer’s transportation needs.

Landstar provides services principally throughout the United States and to a lesser extent in Canada and Mexico, and between the United States and Canada, Mexico and other countries around the world.

The Company’s services emphasize safety, information coordination and customer service and are delivered through a network of over 1,200 independent commission sales agents and approximately 65,000 third party capacity providers, primarily truck capacity providers, linked together by a series of mobile and digital applications which are provided and coordinated by the Company.

The Company’s services emphasize safety, information coordination and customer service and are delivered through a network of over 1,200 independent commission sales agents and approximately 64,000 third party capacity providers, primarily truck capacity providers, linked together by a series of digital technologies which are provided and coordinated by the Company.

The nature of the Company’s business is such that a significant portion of its operating costs varies directly with revenue.

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contractual arrangements (the “Truck Brokerage Carriers”), air cargo carriers, ocean cargo carriers and railroads.

Through this network of agents and capacity providers linked together by Landstar’s information technology systems, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $4.1 billion during the most recently completed fiscal year.

Through this network of agents and capacity providers linked together by Landstar’s series of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $4.1 billion during the most recently completed fiscal year.

The Company reports the results of two operating segments:

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Billings for freight transportation services are typically charged to customers on a per shipment basis for the physical transportation of freight and are referred to as transportation revenue.

During the thirteen weeks ended March 28, 2020, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 46%, 46% and 3%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the thirteen-week period ended March 28, 2020.

During the twenty six weeks ended June 27, 2020, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 46%, 46% and 3%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the twenty-six-week

period ended June 27, 2020.

Landstar Metro, S.A.P.I.

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Accordingly, as of such date, Landstar Metro and Landstar Servicios each became wholly owned subsidiaries of the Company.

Revenue from Landstar Metro represented less than 1% of the Company’s transportation logistics segment revenue in the thirteen-week period ended March 28, 2020.

Revenue from Landstar Metro represented less than 1% of the Company’s transportation logistics segment revenue in the twenty-six-week

period ended June 27, 2020.

On May 6, 2020, Landstar System Holdings, Inc.

formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”).

Landstar Blue arranges truckload brokerage services while helping the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents.

The results of operations from Landstar Blue are presented as part of the Company’s transportations logistics segment.

The Company expects that Landstar Blue will not have a material effect on its revenues and earnings for the remainder of fiscal year 2020.

Revenue from Landstar Blue represented less than 1% of the Company’s transportation logistics segment revenue in the twenty-six-week

period ended June 27, 2020.

The insurance segment is comprised of Signature Insurance Company, a wholly owned offshore insurance subsidiary (“Signature”), and Risk Management Claim Services, Inc.

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Revenue at the insurance segment represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirteen-week period ended March 28, 2020.

Recent Developments

was first identified in Wuhan, China in December 2019.

outbreak was subsequently declared a pandemic by the World Health Organization on March 11, 2020.

pandemic has caused significant disruptions in the global economy, which significantly intensified in the United States in late March and early April 2020, and has fueled concerns that it will lead to a global recession.

These conditions are expected to continue and worsen in the near term.

This could have a material adverse impact on the demand for our services and our ability to obtain financing on favorable terms or at all.

The situation continues to evolve rapidly and its effects, both short and long-term, remain unknown.

In connection with the impact of the COVID-19

pandemic, the Company experienced a significant decline in truckload volumes during the last week of its fiscal quarter ended March 28, 2020.

The Company believes the COVID-19

pandemic is likely to have a significant adverse impact on truckload volumes in its 2020 second fiscal quarter.

Although it does not appear the impact of the COVID-19

pandemic had a significant impact on truckload pricing in the 2020 first quarter, no assurance can be given regarding the potential impact of the pandemic on truckload pricing in future periods, including the 2020 second quarter.

The extent to which the COVID-19

pandemic impacts the Company’s results in the 2020 second quarter as well as in future quarters will depend on future developments that are highly uncertain and cannot be predicted, including the duration of the pandemic, new information that may emerge concerning the severity of the pandemic, the actions taken to contain its impact and the role of federal, state and local governments in lifting stay-at-home

orders and taking other measures that will be needed to help the economy transition back to more normal operating conditions.

In an effort to support BCO Independent Contractors and independent commission sales agents in the Landstar network, the Company announced that for each load delivered by a BCO Independent Contractor with a confirmed delivery date from April 1, 2020 through April 30, 2020, the Company will pay an extra $50 to both the BCO hauling the load and the Landstar agent dispatching the load.

The Company subsequently announced the extension of this program through May 15, 2020.

The Company estimates that Landstar BCOs will deliver between 60,000 and 70,000 loads in April 2020 and 30,000 to 35,000 from May 1, 2020 through May 15, 2020.

In addition, if a Landstar BCO tests positive for COVID-19

or is placed under a mandatory quarantine by a public health authority, the Company will provide up to $2,000 to the affected BCO.

Further, in the event that current market conditions persist, it is possible that Landstar will provide additional financial support to its independent agents and/or BCO Independent Contractors during the 2020 second quarter as part of the Company’s pandemic relief efforts.

These pandemic relief efforts will have an impact on the Company’s financial results for the 2020 second quarter.

Moreover, the COVID-19

virus continues to spread in areas where we provide services.

While we have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19

pandemic and such measures may not adequately protect our business from the impact of such events.

The Landstar network includes over 1,200 independent agent locations throughout North America where such independent agents provide shipment coordination and dispatch services, freight tracking, trailer management and numerous other operational functions.

Similarly, the Landstar network includes tens of thousands of truck capacity providers who operate throughout North America without any Landstar truck terminals.

Management believes the decentralized nature of our model provides resiliency to Landstar’s freight operations in an environment where social distancing can disrupt centralized business structures.

A significant impact to our independent agent network and/or a significant decrease in available truck capacity providers due to illness or government restrictions related to the COVID-19

pandemic could have a material adverse effect on our ability to source capacity to service our customers and could have a significant impact on Landstar, including our results of operations, revenue and cash flows.

Revenue at the insurance segment represented approximately 2% of the Company’s consolidated revenue for the twenty-six-week

period ended June 27, 2020.

Changes in Financial Condition and Results of Operations

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Management’s emphasis with respect to revenue growth is on revenue generated by independent commission sales agents who on an annual basis generate $1 million or more of Landstar revenue (“Million Dollar Agents”).

Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents, increasing the revenue opportunities generated by existing independent commission sales agents and providing its independent commission sales agents with technology-based tools they may use to grow revenue and increase efficiencies at their businesses.

Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents, increasing the revenue opportunities generated by existing independent commission sales agents and providing its independent commission sales agents with digital technologies they may use to grow revenue and increase efficiencies at their businesses.

During the 2019 fiscal year, 555 independent commission sales agents generated $1 million or more of Landstar revenue and thus qualified as Million Dollar Agents.

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The following table summarizes this information by trailer type for truck transportation and by mode for all others:

Twenty Six Weeks Ended

Thirteen Weeks Ended

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The following table summarizes the number of available truck capacity providers on the dates indicated:

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

BCO Independent Contractors

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Purchased transportation is the largest component of costs and expenses and, on a consolidated basis, increases or decreases as a percentage of consolidated revenue in proportion to changes in the percentage of consolidated revenue generated through BCO Independent Contractors and other third party capacity providers and external revenue from the insurance segment, consisting of reinsurance premiums.

Purchased transportation as a percent of revenue also increases or decreases in relation to the availability of truck brokerage capacity and with changes in the price of fuel on revenue generated by Truck Brokerage Carriers.

The Company passes 100% of fuel surcharges billed to customers for freight hauled by BCO Independent Contractors to its BCO Independent Contractors.

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Under certain contracts with independent commission sales agents, the Company retains a fixed percentage of revenue and the agent retains the amount remaining less the cost of purchased transportation (the “retention contracts”).

Gross profit margin on revenue generated by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature as the Company’s contracts with

independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of net revenue for these types of loads.

Approximately 52% of the Company’s consolidated revenue in the thirteen-week period ended March 28, 2020 was generated under contracts that have a fixed gross profit margin while 48% was under contracts that have a variable gross profit margin.

Gross profit margin on revenue generated from shipments hauled by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature as the

Company’s contracts with independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of net revenue for these types of shipments.

Approximately 52% of the Company’s consolidated revenue in the twenty-six-week

period ended June 27, 2020 was generated under contracts that have a fixed gross profit margin while 48% was under contracts that have a variable gross profit margin.

Maintenance costs for Company-provided trailing equipment and BCO Independent Contractor recruiting and qualification costs are the largest components of other operating costs.

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threshold amount, the Initial Excess Policy would require the Company to pay additional premium up to a maximum amount of $3,500,000.

As previously disclosed, BCO Independent Contractors with a subsidiary of the Company have been involved in two tragic accidents during the policy year ending April 30, 2020, the first of which occurred in the 2019 third quarter and the second of which occurred in the 2020 first quarter.

As previously disclosed, BCO Independent Contractors with a subsidiary of the Company were involved in two tragic accidents during the policy year ending April 30, 2020, the first of which occurred in the 2019 third quarter and the second of which occurred in the 2020 first quarter.

Following these two tragic accidents, the Company exercised its option under the Initial Excess Policy to increase its aggregate limits to $15,000,000 for each policy year and $20,000,000 for the thirty-six

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amount of additional premium, Landstar would retain liability of up to $10,000,000 per occurrence, inclusive of its $5,000,000 self-insured retention for commercial trucking claims during the remainder of the applicable policy year(s).

In addition, as a result of the Company’s aggregate loss experience since it entered into the Initial Excess Policy, it believes it is probable it will be required to pay additional premium under the Initial Excess Policy, which amount of additional premium was included in insurance and claims costs for the Company’s 2020 fiscal first quarter.

The Company continues to maintain third party insurance arrangements providing excess coverage on a per occurrence basis for commercial trucking liabilities in excess of $10,000,000.

The Company also retains liability of up to $1,000,000 for each general liability claim, up to $250,000 for each workers’ compensation claim and up to $250,000 for each cargo claim.

In addition, as a result of the Company’s aggregate loss experience since it entered into the Initial Excess Policy, it believes it is probable it will be required to pay additional premium under the Initial Excess Policy, which amount of additional premium was provided for in insurance and claims costs for the Company’s 2020 fiscal first quarter.

The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of $10,000,000.

These third party arrangements provide coverage on a per occurrence or aggregated basis.

Due to the increasing cost of commercial auto liability claims throughout the United States in recent years, the availability of such excess coverage has significantly decreased and the pricing associated with such excess coverage, to the extent available, has significantly increased.

Effective May 1, 2020 with respect to the annual policy year ending April 30, 2021, the Company experienced an increase of approximately $14 million, or over 170%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10,000,000.

No assurances can be given that the availability of excess coverage for commercial trucking claims will not continue to deteriorate, that the pricing associated with such excess coverage, to the extent available, will not continue to increase, nor that insurance coverage from third party insurers for excess coverage of commercial trucking claims will even be available on commercially reasonable terms at certain levels.

Further, the Company retains liability of up to $1,000,000 for each general liability claim, up to $250,000 for each workers’ compensation claim and up to $250,000 for each cargo claim.

In addition, under reinsurance arrangements by Signature of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $500,000, $1,000,000 or $2,000,000 with respect to certain occupational accident claims and up to $750,000 with respect to certain workers’ compensation claims.

The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage.

The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight

on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage.

A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

During the thirteen-week period ended March 28, 2020, employee compensation and benefits accounted for approximately sixty-three percent of the Company’s selling, general and administrative costs.

During the twenty-six-week

period ended June 27, 2020, employee compensation and benefits accounted for approximately sixty-four percent of the Company’s selling, general and administrative costs.

Depreciation and amortization primarily relate to depreciation of trailing equipment and information technology hardware and software.

The following table sets forth the percentage relationship of purchased transportation and commissions to agents, both being direct costs, to revenue and indirect costs as a percentage of gross profit for the periods indicated:

Twenty Six Weeks Ended

Thirteen Weeks Ended

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Depreciation and amortization

Impairment of intangible and other assets

Total costs and expenses

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(1) the insurance segment has no other operating costs;

(2) discussion of insurance and claims at either segment without reference to the other may create confusion amongst investors and potential investors due to intercompany arrangements and specific deductible programs that affect comparability of financial results by segment between various fiscal periods but that have no effect on the Company from a consolidated reporting perspective;

affect comparability of financial results by segment between various fiscal periods but that have no effect on the Company from a consolidated reporting perspective;

(3) selling, general and administrative costs of the insurance segment comprise less than 10% of consolidated selling, general and administrative costs and have historically been relatively consistent on a year-over-year basis;

and (4) the insurance segment has no depreciation and amortization.

THIRTEEN WEEKS ENDED MARCH 28, 2020 COMPARED TO THIRTEEN WEEKS ENDED MARCH 30, 2019

TWENTY SIX WEEKS ENDED JUNE 27, 2020 COMPARED TO TWENTY SIX WEEKS ENDED JUNE 29, 2019

Revenue for the 2020 twenty-six-week

period was $1,751,080,000, a decrease of $326,960,000, or 16%, compared to the 2019 twenty-six-week

Transportation revenue decreased $326,095,000, or 16%.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 11% and decreased revenue per load of approximately 6% compared to the 2019 twenty-six-week

Reinsurance premiums were $27,398,000 and $28,263,000 for the 2020 and 2019 twenty-six-week

periods, respectively.

The decrease in revenue from reinsurance premiums was primarily attributable to the decrease in the average number of trucks provided by BCO Independent Contractors in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2020 twenty-six-week

period was $1,607,909,000, representing 92% of total revenue, a decrease of $313,406,000, or 16%, compared to the 2019 twenty-six-week

The number of loads hauled by third party truck capacity providers decreased approximately 11% in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 6% compared to the 2019 twenty-six-week

The decrease in the number of loads hauled via truck compared to the 2019 twenty-six-week

period was due to relative softness in the U.S.

manufacturing sector in the 2020 period compared to the 2019 period and the unfavorable impact of the COVID-19

pandemic, which began during the last week of the Company’s first fiscal quarter and persisted throughout the second fiscal quarter.

Loads hauled via van equipment decreased 13% and loads hauled via unsided/platform equipment decreased 11%, while less-than-truckload volumes increased 5% as compared to the 2019 twenty-six-week

The decrease in revenue per load on loads hauled via truck was primarily due to a softer freight demand environment experienced during the 2020 twenty-six-week

period, which resulted in more readily available truck capacity as compared to the 2019 twenty-six-week

Revenue per load on loads hauled via van equipment decreased 4%, revenue per load on loads hauled via unsided/platform equipment decreased 7% and revenue per load on less-than-truckload loadings decreased 9% as compared to the 2019 twenty-six-week

Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue.

Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $29,302,000 and $41,321,000 in the 2020 and 2019 twenty-six-week

periods, respectively.

It should be noted that billings to many customers of the Company’s truck brokerage services include a single all-in

rate that does not separately identify fuel surcharges on loads hauled via Truck Brokerage Carriers.

Accordingly, the overall impact of changes in fuel prices on revenue and revenue per load on loads hauled via truck is likely to be greater than that indicated.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2020 twenty-six-week

period was $108,565,000, or 6% of total revenue, a decrease of $8,913,000, or 8%, compared to the 2019 twenty-six-week

The number of loads hauled by multimode capacity providers decreased approximately 7% in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period, and revenue per load on revenue generated by multimode capacity providers decreased approximately 1% over the same period.

The decrease in the number of loads hauled by multimode capacity providers was primarily due to a 10% decrease in rail intermodal loadings, mostly attributable to decreased loadings at two specific customers, and a 7% decrease in ocean loadings, primarily due to decreased shipments originating in China for export to the United States.

The decrease in revenue per load of 1% on loads hauled by multimode capacity providers was entirely attributable to decreased revenue per load on rail intermodal shipments.

Also, revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity.

Purchased transportation was 76.8% and 76.6% of revenue in the 2020 and 2019 twenty-six-week

periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation paid on BCO Independent Contractor revenue due to the impact of COVID-19

pandemic relief incentive payments.

Under that program, for each load delivered by a BCO Independent Contractor with a confirmed delivery date from April 1, 2020 through May 30, 2020, the Company paid each of the BCO Independent Contractor who hauled the load and the independent commission sales agent who dispatched the load an extra $50.

Commissions to agents were 8.6% and 8.3% of revenue in the 2020 and 2019 twenty-six-week

periods, respectively.

The increase in commissions to agents as a percentage of revenue was primarily attributable to the impact of COVID-19

pandemic relief incentive payments to agents.

The Company paid a total of $12,593,000 in COVID-19

pandemic relief incentive payments during the 2020 twenty-six

Investment income was $2,002,000 and $2,421,000 in the 2020 and 2019 twenty-six-week

periods, respectively.

The decrease in investment income was primarily attributable to lower average rates of return on investments in the 2020 twenty-six-week period,

partially offset by a higher average investment balance held by the insurance segment in the 2020 twenty-six

Other operating costs decreased $2,426,000 in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period and represented 6.1% of gross profit in the 2020 period compared to 5.8% of gross profit in the 2019 period.

The decrease in other operating costs compared to the prior year was primarily due to decreased BCO Independent Contractor recruiting costs, increased gains on the sales of used trailing equipment and decreased trailer rental expense.

The increase in other operating costs as a percentage of gross profit was caused by the effect of decreased gross profit, partially offset by the decrease in other operating costs.

Insurance and claims increased $13,429,000 in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period and represented 17.5% of gross profit in the 2020 period compared to 10.0% of gross profit in the 2019 period.

The increase in insurance and claims expense compared to the prior year was primarily due to a $5,000,000 charge for the Company’s self-insured retention with respect to a tragic vehicular accident involving a fatality, a $3,500,000 charge relating to anticipated additional premium the Company expects to pay under its existing multi-year insurance arrangements in connection with certain aggregated losses, increased insurance premiums incurred in May and June for commercial trucking liability coverage following the Company’s May 1, 2020 insurance renewal, increased net unfavorable development of prior years’ claims and increased severity of current year claims in the 2020 period.

During the 2020 and 2019 twenty-six-week

periods, insurance and claims costs included $5,039,000 and $2,900,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

The increase in insurance and claims as a percent of gross profit was caused by the increase in insurance and claims costs and the effect of decreased gross profit.

Selling, general and administrative costs increased $3,363,000 in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period and represented 33.6% of gross profit in the 2020 period compared to 26.3% of gross profit in the 2019 period.

The increase in selling, general and administrative costs compared to prior year was attributable to an increased provision for customer bad debt, an increased provision for incentive compensation and increased information technology costs, partially offset by decreased stock-based compensation expense, decreased agent convention costs and decreased travel and entertainment costs related to the impact of the COVID-19

Included in selling, general and administrative costs was incentive compensation expense of $4,057,000 and $1,911,000 for the 2020 and 2019 twenty-six-week

periods, respectively, and stock-based compensation expense of $1,201,000 and $3,368,000 for the 2020 and 2019 twenty-six-week

periods, respectively.

The increase in selling, general and administrative costs as a percent of gross profit was due to the effect of decreased gross profit and the increase in selling, general and administrative costs.

Depreciation and amortization increased $622,000 in the 2020 twenty-six-week

period compared to the 2019 twenty-six-week

period and represented 9.0% of gross profit in the 2020 period compared to 7.1% of gross profit in the 2019 period.

The increase in depreciation and amortization expenses was primarily due to increased depreciation on information technology assets, partially offset by a decrease in trailing equipment depreciation.

The increase in depreciation and amortization as a percentage of gross profit was due to the effect of decreased gross profit and increased depreciation.

During the 2020 second fiscal quarter, the Company recorded a non-cash

impairment charge of $2,582,000 in respect of certain assets, primarily customer contract and related customer relationship intangible assets, acquired on September 20, 2017, along with substantially all of the other assets of the asset-light transportation logistics business of Fletes Avella, S.A.

(“Fletes Avella”).

As previously disclosed in Item 1A.

Risk Factors in the Company’s Form 10-Q

for the 2020 first quarter, negative macroeconomic trends in Mexico, including issues in the international oil and gas sector, have caused significant disruptions in the Mexican economy.

Accordingly, management performed impairment tests of the carrying values of certain assets that primarily relate to intra-Mexico business acquired as a part of the Fletes Avella acquisition.

The impairment tests resulted in an impairment charge of $2,582,000, as the negative macroeconomic trends in Mexico have caused current financial projections relating to these intangible assets to be substantially below those originally anticipated at the acquisition date.

There was no corresponding goodwill impairment charge recorded as the fair value of the Company’s Mexico and cross-border reporting unit continues to significantly exceed its carrying value as of June 27, 2020.

Interest and debt expense in the 2020 twenty-six-week

period increased $414,000 compared to the 2019 twenty-six-week

The increase in interest and debt expense was primarily attributable to decreased interest income earned on cash balances held by the transportation logistics segment.

The provisions for income taxes for the 2020 and 2019 twenty-six-week

periods were each based on an estimated annual effective income tax rate of 24.2%, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate

for the 2020 twenty-six-week

period was 22.7%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock-based awards.

The effective income tax rate for the 2019 twenty-six-week

period was 22.4%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock-based awards.

The effective income tax rate in the 2020 twenty-six-week

period of 22.7% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2020 twenty-six-week

The effective income tax rate in the 2019 twenty-six-week

period of 22.4% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2019 twenty-six-week

The net loss attributable to noncontrolling interest of $17,000 in the 2019 twenty-six-week

period represents the former noncontrolling investors’ share of the net loss incurred by Landstar Metro and Landstar Servicios.

Net income was $65,149,000, or $1.68 per common share ($1.68 per diluted share), in the 2020 twenty-six-week

Net income attributable to the Company was $124,417,000, or $3.11 per common share ($3.11 per diluted share), in the 2019 twenty-six-week

Net income was unfavorably impacted by approximately $12,593,000, or $0.24 per common share ($0.24 per diluted share), during the 2020 twenty-six-week

period, related to the impact of the COVID-19

pandemic relief incentive payments.

THIRTEEN WEEKS ENDED JUNE 27, 2020 COMPARED TO THIRTEEN WEEKS ENDED JUNE 29, 2019

Revenue for the 2020 thirteen-week period was $823,514,000, a decrease of $221,526,000, or 21%, compared to the 2019 thirteen-week period.

Transportation revenue decreased $221,018,000, or 21%.

The decrease in transportation revenue was attributable to decreased revenue per load of approximately 5% and a decreased number of loads hauled of approximately 6% compared to the 2019

thirteen-week period.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 16% and decreased revenue per load of approximately 6% compared to the 2019 thirteen-week period.

Reinsurance premiums were $13,716,000 and $14,224,000 for the 2020 and 2019 thirteen-week periods, respectively.

The decrease in revenue from reinsurance premiums was primarily attributable to the decrease in the average number of trucks provided by BCO Independent Contractors in the 2020 thirteen-week period compared to the 2019 thirteen-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2020 thirteen-week period was $854,576,000, representing 92% of total revenue, a decrease of $98,535,000, or 10%, compared to the 2019 thirteen-week period.

Truck transportation revenue generated by third party truck capacity providers for the 2020 thirteen-week period was $753,333,000, representing 91% of total revenue, a decrease of $214,871,000, or 22%, compared to the 2019 thirteen-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 16% in the 2020 thirteen-week period compared to the 2019 thirteen-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 7% compared to the 2019 thirteen-week period.

The decrease in the number of loads hauled via truck compared to the 2019 thirteen-week period was due to relative softness in in the U.S.

manufacturing sector in the 2020 period compared to the 2019 period and the unfavorable impact of the COVID-19

pandemic experienced during the last week of the 2020 first fiscal quarter.

The decrease in the number of loads hauled via truck compared to the 2019 thirteen-week period was due to the unfavorable impact of the COVID-19

pandemic experienced during the 2020 thirteen-week period as the result of actions taken by governmental authorities and businesses to reduce the further spread of COVID-19.

The number of loads hauled via truck was below the prior year comparable period by 21 %

for April, May and June, respectively.

Loads hauled via van equipment decreased 17% and loads hauled via unsided/platform equipment decreased 19%, while less-than-truckload volumes increased 1% as compared to the 2019 thirteen-week period.

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Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $12,106,000 and $20,334,000 in the 2020 and 2019 thirteen-week periods, respectively.

It should be noted that billings to many customers of the Company’s truck brokerage services include a single all-in

rate that does not separately identify fuel surcharges on loads hauled via Truck Brokerage Carriers.

Accordingly, the overall impact of changes in fuel prices on revenue and revenue per load on loads hauled via truck is likely to be greater than that indicated.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2020 thirteen-week period was $54,716,000, or 6% of total revenue, a decrease of $5,968,000, or 10%, compared to the 2019 thirteen-week period.

The number of loads hauled by multimode capacity providers decreased approximately 7% in the 2020 thirteen-week period compared to the 2019 thirteen-week period, and revenue per load on revenue generated by multimode capacity providers decreased approximately 3% over the same period.

The decrease in the number of loads hauled by multimode capacity providers was primarily due to a 7% decrease in rail intermodal loadings, mostly attributable to decreased loadings at two specific customers, and a 13% decrease in ocean loadings, primarily due to decreased shipments originating in China for export to the United States.

The decrease in revenue per load of 3% on loads hauled by multimode capacity providers was primarily attributable to decreased revenue per load on air cargo shipments.

Transportation revenue generated by multimode capacity providers for the 2020 thirteen-week period was $53,849,000, or 7% of total revenue, a decrease of $2,945,000, or 5%, compared to the 2019 thirteen-week period.

The number of loads hauled by multimode capacity providers decreased approximately 7% in the 2020 thirteen-week period compared to the 2019 thirteen-week period, while revenue per load on revenue generated by multimode capacity providers increased approximately 2% over the same period.

The decrease in the number of loads hauled by multimode capacity providers was primarily due to a 13% decrease in rail intermodal loadings, mostly attributable to decreased loadings at three specific customers.

The increase in revenue per load of 2% on loads hauled by multimode capacity providers was primarily attributable to increased revenue per load on air cargo shipments and an increase in ocean loads as a percentage of loads hauled by multimode capacity providers, as ocean loads typically generate a higher revenue per load compared to loads hauled by rail or air cargo carriers.

Purchased transportation was 77.1% and 76.5% of revenue in the 2020 and 2019 thirteen-week periods, respectively.

The decrease in purchased transportation as a percentage of revenue was primarily due to an increased percentage of revenue contributed by BCO Independent Contractors, which typically has a lower rate of purchased transportation than revenue generated by Truck Brokerage Carriers.

pandemic relief incentive payments.

Commissions to agents were 9.1% and 8.4% of revenue in the 2020 and 2019 thirteen-week periods, respectively.

The decrease in commissions to agents as a percentage of revenue was primarily attributable to a decreased net revenue margin on revenue generated by Truck Brokerage Carriers.

The increase in commissions to agents as a percentage of revenue was primarily attributable to the impact of COVID-19

pandemic relief incentive payments to agents.

The Company paid a total of $12,593,000 in COVID-19

pandemic relief incentive payments during the 2020 thirteen-week period.

Investment income was $835,000 and $1,283,000 in the 2020 and 2019 thirteen-week periods, respectively.

Other operating costs increased $67,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 5.8% of gross profit in the 2020 period compared to 5.3% of gross profit in the 2019 period.

The increase in other operating costs compared to the prior year was primarily due to an increased provision for contractor bad debt and increased trailing equipment maintenance costs, partially offset by decreased trailer rental expense.

The increase in other operating costs as a percentage of gross profit was caused by the effect of decreased gross profit.

The decrease in investment income was primarily attributable to lower average rates of return on investments in the 2020 thirteen-week period and a lower average investment balance held by the insurance segment in the 2020 thirteen-week period.

Other operating costs decreased $2,493,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 6.6% of gross profit in the 2020 period compared to 6.2% of gross profit in the 2019 period.

The decrease in other operating costs compared to the prior year was primarily due to a decreased provision for contractor bad debt, decreased BCO Independent Contractor recruiting costs, increased gains on the sales of used trailing equipment and decreased trailer rental expense.

The increase in other operating costs as a percentage of gross profit was caused by the effect of decreased gross profit, partially offset by the decrease in other operating costs.

Insurance and claims increased $3,465,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 17.5% of gross profit in the 2020 period compared to 10.3% of gross profit in the 2019 period.

pay under its existing multi-year insurance arrangements in connection with certain aggregated losses and, to a lesser extent, increased net unfavorable development of prior years’ claims.

The increase in insurance and claims expense compared to the prior year was primarily due to increased net unfavorable development of prior years’ claims, increased insurance premiums incurred in May and June for commercial trucking liability coverage following the Company’s May 1, 2020 insurance renewal and increased severity of current year claims in the 2020 period, partially offset by reduced frequency of claims in the 2020 period.

During the 2020 and 2019 thirteen-week periods, insurance and claims costs included $2,816,000 and $1,493,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

The increase in insurance and claims as a percent of gross profit was caused by the increase in insurance and claims costs and the effect of decreased gross profit.

Selling, general and administrative costs increased $4,059,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 31.7% of gross profit in the 2020 period compared to 26.5% of gross profit in the 2019 period.

The increase in selling, general and administrative costs compared to prior year was attributable to an increased provision for customer bad debt, an increased provision for incentive compensation and increased wages and employee benefit costs, partially offset by decreased stock-based compensation expense.

Included in selling, general and administrative costs in the 2020 thirteen-week period is approximately $757,000 related to the cancellation due to the COVID-19 pandemic of the Company’s annual agent convention previously planned to occur in the Company’s 2020 second quarter.

The increase in insurance and claims as a percent of gross profit was caused by the effect of decreased gross profit and the increase in insurance and claims costs.

Selling, general and administrative costs decreased $696,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 35.9% of gross profit in the 2020 period compared to 26.1% of gross profit in the 2019 period.

The decrease in selling, general and administrative costs compared to prior year was attributable to decreased agent convention costs and decreased travel and entertainment costs related to the impact of the COVID-19

pandemic and decreased stock-based compensation expense, partially offset by an increased provision for incentive compensation, an increased provision for customer bad debt, and increased information technology costs.

Included in selling, general and administrative costs was incentive compensation expense of $2,026,000 and $873,000 for the 2020 and 2019 thirteen-week periods, respectively, and stock-based compensation expense of $570,000 and $1,430,000 for the 2020 and 2019 thirteen-week periods, respectively.

The increase in selling, general and administrative costs as a percent of gross profit was due to the increase in selling, general and administrative costs and the effect of decreased gross profit.

The increase in selling, general and administrative costs as a percent of gross profit was due to the effect of decreased gross profit, partially offset by the decrease in selling, general and administrative costs.

Depreciation and amortization increased $433,000 in the 2020 thirteen-week period compared to the 2019 thirteen-week period and represented 10.1% of gross profit in the 2020 period compared to 7.0% of gross profit in the 2019 period.

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The increase in depreciation and amortization as a percentage of gross profit was due to the effect of decreased gross profit and increased depreciation.

During the 2020 second fiscal quarter, the Company recorded a non-cash

As previously disclosed in Item 1A.

Risk Factors in the Company’s Form 10-Q

for the 2020 first quarter, negative macroeconomic trends in Mexico, including issues in the international oil and gas sector, have caused significant disruptions in the Mexican economy.

Accordingly, management performed impairment tests of the carrying values of certain assets that primarily relate to intra-Mexico business acquired as a part of the Fletes Avella acquisition.

impairment tests resulted in an impairment charge of $2,582,000, as the negative macroeconomic trends in Mexico have caused current financial projections relating to these intangible assets to be substantially below those originally anticipated at the acquisition date.

Interest and debt expense in the 2020 thirteen-week period increased $267,000 compared to the 2019 thirteen-week period.

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The provisions for income taxes for the 2020 and 2019 thirteen-week periods were each based on an estimated annual effective income tax rate of 24.2%, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2020 thirteen-week period was 22.9%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock based awards.

The effective income tax rate for the 2019 thirteen-week period was 21.0%, which approximated the statutory federal income tax rate.

The effective income tax rate for the 2020 thirteen-week period was 22.3%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by state tax refunds received during the 2020 thirteen-week period and excess tax benefits realized on stock -

based awards.

The effective income tax rate for the 2019 thirteen-week period was 23.8%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock -

based awards.

The effective income tax rate in the 2020 thirteen-week period of 22.3% was lower than the 24.2% estimated annual effective income tax rate primarily due to the impact of the state tax refund and excess tax benefits recognized on stock-based compensation arrangements in the 2020 thirteen-week period.

The effective income tax rate in the 2019 thirteen-week period of 23.8% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2019 thirteen-week period.

The effective income tax rate in the 2019 thirteen-week period of 21.0% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2019 thirteen-week period, which essentially offset the impact of state taxes and the meals and entertainment exclusion.

The net loss attributable to noncontrolling interest of $17,000 in the 2019 thirteen-week period represents the former noncontrolling investors’ share of the net loss incurred by Landstar Metro and Landstar Servicios.

Net income was $24,254,000, or $0.63 per common share ($0.63 per diluted share), in the 2020 thirteen-week period.

Net income was $63,317,000, or $1.58 per common share ($1.58 per diluted share), in the 2019 thirteen-week period.

Net income attributable to the Company was $61,100,000 or $1.53 per common share ($1.53 per diluted share), in the 2019 thirteen-week period.

Net income was unfavorably impacted by approximately $12,593,000, or

$0.25 per common share ($0.25 per diluted share), during the 2020 thirteen-week period, related to the impact of the COVID-19 pandemic relief incentive

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $351,325,000 and 1.8 to 1, respectively, at March 28, 2020, compared with $444,984,000 and 1.8 to 1, respectively, at December 28, 2019.

Working capital and the ratio of current assets to current liabilities were $366,892,000 and 1.8 to 1, respectively, at June 27, 2020, compared with $444,984,000 and 1.8 to 1, respectively, at December 28, 2019.

Landstar has historically operated with current ratios within the range of 1.5 to 1 to 2.0 to 1.

Cash provided by operating activities was $99,216,000 in the 2020 thirteen-week period compared with $121,416,000 in the 2019 thirteen-week period.

The decrease in cash flow provided by operating activities was primarily attributable to the timing of collections of trade receivables and decreased net income.

The Company declared and paid $0.185 per share, or $7,336,000 in the aggregate, in cash dividends during the thirteen-week period ended March 28, 2020 and, during such period, also paid $78,947,000 of dividends payable which were declared during fiscal year 2019 and included in current liabilities in the consolidated balance sheet at December 28, 2019.

The Company declared and paid $0.165 per share, or $6,629,000 in the aggregate, in cash dividends during the thirteen-week period ended March 30, 2019.

During the thirteen-week

period ended March 28, 2020, the Company purchased 1,178,970 shares of its common stock at a total cost of $115,962,000.

During the thirteen-week period ended March 30, 2019, the Company purchased 124,481 shares of its common stock at a total cost of $12,977,000.

As of March 28, 2020, the Company may purchase in the aggregate up to 1,821,030 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $101,921,000 at March 28, 2020, $10,923,000 lower than at December 28, 2019.

Shareholders’ equity was $627,095,000, or 86% of total capitalization (defined as long-term debt including current maturities plus equity), at March 28, 2020, compared to $721,469,000, or 86% of total capitalization, at December 28, 2019.

The decrease in equity was primarily the result of purchases of shares of the Company’s common stock and dividends declared by the Company in the 2020 thirteen-week period, partially offset by net income.

Cash provided by operating activities was $198,385,000 in the 2020 twenty-six-week

period compared with $184,076,000 in the 2019 twenty-six-week

The increase in cash flow provided by operating activities was primarily attributable to favorable working capital adjustments including timing of collections of receivables and payments of accounts payable, partially offset by decreased net income.

The Company declared and paid $0.37 per share, or $14,435,000 in the aggregate, in cash dividends during the twenty-six-week

period ended June 27, 2020 and, during such period, also paid $78,947,000 of dividends payable which were declared during fiscal year 2019 and included in current liabilities in the consolidated balance sheet at December 28, 2019.

The Company declared and paid $0.33 per share, or $13,257,000 in the aggregate, in cash dividends during the twenty-six-week

period ended June 29, 2019.

During the twenty-six-week

period ended June 27, 2020, the Company purchased 1,178,970 shares of its common stock at a total cost of $115,962,000.

During the twenty-six-week

period ended June 29, 2019, the Company purchased 674,410 shares of its common stock at a total cost of $69,729,000.

As of June 27, 2020, the Company may purchase in the aggregate up to 1,821,030 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $98,371,000 at June 27, 2020, $14,473,000 lower than at December 28, 2019.

Shareholders’ equity was $649,121,000, or 87% of total capitalization (defined as long-term debt including current maturities plus equity), at June 27, 2020, compared to $721,469,000, or 86% of total capitalization, at December 28, 2019.

The decrease in equity was primarily the result of purchases of shares of the Company’s common stock and dividends declared by the Company in the 2020 twenty-six-week

period, partially offset by net income.

On June 2, 2016, Landstar entered into a credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”).

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The Company is currently in compliance with all of the debt covenants under the Credit Agreement.

At March 28, 2020, the Company had no borrowings outstanding and $34,368,000 of letters of credit outstanding under the Credit Agreement.

At March 28, 2020, there was $215,632,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $61,503,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $68,337,000 at March 28, 2020.

At June 27, 2020, the Company had no borrowings outstanding and $34,156,000 of letters of credit outstanding under the Credit Agreement.

At June 27, 2020, there was $215,844,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $61,503,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $68,337,000 at June 27, 2020.

Investments, all of which are carried at fair value, include primarily investment-grade bonds and U.S.

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In addition, a significant portion of the trailing equipment used by the Company is provided by third party capacity providers, thereby reducing the Company’s capital requirements.

During the 2020 thirteen-week period, the Company purchased $5,799,000 of operating property.

During the 2020 twenty-six-week

period, the Company purchased $17,676,000 of operating property.

In addition, during the 2020 twenty-six

week period Landstar acquired $1,440,000 of operating property for which the Company accrued a corresponding liability in accounts payable as of June 27, 2020.

In addition, on June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company.

Cash consideration paid for the acquisition was approximately $2,701,000.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2020 approximately $51,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment.

Regarding the recent swift and significant decrease in the Company’s revenue beginning in late March caused by the COVID-19 pandemic, management continues to believe that cash flow from operations combined with the Company’s borrowing capacity under the Credit Agreement will be adequate to meet Landstar’s debt service requirements, fund continued growth, both internal and through acquisitions, pay dividends, complete the authorized share purchase program and meet working capital needs.

The Company remains committed to returning cash to stockholders over time, primarily through share repurchases, as demonstrated during the thirteen-week period ended March 28, 2020;

however, the Company intends to be prudent in its current approach to share repurchases as the depth and duration of the COVID-19 pandemic crisis become clearer.

Management believes that cash flow from operations combined with the Company’s borrowing capacity under the Credit Agreement will be adequate to meet Landstar’s debt service requirements, fund continued growth, both internal and through acquisitions, pay dividends, complete the authorized share purchase programs and meet working capital needs.

LEGAL MATTERS

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc.

and Landstar Ranger, Inc.

(together, the “Defendants”).

The complaint purported to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” The complaint asserted claims based on the alleged misclassification of Mr.

Tanious as an independent contractor and alleged violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition.

Tanious was a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc.

On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S.

Fischer of the United State District Court for the Central District of California.

On August 22, 2019, the Court issued an order, among other things, striking all class allegations from the complaint and stating that this matter would proceed as an individual action.

On June 15, 2020, the Court issued an order granting the Defendants’ motion to transfer venue to the United States District Court for the Middle District of Florida, where the matter was assigned to Judge Marcia Morales Howard.

On June 24, 2020, the Court, sua sponte

, issued an order striking the first amended complaint that was deemed by the Court to have been filed by the plaintiff on March 23, 2020.

On July 6, 2020, the plaintiff filed a voluntary dismissal without prejudice of all remaining claims relating to this action.

On July 15, the Court issued an order granting the voluntary dismissal of this action in full.

The Company is involved in certain claims and pending litigation arising from the normal conduct of business.

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Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates.

During the 2020 and 2019 thirteen-week periods, insurance and claims costs included $2,223,000 and $1,407,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims liability at March 28, 2020.

During the 2020 and 2019 twenty-six-week

periods, insurance and claims costs included $5,039,000 and $2,900,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims liability at June 27, 2020.

Significant variances from management’s estimates for the ultimate resolution of self-insured claims could be expected to positively or negatively affect Landstar’s earnings in a given quarter or year.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis