What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-30 compared with 2021-04-30 · 206 added, 62 removed, 245 unchanged (52% of the section changed)

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and its subsidiary, Landstar System Holdings, Inc.

(collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), is a worldwide asset-light provider of integrated transportation management solutions.

(collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), is a worldwide technology enabled 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 comprehensive third party logistics solutions to meet all of a customer’s transportation needs.

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Landstar’s independent commission sales agents enter into contractual arrangements with the Company and are responsible for locating freight, making that freight available to Landstar’s capacity providers and coordinating the transportation of the freight with customers and capacity providers.

The Company’s third party capacity providers consist of independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the “BCO Independent Contractors”), unrelated trucking companies who provide truck capacity to the Company under non-exclusive

The Company’s third party capacity providers consist of independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the

“BCO Independent Contractors”), unrelated trucking companies who provide truck capacity to the Company under non-exclusive

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

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In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-than-truckload service providers.

Each of the independent commission sales agents has the opportunity to market all of the services provided by the transportation logistics segment.

The independent commission sales agents market services provided by the transportation logistics segment.

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 27, 2021, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44%, 49% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 4% of the Company’s consolidated revenue in the thirteen-week period ended March 27, 2021.

During the twenty six weeks ended June 26, 2021, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 42%, 50% and 3%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 4% of the Company’s consolidated revenue in the twenty-six-week

period ended June 26, 2021.

On May 6, 2020, the Company formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”).

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

Revenue from Landstar Blue represented less than 1% of the Company’s transportation logistics segment revenue in the thirteen-week period ended March 27, 2021.

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

period ended June 26, 2021.

The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, 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 27, 2021.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the twenty-six-week

period ended June 26, 2021.

Changes in Financial Condition and Results of Operations

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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 27, 2021

March 28, 2020

June 26, 2021

June 27, 2020

BCO Independent Contractors

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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 48% of the Company’s consolidated revenue in the thirteen-week period ended March 27, 2021 was generated under contracts that have a fixed gross profit margin while 52% was under contracts that have a variable gross profit margin.

Approximately 47% of the Company’s consolidated revenue in the twenty-six-week

period ended June 26, 2021 was generated under contracts that have a fixed gross profit margin while 53% 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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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.

Effective May 1, 2021, with respect to the annual policy year ending April 30, 2022, the Company experienced an increase of approximately $3 million, or 19%, 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.

Moreover, the Company increased the level of its financial exposure to commercial trucking claims in excess of $10,000,000, including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage.

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.

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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 27, 2021, employee compensation and benefits accounted for approximately seventy-three percent of the Company’s selling, general and administrative costs.

During the twenty-six-week

period ended June 26, 2021, employee compensation and benefits accounted for approximately seventy-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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and (4) this information facilitates comparisons by investors of the Company’s results to the results of other non-asset

or asset-light companies in the transportation and logistics services industry who report “net revenue” in Management’s Discussion and Analysis, which represents revenue less the cost of purchased transportation.

The difference between the Company’s use of the term “gross profit” and the use of the term “net revenue” by other companies in the transportation and logistics services industry is due to the direct cost of commissions to agents under the Landstar business model, whereas other companies in this industry generally have no commissions to agents.

or asset-light companies in the transportation and logistics services industry who report “net revenue” or “adjusted gross profit” in Management’s Discussion and Analysis, which represents revenue less the cost of purchased transportation.

The difference between the Company’s use of the term “gross profit” and the use of the term “net revenue” or “adjusted gross profit” by other companies in the transportation and logistics services industry is due to the direct cost of commissions to agents under the Landstar business model, whereas other companies in this industry generally have no commissions to agents.

Also, as previously mentioned, the Company reports two operating segments:

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

THIRTEEN WEEKS ENDED MARCH 27, 2021 COMPARED TO THIRTEEN WEEKS ENDED MARCH 28, 2020

TWENTY SIX WEEKS ENDED JUNE 26, 2021 COMPARED TO TWENTY SIX WEEKS ENDED JUNE 27, 2020

Revenue for the 2021 twenty-six-week

period was $2,858,252,000, an increase of $1,107,172,000, or 63%, compared to the 2020 twenty-six-week

Transportation revenue increased $1,099,875,000, or 64%.

The increase in transportation revenue was attributable to increased revenue per load of approximately 31% and an increased number of loads hauled of approximately 25% compared to the 2020 twenty-six-week

The significant increase in revenue in the 2021 first half from the 2020 first half was primarily related to two

(1) consumer demand for durable goods, building products and e-commerce

drove revenue during the 2021 period to record levels;

and (2) transportation revenue from the 2020 period was significantly adversely impacted by the effect of the COVID-19

pandemic on the U.S.

and global economies.

In particular, the impact of the COVID-19

pandemic on demand for the Company’s truck transportation services significantly accelerated during the last week of the Company’s 2020 first fiscal quarter and led to demand lows experienced by the Company in April and May 2020.

In June 2020, demand for the Company’s truck transportation services sequentially increased from May 2020, but remained at significantly depressed levels throughout the remainder of the 2020 twenty-six-week

Reinsurance premiums were $34,695,000 and $27,398,000 for the 2021 and 2020 twenty-six-week

periods, respectively.

The increase in revenue from reinsurance premiums was primarily attributable to increased premiums from a third party insurance company relating to unladen insurance provided to certain BCO Independent Contractors and an increase in the average number of trucks provided by BCO Independent Contractors in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2021 twenty-six-week

period was $2,637,676,000, representing 92% of total revenue, an increase of $1,029,767,000, or 64%, compared to the 2020 twenty-six-week

Revenue per load on loads hauled by third party truck capacity providers increased approximately 31% compared to the 2020 twenty-six-week

The increase in revenue per load on loads hauled via truck was primarily due to an extremely tight truck capacity environment experienced during the 2021 twenty-six-week

During the 2021 twenty-six-week

period, the demand for truck capacity, particularly with respect to van capacity, increased more rapidly than the supply of available truck capacity in the marketplace as the U.S.

economy recovered from the impact of the COVID-19

Revenue per load on loads hauled via van equipment increased 35%, revenue per load on loads hauled via unsided/platform equipment increased 23% and revenue per load on less-than-truckload loadings increased 10% as compared to the 2020 twenty-six-week

The number of loads hauled by third party truck capacity providers increased approximately 25% in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

The increase in the number of loads hauled via truck compared to the 2020 twenty-six-week

period was due to a broad-based increase in demand for the Company’s truck transportation services during the 2021 period, particularly those services provided via van equipment, compared to the 2020 period, which was adversely impacted by the COVID-19

Loads hauled via van equipment increased 30%, loads hauled via unsided/platform equipment increased 19% and less-than-truckload volumes increased 9% as compared to the 2020 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 $45,574,000 and $29,302,000 in the 2021 and 2020 twenty-six-week

periods, respectively.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2021 twenty-six-week

period was $183,908,000, or 6% of total revenue, an increase of $75,343,000, or 69%, compared to the 2020 twenty-six-week

Revenue per load on revenue generated by multimode capacity providers increased approximately 32% in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

period, and the number of loads hauled by multimode capacity providers increased approximately 29% over the same period.

Revenue per load on loads hauled by multimode capacity providers increased for all modes, primarily due to strong U.S.

and global economic recoveries coupled with the impact of global supply chain disruptions.

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.

The increase in the number of loads hauled by multimode capacity providers was due to a broad-based increase in demand across many customers for the Company’s rail, air and ocean service offerings during the 2021 period as well as the adverse impact of the COVID-19

pandemic on multimode loadings during the 2020 period, which began during the last week of the Company’s 2020 first fiscal quarter and persisted throughout the entirety of the 2020 second fiscal quarter.

Purchased transportation was 77.9% and 76.8% of revenue in the 2021 and 2020 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 on revenue generated by Truck Brokerage Carriers and an increased percentage of revenue contributed by Truck Brokerage Carriers, which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors, partially offset by a decreased rate of purchased transportation paid on revenue generated by BCO Independent Contractor revenue due to the impact of COVID-19

pandemic relief incentive payments in the 2020 twenty-six-week

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 7.8% and 8.6% of revenue in the 2021 and 2020 twenty-six-week

periods, respectively.

pandemic relief incentive payments to agents included in the 2020 period and the elimination as of the end of the 2020 fiscal year of certain incentive commission arrangements formerly paid to agents relating to a discontinued BCO recruitment and retention program.

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

pandemic relief incentive payments during the 2020 twenty-six-week

Investment income was $1,432,000 and $2,002,000 in the 2021 and 2020 twenty-six-week

periods, respectively.

The decrease in investment income was primarily attributable to lower average rates of return on investments in the 2021 twenty-six-week

period, partially offset by a higher average investment balance held by the insurance segment in the 2021 twenty-six-week

Other operating costs increased $871,000 in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

period and represented 4.0% of gross profit in the 2021 period compared to 6.1% of gross profit in the 2020 period.

The increase in other operating costs compared to the prior year was primarily due to decreased gains on sales of used trailing equipment and increased trailing equipment maintenance costs, partially offset by a decreased provision for contractor bad debt.

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

Insurance and claims increased $921,000 in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

period and represented 11.1% of gross profit in the 2021 period compared to 17.5% of gross profit in the 2020 period.

The increase in insurance and claims expense compared to the prior year was primarily due to an increase in insurance premiums, primarily for commercial trucking liability coverage, in the 2021 twenty-six-week

period, partially offset by a $5,000,000 charge for the Company’s self-insured retention with respect to a tragic vehicular accident involving a fatality during the 2020 period, a $3,500,000 charge relating to additional premium the Company was required to pay under its existing multi-year insurance arrangements in connection with certain aggregated losses incurred during the 2020 period, as well as the impact of decreased net unfavorable development of prior years’ claims in the 2021 twenty-six-week

During the 2021 and 2020 twenty-six-week

periods, insurance and claims costs included $980,000 and $5,039,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

The decrease in insurance and claims as a percent of gross profit was caused by the effect of increased gross profit, partially offset by the increase in insurance and claims costs.

Selling, general and administrative costs increased $13,594,000 in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

period and represented 24.3% of gross profit in the 2021 period compared to 33.6% of gross profit in the 2020 period.

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

Included in selling, general and administrative costs was incentive compensation expense of $12,615,000 and $4,057,000 for the 2021 and 2020 twenty-six-week

periods, respectively, and stock-based compensation expense of $10,893,000 and $1,201,000 for the 2021 and 2020 twenty-six-week

periods, respectively.

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

Depreciation and amortization increased $1,272,000 in the 2021 twenty-six-week

period compared to the 2020 twenty-six-week

period and represented 5.9% of gross profit in the 2021 period compared to 9.0% of gross profit in the 2020 period.

The increase in depreciation and amortization expenses was primarily due to increased depreciation on information technology assets.

The decrease in depreciation and amortization as a percentage of gross profit was due to the effect of increased gross profit, partially offset by the increase in depreciation and amortization.

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”).

Interest and debt expense in the 2021 twenty-six-week

period increased $81,000 compared to the 2020 twenty-six-week

The provisions for income taxes for the 2021 and 2020 twenty-six-week

periods were based on estimated annual effective income tax rates of 24.4% and 24.2%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The increase in the estimated annual effective income tax rate was primarily attributable to an increased provision for nondeductible executive compensation during the 2021 period.

The effective income tax rate for the 2021 twenty-six-week

period was 24.1%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and nondeductible executive compensation, partially offset by excess tax benefits realized on 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 in the 2021 twenty-six-week

period of 24.1% was lower than the 24.4% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2021 twenty-six-week

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

Net income was $169,534,000, or $4.41 per diluted share, in the 2021 twenty-six-week

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

Net income was unfavorably impacted by approximately $12,593,000, or $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 26, 2021 COMPARED TO THIRTEEN WEEKS ENDED JUNE 27, 2020

Revenue for the 2021 thirteen-week period was $1,570,718,000, an increase of $747,204,000, or 91%, compared to the 2020 thirteen-week period.

Transportation revenue increased $743,260,000, or 92%.

The increase in transportation revenue was attributable to increased revenue per load of approximately 24% and an increased number of loads hauled of approximately 13% compared to the 2020 thirteen-week period.

The increase in transportation revenue was attributable to an increased number of loads hauled of approximately 39% and increased revenue per load of approximately 38% compared to the 2020 thirteen-week period.

The increase in revenue in the 2021 period from the 2020 period was primarily related to two factors:

(1) consumer demand for durable goods, building products and e-commerce

drove revenue in the 2021 period to record levels;

and (2) transportation revenue from the 2020 period was significantly adversely impacted by the effect of the COVID-19

pandemic on the U.S.

and global economies.

In particular, the impact of the COVID-19

In June 2020, demand for the Company’s truck transportation services sequentially increased from May 2020, but remained at significantly depressed levels.

Reinsurance premiums were $17,660,000 and $13,716,000 for the 2021 and 2020 thirteen-week periods, respectively.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2021 thirteen-week period was $1,193,489,000, representing 93% of total revenue, an increase of $338,913,000, or 40%, compared to the 2020 thirteen-week period.

Revenue per load on loads hauled by third party truck capacity providers increased approximately 24% compared to the 2020 thirteen-week period, and the number of loads hauled by third party truck capacity providers increased approximately 13% in the 2021 thirteen-week period compared to the 2020 thirteen-week period.

The increase in revenue per load on loads hauled via truck was primarily due to a tight truck capacity environment during the 2021 thirteen-week period, which resulted in less readily available truck capacity as compared to the 2020 thirteen-week period.

The tight truck capacity environment was exacerbated during fiscal March by the impact of severe winter weather across the United States.

Year-over-year truck revenue per load increased compared to the corresponding period of 2020 by 18%, 19% and 31% for January, February and March, respectively.

Revenue per load on loads hauled via van equipment increased 30%, revenue per load on loads hauled via unsided/platform equipment increased 14% and revenue per load on less-than-truckload loadings increased 5% as compared to the 2020 thirteen-week period.

The increase in the number of loads hauled via truck compared to the 2020 thirteen-week period was due to increased demand for the Company’s truck transportation services, particularly those services provided via van equipment in the 2021 period compared to the 2020 period.

Truck transportation revenue generated by third party truck capacity providers for the 2021 thirteen-week period was $1,444,187,000, representing 92% of total revenue, an increase of $690,854,000, or 92%, compared to the 2020 thirteen-week period.

Both truck loads and revenue per load on loads hauled via truck increased approximately 38% in the 2021 thirteen-week period compared to the 2020 thirteen-week period.

The increase in the number of loads hauled via truck compared to the 2020 thirteen-week period was due to a broad-based increase in demand for the Company’s truck transportation services during the 2021 period as well as the unfavorable impact of the COVID-19

pandemic on the 2020 period.

The number of loads hauled via truck increased 44% in April, 45% in May and 30% in June, respectively, as compared to the corresponding periods in 2020.

Loads hauled via van equipment increased 43%, loads hauled via unsided/platform equipment increased 35% and less-than-truckload volumes increased 12% as compared to the 2020 thirteen-week period.

The increase in revenue per load on loads hauled by third party truck capacity providers primarily was due to an extremely tight truck capacity environment experienced during the 2021 period.

During the 2021 thirteen-week period, the demand for truck capacity, particularly with respect to van capacity, increased more rapidly than the supply of available truck capacity in the marketplace as the U.S.

economy recovered from the impact of the COVID-19

Revenue per load on loads hauled via van equipment increased 40%, revenue per load on loads hauled via unsided/platform equipment increased 33% and revenue per load on less-than-truckload loadings increased 13% as compared to the 2020 thirteen-week period.

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 $26,340,000 and $12,106,000 in the 2021 and 2020 thirteen-week periods, respectively.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2021 thirteen-week period was $79,308,000, or 6% of total revenue, an increase of $24,592,000, or 45%, compared to the 2020 thirteen-week period.

Revenue per load on revenue generated by multimode capacity providers increased approximately 29% in the 2021 thirteen-week period compared to the 2020 thirteen-week period, and the number of loads hauled by multimode capacity providers increased approximately 12% over the same period.

Transportation revenue generated by multimode capacity providers for the 2021 thirteen-week period was $104,600,000, or 7% of total revenue, an increase of $50,751,000, or 94%, compared to the 2020 thirteen-week period.

The number of loads hauled by multimode capacity providers increased approximately 46% in the 2021 thirteen-week period compared to the 2020 thirteen-week period, and revenue per load on revenue generated by multimode capacity providers increased approximately 33% over the same period.

pandemic had on multimode volumes during the 2020 second fiscal quarter.

Revenue per load on loads hauled by multimode capacity providers increased for all modes, primarily due to strong U.S.

and global economic recoveries coupled with supply chain disruptions.

and global economic recoveries coupled with the impact of supply chain disruptions.

The increase in the number of loads hauled by multimode capacity providers was primarily due to a 33% increase in air loadings and a 29% increase in ocean loadings.

The 33% increase in air loadings was primarily attributable to increased loadings at one specific agency, while the 29% increase in ocean loadings was broad-based across many customers.

Purchased transportation was 78.2% and 77.1% of revenue in the 2021 and 2020 thirteen-week periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation on revenue generated by Truck Brokerage Carriers and an increased percentage of revenue contributed by Truck Brokerage Carriers, which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors, partially offset by a decrease in purchased transportation paid on BCO Independent Contractor revenue due to the impact of COVID-19

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

Commissions to agents were 7.7% and 9.1% of revenue in the 2021 and 2020 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 and a decreased commission rate paid on revenue generated by BCO Independent Contractors due to the elimination as of the end of the 2020 fiscal year of certain incentive commission arrangements formerly paid to agents relating to a discontinued BCO recruitment and retention program.

pandemic relief incentive payments to agents during the 2020 period and the elimination as of the end of the 2020 fiscal year of certain incentive commission arrangements formerly paid to agents relating to a discontinued BCO recruitment and retention program.

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 $748,000 and $835,000 in the 2021 and 2020 thirteen-week periods, respectively.

The decrease in investment income was primarily attributable to lower average rates of return on investments in the 2021 thirteen-week period and a lower average investment balance held by the insurance segment in the 2021 thirteen-week period.

Other operating costs decreased $664,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 4.0% of gross profit in the 2021 period compared to 5.8% of gross profit in the 2020 period.

The decrease in other operating costs compared to the prior year was primarily due to a decreased provision for contractor bad debt and decreased trailing equipment maintenance costs, partially offset by decreased gains on sales of used trailing equipment.

The decrease in other operating costs as a percentage of gross profit was caused by the effect of increased gross profit and the decrease in other operating costs.

Insurance and claims decreased $3,452,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 11.4% of gross profit in the 2021 period compared to 17.5% of gross profit in the 2020 period.

The decrease in insurance and claims expense compared to the prior year was primarily due to a severe claim incurred in the 2020 period, as well as the impact of net unfavorable development of prior years’ claims in the 2020 thirteen-week period, partially offset by an increase in insurance premiums, primarily for commercial trucking liability coverage.

During the 2021 and 2020 thirteen-week periods, insurance and claims costs included $292,000 of net favorable and $2,223,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

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

The decrease in investment income was primarily attributable to lower average rates of return on investments in the 2021 thirteen-week period, partially offset by a higher average investment balance held by the insurance segment in the 2021 thirteen-week period.

Other operating costs increased $1,535,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 4.0% of gross profit in the 2021 period compared to 6.6% of gross profit in the 2020 period.

The increase in other operating costs compared to the prior year was primarily due to increased trailing equipment maintenance costs, increased BCO recruiting and qualification costs and decreased gains on sales of used trailing equipment.

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

Insurance and claims increased $4,373,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 10.9% of gross profit in the 2021 period compared to 17.5% of gross profit in the 2020 period.

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year claims in the 2021 period, an increase in BCO miles traveled in the 2021 period, as well as an increase in insurance premiums, primarily for commercial trucking liability coverage, partially offset by decreased net unfavorable development of prior years’ claims in the 2021 thirteen-week period.

During the 2021 and 2020 thirteen-week periods, insurance and claims costs included $1,272,000 and $2,816,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

The decrease in insurance and claims as a percent of gross profit was caused by the effect of increased gross profit, partially offset by the increase in insurance and claims costs.

Selling, general and administrative costs increased $13,513,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 24.5% of gross profit in the 2021 period compared to 35.9% of gross profit in the 2020 period.

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

Included in selling, general and administrative costs was stock-based compensation expense of $4,029,000 and $631,000 for the 2021 and 2020 thirteen-week periods, respectively, and incentive compensation expense of $4,289,000 and $2,031,000 for the 2021 and 2020 thirteen-week periods, respectively.

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

Included in selling, general and administrative costs was incentive compensation expense of $8,326,000 and $2,026,000 for the 2021 and 2020 thirteen-week periods, respectively, and stock-based compensation expense of $6,864,000 and $570,000 for the 2021 and 2020 thirteen-week periods, respectively.

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The decrease in depreciation and amortization as a percentage of gross profit was due to the effect of increased gross profit, partially offset by the increase in depreciation and amortization.

Interest and debt expense in the 2021 thirteen-week period increased $90,000 compared to the 2020 thirteen-week period.

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

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

Interest and debt expense in the 2021 thirteen-week period decreased $9,000 compared to the 2020 thirteen-week period.

The provisions for income taxes for the 2021 and 2020 thirteen-week periods were based on estimated annual effective income tax rates of 24.4% and 24.2%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The increase in the estimated annual effective income tax rate was primarily attributable to an increased provision for nondeductible executive compensation during the 2021 period.

The effective income tax rate for the 2021 thirteen-week period was 24.4%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and nondeductible executive compensation, partially offset by excess tax benefits realized on 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 2021 thirteen-week period was 23.9%, which was higher than

the statutory federal income tax rate of 21% primarily attributable to state taxes and nondeductible executive compensation, partially offset by excess tax benefits realized on stock-based awards.

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 in the 2021 thirteen-week period of 23.9% was lower than the 24.4% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2021 thirteen-week period.

Net income was $77,240,000, or $2.01 per common share ($2.01 per diluted share), in the 2021 thirteen-week period.

Net income was $40,895,000, or $1.04 per common share ($1.04 per diluted share), in the 2020 thirteen-week period.

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.

Net income was $92,294,000, or $2.40 per diluted share, in the 2021 thirteen-week period.

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

Net income during the 2020 thirteen-week period was unfavorably impacted by approximately $12,593,000, or $0.25 per diluted share, related to the impact of the COVID-19

pandemic relief incentive payments.

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $474,654,000 and 1.7 to 1, respectively, at March 27, 2021, compared with $402,038,000 and 1.5 to 1, respectively, at December 26, 2020.

Working capital and the ratio of current assets to current liabilities were $513,051,000 and 1.7 to 1, respectively, at June 26, 2021, compared with $402,038,000 and 1.5 to 1, respectively, at December 26, 2020.

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 $69,891,000 in the 2021 thirteen-week period compared with $99,216,000 in the 2020 thirteen-week period.

Cash provided by operating activities was $137,176,000 in the 2021 twenty-six-week

period compared with $198,385,000 in the 2020 twenty-six-week

The decrease in cash flow provided by operating activities was primarily attributable to the 63% increase in revenue year-over-year, which increased net receivables, defined as accounts receivable less accounts payable.

The Company declared and paid $0.21 per share, or $8,067,000 in the aggregate, in cash dividends during the thirteen-week period ended March 27, 2021 and, during such period, also paid $76,770,000 of dividends payable which were declared during fiscal year 2020 and included in current liabilities in the consolidated balance sheet at December 26, 2020.

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.

During the thirteen-week period ended March 27, 2021, the Company did not purchase any shares of its common stock.

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.

As of March 27, 2021, 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 $90,996,000 at March 27, 2021, $9,778,000 lower than at December 26, 2020.

Shareholders’ equity was $762,919,000, or 89% of total capitalization (defined as long-term debt including current maturities plus equity), at March 27, 2021, compared to $691,835,000, or 87% of total capitalization, at December 26, 2020.

The increase in shareholders’ equity was primarily the result of net income, partially offset by dividends declared by the Company in the 2021 thirteen-week period.

The Company declared and paid $0.42 per share, or $16,135,000 in the aggregate, in cash dividends during the twenty-six-week

period ended June 26, 2021 and, during such period, also paid $76,770,000 of dividends payable which were declared during fiscal year 2020 and included in current liabilities in the consolidated balance sheet at December 26, 2020.

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.

During the twenty-six-week

period ended June 26, 2021, the Company purchased 150,000 shares of its common stock at a total cost of $23,837,000.

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.

As of June 26, 2021, the Company may purchase in the aggregate up to 1,671,030 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $81,631,000 at June 26, 2021, $19,143,000 lower than at December 26, 2020.

Shareholders’ equity was $830,173,000, or 91% of total capitalization (defined as long-term debt including current maturities plus equity), at June 26, 2021, compared to $691,835,000, or 87% of total capitalization, at December 26, 2020.

The increase in shareholders’ equity was primarily the result of net income, partially offset by purchases of shares of the Company’s common stock and dividends declared by the Company in the 2021 twenty-six-week

On August 18, 2020, Landstar entered into an amended and restated 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 27, 2021, the Company had no borrowings outstanding and $33,620,000 of letters of credit outstanding under the Credit Agreement.

At March 27, 2021, there was $216,380,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $64,934,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $72,149,000 at March 27, 2021.

At June 26, 2021, the Company had no borrowings outstanding and $33,579,000 of letters of credit outstanding under the Credit Agreement.

At June 26, 2021, there was $216,421,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $65,434,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $72,704,000 at June 26, 2021.

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 2021 thirteen-week period, the Company purchased $4,076,000 of operating property.

During the 2021 twenty-six-week

period, the Company purchased $9,000,000 of operating property.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2021 approximately $102,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment.

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

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 27, 2021.

During the 2021 and 2020 twenty-six-week

periods, insurance and claims costs included $980,000 and $5,039,000 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 26, 2021.

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