What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-29 compared with 2021-07-30 · 199 added, 212 removed, 239 unchanged (63% of the section changed)

34 unchanged sentences

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 89,000 third party capacity providers, primarily truck capacity providers, linked together by a series of digital technologies which are provided and coordinated by the Company.

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 over 94,000 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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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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Landstar Ranger, Inc., Landstar Inway, Inc., Landstar Ligon, Inc., Landstar Gemini, Inc., Landstar Transportation Logistics, Inc., Landstar Global Logistics, Inc., Landstar Express America, Inc., Landstar Canada, Inc., Landstar Metro, S.A.P.I.

de C.V., Landstar Servicios, S.A.P.I.

de C.V., and as further described below, Landstar Blue.

Transportation services offered by the Company include truckload and less-than-truckload transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage.

Transportation services offered by the Company include truckload, less-than-truckload and power-only transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage.

Examples of the industries serviced by the transportation logistics segment include automotive parts and assemblies, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics and military equipment.

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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 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.

During the thirty nine weeks ended September 25, 2021, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 41%, 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 thirty-nine-week period ended September 25, 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 twenty-six-week

period ended June 26, 2021.

Revenue from Landstar Blue represented less than 1% of the Company’s transportation logistics segment revenue in the thirty-nine-week period ended September 25, 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 twenty-six-week

period ended June 26, 2021.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirty-nine-week period ended September 25, 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

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Revenue generated through (in thousands):

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Less-than-truckload

Other truck transportation (1)

Total truck transportation

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Less-than-truckload

Other truck transportation (1)

Total truck transportation

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Less-than-truckload

Other truck transportation (1)

Total truck transportation

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Ocean and air cargo carriers

Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment.

Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.

Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.

Purchased transportation

Also critical to the Company’s success is its ability to secure capacity, particularly truck capacity, at rates that allow the Company to profitably transport customers’ freight.

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

June 26, 2021

June 27, 2020

September 25, 2021

September 26, 2020

BCO Independent Contractors

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Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.

The Company incurs costs that are directly related to the transportation of freight that include purchased transportation and commissions to agents.

The Company incurs indirect costs associated with the transportation of freight that include other operating costs and insurance and claims.

In addition, the Company incurs selling, general and administrative costs essential to administering its business operations.

Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets which, in general, are used to benchmark costs incurred on a monthly basis.

Purchased transportation represents the amount a BCO Independent Contractor or other third party capacity provider is paid to haul freight.

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Purchased transportation costs are recognized over the freight transit period as the performance obligation to the customer is completed.

Commissions to agents are based on contractually agreed-upon percentages of revenue or net revenue, defined as revenue less the cost of purchased transportation, or net revenue less a contractually agreed upon percentage of revenue retained by Landstar.

Commissions to agents as a percentage of consolidated revenue will vary directly with fluctuations in the percentage of consolidated revenue generated by the various modes of transportation and reinsurance premiums and with changes in net revenue margin, defined as net revenue divided by revenue, on services provided by Truck Brokerage Carriers, railroads, air cargo carriers and ocean cargo carriers.

Commissions to agents

Commissions to agents are based on contractually agreed-upon percentages of (i) revenue, (ii) revenue less the cost of purchased transportation, or (iii) revenue less a contractually agreed upon percentage of revenue retained by Landstar and the cost of purchased transportation (the “retention contracts”).

Commissions to agents as a percentage of consolidated revenue vary directly with fluctuations in the percentage of consolidated revenue generated by the various modes of transportation and reinsurance premiums and, in general, vary inversely with changes in the amount of purchased transportation as a percentage of revenue on services provided by Truck Brokerage Carriers, railroads, air cargo carriers and ocean cargo carriers.

Commissions to agents are recognized over the freight transit period as the performance obligation to the customer is completed.

The Company defines gross profit as revenue less the cost of purchased transportation and commissions to agents.

Gross profit divided by revenue is referred to as gross profit margin.

The Company’s operating margin is defined as operating income divided by gross profit.

In general, gross profit margin on revenue generated by BCO Independent Contractors represents a fixed percentage of revenue due to the nature of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents.

For revenue generated by Truck Brokerage Carriers, gross profit margin is either fixed or variable as a percent of revenue, depending on the contract with each individual independent commission sales agent.

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 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 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.

Other operating costs, net of gains on asset sales/dispositions

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

Also included in other operating costs are trailer rental costs, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents and gains/losses, if any, on sales of Company-owned trailing equipment.

Insurance and claims

With respect to insurance and claims cost, potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable.

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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 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.

Selling, general and administrative

During the thirty-nine-week period ended September 25, 2021, employee compensation and benefits accounted for approximately seventy-five percent of the Company’s selling, general and administrative costs.

Depreciation and amortization

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

Costs of revenue

The Company incurs costs of revenue related to the transportation of freight and, to a much lesser extent, to reinsurance premiums received by Signature.

Costs of revenue include variable costs of revenue and other costs of revenue.

Variable costs of revenue include purchased transportation and commissions to agents, as these costs are entirely variable on a shipment-by-shipment

Other costs of revenue include fixed costs of revenue and semi-variable costs of revenue, where such costs may vary over time based on certain economic factors or operational metrics such as the number of Company-controlled trailers, the number of BCO Independent Contractors, the frequency and severity of insurance claims, the number of miles traveled by BCO Independent Contractors, or the number and/or scale of information technology projects in process or in-service

to support revenue generating activities, rather than on a shipment-by-shipment

Other costs of revenue associated with the transportation of freight include:

(i) other operating costs, primarily consisting of trailer maintenance and BCO Independent Contractor recruiting and qualification costs, as reported in the Company’s Consolidated Statements of Income, (ii) transportation-related insurance premiums paid and claim costs incurred, included as a portion of insurance and claims in the Company’s Consolidated Statements of Income, (iii) costs incurred related to internally developed software including ASC 350-40

amortization, implementation costs, hosting costs and other support costs utilized to support our independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company’s Consolidated Statements of Income;

and (iv) depreciation on Company-owned trailing equipment, included as a portion of depreciation and amortization in the Company’s Consolidated Statements of Income.

Other costs of revenue associated with reinsurance premiums received by Signature are comprised of broker commissions and other fees paid related to the administration of insurance programs to BCO Independent Contractors and are included in selling, general and administrative in the Company’s Consolidated Statements of Income.

In addition to costs of revenue, the Company incurs various other costs relating to its business, including most selling, general and administrative costs and portions of costs attributable to insurance and claims and depreciation and amortization.

Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets that, in general, are used to benchmark costs incurred on a monthly basis.

Gross Profit, Variable Contribution, Gross Profit Margin and Variable Contribution Margin

The following table sets forth calculations of gross profit, defined as revenue less costs of revenue, and gross profit margin defined as gross profit divided by revenue, for the periods indicated.

The Company refers to revenue less variable costs of revenue as “variable contribution” and variable contribution divided by revenue as “variable contribution margin”.

Variable contribution and variable contribution margin are each non-GAAP

financial measures.

The closest comparable GAAP financial measures to variable contribution and variable contribution margin are, respectively, gross profit and gross profit margin.

The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a shipment-by-shipment

level attributable to our transportation network of third-party capacity providers and independent agents in order to provide services to our customers.

The Company believes variable contribution and variable contribution margin are important performance measurements and management considers variable contribution and variable contribution margin in evaluating the Company’s financial performance and in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs.

The reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin are each presented below:

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Costs of revenue:

Purchased transportation

Commissions to agents

Variable costs of revenue

Trailing equipment depreciation

Information technology costs

Insurance-related costs (1)

Other operating costs

Other costs of revenue

Total costs of revenue

Gross profit margin

Investment income

Indirect costs and expenses:

Other operating costs, net of gains on asset sales/dispositions

Insurance and claims

Selling, general and administrative

Depreciation and amortization

Impairment of intangible and other assets

Total costs and expenses

Operating margin

Management believes that a discussion of indirect costs as a percentage of gross profit is useful and meaningful to investors for the following principal reasons:

(1) disclosure of these relative measures (i.e., each indirect operating cost line item as a percentage of gross profit) allows investors to better understand the underlying trends in the Company’s results of operations;

(2) due to the generally fixed nature of these indirect costs (other than insurance and claims costs), these relative measures are meaningful to investors’ evaluations of the Company’s management of its indirect costs attributable to operations;

(3) management considers this financial information in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs;

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” 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.

other costs of revenue

Variable contribution

Variable contribution margin

Insurance-related costs in the table above include (i) other costs of revenue related to the transportation of freight that are included as a portion of insurance and claims in the Company’s Consolidated Statements of Income and (ii) certain other costs of revenue related to reinsurance premiums received by Signature that are included as a portion of selling, general and administrative in the Company’s Consolidated Statements of Income.

Insurance and claims costs included in other costs of revenue relating to the transportation of freight primarily consist of insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight and the related cost of claims incurred under those programs, and, to a lesser extent, the cost of claims incurred under insurance programs available to BCO Independent Contractors that are reinsured by Signature.

Other insurance and claims costs included in costs of revenue that are included in selling, general and administrative in the Company’s Consolidated Statements of Income consist of brokerage commissions and other fees incurred by Signature relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by Signature.

In general, variable contribution margin on revenue generated by BCO Independent Contractors represents a fixed percentage due to the nature of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents.

For revenue generated by Truck Brokerage Carriers, variable contribution margin may be either a fixed or variable percentage, depending on the contract with each individual independent commission sales agent.

Variable contribution 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 the amount represented by revenue less purchased transportation for these types of shipments.

Approximately 46% of the Company’s consolidated revenue in the thirty-nine-week period ended September 25, 2021 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 54% was generated under transactions that pay a variable percentage of revenue to the third party capacity provider and/or agents.

Operating income as a percentage of gross profit and operating income as a percentage of variable contribution

The following table presents operating income as a percentage of gross profit and operating income as a percentage of variable contribution.

The Company’s operating income as a percentage of variable contribution is a non-GAAP

financial measure calculated as operating income divided by variable contribution.

The Company believes that operating income as a percentage of variable contribution is useful and meaningful to investors for the following principal reasons:

(i) the variable costs of revenue for a significant portion of the business are highly influenced by short-term market-based trends in the freight transportation industry, whereas other costs, including other

costs of revenue, are much less impacted by short-term freight market trends;

(ii) disclosure of this measure allows investors to better understand the underlying trends in the Company’s results of operations;

(iii) this measure is meaningful to investors’ evaluations of the Company’s management of costs attributable to operations other than the purely variable costs associated with purchased transportation and commissions to agents that the Company incurs to provide services to our customers;

and (iv) management considers this financial information in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs.

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Operating income

Operating income as % of gross profit

Variable contribution

Operating income

Operating income as % of variable contribution

The increase in operating income as a percentage of gross profit from the 2020 thirty-nine-week period to the 2021 thirty-nine-week period and from the 2020 thirteen-week period to the 2021 thirteen-week period resulted from operating income increasing at a more rapid percentage rate than the increase in gross profit, as the Company was able to increase operating efficiencies during the period by scaling our fixed cost infrastructure, primarily certain components of selling, general and administrative costs, across a larger gross profit base.

The increase in operating income as a percentage of variable contribution from the 2020 thirty-nine-week period to the 2021 thirty-nine-week period and from the 2020 thirteen-week period to the 2021 thirteen-week period resulted from operating income increasing at a more rapid percentage rate than the increase in variable contribution, as the Company was able to increase operating efficiencies during the period by scaling our fixed cost infrastructure, primarily certain components of selling, general and administrative costs, as well as our other costs of revenue, across a larger variable contribution base.

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

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External revenue at the insurance segment, representing reinsurance premiums, has historically been relatively consistent on an annual basis at 2% or less of consolidated revenue and generally corresponds directly with the number of trucks provided by BCO Independent Contractors.

The discussion of indirect cost line items in Management’s Discussion and Analysis of Financial Condition and Results of Operations considers the Company’s costs on a consolidated basis rather than on a segment basis.

The discussion of cost line items in Management’s Discussion and Analysis of Financial Condition and Results of Operations considers the Company’s costs on a consolidated basis rather than on a segment basis.

Management believes this presentation format is the most appropriate to assist users of the financial statements in understanding the Company’s business for the following reasons:

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

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

THIRTY NINE WEEKS ENDED SEPTEMBER 25, 2021 COMPARED TO THIRTY NINE WEEKS ENDED SEPTEMBER 26, 2020

Revenue for the 2021 thirty-nine-week period was $4,592,551,000, an increase of $1,755,925,000, or 62%, compared to the 2020 thirty-nine-week period.

Transportation revenue increased $1,744,505,000, or 62%.

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

The increase in transportation revenue was attributable to increased revenue per load of approximately 31% and an increased number of loads hauled of approximately 24% compared to the 2020 thirty-nine-week period.

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

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

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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.

pandemic on demand for the Company’s truck transportation services significantly accelerated during the last week of the Company’s 2020 first fiscal quarter.

However, following the demand lows experienced by the Company in April and May 2020, demand for the Company’s truck transportation services sequentially increased throughout the remainder of the thirty-nine-week period.

This significant, rapid decrease in demand followed by a similarly significant yet more gradual sequential increase in demand was unprecedented in the history of the Company.

Reinsurance premiums were $52,990,000 and $41,570,000 for the 2021 and 2020 thirty-nine-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 thirty-nine-week period was $4,218,406,000, representing 92% of total revenue, an increase of $1,604,319,000, or 61%, compared to the 2020 thirty-nine-week period.

Revenue per load on loads hauled by third party truck capacity providers increased approximately 30% compared to the 2020 thirty-nine-week period, and the number of loads hauled by third party truck capacity providers increased approximately 24% over the same period.

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 thirty-nine-week period.

During the 2021 thirty-nine-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

Revenue per load on loads hauled via van equipment increased 34%, revenue per load on loads hauled via unsided/platform equipment increased 22%, revenue per load on less-than-truckload loadings increased 7% and revenue per load on loads hauled via other truck transportation increased 41% as compared to the 2020 thirty-nine-week period.

The increase in the number of loads hauled via truck compared to the 2020 thirty-nine-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 and other truck transportation loadings, primarily power-only, compared to the 2020 period, which was adversely impacted by the COVID-19

Loads hauled via van equipment increased 26%, loads hauled via unsided/platform equipment increased 13%, loads hauled via less-than-truckload increased 13% and loads hauled via other truck transportation increased 47% as compared to the 2020 thirty-nine-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 $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.

Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $74,195,000 and $43,570,000 in the 2021 and 2020 thirty-nine-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 2021 thirty-nine-week period was $312,491,000, or 7% of total revenue, an increase of $141,742,000, or 83%, compared to the 2020 thirty-nine-week period.

Revenue per load on revenue generated by multimode capacity providers increased approximately 47% in the 2021 thirty-nine-week period compared to the 2020 thirty-nine-week period, and the number of loads hauled by multimode capacity providers increased approximately 25% 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 loads hauled via ocean, air and rail intermodal increased 62%, 47% and 22%, respectively, during the 2021 thirty-nine-week period as compared to the 2020 thirty-nine-week period.

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

pandemic on multimode loadings during the 2020 period.

Purchased transportation was 78.0% and 77.0% of revenue in the 2021 and 2020 thirty-nine-week periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to 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, and an increased rate of purchased transportation on revenue generated by Truck Brokerage Carriers, 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 thirty-nine-week period.

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.

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 impact of the COVID-19

Commissions to agents were 7.8% and 8.3% of revenue in the 2021 and 2020 thirty-nine-week periods, respectively.

The decrease in commissions to agents as a

percentage of revenue was primarily attributable to an increased cost of purchased transportation as a percentage of revenue on revenue generated by Truck Brokerage Carriers and a decreased commission rate paid on revenue generated by BCO Independent Contractors due to the impact of the COVID-19

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.

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.

pandemic relief incentive payments during the 2020 thirty-nine-week period.

Investment income was $2,138,000 and $2,716,000 in the 2021 and 2020 thirty-nine-week periods, respectively.

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

Other operating costs increased $4,082,000 in the 2021 thirty-nine-week period compared to the 2020 thirty-nine-week period.

The increase in other operating costs compared to the prior year was primarily due to increased trailing equipment maintenance costs, decreased gains on sales of used trailing equipment, increased BCO recruiting and qualification costs and increased payments of up to $2,000 made to BCO Independent Contractors who tested positive for COVID-19

and were placed out of service.

Insurance and claims increased $8,635,000 in the 2021 thirty-nine-week period compared to the 2020 thirty-nine-week 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 thirty-nine-week period, and an increase in BCO miles traveled in the 2021 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 thirty-nine-week period.

During the 2021 and 2020 thirty-nine-week periods, insurance and claims costs included $4,522,000 and $6,162,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $33,941,000 in the 2021 thirty-nine-week period compared to the 2020 thirty-nine-week 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, partially offset by a decreased provision for customer bad debt.

Included in selling, general and administrative costs was stock-based compensation expense of $18,717,000 and $2,691,000 for the 2021 and 2020 thirty-nine-week periods, respectively, and incentive compensation expense of $21,370,000 and $6,190,000 for the 2021 and 2020 thirty-nine-week periods, respectively.

Depreciation and amortization increased $2,320,000 in the 2021 thirty-nine-week period compared to the 2020 thirty-nine-week 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

1 unchanged sentence

(“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.

Interest and debt expense in the 2021 thirty-nine-week period increased $38,000 compared to the 2020 thirty-nine-week period.

The provisions for income taxes for the 2021 and 2020 thirty-nine-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

The effective income tax rate for the 2021 thirty-nine-week period was 24.2%, 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 thirty-nine-week period was 23.3%, 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 excess tax benefits realized on stock-based awards and state tax refunds.

The effective income tax rate in the 2021 thirty-nine-week period of 24.2% 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 thirty-nine-week period.

The effective income tax rate in the 2020 thirty-nine-week period of 23.3% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements and state tax refunds in the 2020 thirty-nine-week period.

Net income was $268,209,000, or $7.00 per diluted share, in the 2021 thirty-nine-week period.

Net income was $127,035,000, or $3.28 per diluted share, in the 2020 thirty-nine-week period.

Net income was unfavorably impacted by approximately $12,593,000, or $0.25 per diluted share, during the 2020 thirty-nine-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

THIRTEEN WEEKS ENDED SEPTEMBER 25, 2021 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 26, 2020

Revenue for the 2021 thirteen-week period was $1,734,299,000, an increase of $648,753,000, or 60%, compared to the 2020 thirteen-week period.

Transportation revenue increased $644,630,000, or 60%.

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.

The increase in transportation revenue was attributable to increased revenue per load of approximately 32% and an increased number of loads hauled of approximately 22% compared to the 2020 thirteen-week period.

The increase in revenue in the 2021 period from the 2020 period was primarily attributable to consumer demand for durable goods and e-commerce,

which drove revenue in the 2021 period to record levels.

Reinsurance premiums were $18,295,000 and $14,172,000 for the 2021 and 2020 thirteen-week periods, respectively.

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Truck transportation revenue generated by third party truck capacity providers for the 2021 thirteen-week period was $1,580,730,000, representing 91% of total revenue, an increase of $574,552,000, or 57%, 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.

Revenue per load on loads hauled by third party truck capacity providers increased approximately 29% compared to the 2020 thirteen-week period and the number of loads hauled via truck increased approximately 22% in the 2021 thirteen-week period 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.

During the 2021 thirteen-week period, the demand for truck capacity, particularly with respect to van capacity, remained at heightened levels and the supply of available truck capacity in the marketplace did not increase sufficiently to balance the heightened demand for truck capacity that has resulted in connection with the recovery of the U.S.

economy from the impact of the COVID-19

Revenue per load on loads hauled via van equipment increased 31%, revenue per load on loads hauled via unsided/platform equipment increased 27%, revenue per load on less-than-truckload loadings increased 2% and revenue per load on loads hauled via other truck transportation increased 34% as compared to the 2020 thirteen-week period.

Loads hauled via van equipment increased 21%, loads hauled via unsided/platform equipment increased 13%, loads hauled via less-than-truckload increased 20% and loads hauled via other truck transportation increased 43% as compared to the 2020 thirteen-week period.

The number of loads hauled via truck increased 25% in July, 22% in August and 19% in September, respectively, as compared to the corresponding periods in 2020, as the comparisons to prior year periods began to normalize due to the strong recovery from the COVID-19

pandemic experienced during the Company’s 2020 third fiscal quarter.

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

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Transportation revenue generated by multimode capacity providers for the 2021 thirteen-week period was $128,583,000, or 7% of total revenue, an increase of $66,399,000, or 107%, 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 revenue generated by multimode capacity providers increased approximately 75% 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 18% 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 supply chain disruptions.

Revenue per load on loads hauled via ocean, air and rail intermodal increased 98%, 58% and 28%, respectively, during the 2021 thirteen-week period as compared to the 2020 thirteen-week period.

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 and ocean service offerings, partially offset by decreased air loadings, primarily attributable to decreased loadings at one specific customer.

Purchased transportation was 78.2% and 77.3% 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 7.8% and 7.9% of revenue in the 2021 and 2020 thirteen-week periods, respectively.

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.

The decrease in commissions to agents as a percentage of revenue was primarily attributable to a decreased commission rate paid on revenue generated by BCO Independent Contractors, primarily attributable 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, partially offset by an increased commission amount paid on revenue generated by Truck Brokerage Carriers due to a decreased cost of purchased transportation as a percentage of revenue on revenue generated by Truck Brokerage Carriers.

Investment income was $706,000 and $714,000 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, 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.

Other operating costs increased $3,211,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period.

The increase in other operating costs compared to the prior year was primarily due to an increased provision for contractor bad debt, increased trailing equipment maintenance costs and increased BCO recruiting and qualification costs.

Insurance and claims increased $7,714,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period.

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year claims, increased insurance premiums, primarily for commercial trucking liability coverage, and increased 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 $3,542,000 and $1,123,000 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 an increased provision for incentive compensation and increased stock-based compensation expense, partially offset by a decreased provision for customer bad debt.

Selling, general and administrative costs increased $20,347,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period.

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

Included in selling, general and administrative costs was incentive compensation expense of $8,755,000 and $2,133,000 for the 2021 and 2020 thirteen-week periods, respectively, and stock-based compensation expense of $7,824,000 and $1,490,000 for the 2021 and 2020 thirteen-week periods, respectively.

Depreciation and amortization increased $676,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week period and represented 5.5% of gross profit in the 2021 period compared to 10.1% of gross profit in the 2020 period.

Depreciation and amortization increased $1,048,000 in the 2021 thirteen-week period compared to the 2020 thirteen-week 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.

Interest and debt expense in the 2021 thirteen-week period decreased $43,000 compared to the 2020 thirteen-week period.

1 unchanged sentence

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 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 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.

The effective income tax rate for the 2020 thirteen-week period was 23.9%, 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 in the 2021 thirteen-week period of 24.4% approximated the 24.4% estimated annual effective income tax rate.

The effective income tax rate in the 2020 thirteen-week period of 23.9% 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 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 $98,675,000, or $2.58 per diluted share, in the 2021 thirteen-week period.

Net income was $61,886,000, or $1.61 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 $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.

Working capital and the ratio of current assets to current liabilities were $564,816,000 and 1.7 to 1, respectively, at September 25, 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 $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 $0.42 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

Cash provided by operating activities was $216,990,000 in the 2021 thirty-nine-week period compared with $185,548,000 in the 2020 thirty-nine-week period.

The increase in cash flow provided by operating activities was primarily attributable to increased net income, partially offset by the 62% increase in revenue year-over-year, which increased net receivables, defined as accounts receivable less accounts payable.

The Company declared and paid $0.67 per share, or $25,693,000 in the aggregate, in cash dividends during the thirty-nine-week period ended September 25, 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 $0.58 per share, or $22,495,000 in the aggregate, in cash dividends during the thirty-nine-week period ended September 26, 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 thirty-nine-week period ended September 25, 2021, the Company purchased 317,046 shares of its common stock at a total cost of $50,230,000.

During the thirty-nine-week period ended September 26, 2020, the Company purchased 1,178,970 shares of its common stock at a total cost of $115,962,000.

As of September 25, 2021, the Company may purchase in the aggregate up to 1,503,984 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $97,341,000 at September 25, 2021, $3,433,000 lower than at December 26, 2020.

Shareholders’ equity was $899,690,000, or 90% of total capitalization (defined as long-term debt including current maturities plus equity), at September 25, 2021, compared to $691,835,000, or 87% of total capitalization, at December 26, 2020.

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”).

8 unchanged sentences

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

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.

Treasury obligations having maturities of up to five years.

At September 25, 2021, the Company had no borrowings outstanding and $33,577,000 of letters of credit outstanding under the Credit Agreement.

At September 25, 2021, there was $216,423,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $69,434,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $77,149,000 at September 25, 2021.

Investments, all of which are carried at fair value, include primarily investment-grade bonds and asset-backed securities having maturities of up to five years.

Fair value of investments is based primarily on quoted market prices.

3 unchanged sentences

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 twenty-six-week

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

During the 2021 thirty-nine-week period, the Company acquired $23,080,000 of trailing equipment by entering into finance leases.

During the 2021 thirty-nine-week period, the Company also purchased $18,561,000 of operating property.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2021 approximately $69,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment.

10 unchanged sentences

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

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.

During the 2021 and 2020 thirty-nine-week periods, insurance and claims costs included $4,522,000 and $6,162,000 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 September 25, 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.

3 unchanged sentences

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