What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-07-29 · 129 added, 182 removed, 287 unchanged (52% of the section changed)

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The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995.

contain forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations.

Statements contained in this document that are not based on historical facts are “forward-looking statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations.

Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements.

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the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2021 fiscal year;

the impact of the coronavirus (COVID-19)

the impact of the coronavirus (COVID-19) pandemic;

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

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intellectual property;

and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K

for the 2021 fiscal year, described in Item 1A “Risk Factors”, Landstar’s Form 10-Q

for the 2022 first quarter, described in Part II, Item 1A “Risk Factors”, and in this report or in Landstar’s other Securities and Exchange Commission filings from time to time.

and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2021 fiscal year, described in Item 1A “Risk Factors”, Landstar’s Form 10-Qs for the 2022 first and second quarters, described in Part II, Item 1A “Risk Factors”, and in this report or in Landstar’s other Securities and Exchange Commission filings from time to time.

These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated.

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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

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

Through this network of agents and capacity providers linked together by Landstar’s ecosystem of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $6.5 billion during the most recently completed fiscal year.

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

Transportation services offered by the Company include truckload and less-than-truckload transportation and other truck 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 other truck 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-week

period ended June 25, 2022, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 36%, 53% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 8% of the Company’s consolidated revenue in the twenty-six-week

period ended June 25, 2022.

During the thirty-nine-week period ended September 24, 2022, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 35%, 53% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 8% of the Company’s consolidated revenue in the thirty-nine-week period ended September 24, 2022.

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 25, 2022.

Revenue from Landstar Blue represented less than 1% of the Company’s transportation logistics segment revenue in the thirty-nine-week period ended September 24, 2022.

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 25, 2022.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirty-nine-week period ended September 24, 2022.

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 24,

September 25,

September 24,

September 25,

Revenue generated through (in thousands):

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

June 25, 2022

June 26, 2021

September 24,

September 25,

BCO Independent Contractors

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The Company subsequently extended the Initial Excess Policy for one additional policy year, from May 1, 2022 through April 30, 2023.

For commercial trucking claims incurred on or after May 1, 2022 through April 30, 2023, the extended Initial Excess Policy provides for a limit for a single loss of $5 million, with a remaining aggregate limit of $10 million for the policy period ending April 30, 2023, and an option to increase such aggregate limit for a pre-established

amount of additional premium.

amount of additional premium, the Company would retain liability of up to $10 million per occurrence, inclusive of its $5 million self-insured retention for commercial trucking claims during the remainder of the policy period ending April 30, 2023.

If aggregate losses under the Initial Excess Policy exceed the aggregate limit for the period ending April 30, 2023, and the Company did not elect to increase such aggregate limit for a pre-established amount of additional premium, the Company would retain liability of up to $10 million per occurrence, inclusive of its $5 million self-insured retention for commercial trucking claims during the remainder of the policy period ending April 30, 2023.

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

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Selling, general and administrative

During the twenty-six-week

period ended June 25, 2022, employee compensation and benefits accounted for approximately 67% of the Company’s selling, general and administrative costs.

During the thirty-nine-week period ended September 24, 2022, employee compensation and benefits accounted for approximately 68% of the Company’s selling, general and administrative costs.

Employee compensation and benefits include wages and employee benefit costs as well as incentive compensation and stock-based compensation expense.

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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.

The Company incurs costs of revenue related to the transportation of freight and, to a much lesser extent, 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

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

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

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;

(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.

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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.

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 commission sales agents in order to provide services to our customers.

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 commission sales 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:

Twenty Six Weeks Ended

Thirty Nine Weeks Ended

Thirteen Weeks Ended

June 25, 2022

June 26, 2021

June 25, 2022

June 26, 2021

September 24,

September 25,

September 24,

September 25,

Costs of revenue:

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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 41% of the Company’s consolidated revenue in the twenty-six-week

period ended June 25, 2022 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 59% was generated under transactions that pay a variable percentage of revenue to the third party capacity provider and/or agents.

Approximately 40% of the Company’s consolidated revenue in the thirty-nine-week period ended September 24, 2022 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 60% 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’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;

(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.

Twenty Six Weeks Ended

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 24,

September 25,

September 24,

September 25,

Operating income

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Operating income as % of variable contribution

The increase in operating income as a percentage of gross profit from the 2021 twenty-six-week

period to the 2022 twenty-six-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 scale 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 2021 twenty-six-week

period to the 2022 twenty-six-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 scale our fixed cost infrastructure, primarily certain components of selling, general and administrative costs, as well as certain components of our other costs of revenue, across a larger variable contribution base.

The increase in operating income as a percentage of gross profit from the 2021 thirty-nine-week period to the 2022 thirty-nine-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 scale 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 gross profit from the 2021 thirteen-week period to the 2022 thirteen-week period resulted from operating income increasing notwithstanding a modest decrease in gross profit, as certain components of selling, general and administrative costs, namely incentive and equity compensation under the Company’s variable compensation programs, decreased approximately $8,500,000 from the 2021 thirteen-week period to the 2022 thirteen-week period.

The increase in operating income as a percentage of variable contribution from the 2021 thirty-nine-week period to the 2022 thirty-nine-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 scale our fixed cost infrastructure, primarily certain components of selling, general and administrative costs, as well as certain components of our other costs of revenue, across a larger variable contribution base.

The ten basis point increase in operating income as a percentage of variable contribution from the 2021 thirteen-week period to the 2022 thirteen-week period resulted from operating income increasing at a modestly higher percentage rate than the increase in variable contribution, as the Company was able to scale our fixed cost infrastructure, primarily certain components of selling, general and administrative costs across a larger variable contribution base.

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

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

TWENTY SIX WEEKS ENDED JUNE 25, 2022 COMPARED TO TWENTY SIX WEEKS ENDED JUNE 26, 2021

Revenue for the 2022 twenty-six-week

period was $3,945,663,000, an increase of $1,087,411,000, or 38%, compared to the 2021 twenty-six-week

THIRTY NINE WEEKS ENDED SEPTEMBER 24, 2022 COMPARED TO THIRTY NINE WEEKS ENDED SEPTEMBER 25, 2021

Revenue for the 2022 thirty-nine-week period was $5,761,795,000, an increase of $1,169,244,000, or 25%, compared to the 2021 thirty-nine-week period.

Transportation revenue increased $1,163,398,000, or 26%.

The increase in transportation revenue was attributable to increased revenue per load of approximately 21% and an increased number of loads hauled of approximately 14% compared to the 2021 twenty-six-week

Reinsurance premiums were $39,105,000 and $34,695,000 for the 2022 and 2021 twenty-six-week

periods, respectively.

The increase in revenue from reinsurance premiums was primarily attributable to an increase in the average number of trucks provided by BCO Independent Contractors and an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by Signature in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2022 twenty-six-week

period was $3,498,482,000, representing 89% of total revenue, an increase of $860,806,000, or 33%, compared to the 2021 twenty-six-week

Revenue per load on loads hauled by third party truck capacity providers increased approximately 16% compared to the 2021 twenty-six-week

period, and the number of loads hauled by third party truck capacity providers increased approximately 15% in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

The increase in revenue per load on loads hauled via truck was due a tight truck capacity environment experienced during the 2022 twenty-six-week

period, which resulted in less readily available truck capacity as compared to the 2021 twenty-six-week

The increase was also attributable to the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers and was partially offset by (i) a decrease in the number of loads hauled via heavy specialized equipment, which typically have a higher revenue per load, as a percentage of total truck loads and (ii) a decrease in length of haul during the 2022 twenty-six-week

Revenue per load on loads hauled via van equipment increased 18%, revenue per load on loads hauled via unsided/platform equipment increased 14%, revenue per load on less-than-truckload loadings increased 13% and other truck transportation services revenue per load increased 8% as compared to the 2021 twenty-six-week

The increase in the number of loads hauled via truck compared to the 2021 twenty-six-week

period was due to a broad-based increase in demand for the Company’s truck transportation services.

Loads hauled via van equipment increased 13%, loads hauled via unsided/platform equipment increased 13%, loads hauled via less-than-truckload increased 14% and other truck transportation services load count increased 31% as compared to the 2021 twenty-six-week

The increase in transportation revenue was attributable

to increased revenue per load of approximately 15% and an increased number of loads hauled of approximately 9% compared to the 2021 thirty-nine-week period.

Reinsurance premiums were $58,836,000 and $52,990,000 for the 2022 and 2021 thirty-nine-week periods, respectively.

The increase in revenue from reinsurance premiums was primarily attributable to (i) an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by Signature;

(ii) an increase in the average number of trucks provided by BCO Independent Contractors and (iii) participation levels among BCO Independent Contractors in certain occupational accident programs and workers’ compensation programs in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2022 thirty-nine-week period was $5,097,248,000, representing 88% of total revenue, an increase of $878,842,000, or 21%, compared to the 2021 thirty-nine-week period.

Revenue per load on loads hauled by third party truck capacity providers increased approximately 10% compared to the 2021 thirty-nine-week period, and the number of loads hauled by third party truck capacity providers increased approximately 10% in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

The increase in revenue per load on loads hauled via truck was due to a tight truck capacity environment experienced during the 2022 thirty-nine-week period, in particular during the first fiscal quarter of 2022, and the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers, partially offset by (i) a decrease in the number of loads hauled via heavy specialized equipment, which typically have a higher revenue per load, as a percentage of total truck loads and (ii) a decreased average length of haul during the 2022 thirty-nine-week period.

Revenue per load on loads hauled via van equipment increased 11%, revenue per load on loads hauled via unsided/platform equipment increased 9%, revenue per load on less-than-truckload loadings increased 17% and other truck transportation services revenue per load increased 4% as compared to the 2021 thirty-nine-week period.

The increase in the number of loads hauled via truck compared to the 2021 thirty-nine-week period was due to a broad-based increase in demand for the Company’s truck transportation services.

Loads hauled via van equipment increased 9%, loads hauled via unsided/platform equipment increased 10%, less-than-truckload loadings increased 6% and loads hauled via other truck transportation services increased 17% as compared to the 2021 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 $94,537,000 and $45,574,000 in the 2022 and 2021 twenty-six-week

periods, respectively.

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

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

Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $153,195,000 and $74,195,000 in the 2022 and 2021 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 2022 twenty-six-week

period was $397,014,000, or 10% of total revenue, an increase of $213,106,000, or 116%, compared to the 2021 twenty-six-week

Revenue per load on revenue generated by multimode capacity providers increased approximately 112% in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

period, and the number of loads hauled by multimode capacity providers increased approximately 2% over the same period.

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

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2022 thirty-nine-week period was $588,918,000, or 10% of total revenue, an increase of $276,427,000, or 88%, compared to the 2021 thirty-nine-week period.

Revenue per load on revenue generated by multimode capacity providers increased approximately 99% in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period, while the number of loads hauled by multimode capacity providers decreased approximately 5% over the same period.

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

and global economic recoveries coupled with the impact of global supply chain disruptions which were particularly acute with respect to international ocean and air freight.

Revenue per load on loads hauled via air, ocean and rail intermodal increased 145%, 123% and 25%, respectively, during the 2022 twenty-six-week

period as compared to the 2021 twenty-six-week

Revenue per load on loads hauled via air, ocean and rail intermodal increased 139%, 93% and 19%, respectively, during the 2022 thirty-nine-week period as compared to the 2021 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 44% increase in ocean loadings, almost entirely offset by a 26% decrease in air loadings and a 10% decrease in rail loadings.

The decrease in the number of loads hauled by multimode capacity providers was due to a 21% decrease in rail loadings and a 19% decrease in air loadings, partially offset by a 34% increase in ocean loadings.

The 21% decrease in rail loadings was broad-based across several agencies and customers, and the 19% decrease in air loadings was entirely attributable to decreased loadings at one specific customer.

The 34% increase in ocean loadings was due to a broad-based increase in demand across many customers for the Company’s ocean services.

The 26% decrease in air loadings was entirely attributable to decreased loadings at one specific customer, and the 10% decrease in rail loadings was primarily attributable to decreased loadings at one specific agency.

Purchased transportation was 78.5% and 77.9% of revenue in the 2022 and 2021 twenty-six-week

periods, respectively.

Purchased transportation was 78.3% and 78.0% of revenue in the 2022 and 2021 thirty-nine-week periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to (i) an increased percentage of revenue generated by Truck Brokerage Carriers, which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors and (ii) an increased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity providers, partially offset by a lower rate of purchased transportation on revenue generated by Truck Brokerage Carriers.

Commissions to agents were 7.9% and 7.8% of revenue in the 2022 and 2021 twenty-six-week

periods, respectively.

Commissions to agents were 8.1% and 7.8% of revenue in the 2022 and 2021 thirty-nine-week periods, respectively.

The increase in commissions to agents as a percentage of revenue was primarily attributable to a decreased cost of purchased transportation as a percentage of revenue on revenue generated by Truck Brokerage Carriers.

Investment income was $1,307,000 and $1,432,000 in the 2022 and 2021 twenty-six-week

periods, respectively.

The decrease in investment income was primarily attributable to a lower average investment balance held by the insurance segment in the 2022 twenty-six-week

period, partially offset by higher average rates of return on investments in the 2022 twenty-six-week

Other operating costs increased $4,977,000 in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

Investment income was $2,023,000 and $2,138,000 in the 2022 and 2021 thirty-nine-week periods, respectively.

The decrease in investment income was primarily attributable to a lower average investment balance held by the insurance segment in the 2022 thirty-nine-week period, partially offset by higher average rates of return on investments in the 2022 thirty-nine-week period.

Other operating costs increased $7,761,000 in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

The increase in other operating costs compared to the prior year was primarily due to (i) increased trailing equipment maintenance costs as a result of (x) increased labor and parts costs charged by the Company’s network of third party trailer maintenance facilities as the Company retained older trailing equipment to support current business levels;

and (y) an increased average trailer fleet size during the 2022 twenty-six-week

period, and (ii) an increased provision for contractor bad debt, partially offset by increased gains on the sale of operating property.

Insurance and claims increased $19,191,000 in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year trucking claims during the 2022 twenty-six-week

period, the impact of net unfavorable development of prior years’ claims in the 2022 twenty-six-week

period and increased insurance premiums, primarily for commercial auto and excess liability coverage.

During the 2022 and 2021 twenty-six-week

periods, insurance and claims costs included $5,381,000 and $980,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $12,158,000 in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

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

Included in selling, general and administrative costs was stock-based compensation expense of $5,810,000 and $10,893,000 for the 2022 and 2021 twenty-six-week

periods, respectively, and incentive compensation expense of $9,723,000 and $12,615,000 for the 2022 and 2021 twenty-six-week

periods, respectively.

Depreciation and amortization expense increased $3,801,000 in the 2022 twenty-six-week

period compared to the 2021 twenty-six-week

and (y) an increased average trailer fleet size during the 2022 thirty-nine-week period and (ii) the impact of the resumption of a large in-person event for the Company’s BCO Independent Contractors.

Insurance and claims increased $21,067,000 in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year trucking claims during the 2022 thirty-nine-week period, the impact of net unfavorable development of prior years’ claims in the 2022 thirty-nine-week period and increased insurance premiums, primarily for commercial auto and excess liability coverage.

During the 2022 and 2021 thirty-nine-week periods, insurance and claims costs included $7,505,000 and $4,522,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $6,479,000 in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

The increase in selling, general and administrative costs compared to the prior year was attributable to increased wages, an increased provision for customer bad debt and the return of the Company’s annual agent convention held in April 2022, partially offset by decreased stock-based compensation expense and a decreased provision for incentive compensation.

Included in selling, general and administrative costs was stock-based compensation expense of $9,409,000 and $18,717,000 for the 2022 and 2021 thirty-nine-week periods, respectively, and incentive compensation expense of $14,185,000 and $21,370,000 for the 2022 and 2021 thirty-nine-week periods, respectively.

Depreciation and amortization expense increased $6,095,000 in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period.

The increase in depreciation and amortization expense was primarily due to increased depreciation on digital technology tools in connection with the deployment of new and upgraded applications for use by the Company’s network of agents, capacity providers and employees, and to a lesser extent, in connection with increased trailing equipment depreciation.

Interest and debt expense in the 2022 twenty-six-week

period increased $219,000 compared to the 2021 twenty-six-week

The increase in interest and debt expense was entirely attributable to increased average borrowings on the Company’s revolving credit facility during the 2022 twenty-six-week

period, as the Company had no borrowings under its revolving credit facility during the 2021 period.

The Company had no borrowings under its revolving credit facility as of the end of the 2022 twenty-six-week

The provisions for income taxes for the 2022 and 2021 twenty-six-week

periods were based on estimated annual effective income tax rates of 24.5% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

Interest and debt expense in the 2022 thirty-nine-week period increased $301,000 compared to the 2021 thirty-nine-week period.

The increase in interest and debt expense was primarily attributable to increased average borrowings on the Company’s revolving credit facility during the 2022 thirty-nine-week period, as the Company had no borrowings under its revolving credit facility during the 2021 period.

The Company had no borrowings under its revolving credit facility as of the end of the 2022 thirty-nine-week period.

The provisions for income taxes for the 2022 and 2021 thirty-nine-week periods were based on estimated annual effective income tax rates of 24.5% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in both periods primarily attributable to state taxes and nondeductible executive compensation.

The effective income tax rate for the 2022 twenty-six-week

period was 23.7%, which was lower than the estimated annual effective income tax rate of 24.5%, primarily attributable to 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 realized on stock-based awards in the 2021 twenty-six-week

Net income was $237,394,000, or $6.39 per diluted share, in the 2022 twenty-six-week

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

THIRTEEN WEEKS ENDED JUNE 25, 2022 COMPARED TO THIRTEEN WEEKS ENDED JUNE 26, 2021

The effective income tax rate for the 2022 thirty-nine-week period was 23.9%, which was lower than the estimated annual effective income tax rate of 24.5%, primarily attributable to excess tax benefits realized on stock-based awards.

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 realized on stock-based awards in the 2021 thirty-nine-week period.

Net income was $337,612,000, or $9.15 per diluted share, in the 2022 thirty-nine-week period.

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

THIRTEEN WEEKS ENDED SEPTEMBER 24, 2022 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 25, 2021

Revenue for the 2022 thirteen-week period was $1,816,132,000, an increase of $81,833,000, or 5%, compared to the 2021 thirteen-week period.

Transportation revenue increased $80,397,000, or 5%.

The increase in transportation revenue was attributable to increased revenue per load of approximately 15% and an increased number of loads hauled of approximately 9% compared to the 2021 thirteen-week period.

The increase in transportation revenue was attributable to increased revenue per load of approximately 4%, while the number of loads hauled was approximately equal to the 2021 thirteen-week period.

Reinsurance premiums were $19,731,000 and $18,295,000 for the 2022 and 2021 thirteen-week periods, respectively.

The increase in revenue from reinsurance premiums was primarily attributable to (i) an increase in the aggregate value of equipment insured by BCO

Independent Contractors under a physical damage program reinsured by Signature;

(ii) an increase in the average number of trucks provided by BCO Independent Contractors and (iii) participation levels among BCO Independent Contractors in certain occupational accident programs and workers’ compensation programs in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

Truck transportation revenue generated by third party truck capacity providers for the 2022 thirteen-week period was $1,598,766,000, representing 88% of total revenue, an increase of $18,036,000, or 1%, compared to the 2021 thirteen-week period.

Revenue per load on loads hauled by third party truck capacity providers increased approximately 10% compared to the 2021 thirteen-week period, and the number of loads hauled by third party truck capacity providers increased approximately 10% in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

The increase in revenue per load on loads hauled via truck was due a relatively tighter truck capacity environment experienced during the 2022 thirteen-week period, which resulted in less readily available truck capacity as compared to the 2021 thirteen-week period and the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers, partially offset by a decreased average length of haul during the 2022 thirteen-week period.

Revenue per load on loads hauled via van equipment increased 11%, revenue per load on loads hauled via unsided/platform equipment increased 10%, revenue per load on less-than-truckload loadings increased 15% and other truck transportation services revenue per load increased 3% as compared to the 2021 thirteen-week period.

Revenue per load on loads hauled via truck increased 15%, 8% and 7% in April, May and June, respectively, as compared to the corresponding periods in 2021.

The increase in the number of loads hauled via truck compared to the 2021 thirteen-week period was due to a broad-based increase in demand for the Company’s truck transportation services.

Loads hauled via van equipment increased 9%, loads hauled via unsided/platform equipment increased 10%, loads hauled via less-than-truckload increased 10% and other truck transportation services load count increased 20% as compared to the 2021 thirteen-week period.

The number of loads hauled via truck increased 13%, 11% and 8% in April, May and June, respectively, as compared to the corresponding periods in 2021.

The number of loads hauled by third party truck capacity providers increased approximately 1% in the 2022 thirteen-week period compared to the 2021 thirteen-week period, while revenue per load on loads hauled by third party truck capacity providers was approximately equal to the 2021 thirteen-week period.

The increase in the number of loads hauled via truck compared to the 2021 thirteen-week period was due to (i) a broad-based increase in demand for the Company’s truck transportation services provided via unsided/platform equipment and (ii) a modest increase in demand for the Company’s truck transportation services provided via van equipment, partially offset by reduced demand for substitute line-haul and power-only services from certain parcel and less-than-truckload carriers.

Loads hauled via unsided/platform equipment increased 6% and loads hauled via van equipment increased 2%, while less-than-truckload loadings decreased 8% and other truck transportation services load count decreased 6% as compared to the 2021 thirteen-week period.

The number of loads hauled via truck increased 5% in July, was relatively flat in August and then declined 1% in September, as compared to the corresponding periods in 2021.

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

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Revenue per load on revenue generated by multimode capacity providers increased approximately 85% in the 2022 thirteen-week period compared to the 2021 thirteen-week period, while the number of loads hauled by multimode capacity providers decreased approximately 19% over the same period.

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

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

and global economic recoveries coupled with the impact of global supply chain disruptions which were particularly acute with respect to international ocean and air freight.

Revenue per load on loads hauled via air, ocean and rail intermodal increased 127%, 63% and 10%, respectively, during the 2022 thirteen-week period as compared to the 2021 thirteen-week period.

The decrease in the number of loads hauled by multimode capacity providers was due to a 23% decrease in rail loadings and a 21% decrease in air loadings, partially offset by a 28% increase in ocean loadings.

The 23% decrease in rail loadings was broad-based across several agencies and customers, while the 21% decrease in air loadings was entirely attributable to one specific customer.

The decrease in the number of loads hauled by multimode capacity providers was due to a 43% decrease in rail loadings, partially offset by an 18% increase in ocean loadings.

Air loadings during the 2022 thirteen-week period were approximately equal to the 2021 thirteen-week period.

The 43% decrease in rail loadings was broad-based across several agencies and customers.

The 18% increase in ocean loadings was due to a broad-based increase in demand across many customers for the Company’s ocean services.

Purchased transportation was 78.0% and 78.2% of revenue in the 2022 and 2021 thirteen-week periods, respectively.

and (ii) an increased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity providers, partially offset by a lower rate of purchased transportation on revenue generated by Truck Brokerage Carriers.

The decrease in purchased transportation as a percentage of revenue was primarily due to a lower rate of purchased transportation on revenue generated by Truck Brokerage Carriers, partially offset by (i) an increased percentage of revenue generated by Truck Brokerage Carriers, which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors;

and (ii) an increased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity providers.

Commissions to agents were 8.5% and 7.8% of revenue in the 2022 and 2021 thirteen-week periods, respectively.

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Investment income was $716,000 and $706,000 in the 2022 and 2021 thirteen-week periods, respectively.

The decrease in investment income was primarily attributable to a lower average investment balance held by the insurance segment in the 2022 thirteen-week period, partially offset by higher average rates of return on investments in the 2022 thirteen-week period.

Other operating costs increased $2,784,000 in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

The increase in other operating costs compared to the prior year was primarily due to (i) increased trailing equipment maintenance costs as a result of (x) increased labor and parts costs as the Company retained older equipment to support current business levels, and (y) an increased average trailer fleet size during the 2022 thirteen-week period, and (ii) an increased provision for contractor bad debt, partially offset by increased gains on the sale of operating property.

The increase in other operating costs compared to the prior year was primarily due to (i) increased trailing equipment maintenance costs as a result of (x) increased labor and parts costs as the Company retained older equipment to support current business levels, and (y) an increased average trailer fleet size during the 2022 thirteen-week period, (ii) the impact of the resumption of a large in-person event for the Company’s BCO Independent Contractors and (iii) decreased gains on the sale of operating property.

Insurance and claims increased $1,876,000 in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year trucking claims during the 2022 thirteen-week period, primarily due to the impact of two tragic vehicular accidents during the 2022 thirteen-week period.

Selling, general and administrative costs increased $4,853,000 in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

The increase in selling, general and administrative costs compared to prior year was attributable to increased wages and benefits, an increased provision for customer bad debt and approximately $2,000,000 in expense related to the return of the Company’s annual agent convention held in April 2022, partially offset by a decreased provision for incentive compensation and decreased stock-based compensation expense.

The increase in insurance and claims expense compared to the prior year was primarily due to increased severity of current year trucking claims during the 2022 thirteen-week period as well as increased premiums for commercial auto and excess liability coverage, partially offset by decreased net unfavorable development of prior years’ claims during the 2022 thirteen-week period.

During the 2022 and 2021 thirteen-week periods, insurance and claims costs included $2,124,000 and $3,542,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs decreased $5,679,000 in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

The decrease in selling, general and administrative costs compared to the prior year was attributable to a decreased provision for incentive compensation, decreased stock-based compensation expense and decreased employee benefit costs, partially offset by increased wages.

Included in selling, general and administrative costs was incentive compensation expense of $4,462,000 and $8,755,000 for the 2022 and 2021 thirteen-week periods, respectively, and stock-based compensation expense of $3,599,000 and $7,824,000 for the 2022 and 2021 thirteen-week periods, respectively.

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Interest and debt expense in the 2022 thirteen-week period increased $82,000 compared to the 2021 thirteen-week period.

The increase in interest and debt expense was entirely attributable to increased average borrowings on the Company’s revolving credit facility during the 2022 period, as the Company had no borrowings during the 2021 period.

The provisions for income taxes for the 2022 and 2021 thirteen-week periods were based on an estimated annual effective income tax rates of 24.5% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The provisions for income taxes for the 2022 and 2021 thirteen-week periods were based on estimated annual effective income tax rates of 24.5% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2022 thirteen-week period was 24.6%, which was higher than the estimated annual effective income tax rate of 24.5%, primarily attributable to tax shortfalls realized on stock-based awards in the 2022 period.

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.

The effective income tax rate for the 2022 thirteen-week period was 24.3%, which was lower than the estimated annual effective income tax rate of 24.5%, primarily attributable to higher than anticipated state income tax refunds and excess tax benefits realized on stock-based awards.

The effective income tax rate in the 2021 thirteen-week period of 24.4% was consistent with the estimated annual effective income tax rate of 24.4%.

Net income was $100,218,000, or $2.76 per diluted share, in the 2022 thirteen-week period.

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CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $527,380,000 and 1.5 to 1, respectively, at June 25, 2022, compared with $512,917,000 and 1.5 to 1, respectively, at December 25, 2021.

Working capital and the ratio of current assets to current liabilities were $543,330,000 and 1.6 to 1, respectively, at September 24, 2022, compared with $512,917,000 and 1.5 to 1, respectively, at December 25, 2021.

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 $209,651,000 in the 2022 twenty-six-week

period compared with $137,176,000 in the 2021 twenty-six-week

The increase in cash flow provided by operating activities was primarily attributable to increased net income as the change in net working capital was relatively consistent in both the 2022 and 2021 twenty-six-week

The Company declared and paid $0.50 per share, or $18,581,000 in the aggregate, in cash dividends during the twenty-six-week

period ended June 25, 2022 and, during such period, also paid $75,387,000 of dividends payable which were declared during fiscal year 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021.

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.

During the twenty-six-week

period ended June 25, 2022, the Company purchased 1,396,761 shares of its common stock at a total cost of $212,632,000.

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.

As of June 25, 2022, the Company may purchase in the aggregate up to 1,603,239 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $110,826,000 at June 25, 2022, $978,000 lower than at December 25, 2021.

Shareholders’ equity was $856,870,000, or 89% of total capitalization (defined as long-term debt including current maturities plus equity), at June 25, 2022, compared to $862,010,000, or 89% of total capitalization, at December 25, 2021.

The decrease in shareholders’ equity was primarily the result of purchases of shares of the Company’s common stock, dividends declared by the Company in the 2022 twenty-six-week

period and taxes paid in lieu of shares issued related to stock-based compensation plans, partially offset by net income.

Cash provided by operating activities was $436,381,000 in the 2022 thirty-nine-week period compared with $216,990,000 in the 2021 thirty-nine-week period.

The increase in cash flow provided by operating activities was primarily attributable to favorable working capital impacts in connection with the timing of collections of receivables and payment of certain payables and increased net income.

The Company declared and paid $0.80 per share, or $29,506,000 in the aggregate, in cash dividends during the thirty-nine-week period ended September 24, 2022 and, during such period, also paid $75,387,000 of dividends payable which were declared during fiscal year 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021.

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.

During the thirty-nine-week period ended September 24, 2022, the Company purchased 1,900,826 shares of its common stock at a total cost of $285,983,000.

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.

As of September 24, 2022, the Company may purchase in the aggregate up to 1,099,174 shares of its common stock under its authorized stock purchase program.

Long-term debt, including current maturities, was $109,470,000 at September 24, 2022, $2,334,000 lower than at December 25, 2021.

Shareholders’ equity was $873,173,000, or 89% of total capitalization (defined as long-term debt including current maturities plus equity), at September 24, 2022, compared to $862,010,000, or 89% of total capitalization, at December 25, 2021.

The increase in shareholders’ equity was primarily the result of net income, partially offset by purchases of shares of the Company’s common stock, dividends declared by the Company in the 2022 thirty-nine-week period and taxes paid in lieu of shares issued related to stock-based compensation plans.

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 “First Amended and Restated Credit Agreement”).

As previously disclosed in a Form 8-K

filed with the SEC on July 8, 2022, Landstar entered into a second amended and restated credit agreement, dated July 1, 2022, with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”) that superseded and replaced the First Amended and Restated Credit Agreement.

As previously disclosed in a Form 8-K filed

with the SEC on July 8, 2022, Landstar entered into a second amended and restated credit agreement, dated July 1, 2022, with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the “Second Amended and Restated Credit Agreement”) that superseded and replaced the First Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement which matures July 1, 2027, provides for borrowing capacity in the form of a revolving credit facility of $300,000,000, $45,000,000 of which may be utilized in the form of letters of credit.

The Second Amended and Restated Credit Agreement also includes an “accordion” feature providing for a possible increase of up to an aggregate amount of borrowing capacity of $600,000,000.

The First Amended and Restated Credit Agreement, as superseded and replaced by the Second Amended and Restated Credit Agreement, is referred to herein as the “Credit Agreement.” As of June 25, 2022, there were no borrowings outstanding under the revolving credit facility of the Credit Agreement.

The Second Amended and Restated Credit Agreement, which superseded and replaced the First Amended and Restated Credit Agreement, is referred to herein as the “Credit Agreement.” As of September 24, 2022, there were no borrowings outstanding under the revolving credit facility of the Credit Agreement.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness.

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

At June 25, 2022, the Company had no borrowings outstanding and $33,495,000 of letters of credit outstanding under the Credit Agreement.

At June 25, 2022, there was $216,505,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $76,567,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $85,074,000 at June 25, 2022.

At September 24, 2022, the Company had no borrowings outstanding and $33,493,000 of letters of credit outstanding under the Credit Agreement.

At September 24, 2022, there was $266,507,000 available for future borrowings under the Credit Agreement.

In addition, the Company has $76,567,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $85,074,000 at September 24, 2022.

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.

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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 2022 twenty-six-week

period, the Company purchased $7,467,000 of operating property and acquired $18,073,000 of trailing equipment by entering into finance leases.

During the 2022 thirty-nine-week period, the Company purchased $21,096,000 of operating property and acquired $26,741,000 of trailing equipment by entering into finance leases.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2022 approximately $17,000,000 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.

During the 2022 and 2021 twenty-six-week

periods, insurance and claims costs included $5,381,000 and $980,000 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 25, 2022.

During the 2022 and 2021 thirty-nine-week periods, insurance and claims costs included $7,505,000 and $4,522,000 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 24, 2022.

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