What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 111 added, 159 removed, 310 unchanged (47% of the section changed)

32 unchanged sentences

and its subsidiary, Landstar System Holdings, Inc.

(collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), is a worldwide technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third party capacity providers and employees.

(collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), is a technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third party capacity providers and employees.

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 1,100 independent commission sales agents and over 97,000 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 Company’s services emphasize safety, information coordination and customer service and are delivered through a network of approximately 1,100 independent commission sales agents and over 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.

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 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., and as further described below, Landstar Blue, LLC.

de C.V., and as further described below, Landstar Blue, LLC (“Landstar Blue”).

Transportation services offered by the Company include truckload, 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.

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.

electronics and military equipment.

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

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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 July 1, 2023, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 37%, 55% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 5% of the Company’s consolidated revenue in the twenty-six-week

period ended July 1, 2023.

Landstar Blue, LLC (“Landstar Blue”) arranges truckload brokerage services with a focus on the contract services market.

During the thirty-nine-week period ended September 30, 2023, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 38%, 54% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 5% of the Company’s consolidated revenue in the thirty-nine-week period ended September 30, 2023.

Landstar Blue arranges truckload brokerage services with a focus on the contract services market.

Landstar Blue also helps the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents.

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

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

period ended July 1, 2023.

Revenue from Landstar Blue represented approximately 1% of the Company’s transportation logistics segment revenue in the thirty-nine-week period ended September 30, 2023.

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 July 1, 2023.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirty-nine-week period ended September 30, 2023.

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 30,

September 24,

September 30,

September 24,

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

September 30, 2023

September 24, 2022

BCO Independent Contractors

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Selling, general and administrative

During the twenty-six-week

period ended July 1, 2023, employee compensation and benefits accounted for approximately 60% of the Company’s selling, general and administrative costs.

During the thirty-nine-week period ended September 30, 2023, employee compensation and benefits accounted for approximately 60% 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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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

September 30,

September 24,

September 30,

September 24,

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 42% of the Company’s consolidated revenue in the twenty-six-week

period ended July 1, 2023 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 58% was generated under transactions that pay a variable percentage of revenue to the third party capacity provider and/or agents.

Approximately 43% of the Company’s consolidated revenue in the thirty-nine-week period ended September 30, 2023 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 57% 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

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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 30,

September 24,

September 30,

September 24,

Operating income

3 unchanged sentences

Operating income as % of variable contribution

The decrease in operating income as a percentage of gross profit from both the 2022 twenty-six-week

period to the 2023 twenty-six-week

period and from the 2022 thirteen-week period to the 2023 thirteen-week period primarily resulted from the effect of decreased gross profit on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs.

The decrease in operating income as a percentage of variable contribution from both the 2022 twenty-six-week

period to the 2023 twenty-six-week

period and from the 2022 thirteen-week period to the 2023 thirteen-week period primarily resulted from the effect of decreased variable contribution on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs, partially offset by the impact of decreased incentive and equity compensation costs under the Company’s variable compensation programs and decreased insurance and claims costs.

The decrease in operating income as a percentage of gross profit from both the 2022 thirty-nine-week period to the 2023 thirty-nine-week period and from the 2022 thirteen-week period to the 2023 thirteen-week period primarily resulted from the effect of decreased gross profit on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs.

The decrease in operating income as a percentage of variable contribution from both the 2022 thirty-nine-week period to the 2023 thirty-nine-week period and from the 2022 thirteen-week period to the 2023 thirteen-week period primarily resulted from the effect of decreased variable contribution on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs, partially offset by the impact of decreased incentive and equity compensation costs under the Company’s variable compensation programs and decreased insurance and claims costs.

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

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

WEEKS ENDED JULY 1, 2023 COMPARED TO TWENTY-SIX

WEEKS ENDED JUNE 25, 2022

Revenue for the 2023 twenty-six-week

period was $2,809,532,000, a decrease of $1,136,131,000, or 29%, compared to the 2022 twenty-six-week

THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2023 COMPARED TO THIRTY-NINE WEEKS ENDED SEPTEMBER 24, 2022

Revenue for the 2023 thirty-nine-week period was $4,098,877,000, a decrease of $1,662,918,000, or 29%, compared to the 2022 thirty-nine-week period.

Transportation revenue decreased $1,659,135,000, or 29%.

The decrease in transportation revenue was attributable to decreased revenue per load of approximately 17% and a decreased number of loads hauled of approximately 15% compared to the 2022 twenty-six-week

Reinsurance premiums were $37,093,000 and $39,105,000 for the 2023 and 2022 twenty-six-week

periods, respectively.

The decrease in revenue from reinsurance premiums was primarily attributable to a decrease in the average number of trucks provided by BCO Independent Contractors in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

period, partially offset by an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by Signature in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2023 twenty-six-week

period was $2,570,653,000, representing 91% of total revenue, a decrease of $927,829,000, or 27%, compared to the 2022 twenty-six-week

Revenue per load on loads hauled by third party truck capacity providers decreased approximately 14% compared to the 2022 twenty-six-week

period, and the number of loads hauled by third party truck capacity providers also decreased approximately 14% in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

The decrease in revenue per load on loads hauled via truck was primarily due to pricing pressure throughout the 2023 twenty-six-week

period as industry-wide truck capacity was significantly more readily available as compared to the 2022 twenty-six-week

period, during which pandemic-related supply chain disruption was at a high point.

Revenue per load on loads hauled via van equipment decreased 19%, on less-than-truckload loadings decreased 8%, on loads hauled via unsided/platform equipment decreased 7% and on loads hauled by other truck transportation services decreased 4% as compared to the 2022 twenty-six-week

The decrease in the number of loads hauled via truck compared to the 2022 twenty-six-week

period was primarily due to a decrease in demand from the record high levels experienced in the 2022 twenty-six-week

period for the Company’s van services and power-only services included in other truck transportation services, which tend to be more correlated with U.S.

The decrease in transportation revenue was attributable to decreased revenue per load of approximately 16% and a decreased number of loads hauled of approximately 15% compared to the 2022 thirty-nine-week period.

Reinsurance premiums were $55,053,000 and $58,836,000 for the 2023 and 2022 thirty-nine-week periods, respectively.

The decrease in revenue from reinsurance premiums was primarily attributable to a decrease in the average number of trucks provided by BCO Independent Contractors in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period, partially offset by an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by Signature in the 2023 thirty-nine-week period compared to the 2022 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 2023 thirty-nine-week period was $3,744,417,000, representing 91% of total revenue, a decrease of $1,352,831,000, or 27%, compared to the 2022 thirty-nine-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 15% compared to the 2022 thirty-nine-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 14% in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period.

The decrease in the number of loads hauled via truck compared to the 2022 thirty-nine-week period was primarily due to a decrease in demand from the record high levels experienced in the 2022 thirty-nine-week period for the Company’s van services and power-only services included in other truck transportation services, which tend to be more correlated with U.S.

consumer demand.

Loads hauled via other truck transportation services decreased 34%, loads hauled via van equipment decreased 14%, loads hauled via unsided/platform equipment decreased 6% and less-than-truckload loadings decreased 4% as compared to the 2022 twenty-six-week

Loads hauled via other truck transportation services decreased 35%, loads hauled via van equipment decreased 14%, loads hauled via unsided/platform equipment decreased 7% and less-than-truckload loadings decreased 6% as compared to the 2022 thirty-nine-week period.

The decrease in revenue per load on loads hauled via truck was primarily due to pricing pressure throughout the 2023 thirty-nine-week period as industry-wide truck capacity was significantly more readily available as compared to the 2022 thirty-nine-week period, particularly during the 2022 first quarter during which pandemic-related supply chain disruption was at a high point.

Revenue per load on loads hauled via van equipment decreased 18%, on less-than-truckload loadings decreased 9%, on loads hauled via unsided/platform equipment decreased 7% and on loads hauled by other truck transportation services decreased 7% as compared to the 2022 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 $79,295,000 and $94,537,000 in the 2023 and 2022 twenty-six-week

periods, respectively.

Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $112,879,000 and $153,195,000 in the 2023 and 2022 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

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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 2023 twenty-six-week

period was $187,423,000, or 7% of total revenue, a decrease of $209,591,000, or 53%, compared to the 2022 twenty-six-week

The number of loads hauled by multimode capacity providers decreased approximately 32% in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

period, and revenue per load on revenue generated by multimode capacity providers decreased approximately 31% over the same period.

The decrease in the number of loads hauled by multimode capacity providers was due to a 36% decrease in rail loadings, a 31% decrease in ocean loadings and a 13% decrease in air loadings.

The 36% decrease in rail loadings was broad-based across several customers, the 31% decrease in ocean loadings was due to a broad-based decrease in demand across many customers for the Company’s ocean services and the 13% decrease in air loadings was primarily attributable to decreased loadings at one specific customer.

Revenue per load on loads hauled via ocean, air and rail intermodal decreased 42%, 22% and 7%, respectively, during the 2023 twenty-six-week

period as compared to the 2022 twenty-six-week

The decrease in revenue per load on loads hauled by ocean cargo carriers was primarily related to the impact of global supply chain disruptions during the 2022 twenty-six-week

period, which were particularly acute with respect to international ocean freight.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2023 thirty-nine-week period was $276,311,000, or 7% of total revenue, a decrease of $312,607,000, or 53%, compared to the 2022 thirty-nine-week period.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 35% in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period, and the number of loads hauled by multimode capacity providers decreased approximately 28% over the same period.

Revenue per load on loads hauled via ocean, air and rail intermodal decreased 45%, 23% and 6%, respectively, during the 2023 thirty-nine-week period as compared to the 2022 thirty-nine-week period.

The decrease in revenue per load on loads hauled by ocean cargo carriers was primarily related to the impact of global supply chain disruptions during the 2022 thirty-nine-week period, which were particularly acute with respect to international ocean freight.

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

Purchased transportation was 76.7% and 78.5% of revenue in the 2023 and 2022 twenty-six-week

periods, respectively.

The decrease in the number of loads hauled by multimode capacity providers was due to a 31% decrease in rail loadings, a 30% decrease in ocean loadings and a 15% decrease in air loadings.

The 31% decrease in rail loadings and the 30% decrease in ocean loadings were both broad-based across several customers, while the 15% decrease in air loadings was primarily attributable to decreased loadings at one specific customer.

Purchased transportation was 76.6% and 78.3% of revenue in the 2023 and 2022 thirty-nine-week periods, respectively.

The decrease in purchased transportation as a percentage of revenue was primarily due to (i) a decreased rate of purchased transportation on revenue generated by Truck Brokerage Carriers and (ii) a decreased 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 8.8% and 7.9% of revenue in the 2023 and 2022 twenty-six-week

periods, respectively.

Commissions to agents were 8.9% and 8.1% of revenue in the 2023 and 2022 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 $3,852,000 and $1,307,000 in the 2023 and 2022 twenty-six-week

periods, respectively.

The increase in investment income was attributable to higher average rates of return on investments and a higher average investment balance held by the insurance segment during the 2023 twenty-six-week

Other operating costs increased $4,318,000 in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

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 increased labor and parts costs charged by the Company’s network of third party trailer maintenance facilities;

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

Insurance and claims decreased $7,389,000 in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

The decrease in insurance and claims expense compared to the prior year was primarily due to decreased net unfavorable development of prior years’ claims in the 2023 twenty-six-week

period, decreased severity of current year trucking claims during the 2023 twenty-six-week

period and a decrease in BCO miles traveled in the 2023 twenty-six-week

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

During the 2023 and 2022 twenty-six-week

periods, insurance and claims costs included $2,831,000 and $5,381,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs decreased $3,584,000 in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

The decrease in selling, general and administrative costs compared to prior year was primarily attributable to a decreased provision for incentive compensation, decreased stock-based compensation expense, a decreased provision for customer bad debt and decreased employee benefit costs, primarily attributable to decreased medical and pharmacy costs under the self-insured portion of the Company’s medical plan, partially offset by increased wages and increased information technology costs.

Included in selling, general and administrative costs was incentive compensation expense of $323,000 and $9,723,000 for the 2023 and 2022 twenty-six-week

periods, respectively and stock-based compensation expense of $3,126,000 and $5,810,000 for the 2023 and 2022 twenty-six-week

periods, respectively.

Depreciation and amortization increased $2,094,000 in the 2023 twenty-six-week

period compared to the 2022 twenty-six-week

Investment income was $6,874,000 and $2,023,000 in the 2023 and 2022 thirty-nine-week periods, respectively.

Other operating costs increased $6,120,000 in the 2023 thirty-nine-week period compared to the 2022 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 the higher average age of the Company-owned trailer fleet and increased labor and parts costs charged by the Company’s network of third party trailer maintenance facilities and (ii) an increased provision for contractor bad debt, partially offset by increased gains on sales of operating property.

Insurance and claims decreased $9,294,000 in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period.

The decrease in insurance and claims expense compared to the prior year was primarily due to decreased severity of current year trucking claims during the 2023 thirty-nine-week period, decreased net unfavorable development of prior years’ claims in the 2023 thirty-nine-week period and a decrease in BCO miles traveled in the 2023 thirty-nine-week period, partially offset by increased insurance premiums, primarily for commercial auto and excess liability coverage.

During the 2023 and 2022 thirty-nine-week periods, insurance and claims costs included $5,154,000 and $7,505,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs decreased $6,128,000 in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period.

Included in selling, general and administrative costs was incentive compensation expense of $483,000 and $14,185,000 for the 2023 and 2022 thirty-nine-week periods, respectively, and stock-based compensation expense of $4,270,000 and $9,409,000 for the 2023 and 2022 thirty-nine-week periods, respectively.

Depreciation and amortization increased $1,871,000 in the 2023 thirty-nine-week period compared to the 2022 thirty-nine-week period.

The increase in depreciation and amortization expense was primarily due to increased depreciation on new and updated digital tools deployed for use by the Company’s network of agents, capacity providers and employees, partially offset by decreased trailing equipment depreciation.

The year-over-prior-year change in interest and debt (income) expense was $3,261,000, with net interest income of $1,033,000 in the 2023 twenty-six-week

period compared to net interest and debt expense of $2,228,000 in the 2022 twenty-six-week

The increase in interest and debt (income) expense was primarily attributable to increased interest income earned on cash balances held by the transportation logistics segment and decreased average borrowings on the Company’s revolving credit facility, as the Company had no borrowings during the 2023 period, partially offset by increased interest expense related to finance lease obligations.

The provisions for income taxes for the 2023 and 2022 twenty-six-week

periods were based on estimated annual effective income tax rates of 24.4% and 24.5%, 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 the 2023 period primarily attributable to state taxes and non-deductible

meals and entertainment.

The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes and non-deductible

executive compensation.

The effective income tax rate for the 2023 twenty-six-week

period was 23.9%, which was lower than the estimated annual effective income tax rate of 24.4%, primarily attributable to excess tax benefits realized on stock-based awards.

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.

Net income was $144,754,000, or $4.03 per diluted share, in the 2023 twenty-six-week

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

THIRTEEN WEEKS ENDED JULY 1, 2023 COMPARED TO THIRTEEN WEEKS ENDED JUNE 25, 2022

The year-over-prior-year change in interest and debt (income) expense was $5,354,000, with net interest income of $2,079,000 in the 2023 thirty-nine-week period compared to net interest and debt expense of $3,275,000 in the 2022 thirty-nine-week period.

The provisions for income taxes for the 2023 and 2022 thirty-nine-week periods were based on estimated annual effective income tax rates of 24.4% and 24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2023 thirty-nine-week period was 24.0%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2023 period primarily attributable to state taxes.

The effective income tax rate for the 2022 thirty-nine-week period was 23.9%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes.

Net income was $206,407,000, or $5.74 per basic and diluted share, in the 2023 thirty-nine-week period.

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

THIRTEEN WEEKS ENDED SEPTEMBER 30, 2023 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 24, 2022

Revenue for the 2023 thirteen-week period was $1,289,345,000, a decrease of $526,787,000, or 29%, compared to the 2022 thirteen-week period.

Transportation revenue decreased $525,016,000, or 29%.

The decrease in transportation revenue was attributable to decreased revenue per load of approximately 17% and also a decreased number of loads hauled of approximately 17% compared to the 2022 thirteen-week period.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 17% and decreased revenue per load of approximately 15% compared to the 2022 thirteen-week period.

Reinsurance premiums were $17,960,000 and $19,731,000 for the 2023 and 2022 thirteen-week periods, respectively.

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The number of loads hauled by third party truck capacity providers decreased approximately 16% compared to the 2022 thirteen-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 12% in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

The decrease in the number of loads hauled via truck compared to the 2022 thirteen-week period was primarily due to a decrease in demand from the near-record high levels experienced in the 2022 thirteen-week period for the Company’s van services and power-only services included in other truck transportation services, which tend to be more correlated with U.S.

The decrease in the number of loads hauled via truck compared to the 2022 thirteen-week period was primarily due to a decrease in demand from the 2022 thirteen-week period for the Company’s van services and power-only services included in other truck transportation services, which tend to be more correlated with U.S.

consumer demand.

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The decrease in revenue per load on loads hauled via truck was primarily due to pricing pressure throughout the 2023 thirteen-week period as industry-wide truck capacity was significantly more readily available as compared to the 2022 thirteen-week period, partially offset by an increased average length of haul during the 2023 thirteen-week period.

Revenue per load on loads hauled via van equipment decreased 18%, on loads hauled by other truck transportation services decreased 13%, on less-than-truckload loadings decreased 12% and on loads hauled via unsided/platform equipment decreased 9% as compared to the 2022 thirteen-week period.

Revenue per load on loads hauled by other truck transportation services decreased 14%, on loads hauled via van equipment decreased 14%, on less-than-truckload loadings decreased 12% and on loads hauled via unsided/platform equipment decreased 7% as compared to the 2022 thirteen-week period.

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 2023 thirteen-week period was $88,888,000, or 7% of total revenue, a decrease of $103,016,000, or 54%, compared to the 2022 thirteen-week period.

The number of loads hauled by multimode capacity providers decreased approximately 30% in the 2023 thirteen-week period compared to the 2022 thirteen-week period, and revenue per load on revenue generated by multimode capacity providers decreased approximately 28% over the same period.

The decrease in the number of loads hauled by multimode capacity providers was due to a 34% decrease in rail loadings, a 30% decrease in ocean loadings and a 16% decrease in air loadings.

The 34% decrease in rail loadings was primarily attributable to decreased loadings at two specific agencies, the 30% decrease in ocean loadings was due to a broad-based decrease in demand across many customers for the Company’s ocean services and the 16% decrease in air loadings was primarily attributable to decreased loadings at one specific customer.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 42% in the 2023 thirteen-week period compared to the 2022 thirteen-week period, and the number of loads hauled by multimode capacity providers decreased approximately 20% over the same period.

Revenue per load on loads hauled via ocean, air and rail intermodal decreased 49%, 29% and 5%, respectively, during the 2023 thirteen-week period as compared to the 2022 thirteen-week period.

The decrease in revenue per load on loads hauled by ocean and air cargo carriers was primarily related to the impact of global supply chain disruptions during the 2022 thirteen-week period, which were particularly acute with respect to international ocean and air freight.

The decrease in the number of loads hauled by multimode capacity providers was due to a 27% decrease in ocean loadings, a 20% decrease in air loadings and a 12% decrease in rail intermodal loadings.

The 27% decrease in ocean loadings was due to a broad-based decrease in demand across many customers for the Company’s ocean services, the 20% decrease in air loadings was primarily attributable to decreased loadings at one specific customer and the 12% decrease in rail loadings was broad-based across several customers.

Purchased transportation was 76.5% and 78.0% of revenue in the 2023 and 2022 thirteen-week periods, respectively.

The decrease in purchased transportation as a percentage of revenue was primarily due to (i) a decreased rate of purchased transportation on revenue generated by Truck Brokerage Carriers and (ii) a decreased percentage of revenue generated by Truck Brokerage Carriers and multimode capacity providers, which typically have a higher rate of purchased transportation than that of BCO Independent Contractors.

The decrease in purchased transportation as a percentage of revenue was primarily due to (i) a decreased percentage of revenue generated by Truck Brokerage Carriers and multimode capacity providers, which typically have a higher rate of purchased transportation than that of BCO Independent Contractors, and (ii) a decreased rate of purchased transportation on revenue generated by Truck Brokerage Carriers.

Commissions to agents were 8.9% and 8.5% of revenue in the 2023 and 2022 thirteen-week periods, respectively.

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Other operating costs increased $1,802,000 in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

The increase in other operating costs compared to the prior year was primarily due to (i) an increased provision for contractor bad debt and (ii) increased trailing equipment maintenance costs as a result of increased labor and parts costs charged by the Company’s network of third party trailer maintenance facilities, partially offset by increased gains on sales of operating property.

Insurance and claims decreased $1,905,000 in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

The decrease in insurance and claims expense compared to the prior year was primarily due to decreased severity of current year trucking claims during the 2023 thirteen-week period, partially offset by increased insurance premiums, primarily for commercial auto and excess liability coverage.

The decrease in insurance and claims expense compared to the prior year was primarily due to decreased severity of current year trucking claims during the 2023 thirteen-week period and a decrease in BCO miles traveled in the 2023 thirteen-week period, partially offset by increased severity of current year cargo claims.

Selling, general and administrative costs decreased $2,544,000 in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

Included in selling, general and administrative costs for the 2023 thirteen-week period was a reduction to the Company’s current year provision for incentive compensation of $1,098,000.

Included in selling, general and administrative costs for the 2022 thirteen-week period was incentive compensation expense of $4,524,000.

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

Included in selling, general and administrative costs for the 2023 thirteen-week period was incentive compensation expense of $160,000 and $4,462,000 for the 2023 and 2022 thirteen-week periods, respectively.

Stock-based compensation expense of $1,144,000 and $3,599,000 was included in selling, general and administrative costs for the 2023 and 2022 thirteen-week periods, respectively.

Depreciation and amortization increased $653,000 in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

Depreciation and amortization decreased $223,000 in the 2023 thirteen-week period compared to the 2022 thirteen-week period.

The decrease in depreciation and amortization expense was primarily due to decreased trailing equipment depreciation, partially offset by increased depreciation on new and updated digital tools deployed for use by the Company’s network of agents, capacity providers and employees.

The quarter-over-prior-year-quarter change in interest and debt (income) expense was $2,093,000, with net interest income of $1,046,000 in the 2023 thirteen-week period compared to net interest and debt expense of $1,047,000 in the 2022 thirteen-week period.

The provisions for income taxes for the 2023 and 2022 thirteen-week periods were based on estimated annual effective income tax rates of 24.4% and 24.5%, 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 the 2023 period primarily attributable to state taxes and non-deductible

meals and entertainment.

The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes and non-deductible

executive compensation.

The effective income tax rate for the 2023 thirteen-week period was 24.6%, which was higher than the estimated annual effective income tax rate of 24.4%, primarily attributable to a discrete state income tax charge.

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.

Net income was $66,559,000, or $1.85 per diluted share, in the 2023 thirteen-week period.

Net income was $112,555,000, or $3.05 per diluted share, in the 2022 thirteen-week period.

The effective income tax rate for the 2023 thirteen-week period was 24.3%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2023 period primarily attributable to state taxes.

The effective income tax rate for the 2022 thirteen-week period was 24.3%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes.

Net income was $61,653,000, or $1.71 per basic and diluted share, in the 2023 thirteen-week period.

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

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $680,861,000 and 2.0 to 1, respectively, at July 1, 2023, compared with $561,255,000 and 1.6 to 1, respectively, at December 31, 2022.

Working capital and the ratio of current assets to current liabilities were $725,477,000 and 2.1 to 1, respectively, at September 30, 2023, compared with $561,255,000 and 1.6 to 1, respectively, at December 31, 2022.

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 $191,733,000 in the 2023 twenty-six-week

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

Cash provided by operating activities was $303,785,000 in the 2023 thirty-nine-week period compared with $436,381,000 in the 2022 thirty-nine-week period.

The decrease in cash flow provided by operating activities was primarily attributable to decreased net income, partially offset by favorable working capital impacts in connection with the decreased net receivables, defined as accounts receivable less accounts payable.

The Company declared and paid $0.60 per share, or $21,586,000 in the aggregate, in cash dividends during the twenty-six-week

period ended July 1, 2023 and, during such period, also paid $71,854,000 of dividends payable which were declared in December 2022 and included in current liabilities in the consolidated balance sheet at December 31, 2022.

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 in December 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021.

During the twenty-six-week

period ended July 1, 2023, the Company purchased 89,661 shares of its common stock at a total cost of $15,433,000.

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.

As of July 1, 2023, the Company may purchase in the aggregate up to 2,910,339 shares of its common stock under its authorized stock purchase programs.

Long-term debt, including current maturities, was $84,709,000 at July 1, 2023, $18,691,000 lower than at December 31, 2022.

Shareholders’ equity was $993,561,000, or 92% of total capitalization (defined as long-term debt including current maturities plus equity), at July 1, 2023, compared to $887,221,000, or 90% of total capitalization, at December 31, 2022.

The increase in shareholders’ equity was primarily the result of net income, partially offset by dividends declared by the Company and purchases of shares of the Company’s common stock in the 2023 twenty-six-week

The Company declared and paid $0.93 per share, or $33,448,000 in the aggregate, in cash dividends during the thirty-nine-week period ended September 30, 2023 and, during such period, also paid $71,854,000 of dividends payable which were declared in December 2022 and included in current liabilities in the consolidated balance sheet at December 31, 2022.

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 in December 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021.

During the thirty-nine-week period ended September 30, 2023, the Company purchased 89,661 shares of its common stock at a total cost of $15,433,000.

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.

As of September 30, 2023, the Company may purchase in the aggregate up to 2,910,339 shares of its common stock under its authorized stock purchase programs.

Long-term debt, including current maturities, was $75,383,000 at September 30, 2023, $28,017,000 lower than at December 31, 2022.

Shareholders’ equity was $1,043,154,000, or 93% of total capitalization (defined as long-term debt including current maturities plus equity), at September 30, 2023, compared to $887,221,000, or 90% of total capitalization, at December 31, 2022.

On July 1, 2022, Landstar entered into a second amended and restated credit agreement with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”).

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

At July 1, 2023, the Company had no borrowings outstanding and $33,492,000 of letters of credit outstanding under the Credit Agreement.

At July 1, 2023, there was $266,508,000 available for future borrowings under the Credit Agreement and access to an additional $300,000,000 under the Credit Agreement’s “accordion” feature.

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 July 1, 2023.

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

Treasury obligations and asset-backed securities having maturities of up to five years.

At September 30, 2023, the Company had no borrowings outstanding and $33,492,000 of letters of credit outstanding under the Credit Agreement.

At September 30, 2023, there was $266,508,000 available for future borrowings under the Credit Agreement and access to an additional $300,000,000 under the Credit Agreement’s “accordion” feature.

In addition, the Company has $77,054,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $85,615,000 at September 30, 2023.

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

Treasury obligations having maturities of up to five years.

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

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

During the 2023 twenty-six-week

period, the Company purchased $12,631,000 of operating property.

During the 2023 thirty-nine-week period, the Company purchased $15,394,000 of operating property.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2023 approximately $18,000,000 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 within its various programs.

During the 2023 and 2022 twenty-six-week

periods, insurance and claims costs included $2,831,000 and $5,381,000 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 July 1, 2023, primarily due to the inherent difficulty in estimating the severity of commercial trucking claims and the potential judgment or settlement amount that may be incurred in connection with the resolution of such claims.

During the 2023 and 2022 thirty-nine-week periods, insurance and claims costs included $5,154,000 and $7,505,000 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 30, 2023, primarily due to the inherent difficulty in estimating the severity of commercial trucking claims and the potential judgment or settlement amount that may be incurred in connection with the resolution of such claims.

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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In particular, the Company’s 2022 fiscal year results did not reflect normal seasonal patterns.

Moreover, the twenty-six

week period ended July 1, 2023 also did not reflect normal seasonal patterns.

Moreover, the thirty-nine week period ended September 30, 2023 also did not reflect normal seasonal patterns.

No assurances can be given regarding the extent to which or when trends common to the trucking industry and Landstar’s operations, in particular, will return to more typical, pre-pandemic,

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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