What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-02-26 compared with 2023-02-24 · 45 added, 48 removed, 233 unchanged (29% of the section changed)

3 unchanged sentences

(collectively with its subsidiaries and other affiliated companies referred to herein as “Landstar” or the “Company,” unless the context otherwise requires) is located at 13410 Sutton Park Drive South, Jacksonville, Florida 32224 and its telephone number is (904) 398-9400.

The Company makes available free of charge through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and any amendments to those reports filed or furnished pursuant to Section 13(a) of 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”).

The Company makes available free of charge through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and any amendments to those reports filed or furnished pursuant to Section 13(a) and 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”).

The Company’s website is www.landstar.com.

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Description of Business

Landstar, 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.

Landstar, 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.

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Landstar markets its integrated transportation management solutions primarily through independent commission sales agents and exclusively utilizes third party capacity providers to transport customers’ freight.

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.

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.

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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 under “ Truck Services ”, Landstar Blue, LLC.

de C.V., and Landstar Blue, LLC.

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.

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See “Notes to Consolidated Financial Statements” for the amount of revenue from external customers, measure of profit and total assets attributable to the transportation logistics segment for the last three fiscal years.

Truck Services .

Truck Transportation Services .

The transportation logistics segment’s truck transportation services include a full array of truckload transportation for a wide range of commodities and, to a lesser degree, less-than-truckload and other truck transportation services.

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Also, during fiscal year 2023, truck transportation revenue generated via van equipment and unsided/platform trailing equipment was 57% and 31%, respectively, of truck transportation revenue and less-than-truckload and other truck transportation revenue was 2% and 10%, respectively, of truck transportation revenue.

The Company’s truck services contributed 89% of consolidated revenue in fiscal year 2022, 91% of consolidated revenue in fiscal year 2021 and 92% of consolidated revenue in fiscal year 2020.

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

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.

On June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company whose business focused on truckload brokerage services.

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 fiscal year 2022 and less than 1% in both fiscal years 2021 and 2020.

The Company’s truck transportation services contributed 91% of consolidated revenue in fiscal year 2023, 89% of consolidated revenue in fiscal year 2022 and 91% of consolidated revenue in fiscal year 2021.

Rail Intermodal Services.

The transportation logistics segment has contracts with Class 1 domestic and Canadian railroads, certain short-line railroads and most major asset-based intermodal equipment providers, including agreements with stacktrain operators and container and trailing equipment companies.

In addition, the transportation logistics segment has contracts with a vast network of local trucking companies that handle pick-up and delivery of rail freight.

The transportation logistics segment’s rail intermodal services operate with contracts with Class 1 domestic and Canadian railroads, certain short-line railroads and most major asset-based intermodal equipment providers, including agreements with stacktrain operators and container and trailing equipment companies.

In addition, the transportation logistics segment’s rail intermodal services operate with contracts with a vast network of local trucking companies that handle pick-up and delivery of rail freight.

These contracts provide the transportation logistics segment the ability to transport freight via rail throughout the United States, Canada and Mexico.

The transportation logistics segment’s rail intermodal service capabilities include trailer on flat car, container on flat car, box car and railcar.

The transportation logistics segment’s rail intermodal services contributed 2% of consolidated revenue in both fiscal years 2022 and 2021 and 3% in fiscal year 2020.

The transportation logistics segment’s rail intermodal services contributed 2% of consolidated revenue in each of fiscal years 2023, 2022 and 2021.

Air and Ocean Services.

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The independent commission sales agents use a variety of digital technologies provided by the Company to service the requirements of shippers.

For truckload services, the Company’s independent commission sales agents primarily use Landstar proprietary software which enables agents to enter available freight, dispatch capacity and process most administrative tasks and then communicate that information to Landstar and its capacity providers through either web-based or mobile tools.

The Company’s web-based available truck information system provides a listing of available truck capacity to the Company’s independent commission sales agents.

The Company’s cloud-based available truck information system provides a listing of available truck capacity to the Company’s independent commission sales agents.

The Company also offers independent commission sales agents a variety of proprietary pricing, operational and financial tools via web or mobile applications.

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These third party transportation capacity providers consist of BCO Independent Contractors, Truck Brokerage Carriers, air and ocean cargo carriers and railroads.

Landstar’s use of capacity provided by third parties allows it to maintain a lower level of capital investment, resulting in lower fixed costs.

Landstar’s use of capacity provided by third parties allows it to maintain a lower level of capital investment, resulting in lower fixed costs and a higher return on invested capital.

During fiscal year 2023, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 38%, 53% and 2%, respectively, of the Company’s consolidated revenue.

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Department of Transportation (“DOT”) to Landstar’s Operating Subsidiary to which such BCO Independent Contractor provides services and has leased his or her equipment.

The Company’s network of BCO Independent Contractors provides marketing, operating, safety, recruiting and retention advantages to the Company.

The Company’s network of BCO Independent Contractors provides marketing, operating, customer service, safety, recruiting and retention advantages to the Company.

The Company’s BCO Independent Contractors are compensated primarily based on a contractually agreed-upon percentage of revenue generated by loads they haul.

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The number of trucks provided by BCO Independent Contractors fluctuates daily as a result of truck recruiting and truck terminations.

Less trucks were recruited in fiscal year 2022 than in fiscal year 2021 and trucks terminated were higher in fiscal year 2022 than in fiscal year 2021, resulting in an overall net decrease of 583 trucks during fiscal year 2022.

More trucks were recruited in fiscal year 2023 than in fiscal year 2022 but trucks terminated were higher in fiscal year 2023 than in fiscal year 2022, resulting in an overall net decrease of 1,472 trucks during fiscal year 2023.

Landstar’s BCO Independent Contractor truck turnover was approximately 41% in fiscal year 2023, compared to 29% in fiscal year 2022.

Approximately 34% of 2023 turnover was attributable to BCO Independent Contractors who had been with the Company for less than one year.

to empower them to manage their businesses, the Company’s programs to reduce the operating costs of its BCO Independent Contractors and Landstar’s reputation for quality, service, reliability and financial strength.

Management believes the factors that have historically favorably impacted turnover include the Company’s extensive agent network, the quantity and quality of available freight, the proprietary technology-based tools the Company makes available to BCO Independent Contractors to empower them to manage their businesses, the Company’s programs to reduce the operating costs of its BCO Independent Contractors and Landstar’s reputation for quality, service, reliability and financial strength.

Decreasing revenue per load on a sequential basis historically has had an unfavorable impact on BCO Independent Contractor turnover.

During fiscal year 2022, revenue per load reached its all-time high during the Company’s 2022 first quarter and sequentially decreased throughout the second, third and fourth fiscal quarters.

In October 2020, the Company announced a new initiative in further support of its network of BCO Independent Contractors.

This initiative involved the establishment of multiple field operations centers located in the United States and Canada to further support the Company’s ongoing efforts in recruiting and retaining BCO Independent Contractors.

In connection with this initiative, the Company recorded commission program termination costs of $15,494,000 related to buyouts of certain incentive commission arrangements with several of its independent sales agents due to the Company’s discontinuation of a truck owner-operator recruitment and retention program formerly involving those agents.

During fiscal year 2023, revenue per load sequentially decreased quarter to quarter throughout the entire year.

Truck Brokerage Carriers.

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The Company recruits, approves, establishes contracts with and tracks safety ratings and service records of these third party trucking companies.

In addition to providing additional capacity to the Company, the use of Truck Brokerage Carriers enables the Company to pursue different types and quality of freight such as short-haul traffic, less-than-truckload and, in certain instances, lower-priced freight that generally would not be handled by the Company’s BCO Independent Contractors.

In addition to providing additional capacity to the Company, the use of Truck Brokerage Carriers enables the Company to pursue different types and quality of freight such as short-haul traffic, less-than-truckload and, in certain instances, lower-priced freight that generally would not be desirable to the Company’s BCO Independent Contractors.

The Company maintains an ecosystem of digital technologies and applications through which Truck Brokerage Carriers can view a listing of the Company’s freight that is available to them.

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These advantages allow the Company to meet the needs of even the largest shippers.

Larger shippers often consider reducing the number of authorized carriers they use in favor of a small number of “core carriers,” such as the Company, whose size and diverse service capabilities enable these core carriers to satisfy most of the shippers’ transportation needs.

The Company’s national account customers include the United States Department of Defense and many of the companies included in the Fortune 500.

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(i) assist Landstar independent commission sales agents in efficiently sourcing capacity, pricing transportation services and managing and analyzing the performance of their independent businesses, (ii) assist customers in meeting their transportation needs, (iii) assist third party capacity providers in identifying desirable freight opportunities and operating their independent businesses, and (iv) improve operational and administrative efficiency throughout the Company.

Landstar intends to continue to improve its technologies to meet the total needs of its agents, customers and third party capacity providers and remains engaged in various multi-year projects aimed at increasing efficiencies, primarily through technology, at Landstar and across our agent and third party capacity network.

Landstar intends to continue to improve and enhance its technologies to meet the total needs of its agents, customers and third party capacity providers and remains engaged in various multi-year projects aimed at increasing efficiencies, primarily through technology, at Landstar and across our agent and third party capacity network.

Management believes leadership in the development, operation and support of an ecosystem of digital technologies and applications is an ongoing part of providing high quality service.

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A cloud-based platform for truckload freight agent workflow.

A cloud-based platform built specifically to service the truckload brokerage contract services market.

A suite of business intelligence applications powered by Microsoft Power BI for independent sales agents and BCO Independent Contractors to access information and identify trends in their businesses.

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Mobile application available to BCO Independent Contractors and third party motor carriers providing a one-stop location for available loading opportunities as well as fueling station locations, retail fuel prices, fuel prices net of Landstar-arranged discounts and applicable state fuel tax credits, and equipment inspection site locations.

Landstar’s proprietary freight tracking exception management tool that incorporates geo-positional data from, among other sources, electronic logging devices, trailer tracking devices and third party data aggregators.

Landstar’s proprietary freight tracking tool that incorporates geo-locational data from, among other sources, electronic logging devices, trailer tracking devices and third party data aggregators.

Agent and Capacity Portals:

New and improved cloud-based portals built to provide a single on-ramp to a multitude of applications, tools and information available to Landstar independent agents and capacity providers.

Trailer Tools:

Applications empowering independent commission sales agents through the automation of the Company’s trailer request and trailer pool management processes.

Application that automates the credit request process for independent commission sales agents.

Application that automates the process for independent commission sales agents to request customer credit.

Since the launch of this initiative in 2016, the Company has invested approximately $158 million in this strategic development effort, including approximately $35 million and $33 million, respectively, in fiscal years 2023 and 2022.

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The transportation and logistics services industry is extremely competitive and fragmented.

Management believes that competition for freight transported by the Company is based on service, efficiency and freight rates, which are influenced significantly by the economic environment, particularly the amount of available transportation capacity and freight demand.

Management believes that competition for freight transported by the Company is based on service, efficiency, safety and freight rates, which are influenced significantly by the economic environment, particularly the amount of available transportation capacity and freight demand.

Management believes that Landstar’s overall size, service offerings and availability of a wide range of equipment, together with its geographically dispersed local independent agent network, present the Company with significant competitive advantages over many transportation and logistics service providers.

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Potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable.

For periods prior to May 1, 2019, Landstar retains liability for commercial trucking claims up to $5 million per occurrence and maintains various third party insurance arrangements for liabilities in excess of its $5 million self-insured retention.

Effective May 1, 2019, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “Initial Excess Policy”) with a third party insurance company.

Landstar retains liability through a self-insured retention for commercial trucking claims up to $5 million per occurrence.

Effective May 1, 2019, the Company entered into a three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “2019 Initial Excess Policy”) with a third party insurance company.

The Company subsequently extended the 2019 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.

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.

For commercial trucking claims incurred on or after May 1, 2022 through April 30, 2023, the extended 2019 Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $10 million for the policy period ended April 30, 2023.

Effective May 1, 2023, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “2023 Initial Excess Policy”) with a third party insurance company.

For commercial trucking claims incurred on or after May 1, 2023 through April 30, 2026, the 2023 Initial Excess Policy provides for an aggregate deductible of $18 million over the thirty-six month term ending April 30, 2026.

After payment of the deductible, the 2023 Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $15 million for the thirty-six month term ending April 30, 2026.

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

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

Over the most recent three-year period, with respect to

the annual policy year ending April 30, 2023, as compared to the annual policy year ended April 30, 2020, the Company experienced an increase of approximately $20 million, or over 360%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million.

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

For example, with respect to a hypothetical claim in the amount of $35 million incurred during the annual policy year ending April 30, 2023, the Company would have an aggregate financial exposure of approximately $10 million.

Since the annual policy year ended April 30, 2020, as compared to the annual policy year ending April 30, 2024, the Company experienced an increase of approximately $21 million, or over 380%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million.

Moreover, the Company from year to year manages the level of its financial exposure to commercial trucking claims in excess of $10 million, including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage

layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage.

For example, with respect to a single hypothetical claim in the amount of $60 million incurred during the annual policy year ending April 30, 2024, the Company would have an aggregate financial exposure of approximately $25 million.

Furthermore, the Company’s third party insurance arrangements provide excess coverage up to an uppermost coverage layer, in excess of which the Company retains additional financial exposure.

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Moreover, the occurrence of a Nuclear Verdict, or the settlement of a catastrophic injury and/or fatality claim that could have otherwise resulted in a Nuclear Verdict, could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

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

Further, the Company retains liability of up to $2,000,000 for each general liability claim, $250,000 for each workers’ compensation claim and $250,000 for each cargo claim.

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

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The FMCSA has broad regulatory powers with respect to activities such as motor carrier operations, practices, periodic financial reporting and insurance.

Subject to federal and state regulatory authorities or regulation, the Company’s capacity providers may transport most types of freight to and from any point in the United States over any route selected.

Interstate motor carrier operations are subject to safety requirements prescribed by the FMCSA.

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Landstar’s operations are subject to seasonal trends common to the trucking industry.

Truckload volumes for the quarter ending in March are typically lower than for the quarters ending in June, September and December.

Historically, truckload shipments for the quarter ending in March are typically lower than for the quarters ending in June, September and December.

The COVID-19 global pandemic and related supply chain issues significantly disrupted these typical seasonal patterns.

In particular, the Company’s 2022 and 2023 fiscal year results did not reflect normal seasonal patterns.

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

Human Capital Resources

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Our short and long-term incentive programs are aligned with key business objectives and are intended to motivate strong performance.

Our employees are eligible for medical, dental and vision insurance, a 401(k) savings/retirement plan, flexible time-off, employer-provided life and disability insurance, our wellness program, our tuition reimbursement program, and an array of voluntary benefits designed to meet individual needs.

Our employees are eligible to participate in our medical, dental and vision programs, a 401(k) savings/retirement plan, flexible time-off, employer-provided life and disability insurance, our wellness program, our tuition reimbursement program, and an array of voluntary benefits designed to meet individual needs.

We engage firms nationally recognized in the benefits area to objectively evaluate our programs and benchmark them against peers and other similarly situated organizations.

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The Company reaffirms its commitment to equal employment opportunity for all people.

The Company complies with all applicable federal and state laws pertaining to equal employment opportunity and affirmative action.

The Company complies with all applicable federal and state laws pertaining to equal

employment opportunity and affirmative action.

It is our philosophy to treat our employees and applicants fairly without regard to race, color, sex, religion, national origin, disability, present, past, or future service in a branch of the uniformed services of the United States, citizenship, sexual orientation or gender identity.

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All of our employees must adhere to a code of ethics and employee compliance code that set standards for appropriate behavior and includes required annual training.

During 2020, amidst the COVID-19 pandemic, we shifted the vast majority of our employees to a remote work environment and implemented a number of other measures to address the safety and health of our employees, BCO Independent Contractors, and independent commission sales agents.

In 2022, as the immediate threat related to the COVID-19 pandemic subsided in the United States, many of our employees began to return to our offices and resume in-person meetings.

As of the end of 2022, however, a significant majority of the Company’s employees continued to work remotely or on a hybrid basis.

As of the end of 2023, a majority of the Company’s employees work remotely or on a hybrid basis.

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-K

Item 1. Business