What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-03 · 81 added, 159 removed, 262 unchanged (48% of the section changed)

3 unchanged sentences

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.

Such statements are by nature subject to uncertainties and risks, including but not limited to:

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 2022 fiscal year;

the impact of the coronavirus (COVID-19)

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

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dependence on third party capacity providers;

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 2023 fiscal year;

decreased demand for transportation services;

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regulations focused on diesel emissions and other air quality matters;

regulations requiring the purchase and use of zero-emission vehicles;

intellectual property;

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

for the 2022 fiscal year, described in Item 1A “Risk Factors”, in Landstar’s Form 10-Q

for the quarterly period ended April 1, 2023, 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 2023 fiscal year, described in Item 1A “Risk Factors”, 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.

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 $5.3 billion during the most recently completed fiscal year.

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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 (“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.

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.

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 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 thirty-nine-week period ended September 30, 2023.

During the thirteen weeks ended March 30, 2024, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 39%, 53% 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 thirteen-week period ended March 30, 2024.

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 thirty-nine-week period ended September 30, 2023.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirteen-week period ended March 30, 2024.

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:

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:

September 30, 2023

September 24, 2022

March 30, 2024

April 1, 2023

BCO Independent Contractors

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

Maintenance costs for Company-provided trailing equipment, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents and BCO Independent Contractor recruiting and qualification costs are the largest components of other operating costs.

Maintenance costs for Company-provided trailing equipment, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents and recruiting and qualification costs for BCO Independent Contractors are the largest components of other operating costs.

Also included in other operating costs are trailer rental costs and gains/losses, if any, on sales of Company-owned trailing equipment.

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Effective May 1, 2023, the Company entered into a 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.

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 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.

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.

These third party arrangements provide coverage on a per occurrence or aggregated basis.

In recent years, there has been a significant increase in the occurrence of trials in courts throughout the United States involving catastrophic injury and fatality claims against commercial motor carriers that have resulted in verdicts in excess of $10 million.

Over the past decade, there has been a significant increase in the occurrence of trials in courts throughout the United States involving catastrophic injury and fatality claims against commercial motor carriers that have resulted in verdicts in excess of $10 million.

Within the transportation logistics industry, these verdicts are often referred to as “Nuclear Verdicts.” The increase in Nuclear Verdicts has had a significant impact on the cost of commercial auto liability claims throughout the United States.

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Since the annual policy year ended April 30, 2020, as compared to the annual policy year ending April 30, 2025, the Company experienced an increase of approximately $22 million, or over 400%, 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.

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 $65 million incurred during the annual policy year ending April 30, 2025, the Company would have an aggregate financial exposure of approximately $30 million.

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Selling, general and administrative

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.

During the thirteen-week period ended March 30, 2024, 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 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 the Company’s 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, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents 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 the Company’s 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:

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 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.

Approximately 44% of the Company’s consolidated revenue in the thirteen-week period ended March 30, 2024 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 56% 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;

(ii) disclosure of this measure allows investors to better

understand the underlying trends in the Company’s results of operations;

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

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

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

September 30,

September 24,

September 30,

September 24,

Operating income

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Operating income as % of variable contribution

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.

The decrease in operating income as a percentage of gross profit from the 2023 thirteen-week period to the 2024 thirteen-week period resulted from the decrease of operating income at a more rapid percentage rate than the decrease in gross profit, primarily due to the impact of the Company’s fixed cost infrastructure, principally certain components of selling, general and administrative costs, in comparison to a smaller gross profit base.

The decrease in operating income as a percentage of variable contribution from the 2023 thirteen-week period to the 2024 thirteen-week period resulted from the decrease of operating income at a more rapid percentage rate than the decrease in variable contribution, primarily due to the impact of the Company’s fixed cost infrastructure, principally certain components of selling, general and administrative costs, in comparison to a smaller variable contribution base, and the impact of increased other operating costs during the 2024 thirteen-week period.

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

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

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 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 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 $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

rate and do 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 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.

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 8.9% 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 $6,874,000 and $2,023,000 in the 2023 and 2022 thirty-nine-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 thirty-nine-week period.

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.

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 and a decreased provision for customer bad debt, partially offset by increased information technology costs and increased wages.

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 $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 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.

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

THIRTEEN WEEKS ENDED MARCH 30, 2024 COMPARED TO THIRTEEN WEEKS ENDED APRIL 1, 2023

Revenue for the 2024 thirteen-week period was $1,171,043,000, a decrease of $264,632,000, or 18%, compared to the 2023 thirteen-week period.

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Reinsurance premiums were $16,511,000 and $18,829,000 for the 2024 and 2023 thirteen-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 thirteen-week period compared to the 2022 thirteen-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 thirteen-week period compared to the 2022 thirteen-week period.

Truck transportation revenue generated by third party truck capacity providers for the 2023 thirteen-week period was $1,173,764,000, representing 91% of total revenue, a decrease of $425,002,000, or 27%, compared to the 2022 thirteen-week period.

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 2024 thirteen-week period compared to the 2023 thirteen-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2024 thirteen-week period was $1,068,932,000, representing 91% of total revenue, a decrease of $254,776,000, or 19%, compared to the 2023 thirteen-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 13% compared to the 2023 thirteen-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 7% in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

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consumer demand.

Loads hauled via other truck transportation services decreased 39%, loads hauled via van equipment decreased 15%, loads hauled via unsided/platform equipment decreased 10% and less-than-truckload loadings decreased 10% as compared to the 2022 thirteen-week period.

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 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.

Loads hauled via other truck transportation services decreased 42%, less-than-truckload loadings decreased 13%, loads hauled via van equipment decreased 10% and loads hauled via unsided/platform equipment decreased 8% as compared to the 2023 thirteen-week period.

The decrease in revenue per load on loads hauled via truck was primarily due to a loose truck capacity environment experienced throughout the 2024 thirteen-week period.

Revenue per load on loads hauled via other truck transportation services decreased 22%, on loads hauled via van equipment decreased 8%, on less-than-truckload loadings decreased 7% and on loads hauled via unsided/platform equipment decreased 2% as compared to the 2023 thirteen-week period.

The decrease in revenue per load on loads hauled via unsided/platform equipment of 2% was favorably impacted by an increase in the percentage of revenue contributed by heavy/specialized equipment, which typically has a higher revenue per load.

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 $30,033,000 and $42,935,000 in the 2024 and 2023 thirteen-week periods, respectively.

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.

It should be noted that billings to many customers of the Company’s truck brokerage services include a single all-in rate that do 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 2024 thirteen-week period was $76,769,000, or 7% of total revenue, a decrease of $9,981,000, or 12%, compared to the 2023 thirteen-week period.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 10% in the 2024 thirteen-week period compared to the 2023 thirteen-week period, and the number of loads hauled by multimode capacity providers decreased approximately 2% 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.

Revenue per load on loads hauled via air, rail intermodal and ocean decreased 58%, 4% and 3%, respectively, during the 2024 thirteen-week period as compared to the 2023 thirteen-week period.

The decrease in revenue per load on loads hauled by air cargo carriers was primarily attributable to the impact of high value air loadings at one specific customer during the 2023 thirteen-week period.

The decrease in the number of loads hauled by multimode capacity providers was due to an 8% decrease in rail loadings and a 3% decrease in air loadings, partially offset by a 6% increase in ocean loadings.

The 8% decrease in rail loadings was primarily attributable to decreased loadings at one specific agency.

The 3% decrease in air loadings was primarily attributable to decreased loadings at one specific customer.

The 6% increase in ocean loadings was broad-based with increases at several customers.

Purchased transportation was 77.3% and 76.7% of revenue in the 2024 and 2023 thirteen-week periods, respectively.

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.

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

Commissions to agents were 8.3% and 8.8% of revenue in the 2024 and 2023 thirteen-week periods, respectively.

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

Investment income was $3,412,000 and $1,368,000 in the 2024 and 2023 thirteen-week periods, respectively.

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

The increase in investment income was attributable to higher average rates of return on investments in the 2024 thirteen-week period and a higher average investment balance held by the insurance segment during the 2024 thirteen-week period.

Other operating costs increased $2,481,000 in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The increase in other operating costs compared to the prior year was primarily due to an increased provision for contractor bad debt and decreased gains on sales of operating property.

Insurance and claims decreased $1,379,000 in the 2024 thirteen-week period compared to the 2023 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 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.

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.

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 2024 thirteen-week period and decreased frequency of trucking accidents during the 2024 thirteen-week period, partially offset by increased severity of current year trucking claims during the 2024 thirteen-week period.

During the 2024 and 2023 thirteen-week periods, insurance and claims costs included $1,127,000 and $1,855,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $2,855,000 in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The increase in selling, general and administrative costs compared to prior year was primarily attributable to increased employee benefit costs, primarily attributable to increased medical and pharmacy costs under the self-insured portion of the Company’s medical plan, an increased provision for incentive compensation and the impact of CEO transition costs, partially offset by decreased project consulting fees and a decreased provision for customer bad debt.

Included in selling, general and administrative costs was incentive compensation expense of $2,853,000 and $1,421,000 for the 2024 and 2023 thirteen-week periods, respectively.

Depreciation and amortization decreased $1,056,000 in the 2024 thirteen-week period compared to the 2023 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 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 interest expense related to finance lease obligations.

Net interest and debt income increased $885,000 in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

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

The provisions for income taxes for the 2024 and 2023 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.

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CAPITAL RESOURCES AND LIQUIDITY

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.

Working capital and the ratio of current assets to current liabilities were $720,696,000 and 2.2 to 1, respectively, at March 30, 2024, compared with $677,517,000 and 2.0 to 1, respectively, at December 30, 2023.

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 $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 $0.93 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.

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 thirty-nine-week period.

Cash provided by operating activities was $94,208,000 in the 2024 thirteen-week period compared with $139,035,000 in the 2023 thirteen-week period.

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

The Company declared and paid $0.33 per share, or $11,802,000 in the aggregate, in cash dividends during the thirteen-week period ended March 30, 2024 and, during such period, also paid $71,433,000 of dividends payable which were declared in December 2023 and included in current liabilities in the consolidated balance sheet at December 30, 2023.

The Company declared and paid $0.30 per share, or $10,806,000 in the aggregate, in cash dividends during the thirteen-week period ended April 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.

During the thirteen-week period ended March 30, 2024, the Company did not purchase any shares of its common stock.

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

As of March 30, 2024, the Company may purchase in the aggregate up to 3,000,000 shares of its common stock under its authorized stock purchase programs.

Long-term debt, including current maturities, was $65,226,000 at March 30, 2024, $5,914,000 lower than at December 30, 2023.

Shareholders’ equity was $1,017,911,000, or 94% of total capitalization (defined as long-term debt including current maturities plus equity), at March 30, 2024, compared to $983,923,000, or 93% of total capitalization, at December 30, 2023.

The increase in shareholders’ equity was primarily the result of net income, partially offset by dividends declared by the Company in the 2024 thirteen-week period.

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 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.

At March 30, 2024, the Company had no borrowings outstanding and $33,492,000 of letters of credit outstanding under the Credit Agreement.

At March 30, 2024, 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 March 30, 2024.

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

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

During the 2024 thirteen-week period, the Company purchased $9,281,000 of operating property and acquired $1,325,000 of trailing equipment by entering into finance leases.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2024 approximately $84,000,000 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 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.

During the 2024 and

2023 thirteen-week periods, insurance and claims costs included $1,127,000 and $1,855,000 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 March 30, 2024, 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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Historically, truckload shipments for the quarter ending in March are typically lower than for the quarters ending June, September and December.

global pandemic and related supply chain issues significantly disrupted these typical seasonal patterns.

In particular, the Company’s 2022 fiscal year results 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,

seasonal patterns.

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 and Landstar’s operations, in particular, will return to more typical, pre-pandemic, seasonal patterns.

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