What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-31 · 113 added, 105 removed, 287 unchanged (43% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Re s

ults of Oper ati

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the interim consolidated financial statements and notes thereto included herein, and with the Company’s audited financial statements and notes thereto for the fiscal year ended December 30, 2023 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2023 Annual Report on Form 10-K.

44 unchanged sentences

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.

In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-

than-truckload service providers.

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

The independent commission sales agents market services provided by the transportation logistics segment.

Billings for freight transportation services are typically charged to customers on a per shipment basis for the physical transportation of freight and are referred to as transportation revenue.

During the twenty-six weeks ended June 29, 2024, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 38%, 52% 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 June 29, 2024.

During the thirty-nine weeks ended September 28, 2024, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 38%, 52% and 2%, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 6% of the Company’s consolidated revenue in the thirty-nine-week period ended September 28, 2024.

The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc.

2 unchanged sentences

Revenue at the insurance segment represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the twenty-six-week period ended June 29, 2024.

Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the thirty-nine-week period ended September 28, 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:

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

September 28,

September 30,

September 28,

September 30,

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 29, 2024

September 28,

September 30,

BCO Independent Contractors

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Selling, general and administrative

During the twenty-six-week period ended June 29, 2024, employee compensation and benefits accounted for approximately 64% of the Company’s selling, general and administrative costs.

During the thirty-nine-week period ended September 28, 2024, employee compensation and benefits accounted for approximately 64% 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 following table sets forth calculations of gross profit, defined as revenue less costs of revenue, and gross profit margin, defined as gross profit divided by revenue, for the periods indicated.

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

Variable contribution and variable contribution margin are each non-GAAP financial measures.

The Company refers to revenue less variable costs of revenue as “variable contribution” and variable contribution divided by revenue as “variable contribution margin.” Variable contribution and variable contribution margin are each non-GAAP financial measures.

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

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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 28,

September 30,

September 28,

September 30,

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 twenty-six-week period ended June 29, 2024 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 43% of the Company’s consolidated revenue in the thirty-nine-week period ended September 28, 2024 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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(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.

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

September 28,

September 30,

September 28,

September 30,

Operating income

3 unchanged sentences

Operating income as % of variable contribution

The decrease in operating income as a percentage of gross profit from the 2023 twenty-six-week period to the 2024 twenty-six-week period and 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 twenty-six-week period to the 2024 twenty-six-week period and 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.

The decrease in operating income as a percentage of gross profit from the 2023 thirty-nine-week period to the 2024 thirty-nine-week period and 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 thirty-nine-week period to the 2024 thirty-nine-week period and 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.

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

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

TWENTY-SIX WEEKS ENDED JUNE 29, 2024 COMPARED TO TWENTY-SIX WEEKS ENDED JULY 1, 2023

Revenue for the 2024 twenty-six-week period was $2,396,048,000, a decrease of $413,484,000, or 15%, compared to the 2023 twenty-six-week period.

THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 2024 COMPARED TO THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2023

Revenue for the 2024 thirty-nine-week period was $3,609,915,000, a decrease of $488,962,000, or 12%, compared to the 2023 thirty-nine-week period.

Transportation revenue decreased $481,883,000, or 12%.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 11% and decreased revenue per load of approximately 5% compared to the 2023 twenty-six-week period.

Reinsurance premiums were $32,441,000 and $37,093,000 for the 2024 and 2023 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 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2024 twenty-six-week period was $2,174,621,000, representing 91% of total revenue, a decrease of $396,032,000, or 15%, compared to the 2023 twenty-six-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 11% compared to the 2023 twenty-six-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 5% in the 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

The decrease in the number of loads hauled via truck compared to the 2023 twenty-six-week period was primarily due to a broad-based decrease in demand for the Company’s truck transportation services.

Loads hauled via other truck transportation services decreased 35%, less-than-truckload loadings decreased 11%, loads hauled via van equipment decreased 8% and loads hauled via unsided/platform equipment decreased 7% as compared to the 2023 twenty-six-week period.

The decrease in revenue per load on loads hauled via truck was primarily due to a softer freight demand environment experienced throughout the 2024 twenty-six-week period.

Revenue per load on loads hauled via other truck transportation services decreased 17%, on loads hauled via van equipment decreased 7% and on less-than-truckload loadings decreased 4%, while revenue per load on loads hauled via unsided/platform equipment increased 1% as compared to the 2023 twenty-six-week period.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 10% and decreased revenue per load of approximately 3% compared to the 2023 thirty-nine-week period.

Reinsurance premiums were $47,974,000 and $55,053,000 for the 2024 and 2023 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 2024 thirty-nine-week period compared to the 2023 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 2024 thirty-nine-week period was $3,265,745,000, representing 90% of total revenue, a decrease of $478,672,000, or 13%, compared to the 2023 thirty-nine-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 10% compared to the 2023 thirty-nine-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 3% in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-week period.

The decrease in the number of loads hauled via truck compared to the 2023 thirty-nine-week period was primarily due to a broad-based decrease in demand for the Company’s truck transportation services.

Loads hauled via other truck transportation services decreased 27%, less-than-truckload loadings decreased 11%, loads hauled via van equipment decreased 8% and loads hauled via unsided/platform equipment decreased 7% as compared to the 2023 thirty-nine-week period.

The decrease in revenue per load on loads hauled via truck was primarily due to a softer freight demand environment experienced during the 2024 thirty-nine-week period.

Revenue per load on loads hauled via other truck transportation services decreased 12%, on loads hauled via van equipment decreased 5% and on less-than-truckload loadings decreased 3%, while revenue per load on loads hauled via unsided/platform equipment increased 2% as compared to the 2023 thirty-nine-week period.

The increase 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 $60,302,000 and $79,295,000 in the 2024 and 2023 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 $89,862,000 and $112,879,000 in the 2024 and 2023 thirty-nine-week periods, respectively.

It should be noted that billings to many customers of the Company’s truck brokerage services include a single all-in rate that 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 twenty-six-week period was $170,382,000, or 7% of total revenue, a decrease of $17,041,000, or 9%, compared to the 2023 twenty-six-week period.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 8% in the 2024 twenty-six-week period compared to the 2023 twenty-six-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 air and rail intermodal decreased 61% and 5% respectively, while revenue per load on loads hauled via ocean increased 2%, during the 2024 twenty-six-week period as compared to the 2023 twenty-six-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 twenty-six-week period.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2024 thirty-nine-week period was $267,710,000, or 7% of total revenue, a decrease of $8,601,000, or 3%, compared to the 2023 thirty-nine-week period.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 3% in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-week period, while the number of loads hauled by multimode capacity providers was approximately equal to the 2023 thirty-nine-week period.

Revenue per load on loads hauled via air and rail intermodal decreased 58% and 8% respectively, while revenue per load on loads hauled via ocean increased 11%, during the 2024 thirty-nine-week period as compared to the 2023 thirty-nine-week period.

The decrease in revenue per load on loads hauled by rail intermodal and the increase in revenue per load on loads hauled via ocean were both broad-based across many customers.

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 7% decrease in rail loadings and a 4% decrease in air loadings, partially offset by a 6% increase in ocean loadings.

The 7% decrease in rail loadings was primarily attributable to decreased loadings at two specific agencies.

The 4% decrease in air loadings was primarily attributable to decreased loadings at two specific customers.

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

Purchased transportation was 77.4% and 76.7% of revenue in the 2024 and 2023 twenty-six-week periods, respectively.

Purchased transportation was 77.5% and 76.6% of revenue in the 2024 and 2023 thirty-nine-week periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation on revenue generated by Truck Brokerage Carriers, 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 8.2% and 8.8% of revenue in the 2024 and 2023 twenty-six-week periods, respectively.

Commissions to agents were 8.2% and 8.9% of revenue in the 2024 and 2023 thirty-nine-week periods, respectively.

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

Investment income was $7,066,000 and $3,852,000 in the 2024 and 2023 twenty-six-week periods, respectively.

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

Other operating costs increased $3,154,000 in the 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

Investment income was $10,988,000 and $6,874,000 in the 2024 and 2023 thirty-nine-week periods, respectively.

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

Other operating costs increased $3,140,000 in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-week period.

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

Insurance and claims decreased $3,999,000 in the 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

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 twenty-six-week period, decreased BCO miles traveled and decreased severity of trucking accidents during the 2024 twenty-six-week period.

During the 2024 and 2023 twenty-six-week periods, insurance and claims costs included $2,116,000 and $2,831,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $3,265,000 in the 2024 twenty-six-week period compared to the 2023 twenty-six-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, the impact of CEO transition costs and an increased provision for incentive compensation, partially offset by decreased project consulting fees.

Included in selling, general and administrative costs was incentive compensation expense of $1,455,000 and $323,000 for the 2024 and 2023 twenty-six-week periods, respectively.

Depreciation and amortization decreased $1,509,000 in the 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

Insurance and claims costs decreased $3,141,000 in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-week period.

The decrease in insurance and claims expense compared to the prior year was primarily due to decreased BCO miles traveled and decreased frequency of trucking accidents during the 2024 thirty-nine-week period, partially offset by increased net unfavorable development of prior years’ claims in the 2024 thirty-nine-week period.

During the 2024 and 2023 thirty-nine-week periods, insurance and claims costs included $6,666,000 and $5,154,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $3,542,000 in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-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, the impact of Chief Executive Officer (“CEO”) transition costs and an increased provision for incentive compensation, partially offset by decreased project consulting fees.

Included in selling, general and administrative costs was incentive compensation expense of $2,184,000 and $483,000 for the 2024 and 2023 thirty-nine-week periods, respectively.

Depreciation and amortization decreased $497,000 in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-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.

Net interest and debt income increased $2,253,000 in the 2024 twenty-six-week period compared to the 2023 twenty-six-week period.

Net interest and debt income increased $2,376,000 in the 2024 thirty-nine-week period compared to the 2023 thirty-nine-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 twenty-six-week periods were based on estimated annual effective income tax rates of 24.5% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2024 twenty-six-week period was 24.1%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2024 period primarily attributable to state taxes.

The effective income tax rate for the 2023 twenty-six-week period was 23.9%.

The provisions for income taxes for the 2024 and 2023 thirty-nine-week periods were based on estimated annual effective income tax rates of 24.3% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2024 thirty-nine-week period was 23.4%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2024 period primarily attributable to state taxes, partially offset by federal tax credits.

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.

Net income was $99,720,000, or $2.79 per basic and diluted share, in the 2024 twenty-six-week period.

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

THIRTEEN WEEKS ENDED JUNE 29, 2024 COMPARED TO THIRTEEN WEEKS ENDED JULY 1, 2023

Net income was $149,753,000, or $4.21 per basic and diluted share, in the 2024 thirty-nine-week period.

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

THIRTEEN WEEKS ENDED SEPTEMBER 28, 2024 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 30, 2023

Revenue for the 2024 thirteen-week period was $1,213,867,000, a decrease of $75,478,000, or 6%, compared to the 2023 thirteen-week period.

Transportation revenue decreased $73,051,000, or 6%.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 9% and decreased revenue per load of approximately 2% compared to the 2023 thirteen-week period.

The decrease in transportation revenue was attributable to a decreased number of loads hauled of approximately 7%, partially offset by an increased revenue per load of approximately 2% compared to the 2023 thirteen-week period.

Reinsurance premiums were $15,533,000 and $17,960,000 for the 2024 and 2023 thirteen-week periods, respectively.

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Truck transportation revenue generated by third party truck capacity providers for the 2024 thirteen-week period was $1,091,124,000, representing 90% of total revenue, a decrease of $82,640,000, or 7%, compared to the 2023 thirteen-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 9% compared to the 2023 thirteen-week period, and revenue per load on loads hauled by third party truck capacity providers decreased approximately 3% in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The number of loads hauled by third party truck capacity providers decreased approximately 8% compared to the 2023 thirteen-week period, while revenue per load on loads hauled by third party truck capacity providers increased approximately 1% in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The decrease in the number of loads hauled via truck compared to the 2023 thirteen-week period was primarily due to a broad-based decrease in demand for the Company’s truck transportation services.

Loads hauled via other truck transportation services decreased 28%, less-than-truckload loadings decreased 9%, loads hauled via van equipment decreased 7% and loads hauled via unsided/platform equipment decreased 7% as compared to the 2023 thirteen-week period.

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

Revenue per load on loads hauled via other truck transportation services decreased 9%, on loads hauled via van equipment decreased 5% and on less-than-truckload loadings decreased 1%, while revenue per load on loads hauled via unsided/platform equipment increased 3% as compared to the 2023 thirteen-week period.

The increase in revenue per load on loads hauled via unsided/platform equipment of 3% was favorably impacted by an increase in the percentage of revenue contributed by heavy/specialized equipment, which typically has a higher revenue per load.

Less-than-truckload loadings decreased 12%, loads hauled via other truck transportation services decreased 8%, loads hauled via van equipment decreased 8% and loads hauled via unsided/platform equipment decreased 6% as compared to the 2023 thirteen-week period.

The increase in revenue per load on loads hauled via truck was primarily due to an increased average length of haul on truckload shipments during the 2024 thirteen-week period.

Revenue per load on loads hauled via unsided/platform equipment increased 4%, while revenue per load on less-than-truckload loadings decreased 2%, on loads hauled via van equipment decreased 2% and on loads hauled via other truck transportation services decreased 1% as compared to the 2023 thirteen-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 $29,560,000 and $33,584,000 in the 2024 and 2023 thirteen-week periods, respectively.

Transportation revenue generated by multimode capacity providers for the 2024 thirteen-week period was $93,613,000, or 8% of total revenue, a decrease of $7,060,000, or 7%, compared to the 2023 thirteen-week period.

Revenue per load on revenue generated by multimode capacity providers decreased approximately 6% 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 1% over the same period.

Revenue per load on loads hauled via air and rail intermodal decreased 62% and 7%, respectively, while revenue per load on loads hauled via ocean increased 6%, during the 2024 thirteen-week period as compared to the 2023 thirteen-week period.

Transportation revenue generated by multimode capacity providers for the 2024 thirteen-week period was $97,328,000, or 8% of total revenue, an increase of $8,440,000, or 9%, compared to the 2023 thirteen-week period.

Revenue per load on revenue generated by multimode capacity providers increased approximately 6% in the 2024 thirteen-week period compared to the 2023 thirteen-week period, and the number of loads hauled by multimode capacity providers increased approximately 3% over the same period.

Revenue per load on loads hauled via ocean increased 28%, while revenue per load on loads hauled via air and rail intermodal decreased 52% and 13%, respectively, during the 2024 thirteen-week period as compared to the 2023 thirteen-week period.

The increase in revenue per load on loads hauled via ocean was broad-based across many customers and reflected the impact of various geopolitical events on ocean shipping rates, generally.

The decrease in revenue per load on loads hauled by rail intermodal was broad-based.

The decrease in the number of loads hauled by multimode capacity providers was due to a 5% decrease in rail loadings and a 5% decrease in air loadings, partially offset by a 6% increase in ocean loadings.

The 5% decrease in rail loadings was primarily attributable to decreased loadings at two specific agencies.

The 5% decrease in air loadings was primarily attributable to decreased loadings at one specific customer.

The increase in the number of loads hauled by multimode capacity providers was due to increases in air, rail intermodal and ocean loadings of 10%, 4% and 1%, respectively.

The 10% increase in air loadings was primarily attributable to increased loadings at one specific agency.

The 4% increase in rail intermodal loadings was primarily attributable to increased loadings at three specific agencies.

The 1% increase in ocean loadings was primarily attributable to increased loadings at one specific customer.

Purchased transportation was 77.8% and 76.5% of revenue in the 2024 and 2023 thirteen-week periods, respectively.

The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation on revenue generated by Truck Brokerage Carriers.

The increase in purchased transportation as a percentage of revenue was primarily due to (i) an increased rate of purchased transportation on revenue generated by Truck Brokerage Carriers and (ii) an increased 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.

Commissions to agents were 8.1% and 8.9% of revenue in the 2024 and 2023 thirteen-week periods, respectively.

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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 $673,000 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 decreased gains on sales of operating property.

Insurance and claims decreased $2,620,000 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 and decreased BCO miles traveled during the 2024 thirteen-week period.

Other operating costs decreased $14,000 in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The decrease in other operating costs compared to the prior year was primarily due to decreased trailing equipment maintenance costs, almost entirely offset by an increased provision for contractor bad debt and decreased gains on sales of operating property.

Insurance and claims costs increased $858,000 in the 2024 thirteen-week period compared to the 2023 thirteen-week period.

The increase in insurance and claims expense compared to the prior year was primarily due to increased net unfavorable development of prior years’ claims in the 2024 thirteen-week period, partially offset by decreased BCO miles traveled and decreased frequency of current year trucking claims during the 2024 thirteen-week period.

During the 2024 and 2023 thirteen-week periods, insurance and claims costs included $4,550,000 and $2,323,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased $277,000 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 customer bad debt and increased stock-based compensation expense, partially offset by decreased project consulting fees and decreased event-related expenses.

Included in selling, general and administrative costs was stock-based compensation expense of $1,892,000 and $1,274,000 for the 2024 and 2023 thirteen-week periods, respectively.

Depreciation and amortization decreased $453,000 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, and an increased provision for incentive compensation, partially offset by decreased stock-based compensation expense and decreased project consulting fees.

Included in selling, general and administrative costs was incentive compensation expense of $729,000 and $160,000 for the 2024 and 2023 thirteen-week periods, respectively, and stock-based compensation (benefit) expense of ($43,000) and $1,144,000 for the 2024 and 2023 thirteen-week periods, respectively.

Depreciation and amortization increased $1,012,000 in the 2024 thirteen-week period compared to the 2023 thirteen-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.

Net interest and debt income increased $123,000 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, partially offset by increased 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 24.3% and 24.4%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2024 thirteen-week period was 22.2%.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2024 period primarily attributable to state taxes.

The effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2024 period primarily attributable to state taxes, partially offset by federal tax credits.

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

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CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $709,467,000 and 2.2 to 1, respectively, at June 29, 2024, compared with $677,517,000 and 2.0 to 1, respectively, at December 30, 2023.

Working capital and the ratio of current assets to current liabilities were $718,742,000 and 2.2 to 1, respectively, at September 28, 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 $142,343,000 in the 2024 twenty-six-week period compared with $191,733,000 in the 2023 twenty-six-week period.

The decrease in cash flow provided by operating activities was primarily attributable to decreased net income.

The Company declared and paid $0.66 per share, or $23,579,000 in the aggregate, in cash dividends during the twenty-six-week period ended June 29, 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 $0.60 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.

During the twenty-six-week period ended June 29, 2024, the Company purchased 315,649 shares of its common stock at a total cost of $56,995,000, including $56,515,000 in cash purchases and accrued excise tax of $480,000, which is included in other current liabilities in the consolidated balance sheet at June 29, 2024.

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.

As of June 29, 2024, the Company may purchase in the aggregate up to 2,684,351 shares of its common stock under its authorized stock purchase programs.

Long-term debt, including current maturities, was $73,377,000 at June 29, 2024, $2,237,000 higher than at December 30, 2023.

Shareholders’ equity was $1,000,812,000, or 93% of total capitalization (defined as long-term debt including current maturities plus equity), at June 29, 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 purchases of shares of the Company’s common stock and dividends declared by the Company in the 2024 twenty-six-week period.

Cash provided by operating activities was $225,439,000 in the 2024 thirty-nine-week period compared with $303,785,000 in the 2023 thirty-nine-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 $1.02 per share, or $36,325,000 in the aggregate, in cash dividends during the thirty-nine-week period ended September 28, 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 $0.93 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.

During the thirty-nine-week period ended September 28, 2024, the Company purchased 436,919 shares of its common stock at a total cost of $79,388,000, including $78,697,000 in cash purchases and accrued excise tax of $691,000, which is included in other current liabilities in the consolidated balance sheet at September 28, 2024.

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.

As of September 28, 2024, the Company may purchase in the aggregate up to 2,563,081 shares of its common stock under its authorized stock purchase programs.

Long-term debt, including current maturities, was $72,506,000 at September 28, 2024, $1,366,000 higher than at December 30, 2023.

Shareholders’ equity was $1,015,918,000, or 93% of total capitalization (defined as long-term debt including current maturities plus equity), at September 28, 2024, compared to $983,923,000, or 93% of total capitalization, at December 30, 2023.

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 (as further amended as of June 21, 2024, the “Credit Agreement”).

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The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement.

None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity.

None of these covenants are presently considered by the Company to be materially restrictive to the Company’s operations, capital resources or liquidity.

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

At June 29, 2024, the Company had no borrowings outstanding and $35,025,000 of letters of credit outstanding under the Credit Agreement.

At June 29, 2024, there was $264,975,000 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 $77,629,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $86,254,000 at June 29, 2024.

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

Treasury obligations having maturities of up to five years.

At September 28, 2024, the Company had no borrowings outstanding and $35,250,000 of letters of credit outstanding under the Credit Agreement.

At September 28, 2024, there was $264,750,000 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 $73,117,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $81,241,000 at September 28, 2024.

Investments, all of which are carried at fair value, include primarily investment-grade bonds, asset-backed securities and commercial paper 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 2024 twenty-six-week period, the Company purchased $16,778,000 of operating property and acquired $17,144,000 of trailing equipment by entering into finance leases.

During the 2024 thirty-nine-week period, the Company purchased $24,256,000 of operating property and acquired $24,238,000 of trailing equipment by entering into finance leases.

In addition, during the 2024 thirty-nine-week period, Landstar acquired $6,690,000 of operating property for which the Company accrued a corresponding liability of $1,201,000 in accounts payable and $5,489,000 in other noncurrent liabilities as of September 28, 2024.

Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2024 approximately $39,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology hardware and software.

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Many of these claims are covered in whole or in part by insurance.

Based on knowledge of the facts and, in certain cases, opinions of outside counsel, management believes that adequate provisions have been made for probable and estimable losses with respect to the resolution of all such claims and pending litigation and that the ultimate outcome, after provisions therefor, will not have a material adverse effect on the financial condition of the Company, but could have a material effect on the results of operations in a given quarter or year.

Based on knowledge of the facts and, in certain cases, opinions of outside counsel, the Company believes that adequate provisions have been made for probable and reasonably estimable losses with respect to the resolution of all such claims and pending litigation and that the ultimate outcome, after provisions therefor, will not have a material adverse effect on the financial condition of the Company, but could have a material effect on the results of operations in a given quarter or year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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The amount recorded for the estimated liability for claims incurred is based upon the facts and circumstances known on the applicable balance sheet date.

The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by management.

The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by the Company.

The Company continually revises its existing claim estimates as new or revised information becomes available on the status of each claim.

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

During the 2024 and 2023 twenty-six-week periods, insurance and claims costs included $2,116,000 and $2,831,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims liability at June 29, 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.

During the 2024 and 2023 thirty-nine-week periods, insurance and claims costs included $6,666,000 and $5,154,000 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 28, 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 the Company’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.

However, management believes that the ultimate resolution of these items, given a range of reasonably likely outcomes, will not significantly affect the long-term financial condition of Landstar or its ability to fund its continuing operations.

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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