LANDSTAR SYSTEM INC 10-K

Item 8. Financial Statements and Supplementary Data LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) Dec. 28, 2024 Dec. 30, 2023 ASSETS Current Assets Cash and cash equivalents $ 515,018 $ 481,043 Short-term investments 51,619 59,661 Trade accounts receivable, less allowance of $ 12,904 and $ 11,738 683,841 743,762 Other receivables, including advances to independent contractors, less allowance of $ 17,812 and $ 14,010 47,160 43,339 Other current assets 22,229 24,936 Total current assets 1,319,867 1,352,741 Operating property, less accumulated depreciation and amortization of $ 456,547 and $ 436,682 311,345 284,300 Goodwill 40,933 42,275 Other assets 141,166 122,530 Total assets $ 1,813,311 $ 1,801,846 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Cash overdraft $ 61,033 $ 61,541 Accounts payable 383,625 395,980 Current maturities of long-term debt 33,116 27,876 Insurance claims 40,511 41,825 Dividends payable 70,632 71,433 Other current liabilities 84,237 76,569 Total current liabilities 673,154 675,224 Long-term debt, excluding current maturities 69,191 43,264 Insurance claims 62,842 58,922 Deferred income taxes and other noncurrent liabilities 35,685 40,513 Shareholders’ Equity Common stock, $ 0.01 par value, authorized 160,000,000 shares, issued 68,559,269 and 68,497,324 shares 686 685 Additional paid-in capital 255,260 254,642 Retained earnings 2,859,916 2,783,645 Cost of 33,243,196 and 32,780,651 shares of common stock in treasury ( 2,131,413 ) ( 2,048,184 ) Accumulated other comprehensive loss ( 12,010 ) ( 6,865 ) Total shareholders’ equity 972,439 983,923 Total liabilities and shareholders’ equity $ 1,813,311 $ 1,801,846 See accompanying notes to consolidated financial statements. 39 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) Fiscal Years Ended December 28, 2024 December 30, 2023 December 31, 2022 Revenue $ 4,819,245 $ 5,303,322 $ 7,436,562 Investment income 14,810 10,141 3,162 Costs and expenses: Purchased transportation 3,745,241 4,068,262 5,804,017 Commissions to agents 392,751 462,668 614,865 Other operating costs, net of gains on asset sales/dispositions 58,781 54,191 45,192 Insurance and claims 113,929 114,241 125,835 Selling, general and administrative 217,708 211,799 221,279 Depreciation and amortization 56,738 58,153 57,453 Total costs and expenses 4,585,148 4,969,314 6,868,641 Operating income 248,907 344,149 571,083 Interest and debt (income) expense ( 5,419 ) ( 3,946 ) 3,620 Income before income taxes 254,326 348,095 567,463 Income taxes 58,380 83,701 136,549 Net income $ 195,946 $ 264,394 $ 430,914 Basic and diluted earnings per share $ 5.51 $ 7.36 $ 11.76 Average basic and diluted shares outstanding 35,538,000 35,920,000 36,633,000 Dividends per common share $ 3.38 $ 3.26 $ 3.10 See accompanying notes to consolidated financial statements. 4 0 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Fiscal Years Ended Dec. 28, 2024 Dec. 30, 2023 Dec. 31, 2022 Net income $ 195,946 $ 264,394 $ 430,914 Other comprehensive income (loss): Unrealized holding gains (losses) on available-for-sale investments, net of tax expense (benefit) of $ 604 , $ 942 and ($ 2,345 ) 2,205 3,439 ( 8,562 ) Foreign currency translation (losses) gains ( 7,350 ) 4,720 ( 1,059 ) Other comprehensive (loss) income ( 5,145 ) 8,159 ( 9,621 ) Comprehensive income $ 190,801 $ 272,553 $ 421,293 See accompanying notes to consolidated financial statements. 4 1 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Fiscal Years Ended Dec. 28, 2024 Dec. 30, 2023 Dec. 31, 2022 OPERATING ACTIVITIES Net income $ 195,946 $ 264,394 $ 430,914 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 56,738 58,153 57,453 Non-cash interest charges 263 263 355 Provisions for losses on trade and other accounts receivable 18,266 14,032 12,220 Gains on sales/disposals of operating property ( 1,597 ) ( 4,574 ) ( 2,944 ) Deferred income taxes, net ( 6,990 ) ( 7,709 ) ( 5,360 ) Stock-based compensation 3,435 4,282 12,399 Changes in operating assets and liabilities: Decrease in trade and other accounts receivable 37,834 222,895 219,190 Increase in other assets ( 16,094 ) ( 2,544 ) ( 5,938 ) Decrease in accounts payable ( 12,355 ) ( 131,392 ) ( 76,758 ) Increase (decrease) in other liabilities 8,509 ( 15,795 ) ( 31,571 ) Increase (decrease) in insurance claims 2,606 ( 8,357 ) 12,699 NET CASH PROVIDED BY OPERATING ACTIVITIES 286,561 393,648 622,659 INVESTING ACTIVITIES Sales and maturities of investments 112,065 112,555 41,198 Purchases of investments ( 101,312 ) ( 101,639 ) ( 40,202 ) Purchases of operating property ( 30,998 ) ( 25,688 ) ( 26,005 ) Proceeds from sales of operating property 9,746 8,294 5,236 Purchase of non-marketable securities —   —   ( 4,999 ) NET CASH USED BY INVESTING ACTIVITIES ( 10,499 ) ( 6,478 ) ( 24,772 ) FINANCING ACTIVITIES Decrease in cash overdraft ( 508 ) ( 31,412 ) ( 23,525 ) Dividends paid ( 120,476 ) ( 117,130 ) ( 115,671 ) Payment for debt issue costs —   —   ( 1,080 ) Proceeds from exercises of stock options —   28 68 Taxes paid in lieu of shares issued related to stock-based compensation plans ( 3,928 ) ( 9,185 ) ( 10,428 ) Purchases of common stock ( 81,400 ) ( 53,919 ) ( 285,983 ) Principal payments on finance lease obligations ( 31,027 ) ( 36,353 ) ( 39,063 ) NET CASH USED BY FINANCING ACTIVITIES ( 237,339 ) ( 247,971 ) ( 475,682 ) Effect of exchange rate changes on cash and cash equivalents ( 4,748 ) 2,263 ( 2,195 ) Increase in cash, cash equivalents and restricted cash 33,975 141,462 120,010 Cash, cash equivalents and restricted cash at beginning of period 481,043 339,581 219,571 Cash, cash equivalents at end of period $ 515,018 $ 481,043 $ 339,581 See accompanying notes to consolidated financial statements. 4 2 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the Fiscal Years Ended December 28, 2024, December 30, 2023 and December 31, 2022 (In thousands, except share and per share amounts) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock at Cost Accumulated Other Comprehensive (Loss) Income Total Shares Amount Shares Amount Balance December 25, 2021 68,232,975 $ 682 $ 255,148 $ 2,317,184 30,539,235 $ ( 1,705,601 ) $ ( 5,403 ) $ 862,010 Net income 430,914 430,914 Dividends ($ 3.10 per share) ( 112,138 ) ( 112,138 ) Purchases of common stock 1,900,826 ( 285,983 ) ( 285,983 ) Issuance of stock related to stock-based compensation plans 149,335 2 ( 9,060 ) 15,239 ( 1,302 ) ( 10,360 ) Stock-based compensation 12,399 12,399 Other comprehensive loss ( 9,621 ) ( 9,621 ) Balance December 31, 2022 68,382,310 $ 684 $ 258,487 $ 2,635,960 32,455,300 $ ( 1,992,886 ) $ ( 15,024 ) $ 887,221 Net income 264,394 264,394 Dividends ($ 3.26 per share) ( 116,709 ) ( 116,709 ) Purchases of common stock 319,332 ( 54,267 ) ( 54,267 ) Issuance of stock related to stock-based compensation plans 115,014 1 ( 8,127 ) 6,019 ( 1,031 ) ( 9,157 ) Stock-based compensation 4,282 4,282 Other comprehensive loss 8,159 8,159 Balance December 30, 2023 68,497,324 $ 685 $ 254,642 $ 2,783,645 32,780,651 $ ( 2,048,184 ) $ ( 6,865 ) $ 983,923 Net income 195,946 195,946 Dividends ($ 3.38 per share) ( 119,675 ) ( 119,675 ) Purchases of common stock 452,019 ( 82,117 ) ( 82,117 ) Issuance of stock related to stock-based compensation plans 61,945 1 ( 2,817 ) 10,526 ( 1,112 ) ( 3,928 ) Stock-based compensation 3,435 3,435 Other comprehensive loss ( 5,145 ) ( 5,145 ) Balance December 28, 2024 68,559,269 $ 686 $ 255,260 $ 2,859,916 33,243,196 $ ( 2,131,413 ) $ ( 12,010 ) $ 972,439 See accompanying notes to consolidated financial statements. 4 3 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (“LSHI”). Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation. Estimates The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Fiscal Year Landstar’s fiscal year is the 52 or 53 week period ending the last Saturday in December. Revenue Recognition The nature of the Company’s freight transportation services and its performance obligations to customers, regardless of the mode of transportation used to perform such services, relate to the safe and on-time pick-up and delivery of a customer’s freight on a shipment-by-shipment basis. Landstar customers are typically invoiced on a shipment-by-shipment basis at a pre-defined rate, payable thirty to sixty (30-60) days after the customer’s receipt of such invoice. Payment terms to customers do not contain a significant financing component and the amount owed by the customer does not contain variable terms, embedded or otherwise. We have determined that revenue recognition over the freight transit period provides a faithful depiction of the transfer of services to the customer as our obligation for which we are primarily responsible for fulfilling is performed over the transit period. Accordingly, transportation revenue billed to a customer for the physical transportation of freight and related direct freight expenses are recognized on a gross basis over the freight transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a given shipment based upon the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determining the transit period and how much of it has been completed as of a given reporting date may therefore require management to make judgments that affect the timing of revenue recognized. With respect to shipments with a pick-up date in one reporting period and a delivery date in another, the Company recognizes such transportation revenue based on relative transit time in each reporting period. A days in transit output method is used to measure the progress of the performance of the Company’s freight transportation services as of the reporting date and a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Reinsurance premiums of the insurance segment are recognized over the period earned, which is usually on a monthly basis. Fuel surcharges billed to customers for freight hauled by independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the “BCO Independent Contractors”) are excluded from revenue and paid in entirety to the BCO Independent Contractors. 4 4 Table of Contents Revenue from Contracts with Customers – Disaggregation of Revenue The following table summarizes (i) the percentage of consolidated revenue generated by mode of transportation and (ii) the total amount of truck transportation revenue hauled by BCO Independent Contractors and Truck Brokerage Carriers generated by equipment type during the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 (dollars in thousands): Fiscal Years Ended December 28, 2024 December 30, 2023 December 31, 2022 Mode Truck – BCO Independent Contractors 38 % 38 % 35 % Truck – Truck Brokerage Carriers 52 % 53 % 54 % Rail intermodal 2 % 2 % 2 % Ocean and air cargo carriers 6 % 5 % 8 % Truck Equipment Type Van equipment $ 2,447,810 $ 2,742,281 $ 3,892,085 Unsided/platform equipment $ 1,455,663 $ 1,490,393 $ 1,760,357 Less-than-truckload $ 99,828 $ 117,683 $ 142,438 Other truck transportation (1) $ 343,253 $ 479,173 $ 835,959 (1) Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee. Insurance Claim Costs Landstar provides, primarily on an actuarially determined basis, for the estimated costs of cargo, property, casualty, general liability and workers’ compensation claims both reported and for claims incurred but not reported. Landstar retains liability through a self-insured retention for commercial trucking claims up to $ 5 million per occurrence. 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. 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. 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. Further, the Company retains liability of up to $ 2,000,000 for each general liability claim, $ 250,000 for each workers’ compensation claim and $ 250,000 for each cargo claim. In addition, under reinsurance arrangements by Signature Insurance Company (“Signature”) of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $ 500,000 , $ 1,000,000 or $ 2,000,000 with respect to certain occupational accident claims and up to $ 750,000 with respect to certain workers’ compensation claims. 4 5 Table of Contents Tires Tires purchased as part of trailing equipment are capitalized as part of the cost of the equipment. Replacement tires are charged to expense when placed in service. Cash, Cash Equivalents and Restricted Cash Included in cash and cash equivalents are all investments, except those provided for collateral, with an original maturity of 3 months or less. At December 28, 2024, December 30, 2023 and December 31, 2022, the Company had no restricted cash held by the Company’s insurance segment. At December 25, 2021, the Company had $ 4,049 ,000 of restricted cash held by the Company’s insurance segment included in the short-term investments balance of $ 35,778 ,000, providing collateral, along with certain other investments, for the letters of credit issued to guarantee payment of insurance claims. Financial Instruments The Company’s financial instruments include cash equivalents, short and long-term investments, trade and other accounts receivable, accounts payable, other accrued liabilities, and long-term debt plus current maturities (“Debt”). The carrying value of cash equivalents, trade and other accounts receivable, accounts payable, current insurance claims and other accrued liabilities approximates fair value as the assets and liabilities are short term in nature. Short and long-term investments are carried at fair value as further described in Note 3 in the Company’s consolidated financial statements. The Company’s Debt includes borrowings under the Company’s revolving credit facility, to the extent there are any, plus borrowings relating to finance lease obligations used to finance trailing equipment. The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates that adjust monthly and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value. Trade and Other Receivables The allowance for doubtful accounts for both trade and other receivables represents management’s estimate of the amount of outstanding receivables that will not be collected. Estimates are used to determine the allowance for doubtful accounts for both trade and other receivables and are generally based on specific identification, historical collection results, current economic trends and changes in payment trends. Following is a summary of the activity in the allowance for doubtful accounts for fiscal years ending December 28, 2024, December 30, 2023 and December 31, 2022 (in thousands): Balance at Beginning of Period Charged to Costs and Expenses Write-offs, Net of Recoveries Balance at End of Period For the Fiscal Year Ended December 28, 2024 Trade receivables $ 11,738 $ 6,449 $ ( 5,283 ) $ 12,904 Other receivables 15,376 11,811 ( 7,911 ) 19,276 Other non-current receivables 206 6 ( 4 ) 208 $ 27,320 $ 18,266 $ ( 13,198 ) $ 32,388 For the Fiscal Year Ended December 30, 2023 Trade receivables $ 12,121 $ 5,704 $ ( 6,087 ) $ 11,738 Other receivables 11,745 8,325 ( 4,694 ) 15,376 Other non-current receivables 203 3 —   206 $ 24,069 $ 14,032 $ ( 10,781 ) $ 27,320 For the Fiscal Year Ended December 31, 2022 Trade receivables $ 7,074 $ 7,354 $ ( 2,307 ) $ 12,121 Other receivables 9,511 4,863 ( 2,629 ) 11,745 Other non-current receivables 200 3 —   203 $ 16,785 $ 12,220 $ ( 4,936 ) $ 24,069 Other Receivables and Other Assets The Company provides financing to certain independent commission sales agents. Generally, these notes receivable include personal guarantees, may be collateralized by the assets and equity of the borrower and are due in periodic installments, including principal and interest payments, for terms of one to seven years. Notes receivable are recorded at amortized cost, net of the allowance for doubtful accounts. At December 28, 2024 and December 30, 2023, the Company had $ 26,606 ,000 and $ 5,079 ,000, respectively, of gross notes receivable from independent commission sales agents. The current portion is included within other receivables and the long-term portion is included in other assets in the consolidated balance sheets. 4 6 Table of Contents Operating Property Operating property is recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Buildings and improvements are being depreciated over 30 years. Trailing equipment is being depreciated over 7 to 10 years. Information technology hardware and software is generally being depreciated over 3 to 7 years. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets of acquired businesses. The Company has two reporting units within the transportation logistics segment that report goodwill. The Company reviews its goodwill balance annually for impairment for each reporting unit, unless circumstances dictate more frequent assessments, and in accordance with ASU 2011-08, Testing Goodwill for Impairment . ASU 2011-08 permits an initial assessment, commonly referred to as “step zero”, of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and also provides a basis for determining whether it is necessary to perform the quantitative analysis required by ASC Topic 350. In the fourth fiscal quarter of 2024, the Company performed the qualitative assessment of goodwill and determined it was more likely than not that the fair value of each of its reporting units would be greater than its carrying amount. Therefore, the Company determined it was not necessary to perform the quantitative goodwill impairment test. Furthermore, there has been no historical impairment of the Company’s goodwill. Income Taxes Income tax expense is equal to the current year’s liability for income taxes and a provision for deferred income taxes. Deferred tax assets and liabilities are recorded for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Share-Based Payments The Company’s share-based payment arrangements include restricted stock units (“RSU”), non-vested restricted stock, Deferred Stock Units and stock options. The fair value of an RSU with a performance condition is determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. With respect to RSU awards with a performance condition, the Company reports compensation expense ratably over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU. The fair value of an RSU with a market condition is determined at the time of grant based on the expected achievement of the market condition at the end of each vesting period. With respect to RSU awards with a market condition, the Company recognizes compensation expense ratably over the requisite service period under an award based on the fair market value of the award at the time of grant, regardless of whether the market condition is satisfied. Previously recognized compensation cost would be reversed, however, if the employee terminated employment prior to completing such requisite service period. The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes pricing model and recognizes compensation cost for stock option awards expected to vest on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated at grant date based on historical experience and anticipated employee turnover. The fair values of each share of non-vested restricted stock issued and Deferred Stock Unit granted are based on the fair value of a share of the Company’s Common Stock on the date of grant and compensation costs for non-vested restricted stock and Deferred Stock Units are recognized on a straight-line basis over the requisite service period for the award. Earnings Per Share Basic earnings per common share are based on the weighted average number of common shares outstanding, which includes outstanding non-vested restricted stock and outstanding Deferred Stock Units. Diluted earnings per share are based on the weighted average number of common shares outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options. During the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022, the weighted-average number of common shares outstanding is the same for purposes of the calculations of both basic and diluted earnings per share. During and as of the fiscal year ended December 28, 2024, there were no outstanding stock options issued by the 4 7 Table of Contents Company. During the fiscal years ended December 30, 2023 and December 31, 2022, the impact on earnings per share of future compensation expense related to outstanding, unvested time-based awards was greater than the incremental impact of outstanding dilutive stock options, and would therefore have an anti-dilutive effect on earnings per share if included in the calculation of earnings per share. Accordingly, the Company had no reconciling items between the average number of common shares outstanding used to calculate basic earnings per common share and the average number of common shares and common share equivalents outstanding used to calculate diluted earnings per share during the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022. For the fiscal years ended December 30, 2023 and December 31, 2022, no options outstanding to purchase shares of Common Stock were antidilutive. Outstanding RSUs were excluded from the calculation of diluted earnings per share for all periods because the performance metric requirements or market condition for vesting had not been satisfied. Dividends Payable On December 9, 2024 , the Company announced that its Board of Directors declared a special cash dividend of $ 2.00 per share payable on January 21, 2025 to stockholders of record of its Common Stock as of January 7, 2025 . Dividends payable of $ 70,632 ,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 28, 2024. On December 4, 2023 , the Company announced that its Board of Directors declared a special cash dividend of $ 2.00 per share payable on January 19, 2024 to stockholders of record of its Common Stock as of January 3, 2024 . Dividends payable of $ 71,433 ,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 30, 2023. Foreign Currency Translation Assets and liabilities of the Company’s Canadian and Mexican operations are translated from their functional currency to U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average monthly exchange rates during the period. Adjustments resulting from the translation process are included in accumulated other comprehensive income. Transactional gains and losses arising from receivable and payable balances, including intercompany balances, in the normal course of business that are denominated in a currency other than the functional currency of the operation are recorded in the statements of income when they occur. (2) Other Comprehensive Income The following table presents the components of and changes in accumulated other comprehensive income (loss), net of related income taxes, as of and for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 (in thousands): Unrealized Holding Gains (Losses) on Available-for-Sale Securities Foreign Currency Translation Total Balance as of December 25, 2021 $ 113 $ ( 5,516 ) $ ( 5,403 ) Other comprehensive loss ( 8,562 ) ( 1,059 ) ( 9,621 ) Balance as of December 31, 2022 ( 8,449 ) ( 6,575 ) ( 15,024 ) Other comprehensive income 3,439 4,720 8,159 Balance as of December 30, 2023 ( 5,010 ) ( 1,855 ) ( 6,865 ) Other comprehensive income (loss) 2,205 ( 7,350 ) ( 5,145 ) Balance as of December 28, 2024 $ ( 2,805 ) $ ( 9,205 ) $ ( 12,010 ) Amounts reclassified from accumulated other comprehensive income to investment income due to the realization of previously unrealized gains and losses in the accompanying consolidated statements of income were not significant for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022. 4 8 Table of Contents (3) Investments Investments include primarily investment-grade corporate bonds, asset-backed securities and commercial paper having maturities of up to five years (the “bond portfolio”) and money market investments. Investments in the bond portfolio are reported as available-for-sale and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on available-for-sale investments to determine whether an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be a result of credit-related factors, are to be included as a charge in the statement of income, while unrealized losses considered to be a result of non-credit-related factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities, commercial paper and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $ 3,573,000 and $ 6,382,000 at December 28, 2024 and December 30, 2023, respectively. The amortized cost and fair values of available-for-sale investments are as follows at December 28, 2024 and December 30, 2023 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 28, 2024 Money market investments $ 13,473 $ —   $ —   $ 13,473 Asset-backed securities 26,785 25 1,770 25,040 Corporate bonds, commercial paper and direct obligations of government agencies 107,180 198 2,026 105,352 Total $ 147,438 $ 223 $ 3,796 $ 143,865 December 30, 2023 Money market investments $ 16,832 $ —   $ —   $ 16,832 Asset-backed securities 16,543 —   2,236 14,307 Corporate bonds, commercial paper and direct obligations of government agencies 118,481 279 4,384 114,376 U.S. Treasury obligations 6,287 2 43 6,246 Total $ 158,143 $ 281 $ 6,663 $ 151,761 49 Table of Contents For those available-for-sale investments with unrealized losses at December 28, 2024 and December 30, 2023, the following table summarizes the duration of the unrealized loss (in thousands): Less than 12 months 12 months or longer Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss December 28, 2024 Asset-backed securities $ 9,663 $ 37 $ 12,596 $ 1,733 $ 22,259 $ 1,770 Corporate bonds, commercial paper, and direct obligations of government agencies 18,409 169 59,609 1,857 78,018 2,026 Total $ 28,072 $ 206 $ 72,205 $ 3,590 $ 100,277 $ 3,796 December 30, 2023 Asset-backed securities $ —   $ —   $ 14,307 $ 2,236 $ 14,307 $ 2,236 Corporate bonds, commercial paper, and direct obligations of government agencies 3,506 42 86,841 4,342 90,347 4,384 U.S. Treasury obligations —   —   2,305 43 2,305 43 Total $ 3,506 $ 42 $ 103,453 $ 6,621 $ 106,959 $ 6,663 The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality. The Company expects to recover, through collection of all of the contractual cash flows of each security, the amortized cost basis of these securities as it does not intend to sell, and does not anticipate being required to sell, these securities before recovery of the cost basis. For these reasons, no losses have been recognized in the Company’s consolidated statements of income. Short-term investments include $ 51,619,000 in current maturities of investments held by the Company’s insurance segment at December 28, 2024. The non-current portion of the bond portfolio of $ 92,246,000 is included in other assets. The short-term investments, together with $ 30,960,000 of non-current investments, provide collateral for the $ 74,321,000 of letters of credit issued to guarantee payment of insurance claims. Investment income represents the earnings on the insurance segment’s assets. Investment income earned from the assets of the insurance segment are included as a component of operating income as the investment of these assets is critical to providing collateral, liquidity and earnings with respect to the operation of the Company’s insurance programs. (4) Income Taxes The provisions for income taxes consisted of the following (in thousands): Fiscal Years 2024 2023 2022 Current: Federal $ 54,621 $ 76,827 $ 116,642 State 9,750 13,305 23,309 Foreign 999 1,278 1,958 Total current $ 65,370 $ 91,410 $ 141,909 Deferred: Federal $ ( 5,441 ) $ ( 8,410 ) $ ( 3,945 ) State ( 1,549 ) 701 ( 1,415 ) Total deferred $ ( 6,990 ) $ ( 7,709 ) $ ( 5,360 ) Income taxes $ 58,380 $ 83,701 $ 136,549 50 Table of Contents Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities consisted of the following (in thousands): Dec. 28, 2024 Dec. 30, 2023 Deferred tax assets: Receivable valuations $ 7,899 $ 6,616 Share-based payments 1,139 2,550 Self-insured claims 4,659 3,376 Other 11,411 10,412 Total deferred tax assets $ 25,108 $ 22,954 Deferred tax liabilities: Operating property $ 35,131 $ 39,117 Goodwill 4,366 4,107 Other 3,213 3,718 Total deferred tax liabilities $ 42,710 $ 46,942 Net deferred tax liability $ 17,602 $ 23,988 The following table summarizes the differences between income taxes calculated at the federal income tax rate of 21 % on income before income taxes and the provisions for income taxes (in thousands): Fiscal Years 2024 2023 2022 Income taxes at federal income tax rate $ 53,408 $ 73,100 $ 119,167 State income taxes, net of federal income tax benefit 6,637 11,250 16,596 Non-deductible executive compensation 1,063 2,309 3,552 Meals and entertainment exclusion 508 520 200 Research and development credits ( 2,591 ) ( 1,672 ) ( 1,526 ) Share-based payments ( 1,122 ) ( 2,832 ) ( 2,958 ) Other, net 477 1,026 1,518 Income taxes $ 58,380 $ 83,701 $ 136,549 The Company files a consolidated U.S. federal income tax return. The Company or its subsidiaries file state tax returns in the majority of the U.S. state tax jurisdictions. With few exceptions, the Company and its subsidiaries are no longer subject to U.S. federal or state income tax examinations by tax authorities for 2020 and prior years. The Company’s wholly-owned Canadian subsidiary, Landstar Canada, Inc., is subject to Canadian income and other taxes. The Company’s wholly-owned Mexican subsidiaries, Landstar Holdings, S. de R.L.C.V. and Landstar Metro, S.A.P.I. de C.V., are subject to Mexican income and other taxes. The Company’s Canadian and Mexican subsidiaries also may each be subject to U.S. income and other taxes. As of December 28, 2024 and December 30, 2023, the Company had $ 5,396,000 and $ 4,467,000 , respectively, of net unrecognized tax benefits representing the provision for the uncertainty of certain tax positions plus a component of interest and penalties. Estimated interest and penalties on the provision for the uncertainty of certain tax positions is included in income tax expense. At December 28, 2024 and December 30, 2023, there was $ 1,793,000 and $ 1,249,000 , respectively, accrued for estimated interest and penalties related to the uncertainty of certain tax positions. The Company does not currently anticipate any significant increase or decrease to the unrecognized tax benefit during fiscal year 2025. The following table summarizes the rollforward of the total amounts of gross unrecognized tax benefits for fiscal years 2024 and 2023 (in thousands): Fiscal Years 2024 2023 Gross unrecognized tax benefits – beginning of the year $ 5,454 $ 3,726 Gross increases related to current year tax positions 598 953 Gross increases related to prior year tax positions 1,344 1,570 Lapse of statute of limitations ( 825 ) ( 795 ) Gross unrecognized tax benefits – end of the year $ 6,571 $ 5,454 Landstar paid income taxes of $ 47,528,000 in fiscal year 2024, $ 92,695,000 in fiscal year 2023 and $ 158,715,000 in fiscal year 2022. 51 Table of Contents (5) Operating Property Operating property is summarized as follows (in thousands): Dec. 28, 2024 Dec. 30, 2023 Land $ 17,389 $ 16,328 Buildings and improvements 80,719 71,157 Trailing equipment 518,524 491,208 Information technology hardware and software 141,029 132,153 Other equipment 10,231 10,136 Total operating property, gross 767,892 720,982 Less accumulated depreciation and amortization 456,547 436,682 Total operating property, net $ 311,345 $ 284,300 Included above is $ 175,464,000 in fiscal year 2024 and $ 143,542,000 in fiscal year 2023 of operating property under finance leases, $ 131,770,000 and $ 100,188,000 , respectively, net of accumulated depreciation and amortization. Landstar acquired operating property by entering into finance leases in the amount of $ 62,194,000 in fiscal year 2024, $ 4,093,000 in fiscal year 2023 and $ 30,659,000 in fiscal year 2022. (6) Retirement Plan Landstar sponsors an Internal Revenue Code section 401(k) defined contribution plan for the benefit of U.S. domiciled full-time employees who have completed three months of service. Eligible employees make voluntary contributions up to 75 % of their base salary, subject to certain limitations. Landstar contributes an amount equal to 100 % of the first 3 % and 50 % of the next 2 % of such contributions, subject to certain limitations. The expense for the Company-sponsored defined contribution plan included in selling, general and administrative expense was $ 2,805,000 in fiscal year 2024, $ 2,812,000 in fiscal year 2023 and $ 2,716,000 in fiscal year 2022. (7) Debt Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of December 28, 2024 and 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”). The Credit Agreement, which matures July 1, 2027, provides for borrowing capacity in the form of a revolving credit facility of $ 300,000,000 , $ 45,000,000 of which may be utilized in the form of letters of credit. The Credit Agreement also includes an “accordion” feature providing for a possible increase of up to an aggregate amount of borrowing capacity of $ 600,000,000 . As of December 28, 2024, the Company had no borrowings outstanding under the Credit Agreement. The revolving credit loans under the Credit Agreement, at the option of Landstar, bear interest at (i) a forward-looking term rate based on the secured overnight financing rate plus 0.10 % and an applicable margin ranging from 1.25 % to 2.00 %, or (ii) an alternate base rate plus an applicable margin ranging from 0.25 % to 1.00 %, in each case with the applicable margin determined based upon the Company’s Leverage Ratio, as defined in the Credit Agreement, at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The revolving credit facility bears a commitment fee, payable quarterly in arrears, of 0.20 % to 0.30 %, based on the Company’s Leverage Ratio at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum fixed charge coverage ratio, as described in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. 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 52 Table of Contents 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. The Company is currently in compliance with all of the debt covenants under the Credit Agreement. The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value. Landstar paid interest of $ 3,813,000 in fiscal year 2024, $ 3,604,000 in fiscal year 2023 and $ 4,151,000 in fiscal year 2022. (8) Leases Landstar’s noncancelable leases are primarily comprised of finance leases for the acquisition of new trailing equipment. Each finance lease for the acquisition of trailing equipment is a five year lease with a $ 1 purchase option for the applicable equipment at lease expiration. Substantially all of Landstar’s operating lease right-of-use assets and operating lease liabilities represent leases for facilities maintained in support of the Company’s network of BCO Independent Contractors and office space used to conduct Landstar’s business. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. Further, the leases do not contain contingent rent provisions. Landstar also rents certain trailing equipment to supplement the Company-owned trailer fleet under “month-to-month” lease terms, which are not required to be recorded on the balance sheet due to the less than twelve month lease term exemption. Sublease income is primarily comprised of weekly trailing equipment rentals to BCO Independent Contractors. Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the right-of-use assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term. As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate. The components of lease cost for finance leases and operating leases for the fiscal year ended December 28, 2024 were (in thousands): Finance leases: Amortization of right-of-use assets $ 17,476 Interest on lease liability 2,767 Total finance lease cost 20,243 Operating leases: Lease cost 3,835 Variable lease cost —   Sublease income ( 5,604 ) Total net operating lease income ( 1,769 ) Total net lease cost $ 18,474 Total net operating lease income, net of rent expense under operating leases, was $ 1,853,000 and $ 2,121,000 in fiscal years 2023 and 2022, respectively. 53 Table of Contents A summary of the lease classification on the Company’s consolidated balance sheet as of December 28, 2024 is as follows (in thousands): Assets: Operating lease right-of-use assets Other assets $ 1,062 Finance lease assets Operating property, less accumulated depreciation and amortization 131,770 Total lease assets $ 132,832 Liabilities: The following table reconciles the undiscounted cash flows for the finance and operating leases to the finance and operating lease liabilities recorded on the balance sheet at December 28, 2024 (in thousands): Finance Leases Operating Leases 2025 $ 39,915 $ 599 2026 31,653 272 2027 19,400 216 2028 15,309 48 2029 11,197 —   Thereafter —   —   Total future minimum lease payments 117,474 1,135 Less amount representing interest ( 1.6 % to 6.4 %) 15,167 73 Present value of minimum lease payments $ 102,307 $ 1,062 Current maturities of long-term debt 33,116 Long-term debt, excluding current maturities 69,191 Other current liabilities 520 Deferred income taxes and other noncurrent liabilities 542 The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of December 28, 2024 were: Finance Leases Operating Leases Weighted average remaining lease term (years) 3.7 2.3 Weighted average discount rate 4.8 % 5.5 % (9) Share-Based Payment Arrangements As of December 28, 2024, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors, the 2022 Directors Stock Compensation Plan (the “2022 DSCP”). 6,000,000 shares of the Company’s Common Stock were authorized for issuance under the 2011 EIP and 200,000 shares of the Company’s Common Stock were authorized for issuance under the 2022 DSCP. The 2011 EIP and 2022 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands): Fiscal Years 2024 2023 2022 Total cost of the Plans during the period $ 3,435 $ 4,282 $ 12,399 Amount of related income tax benefit recognized during the period ( 1,963 ) ( 3,622 ) ( 5,199 ) Net cost of the Plans during the period $ 1,472 $ 660 $ 7,200 Included in income tax benefits recognized in the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 were excess tax benefits from stock-based awards of $ 1,122,000 , $ 2,830,000 and $ 2,948,000 , respectively. 54 Table of Contents As of December 28, 2024, there were 181,450 shares of the Company’s Common Stock reserved for issuance under the 2022 DSCP and 2,799,702 shares of the Company’s Common Stock reserved for issuance under the 2011 EIP. Restricted Stock Units The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans: Number of RSUs Weighted Average Grant Date Fair Value Outstanding at December 25, 2021 209,399 $ 102.90 Granted 50,019 $ 139.44 Shares earned in excess of target (1) 91,497 $ 92.58 Vested shares, including shares earned in excess of target ( 177,146 ) $ 95.48 Forfeited ( 21,989 ) $ 113.85 Outstanding at December 31, 2022 151,780 $ 115.80 Granted 41,638 $ 164.91 Shares earned in excess of target (2) 79,176 $ 98.39 Vested shares, including shares earned in excess of target ( 137,861 ) $ 97.97 Forfeited ( 2,011 ) $ 142.67 Outstanding at December 30, 2023 132,722 $ 138.93 Granted 102,997 $ 138.85 Shares earned in excess of target (3) 1,791 $ 51.42 Vested shares, including shares earned in excess of target ( 45,057 ) $ 115.69 Forfeited ( 29,801 ) $ 140.20 Outstanding at December 28, 2024 162,652 $ 144.12 (1) Represents additional shares earned under each of the February 2, 2017, February 2, 2018 and February 1, 2019 RSU awards, as fiscal year 2021 financial results exceeded target performance level under each such award. (2) Represents additional shares earned (i) under the February 1, 2019 and January 31, 2020 RSU awards as fiscal year 2022 financial results exceeded target performance level and (ii) under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each of those awards. (3) Represents additional shares earned under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each of those awards. During fiscal years 2024, 2023 and 2022, the Company granted RSUs with a performance condition. During fiscal year 2024, the Company also granted RSUs with a market condition. RSUs with a performance condition granted on February 2, 2024 may vest on January 31 of 2027, 2028 and 2029 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2023 fiscal year. RSUs with a performance condition granted on February 3, 2023 may vest on January 31 of 2026, 2027 and 2028 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2022 fiscal year. RSUs with a performance condition granted on January 28, 2022 may vest on January 31 of 2025, 2026 and 2027 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2021 fiscal year. At the time of grant, the target number of common shares available for issuance under the February 2, 2024, February 3, 2023 and January 28, 2022 grants equals 100 % of the number of RSUs granted, and the maximum number of common shares available for issuance under the February 2, 2024, February 3, 2023 and January 28, 2022 grants equals 200 % of the number of RSUs credited to the recipient. In the event actual results exceed the target, the number of shares that will be granted will exceed the number of RSUs granted. The fair value of an RSU with a performance condition was determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. The discount rate due to lack of marketability used for RSU award grants with a performance condition for all periods was 7 %. With respect to RSU awards with a performance condition, the Company reports compensation expense over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU at the time of grant. 55 Table of Contents On February 2, 2024, the Company granted 58,268 RSUs that vest based on a market condition. These RSUs may vest based on the Company’s achievement of a target total shareholder return (“TSR”) compound annual growth rate (adjusted to reflect dividends (if any) paid during the period the awards are outstanding and capital adjustments as may be necessary), to be measured annually starting after the sixth anniversary of the grant date and concluding after the tenth anniversary of the grant date. The fair value of this RSU award was determined at the time of grant based on the expected achievement of the market condition. With respect to these RSU awards, the Company reports compensation expense ratably over the service period of the award based on the number of units granted multiplied by the grant date fair value of the RSU. Previously recognized compensation cost would be reversed only if the employee did not complete the requisite service period due to termination of employment. The Company recognized approximately ($ 800,000 ), $ 581,000 and $ 9,100,000 of share-based compensation (benefit) expense related to RSU awards in fiscal years 2024, 2023 and 2022, respectively. As of December 28, 2024, there was a maximum of $ 41.9 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.3 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results. Non-vested Restricted Stock and Deferred Stock Units The 2011 EIP provides the Compensation Committee of the Board of Directors with the authority to issue shares of Common Stock of the Company, subject to certain vesting and other restrictions on transfer (“restricted stock”). The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans: Number of Shares and Deferred Stock Units Weighted Average Grant Date Fair Value Non-vested at December 25, 2021 56,436 $ 125.16 Granted 25,354 $ 152.54 Vested ( 27,074 ) $ 122.68 Forfeited ( 6,921 ) $ 144.45 Non-vested at December 31, 2022 47,795 $ 138.30 Granted 22,714 $ 179.32 Vested ( 24,161 ) $ 138.35 Non-vested at December 30, 2023 46,348 $ 158.38 Granted 31,525 $ 187.08 Vested ( 25,647 ) $ 151.16 Forfeited ( 4,707 ) $ 169.92 Non-vested at December 28, 2024 47,519 $ 180.17 The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s Common Stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of grant or the third, fourth and fifth anniversary of the date of the grant, in two equal annual installments on the first and second anniversary of the date of the grant or 100 % on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s Common Stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100 % on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s Common Stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares. As of December 28, 2024, there was $ 4,684,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 1.6 years. 56 Table of Contents Stock Options The Company did not grant any stock options during its 2022, 2023 or 2024 fiscal years. Options outstanding under the Plans generally become exercisable in either five equal annual installments commencing on the first anniversary of the date of grant or 100 % on the fifth anniversary from the date of grant, subject to acceleration in certain circumstances. All options granted under the Plans expire on the tenth anniversary of the date of grant. Under the Plans, the exercise price of each option equals the fair market value of the Company’s Common Stock on the date of grant. The fair value of each option grant on its grant date was calculated using the Black-Scholes option pricing model. The Company utilized historical data, including exercise patterns and employee departure behavior, in estimating the term that options will be outstanding. Expected volatility was based on historical volatility and other factors, such as expected changes in volatility arising from planned changes to the Company’s business, if any. The risk-free interest rate was based on the yield of zero coupon U.S. Treasury bonds for terms that approximated the terms of the options granted. The Company had no issued and outstanding vested or unvested stock options or unrecognized compensation costs related to non-vested stock options granted under the Plans as of or for the fiscal year ended December 28, 2024. The following table summarizes information regarding the Company’s outstanding stock options under the Plans for fiscal years 2023 and 2022: Options Outstanding Options Exercisable Number of Options Weighted Average Exercise Price per Share Number of Options Weighted Average Exercise Price per Share Options at December 25, 2021 8,570 $ 55.42 8,570 $ 55.42 Exercised ( 6,670 ) $ 55.14 Options at December 31, 2022 1,900 $ 56.40 1,900 $ 56.40 Exercised ( 1,900 ) $ 56.40 Options at December 30, 2023 —   —   The total intrinsic value of stock options exercised during fiscal years 2023 and 2022 was $ 218,000 and $ 704,000 , respectively. Directors’ Stock Compensation Plan Directors of the Company who are not employees of the Company (each an “Eligible Director”) are entitled under the 2022 DSCP to receive a grant of such number of restricted shares of the Company’s Common Stock or Deferred Stock Units equal to the quotient of $ 150,000 divided by the fair market value of a share of Common Stock on the date immediately following the date of each annual meeting of the stockholders of the Company (an “Annual Meeting”). In fiscal year 2024, 5,810 restricted shares were granted to Eligible Directors. In fiscal year 2023, 5,957 restricted shares were granted to Eligible Directors. In fiscal year 2022, 7,063 restricted shares were granted to Eligible Directors. No Deferred Stock Units were issued in fiscal years 2024, 2023 or 2022. Restricted shares granted in 202 4 , 2023 and 202 2 vest on the date of the next Annual Meeting. During fiscal years 2024, 2023 and 2022, $ 1,053,000 , $ 1,050,000 and $ 964,000 , respectively, of compensation cost was recorded for the grant of these restricted shares. (10) Equity On December 7, 2021, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,912,824 shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. On December 6, 2022, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,900,826 additional shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. On December 4, 2023, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 319,332 additional shares of its Common Stock from time to time in the open market and in privately negotiated transactions under its share purchase program. As of December 28, 2024, the Company had authorization to purchase in the aggregate up to 2,547,981 shares of its Common Stock under these programs. No specific expiration date has been assigned to the December 7, 2021, December 6, 2022 or December 4, 2023 authorizations. During fiscal year 2024, Landstar purchased a total of 452,019 shares of its Common Stock at a total cost of $ 82,117 ,000 pursuant to its previously announced stock purchase program, including $ 81,400 ,000 in cash purchases and accrued excise tax of $ 717 ,000, which is included in other current liabilities in the consolidated balance sheet at December 28, 2024. The Company has 2,000,000 shares of preferred stock authorized and unissued. 57 Table of Contents (11) Commitments and Contingencies At December 28, 2024, in addition to the $ 74,321,000 letters of credit secured by investments, Landstar had $ 35,250,000 of letters of credit outstanding under the Company’s Credit Agreement. The Company is involved in certain claims and pending litigation arising from the normal conduct of business. 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 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. (12) Segment Information Landstar markets its integrated transportation management solutions primarily through independent commission sales agents and exclusively utilizes third party capacity providers to transport customers’ freight. Landstar’s independent commission sales agents enter into contractual arrangements with the Company and are responsible for locating freight, making that freight available to Landstar’s capacity providers and coordinating the transportation of the freight with customers and capacity providers. 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 $ 4.8 billion during the most recently completed fiscal year. The Company reports the results of two operating segments: the transportation logistics segment and the insurance segment. The transportation logistics segment provides a wide range of integrated transportation management solutions. Transportation services offered by the Company include truckload, less-than-truckload and other truck transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage. Examples of the industries serviced by the transportation logistics segment include automotive parts and assemblies, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics and military equipment and general commodities. 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. The results of operations from Landstar Blue and Landstar Metro are presented as part of the Company’s transportation logistics segment. The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to certain of Landstar’s operating subsidiaries. In addition, it reinsures certain risks of the Company’s BCO Independent Contractors and provides certain property and casualty insurance directly to certain of Landstar’s operating subsidiaries. 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. Internal revenue for premiums billed by the insurance segment to the transportation logistics segment is calculated each fiscal period based primarily on an actuarial calculation of historical loss experience and is believed to approximate the cost that would have been incurred by the transportation logistics segment had similar insurance been obtained from an unrelated third party. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”) is our Chief Executive Officer. The CODM evaluates each segment’s performance and makes decisions about resource allocations primarily based on operating income, which is the principal financial metric utilized to monitor budgeted versus actual results by segment of the Company. Asset information by segment is not typically provided to the CODM for purposes of evaluating performance or allocating resources, and therefore such information has not been presented. No single customer accounted for more than 10 % of the Company’s consolidated revenue in fiscal years 2024, 2023 and 2022. Substantially all of the Company’s revenue is generated in North America, primarily through customers located in the United States. 58 Table of Contents The following tables summarize information about the Company’s reportable business segments as of and for the fiscal years ending December 28, 2024, December 30, 2023 and December 31, 2022 (in thousands): Transportation Logistics Insurance Total 2024 External revenue $ 4,756,008 $ 63,237 $ 4,819,245 Internal revenue —   57,476 57,476 Total revenue 4,756,008 120,713 4,876,721 Investment income 14,810 14,810 Purchased transportation 3,745,241 3,745,241 Commissions to agents 392,751 392,751 Other operating costs, net of gains on asset sales/dispositions 58,781 58,781 Insurance and claims 92,712 78,693 171,405 Selling, general and administrative 204,089 13,619 217,708 Depreciation and amortization 56,738 56,738 Operating income 205,696 43,211 248,907 Goodwill 40,933 40,933 Transportation Logistics Insurance Total 2023 External revenue $ 5,230,846 $ 72,476 $ 5,303,322 Internal revenue —   67,977 67,977 Total revenue 5,230,846 140,453 5,371,299 Investment income 10,141 10,141 Purchased transportation 4,068,262 4,068,262 Commissions to agents 462,668 462,668 Other operating costs, net of gains on asset sales/dispositions 54,191 54,191 Insurance and claims 101,179 81,039 182,218 Selling, general and administrative 197,819 13,980 211,799 Depreciation and amortization 58,153 58,153 Operating income 288,574 55,575 344,149 Goodwill 42,275 42,275 59 Table of Contents Transportation Logistics Insurance Total 2022 External revenue $ 7,358,008 $ 78,554 $ 7,436,562 Internal revenue —   79,229 79,229 Total revenue 7,358,008 157,783 7,515,791 Investment income 3,162 3,162 Purchased transportation 5,804,017 5,804,017 Commissions to agents 614,865 614,865 Other operating costs, net of gains on asset sales/dispositions 45,192 45,192 Insurance and claims 105,477 99,587 205,064 Selling, general and administrative 206,504 14,775 221,279 Depreciation and amortization 57,453 57,453 Operating income 524,500 46,583 571,083 Goodwill 41,220 41,220 Fiscal Years Ended December 28, 2024 December 30, 2023 December 31, 2022 Total revenue $ 4,876,721 $ 5,371,299 $ 7,515,791 Elimination of internal revenue ( 57,476 ) ( 67,977 ) ( 79,229 ) Total consolidated revenue 4,819,245 5,303,322 7,436,562 Operating income $ 248,907 $ 344,149 $ 571,083 Interest and debt (income) expense (1) ( 5,419 ) ( 3,946 ) 3,620 Income before income taxes 254,326 348,095 567,463 (1) Interest and debt (income) expense includes (1) interest income earned on cash balances held by the transportation logistics segment of $ 9,495 , $ 7,811 an d $ 900 in 2024, 2023 and 2022, respectively an d (2) consolidated total interest expense of $ 4,076 , $ 3,865 and $ 4,520 (1) in 2024, 2023 an d 2022, respectively. (13) Change in Accounting Estimate for Self-Insured Claims Landstar provides for the estimated costs of self-insured claims primarily on an actuarial basis. 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 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. The following table summarizes the adverse effect of the increase in the cost of insurance claims resulting from unfavorable development of prior year self-insured claims estimates on operating income, net income and earnings per share set forth in the consolidated statements of income for the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 (in thousands, except per share amounts): Fiscal Years Ended December 28, 2024 December 30, 2023 December 31, 2022 Operating income $ 8,824 $ 6,058 $ 11,331 Net income $ 6,794 $ 4,598 $ 8,570 Basic and diluted earnings per share $ 0.19 $ 0.13 $ 0.23 The unfavorable development of prior years’ claims in the fiscal years ended December 28, 2024, December 30, 2023 and December 31, 2022 was primarily attributable in each year to several specific claims. (14) Equity investment On April 1, 2022, Landstar Investment Holdco, LLC, a newly formed Delaware LLC and wholly owned subsidiary of Landstar System Holdings, Inc., purchased Class A units of Cavnue, LLC, for approximately $ 4,999,000 in cash consideration. Cavnue, LLC is a privately held company focused on combining technology and road infrastructure to unlock the full potential of connected and autonomous vehicles. 60 Table of Contents This non-controlling investment in units of Cavnue, LLC, is considered an investment in non-marketable equity securities without a readily determinable market value. The carrying value of our non-marketable equity securities going forward will be adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). (15) Gain Contingency The Company does not allow for the recognition of a gain contingency within its consolidated financial statements prior to the settlement of the underlying events or contingencies associated with the gain contingency. As a result, the consideration related to a gain contingency is recorded in the consolidated financial statements during the period in which all underlying events or contingencies are resolved and the gain is realized. It is anticipated that during the 2025 second fiscal quarter, the Company will receive a $ 12,000,000 cash payment from a third party reinsurance provider in the form of a “no claims bonus” resulting from favorable loss experience under a three year commercial auto liability reinsurance arrangement relating to claims incurred between May 1, 2020 through April 30, 2023. The Company intends to record the receipt of this payment as a deferred gain on the balance sheet, until such time as all underlying claims with exposure under the applicable excess layer insurance arrangement are resolved and the gain can be recognized. (16) Recent Accounting Pronouncements Adoption of New Accounting Standards In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. ASU 2023-07 is effective for annual periods beginning after December 15, 2023. The Company adopted ASU 2023-07 on December 28, 2024 retrospectively to all prior periods presented in the consolidated financial statements. Accounting Standards Issued But Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which expands disclosures about certain categories of expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and disclosures. 61 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Landstar System, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Landstar System, Inc. and subsidiary (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 28, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Self-insurance claims liability As discussed in Note 1 to the consolidated financial statements, the liability for insurance claims includes the actuarially determined estimated costs of cargo, property, casualty, general liability, and workers’ compensation claims, both reported and for claims incurred but not reported, up to the Company’s retained amount per claim, which is referred to as the self-insurance claims liability. The Company’s estimated costs of insurance claims include assumptions regarding the frequency and severity of claims and are based upon the facts and circumstances known as of the applicable balance sheet date. The Company’s liability for insurance claims as of December 28, 2024 was $103,353,000, which includes the self-insurance claims liability. 62 Table of Contents We identified the evaluation of the self-insurance claims liability as a critical audit matter. Specialized skills were needed to evaluate the Company’s estimate of the self-insurance claims liability. This evaluation included assumptions related to the potential for the development in future periods of claims both reported and incurred but not reported as of the balance sheet date and the impact of those developments on the estimated liability associated with such claims. In addition, a higher degree of subjective auditor judgment was required to evaluate the Company’s estimate of the self-insurance claims liability due to the inherent uncertainty in the frequency and severity of claims. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s self-insurance claims process, including a control related to the development of the assumptions used to estimate the self-insurance claims liability. We involved actuarial professionals with specialized skills and knowledge, who assisted in assessing the actuarial model used by the Company, including the external actuarial report obtained by the Company, to estimate the self-insurance claims liability for consistency with generally accepted actuarial standards. The actuarial professionals also developed an estimate of the range of the self-insurance claims liability using the Company’s historical claims data. We compared the estimated range of the self-insurance claims liability to the amount recorded by the Company. We tested a sample of the claims data used in the actuarial model by comparing the data to underlying claims details. For certain claims, we obtained letters received directly from the Company’s external legal counsel to evaluate the liability recorded. Additionally, we assessed the development of the self-insurance claims liability in the current year compared to recent historical trends and considered implications on the current year assumptions. We also assessed facts and circumstances received by the Company after the balance sheet date, but before the consolidated financial statements were issued, and the impact, if any, of such facts and circumstances on the self-insurance claims liability. /s/ KPMG LLP We have served as the Company’s auditor since 1988. Jacksonville, Florida February 24, 2025 63 KPMG LLP (PCAOB ID: 185 ), the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K for the fiscal year ended December 28, 2024, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. Such report appears immediately below. (b) Attestation Report of the Registered Public Accounting Firm 65 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Landstar System, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Landstar System, Inc. and subsidiary’s (the Company) internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2024 and December 30, 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 28, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2025 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/KPMG LLP Jacksonville, Florida February 24, 2025 66 Table of Contents (c) Changes in Internal Control Over Financial Reporting There were no significant changes in the Company’s internal control over financial reporting during the Company’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting . 67 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.