LANDSTAR SYSTEM INC 10-Q

Item 1. Financial Statements The interim consolidated financial statements contained herein reflect all adjustments (all of a normal, recurring nature) which, in the opinion of management, are necessary for a fair statement of the financial condition, results of operations, cash flows and changes in shareholders’ equity for the periods presented. They have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the twenty-six weeks ended June 28, 2025 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 27, 2025. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2024 Annual Report on Form 10-K. 3 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited) June 28, 2025 December 28, 2024 ASSETS Current Assets Cash and cash equivalents $ 359,237 $ 515,018 Short-term investments 66,935 51,619 Trade accounts receivable, less allowance of $ 12,284 and $ 12,904 717,249 683,841 Other receivables, including advances to independent contractors, less allowance of $ 21,995 and $ 17,812 48,781 47,160 Other current assets 45,144 22,229 Total current assets 1,237,346 1,319,867 Operating property, less accumulated depreciation and amortization of $ 464,538 and $ 456,547 287,500 311,345 Goodwill 41,399 40,933 Other assets 133,399 141,166 Total assets $ 1,699,644 $ 1,813,311 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Cash overdraft $ 58,141 $ 61,033 Accounts payable 401,849 383,625 Current maturities of long-term debt 30,747 33,116 Insurance claims 36,797 40,511 Dividends payable —   70,632 Other current liabilities 91,605 84,237 Total current liabilities 619,139 673,154 Long-term debt, excluding current maturities 54,677 69,191 Insurance claims 73,268 62,842 Deferred income taxes and other noncurrent liabilities 30,734 35,685 Shareholders’ Equity Common stock, $ 0.01 par value, authorized 160,000,000 shares, issued 68,589,418 and 68,559,269 shares 686 686 Additional paid-in capital 258,915 255,260 Retained earnings 2,905,011 2,859,916 Cost of 33,935,882 and 33,243,196 shares of common stock in treasury ( 2,235,622 ) ( 2,131,413 ) Accumulated other comprehensive loss ( 7,164 ) ( 12,010 ) Total shareholders’ equity 921,826 972,439 Total liabilities and shareholders’ equity $ 1,699,644 $ 1,813,311 See accompanying notes to consolidated financial statements. 4 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited) Twenty-Six Weeks Ended Thirteen Weeks Ended June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Revenue $ 2,363,885 $ 2,396,048 $ 1,211,383 $ 1,225,005 Investment income 7,327 7,066 3,729 3,654 Costs and expenses: Purchased transportation 1,839,289 1,855,579 941,411 950,058 Commissions to agents 192,836 197,098 99,522 99,816 Other operating costs, net of gains on asset sales/dispositions 31,424 28,994 19,595 14,135 Insurance and claims 70,301 53,432 30,449 27,164 Selling, general and administrative 117,288 111,361 55,706 54,939 Depreciation and amortization 24,375 28,630 12,149 14,488 Total costs and expenses 2,275,513 2,275,094 1,158,832 1,160,600 Operating income 95,699 128,020 56,280 68,059 Interest and debt expense (income) 539 ( 3,286 ) 698 ( 1,675 ) Income before income taxes 95,160 131,306 55,582 69,734 Income taxes 23,461 31,586 13,689 17,110 Net income $ 71,699 $ 99,720 $ 41,893 $ 52,624 Basic and diluted earnings per share $ 2.05 $ 2.79 $ 1.20 $ 1.48 Average basic and diluted shares outstanding 35,037,000 35,702,000 34,870,000 35,654,000 Dividends per common share $ 0.76 $ 0.66 $ 0.40 $ 0.33 See accompanying notes to consolidated financial statements. 5 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (Unaudited) Twenty-Six Weeks Ended Thirteen Weeks Ended June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Net income $ 71,699 $ 99,720 $ 41,893 $ 52,624 Other comprehensive income (loss): Unrealized holding gains on available-for-sale investments, net of tax expense of $ 424 , $ 204 , $ 160 and $ 112 1,546 746 582 410 Foreign currency translation gains (losses) 3,300 ( 3,359 ) 3,250 ( 3,053 ) Other comprehensive income (loss) 4,846 ( 2,613 ) 3,832 ( 2,643 ) Comprehensive income $ 76,545 $ 97,107 $ 45,725 $ 49,981 See accompanying notes to consolidated financial statements. 6 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Twenty-Six Weeks Ended June 28, 2025 June 29, 2024 OPERATING ACTIVITIES Net income $ 71,699 $ 99,720 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,375 28,630 Non-cash interest charges 132 132 Provisions for losses on trade and other accounts receivable 9,912 8,840 Gains on sales/disposals of operating property ( 1,389 ) ( 555 ) Deferred income taxes, net ( 5,904 ) 1,752 Stock-based compensation 3,657 3,616 Changes in operating assets and liabilities: (Increase) decrease in trade and other accounts receivable ( 44,941 ) 11,665 Increase in other assets ( 26,544 ) ( 17,869 ) Increase in accounts payable 18,224 5,555 Increase (decrease) in other liabilities 6,903 ( 935 ) Increase in insurance claims 6,712 1,792 NET CASH PROVIDED BY OPERATING ACTIVITIES 62,836 142,343 INVESTING ACTIVITIES Sales and maturities of investments 84,755 59,791 Purchases of investments ( 86,838 ) ( 56,921 ) Purchases of operating property ( 4,383 ) ( 16,778 ) Proceeds from sales of operating property 5,690 3,431 NET CASH USED BY INVESTING ACTIVITIES ( 776 ) ( 10,477 ) FINANCING ACTIVITIES Decrease in cash overdraft ( 2,892 ) ( 3,183 ) Dividends paid ( 97,236 ) ( 95,012 ) Taxes paid in lieu of shares issued related to stock-based compensation plans ( 916 ) ( 3,260 ) Purchases of common stock ( 102,300 ) ( 56,515 ) Principal payments on finance lease obligations ( 16,883 ) ( 14,907 ) NET CASH USED BY FINANCING ACTIVITIES ( 220,227 ) ( 172,877 ) Effect of exchange rate changes on cash and cash equivalents 2,386 ( 1,970 ) Decrease in cash and cash equivalents ( 155,781 ) ( 42,981 ) Cash and cash equivalents at beginning of period 515,018 481,043 Cash and cash equivalents at end of period $ 359,237 $ 438,062 See accompanying notes to consolidated financial statements. 7 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Twenty-Six and Thirteen Weeks Ended June 28, 2025 and June 29, 2024 (Dollars in thousands) (Unaudited) Common Stock Additional Paid-In Retained Treasury Stock at Cost Accumulated Other Comprehensive Total Shares Amount Capital Earnings Shares Amount (Loss) Income Balance December 28, 2024 68,559,269 $ 686 $ 255,260 $ 2,859,916 33,243,196 $ ( 2,131,413 ) $ ( 12,010 ) $ 972,439 Net income 29,806 29,806 Dividends ($ 0.36 per share) ( 12,688 ) ( 12,688 ) Purchases of common stock 386,318 ( 60,945 ) ( 60,945 ) Issuance of stock related to stock-based compensation plans 22,503 ( 2 ) 6,081 ( 907 ) ( 909 ) Stock-based compensation 2,038 2,038 Other comprehensive income 1,014 1,014 Balance March 29, 2025 68,581,772 $ 686 $ 257,296 $ 2,877,034 33,635,595 $ ( 2,193,265 ) $ ( 10,996 ) $ 930,755 Net income 41,893 41,893 Dividends ($ 0.40 per share) ( 13,916 ) ( 13,916 ) Purchases of common stock 300,141 ( 42,350 ) ( 42,350 ) Issuance of stock related to stock-based compensation plans 7,646 146 ( 7 ) ( 7 ) Stock-based compensation 1,619 1,619 Other comprehensive income 3,832 3,832 Balance June 28, 2025 68,589,418 $ 686 $ 258,915 $ 2,905,011 33,935,882 $ ( 2,235,622 ) $ ( 7,164 ) $ 921,826 8 Table of Contents Common Stock Additional Paid-In Retained Treasury Stock at Cost Accumulated Other Comprehensive Total Shares Amount Capital Earnings Shares Amount (Loss) Income 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 47,096 47,096 Dividends ($ 0.33 per share) ( 11,802 ) ( 11,802 ) Issuance of stock related to stock-based compensation plans 50,229 ( 2,174 ) 4,864 ( 886 ) ( 3,060 ) Stock-based compensation 1,724 1,724 Other comprehensive income 30 30 Balance March 30, 2024 68,547,553 $ 685 $ 254,192 $ 2,818,939 32,785,515 $ ( 2,049,070 ) $ ( 6,835 ) $ 1,017,911 Net income 52,624 52,624 Dividends ($ 0.33 per share) ( 11,777 ) ( 11,777 ) Purchases of common stock 315,649 ( 56,995 ) ( 56,995 ) Issuance of stock related to stock-based compensation plans 6,374 1 1,112 ( 201 ) ( 200 ) Stock-based compensation 1,892 1,892 Other comprehensive loss ( 2,643 ) ( 2,643 ) Balance June 29, 2024 68,553,927 $ 686 $ 256,084 $ 2,859,786 33,102,276 $ ( 2,106,266 ) $ ( 9,478 ) $ 1,000,812 See accompanying notes to consolidated financial statements. 9 Table of Contents LANDSTAR SYSTEM, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all adjustments (all of a normal, recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation. (1) Significant Accounting Policies 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 twenty-six-week and thirteen-week periods ended June 28, 2025 and June 29, 2024 (dollars in thousands): Twenty-Six Weeks Ended Thirteen Weeks Ended Mode June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Truck – BCO Independent Contractors 38 % 38 % 38 % 38 % Truck – Truck Brokerage Carriers 54 % 52 % 54 % 52 % Rail intermodal 2 % 2 % 2 % 2 % Ocean and air cargo carriers 5 % 5 % 4 % 6 % Truck Equipment Type Van equipment $ 1,186,071 $ 1,247,244 $ 591,276 $ 618,940 Unsided/platform equipment $ 741,270 $ 723,995 $ 400,862 $ 380,950 Less-than-truckload $ 47,749 $ 53,707 $ 25,313 $ 28,090 Other truck transportation (1) $ 192,766 $ 149,675 $ 100,687 $ 77,709 (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. 10 Table of Contents (2) Share-based Payment Arrangements As of June 28, 2025, 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): Twenty-Six Weeks Ended Thirteen Weeks Ended June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Total cost of the Plans during the period $ 3,657 $ 3,616 $ 1,619 $ 1,892 Amount of related income tax benefit recognized during the period ( 792 ) ( 1,684 ) ( 344 ) ( 532 ) Net cost of the Plans during the period $ 2,865 $ 1,932 $ 1,275 $ 1,360 Included in income tax benefits recognized in the twenty-six-week periods ended June 28, 2025 and June 29, 2024 were tax deficiencies (excess tax benefits) from stock-based awards of $ 104,000 and ($ 799,000 ), respectively. As of June 28, 2025, there were 174,149 shares of the Company’s common stock reserved for issuance under the 2022 DSCP and 2,672,870 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 28, 2024 162,652 $ 144.12 Granted 53,408 $ 147.19 Forfeited ( 8,653 ) $ 158.98 Outstanding at June 28, 2025 207,407 $ 144.30 During the twenty-six-week period ended June 28, 2025, the Company granted RSUs with a performance condition and RSUs with a market condition, as further described below. Outstanding RSUs at both December 28, 2024 and June 28, 2025 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2024 Annual Report on Form 10-K. RSUs with a performance condition granted on January 31, 2025 and February 3, 2025 may vest on January 31 of 2028, 2029 and 2030 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2024 fiscal year. On January 31, 2025, the Company granted 6,050 RSUs that vest based on a market condition. These RSUs may vest based on the achievement of the target Company’s total shareholder return (“TSR”) compound annual growth rate, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary, and are eligible to vest 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. 11 Table of Contents The Company recognized approximately $ 1,253,000 and $ 1,315,000 of share-based compensation expense related to RSU awards in the twenty-six-week periods ended June 28, 2025 and June 29, 2024, respectively. As of June 28, 2025, there was a maximum of $ 52.5 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 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 28, 2024 47,519 $ 180.17 Granted 30,149 $ 159.69 Vested ( 23,429 ) $ 177.68 Forfeited ( 661 ) $ 173.64 Non-vested at June 28, 2025 53,578 $ 169.81 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 the 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 the recipient’s 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 June 28, 2025, there was $ 6,981,000 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 1.9 years. (3) Income Taxes The provisions for income taxes for the 2025 and 2024 twenty-six-week periods were based on estimated annual effective income tax rates of 24.3 % and 24.5 %, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2025 twenty-six-week period was 24.7 %. The effective income tax rate was higher than the statutory federal income tax rate of 21 % in the 2025 period primarily attributable to state taxes. 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. (4) Earnings Per Share Basic earnings per common share are based on the weighted average number of 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 dilutive effect of outstanding stock awards, if applicable. 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. 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 each of the 2025 and 2024 twenty-six-week periods. 12 Table of Contents (5) Additional Cash Flow Information During the 2025 twenty-six-week period, Landstar paid income taxes and interest of $ 33,972,000 and $ 2,816,000 , respectively. During the 2024 twenty-six-week period, Landstar paid income taxes and interest of $ 28,096,000 and $ 1,628,000 , respectively. Landstar did not acquire any operating property by entering into finance leases in the 2025 twenty-six-week period. Landstar acquired operating property by entering into finance leases in the amount of $ 17,144,000 in the 2024 twenty-six-week period. During the 2025 twenty-six-week period, the Company purchased its common stock at a total cost of $ 103,295 ,000, including $ 102,300 ,000 in cash purchases and accrued excise tax of $ 995,000 , which is included in other current liabilities in the consolidated balance sheet at June 28, 2025. During the 2024 twenty-six-week period, the Company purchased 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 was included in other current liabilities in the consolidated balance sheet at June 29, 2024. (6) Segment Information The Company reports the results of two operating segments: the transportation logistics segment and the insurance segment. 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. The following tables summarize information about the Company’s reportable business segments as of and for the twenty-six-week and thirteen-week periods ended June 28, 2025 and June 29, 2024 (in thousands): Twenty-Six Weeks Ended June 28, 2025 June 29, 2024 Transportation Logistics Insurance Total Transportation Logistics Insurance Total External revenue $ 2,334,432 $ 29,453 $ 2,363,885 $ 2,363,607 $ 32,441 $ 2,396,048 Internal revenue 53,093 53,093 53,346 53,346 Total revenue 2,334,432 82,546 2,416,978 2,363,607 85,787 2,449,394 Investment income 7,327 7,327 7,066 7,066 Purchased transportation 1,839,289 1,839,289 1,855,579 1,855,579 Commissions to agents 192,836 192,836 197,098 197,098 Other operating costs, net of gains on asset sales/dispositions 31,424 31,424 28,994 28,994 Insurance and claims 63,373 60,021 123,394 54,837 51,941 106,778 Selling, general and administrative 111,985 5,303 117,288 105,017 6,344 111,361 Depreciation and amortization 24,375 24,375 28,630 28,630 Operating income 71,150 24,549 95,699 93,452 34,568 128,020 Goodwill 41,399 41,399 41,607 41,607 Operating income 95,699 128,020 Interest and debt expense (income) (1) 539 ( 3,286 ) Income before income taxes 95,160 131,306 Thirteen Weeks Ended June 28, 2025 June 29, 2024 Transportation Logistics Insurance Total Transportation Logistics Insurance Total External revenue $ 1,196,687 $ 14,696 $ 1,211,383 $ 1,209,075 $ 15,930 $ 1,225,005 Internal revenue 41,514 41,514 41,277 41,277 Total revenue 1,196,687 56,210 1,252,897 1,209,075 57,207 1,266,282 Investment income 3,729 3,729 3,654 3,654 Purchased transportation 941,411 941,411 950,058 950,058 Commissions to agents 99,522 99,522 99,816 99,816 Other operating costs, net of gains on asset sales/dispositions 19,595 19,595 14,135 14,135 Insurance and claims 29,517 42,446 71,963 27,984 40,457 68,441 Selling, general and administrative 52,559 3,147 55,706 51,823 3,116 54,939 Depreciation and amortization 12,149 12,149 14,488 14,488 Operating income 41,934 14,346 56,280 50,771 17,288 68,059 Operating income 56,280 68,059 Interest and debt expense (income) (1) 698 ( 1,675 ) Income before income taxes 55,582 69,734 1 3 Table of Contents (1) Interest and debt expense (income) includes (i) interest income earned on cash balances held by the transportation logistics segment of $ 2,409 and $ 5,045 in the 2025 and 2024 twenty-six-week periods, respectively, and $ 741 and $ 2,545 in the 2025 and 2024 thirteen-week periods, respectively, and (ii) consolidated total interest expense of $ 2,948 and $ 1,759 in the 2025 and 2024 twenty-six-week periods, respectively, and $ 1,439 and $ 870 in the 2025 and 2024 thirteen-week periods, respectively. In the twenty-six-week periods ended June 28, 2025 and June 29, 2024, no single customer accounted for more than 10 % of the Company’s consolidated revenue. (7) Other Comprehensive Income The following table presents the components of and changes in accumulated other comprehensive (loss) income, net of related income taxes, as of and for the twenty-six-week period ended June 28, 2025 (in thousands): Unrealized Holding (Losses) Gains on Available-for-Sale Securities Foreign Currency Translation Total Balance as of December 28, 2024 $ ( 2,805 ) $ ( 9,205 ) $ ( 12,010 ) Other comprehensive income 1,546 3,300 4,846 Balance as of June 28, 2025 $ ( 1,259 ) $ ( 5,905 ) $ ( 7,164 ) 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 twenty-six-week period ended June 28, 2025. (8) Investments Investments include primarily investment-grade corporate bonds, asset-backed securities, commercial paper and U.S. treasury obligations 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 U.S. Treasury obligations and 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 $ 1,603,000 and $ 3,573,000 at June 28, 2025 and December 28, 2024, respectively. 1 4 Table of Contents The amortized cost and fair values of available-for-sale investments are as follows at June 28, 2025 and December 28, 2024 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value June 28, 2025 Money market investments $ 9,452 $ —   $ —   $ 9,452 Asset-backed securities 23,117 56 1,353 21,820 Corporate bonds, commercial paper and direct obligations of government agencies 104,467 727 1,031 104,163 U.S. Treasury obligations 12,748 —   2 12,746 Total $ 149,784 $ 783 $ 2,386 $ 148,181 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 For those available-for-sale investments with unrealized losses at June 28, 2025 and December 28, 2024, 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 June 28, 2025 Asset-backed securities $ 1,990 $ 8 $ 12,379 $ 1,345 $ 14,369 $ 1,353 Corporate bonds, commercial paper, and direct obligations of government agencies 8,966 8 37,112 1,023 46,078 1,031 U.S. Treasury obligations 6,868 2 —   —   6,868 2 Total $ 17,824 $ 18 $ 49,491 $ 2,368 $ 67,315 $ 2,386 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 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. (9) 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. 1 5 Table of Contents 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 twenty-six weeks ended June 28, 2025 were (in thousands): Finance leases: Amortization of right-of-use assets $ 9,131 Interest on lease liability 2,306 Total finance lease cost 11,437 Operating leases: Lease cost 1,986 Variable lease cost —   Sublease income ( 2,928 ) Total net operating lease income ( 942 ) Total net lease cost $ 10,495 1 6 Table of Contents A summary of the lease classification on the Company’s consolidated balance sheet as of June 28, 2025 is as follows (in thousands): Assets: Operating lease right-of-use assets Other assets $ 851 Finance lease assets Operating property, less accumulated depreciation and amortization 119,641 Total lease assets $ 120,492 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 June 28, 2025 (in thousands): Finance Leases Operating Leases 2025 Remainder $ 18,282 $ 253 2026 30,028 299 2027 19,217 265 2028 15,309 95 2029 10,920 —   Thereafter —   —   Total future minimum lease payments 93,756 912 Less amount representing interest ( 1.6 % to 6.4 %) 8,332 61 Present value of minimum lease payments $ 85,424 $ 851 Current maturities of long-term debt 30,747 Long-term debt, excluding current maturities 54,677 Other current liabilities 392 Deferred income taxes and other noncurrent liabilities 459 The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of June 28, 2025 were: Finance Leases Operating Leases Weighted average remaining lease term (years) 3.4 2.5 Weighted average discount rate 5.0 % 5.5 % (10) Debt Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of June 28, 2025 and December 28, 2024. 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 June 28, 2025, 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. 1 7 Table of Contents 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 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. (11) Commitments and Contingencies Short-term investments include $ 66,935,000 in current maturities of investments held by the Company’s insurance segment at June 28, 2025. The non-current portion of the bond portfolio of $ 81,246,000 is included in other assets. The short-term investments, together with $ 15,644,000 of non-current investments, provide collateral for the $ 74,321,000 of letters of credit issued to guarantee payment of insurance claims. As of June 28, 2025, Landstar also had $ 35,415,000 of additional letters of credit outstanding under the Company’s Credi t Agreement. On July 22, 2025, a jury trial (the “Trial”) began in state court in El Paso County, Texas, in connection with a tragic vehicular accident (the “Accident”) that occurred on December 31, 2021, near El Paso. The Accident involved a collision between a recreational vehicle, or RV, rented by a family and a tractor-trailer owned and operated by an independent trucking company licensed by the U.S. Department of Transportation. This independent motor carrier was not a Landstar BCO Independent Contractor, but rather was providing truck capacity to Landstar Ranger, Inc., a wholly-owned subsidiary of the Company (“Landstar Ranger”), under a non-exclusive truck brokerage contractual arrangement. The plaintiffs principally assert that Landstar Ranger acted as a motor carrier rather than as a broker with respect to the shipment involved in the Accident and, as a result, should be determined to be legally responsible for the operation of the independent, non-exclusive truck brokerage carrier involved in the Accident and the conduct of its driver. Based on knowledge of the facts, available insurance coverage and the analysis of the Company’s outside counsel, an immaterial accrual was included in insurance claims in the Company’s consolidated balance sheet as of June 28, 2025. No assurances can be provided as to the amount of the verdict that may be entered against Landstar Ranger at the conclusion of the Trial, which is expected to occur during the Company’s 2025 third quarter. Moreover, the Trial could result in a substantial verdict against Landstar Ranger and could have a material negative effect on the results of operations for the Company’s 2025 third quarter and fiscal year. The Company intends to preserve its right to appeal any such verdict. No assurances can be provided as to the probability of success with respect to any potential appeal of any such verdict or the ultimate outcome of any such appeal. The total cost associated with this matter, which may include post-judgment interest, bonding-related costs and legal and other professional fees, will depend on many factors. The ultimate financial impact, as well as the timing of the ultimate resolution of this matter, are difficult to predict and could have a material negative effect on the results of operations in the quarter or year in which such ultimate resolution occurs. The Company is involved in certain other 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) 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 fro m net u nfavorable development of prior year self-insured claims estimates on operating income, net income and basic and diluted earnings per share set forth in the consolidated statements of income for the twenty-six-week and thirteen-week periods ended June 28, 2025 and June 29, 2024 (in thousands, except per share amounts): Twenty-Six Weeks Ended Thirteen Weeks Ended June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Operating income $ 13,641 $ 2,116 $ 2,289 $ 989 Net income $ 10,272 $ 1,606 $ 1,726 $ 747 Basic and diluted earnings per share $ 0.29 $ 0.04 $ 0.05 $ 0.02 The unfavorable development of prior years’ claims during the twenty-six-week period ended June 28, 2025 was primarily attributable to elevated cargo loss experience as a result of fraud and theft in the supply chain and several specific commercial trucking claims. 18 Table of Contents (13) 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. Within the Company’s third party insurance arrangements providing excess coverage for commercial trucking liabilities, structured arrangements with third party reinsurers within a specific loss layer may include provisions that provide for a refund of premium in the event of favorable loss experience. During the 2025 second fiscal quarter, with respect to one such three-year commercial auto liability reinsurance arrangement relating to certain excess claims incurred between May 1, 2020 through April 30, 2023, the Company received $ 9,000,000 of an anticipated $ 12,000,000 cash payment from third party reinsurance providers in the form of a “no claims bonus” due to favorable loss experience with respect to claims incurred during the applicable policy period. The Company recorded this payment as a deferred gain within other current liabilities in the consolidated balance sheet as of June 28, 2025, until such time as all underlying claims with exposure under the applicable excess layer insurance arrangement are resolved and the gain can be recognized. On the first business day of the 2025 third fiscal quarter, the Company received the remaining $ 3,000,000 cash payment. (14) Recent Accounting Pronouncements 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. (15) Supply Chain Fraud Matter During the last week of the Company’s 2025 first quarter, the Company identified a supply chain fraud relating to the Company’s international freight forwarding operations. This supply chain fraud matter does not involve the Company’s core North American truckload services. In connection with this supply chain fraud matter, consolidated revenue and purchased transportation as reported in the Company’s fiscal year 2024, 2023 and 2022 financial results were each overstated by approximately 2 %, 1 %, and less than 0.5 %, respectively. As the overstated amount of revenue was approximately equal to the overstated amount of purchased transportation, the impact on each of operating income and net income, as reported, was less than 1 % in fiscal year 2024 and less than 0.2 % in fiscal years 2023 and 2022, respectively. The Company has performed a quantitative and qualitative analysis of the impact of this supply chain fraud matter in respect of the 2025 first quarter and the financial statements for each prior fiscal year period during which identified instances of fraud relating to this matter occurred. In connection therewith, the Company concluded that such impact was immaterial with respect to each such fiscal period. The Company’s financial results for the 2025 first quarter and for the twenty-six week period ended June 28, 2025 included a $ 4.8 million pre-tax expense, or $ 0.10 per basic and diluted share, relating to this matter. This expense reflects the total currently anticipated aggregate adverse financial impact to Landstar relating to the fraud, net of certain actual and anticipated recoveries and before taking into account the cost of legal and other professional fees as well as additional potential recoveries in the future. This expense was reflected in 2025 first quarter selling, general & administrative costs as an increase to the provision for customer bad debt expense, resulting in an increase in the allowance for doubtful accounts related to trade accounts receivable. In the 2025 second quarter, this expense was reclassified from the provision for customer bad debt expense within selling, general and administrative costs to the provision for contractor bad debt expense within other operating costs due to the finalization of certain agreements with the affected independent commission sales agency during the 2025 second fiscal quarter. As of the June 28, 2025 consolidated balance sheet, this amount was included in the allowance for doubtful accounts related to other receivables. 1 9