☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
INC ofINC.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | LSTR | NASDAQ |
Yes ☑
Yes ☑
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Yes
☒
38,370,508.
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EX – 31.1 Section 302 CEO Certification | |||||
EX – 31.2 Section 302 CFO Certification | |||||
EX – 32.1 Section 906 CEO Certification | |||||
EX – 32.2 Section 906 CFO Certification |
26, 2020.
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 249,741 | $ | 178,897 | ||||
Short-term investments | 45,687 | 66,560 | ||||||
Trade accounts receivable, less allowance of $6,163 and $5,161 | 546,826 | 463,102 | ||||||
Other receivables, including advances to independent contractors, less allowance of $6,306 and $5,523 | 18,704 | 18,567 | ||||||
Other current assets | 16,925 | 10,281 | ||||||
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Total current assets | 877,883 | 737,407 | ||||||
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Operating property, less accumulated depreciation and amortization of $210,018 and $190,374 | 261,465 | 272,843 | ||||||
Goodwill | 39,914 | 31,134 | ||||||
Other assets | 84,077 | 55,207 | ||||||
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Total assets | $ | 1,263,339 | $ | 1,096,591 | ||||
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LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
Cash overdraft | $ | 33,853 | $ | 36,251 | ||||
Accounts payable | 269,389 | 219,409 | ||||||
Current maturities of long-term debt | 40,610 | 45,047 | ||||||
Insurance claims | 34,211 | 26,121 | ||||||
Other current liabilities | 68,854 | 53,483 | ||||||
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Total current liabilities | 446,917 | 380,311 | ||||||
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Long-term debt, excluding current maturities | 76,792 | 93,257 | ||||||
Insurance claims | 32,804 | 26,883 | ||||||
Deferred income taxes and other noncurrent liabilities | 52,853 | 53,583 | ||||||
Equity | ||||||||
Landstar System, Inc. and subsidiary shareholders’ equity | ||||||||
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,715,290 and 67,585,675 shares | 677 | 676 | ||||||
Additional paid-in capital | 205,396 | 199,414 | ||||||
Retained earnings | 1,613,590 | 1,512,993 | ||||||
Cost of 25,749,493 and 25,747,541 shares of common stock in treasury | (1,167,600 | ) | (1,167,437 | ) | ||||
Accumulated other comprehensive loss | (1,708 | ) | (3,089 | ) | ||||
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Total Landstar System, Inc. and subsidiary shareholders’ equity | 650,355 | 542,557 | ||||||
Noncontrolling interest | 3,618 | — | ||||||
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Total equity | 653,973 | 542,557 | ||||||
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Total liabilities and equity | $ | 1,263,339 | $ | 1,096,591 | ||||
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March 28, 2020 | December 28, 2019 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 177,224 | $ | 319,515 | ||||
Short-term investments | 33,627 | 32,901 | ||||||
Trade accounts receivable, less allowance of $8,536 and $7,284 | 562,528 | 588,549 | ||||||
Other receivables, including advances to independent contractors, less allowance of $8,847 and $7,667 | 35,153 | 35,553 | ||||||
Other current assets | 7,624 | 21,370 | ||||||
Total current assets | 816,156 | 997,888 | ||||||
Operating property, less accumulated depreciation and amortization of $286,593 and $280,849 | 276,663 | 285,855 | ||||||
Goodwill | 37,182 | 38,508 | ||||||
Other assets | 106,432 | 105,460 | ||||||
Total assets | $ | 1,236,433 | $ | 1,427,711 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Cash overdraft | $ | 36,002 | $ | 53,878 | ||||
Accounts payable | 272,175 | 271,996 | ||||||
Current maturities of long-term debt | 39,944 | 42,632 | ||||||
Insurance claims | 50,773 | 44,532 | ||||||
Dividends payable | — | 78,947 | ||||||
Contractor escrow | 24,517 | 24,902 | ||||||
Other current liabilities | 41,420 | 36,017 | ||||||
Total current liabilities | 464,831 | 552,904 | ||||||
Long-term debt, excluding current maturities | 61,977 | 70,212 | ||||||
Insurance claims | 33,456 | 33,575 | ||||||
Deferred income taxes and other noncurrent liabilities | 49,074 | 49,551 | ||||||
Shareholders’ Equity | ||||||||
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,167,482 and 68,083,419 shares | 682 | 681 | ||||||
Additional paid-in capital | 224,973 | 226,123 | ||||||
Retained earnings | 1,995,018 | 1,962,161 | ||||||
Cost of 29,796,974 and 28,609,926 shares of common stock in treasury | (1,581,885 | ) | (1,465,284 | ) | ||||
Accumulated other comprehensive loss | (11,693 | ) | (2,212 | ) | ||||
Total shareholders’ equity | 627,095 | 721,469 | ||||||
Total liabilities and shareholders’ equity | $ | 1,236,433 | $ | 1,427,711 | ||||
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Revenue | $ | 2,594,772 | $ | 2,274,805 | $ | 943,430 | $ | 787,938 | ||||||||
Investment income | 1,733 | 1,100 | 711 | 357 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Purchased transportation | 1,989,938 | 1,730,745 | 726,827 | 601,002 | ||||||||||||
Commissions to agents | 210,678 | 189,075 | 76,598 | 65,144 | ||||||||||||
Other operating costs, net of gains on asset sales/dispositions | 22,497 | 21,484 | 8,097 | 7,492 | ||||||||||||
Insurance and claims | 46,333 | 42,795 | 17,927 | 12,488 | ||||||||||||
Selling, general and administrative | 123,179 | 106,211 | 43,995 | 34,692 | ||||||||||||
Depreciation and amortization | 29,961 | 26,109 | 10,130 | 9,016 | ||||||||||||
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Total costs and expenses | 2,422,586 | 2,116,419 | 883,574 | 729,834 | ||||||||||||
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Operating income | 173,919 | 159,486 | 60,567 | 58,461 | ||||||||||||
Interest and debt expense | 2,559 | 2,725 | 657 | 948 | ||||||||||||
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Income before income taxes | 171,360 | 156,761 | 59,910 | 57,513 | ||||||||||||
Income taxes | 59,047 | 58,985 | 17,490 | 21,235 | ||||||||||||
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Net income | 112,313 | 97,776 | 42,420 | 36,278 | ||||||||||||
Less: Net loss attributable to noncontrolling interest | (23 | ) | — | (23 | ) | — | ||||||||||
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Net income attributable to Landstar System, Inc. and subsidiary | $ | 112,336 | $ | 97,776 | $ | 42,443 | $ | 36,278 | ||||||||
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Earnings per common share attributable to Landstar System, Inc. and subsidiary | $ | 2.68 | $ | 2.32 | $ | 1.01 | $ | 0.86 | ||||||||
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Diluted earnings per share attributable to Landstar System, Inc. and subsidiary | $ | 2.67 | $ | 2.31 | $ | 1.01 | $ | 0.86 | ||||||||
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Average number of shares outstanding: | ||||||||||||||||
Earnings per common share | 41,924,000 | 42,223,000 | 41,957,000 | 42,039,000 | ||||||||||||
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Diluted earnings per share | 42,013,000 | 42,341,000 | 42,028,000 | 42,170,000 | ||||||||||||
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Dividends per common share | $ | 0.28 | $ | 0.25 | $ | 0.10 | $ | 0.09 | ||||||||
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Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Revenue | $ | 927,566 | $ | 1,033,000 | ||||
Investment income | 1,167 | 1,138 | ||||||
Costs and expenses: | ||||||||
Purchased transportation | 709,257 | 791,755 | ||||||
Commissions to agents | 75,376 | 85,671 | ||||||
Other operating costs, net of gains on asset sales/dispositions | 8,306 | 8,239 | ||||||
Insurance and claims | 24,957 | 14,993 | ||||||
Selling, general and administrative | 45,327 | 41,268 | ||||||
Depreciation and amortization | 11,505 | 11,316 | ||||||
Total costs and expenses | 874,728 | 953,242 | ||||||
Operating income | 54,005 | 80,896 | ||||||
Interest and debt expense | 952 | 805 | ||||||
Income before income taxes | 53,053 | 80,091 | ||||||
Income taxes | 12,158 | 16,791 | ||||||
Net income | 40,895 | 63,300 | ||||||
Less: Net loss attributable to noncontrolling interest | — | (17 | ) | |||||
Net income attributable to Landstar System, Inc. and subsidiary | $ | 40,895 | $ | 63,317 | ||||
Earnings per common share attributable to Landstar System, Inc. and subsidiary | $ | 1.04 | $ | 1.58 | ||||
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary | $ | 1.04 | $ | 1.58 | ||||
Average number of shares outstanding: | ||||||||
Earnings per common share | 39,254,000 | 40,161,000 | ||||||
Diluted earnings per share | 39,254,000 | 40,166,000 | ||||||
Dividends per common share | $ | 0.185 | $ | 0.165 | ||||
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Net income attributable to Landstar System, Inc. and subsidiary | $ | 112,336 | $ | 97,776 | $ | 42,443 | $ | 36,278 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized holding gains (losses) on available-for-sale investments, net of tax expense (benefit) of $136, $198, $47 and ($19) | 251 | 363 | 86 | (34 | ) | |||||||||||
Foreign currency translation gains (losses) | 1,130 | 656 | 545 | (181 | ) | |||||||||||
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Other comprehensive income (loss) | 1,381 | 1,019 | 631 | (215 | ) | |||||||||||
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Comprehensive income attributable to Landstar System, Inc. and subsidiary | $ | 113,717 | $ | 98,795 | $ | 43,074 | $ | 36,063 | ||||||||
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Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Net income attributable to Landstar System, Inc. and subsidiary | $ | 40,895 | $ | 63,317 | ||||
Other comprehensive (loss) income: | ||||||||
Unrealized holding (losses) gains on available-for-sale investments, net of tax (benefit) expense of $(432), and $272 | (1,579 | ) | 995 | |||||
Foreign currency translation (losses) gains | (7,902 | ) | 554 | |||||
Other comprehensive (loss) income | (9,481 | ) | 1,549 | |||||
Comprehensive income attributable to Landstar System, Inc. and subsidiary | $ | 31,414 | $ | 64,866 | ||||
Thirty Nine Weeks Ended | ||||||||
September 30, 2017 | September 24, 2016 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 112,313 | $ | 97,776 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of operating property and intangible assets | 29,961 | 26,109 | ||||||
Non-cash interest charges | 189 | 175 | ||||||
Provisions for losses on trade and other accounts receivable | 5,643 | 4,076 | ||||||
Gains on sales/disposals of operating property | (900 | ) | (3,221 | ) | ||||
Deferred income taxes, net | (708 | ) | 8,925 | |||||
Stock-based compensation | 3,660 | 2,718 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) decrease in trade and other accounts receivable | (89,504 | ) | 50,957 | |||||
(Increase) decrease in other assets | (8,671 | ) | 3,820 | |||||
Increase (decrease) in accounts payable | 53,290 | (25,074 | ) | |||||
Increase (decrease) in other liabilities | 12,980 | (5,436 | ) | |||||
Increase in insurance claims | 14,011 | 10,472 | ||||||
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NET CASH PROVIDED BY OPERATING ACTIVITIES | 132,264 | 171,297 | ||||||
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INVESTING ACTIVITIES | ||||||||
Sales and maturities of investments | 42,917 | 30,580 | ||||||
Purchases of investments | (44,423 | ) | (31,938 | ) | ||||
Purchases of operating property | (8,800 | ) | (17,833 | ) | ||||
Proceeds from sales of operating property | 3,594 | 8,622 | ||||||
Consideration paid for acquisitions | (8,199 | ) | — | |||||
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NET CASH USED BY INVESTING ACTIVITIES | (14,911 | ) | (10,569 | ) | ||||
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FINANCING ACTIVITIES | ||||||||
Decrease in cash overdraft | (2,398 | ) | (7,884 | ) | ||||
Dividends paid | (11,739 | ) | (10,572 | ) | ||||
Payment for debt issue costs | — | (1,048 | ) | |||||
Proceeds from exercises of stock options | 2,531 | 1,440 | ||||||
Taxes paid in lieu of shares issued related to stock-based compensation plans | (371 | ) | (1,715 | ) | ||||
Excess tax benefits from stock-based awards | — | 343 | ||||||
Purchases of common stock | — | (50,516 | ) | |||||
Principal payments on capital lease obligations | (35,662 | ) | (35,147 | ) | ||||
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NET CASH USED BY FINANCING ACTIVITIES | (47,639 | ) | (105,099 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents | 1,130 | 656 | ||||||
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Increase in cash and cash equivalents | 70,844 | 56,285 | ||||||
Cash and cash equivalents at beginning of period | 178,897 | 114,520 | ||||||
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Cash and cash equivalents at end of period | $ | 249,741 | $ | 170,805 | ||||
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Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 40,895 | $ | 63,300 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of operating property and intangible assets | 11,505 | 11,316 | ||||||
Non-cash interest charges | 63 | 63 | ||||||
Provisions for losses on trade and other accounts receivable | 4,122 | 2,150 | ||||||
Gains on sales/disposals of operating property | (858 | ) | (876 | ) | ||||
Deferred income taxes, net | 797 | 2,079 | ||||||
Stock-based compensation | 631 | 1,938 | ||||||
Changes in operating assets and liabilities: | ||||||||
Decrease in trade and other accounts receivable | 21,369 | 84,505 | ||||||
Decrease in other assets | 9,987 | 2,229 | ||||||
Increase (decrease) in accounts payable | 179 | (40,953 | ) | |||||
Increase (decrease) in other liabilities | 4,404 | (3,776 | ) | |||||
Increase (decrease) in insurance claims | 6,122 | (559 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 99,216 | 121,416 | ||||||
INVESTING ACTIVITIES | ||||||||
Net changes in other short-term investments | 131 | — | ||||||
Sales and maturities of investments | 7,963 | 25,739 | ||||||
Purchases of investments | (8,830 | ) | (26,707 | ) | ||||
Purchases of operating property | (5,799 | ) | (4,576 | ) | ||||
Proceeds from sales of operating property | 2,081 | 2,130 | ||||||
NET CASH USED BY INVESTING ACTIVITIES | (4,454 | ) | (3,414 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Decrease in cash overdraft | (17,876 | ) | (13,820 | ) | ||||
Dividends paid | (86,283 | ) | (6,629 | ) | ||||
Proceeds from exercises of stock options | 575 | 319 | ||||||
Taxes paid in lieu of shares issued related to stock-based compensation plans | (2,994 | ) | (7,923 | ) | ||||
Purchases of common stock | (115,962 | ) | (12,977 | ) | ||||
Principal payments on finance lease obligations | (10,923 | ) | (11,995 | ) | ||||
Purchase of noncontrolling interest | — | (600 | ) | |||||
NET CASH USED BY FINANCING ACTIVITIES | (233,463 | ) | (53,625 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (3,590 | ) | 512 | |||||
(Decrease) increase in cash and cash equivalents | (142,291 | ) | 64,889 | |||||
Cash and cash equivalents at beginning of period | 319,515 | 199,736 | ||||||
Cash and cash equivalents at end of period | $ | 177,224 | $ | 264,625 | ||||
Thirty Nine
2019
Landstar System, Inc. and Subsidiary Shareholders | ||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In | Retained | Treasury Stock at Cost | Accumulated Other Comprehensive | Non- controlling | |||||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Amount | (Loss) Income | Interests | Total | ||||||||||||||||||||||||||||
Balance December 31, 2016 | 67,585,675 | $ | 676 | $ | 199,414 | $ | 1,512,993 | 25,747,541 | $ | (1,167,437 | ) | $ | (3,089 | ) | — | $ | 542,557 | |||||||||||||||||||
Net income (loss) | 112,336 | (23 | ) | 112,313 | ||||||||||||||||||||||||||||||||
Dividends ($0.28 per share) | (11,739 | ) | (11,739 | ) | ||||||||||||||||||||||||||||||||
Issuance of stock related to stock-based compensation plans | 129,615 | 1 | 2,322 | 1,952 | (163 | ) | 2,160 | |||||||||||||||||||||||||||||
Stock-based compensation | 3,660 | 3,660 | ||||||||||||||||||||||||||||||||||
Other comprehensive income | 1,381 | 1,381 | ||||||||||||||||||||||||||||||||||
Acquired business and noncontrolling interests | 3,641 | 3,641 | ||||||||||||||||||||||||||||||||||
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Balance September 30, 2017 | 67,715,290 | $ | 677 | $ | 205,396 | $ | 1,613,590 | 25,749,493 | $ | (1,167,600 | ) | $ | (1,708 | ) | $ | 3,618 | $ | 653,973 | ||||||||||||||||||
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Common Stock | Additional Paid-In | Retained | Treasury Stock at Cost | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Amount | Loss | Total | |||||||||||||||||||||||||
Balance December 28, 2019 | 68,083,419 | $ | 681 | $ | 226,123 | $ | 1,962,161 | 28,609,926 | $ | (1,465,284 | ) | $ | (2,212 | ) | $ | 721,469 | ||||||||||||||||
Adoption of accounting standard (Note 1 1 ) | (702 | ) | (702 | ) | ||||||||||||||||||||||||||||
Net income | 40,895 | 40,895 | ||||||||||||||||||||||||||||||
Dividends ($0.185 per share) | (7,336 | ) | (7,336 | ) | ||||||||||||||||||||||||||||
Purchases of common stock | 1,178,970 | (115,962 | ) | (115,962 | ) | |||||||||||||||||||||||||||
Issuance of stock related to stock-based compensation plans | 84,063 | 1 | (1,781 | ) | 8,078 | (639 | ) | (2,419 | ) | |||||||||||||||||||||||
Stock-based compensation | 631 | 631 | ||||||||||||||||||||||||||||||
Other comprehensive loss | (9,481 | ) | (9,481 | ) | ||||||||||||||||||||||||||||
Balance March 28, 2020 | 68,167,482 | $ | 682 | $ | 224,973 | $ | 1,995,018 | 29,796,974 | $ | (1,581,885 | ) | $ | (11,693 | ) | $ | 627,095 | ||||||||||||||||
Landstar System, Inc. and Subsidiary Shareholders | ||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In | Retained | Treasury Stock at Cost | Accumulated Other Comprehensive | Non-controlling | |||||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Amount | (Loss) Income | Interests | Total | ||||||||||||||||||||||||||||
Balance December 29, 2018 | 67,870,962 | $ | 679 | $ | 226,852 | $ | 1,841,279 | 27,755,001 | $ | (1,376,111 | ) | $ | (5,875 | ) | $ | 2,309 | $ | 689,133 | ||||||||||||||||||
Net income (loss) | 63,317 | (17 | ) | 63,300 | ||||||||||||||||||||||||||||||||
Dividends ($0.165 per share) | (6,629 | ) | (6,629 | ) | ||||||||||||||||||||||||||||||||
Purchases of common stock | 124,481 | (12,977 | ) | (12,977 | ) | |||||||||||||||||||||||||||||||
Purchase of noncontrolling interests | 1,842 | (2,442 | ) | (600 | ) | |||||||||||||||||||||||||||||||
Issuance of stock related to stock-based compensation plans | 176,079 | 1 | (7,081 | ) | 5,199 | (524 | ) | (7,604 | ) | |||||||||||||||||||||||||||
Stock-based compensation | 1,938 | 1,938 | ||||||||||||||||||||||||||||||||||
Other comprehensive income | 1,549 | 150 | 1,699 | |||||||||||||||||||||||||||||||||
Balance March 30, 2019 | 68,047,041 | $ | 680 | $ | 223,551 | $ | 1,897,967 | 27,884,681 | $ | (1,389,612 | ) | $ | (4,326 | ) | $ | — | $ | 728,260 | ||||||||||||||||||
Landstar owns, through various subsidiaries, a controlling interest in Landstar Metro, S.A.P.I. de C.V.
(1) | Significant Accounting Policies |
(1) Acquired Business and Noncontrolling Interests
During 2017, the Company incorporated each of Landstar Metro and Landstar Servicios. On September 20, 2017, Landstar Metro acquired substantially all of the assets of the asset-light transportation logistics business of Fletes Avella, S.A. de C.V., a Mexican transportation logistics company. Cash consideration paid in the quarter for the acquisition was approximately $8,199,000. In addition, the Company assumed approximately $2,200,000 in liabilities consisting of additional contingent purchase price and associated indirect taxes. In connection with the acquisition, individuals affiliated with the seller subscribed in the aggregate for a 30% equity interest in each of Landstar Metro and Landstar Servicios. The asset acquisition by Landstar Metro was accounted for as a business combination in accordance with Accounting Standards Codification 805,Business Combinations (“ASC 805”). The resulting goodwill arising from the acquisition was approximately $8,800,000. With respect to this goodwill, 70% is expected to be deductible by the Company for U.S. income tax purposes, and following the purchase of the noncontrolling interests by the Company, up to 100% of this goodwill would be expected to be deductible by the Company. Pro forma financial information for prior periods is not presented as the Company does not believe the acquisition to be material to our consolidated results. The results of operations from Landstar Metro and Landstar Servicios are presented as part3% respectively, of the Company’s transportations logistics segment. It is not anticipated that Landstar Metroconsolidated revenue. Collectively, revenue generated by air and Landstar Servicios will have a material effect on the revenue and earningsocean cargo carriers represented approximately 3% of the Company forCompany’s consolidated revenue in the remainderthirteen-week period ended March 28, 2020. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended March 28, 2020 was $545,307,000 hauled via van equipment, $286,328,000 hauled via unsided/platform equipment and $22,941,000 of fiscal year 2017.less-than-truckload. During the thirty-nine-weekthirteen weeks ended March 30, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 43%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the thirteen-week period ended SeptemberMarch 30, 2017, the Company incurred approximately $1,000,000, or $0.01 per common share ($0.01 per diluted share),2019. Included inone-time costs related to the completion of the acquisition truck transportation revenue generated by BCO Independent Contractors and subscription of thenon-controlling interests.
As it relates to the noncontrolling interests of Landstar Metro and Landstar Servicios, the Company has the option to purchase, and the minority equityholders have the option to sell,Truck Brokerage Carriers during the thirteen-week period commencing on the third anniversaryended March 30, 2019 was $619,014,000 hauled via van equipment, $310,721,000 hauled via unsided/platform equipment and $23,376,000 of September 20, 2017, the closing date of the subscription by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. The noncontrolling interests are also subject to customary restrictions on transfer, including a right of first refusal in favor of the Company.
(2) Share-based Payment Arrangements
less-than-truckload.
(2) | Share-based Payment Arrangements |
Thirteen Weeks Ended Total cost of the Plans during the period Amount of related income tax benefit Net cost of the Plans during the period Thirty Nine Weeks Ended September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016 $ 3,660 $ 2,718 $ 1,423 $ 652
recognized during the period (2,492 ) (1,128 ) (678 ) (292 ) $ 1,168 $ 1,590 $ 745 $ 360
Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Total cost of the Plans during the period | $ | 631 | $ | 1,938 | ||||
Amount of related income tax benefit recognized during the period | (873 | ) | (3,062 | ) | ||||
Net cost of the Plans during the period | $ | (242 | ) | $ | (1,124 | ) | ||
Number of RSUs | Weighted Average Grant Date Fair Value | |||||||
Outstanding at December 31, 2016 | 378,238 | $ | 50.46 | |||||
Granted | 67,769 | $ | 76.85 | |||||
Forfeited | (58,779 | ) | $ | 46.00 | ||||
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| |||||||
Outstanding at September 30, 2017 | 387,228 | $ | 55.75 | |||||
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|
Number of RSUs | Weighted Average Grant Date Fair Value | |||||||
Outstanding at December 28, 2019 | 198,875 | $ | 84.37 | |||||
Granted | 59,230 | $ | 102.70 | |||||
Shares earned in excess of target (1) | 11,648 | $ | 77.00 | |||||
Vested shares, including shares earned in excess of target | (70,247 | ) | $ | 77.00 | ||||
Forfeited | (10,237 | ) | $ | 100.55 | ||||
Outstanding at March 28, 2020 | 189,269 | $ | 91.51 | |||||
(1) | Represents shares earned in excess of target under the February 2, 2017 RSU awards as actual results exceeded the target under the awards as a result of fiscal year 2019 results. |
Number of Options | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (000s) | |||||||||||||
Options outstanding at December 31, 2016 | 372,561 | $ | 48.24 | |||||||||||||
Exercised | (134,461 | ) | $ | 46.38 | ||||||||||||
Forfeited | (1,200 | ) | $ | 55.67 | ||||||||||||
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Options outstanding at September 30, 2017 | 236,900 | $ | 49.25 | 4.0 | $ | 11,940 | ||||||||||
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Options exercisable at September 30, 2017 | 217,000 | $ | 48.59 | 3.9 | $ | 11,081 | ||||||||||
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Number of Options | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (000s) | |||||||||||||
Options outstanding at December 28, 2019 | 44,467 | $ | 51.24 | |||||||||||||
Exercised | (15,767 | ) | $ | 47.50 | ||||||||||||
Options outstanding at March 28, 2020 | 28,700 | $ | 53.29 | 2.3 | $ | 1,128 | ||||||||||
Options exercisable at March 28, 2020 | 28,700 | $ | 53.29 | 2.3 | $ | 1,128 | ||||||||||
Number of Shares and Deferred Stock Units | Weighted Average Grant Date Fair Value | |||||||
Non-vested at December 31, 2016 | 28,409 | $ | 58.91 | |||||
Granted | 42,123 | $ | 84.26 | |||||
Vested | (16,227 | ) | $ | 61.50 | ||||
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| |||||||
Non-vested at September 30, 2017 | 54,305 | $ | 77.80 | |||||
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Number of Shares and Deferred Stock Units | Weighted Average Grant Date Fair Value | |||||||
Non-vested at December 28, 2019 | 64,808 | $ | 98.24 | |||||
Granted | 20,736 | $ | 111.73 | |||||
Vested | (19,878 | ) | $ | 97.95 | ||||
Forfeited | (2,351 | ) | $ | 106.34 | ||||
Non-vested at March 28, 2020 | 63,315 | $ | 102.45 | |||||
(3) Income Taxes
(3) | Income Taxes |
During the first fiscal quarter of 2017, the Company adopted ASU2016-09, as further described in footnote 11. As required by ASU2016-09, the Company recognized $868,000 of excess tax benefits on stock-based awards in its provision for income taxes in the thirty-nine-week period ended September 30, 2017.
(4) Earnings Per Share
(4) | Earnings Per Share |
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Average number of common shares outstanding | 41,924 | 42,223 | 41,957 | 42,039 | ||||||||||||
Incremental shares from assumed exercises of stock options | 89 | 118 | 71 | 131 | ||||||||||||
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Average number of common shares and common share equivalents outstanding | 42,013 | 42,341 | 42,028 | 42,170 | ||||||||||||
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Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Average number of common shares outstanding | 39,254 | 40,161 | ||||||
Incremental shares from assumed exercises of stock options | — | 5 | ||||||
Average number of common shares and common share equivalents outstanding | 39,254 | 40,166 | ||||||
(5) Additional Cash Flow Information
(5) | Additional Cash Flow Information |
(6) Segment Information
(6) | Segment Information |
Thirty Nine Weeks Ended | ||||||||||||||||||||||||
September 30, 2017 | September 24, 2016 | |||||||||||||||||||||||
Transportation Logistics | Insurance | Total | Transportation Logistics | Insurance | Total | |||||||||||||||||||
External revenue | $ | 2,559,847 | $ | 34,925 | $ | 2,594,772 | $ | 2,240,169 | $ | 34,636 | $ | 2,274,805 | ||||||||||||
Internal revenue | 29,773 | 29,773 | 28,890 | 28,890 | ||||||||||||||||||||
Investment income | 1,733 | 1,733 | 1,100 | 1,100 | ||||||||||||||||||||
Operating income | 148,693 | 25,226 | 173,919 | 133,342 | 26,144 | 159,486 | ||||||||||||||||||
Expenditures on long-lived assets | 8,800 | 8,800 | 17,833 | 17,833 | ||||||||||||||||||||
Goodwill | 39,914 | 39,914 | 31,134 | 31,134 |
Thirteen Weeks Ended | ||||||||||||||||||||||||
September 30, 2017 | September 24, 2016 | |||||||||||||||||||||||
Transportation Logistics | Insurance | Total | Transportation Logistics | Insurance | Total | |||||||||||||||||||
External revenue | $ | 931,692 | $ | 11,738 | $ | 943,430 | $ | 776,397 | $ | 11,541 | $ | 787,938 | ||||||||||||
Internal revenue | 7,335 | 7,335 | 7,229 | 7,229 | ||||||||||||||||||||
Investment income | 711 | 711 | 357 | 357 | ||||||||||||||||||||
Operating income | 54,181 | 6,386 | 60,567 | 47,541 | 10,920 | 58,461 | ||||||||||||||||||
Expenditures on long-lived assets | 2,172 | 2,172 | 8,878 | 8,878 |
Thirteen Weeks Ended | ||||||||||||||||||||||||
March 28, 2020 | March 30, 2019 | |||||||||||||||||||||||
Transportation Logistics | Insurance | Total | Transportation Logistics | Insurance | Total | |||||||||||||||||||
External revenue | $ | 913,884 | $ | 13,682 | $ | 927,566 | $ | 1,018,961 | $ | 14,039 | $ | 1,033,000 | ||||||||||||
Internal revenue | 9,079 | 9,079 | 9,614 | 9,614 | ||||||||||||||||||||
Investment income | 1,167 | 1,167 | 1,138 | 1,138 | ||||||||||||||||||||
Operating income | 55,044 | (1,039 | ) | 54,005 | 67,583 | 13,313 | 80,896 | |||||||||||||||||
Expenditures on long-lived assets | 5,799 | 5,799 | 4,576 | 4,576 | ||||||||||||||||||||
Goodwill | 37,182 | 37,182 | 38,343 | 38,343 |
(7) Other Comprehensive Income
(7) | Other Comprehensive Income |
Unrealized Holding (Losses) Gains on Available-for-Sale Securities | Foreign Currency Translation | Total | ||||||||||
Balance as of December 31, 2016 | $ | (71 | ) | $ | (3,018 | ) | $ | (3,089 | ) | |||
Other comprehensive income | 251 | 1,130 | 1,381 | |||||||||
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| |||||||
Balance as of September 30, 2017 | $ | 180 | $ | (1,888 | ) | $ | (1,708 | ) | ||||
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Unrealized Holding Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation | Total | ||||||||||
Balance as of December 28, 2019 | $ | 1,120 | $ | (3,332 | ) | $ | (2,212 | ) | ||||
Other comprehensive loss | (1,579 | ) | (7,902 | ) | (9,481 | ) | ||||||
Balance as of March 28, 2020 | $ | (459 | ) | $ | (11,234 | ) | $ | (11,693 | ) | |||
(8) Investments
March 28, 2020.
(8) | Investments |
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$278,000 at September 30, 2017, while unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $109,000$1,427,000 at December 31, 2016,28, 2019, respectively.
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
September 30, 2017 | ||||||||||||||||
Money market investments | $ | 16,823 | $ | — | $ | — | $ | 16,823 | ||||||||
Asset-backed securities | 3,497 | 2 | 5 | 3,494 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 84,885 | 373 | 91 | 85,167 | ||||||||||||
U.S. Treasury obligations | 5,496 | — | 1 | 5,495 | ||||||||||||
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Total | $ | 110,701 | $ | 375 | $ | 97 | $ | 110,979 | ||||||||
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December 31, 2016 | ||||||||||||||||
Money market investments | $ | 12,395 | $ | — | $ | — | $ | 12,395 | ||||||||
Asset-backed securities | 4,027 | 3 | 19 | 4,011 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 70,069 | 150 | 239 | 69,980 | ||||||||||||
U.S. Treasury obligations | 23,037 | 2 | 6 | 23,033 | ||||||||||||
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Total | $ | 109,528 | $ | 155 | $ | 264 | $ | 109,419 | ||||||||
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Gross | Gross | |||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
March 28, 2020 | ||||||||||||||||
Money market investments | $ | 15,815 | $ | — | $ | — | $ | 15,815 | ||||||||
Asset-backed securities | 571 | — | 48 | 523 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 98,287 | 1,038 | 1,710 | 97,615 | ||||||||||||
U.S. Treasury obligations | 2,336 | 136 | — | 2,472 | ||||||||||||
Total | $ | 117,009 | $ | 1,174 | $ | 1,758 | $ | 116,425 | ||||||||
December 28, 2019 | ||||||||||||||||
Money market investments | $ | 15,691 | $ | — | $ | — | $ | 15,691 | ||||||||
Asset-backed securities | 572 | — | 1 | 571 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 97,583 | 1,465 | 44 | 99,004 | ||||||||||||
U.S. Treasury obligations | 2,335 | 12 | 5 | 2,342 | ||||||||||||
Total | $ | 116,181 | $ | 1,477 | $ | 50 | $ | 117,608 | ||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
September 30, 2017 | ||||||||||||||||||||||||
Asset-backed securities | $ | — | $ | — | $ | 2,311 | $ | 5 | $ | 2,311 | $ | 5 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 15,429 | 21 | 13,215 | 70 | 28,644 | 91 | ||||||||||||||||||
U.S. Treasury obligations | 5,495 | 1 | — | — | 5,495 | 1 | ||||||||||||||||||
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Total | $ | 20,924 | $ | 22 | $ | 15,526 | $ | 75 | $ | 36,450 | $ | 97 | ||||||||||||
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December 31, 2016 | ||||||||||||||||||||||||
Asset-backed securities | $ | 1,363 | $ | 6 | $ | 2,314 | $ | 13 | $ | 3,677 | $ | 19 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 28,809 | 195 | 1,367 | 44 | 30,176 | 239 | ||||||||||||||||||
U.S. Treasury obligations | 12,734 | 6 | — | — | 12,734 | 6 | ||||||||||||||||||
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Total | $ | 42,906 | $ | 207 | $ | 3,681 | $ | 57 | $ | 46,587 | $ | 264 | ||||||||||||
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Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
March 28, 2020 | ||||||||||||||||||||||||
Asset-backed securities | $ | 523 | $ | 48 | $ | — | $ | — | $ | 523 | $ | 48 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 49,348 | 1,710 | — | — | 49,348 | 1,710 | ||||||||||||||||||
Total | $ | 49,871 | $ | 1,758 | $ | — | $ | — | $ | 49,871 | $ | 1,758 | ||||||||||||
December 28, 2019 | ||||||||||||||||||||||||
Asset-backed securities | $ | 571 | $ | 1 | $ | — | $ | — | $ | 571 | $ | 1 | ||||||||||||
Corporate bonds and direct obligations of government agencies | 8,728 | 41 | 4,260 | 3 | 12,988 | 44 | ||||||||||||||||||
U.S. Treasury obligations | 1,226 | 5 | — | — | 1,226 | 5 | ||||||||||||||||||
Total | $ | 10,525 | $ | 47 | $ | 4,260 | $ | 3 | $ | 14,785 | $ | 50 | ||||||||||||
(9)Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the
Finance leases: | ||||
Amortization of right-of-use assets | $ | 6,151 | ||
Interest on lease liability | 889 | |||
Total finance lease cost | 7,040 | |||
Operating leases: | ||||
Lease cost | 837 | |||
Variable lease cost | — | |||
Sublease income | (1,229 | ) | ||
Total operating lease (income)/cost | (392 | ) | ||
Total lease cost | $ | 6,648 | ||
Assets: | ||||||
Operating lease right-of-use assets | Other assets | $ | 2,554 | |||
Finance lease assets | Operating property, less accumulated depreciation and amortization | 150,273 | ||||
Total lease assets | $ | 152,827 | ||||
Liabilities: |
Finance Leases | Operating Leases | |||||||
2020 Remainder | $ | 33,862 | $ | 517 | ||||
2021 | 31,278 | 637 | ||||||
2022 | 22,123 | 639 | ||||||
2023 | 15,100 | 510 | ||||||
2024 | 5,156 | 433 | ||||||
Thereafter | — | 54 | ||||||
Total future minimum lease payments | 107,519 | 2,790 | ||||||
Less amount representing interest (2.1% to 4.4%) | 5,598 | 236 | ||||||
Present value of minimum lease payments | $ | 101,921 | $ | 2,554 | ||||
Current maturities of long-term debt | 39,944 | |||||||
Long-term debt, excluding current maturities | 61,977 | |||||||
Other current liabilities | 657 | |||||||
Deferred income taxes and other noncurrent liabilities | 1,897 |
Finance Leases | Operating Leases | |||||||
Weighted average remaining lease term (years) | 3.2 | 4.4 | ||||||
Weighted average discount rate | 3.2 | % | 4.0 | % |
During 2017, the Company incorporated each of Landstar Metro and Landstar Servicios. On September 20, 2017, Landstar Metro acquired substantially all of the assets of the asset-light transportation logistics business of Fletes Avella, S.A. de C.V., a Mexican transportation logistics company. In connection with the acquisition, individuals affiliated with the seller subscribed in the aggregate for a 30% equity interest in each of Landstar Metro and Landstar Servicios. As it relates to the noncontrolling interests of Landstar Metro and Landstar Servicios, the Company has the option to purchase, and the minority equityholders have the option to sell, during the period commencing on the third anniversary of September 20, 2017, the closing date of the subscription by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. The noncontrolling interests are also subject to customary restrictions on transfer, including a right of first refusal in favor of the Company.
(10) 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.
The following table summarizes the effect of the increase (decrease) in the cost of insurance claims resulting from unfavorable (favorable) development of prior year self-insured claims estimates on operating income, net income attributable to Landstar System, Inc. and subsidiary and earnings per share attributable to Landstar System, Inc. and subsidiary amounts in the consolidated statements of income for the thirty-nine-week and thirteen-week periods ended September 30, 2017 and September 24, 2016 (in thousands, except per share amounts):
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Operating income | $ | 1,327 | $ | 698 | $ | 1,124 | $ | (2,118 | ) | |||||||
Net income attributable to Landstar System, Inc. and subsidiary | 825 | 431 | 699 | (1,309 | ) | |||||||||||
Earnings per share attributable to Landstar System, Inc. and subsidiary | $ | 0.02 | $ | 0.01 | $ | 0.02 | $ | (0.03 | ) | |||||||
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary | $ | 0.02 | $ | 0.01 | $ | 0.02 | $ | (0.03 | ) |
In February 2016, the FASB issued Accounting Standards Update2016-02 –Leases (“ASU2016-02”). ASU2016-02 requires a company to recognize aright-of-use asset and lease liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. Companies are required to use a modified retrospective transition approach to recognize leases at the beginning of the earliest period presented. ASU2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods therein, and early adoption is permitted. ASU2016-02 is not expected to have a material impact on the Company’s financial statements.
In March 2016, the FASB issued Accounting Standards Update2016-09 –Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”), which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods therein. As such, the Company adopted ASU2016-09 during the first quarter of 2017 with an effective date of January 1, 2017. As a result of the adoption, the Company recognized excess tax benefits in the consolidated statement of income of $868,000 for the thirty-nine-week period ended September 30, 2017. Prior period amounts have not been reclassified.
described in Item 1A “Risk Factors”, in this report or in Landstar’s other Securities and Exchange Commission filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements.
During 2017, the Company incorporated March 28, 2020.
thirteen-week period ended March 28, 2020.
2020, the Company will pay an extra $50 to both the BCO hauling the load and the Landstar agent dispatching the load. The Company subsequently announced the extension of this program through May 15, 2020. The Company estimates that Landstar BCOs will deliver between 60,000 and 70,000 loads in April 2020 and 30,000 to 35,000 from May 1, 2020 through May 15, 2020. In addition, if a Landstar BCO tests positive for
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Revenue generated through (in thousands): | ||||||||||||||||
Truck transportation | ||||||||||||||||
Truckload: | ||||||||||||||||
Van equipment | $ | 1,529,402 | $ | 1,351,980 | $ | 550,484 | $ | 465,785 | ||||||||
Unsided/platform equipment | 825,194 | 700,369 | 304,536 | 248,939 | ||||||||||||
Less-than-truckload | 65,397 | 54,066 | 22,598 | 18,139 | ||||||||||||
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Total truck transportation | 2,419,993 | 2,106,415 | 877,618 | 732,863 | ||||||||||||
Rail intermodal | 68,570 | 76,987 | 24,213 | 24,650 | ||||||||||||
Ocean and air cargo carriers | 70,708 | 56,500 | 29,523 | 18,790 | ||||||||||||
Other (1) | 35,501 | 34,903 | 12,076 | 11,635 | ||||||||||||
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$ | 2,594,772 | $ | 2,274,805 | $ | 943,430 | $ | 787,938 | |||||||||
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Revenue on loads hauled via BCO Independent Contractors included in total truck transportation | $ | 1,211,564 | $ | 1,086,848 | $ | 435,479 | $ | 379,196 | ||||||||
Number of loads: | ||||||||||||||||
Truck transportation | ||||||||||||||||
Truckload: | ||||||||||||||||
Van equipment | 942,894 | 847,208 | 329,329 | 291,089 | ||||||||||||
Unsided/platform equipment | 362,936 | 331,226 | 126,509 | 112,192 | ||||||||||||
Less-than-truckload | 98,740 | 84,316 | 34,232 | 28,589 | ||||||||||||
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Total truck transportation | 1,404,570 | 1,262,750 | 490,070 | 431,870 | ||||||||||||
Rail intermodal | 32,040 | 36,120 | 11,080 | 11,940 | ||||||||||||
Ocean and air cargo carriers | 18,150 | 14,910 | 6,210 | 5,130 | ||||||||||||
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1,454,760 | 1,313,780 | 507,360 | 448,940 | |||||||||||||
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Loads hauled via BCO Independent Contractors included in total truck transportation Revenue per load: Truck transportation Truckload: Van equipment Unsided/platform equipment Less-than-truckload Total truck transportation Rail intermodal Ocean and air cargo carriers Revenue per load on loads hauled via BCO Independent Contractors 686,830 630,880 232,970 216,220 $ 1,622 $ 1,596 $ 1,672 $ 1,600 2,274 2,114 2,407 2,219 662 641 660 634 1,723 1,668 1,791 1,697 2,140 2,131 2,185 2,064 3,896 3,789 4,754 3,663 $ 1,764 $ 1,723 $ 1,869 $ 1,754
Revenue by capacity type (as a % of total revenue): | ||||||||||||||||
Truck capacity providers: | ||||||||||||||||
BCO Independent Contractors | 47 | % | 48 | % | 46 | % | 48 | % | ||||||||
Truck Brokerage Carriers | 47 | % | 45 | % | 47 | % | 45 | % | ||||||||
Rail intermodal | 3 | % | 3 | % | 3 | % | 3 | % | ||||||||
Ocean and air cargo carriers | 3 | % | 2 | % | 3 | % | 2 | % | ||||||||
Other | 1 | % | 2 | % | 1 | % | 1 | % |
Thirteen Weeks Ended | ||||||||
March 28, | March 30, | |||||||
2020 | 2019 | |||||||
Revenue generated through (in thousands): | ||||||||
Truck transportation | ||||||||
Truckload: | ||||||||
Van equipment | $ | 545,307 | $ | 619,014 | ||||
Unsided/platform equipment | 286,328 | 310,721 | ||||||
Less-than-truckload | 22,941 | 23,376 | ||||||
Total truck transportation | 854,576 | 953,111 | ||||||
Rail intermodal | 28,129 | 30,015 | ||||||
Ocean and air cargo carriers | 26,587 | 30,669 | ||||||
Other (1) | 18,274 | 19,205 | ||||||
$ | 927,566 | $ | 1,033,000 | |||||
Revenue on loads hauled via BCO Independent Contractors included in total truck transportation | $ | 431,279 | $ | 449,308 | ||||
Number of loads: | ||||||||
Truck transportation | ||||||||
Truckload: | ||||||||
Van equipment | 315,345 | �� | 341,821 | |||||
Unsided/platform equipment | 120,589 | 125,170 | ||||||
Less-than-truckload | 38,356 | 35,309 | ||||||
Total truck transportation | 474,290 | 502,300 | ||||||
Rail intermodal | 11,540 | 12,460 | ||||||
Ocean and air cargo carriers | 7,070 | 7,510 | ||||||
492,900 | 522,270 | |||||||
Loads hauled via BCO Independent Contractors included in total truck transportation | 233,400 | 234,850 | ||||||
Revenue per load: | ||||||||
Truck transportation | ||||||||
Truckload: | ||||||||
Van equipment | $ | 1,729 | $ | 1,811 | ||||
Unsided/platform equipment | 2,374 | 2,482 | ||||||
Less-than-truckload | 598 | 662 | ||||||
Total truck transportation | 1,802 | 1,897 | ||||||
Rail intermodal | 2,438 | 2,409 | ||||||
Ocean and air cargo carriers | 3,761 | 4,084 | ||||||
Revenue per load on loads hauled via BCO Independent Contractors | $ | 1,848 | $ | 1,913 | ||||
Revenue by capacity type (as a % of total revenue): | ||||||||
Truck capacity providers: | ||||||||
BCO Independent Contractors | 46 | % | 43 | % | ||||
Truck Brokerage Carriers | 46 | % | 49 | % | ||||
Rail intermodal | 3 | % | 3 | % | ||||
Ocean and air cargo carriers | 3 | % | 3 | % | ||||
Other | 2 | % | 2 | % |
(1) | Includes primarily reinsurance premium revenue generated by the insurance |
September 30, 2017 | September 24, 2016 | |||||||
BCO Independent Contractors | 8,939 | 8,889 | ||||||
Truck Brokerage Carriers: | ||||||||
Approved and active(1) | 32,925 | 30,860 | ||||||
Other approved | 15,138 | 15,691 | ||||||
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48,063 | 46,551 | |||||||
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Total available truck capacity providers | 57,002 | 55,440 | ||||||
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Trucks provided by BCO Independent Contractors | 9,548 | 9,510 |
March 28, 2020 | March 30, 2019 | |||||||
BCO Independent Contractors | 9,444 | 9,911 | ||||||
Truck Brokerage Carriers: | ||||||||
Approved and active (1) | 38,879 | 40,404 | ||||||
Other approved | 16,657 | 18,659 | ||||||
55,536 | 59,063 | |||||||
Total available truck capacity providers | 64,980 | 68,974 | ||||||
Trucks provided by BCO Independent Contractors | 10,112 | 10,637 |
(1) | Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end. |
of revenue also increases or decreases in relation to the availability of truck brokerage capacity and with changes in the price of fuel on revenue generated by Truck Brokerage Carriers. The Company passes 100% of fuel surcharges billed to customers for freight hauled by BCO Independent Contractors to its BCO Independent Contractors. These fuel surcharges are excluded from revenue and the cost of purchased transportation. Purchased transportation costs are recognized uponover the completion of freight delivery.
transit period as the performance obligation to the customer is completed.
transit period as the performance obligation to the customer is completed.
Thirty Nine Weeks Ended | Thirteen Weeks Ended | |||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Purchased transportation | 76.7 | 76.1 | 77.0 | 76.3 | ||||||||||||
Commissions to agents | 8.1 | 8.3 | 8.1 | 8.3 | ||||||||||||
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Gross profit margin | 15.2 | % | 15.6 | % | 14.8 | % | 15.5 | % | ||||||||
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Gross profit | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Investment income | 0.4 | 0.3 | 0.5 | 0.3 | ||||||||||||
Indirect costs and expenses: | ||||||||||||||||
Other operating costs, net of gains on asset sales/dispositions | 5.7 | 6.1 | 5.8 | 6.2 | ||||||||||||
Insurance and claims | 11.8 | 12.1 | 12.8 | 10.3 | ||||||||||||
Selling, general and administrative | 31.3 | 29.9 | 31.4 | 28.5 | ||||||||||||
Depreciation and amortization | 7.6 | 7.4 | 7.2 | 7.4 | ||||||||||||
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Total costs and expenses | 56.3 | 55.4 | 57.2 | 52.3 | ||||||||||||
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Operating margin | 44.1 | % | 44.9 | % | 43.3 | % | 48.0 | % | ||||||||
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Thirteen Weeks Ended | ||||||||
March 28, 2020 | March 30, 2019 | |||||||
Revenue | 100.0 | % | 100.0 | % | ||||
Purchased transportation | 76.5 | 76.6 | ||||||
Commissions to agents | 8.1 | 8.3 | ||||||
Gross profit margin | 15.4 | % | 15.1 | % | ||||
Gross profit | 100.0 | % | 100.0 | % | ||||
Investment income | 0.8 | 0.7 | ||||||
Indirect costs and expenses: | ||||||||
Other operating costs, net of gains on asset sales/dispositions | 5.8 | 5.3 | ||||||
Insurance and claims | 17.5 | 9.6 | ||||||
Selling, general and administrative | 31.7 | 26.5 | ||||||
Depreciation and amortization | 8.0 | 7.3 | ||||||
Total costs and expenses | 63.0 | 48.7 | ||||||
Operating margin | 37.8 | % | 52.0 | % | ||||
THIRTY NINE
MARCH 30, 2019
The decrease in revenue from reinsurance premiums was primarily attributable to the decrease in the average number of trucks provided by BCO Independent Contractors in the 2020 thirteen-week period compared to the 2019 thirteen-week period.
Investment income was $1,733,000 and $1,100,000 in the 2017 and 2016 thirty-nine-week periods, respectively. The increase in investment income was primarily due to higher average rates of return on investments during the 2017 period and a higher average investment balance held by the insurance segment in the 2017 period.
Other operating costs increased $1,013,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 5.7% of gross profit in the 2017 period compared to 6.1% of gross profit in the 2016 period. The increase in other operating costs compared to the prior year was primarily due to decreased gains on sales of used trailing equipment and an increased provision for contractor bad debt, partially offset by decreased trailing equipment maintenance costs due to a lower average age of the Company-owned trailer fleet. The decrease in other operating costs as a percentage of gross profit was caused by the effect of increased gross profit, partially offset by the increase in other operating costs.
Insurance and claims increased $3,538,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 11.8% of gross profit in the 2017 period compared to 12.1% of gross profit in the 2016 period. The increase in insurance and claims expense compared to prior year was due to increased severity of current year claims in the 2017 period, increased net unfavorable development of prior years’ claims in the 2017 period and increased insurance premiums on the Company’s commercial trucking liability coverage. Unfavorable development of prior years’ claims was $1,327,000 and $698,000 in the 2017 and 2016 thirty-nine-week periods, respectively. The decrease in insurance and claims as a percent of gross profit was caused by the effect of increased gross profit, partially offset by the increase in insurance and claims costs.
Selling, general and administrative costs increased $16,968,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 31.3% of gross profit in the 2017 period compared to 29.9% of gross profit in the 2016 period. The increase in selling, general and administrative costs compared to prior year was attributable to a $13,634,000 provision for incentive compensation in the 2017 thirty-nine-week period compared to an $875,000 provision in the 2016 thirty-nine-week period and increased wages. The increase in selling, general and administrative costs as a percent of gross profit was due primarily to the increase in selling, general and administrative costs, partially offset by the effect of increased gross profit.
Depreciation and amortization increased $3,852,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 7.6% of gross profit in the 2017 period compared to 7.4% of gross profit in the 2016 period. The increase in depreciation and amortization expenses was due to an increased number of owned trailers in response to increased customer demand for the Company’s drop and hook services and a lower average age of the trailer fleet during the 2017 thirty-nine-week period as compared to the 2016 thirty-nine-week period. The increase in depreciation and amortization as a percentage of gross profit was primarily due to the increased depreciation costs, partially offset by the effect of increased gross profit.
Interest and debt expense in the 2017 thirty-nine-week period decreased $166,000 compared to the 2016 thirty-nine-week period.
The provisions for income taxes for the 2017 and 2016 thirty-nine-week periods were based on estimated annual effective income tax rates of 37.8% and 38.1%, respectively, adjusted for discrete events, such as benefits resulting from disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options. The effective income tax rates for the 2017 and 2016 thirty-nine-week periods were 34.5% and 37.6%, respectively. The effective income tax rate for the 2017 thirty-nine week period was lower than the 35% statutory federal income tax rate primarily as a result of federal domestic production activities deductions and research and development credits recognized as discrete items during the thirteen-week period ended September 30, 2017, partially offset by the effect of state taxes and the meals and entertainment exclusion. The effective income tax rate for the 2016 thirty-nine-week period was higher than the statutory federal income tax rate primarily as a result of state taxes and the meals and entertainment exclusion. The effective income tax rate in the 2017 thirty-nine-week period of 34.5% was less than the 37.8% estimated annual effective income tax rate primarily as a result of federal domestic production activities deductions and research and development credits recognized during 2017 of approximately $5,200,000, excess tax benefits recognized on stock-based compensation arrangements resulting from the Company’s adoption of ASU2016-09 during 2017 and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through the exercises of incentive stock options in the 2017 period. The effective income tax rate in the 2016 thirty-nine-week period of 37.6% was less than the 38.1% estimated annual effective income tax rate primarily due to certain federal income tax credits realized in the 2016 period and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options in the 2016 period.
The net loss attributable to noncontrolling interest of $23,000 in the 2017 thirty-nine-week period represents the noncontrolling investors’ 30% share of the net loss incurred by Landstar Metro and Landstar Servicios.
Net income attributable to the Company was $112,336,000, or $2.68 per common share ($2.67 per diluted share), in the 2017 thirty-nine-week period. Net income attributable to the Company was $97,776,000, or $2.32 per common share ($2.31 per diluted share), in the 2016 thirty-nine-week period.
THIRTEEN WEEKS ENDED SEPTEMBER 30, 2017 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 24, 2016
Revenue for the 2017 thirteen-week period was $943,430,000, an increase of $155,492,000, or 20%, compared to the 2016 thirteen-week period. Transportation revenue increased $155,295,000, or 20%. The increase in transportation revenue was attributable to an increased number of loads hauled of approximately 13% and increased revenue per load of approximately 6%. The Company recognized approximately $23,000,000 in revenue, on approximately 16,000 loads, in the 2017 third quarter in support of local, state and federal relief efforts related to recent hurricanes that impacted Texas, the southeastern United States and Puerto Rico. Reinsurance premiums were $11,738,000 and $11,541,000 for the 2017 and 2016 thirteen-week periods, respectively.
Truck transportation revenue generated by third party capacity providers for the 2017 thirteen-week period was $877,618,000, representing 93% of total revenue, an increase of $144,755,000, or 20%, compared to the 2016 thirteen-week period. The number of loads hauled by third party truck capacity providers increased approximately 13% in the 2017 thirteen-week period compared to the 2016 thirteen-week period, and revenue per load increased approximately 6% compared to the 2016 thirteen-week period. The
increase in the number of loads hauled via truck compared to the 2016 thirteen-week period was due to a broad-based increase in demand across many customers and industries for Landstar’s various truck service offerings and the impact of approximately 16,000 loads hauled in support of disaster relief efforts. The increase in revenue per load on loads hauled via truck of 6% was due to a tighter freight environment experienced during the 2017 thirteen-week period, which resulted in less readily available truck capacity as compared to the 2016 thirteen-week period, and the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers. The freight environment during the 2017 thirteen-week period was also impacted by the hurricanes experienced in Texas and the southeastern United States, which further tightened capacity in the latter part of the quarter. Revenue per load on loads hauled via unsided/platform equipment increased 8%, revenue per load on loads hauled via van equipment increased 5% and revenue per load on less-than-truckload loadings increased 4% as compared to the 2016 thirteen-week period. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $16,171,000 and $14,016,000 in the 2017 and 2016 thirteen-week periods, respectively.
Transportation revenue generated by multimode capacity providers for the thirteen-week period ended September 30, 2017 was $53,736,000, or 6% of total revenue, an increase of $10,296,000, or 24%, compared to the 2016 thirteen-week period, primarily attributable to approximately $9,000,000 of revenue generated in support of disaster relief efforts. Revenue per load on revenue generated by multimode capacity providers increased approximately 22% compared to the prior year period and the number of loads hauled by multimode capacity providers in the 2017 thirteen-week period increased approximately 1% compared to the 2016 thirteen-week period. The increase in revenue per load of 22% was primarily attributable to the impact of air loadings provided in support of disaster relief efforts during the 2017 thirteen-week period. The increase in loads hauled by multimode capacity providers was primarily due to a 21% increase in loads hauled by air and ocean cargo carriers, where the demand was broad-based across many customers, partially offset by a 7% decrease in loads hauled by rail intermodal loads, entirely attributable to decreased loadings at one specific agency.
Purchased transportation was 77.0% and 76.3% of revenue in the 2017 and 2016 thirteen-week periods, respectively. The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation paid to Truck Brokerage Carriers and a decrease in the percentage of revenue contributed by BCO Independent Contractors, which typically has a lower rate of purchased transportation than revenue generated by Truck Brokerage Carriers. Commissions to agents were 8.1% and 8.3% of revenue in the 2017 and 20162019 thirteen-week periods, respectively. The decrease in commissions to agents as a percentage of revenue was primarily attributable to a decreased net revenue margin on revenue generated by Truck Brokerage Carriers.
profit.
depreciation.
receivables and decreased net income.
Equity28, 2019.
2020 thirteen-week period, partially offset by net income.
As it relates to thenon-controlling interests of Landstar Metro and Landstar Servicios, the Company has the option to purchase, and the minority equityholders have the option to sell, during the period commencing on the third anniversary of September 20, 2017, the closing date of the subscriptionlate March caused by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. The noncontrolling interests are also subjectCOVID-19 pandemic, management continues to customary restrictions on transfer, including a right of first refusal in favor of the Company.
Management believesbelieve that cash flow from operations combined with the Company’s borrowing capacity under the Credit Agreement will be adequate to meet Landstar’s debt service requirements, fund continued growth, both internal and through acquisitions, pay dividends, complete the authorized share purchase program and meet working capital needs.
The Company remains committed to returning cash to stockholders over time, primarily through share repurchases, as demonstrated during the thirteen-week period ended March 28, 2020; however, the Company intends to be prudent in its current approach to share repurchases as the depth and duration of the COVID-19 pandemic crisis become clearer.
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. Historically, management’s estimates for uncollectible receivables have been materially correct. Although management believes the amount of the allowance for both trade and other receivables at September 30, 2017 is appropriate, a prolonged period of low or no economic growth may adversely affect the collection of these receivables. In addition, liquidity concerns and/or unanticipated bankruptcy proceedings at any of the Company’s larger customers in which the Company is carrying a significant receivable could result in an increase in the provision for uncollectible receivables and have a significant impact on the Company’s results of operations in a given quarter or year. However, it is not expected that an uncollectible accounts receivable resulting from an individual customer would have a significant impact on the Company’s financial condition. Conversely, a more robust economic environment or the recovery of a previously provided for uncollectible receivable from an individual customer may result in the realization of some portion of the estimated uncollectible receivables.
The Company utilizes certain income tax planning strategies to reduce its overall cost of income taxes. If the Company were to be subject to an audit, it is possible that certain strategies might be disallowed resulting in an increased liability for income taxes. Certain of these tax planning strategies result in a level of uncertainty as to whether the related tax positions taken by the Company would result in a recognizable benefit. The Company has provided for its estimated exposure attributable to such tax positions due to the corresponding level of uncertainty with respect to the amount of income tax benefit that may ultimately be realized. Management believes that the provision for liabilities resulting from the uncertainty in certain income tax positions is appropriate. To date, the Company has not experienced an examination by governmental revenue authorities that would lead management to believe that the Company’s past provisions for exposures related to the uncertainty of such income tax positions are not appropriate.
March 28, 2020.
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. The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage. A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations. For a discussion identifying additional risk factors and other important factors that could cause actual results to differ materially from those anticipated, see the discussions under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form31, 201628, 2019 and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements” in this Quarterly Report on Form
quarter:
Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares That May Yet Be Purchased Under the Programs | ||||||||||||
December 28, 2019 | 3,000,000 | |||||||||||||||
December 29, 2019 – January 25, 2020 | — | $ | — | — | 3,000,000 | |||||||||||
January 26, 2020 – February 22, 2020 | 27,206 | 109.39 | 27,206 | 2,972,794 | ||||||||||||
February 23, 2020 – March 28, 2020 | 1,151,764 | 98.10 | 1,151,764 | 1,821,030 | ||||||||||||
Total | 1,178,970 | $ | 98.36 | 1,178,970 | ||||||||||||
During the thirty-nine-week period ended September 30, 2017, Landstar paid dividends as follows:
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the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio, as defined in the Credit Agreement, would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter.
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Exhibit No. | Description | |||
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(31) | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
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31.1* | ||||
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31.2* | ||||
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(32) | Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
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32.1** | ||||
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32.2** | ||||
101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
* | Filed herewith |
** | Furnished herewith |
LANDSTAR SYSTEM, INC. | ||||||||
Date: | /s/ James B. Gattoni | |||||||
James B. Gattoni | ||||||||
President and
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Chief Executive Officer | ||||||||
Date: | /s/ L. Kevin Stout | |||||||
L. Kevin Stout | ||||||||
Vice President and Chief | ||||||||
Financial Officer |
32