~~UNITED STATES~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~Washington, D.C. 20549~~

~~FORM~~

~~10-Q~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 24, 2022~~July 1, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

0-21238

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)


Delaware		06-1313069
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		~~(I.R.S. Employer~~ Identification No.)

13410 Sutton Park Drive South, Jacksonville, Florida

(Address of principal executive offices)

32224

(Zip Code)

(904)

398-9400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LSTR	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes

☒

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files):

Yes

☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

Yes ☐

☒

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of the close of business on ~~October 17, 2022~~July 24, 2023 was ~~35,925,265.~~35,946,472.

Table of Contents

Index

PART I – Financial Information


Item 1.Financial Statements (unaudited)

Consolidated Balance Sheets as of ~~September 24, 2022~~July 1, 2023 and December ~~25, 2021~~31, 2022			Page 4

Consolidated Statements of Income for the ~~Thirty Nine~~Twenty Six and Thirteen Weeks Ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~			Page 5

Consolidated Statements of Comprehensive Income for the ~~Thirty Nine~~Twenty Six and Thirteen Weeks Ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~			Page 6

Consolidated Statements of Cash Flows for the ~~Thirty Nine~~Twenty Six Weeks Ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~			Page 7

Consolidated Statements of Changes in Shareholders’ Equity for the ~~Thirty Nine~~Twenty Six and Thirteen Weeks Ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~			Page 8

Notes to Consolidated Financial Statements			Page 10

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations			Page 1918

Item 3.Quantitative and Qualitative Disclosures About Market Risk			Page 31

Item 4. Controls and Procedures			Page 32

PART II – Other Information

Item 4. 1.~~Controls and Procedures~~ Legal Proceedings			Page 3332

~~PART II –~~ ~~Other Information~~

Item 1.1A. ~~Legal Proceedings~~Risk Factors			Page 32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			Page 33

Item ~~1A.~~6. ~~Risk Factors~~Exhibits			Page 33

~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~Signatures			Page 3435


~~Item 6.~~ ~~Exhibits~~			~~Page 34~~

~~Signatures~~			~~Page 36~~
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

Table of Contents

PART I -

FINANCIAL INFORMATION

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 ~~thirty nine~~twenty six weeks ended ~~September 24, 2022~~July 1, 2023 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December ~~31, 2022.~~30, 2023.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s ~~2021~~2022 Annual Report on Form

10-K.

Table of Contents

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)

September 24,

2022

December 25,

2021

ASSETS
Current Assets


Cash and cash equivalents
   $ 177,796 $ 215,522
Short-term investments
   50,637 35,778
Trade accounts receivable, less allowance of $10,464 and $7,074
   1,133,681 1,154,314
Other receivables, including advances to independent contractors, less allowance of $9,877 and $8,125
   87,241 101,124
Other current assets
   35,493 16,162


Total current assets
   1,484,848 1,522,900


Operating property, less accumulated depreciation and amortization of $383,458 and $344,099
   321,585 317,386
Goodwill
   41,004 40,768
Other assets
   141,103 164,411


Total assets
   $ 1,988,540 $ 2,045,465


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Cash overdraft
   $ 97,686 $ 116,478
Accounts payable
   644,054 604,130
Current maturities of long-term debt
   37,375 36,561
Insurance claims
   58,131 46,896
Dividends payable
   —   75,387
Other current liabilities
   104,272 130,531


Total current liabilities
   941,518 1,009,983


Long-term debt, excluding current maturities
   72,095 75,243
Insurance claims
   55,765 49,509
Deferred income taxes and other noncurrent liabilities
   45,989 48,720

Shareholders’ Equity

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,380,565 and 68,232,975 shares
   684 682
Additional
paid-in
capital
   255,486 255,148
Retained earnings
   2,625,290 2,317,184
Cost of 32,455,300 and 30,539,235 shares of common stock in treasury
   (1,992,886 ) (1,705,601 )
Accumulated other comprehensive loss
   (15,401 ) (5,403 )


Total shareholders’ equity
   873,173 862,010


Total liabilities and shareholders’ equity
   $ 1,988,540 $ 2,045,465


	July 1, 2023			December 31, 2022
ASSETS
Current Assets
Cash and cash equivalents	$	360,528		$	339,581
Short-term investments		58,574			53,955
Trade accounts receivable, less allowance of $12,715 and $12,121		848,839			967,793
Other receivables, including advances to independent contractors, less allowance of $13,673 and $10,579		64,079			56,235
Other current assets		41,667			21,826

Total current assets		1,373,687			1,439,390

Operating property, less accumulated depreciation and amortization of $417,364 and $393,274		297,066			314,990
Goodwill		42,166			41,220
Other assets		124,846			136,279

Total assets	$	1,837,765		$	1,931,879

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Cash overdraft	$	57,216		$	92,953
Accounts payable		478,688			527,372
Current maturities of long-term debt		31,560			36,175
Insurance claims		45,160			50,836
Dividends payable		—			71,854
Other current liabilities		80,202			98,945

Total current liabilities		692,826			878,135

Long-term debt, excluding current maturities		53,149			67,225
Insurance claims		57,240			58,268
Deferred income taxes and other noncurrent liabilities		40,989			41,030
Shareholders’ Equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,497,324 and 68,382,310 shares		685			684
Additional paid-in capital		253,486			258,487
Retained earnings		2,759,128			2,635,960
Cost of 32,550,852 and 32,455,300 shares of common stock in treasury		(2,009,327	)		(1,992,886	)
Accumulated other comprehensive loss		(10,411	)		(15,024	)

Total shareholders’ equity		993,561			887,221

Total liabilities and shareholders’ equity	$	1,837,765		$	1,931,879

See accompanying notes to consolidated financial statements.

Table of Contents

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

Thirty Nine Weeks Ended

Thirteen Weeks Ended


September 24,

2022

September 25,

2021

September 24,

2022

September 25,

2021

Revenue
   $ 5,761,795    $ 4,592,551    $ 1,816,132    $ 1,734,299
Investment income
   2,023    2,138    716    706
Costs and expenses:

Purchased transportation
   4,512,341    3,583,197    1,416,323    1,356,671
Commissions to agents
   465,759    356,997    154,125    135,295
Other operating costs, net of gains on asset sales/dispositions
   34,878    27,117    13,356    10,572
Insurance and claims
   96,265    75,198    31,445    29,569
Selling, general and administrative
   165,199    158,720    53,519    59,198
Depreciation and amortization
   42,627    36,532    14,582    12,288








Total costs and expenses
   5,317,069    4,237,761    1,683,350    1,603,593








Operating income
   446,749    356,928    133,498    131,412
Interest and debt expense
   3,275    2,974    1,047    965








Income before income taxes
   443,474    353,954    132,451    130,447
Income taxes
   105,862    85,745    32,233    31,772








Net income
   $ 337,612    $ 268,209    $ 100,218    $ 98,675








Diluted earnings per share
   $ 9.15    $ 7.00    $ 2.76    $ 2.58








Average diluted shares outstanding
   36,886,000    38,342,000    36,334,000    38,218,000








Dividends per common share
   $ 0.80    $ 0.67    $ 0.30    $ 0.25


	Twenty Six Weeks Ended					Thirteen Weeks Ended
	July 1, 2023			June 25, 2022		July 1, 2023			June 25, 2022
Revenue	$	2,809,532		$	3,945,663	$	1,373,857		$	1,975,064
Investment income		3,852			1,307		2,484			586
Costs and expenses:
Purchased transportation		2,154,491			3,096,018		1,053,197			1,545,688
Commissions to agents		248,153			311,634		122,478			161,856
Other operating costs, net of gains on asset sales/dispositions		25,840			21,522		13,462			10,381
Insurance and claims		57,431			64,820		29,784			34,052
Selling, general and administrative		108,096			111,680		54,529			58,967
Depreciation and amortization		30,139			28,045		14,941			14,288

Total costs and expenses		2,624,150			3,633,719		1,288,391			1,825,232

Operating income		189,234			313,251		87,950			150,418
Interest and debt (income) expense		(1,033	)		2,228		(307	)		1,105

Income before income taxes		190,267			311,023		88,257			149,313
Income taxes		45,513			73,629		21,698			36,758

Net income	$	144,754		$	237,394		66,559		$	112,555

Diluted earnings per share	$	4.03		$	6.39	$	1.85		$	3.05

Average diluted shares outstanding		35,962,000			37,162,000		35,941,000			36,905,000

Dividends per common share	$	0.60		$	0.50	$	0.30		$	0.25

See accompanying notes to consolidated financial statements.

Table of Contents

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

Thirty Nine Weeks Ended

Thirteen Weeks Ended


September 24,

2022

September 25,

2021

September 24,

2022

September 25,

2021

Net income
   $ 337,612 $ 268,209 $ 100,218 $ 98,675
Other comprehensive (loss) income:

Unrealized holding losses on
available-for-sale
investments, net of tax benefit of $2,461, $347, $436 and $104
   (8,987 ) (1,260 ) (1,596 ) (377 )
Foreign currency translation (losses) gains
   (1,011 ) 320 (1,484 ) (710 )


Other comprehensive loss
   (9,998 ) (940 ) (3,080 ) (1,087 )


Comprehensive income
   $ 327,614 $ 267,269 $ 97,138 $ 97,588


	Twenty Six Weeks Ended					Thirteen Weeks Ended
	July 1, 2023		June 25, 2022			July 1, 2023			June 25, 2022
Net income	$	144,754	$	237,394		$	66,559		$	112,555
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale investments, net of tax expense (benefit) of $214, ($2,025), ($92) and ($604)		782		(7,391	)		(338	)		(2,204	)
Foreign currency translation gains (losses)		3,831		473			2,120			(802	)

Other comprehensive income (loss)		4,613		(6,918	)		1,782			(3,006	)

Comprehensive income	$	149,367	$	230,476		$	68,341		$	109,549

See accompanying notes to consolidated financial statements.

Table of Contents

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Twenty Six Weeks Ended
	July 1, 2023			June 25, 2022
OPERATING ACTIVITIES
Net income	$	144,754		$	237,394
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,139			28,045
Non-cash interest charges		132			224
Provisions for losses on trade and other accounts receivable		7,268			6,359
Gains on sales/disposals of operating property		(2,884	)		(1,213	)
Deferred income taxes, net		(1,178	)		5,999
Stock-based compensation		3,126			5,810
Changes in operating assets and liabilities:
Decrease (increase) in trade and other accounts receivable		103,842			(82,233	)
Increase in other assets		(20,258	)		(42,742	)
(Decrease) increase in accounts payable		(48,684	)		66,404
Decrease in other liabilities		(17,820	)		(25,265	)
(Decrease) increase in insurance claims		(6,704	)		10,869

NET CASH PROVIDED BY OPERATING ACTIVITIES		191,733			209,651

INVESTING ACTIVITIES
Sales and maturities of investments		63,602			21,918
Purchases of investments		(55,507	)		(23,883	)
Purchases of operating property		(12,631	)		(7,467	)
Proceeds from sales of operating property		4,582			2,358
Purchase of non-marketable securities		—			(4,999	)

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES		46			(12,073	)

FINANCING ACTIVITIES
Decrease in cash overdraft		(35,737	)		(2,875	)
Dividends paid		(93,440	)		(93,968	)
Proceeds from exercises of stock options		28			56
Taxes paid in lieu of shares issued related to stock-based compensation plans		(9,162	)		(10,269	)
Purchases of common stock		(15,433	)		(212,632	)
Principal payments on finance lease obligations		(18,691	)		(19,051	)

NET CASH USED BY FINANCING ACTIVITIES		(172,435	)		(338,739	)

Effect of exchange rate changes on cash and cash equivalents		1,603			(190	)

Increase (decrease) in cash, cash equivalents and restricted cash		20,947			(141,351	)
Cash, cash equivalents and restricted cash at beginning of period		339,581			219,571

Cash and cash equivalents at end of period	$	360,528		$	78,220

See accompanying notes to consolidated financial statements.

Table of Contents

~~LANDSTAR SYSTEM, INC. AND SUBSIDIARY~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Dollars in thousands)~~

~~(Unaudited)~~

Thirty Nine Weeks Ended


September 24,

2022

September 25,

2021

OPERATING ACTIVITIES

Net income
   $ 337,612 $ 268,209
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   42,627 36,532
Non-cash
interest charges
   290 336
Provisions for losses on trade and other accounts receivable
   8,346 3,884
Gains on sales/disposals of operating property
   (1,290 ) (1,259 )
Deferred income taxes, net
   (2,597 ) 4,948
Stock-based compensation
   9,409 18,717
Changes in operating assets and liabilities:

Decrease (increase) in trade and other accounts receivable
   26,170 (224,503 )
Increase in other assets
   (17,669 ) (3,822 )
Increase in accounts payable
   39,924 167,880
(Decrease) increase in other liabilities
   (23,932 ) 22,837
Increase (decrease) in insurance claims
   17,491 (76,769 )


NET CASH PROVIDED BY OPERATING ACTIVITIES
   436,381 216,990


INVESTING ACTIVITIES

Sales and maturities of investments    27,568 25,521
Purchases of investments    (30,490 ) (77,649 )
Purchases of operating property    (21,096 ) (18,561 )
Proceeds from sales of operating property    2,669 2,047
Purchase of
non-marketable
securities
   (4,999 ) —


NET CASH USED BY INVESTING ACTIVITIES
   (26,348 ) (68,642 )


FINANCING ACTIVITIES

(Decrease) increase in cash overdraft    (18,792 ) 14,210
Dividends paid    (104,893 ) (102,463 )
Payment for debt issue costs    (1,080 ) —
Proceeds from exercises of stock options    56 134
Taxes paid in lieu of shares issued related to stock-based compensation plans    (10,427 ) (2,342 )
Purchases of common stock    (285,983 ) (50,230 )
Principal payments on finance lease obligations    (29,075 ) (26,513 )
Payment of deferred consideration    —   (168 )


NET CASH USED BY FINANCING ACTIVITIES
   (450,194 ) (167,372 )


Effect of exchange rate changes on cash and cash equivalents
   (1,614 ) 234


Decrease in cash, cash equivalents and restricted cash
   (41,775 ) (18,790 )
Cash, cash equivalents and restricted cash at beginning of period
   219,571 249,354


Cash and cash equivalents at end of period
   $ 177,796 $ 230,564

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

~~Thirty Nine~~Twenty Six and Thirteen Weeks Ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~

(Dollars in thousands)

(Unaudited)


	Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive						Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive			Total
	Shares		Amount		Capital			Earnings			Shares		Amount			Loss			Total			Shares		Amount		Capital			Earnings			Shares		Amount			(Loss) Income			Total
Balance December 31, 2022																							68,382,310	$	684	$	258,487		$	2,635,960			32,455,300	$	(1,992,886	)	$	(15,024	)	$	887,221
Net income																														78,195											78,195
Dividends ($0.30 per share)																														(10,806	)										(10,806	)
Purchases of common stock																																	89,661		(15,433	)					(15,433	)
Issuance of stock related to stock-based compensation plans																							101,653		1		(7,201	)					5,891		(1,008	)					(8,208	)
Stock-based compensation																											1,852														1,852
Other comprehensive income																																						2,831			2,831


Balance December 25, 2021		68,232,975	$	682	$	255,148		$	2,317,184			30,539,235	$	(1,705,601	)	$	(5,403	)	$	862,010
Net income									124,839											124,839
Dividends ($0.25 per share)									(9,324	)										(9,324	)
Purchases of common stock												693,550		(109,332	)					(109,332	)
Issuance of stock related to stock- based compensation plans		137,176		2		(8,913	)					10,033		(1,216	)					(10,127	)
Stock-based compensation						1,995														1,995
Other comprehensive loss																	(3,912	)		(3,912	)

Balance March 26, 2022		68,370,151	$	684	$	248,230		$	2,432,699			31,242,818	$	(1,816,149	)	$	(9,315	)	$	856,149

Net income									112,555											112,555
Dividends ($0.25 per share)									(9,257	)										(9,257	)
Purchases of common stock												703,211		(103,300	)					(103,300	)
Issuance of stock related to stock- based compensation plans		6,783		—		—						587		(86	)					(86	)
Stock-based compensation						3,815														3,815
Other comprehensive loss																	(3,006	)		(3,006	)

Balance June 25, 2022		68,376,934	$	684	$	252,045		$	2,535,997			31,946,616	$	(1,919,535	)	$	(12,321	)	$	856,870
Balance April 1, 2023																							68,483,963	$	685	$	253,138		$	2,703,349			32,550,852	$	(2,009,327	)	$	(12,193	)	$	935,652

Net income									100,218											100,218										66,559											66,559
Dividends ($0.30 per share)									(10,925	)										(10,925	)									(10,780	)										(10,780	)
Purchases of common stock												504,065		(73,351	)					(73,351	)
Issuance of stock related to stock- based compensation plans		3,631		—		(158	)					4,619		—						(158	)
Issuance of stock related to stock-based compensation plans																							13,361				(926	)													(926	)
Stock-based compensation						3,599														3,599							1,274														1,274
Other comprehensive loss																	(3,080	)		(3,080	)
Other comprehensive income																																						1,782			1,782

Balance September 24, 2022		68,380,565	$	684	$	255,486		$	2,625,290			32,455,300	$	(1,992,886	)	$	(15,401	)	$	873,173
Balance July 1, 2023																							68,497,324	$	685	$	253,486		$	2,759,128			32,550,852	$	(2,009,327	)	$	(10,411	)	$	993,561

Table of Contents

Common Stock

Additional
Paid-In

Retained

Treasury Stock at Cost

Accumulated
Other
Comprehensive


Shares

Amount

Capital

Earnings

Shares

Amount

(Loss) Income

Total

Balance December 26, 2020
   68,183,702    $ 682    $ 228,875 $ 2,046,238 29,797,639    $ (1,581,961 ) $ (1,999 ) $ 691,835
Net income
         77,240    77,240
Dividends ($0.21 per share)
         (8,067 )    (8,067 )
Issuance of stock related to stock-based compensation plans
   28,594    —      (307 ) 6,087    (857 ) (1,164 )
Stock-based compensation
         4,029    4,029
Other comprehensive loss
            (954 ) (954 )








Balance March 27, 2021
   68,212,296    $ 682    $ 232,597 $ 2,115,411 29,803,726    $ (1,582,818 ) $ (2,953 ) $ 762,919








Net income
         92,294    92,294
Dividends ($0.21 per share)
         (8,068 )    (8,068 )
Purchases of common stock
         150,000    (23,837 ) (23,837 )
Issuance of stock related to stock-based compensation plans
   17,584    —      (1,039 ) 355    (61 ) (1,100 )
Stock-based compensation
         6,864    6,864
Other comprehensive income
            1,101 1,101








Balance June 26, 2021
   68,229,880    $ 682    $ 238,422 $ 2,199,637 29,954,081    $ (1,606,716 ) $ (1,852 ) $ 830,173








Net income
         98,675    98,675
Dividends ($0.25 per share)
         (9,558 )    (9,558 )
Purchases of common stock
         167,046    (26,393 ) (26,393 )
Issuance of stock related to stock-based compensation plans
   1,133    —      56 1,300    —   56
Stock-based compensation
         7,824    7,824
Other comprehensive loss
            (1,087 ) (1,087 )








Balance September 25, 2021
   68,231,013    $ 682    $ 246,302 $ 2,288,754 30,122,427    $ (1,633,109 ) $ (2,939 ) $ 899,690


	Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive
	Shares		Amount		Capital			Earnings			Shares		Amount			Loss			Total
Balance December 25, 2021		68,232,975	$	682	$	255,148		$	2,317,184			30,539,235	$	(1,705,601	)	$	(5,403	)	$	862,010
Net income									124,839											124,839
Dividends ($0.25 per share)									(9,324	)										(9,324	)
Purchases of common stock												693,550		(109,332	)					(109,332	)
Issuance of stock related to stock-based compensation plans		137,176		2		(8,913	)					10,033		(1,216	)					(10,127	)
Stock-based compensation						1,995														1,995
Other comprehensive loss																	(3,912	)		(3,912	)

Balance March 26, 2022		68,370,151	$	684	$	248,230		$	2,432,699			31,242,818	$	(1,816,149	)	$	(9,315	)	$	856,149

Net income									112,555											112,555
Dividends ($0.25 per share)									(9,257	)										(9,257	)
Purchases of common stock												703,211		(103,300	)					(103,300	)
Issuance of stock related to stock-based compensation plans		6,783		—		—						587		(86	)					(86	)
Stock-based compensation						3,815														3,815
Other comprehensive loss																	(3,006	)		(3,006	)

Balance June 25, 2022		68,376,934	$	684	$	252,045		$	2,535,997			31,946,616	$	(1,919,535	)	$	(12,321	)	$	856,870

See accompanying notes to consolidated financial statements.

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 ~~thirty-nine-week~~

twenty-six-week

and thirteen-week periods ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~ (dollars in thousands):

Thirty Nine Weeks Ended

Thirteen Weeks Ended

Mode

September 24,

2022

September 25,

2021

September 24,

2022

September 25,

2021

Truck – BCO Independent Contractors
   35 % 41 % 35 % 40 %
Truck – Truck Brokerage Carriers
   53 % 50 % 53 % 51 %
Rail intermodal
   2 % 3 % 2 % 3 %
Ocean and air cargo carriers
   8 % 4 % 9 % 5 %

Truck Equipment Type

Van equipment
   $ 3,022,297 $ 2,502,025 $ 914,154 $ 918,115
Unsided/platform equipment
   $ 1,336,956 $ 1,112,358 $ 453,924 $ 422,979
Less-than-truckload
   $ 105,994 $ 85,551 $ 35,343 $ 30,819
Other truck transportation (1)
   $ 632,001 $ 518,472 $ 195,345 $ 208,817


	Twenty Six Weeks Ended						Thirteen Weeks Ended
Mode	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Truck – BCO Independent Contractors		37	%		36	%		38	%		35	%
Truck – Truck Brokerage Carriers		55	%		53	%		53	%		54	%
Rail intermodal		2	%		2	%		2	%		2	%
Ocean and air cargo carriers		5	%		8	%		5	%		8	%
Truck Equipment Type
Van equipment	$	1,458,124		$	2,108,143		$	703,041		$	1,026,938
Unsided/platform equipment	$	772,336		$	883,032		$	394,772		$	474,274
Less-than-truckload	$	62,673		$	70,651		$	31,115		$	36,931
Other truck transportation (1)	$	277,520		$	436,656		$	118,017		$	209,055

(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.~~consignee

Table of Contents

~~(2)~~

(2) Share-based Payment Arrangements

As of ~~September 24, 2022,~~July 1, 2023, 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”), which replaced the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated, the “2013 DSCP”). ~~At the Company’s 2022 Annual Meeting of Stockholders held on May 11, 2022, the Company’s stockholders approved the 2022 DSCP.~~ The provisions of the 2022 DSCP are substantially similar to the provisions of the 2013 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. ~~No further grants can be made under the 2013 DSCP, including 56,502 shares of the Company’s common stock previously reserved for issuance, but not issued, under the 2013 DSCP.~~ The 2011 EIP, 2013 DSCP 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):

Thirty Nine Weeks Ended

Thirteen Weeks Ended


September 24,

2022

September 25,

2021

September 24,

2022

September 25,

2021

Total cost of the Plans during the period
   $ 9,409    $ 18,717    $ 3,599    $ 7,824
Amount of related income tax benefit recognized during the period
   (5,219 )    (5,636 )    (949 )    (1,919 )








Net cost of the Plans during the period
   $ 4,190    $ 13,081    $ 2,650    $ 5,905


	Twenty Six Weeks Ended						Thirteen Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Total cost of the Plans during the period	$	3,126		$	5,810		$	1,274		$	3,815
Amount of related income tax benefit recognized during the period		(3,592	)		(4,270	)		(841	)		(910	)

Net cost of the Plans during the period	$	(466	)	$	1,540		$	433		$	2,905

Included in income tax benefits recognized in the ~~thirty-nine-week~~

twenty-six-week

periods ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021~~ were excess tax benefits from stock-based awards of ~~$2,910,000~~$2,825,000 and ~~$1,039,000~~$2,844,000, respectively.

As of ~~September 24, 2022,~~July 1, 2023, there were ~~193,217~~187,260 shares of the Company’s common stock reserved for issuance under the 2022 DSCP and ~~3,245,251~~3,011,856 shares of the Company’s common stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

Number of
RSUs

Weighted Average

Grant Date
Fair Value

Outstanding at December 25, 2021
   209,399    $ 102.90
Granted
   49,825    $ 139.54
Shares earned in excess of target
(1)
   91,497    $ 92.58
Vested shares, including shares earned in excess of target
   (177,146 )    $ 95.48
Forfeited
   (21,989 )    $ 113.85



Outstanding at September 24, 2022
   151,586    $ 115.80


	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		151,780		$	115.80
Granted		41,317		$	165.14
Shares earned in excess of target (1)		79,176		$	98.39
Vested shares, including shares earned in excess of target		(137,861	)	$	97.97
Forfeited		(554	)	$	136.18

Outstanding at July 1, 2023		133,858		$	139.01

(1)

Represents additional shares earned under ~~each of~~ the ~~February 2, 2017~~

~~February 2, 2018 and~~ February 1, 2019 and January 31, 2020 RSU awards

as fiscal year ~~2021~~2022 financial results exceeded target performance level

and under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each ~~such award.~~

of those awards.

During the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022,~~July 1, 2023, the Company granted RSUs with a performance condition. Outstanding RSUs at both December ~~25, 2021~~31, 2022 and ~~September 24, 2022~~July 1, 2023 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s ~~2021~~2022 Annual Report on Form

10-K.

RSUs with a performance condition granted on ~~January 28, 2022~~February 3, 2023 may vest on January 31 of ~~2025,~~ 2026, 2027 and ~~2027~~2028 based on growth in operating income and

pre-tax

income per diluted share from continuing operations as compared to the results from the ~~2021~~2022 fiscal year.

The Company recognized approximately ~~$7,035,000~~

$1,294,000 and ~~$16,223,000~~$4,203,000 of share-based compensation expense related to RSU awards in the ~~thirty-nine-week~~

twenty-six-week

periods ended ~~September 24,~~July 1, 2023 and June 25, 2022, ~~and September 25, 2021,~~ respectively. As of ~~September 24, 2022,~~July 1, 2023, there was a maximum of ~~$19.7~~$29.8

million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately ~~3.6~~

3.7 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.

Table of Contents

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 25, 2021
   56,436    $ 125.16
Granted
   25,354    $ 152.54
Vested
   (27,074 )    $ 122.68
Forfeited
   (6,921 )    $ 144.45



Non-vested
at September 24, 2022
   47,795    $ 138.30


	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		47,795		$	138.30
Granted		22,714		$	179.32
Vested		(23,640	)	$	138.23

Non-vested at July 1, 2023		46,869		$	158.22

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, or 100% on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of ~~September 24, 2022,~~July 1, 2023, there was ~~$4,375,000~~$5,691,000 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~~2.1 years.

Stock Options

~~The following table summarizes information regarding the Company’s outstanding~~All 1,900 stock options ~~under~~outstanding and exercisable at December 31, 2022 were exercised at an exercise price of $56.40 as of January 31, 2023, following which the ~~Plans:~~Company had no remaining issued and outstanding vested or unvested stock options.

Number of
Options

Weighted Average
Exercise Price
per Share

Weighted Average
Remaining
Contractual
Term (years)

Aggregate Intrinsic
Value (000s)

Options outstanding at December 25, 2021
   8,570    $ 55.42
Exercised
   (4,100 )    $ 54.36



Options outstanding at September 24, 2022
   4,470    $ 56.40    0.4    $ 386



Options exercisable at September 24, 2022
   4,470    $ 56.40    0.4    $ 386

The total intrinsic value of stock options exercised during the ~~thirty-nine-week~~

twenty-six-week

periods ended ~~September 24,~~July 1, 2023 and June 25, 2022 was $218,000 and ~~September 25, 2021 was $429,000 and $644,000,~~$369,000, respectively.

As of ~~September 24, 2022,~~July 1, 2023, there was no unrecognized compensation cost related to

non-vested

stock options granted under the Plans.

~~(3)~~

(3) Income Taxes

The provisions for income taxes for the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods were based on estimated annual effective income tax rates of ~~24.5%~~24.4% and ~~24.4%~~24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in ~~both periods~~the 2023 period primarily attributable to state taxes and

non-deductible

meals and entertainment. The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes and

non-deductible

executive compensation. The effective income tax rate for the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period was 23.9%, which was lower than the estimated annual effective income tax rate of 24.4%, primarily attributable to excess tax benefits realized on stock-based awards. The effective income tax rate for the 2022

twenty-six-week

period was 23.7%, which was lower than the estimated annual effective income tax rate of 24.5%, primarily attributable to excess tax benefits realized on stock-based awards. The effective income tax rate for the 2021 thirty-nine-week period was 24.2%, which was lower than the estimated annual effective income tax rate of 24.4% primarily attributable to excess tax benefits realized on stock-based awards.

~~Table of Contents~~

~~(4)~~

(4) Earnings Per Share

Earnings per common share are based on the weighted average number of shares outstanding, including outstanding

non-vested

restricted stock and outstanding Deferred Stock Units. Diluted earnings per share are based on the weighted average number of common shares and Deferred Stock Units outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options. During the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

and thirteen-week periods, in reference to the determination of diluted earnings per share, the future compensation cost attributable to outstanding shares of

non-vested

restricted stock exceeded the impact of incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options.

Table of Contents

For each of the ~~thirty-nine-week~~

twenty-six-week

periods ended ~~September 24,~~July 1, 2023 and June 25, 2022, ~~and September 25, 2021,~~ no options outstanding to purchase shares of common stock were antidilutive. Outstanding RSUs were excluded from the calculation of diluted earnings per share for all periods because the performance metric requirements or market condition for vesting had not been satisfied.

~~(5)~~

(5) Additional Cash Flow Information

During the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period, Landstar paid income taxes and interest of ~~$125,690,000~~$47,818,000 and ~~$3,101,000,~~$1,957,000, respectively. During the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period, Landstar paid income taxes and interest of ~~$71,823,000~~$95,730,000 and ~~$2,780,000,~~$2,098,000, respectively. Landstar did not acquire any operating property by entering into finance leases in the 2023

twenty-six-week

period. Landstar acquired operating property by entering into finance leases in the amount of ~~$26,741,000 and $23,080,000~~$18,073,000 in the 2022 ~~and 2021 thirty-nine-week periods, respectively.~~

twenty-six-week

period.

~~(6)~~

(6) Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the ~~thirty-nine-week~~

twenty-six-week

and thirteen-week periods ended ~~September 24,~~July 1, 2023 and June 25, 2022 ~~and September 25, 2021:~~

(in thousands):

Thirty Nine Weeks Ended


September 24, 2022

September 25, 2021


Transportation

Logistics

Insurance

Total

Transportation

Logistics

Insurance

Total

External revenue
   $ 5,702,959    $ 58,836    $ 5,761,795    $ 4,539,561    $ 52,990    $ 4,592,551
Internal revenue
      65,753    65,753       53,028    53,028
Investment income
      2,023    2,023       2,138    2,138
Operating income
   412,054    34,695    446,749    323,370    33,558    356,928
Expenditures on long-lived assets
   21,096       21,096    18,561       18,561
Goodwill
   41,004       41,004    40,980       40,980


Thirteen Weeks Ended


September 24, 2022

September 25, 2021


Transportation

Logistics

Insurance

Total

Transportation

Logistics

Insurance

Total

External revenue
   $ 1,796,401    $ 19,731    $ 1,816,132    $ 1,716,004    $ 18,295    $ 1,734,299
Internal revenue
      12,883    12,883       9,533    9,533
Investment income
      716    716       706    706
Operating income
   120,164    13,334    133,498    123,410    8,002    131,412
Expenditures on long-lived assets
   13,629       13,629    9,561       9,561


	Twenty Six Weeks Ended
	July 1, 2023						June 25, 2022
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	2,772,439	$	37,093	$	2,809,532	$	3,906,558	$	39,105	$	3,945,663
Internal revenue				52,178		52,178				52,870		52,870
Investment income				3,852		3,852				1,307		1,307
Operating income		158,853		30,381		189,234		291,890		21,361		313,251
Expenditures on long-lived assets		12,631				12,631		7,467				7,467
Goodwill		42,166				42,166		40,977				40,977


	Thirteen Weeks Ended
	July 1, 2023						June 25, 2022
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,355,593	$	18,264	$	1,373,857	$	1,955,219	$	19,845	$	1,975,064
Internal revenue				40,217		40,217				39,986		39,986
Investment income				2,484		2,484				586		586
Operating income		72,691		15,259		87,950		139,944		10,474		150,418
Expenditures on long-lived assets		6,398				6,398		3,858				3,858

the ~~thirty-nine-week~~

twenty-

six

-week

periods ended ~~September 24,~~July 1, 2023 and June 25, 2022, ~~and September 25, 2021,~~ no single customer accounted for more than 10% of the Company’s consolidated revenue.

13(7) Other Comprehensive Income

~~Table of Contents~~

~~(7)~~

~~Other Comprehensive Income~~

The following table presents the components of and changes in accumulated other comprehensive (loss) income, ~~(loss),~~ net of related income taxes, as of and for the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022~~July 1, 2023 (in thousands):

Unrealized
Holding Gains
(Losses) on
Available-for-Sale

Securities

Foreign Currency
Translation

Total

Balance as of December 25, 2021
   $ 113    $ (5,516 )    $ (5,403 )
Other comprehensive loss
   (8,987 )    (1,011 )    (9,998 )






Balance as of September 24, 2022
   $ (8,874 )    $ (6,527 )    $ (15,401 )


	Unrealized Holding (Losses) Gains on Available-for-Sale Securities			Foreign Currency Translation			Total
Balance as of December 31, 2022	$	(8,449	)	$	(6,575	)	$	(15,024	)
Other comprehensive income		782			3,831			4,613

Balance as of July 1, 2023	$	(7,667	)	$	(2,744	)	$	(10,411	)

Table of Contents

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 ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022.~~July 1, 2023.

~~(8)~~

(8) Investments

Investments include primarily investment-grade corporate bonds, U.S. treasury obligations and asset-backed securities 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 ~~noncredit-related~~

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 and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were ~~$11,304,000~~$9,767,000 and $10,763,000 at ~~September 24,~~July 1, 2023 and December 31, 2022, ~~while unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $144,000 at December 25, 2021.~~respectively.

~~Table of Contents~~

The amortized cost and fair values of

available-for-sale

investments are as follows at ~~September 24, 2022~~July 1, 2023 and December ~~25, 2021~~31, 2022 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
July 1, 2023
Money market investments	$	6,264	$	—	$	—	$	6,264
Asset-backed securities		17,639		—		2,705		14,934
Corporate bonds and direct obligations of government agencies		121,137		1		6,962		114,176
U.S. Treasury obligations		16,058		1		102		15,957

Total	$	161,098	$	2	$	9,769	$	151,331

December 31, 2022
Money market investments	$	21,910	$	—	$	—	$	21,910
Asset-backed securities		18,905		—		2,889		16,016
Corporate bonds and direct obligations of government agencies		126,134		1		7,775		118,360
U.S. Treasury obligations		2,344		—		100		2,244

Total	$	169,293	$	1	$	10,764	$	158,530

Table of Contents

Gross

Gross


Amortized

Cost

Unrealized

Gains

Unrealized

Losses

Fair

Value

September 24, 2022

Money market investments
   $ 22,062    $ —      $ —      $ 22,062
Asset-backed securities
   19,742    —      2,666    17,076
Corporate bonds and direct obligations of government agencies
   129,250    —      8,536    120,714
U.S. Treasury obligations
   2,344    —      102    2,242








Total
   $ 173,398    $ —      $ 11,304    $ 162,094








December 25, 2021

Money market investments
   $ 8,750    $ —      $ —      $ 8,750
Asset-backed securities
   22,441    —      346    22,095
Corporate bonds and direct obligations of government agencies
   137,916    1,406    966    138,356
U.S. Treasury obligations
   2,342    50    —      2,392








Total
   $ 171,449    $ 1,456    $ 1,312    $ 171,593

For those

available-for-sale

investments with unrealized losses at ~~September 24, 2022~~July 1, 2023 and December ~~25, 2021,~~31, 2022, 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

September 24, 2022

Asset-backed securities
   $ 3,224    $ 453    $ 13,852    $ 2,213    $ 17,076    $ 2,666
Corporate bonds and direct obligations of government agencies
   68,854    2,732    51,860    5,804    120,714    8,536
U.S. Treasury obligations
   2,242    102    —      —      2,242    102












Total
   $ 74,320    $ 3,287    $ 65,712    $ 8,017    $ 140,032    $ 11,304












December 25, 2021

Asset-backed securities
   $ 22,095    $ 346    $ —      $ —      $ 22,095    $ 346
Corporate bonds and direct obligations of government agencies
   72,526    966    —      —      72,526    966












Total
   $ 94,621    $ 1,312    $ —      $ —      $ 94,621    $ 1,312


	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
July 1, 2023
Asset-backed securities	$	—	$	—	$	14,934	$	2,705	$	14,934	$	2,705
Corporate bonds and direct obligations of government agencies		19,035		262		93,141		6,700		112,176		6,962
U.S. Treasury obligations		6,223		14		2,259		88		8,482		102

Total	$	25,258	$	276	$	110,334	$	9,493	$	135,592	$	9,769

December 31, 2022
Asset-backed securities	$	—	$	—	$	16,016	$	2,889	$	16,016	$	2,889
Corporate bonds and direct obligations of government agencies		54,031		1,516		62,390		6,259		116,421		7,775
U.S. Treasury obligations		2,244		100		—		—		2,244		100

Total	$	56,275	$	1,616	$	78,406	$	9,148	$	134,681	$	10,764

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)~~

(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.

~~Table of Contents~~

These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other

build-out

clauses. Further, the leases do not contain contingent rent provisions. Landstar also rents certain trailing equipment to supplement the Company-owned trailer fleet under

“month-to-month”

lease terms, which are not required to be recorded on the balance sheet due to the less than twelve month lease term exemption. Sublease income is primarily comprised of weekly trailing equipment rentals to BCO Independent Contractors.

Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the

right-of-use

assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term.

As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate.

Table of Contents

The components of lease cost for finance leases and operating leases for the ~~thirty nine~~twenty six weeks ended ~~September 24, 2022~~July 1, 2023 were (in thousands):

Finance leases:

Amortization of
right-of-use
assets
   $ 16,455
Interest on lease liability
   2,117


Total finance lease cost
   18,572

Operating leases:

Lease cost
   2,587
Variable lease cost
   —
Sublease income
   (3,711 )


Total net operating lease income
   (1,124 )


Total net lease cost
   $ 17,448

~~Table of Contents~~


Finance leases:
Amortization of right-of-use assets	$	10,445
Interest on lease liability		1,452

Total finance lease cost		11,897
Operating leases:
Lease cost		1,751
Variable lease cost		—
Sublease income		(2,626	)

Total net operating lease income		(875	)

Total net lease cost	$	11,022

A summary of the lease classification on our consolidated balance sheet as of ~~September 24, 2022~~July 1, 2023 is as follows (in thousands):

~~Assets:~~



Assets:
Operating lease right-of-use assets	Other assets	$	1,766
Finance lease assets	Operating property, less accumulated depreciation and amortization		125,947

Total lease assets		$	127,713

Liabilities:

Operating lease
right-of-use
assets
   Other assets    $ 1,628
Finance lease assets
   Operating property, less accumulated depreciation and amortization    146,903


Total lease assets
      $ 148,531

~~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 ~~September 24, 2022~~July 1, 2023 (in thousands):


	Finance Leases		Operating Leases		Finance Leases		Operating Leases
2022 Remainder	$	10,680	$	194
2023		37,822		705
2023 Remainder					$	18,669	$	430
2024		27,969		542		28,843		735
2025		21,771		285		22,658		456
2026		13,633		—		14,530		128
2027						4,115		128
Thereafter		3,214		—		—		50

Total future minimum lease payments		115,089		1,726		88,815		1,927
Less amount representing interest (1.6% to 4.6%)		5,619		98
Less amount representing interest (1.6% to 6.0%)						4,106		161

Present value of minimum lease payments	$	109,470	$	1,628	$	84,709	$	1,766

Current maturities of long-term debt		37,375				31,560
Long-term debt, excluding current maturities		72,095				53,149
Other current liabilities				715				800
Deferred income taxes and other noncurrent liabilities				913				966

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of ~~September 24, 2022~~July 1, 2023 were:


	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.1			2.9
Weighted average discount rate		3.0	%		6.0	%

Table of Contents

   Finance Leases Operating Leases
Weighted average remaining lease term (years)
   3.5 2.6
Weighted average discount rate
   2.9 % 4.5 %

(10) Debt

~~(10)~~

~~Debt~~

Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of ~~September 24, 2022~~July 1, 2023 and December ~~25, 2021.~~31, 2022.

On August 18, 2020, Landstar entered into an amended and restated credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “First Amended and Restated Credit Agreement”).

~~As previously disclosed in a Form~~

~~8-K~~

~~filed with the SEC on~~ July 8,1, 2022, Landstar entered into a second amended and restated credit agreement ~~dated July 1, 2022,~~ with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the ~~“Second Amended and Restated Credit~~“Credit Agreement”) ~~that superseded and replaced the First Amended and Restated Credit Agreement.~~. The ~~Second Amended and Restated~~ 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 ~~Second Amended and Restated~~ 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.

~~The Second Amended and Restated Credit Agreement, which superseded and replaced the First Amended and Restated Credit Agreement, is referred to herein as the “Credit Agreement.”~~ As of ~~September 24, 2022, there were~~July 1, 2023, the Company had no borrowings outstanding under the ~~revolving credit facility of the~~ Credit Agreement.

~~Table of Contents~~

The revolving credit loans under the Credit Agreement, at the option of Landstar, bear interest at (i) a forward-looking term rate based on the secured overnight financing rate plus 0.10% and an applicable margin ranging from 1.25% to 2.00%, or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 1.00%, in each case with the applicable margin determined based upon the Company’s Leverage Ratio, as defined in the Credit Agreement, at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The revolving credit facility bears a commitment fee, payable quarterly in arrears, of 0.20% to 0.30%, based on the Company’s Leverage Ratio at the end of the most recent applicable fiscal quarter for which financial statements have been delivered.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum fixed charge coverage ratio, as described in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the 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)~~

(11) Commitments and Contingencies

Short-term investments include ~~$50,637,000~~$58,574,000 in current maturities of investments held by the Company’s insurance segment at ~~September 24, 2022.~~July 1, 2023. The

non-current

portion of the bond portfolio of ~~$111,457,000~~$92,757,000 is included in other assets. The short-term investments, together with ~~$34,437,000~~$26,500,000 of

non-current

investments, provide collateral for the $76,567,000 of letters of credit issued to guarantee payment of insurance claims. As of ~~September 24, 2022,~~July 1, 2023, Landstar also had ~~$33,493,000~~$33,492,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

The Company is involved in certain claims and pending litigation arising from the normal conduct of business. Many of these claims are covered in whole or in part by insurance. Based on knowledge of the facts and, in certain cases, opinions of outside counsel, management believes that adequate provisions have been made for probable losses with respect to the resolution of all such claims and pending litigation and that the ultimate outcome, after provisions therefor, will not have a material adverse effect on the financial condition of the Company, but could have a material effect on the results of operations in a given quarter or year.

~~(12)~~

~~Equity investment~~

On April 1, 2022, Landstar Investment Holdco, LLC, a newly formed Delaware LLC and wholly owned subsidiary of Landstar System Holdings, Inc., purchased Class A units of Cavnue, LLC, for approximately $4,999,000 in cash consideration. Cavnue, LLC is a privately held company focused on combining technology and road infrastructure to unlock the full potential of connected and autonomous vehicles.

~~This~~

~~non-controlling~~

~~investment in units of Cavnue, LLC, is considered an investment in~~

~~non-marketable~~

~~equity securities without a readily determinable market value. The carrying value of our~~

~~non-marketable~~

equity securities going forward will be adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the interim consolidated financial statements and notes thereto included herein, and with the Company’s audited financial statements and notes thereto for the fiscal year ended December ~~25, 2021~~31, 2022 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~2021~~2022 Annual Report on Form

10-K.

FORWARD-LOOKING STATEMENTS

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this document that are not based on historical facts are “forward-looking statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form

10-Q

contain forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the ~~2021~~2022 fiscal year; the impact of the coronavirus

(COVID-19)

pandemic; an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; ~~U.S~~U.S. trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; potential changes in ~~fuel~~ taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form

10-K

for the ~~2021~~2022 fiscal year, described in Item 1A “Risk Factors”, in Landstar’s Form~~10-Qs~~

10-Q

for the ~~2022 first and second quarters,~~quarterly period ended April 1, 2023, described in Part II, Item 1A “Risk Factors”, and in this report or in Landstar’s other Securities and Exchange Commission filings from time to time. 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.

Introduction

Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), ~~a Fortune 500 company,~~ is a worldwide technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third party capacity providers and employees. The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to comprehensive third party logistics solutions to meet all of a customer’s transportation needs. Landstar provides services principally throughout the United States and to a lesser extent in Canada and Mexico, and between the United States and Canada, Mexico and other countries around the world. The Company’s services emphasize safety, information coordination and customer service and are delivered through a network of over ~~1,200~~1,100 independent commission sales agents and over ~~112,000~~97,000 third party capacity providers, primarily truck capacity providers, linked together by a series of digital technologies which are provided and coordinated by the Company. The nature of the Company’s business is such that a significant portion of its operating costs varies directly with revenue.

Landstar markets its integrated transportation management solutions primarily through independent commission sales agents and exclusively utilizes third party capacity providers to transport customers’ freight. Landstar’s independent commission sales agents enter into contractual arrangements with the Company and are responsible for locating freight, making that freight available to Landstar’s capacity providers and coordinating the transportation of the freight with customers and capacity providers. The Company’s third party capacity providers consist of independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the “BCO Independent Contractors”), unrelated trucking companies who provide truck capacity to the Company under

non-exclusive

contractual arrangements (the “Truck Brokerage Carriers”), air cargo carriers, ocean cargo carriers and railroads. Through this network of agents and capacity providers linked together by Landstar’s ecosystem of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of ~~$6.5~~$7.4 billion during the most recently completed fiscal year. The Company reports the results of two operating segments: the transportation logistics segment and the insurance segment.

The transportation logistics segment provides a wide range of integrated transportation management solutions. Transportation services are provided by Landstar’s “Operating Subsidiaries”: Landstar Ranger, Inc., Landstar Inway, Inc., Landstar Ligon, Inc., Landstar Gemini, Inc., Landstar Transportation Logistics, Inc., Landstar Global Logistics, Inc., Landstar Express America, Inc., Landstar Canada, Inc., Landstar Metro, S.A.P.I. de C.V., and as further described below, Landstar ~~Blue.~~Blue, LLC. Transportation services offered by the Company include truckload, less-than-truckload transportation and other truck transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage. Examples of the industries serviced by the transportation logistics segment include automotive parts and assemblies, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics

and military equipment. In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-than-truckload service providers. The independent commission sales agents market services provided by the transportation logistics segment. Billings for freight transportation services are typically charged to customers on a per shipment basis for the physical transportation of freight and are referred to as transportation revenue. During the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022,~~July 1, 2023, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately ~~35%~~37%, ~~53%~~55% and 2%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 8%5% of the Company’s consolidated revenue in the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022.~~

~~On May 6, 2020, the Company formed a new subsidiary that was subsequently renamed~~ July 1, 2023.

Landstar Blue, LLC (“Landstar Blue”)~~. Landstar Blue~~ arranges truckload brokerage services with a focus on the contract services market. Landstar Blue also helps the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents. ~~On June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company whose business focused on truckload brokerage services.~~ The results of operations from Landstar Blue are presented as part of the Company’s transportation logistics segment. Revenue from Landstar Blue represented ~~less than~~approximately 1% of the Company’s transportation logistics segment revenue in the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022.~~

July 1, 2023.

The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to certain of Landstar’s operating subsidiaries. In addition, it reinsures certain risks of the Company’s BCO Independent Contractors and provides certain property and casualty insurance directly to certain of Landstar’s operating subsidiaries. Revenue at the insurance segment represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature. Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022.~~

July 1, 2023.

Changes in Financial Condition and Results of Operations

Management believes the Company’s success principally depends on its ability to generate freight revenue through its network of independent commission sales agents and to deliver freight safely and efficiently utilizing third party capacity providers. Management believes the most significant factors to the Company’s success include increasing revenue, sourcing capacity, empowering its network through technology-based tools and controlling ~~costs.~~

costs, including insurance and claims.

Revenue

While customer demand, which is subject to overall economic conditions, ultimately drives increases or decreases in revenue, the Company primarily relies on its independent commission sales agents to establish customer relationships and generate revenue opportunities. Management’s emphasis with respect to revenue growth is on revenue generated by independent commission sales agents who on an annual basis generate $1 million or more of Landstar revenue (“Million Dollar Agents”). Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents, increasing the revenue opportunities generated by existing independent commission sales agents and providing its independent commission sales agents with digital technologies they may use to grow revenue and increase efficiencies at their businesses. During the ~~2021~~2022 fiscal year, ~~593~~625 independent commission sales agents generated $1 million or more of Landstar revenue and thus qualified as Million Dollar Agents. During the ~~2021~~2022 fiscal year, the average revenue generated by a Million Dollar Agent was ~~$6,150,000~~$11,499,000 and revenue generated by Million Dollar Agents in the aggregate represented ~~94%~~97% of consolidated revenue.

Management monitors business activity by tracking the number of loads (volume) and revenue per load by mode of transportation. Revenue per load can be influenced by many factors other than a change in price. Those factors include the average length of haul, freight type, special handling and equipment requirements, fuel costs and delivery time requirements. For shipments involving two or more modes of transportation, revenue is generally classified by the mode of transportation having the highest cost for the load. The following table summarizes this information by trailer type for truck transportation and by mode for all others:

   Thirty Nine Weeks Ended Thirteen Weeks Ended
   September 24, September 25, September 24, September 25,
   2022 2021 2022 2021
Revenue generated through (in thousands):

Truck transportation

Truckload:

Van equipment
   $ 3,022,297 $ 2,502,025 $ 914,154 $ 918,115
Unsided/platform equipment
   1,336,956 1,112,358 453,924 422,979
Less-than-truckload
   105,994 85,551 35,343 30,819
Other truck transportation ⁽¹⁾
   632,001 518,472 195,345 208,817


Total truck transportation
   5,097,248 4,218,406 1,598,766 1,580,730
Rail intermodal
   113,762 120,540 27,652 44,472
Ocean and air cargo carriers
   475,156 191,951 164,252 84,111
Other ⁽²⁾
   75,629 61,654 25,462 24,986


   $ 5,761,795 $ 4,592,551 $ 1,816,132 $ 1,734,299


Revenue on loads hauled via BCO Independent Contractors included in total truck transportation
   $ 2,043,772 $ 1,899,313 $ 627,809 $ 690,257
Number of loads:

Truck transportation

Truckload:

Van equipment
   1,130,263 1,037,516 366,513 359,263
Unsided/platform equipment
   420,436 381,594 141,091 133,332
Less-than-truckload
   142,740 135,038 45,912 49,943
Other truck transportation ⁽¹⁾
   243,341 208,402 76,594 81,242


Total truck transportation
   1,936,780 1,762,550 630,110 623,780
Rail intermodal
   31,940 40,420 7,720 13,620
Ocean and air cargo carriers
   34,410 29,650 11,520 10,190


   2,003,130 1,832,620 649,350 647,590


Loads hauled via BCO Independent Contractors included in total truck transportation
   777,250 773,270 249,420 263,120
Revenue per load:

Truck transportation

Truckload:

Van equipment
   $ 2,674 $ 2,412 $ 2,494 $ 2,556
Unsided/platform equipment
   3,180 2,915 3,217 3,172
Less-than-truckload
   743 634 770 617
Other truck transportation ⁽¹⁾
   2,597 2,488 2,550 2,570
Total truck transportation
   2,632 2,393 2,537 2,534
Rail intermodal
   3,562 2,982 3,582 3,265
Ocean and air cargo carriers
   13,809 6,474 14,258 8,254
Revenue per load on loads hauled via BCO Independent Contractors
   $ 2,629 $ 2,456 $ 2,517 $ 2,623
Revenue by capacity type (as a % of total revenue):

Truck capacity providers:

BCO Independent Contractors
   35 % 41 % 35 % 40 %
Truck Brokerage Carriers
   53 % 50 % 53 % 51 %
Rail intermodal
   2 % 3 % 2 % 3 %
Ocean and air cargo carriers
   8 % 4 % 9 % 5 %
Other
   1 % 1 % 1 % 1 %


	Twenty Six Weeks Ended						Thirteen Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	1,458,124		$	2,108,143		$	703,041		$	1,026,938
Unsided/platform equipment		772,336			883,032			394,772			474,274
Less-than-truckload		62,673			70,651			31,115			36,931
Other truck transportation (1)		277,520			436,656			118,017			209,055

Total truck transportation		2,570,653			3,498,482			1,246,945			1,747,198
Rail intermodal		50,889			86,110			25,232			43,422
Ocean and air cargo carriers		136,534			310,904			75,441			158,847
Other (2)		51,456			50,167			26,239			25,597

	$	2,809,532		$	3,945,663		$	1,373,857		$	1,975,064

Revenue on loads hauled via BCO Independent Contractors included in total truck transportation	$	1,034,881		$	1,415,963		$	515,355		$	688,389
Number of loads:
Truck transportation
Truckload:
Van equipment		655,036			763,750			323,082			387,482
Unsided/platform equipment		263,185			279,345			135,613			147,516
Less-than-truckload		93,066			96,828			46,874			48,985
Other truck transportation (1)		110,373			166,747			52,311			80,817

Total truck transportation		1,121,660			1,306,670			557,880			664,800
Rail intermodal		15,390			24,220			7,630			11,590
Ocean and air cargo carriers		16,750			22,890			8,310			11,330

		1,153,800			1,353,780			573,820			687,720

Loads hauled via BCO Independent Contractors included in total truck transportation		463,910			527,830			231,360			265,590
Revenue per load:
Truck transportation
Truckload:
Van equipment	$	2,226		$	2,760		$	2,176		$	2,650
Unsided/platform equipment		2,935			3,161			2,911			3,215
Less-than-truckload		673			730			664			754
Other truck transportation (1)		2,514			2,619			2,256			2,587
Total truck transportation		2,292			2,677			2,235			2,628
Rail intermodal		3,307			3,555			3,307			3,747
Ocean and air cargo carriers		8,151			13,583			9,078			14,020
Revenue per load on loads hauled via BCO Independent Contractors	$	2,231		$	2,683		$	2,228		$	2,592
Revenue by capacity type (as a % of total revenue):
Truck capacity providers:
BCO Independent Contractors		37	%		36	%		38	%		35	%
Truck Brokerage Carriers		55	%		53	%		53	%		54	%
Rail intermodal		2	%		2	%		2	%		2	%
Ocean and air cargo carriers		5	%		8	%		5	%		8	%
Other		2	%		1	%		2	%		1	%

⁽¹⁾

⁽²⁾	Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.

Expenses

Purchased transportation

Also critical to the Company’s success is its ability to secure capacity, particularly truck capacity, at rates that allow the Company to profitably transport customers’ freight. The following table summarizes the number of available truck capacity providers on the dates indicated:

   September 24,
2022    September 25,
2021
BCO Independent Contractors
   10,742    10,955
Truck Brokerage Carriers:

Approved and active ⁽¹⁾
   71,207    58,676
Other approved
   30,222    24,602




   101,429    83,278




Total available truck capacity providers
   112,171    94,233




Trucks provided by BCO Independent Contractors
   11,644    11,746


	July 1, 2023		June 25, 2022
BCO Independent Contractors		9,748		11,023
Truck Brokerage Carriers:
Approved and active (1)		58,303		70,649
Other approved		29,503		29,454

		87,806		100,103

Total available truck capacity providers		97,554		111,126

Trucks provided by BCO Independent Contractors		10,548		11,887

⁽¹⁾	Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.

Purchased transportation represents the amount a BCO Independent Contractor or other third party capacity provider is paid to haul freight. The amount of purchased transportation paid to a BCO Independent Contractor is primarily based on a contractually agreed-upon percentage of revenue generated by loads hauled by the BCO Independent Contractor. Purchased transportation paid to a Truck Brokerage Carrier is based on either a negotiated rate for each load hauled or, to a lesser extent, a contractually agreed-upon fixed rate per load. Purchased transportation paid to railroads and ocean cargo carriers is based on either a negotiated rate for each load hauled or a contractually agreed-upon fixed rate per load. Purchased transportation paid to air cargo carriers is generally based on a negotiated rate for each load hauled. Purchased transportation as a percentage of revenue for truck brokerage, rail intermodal and ocean cargo services is normally higher than that of BCO Independent Contractor and air cargo services. Purchased transportation is the largest component of costs and expenses and, on a consolidated basis, increases or decreases as a percentage of consolidated revenue in proportion to changes in the percentage of consolidated revenue generated through BCO Independent Contractors and other third party capacity providers and external revenue from the insurance segment, consisting of reinsurance premiums. Purchased transportation as a percent 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 from shipments hauled 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 over the freight transit period as the performance obligation to the customer is completed.

Commissions to agents

Commissions to agents are based on contractually agreed-upon percentages of (i) revenue, (ii) revenue less the cost of purchased transportation, or (iii) revenue less a contractually agreed upon percentage of revenue retained by Landstar and the cost of purchased transportation (the “retention contracts”). Commissions to agents as a percentage of consolidated revenue vary directly with fluctuations in the percentage of consolidated revenue generated by the various modes of transportation and reinsurance premiums and, in general, vary inversely with changes in the amount of purchased transportation as a percentage of revenue on services provided by Truck Brokerage Carriers, railroads, air cargo carriers and ocean cargo carriers. Commissions to agents are recognized over the freight transit period as the performance obligation to the customer is completed.

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

Maintenance costs for Company-provided trailing equipment, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents and BCO Independent Contractor recruiting and qualification costs are the largest components of other operating costs. Also included in other operating costs are trailer rental costs ~~the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents~~ and gains/losses, if any, on sales of Company-owned trailing equipment.

Insurance and claims

With respect to insurance and claims cost, potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable.

~~For periods prior to May 1, 2019,~~

Landstar retains liability through a self-insured retention for commercial trucking claims up to $5 million per ~~occurrence and maintains various third party insurance arrangements for liabilities in excess of its $5 million self-insured retention.~~occurrence. Effective May 1, 2019, the Company entered into a ~~new~~ three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the ~~“Initial~~“2019 Initial Excess Policy”) with a third party insurance company. The Company subsequently extended the 2019 Initial Excess Policy for one additional policy year, from May 1, 2022 through April 30, 2023. For commercial trucking claims incurred on or after May 1, 2022 through April 30, 2023, the extended 2019 Initial Excess Policy provides for a limit for a single loss of $5 million, with ~~a remaining~~an aggregate limit of $10 million for the policy period ended April 30, 2023. Effective May 1, 2023, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “2023 Initial Excess Policy”) with a third party insurance company. For commercial trucking claims incurred on or after May 1, 2023 through April 30, 2026, the 2023 Initial Excess Policy provides for an aggregate deductible of $18 million over the

thirty-six

month term ending April 30, 2026. After payment of the deductible, the 2023 ~~and an option to increase such aggregate~~Initial Excess Policy provides for a limit for a ~~pre-established~~ ~~amount~~single loss of ~~additional premium. If aggregate losses under the Initial Excess Policy exceed the~~$5 million, with an aggregate limit of $15 million for the ~~period~~

thirty-six

month term ending April 30, ~~2023, and the Company did not elect to increase such aggregate limit for a~~ ~~pre-established~~ amount of additional premium, the Company would retain liability of up to $10 million per occurrence, inclusive of its $5 million self-insured retention for commercial trucking claims during the remainder of the policy period ending April 30, 2023.

2026.

The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of $10 million. These third party arrangements provide coverage on a per occurrence or aggregated basis. In recent years, there has been a significant increase in the occurrence of trials in courts throughout the United States involving catastrophic injury and fatality claims against commercial motor carriers that have resulted in verdicts in excess of $10 million. Within the transportation logistics industry, these verdicts are often referred to as “Nuclear Verdicts.” The increase in Nuclear Verdicts has had a significant impact on the cost of commercial auto liability claims throughout the United States. Due to the increasing cost of commercial auto liability claims, the availability of excess coverage has significantly decreased, and the pricing associated with such excess coverage, to the extent available, has significantly increased. ~~With respect to the annual policy year ended April 30, 2021, as compared to~~Since the annual policy year ended April 30, 2020, as compared to the annual policy year ending April 30, 2024, the Company experienced an increase of approximately ~~$14~~$21 million, or over ~~170%~~380%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Effective May 1, 2021, with respect to the annual policy year ending April 30, 2022, as compared to the annual policy year ended April 30, 2021, the Company experienced an increase of approximately $3 million, or 19%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Effective May 1, 2022, with respect to the annual policy year ending April 30, 2023, as compared to the annual policy year ended April 30, 2022, the Company experienced an increase of approximately $2.3 million, or 10%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million.

Moreover, in recent years the Company has increased the level of its financial exposure to commercial trucking claims in excess of $10 million, including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage. For example, with respect to a single hypothetical claim in the amount of ~~$35~~$60 million incurred during the annual policy year ending April 30, ~~2023,~~2024, the Company would have an aggregate financial exposure of approximately ~~$10~~$25 million. Furthermore, the Company’s third party insurance arrangements provide excess coverage up to an uppermost coverage layer, in excess of which the Company retains additional financial exposure. No assurances can be given that the availability of excess coverage for commercial trucking claims will not continue to deteriorate, that the pricing associated with such excess coverage, to the extent available, will not continue to increase, nor that insurance coverage from third party insurers for excess coverage of commercial trucking claims will even be available on commercially reasonable terms at certain levels. Moreover, the occurrence of a Nuclear Verdict, or the settlement of a catastrophic injury and/or fatality claim that could have otherwise resulted in a Nuclear Verdict, could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

Further, the Company retains liability of up to ~~$1,000,000~~$2,000,000 for each general liability claim, ~~up to~~ $250,000 for each workers’ compensation claim and up to $250,000 for each cargo claim. In addition, under reinsurance arrangements by Signature of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $500,000, $1,000,000 or $2,000,000 with respect to certain occupational accident claims and up to $750,000 with respect to certain workers’ compensation claims. 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.

Selling, general and administrative

During the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022,~~July 1, 2023, employee compensation and benefits accounted for approximately ~~68%~~60% of the Company’s selling, general and administrative costs. Employee compensation and benefits include wages and employee benefit costs as well as incentive compensation and stock-based compensation expense. Incentive compensation and stock-based compensation expense is highly variable in nature in comparison to wages and employee benefit costs.

The reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin are each presented below:

   Thirty Nine Weeks Ended Thirteen Weeks Ended
   September 24, September 25, September 24, September 25,
   2022 2021 2022 2021
Revenue
   $ 5,761,795 $ 4,592,551 $ 1,816,132 $ 1,734,299
Costs of revenue:

Purchased transportation
   4,512,341 3,583,197 1,416,323 1,356,671
Commissions to agents
   465,759 356,997 154,125 135,295


Variable costs of revenue
   4,978,100 3,940,194 1,570,448 1,491,966
Trailing equipment depreciation
   27,760 26,362 9,397 8,615
Information technology costs
   13,868 9,534 4,829 3,450
Insurance-related costs (1)
   98,821 78,175 32,380 30,502
Other operating costs
   34,878 27,117 13,356 10,572


Other costs of revenue
   175,327 141,188 59,962 53,139


Total costs of revenue
   5,153,427 4,081,382 1,630,410 1,545,105


Gross profit
   $ 608,368 $ 511,169 $ 185,722 $ 189,194


Gross profit margin
   10.6 % 11.1 % 10.2 % 10.9 %
Plus: other costs of revenue
   175,327 141,188 59,962 53,139


Variable contribution
   $ 783,695 $ 652,357 $ 245,684 $ 242,333


Variable contribution margin
   13.6 % 14.2 % 13.5 % 14.0 %


	Twenty Six Weeks Ended				Thirteen Weeks Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Revenue	$	2,809,532	$	3,945,663	$	1,373,857	$	1,975,064
Costs of revenue:
Purchased transportation		2,154,491		3,096,018		1,053,197		1,545,688
Commissions to agents		248,153		311,634		122,478		161,856

Variable costs of revenue		2,402,644		3,407,652		1,175,675		1,707,544
Trailing equipment depreciation		16,519		18,363		8,150		9,280
Information technology costs		13,493		9,039		6,742		4,993
Insurance-related costs (1)		58,382		66,441		30,122		34,786
Other operating costs		25,840		21,522		13,462		10,381

Other costs of revenue		114,234		115,365		58,476		59,440

Total costs of revenue		2,516,878		3,523,017		1,234,151		1,766,984

Gross profit	$	292,654	$	422,646	$	139,706	$	208,080

Gross profit margin		10.4%		10.7%		10.2%		10.5%
Plus: other costs of revenue		114,234		115,365		58,476		59,440

Variable contribution	$	406,888	$	538,011	$	198,182	$	267,520

Variable contribution margin		14.5%		13.6%		14.4%		13.5%

(1)

Insurance-related costs in the table above include (i) other costs of revenue related to the transportation of freight that are included as a portion of insurance and claims in the Company’s Consolidated Statements of Income and (ii) certain other costs of revenue related to reinsurance premiums received by Signature that are included as a portion of selling, general and administrative in the Company’s Consolidated Statements of Income. Insurance and claims costs included in other costs of revenue relating to the transportation of freight primarily consist of insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight and the related cost of claims incurred under those programs, and, to a lesser extent, the cost of claims incurred under insurance programs available to BCO Independent Contractors that are reinsured by Signature. Other insurance and claims costs included in costs of revenue that are included in selling, general and administrative in the Company’s Consolidated Statements of Income consist of brokerage commissions and other fees incurred by Signature relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by Signature.

In general, variable contribution margin on revenue generated by BCO Independent Contractors represents a fixed percentage due to the nature of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents. For revenue generated by Truck Brokerage Carriers, variable contribution margin may be either a fixed or variable percentage, depending on the contract with each individual independent commission sales agent. Variable contribution margin on revenue generated from shipments hauled by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature, as the Company’s contracts with independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of the amount represented by revenue less purchased transportation for these types of shipments. Approximately ~~40%~~42% of the Company’s consolidated revenue in the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24, 2022~~July 1, 2023 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while ~~60%~~58% was generated under transactions that pay a variable percentage of revenue to the third party capacity provider and/or agents.

Operating income as a percentage of gross profit and operating income as a percentage of variable contribution

The following table presents operating income as a percentage of gross profit and operating income as a percentage of variable contribution. The Company’s operating income as a percentage of variable contribution is a

non-GAAP

financial measure calculated as operating income divided by variable contribution. The Company believes that operating income as a percentage of variable contribution is useful and meaningful to investors for the following principal reasons: (i) the variable costs of revenue for a significant portion of the business are highly influenced by short-term market-based trends in the freight transportation industry, whereas other costs, including other

costs of revenue, are much less impacted by short-term freight market trends; (ii) disclosure of this measure allows investors to better

understand the underlying trends in the Company’s results of operations; (iii) this measure is meaningful to investors’ evaluations of the Company’s management of costs attributable to operations other than the purely variable costs associated with purchased transportation and commissions to agents that the Company incurs to provide services to our customers; and (iv) management considers this financial information in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs.

   Thirty Nine Weeks Ended Thirteen Weeks Ended
   September 24,
2022 September 25,
2021 September 24,
2022 September 25,
2021
Gross profit
   $ 608,368 $ 511,169 $ 185,722 $ 189,194
Operating income
   $ 446,749 $ 356,928 $ 133,498 $ 131,412
Operating income as % of gross profit
   73.4 % 69.8 % 71.9 % 69.4 %
Variable contribution
   $ 783,695 $ 652,357 $ 245,684 $ 242,333
Operating income
   $ 446,749 $ 356,928 $ 133,498 $ 131,412
Operating income as % of variable contribution
   57.0 % 54.7 % 54.3 % 54.2 %


	Twenty Six Weeks Ended						Thirteen Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Gross profit	$	292,654		$	422,646		$	139,706		$	208,080
Operating income	$	189,234		$	313,251		$	87,950		$	150,418
Operating income as % of gross profit		64.7	%		74.1	%		63.0	%		72.3	%
Variable contribution	$	406,888		$	538,011		$	198,182		$	267,520
Operating income	$	189,234		$	313,251		$	87,950		$	150,418
Operating income as % of variable contribution		46.5	%		58.2	%		44.4	%		56.2	%

The ~~increase~~decrease in operating income as a percentage of gross profit from both the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period to the 2023

twenty-six-week

period and from the 2022 ~~thirty-nine-week~~thirteen-week period to the 2023 thirteen-week period primarily resulted from the effect of decreased gross profit on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs.

The decrease in operating income ~~increasing at~~as a ~~more rapid~~ percentage ~~rate than~~of variable contribution from both the ~~increase in gross profit, as~~2022

twenty-six-week

period to the ~~Company was able~~2023

twenty-six-week

period and from the 2022 thirteen-week period to ~~scale our~~the 2023 thirteen-week period primarily resulted from the effect of decreased variable contribution on the Company’s fixed cost infrastructure, primarily certain components of selling, general and administrative costs, ~~across a larger gross profit base. The increase in operating income as a percentage~~partially offset by the impact of gross profit from the 2021 thirteen-week period to the 2022 thirteen-week period resulted from operating income increasing notwithstanding a modest decrease in gross profit, as certain components of selling, general and administrative costs, namelydecreased incentive and equity compensation costs under the Company’s variable compensation programs and decreased ~~approximately $8,500,000 from the 2021 thirteen-week period to the 2022 thirteen-week period.~~

The increase in operating income as a percentage of variable contribution from the 2021 thirty-nine-week period to the 2022 thirty-nine-week period resulted from operating income increasing at a more rapid percentage rate than the increase in variable contribution, as the Company was able to scale our fixed cost infrastructure, primarily certain components of selling, generalinsurance and administrative costs, as well as certain components of our other costs of revenue, across a larger variable contribution base. The ten basis point increase in operating income as a percentage of variable contribution from the 2021 thirteen-week period to the 2022 thirteen-week period resulted from operating income increasing at a modestly higher percentage rate than the increase in variable contribution, as the Company was able to scale our fixed cost infrastructure, primarily certain components of selling, general and administrative costs across a larger variable contribution base.

claims costs.

Also, as previously mentioned, the Company reports two operating segments: the transportation logistics segment and the insurance segment. External revenue at the insurance segment, representing reinsurance premiums, has historically been relatively consistent on an annual basis at 2% or less of consolidated revenue and generally corresponds directly with the number of trucks provided by BCO Independent Contractors. The discussion of cost line items in Management’s Discussion and Analysis of Financial Condition and Results of Operations considers the Company’s costs on a consolidated basis rather than on a segment basis. Management believes this presentation format is the most appropriate to assist users of the financial statements in understanding the Company’s business for the following reasons: (1) the insurance segment has no other operating costs; (2) discussion of insurance and claims at either segment without reference to the other may create confusion amongst investors and potential investors due to intercompany arrangements and specific deductible programs that affect comparability of financial results by segment between various fiscal periods but that have no effect on the Company from a consolidated reporting perspective; (3) selling, general and administrative costs of the insurance segment comprise less than 10% of consolidated selling, general and administrative costs and have historically been relatively consistent on a year-over-year basis; and (4) the insurance segment has no depreciation and amortization.

~~THIRTY NINE~~

TWENTY-SIX

WEEKS ENDED ~~SEPTEMBER 24, 2022~~JULY 1, 2023 COMPARED TO ~~THIRTY NINE~~

TWENTY-SIX

WEEKS ENDED ~~SEPTEMBER~~JUNE 25, ~~2021~~

2022

Revenue for the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period was ~~$5,761,795,000, an increase~~$2,809,532,000, a decrease of ~~$1,169,244,000,~~$1,136,131,000, or ~~25%~~29%, compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. Transportation revenue ~~increased $1,163,398,000,~~decreased $1,134,119,000, or ~~26%~~29%. The ~~increase~~decrease in transportation revenue was attributable

to ~~increased~~decreased revenue per load of approximately ~~15%~~17% and ~~an increased~~a decreased number of loads hauled of approximately 9%15% compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. Reinsurance premiums were ~~$58,836,000~~$37,093,000 and ~~$52,990,000~~$39,105,000 for the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, respectively. The ~~increase~~decrease in revenue from reinsurance premiums was primarily attributable to ~~(i)~~a decrease in the average number of trucks provided by BCO Independent Contractors in the 2023

twenty-six-week

period compared to the 2022

twenty-six-week

period, partially offset by an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by ~~Signature; (ii) an increase~~Signature in the average number of trucks provided by BCO Independent Contractors and (iii) participation levels among BCO Independent Contractors in certain occupational accident programs and workers’ compensation programs in the 2022 thirty-nine-week 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period was ~~$5,097,248,000,~~$2,570,653,000, representing ~~88%~~91% of total revenue, ~~an increase~~a decrease of ~~$878,842,000,~~$927,829,000, or ~~21%~~27%, compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. Revenue per load on loads hauled by third party truck capacity providers ~~increased~~decreased approximately ~~10%~~14% compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period, and the number of loads hauled by third party truck capacity providers ~~increased~~also decreased approximately ~~10%~~14% in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period.

The ~~increase~~decrease in revenue per load on loads hauled via truck was primarily due to ~~a tight~~pricing pressure throughout the 2023

twenty-six-week

period as industry-wide truck capacity ~~environment experienced~~was significantly more readily available as compared to the 2022

twenty-six-week

period, during the 2022 thirty-nine-week period, in particular during the first fiscal quarter of 2022, and the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers, partially offset by (i)which pandemic-related supply chain disruption was at a decrease in the number of loads hauled via heavy specialized equipment, which typically have a higher revenue per load, as a percentage of total truck loads and (ii) a decreased average length of haul during the 2022 thirty-nine-week period.high point. Revenue per load on loads hauled via van equipment ~~increased 11%~~decreased 19%, ~~revenue per load~~on less-than-truckload loadings decreased 8%, on loads hauled via unsided/platform equipment ~~increased 9%, revenue per load~~decreased 7% and on ~~less-than-truckload loadings increased 17% and~~loads hauled by other truck transportation services ~~revenue per load increased~~decreased 4% as compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period.

The ~~increase~~decrease in the number of loads hauled via truck compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period was primarily due to a ~~broad-based increase~~decrease in demand from the record high levels experienced in the 2022

twenty-six-week

period for the Company’s van services and power-only services included in other truck transportation ~~services.~~services, which tend to be more correlated with U.S. consumer demand. Loads hauled via other truck transportation services decreased 34%, loads hauled via van equipment ~~increased 9%~~decreased 14%, loads hauled via unsided/platform equipment ~~increased 10%,~~decreased 6% and less-than-truckload loadings ~~increased 6% and loads hauled via other truck transportation services increased 17%~~decreased 4% as compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period.

Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were ~~$153,195,000~~$79,295,000 and ~~$74,195,000~~$94,537,000 in the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, respectively. It should be noted that billings to many customers of the Company’s truck brokerage services include a single

all-in

rate ~~that does~~and do not separately identify fuel surcharges on loads hauled via Truck Brokerage Carriers. Accordingly, the overall impact of changes in fuel prices on revenue and revenue per load on loads hauled via truck is likely to be greater than that indicated.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period was ~~$588,918,000,~~$187,423,000, or ~~10%~~7% of total revenue, ~~an increase~~a decrease of ~~$276,427,000,~~$209,591,000, or ~~88%~~53%, compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. ~~Revenue per load on revenue generated by multimode capacity providers increased approximately 99% in the 2022 thirty-nine-week period compared to the 2021 thirty-nine-week period, while the~~The number of loads hauled by multimode capacity providers decreased approximately 5%32% in the 2023

twenty-six-week

period compared to the 2022

twenty-six-week

period, and revenue per load on revenue generated by multimode capacity providers decreased approximately 31% over the same period. The decrease in the number of loads hauled by multimode capacity providers was due to a 36% decrease in rail loadings, a 31% decrease in ocean loadings and a 13% decrease in air loadings. The 36% decrease in rail loadings was broad-based across several customers, the 31% decrease in ocean loadings was due to a broad-based decrease in demand across many customers for the Company’s ocean services and the 13% decrease in air loadings was primarily attributable to decreased loadings at one specific customer. Revenue per load on loads hauled via ocean, air and rail intermodal decreased 42%, 22% and 7%, respectively, during the 2023

twenty-six-week

period as compared to the 2022

twenty-six-week

period. The decrease in revenue per load on loads hauled by ~~multimode capacity providers increased for all modes,~~ocean cargo carriers was primarily ~~due~~related to ~~continuing U.S. and global economic recoveries coupled with~~ the impact of global supply chain disruptions during the 2022

twenty-six-week

period, which were particularly acute with respect to international ocean ~~and air~~ freight. ~~Revenue per load on loads hauled via air, ocean and rail intermodal increased 139%, 93% and 19%, respectively, during the 2022 thirty-nine-week period as compared to the 2021 thirty-nine-week period.~~ Revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity. The decrease in the number of loads hauled by multimode capacity providers was due to a 21% decrease in rail loadings and a 19% decrease in air loadings, partially offset by a 34% increase in ocean loadings. The 21% decrease in rail loadings was broad-based across several agencies and customers, and the 19% decrease in air loadings was entirely attributable to decreased loadings at one specific customer. The 34% increase in ocean loadings was due to a broad-based increase in demand across many customers for the Company’s ocean services.

Purchased transportation was ~~78.3%~~76.7% and ~~78.0%~~78.5% of revenue in the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, respectively. The ~~increase~~decrease in purchased transportation as a percentage of revenue was primarily due to (i) ~~an increased percentage~~a decreased rate of purchased transportation on revenue generated by Truck Brokerage Carriers ~~which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors~~ and (ii) ~~an increased~~a decreased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity ~~providers, partially offset by a lower rate of purchased transportation on revenue generated by Truck Brokerage Carriers.~~providers. Commissions to agents were ~~8.1%~~8.8% and ~~7.8%~~7.9% of revenue in the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, respectively. The increase in commissions to agents as a percentage of revenue was primarily attributable to a decreased cost of purchased transportation as a percentage of revenue on revenue generated by Truck Brokerage Carriers.

Investment income was ~~$2,023,000~~$3,852,000 and ~~$2,138,000~~$1,307,000 in the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, respectively. The ~~decrease~~increase in investment income was ~~primarily~~ attributable to higher average rates of return on investments and a ~~lower~~higher average investment balance held by the insurance segment induring the ~~2022 thirty-nine-week period, partially offset by higher average rates~~2023

twenty-six-week

period.

Other operating costs increased ~~$7,761,000~~$4,318,000 in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. The increase in other operating costs compared to the prior year was primarily due to (i) increased trailing equipment maintenance costs as a result of ~~(x)~~ increased labor and parts costs charged by the Company’s network of third party trailer maintenance ~~facilities as the Company retained older trailing equipment to support current business levels;~~facilities; and ~~(y)~~(ii) an increased ~~average trailer fleet size during the 2022 thirty-nine-week period and (ii) the impact~~provision for contractor bad debt, partially offset by increased gains on sales of ~~the resumption of a large~~ ~~in-person~~ ~~event for the Company’s BCO Independent Contractors.~~

operating property.

Insurance and claims ~~increased $21,067,000~~decreased $7,389,000 in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. The ~~increase~~decrease in insurance and claims expense compared to the prior year was primarily due to ~~increased severity of current year trucking claims during the 2022 thirty-nine-week period, the impact of~~decreased net unfavorable development of prior years’ claims in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period, decreased severity of current year trucking claims during the 2023

twenty-six-week

period and a decrease in BCO miles traveled in the 2023

twenty-six-week

period, partially offset by increased insurance premiums, primarily for commercial auto and excess liability coverage. During the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, insurance and claims costs included ~~$7,505,000~~$2,831,000 and ~~$4,522,000~~$5,381,000 of net unfavorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs ~~increased $6,479,000~~decreased $3,584,000 in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. The ~~increase~~decrease in selling, general and administrative costs compared to ~~the~~ prior year was primarily attributable to ~~increased wages, an increased~~a decreased provision for incentive compensation, decreased stock-based compensation expense, a decreased provision for customer bad debt and decreased employee benefit costs, primarily attributable to decreased medical and pharmacy costs under the ~~return~~self-insured portion of the Company’s ~~annual agent convention held in April 2022,~~medical plan, partially offset by ~~decreased stock-based compensation expense~~increased wages and ~~a decreased provision for incentive compensation.~~increased information technology costs. Included in selling, general and administrative costs was incentive compensation expense of $323,000 and $9,723,000 for the 2023 and 2022

twenty-six-week

periods, respectively and stock-based compensation expense of ~~$9,409,000~~$3,126,000 and ~~$18,717,000~~$5,810,000 for the ~~2022~~2023 and ~~2021 thirty-nine-week periods, respectively, and incentive compensation expense of $14,185,000 and $21,370,000 for the~~ 2022 ~~and 2021 thirty-nine-week~~

twenty-six-week

periods, respectively.

Depreciation and amortization ~~expense~~ increased ~~$6,095,000~~$2,094,000 in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared to the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. The increase in depreciation and amortization expense was primarily due to increased depreciation on ~~digital technology tools in connection with the deployment of~~ new and ~~upgraded applications~~updated digital tools deployed for use by the Company’s network of agents, capacity providers and employees, ~~and to a lesser extent, in connection with increased~~partially offset by decreased trailing equipment depreciation.

~~Interest~~

The year-over-prior-year change in interest and debt (income) expense was $3,261,000, with net interest income of $1,033,000 in the 2023

twenty-six-week

period compared to net interest and debt expense of $2,228,000 in the 2022 ~~thirty-nine-week period increased $301,000 compared to the 2021 thirty-nine-week~~

twenty-six-week

period. The increase in interest and debt (income) expense was primarily attributable to increased interest income earned on cash balances held by the transportation logistics segment and decreased average borrowings on the Company’s revolving credit facility, ~~during the 2022 thirty-nine-week period,~~ as the Company had no borrowings ~~under its revolving credit facility~~ during the ~~2021 period. The Company had no borrowings under its revolving credit facility as of the end of the 2022 thirty-nine-week period.~~

2023 period, partially offset by increased interest expense related to finance lease obligations.

The provisions for income taxes for the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

non-deductible

meals and entertainment. The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes and

non-deductible

executive compensation. The effective income tax rate for the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period was 23.7%, which was lower than the estimated annual effective income tax rate of 24.5%, primarily attributable to excess tax benefits realized on stock-based awards. The effective income tax rate in the 2021 thirty-nine-week period of 24.2% was lower than the 24.4% estimated annual effective income tax rate, primarily due to excess tax benefits realized on stock-based awards in the 2021 thirty-nine-week period.

Net income was ~~$337,612,000,~~$144,754,000, or ~~$9.15~~$4.03 per diluted share, in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period. Net income was ~~$268,209,000,~~$237,394,000, or ~~$7.00~~$6.39 per diluted share, in the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period.

THIRTEEN WEEKS ENDED ~~SEPTEMBER 24, 2022~~JULY 1, 2023 COMPARED TO THIRTEEN WEEKS ENDED ~~SEPTEMBER~~JUNE 25, ~~2021~~

2022

Revenue for the ~~2022~~2023 thirteen-week period was ~~$1,816,132,000, an increase~~$1,373,857,000, a decrease of ~~$81,833,000,~~$601,207,000, or 5%30%, compared to the ~~2021~~2022 thirteen-week period. Transportation revenue ~~increased $80,397,000,~~decreased $599,626,000, or 5%31%. The ~~increase~~decrease in transportation revenue was attributable to ~~increased~~decreased revenue per load of approximately ~~4%, while the~~17% and also a decreased number of loads hauled ~~was~~of approximately ~~equal~~17% compared to the ~~2021~~2022 thirteen-week period. Reinsurance premiums were ~~$19,731,000~~$18,264,000 and ~~$18,295,000~~$19,845,000 for the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively. The ~~increase~~decrease in revenue from reinsurance premiums was primarily attributable to ~~(i)~~a decrease in the average number of trucks provided by BCO Independent Contractors in the 2023 thirteen-week period compared to the 2022 thirteen-week period, partially offset by an increase in the aggregate value of equipment insured by BCO

Independent Contractors under a physical damage program reinsured by ~~Signature; (ii) an increase~~Signature in the average number of trucks provided by BCO Independent Contractors and (iii) participation levels among BCO Independent Contractors in certain occupational accident programs and workers’ compensation programs in the 20222023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period.

Truck transportation revenue generated by third party truck capacity providers for the ~~2022~~2023 thirteen-week period was ~~$1,598,766,000,~~$1,246,945,000, representing ~~88%~~91% of total revenue, ~~an increase~~a decrease of ~~$18,036,000,~~$500,253,000, or 1%29%, compared to the ~~2021~~2022 thirteen-week period. The number of loads hauled by third party truck capacity providers ~~increased~~decreased approximately ~~1% in~~16% compared to the 2022 thirteen-week period, ~~compared to the 2021 thirteen-week period, while~~and revenue per load on loads hauled by third party truck capacity providers ~~was~~decreased approximately ~~equal~~15% in the 2023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period.

The ~~increase~~decrease in the number of loads hauled via truck compared to the ~~2021~~2022 thirteen-week period was primarily due to ~~(i)~~ a ~~broad-based increase~~decrease in demand from the near-record high levels experienced in the 2022 thirteen-week period for the Company’s van services and power-only services included in other truck transportation services, ~~provided~~which tend to be more correlated with U.S. consumer demand. Loads hauled via ~~unsided/platform equipment and (ii) a modest increase in demand for the Company’s~~other truck transportation services ~~provided~~decreased 35%, loads hauled via van equipment ~~partially offset by reduced demand for substitute line-haul and power-only services from certain parcel and less-than-truckload carriers. Loads~~decreased 17%, loads hauled via unsided/platform equipment decreased 8% and less-than-truckload loadings decreased 4% as compared to the 2022 thirteen-week period.

The decrease in revenue per load on loads hauled via truck was primarily due to pricing pressure throughout the 2023 thirteen-week period as industry-wide truck capacity was significantly more readily available as compared to the 2022 thirteen-week period, partially offset by an increased ~~6% and~~average length of haul during the 2023 thirteen-week period. Revenue per load on loads hauled via van equipment ~~increased 2%~~decreased 18%, ~~while less-than-truckload loadings decreased 8% and~~on loads hauled by other truck transportation services ~~load count~~ decreased 6%13%, on less-than-truckload loadings decreased 12% and on loads hauled via unsided/platform equipment decreased 9% as compared to the ~~2021~~2022 thirteen-week period. ~~The number of loads hauled via truck increased 5% in July, was relatively flat in August and then declined 1% in September, as compared to the corresponding periods in 2021.~~

Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were ~~$58,658,000~~$36,360,000 and ~~$28,621,000~~$57,052,000 in the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively.

Transportation revenue generated by multimode capacity providers for the ~~2022~~2023 thirteen-week period was ~~$191,904,000,~~$100,673,000, or ~~11%~~7% of total revenue, ~~an increase~~a decrease of ~~$63,321,000,~~$101,596,000, or ~~49%~~50%, compared to the ~~2021~~2022 thirteen-week period. ~~Revenue per load on revenue generated by multimode capacity providers increased approximately 85% in the 2022 thirteen-week period compared to the 2021 thirteen-week period, while the~~The number of loads hauled by multimode capacity providers decreased approximately ~~19% over~~30% in the ~~same period. Revenue~~2023 thirteen-week period compared to the 2022 thirteen-week period, and revenue per load on ~~loads hauled~~revenue generated by multimode capacity providers ~~increased for all modes, primarily due to~~decreased approximately 28% over the continuing U.S. and global economic recoveries coupled with the impact of global supply chain disruptions which were particularly acute with respect to international ocean and air freight. Revenue per load on loads hauled via air, ocean and rail intermodal increased 127%, 63% and 10%, respectively, during the 2022 thirteen-week period as compared to the 2021 thirteen-weeksame period. The decrease in the number of loads hauled by multimode capacity providers was due to a ~~43%~~34% decrease in rail loadings, ~~partially offset by an 18% increase~~a 30% decrease in ocean loadings and a 16% decrease in air loadings. ~~Air loadings during the 2022 thirteen-week period were approximately equal to the 2021 thirteen-week period.~~ The ~~43%~~34% decrease in rail loadings was ~~broad-based across several~~primarily attributable to decreased loadings at two specific agencies, ~~and customers. The 18% increase~~the 30% decrease in ocean loadings was due to a broad-based ~~increase~~decrease in demand across many customers for the Company’s ocean ~~services.~~

services and the 16% decrease in air loadings was primarily attributable to decreased loadings at one specific customer. Revenue per load on loads hauled via ocean, air and rail intermodal decreased 36%, 27% and 12%, respectively, during the 2023 thirteen-week period as compared to the 2022 thirteen-week period. The decrease in revenue per load on loads hauled by ocean and air cargo carriers was primarily related to the impact of global supply chain disruptions during the 2022 thirteen-week period, which were particularly acute with respect to international ocean and air freight. Revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity.

Purchased transportation was ~~78.0%~~76.7% and ~~78.2%~~78.3% of revenue in the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively. The decrease in purchased transportation as a percentage of revenue was primarily due to (i) a ~~lower~~decreased rate of purchased transportation on revenue generated by Truck Brokerage Carriers ~~partially offset by (i) an increased~~and (ii) a decreased percentage of revenue generated by Truck Brokerage Carriers and multimode capacity providers, which typically ~~has~~have a higher rate of purchased transportation than ~~revenue generated by~~that of BCO Independent Contractors; and (ii) an increased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity providers.Contractors. Commissions to agents were ~~8.5%~~8.9% and ~~7.8%~~8.2% of revenue in the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively. The increase in commissions to agents as a percentage of revenue was primarily attributable to a decreased cost of purchased transportation as a percentage of revenue on revenue generated by Truck Brokerage Carriers.

Investment income was ~~$716,000~~$2,484,000 and ~~$706,000~~$586,000 in the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively.

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

Other operating costs increased ~~$2,784,000~~$3,081,000 in the ~~2022~~2023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period. The increase in other operating costs compared to the prior year was primarily due to (i) an increased provision for contractor bad debt and (ii) increased trailing equipment maintenance costs as a result of ~~(x)~~ increased labor and parts costs as the Company retained older equipment to support current business levels, and (y) an increased average trailer fleet size during the 2022 thirteen-week period, (ii) the impact of the resumption of a large ~~in-person~~ ~~event for~~charged by the Company’s ~~BCO Independent Contractors and (iii) decreased~~network of third party trailer maintenance facilities, partially offset by increased gains on ~~the sale~~sales of operating property.

Insurance and claims ~~increased $1,876,000~~decreased $4,268,000 in the ~~2022~~2023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period. The ~~increase~~decrease in insurance and claims expense compared to the prior year was primarily due to ~~increased~~decreased severity of current year trucking claims during the ~~2022~~2023 thirteen-week period, ~~as well as~~partially offset by increased insurance premiums, primarily for commercial auto and excess liability ~~coverage, partially offset by decreased net unfavorable development~~coverage.

Selling, general and administrative costs decreased ~~$5,679,000~~$4,438,000 in the ~~2022~~2023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period. The decrease in selling, general and administrative costs compared to ~~the~~ prior year was primarily attributable to a decreased provision for incentive compensation, decreased stock-based compensation expense and a decreased ~~employee benefit costs,~~provision for customer bad debt, partially offset by increased information technology costs and increased wages. Included in selling, general and administrative costs for the 2023 thirteen-week period was a reduction to the Company’s current year provision for incentive compensation of $1,098,000. Included in selling, general and administrative costs for the 2022 thirteen-week period was incentive compensation expense of ~~$4,462,000 and $8,755,000 for the 2022 and 2021 thirteen-week periods, respectively, and stock-based~~$4,524,000. Stock-based compensation expense of ~~$3,599,000~~$1,274,000 and ~~$7,824,000~~$3,815,000 was included in selling, general and administrative costs for the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods, respectively.

Depreciation and amortization ~~expense~~ increased ~~$2,294,000~~$653,000 in the ~~2022~~2023 thirteen-week period compared to the ~~2021~~2022 thirteen-week period. The increase in depreciation and amortization expense was primarily due to increased depreciation on ~~digital technology tools in connection with the deployment of~~ new and ~~upgraded applications~~updated digital tools deployed for use by the Company’s network of agents, capacity providers and employees, ~~and to a lesser extent, in connection with increased~~partially offset by decreased trailing equipment depreciation.

~~Interest~~

The quarter-over-prior-year-quarter change in interest and debt (income) expense was $1,412,000, with net interest income of $307,000 in the 2023 thirteen-week period compared to net interest and debt expense of $1,105,000 in the 2022 thirteen-week ~~period~~period. The increase in interest and debt (income) expense was primarily attributable to increased ~~$82,000 compared to~~interest income earned on cash balances held by the ~~2021 thirteen-week~~transportation logistics segment and decreased average borrowings on the Company’s revolving credit facility, as the Company had no borrowings during the 2023 period.

The provisions for income taxes for the ~~2022~~2023 and ~~2021~~2022 thirteen-week periods were based on estimated annual effective income tax rates of ~~24.5%~~24.4% and ~~24.4%~~24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in ~~both periods~~the 2023 period primarily attributable to state taxes and ~~nondeductible~~

non-deductible

meals and entertainment. The estimated annual effective income tax rate was higher than the statutory federal income tax rate of 21% in the 2022 period primarily attributable to state taxes and

non-deductible

executive compensation. The effective income tax rate for the 2023 thirteen-week period was 24.6%, which was higher than the estimated annual effective income tax rate of 24.4%, primarily attributable to a discrete state income tax charge. The effective income tax rate for the 2022 thirteen-week period was ~~24.3%~~24.6%, which was ~~lower~~higher than the estimated annual effective income tax rate of 24.5%, primarily attributable to ~~higher than anticipated state income~~ tax ~~refunds and excess tax benefits~~shortfalls realized on stock-based ~~awards. The effective income tax rate~~awards in the ~~2021 thirteen-week period of 24.4% was consistent with the estimated annual effective income tax rate of 24.4%.~~

2022 period.

Net income was ~~$100,218,000,~~$66,559,000, or ~~$2.76~~$1.85 per diluted share, in the 2023 thirteen-week period. Net income was $112,555,000, or $3.05 per diluted share, in the 2022 thirteen-week period. ~~Net income was $98,675,000, or $2.58 per diluted share, in the 2021 thirteen-week period.~~

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were ~~$543,330,000~~$680,861,000 and 2.0 to 1, respectively, at July 1, 2023, compared with $561,255,000 and 1.6 to 1, respectively, at ~~September 24, 2022, compared with $512,917,000 and 1.5 to 1, respectively, at~~ December ~~25, 2021.~~31, 2022. Landstar has historically operated with current ratios within the range of 1.5 to 1 to 2.0 to 1. Cash provided by operating activities was ~~$436,381,000~~$191,733,000 in the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period compared with ~~$216,990,000~~$209,651,000 in the ~~2021 thirty-nine-week~~ 2022

twenty-six-week

period. The ~~increase~~decrease in cash flow provided by operating activities was primarily attributable to decreased net income, partially offset by favorable working capital impacts in connection with the ~~timing of collections of~~decreased net receivables, ~~and payment of certain payables and increased net income.~~

defined as accounts receivable less accounts payable.

The Company declared and paid ~~$0.80~~$0.60 per share, or ~~$29,506,000~~$21,586,000 in the aggregate, in cash dividends during the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September 24,~~July 1, 2023 and, during such period, also paid $71,854,000 of dividends payable which were declared in December 2022 and included in current liabilities in the consolidated balance sheet at December 31, 2022. The Company declared and paid $0.50 per share, or $18,581,000 in the aggregate, in cash dividends during the

twenty-six-week

period ended June 25, 2022 and, during such period, also paid $75,387,000 of dividends payable which were declared ~~during fiscal year~~in December 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021. ~~The Company declared and paid $0.67 per share, or $25,693,000 in~~During the ~~aggregate, in cash dividends during the thirty-nine-week~~

twenty-six-week

period ended September 25, 2021 and, during such period, also paid $76,770,000 of dividends payable which were declared during fiscal year 2020 and included in current liabilities in the consolidated balance sheet at December 26, 2020. During the thirty-nine-week period ended September 24, 2022,July 1, 2023, the Company purchased ~~1,900,826~~89,661 shares of its common stock at a total cost of ~~$285,983,000.~~$15,433,000. During the ~~thirty-nine-week~~

twenty-six-week

period ended ~~September~~June 25, ~~2021,~~2022, the Company purchased ~~317,046~~1,396,761 shares of its common stock at a total cost of ~~$50,230,000.~~$212,632,000. As of ~~September 24, 2022,~~July 1, 2023, the Company may purchase in the aggregate up to ~~1,099,174~~2,910,339 shares of its common stock under its authorized stock purchase ~~program.~~programs. Long-term debt, including current maturities, was ~~$109,470,000~~$84,709,000 at ~~September 24, 2022, $2,334,000~~July 1, 2023, $18,691,000 lower than at December ~~25, 2021.~~

31, 2022.

Shareholders’ equity was ~~$873,173,000,~~$993,561,000, or ~~89%~~92% of total capitalization (defined as long-term debt including current maturities plus equity), at ~~September 24, 2022,~~July 1, 2023, compared to ~~$862,010,000,~~$887,221,000, or ~~89%~~90% of total capitalization, at December ~~25, 2021.~~31, 2022. The increase in shareholders’ equity was primarily the result of net income, partially offset by dividends declared by the Company and purchases of shares of the Company’s common stock ~~dividends declared by the Company~~ in the ~~2022 thirty-nine-week period and taxes paid in lieu of shares issued related to stock-based compensation plans.~~

2023

twenty-six-week

period.

~~with the SEC on~~ July 8,1, 2022, Landstar entered into a second amended and restated credit agreement ~~dated July 1, 2022,~~ with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the ~~“Second Amended and Restated Credit~~“Credit Agreement”) ~~that superseded and replaced the First Amended and Restated Credit Agreement.~~. The ~~Second Amended and Restated~~ 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 ~~Second Amended and Restated~~ 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. The Second Amended and Restated Credit Agreement, which superseded and replaced the First Amended and Restated Credit Agreement, is referred to herein as the “Credit Agreement.” As of September 24, 2022, there were no borrowings outstanding under the revolving credit facility of the Credit Agreement.

At ~~September 24, 2022,~~July 1, 2023, the Company had no borrowings outstanding and ~~$33,493,000~~$33,492,000 of letters of credit outstanding under the Credit Agreement. At ~~September 24, 2022,~~July 1, 2023, there was ~~$266,507,000~~$266,508,000 available for future borrowings under the Credit ~~Agreement.~~Agreement and access to an additional $300,000,000 under the Credit Agreement’s “accordion” feature. In addition, the Company has $76,567,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $85,074,000 at ~~September 24, 2022.~~July 1, 2023. Investments, all of which are carried at fair value, include primarily investment-grade bonds, U.S. Treasury obligations and asset-backed securities having maturities of up to five years. Fair value of investments is based primarily on quoted market prices. See “Notes to Consolidated Financial Statements” included herein for further discussion on measurement of fair value of investments.

Historically, the Company has generated sufficient operating cash flow to meet its debt service requirements, fund continued growth, both organic and through acquisitions, complete or execute share purchases of its common stock under authorized share purchase programs, pay dividends and meet working capital needs. As an asset-light provider of integrated transportation management solutions, the Company’s annual capital requirements for operating property are generally for trailing equipment and information technology hardware and software. In addition, a significant portion of the trailing equipment ~~used by~~available to the Company is provided by third party capacity providers, thereby reducing the Company’s capital requirements. During the ~~2022 thirty-nine-week~~ 2023

twenty-six-week

period, the Company purchased ~~$21,096,000~~$12,631,000 of operating ~~property and acquired $26,741,000 of trailing equipment by entering into finance leases.~~property. Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year ~~2022~~2023 approximately ~~$17,000,000~~$26,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment.

On April 1, 2022, Landstar Investment Holdco, LLC, a newly formed Delaware LLC and wholly owned subsidiary of Landstar System Holdings, Inc., purchased Class A units of Cavnue, LLC for approximately $4,999,000 in cash consideration. Cavnue, LLC is a privately held company focused on combining technology and road infrastructure to unlock the full potential of connected and autonomous vehicles.

Management believes 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~~programs and meet working capital needs.

LEGAL MATTERS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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.~~estimates within its various programs. During the ~~2022~~2023 and ~~2021 thirty-nine-week~~ 2022

twenty-six-week

periods, insurance and claims costs included ~~$7,505,000~~$2,831,000 and ~~$4,522,000~~$5,381,000 of net unfavorable adjustments to prior years’ claims estimates, respectively. It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims liability at ~~September 24, 2022.~~

July 1, 2023, primarily due to the inherent difficulty in estimating the severity of commercial trucking claims and the potential judgment or settlement amount that may be incurred in connection with the resolution of such claims.

Significant variances from management’s estimates for the ultimate resolution of self-insured claims could be expected to positively or negatively affect Landstar’s earnings in a given quarter or year. However, management believes that the ultimate resolution of these items, given a range of reasonably likely outcomes, will not significantly affect the long-term financial condition of Landstar or its ability to fund its continuing operations.

SEASONALITY

Landstar’s operations are subject to seasonal trends common to the trucking industry. ~~Truckload~~Historically, truckload shipments for the quarter ending in March are typically lower than for the quarters ending June, September and December.

The

COVID-19

global pandemic and related supply chain issues significantly disrupted these typical seasonal patterns. In particular, the Company’s 2022 fiscal year results did not reflect normal seasonal patterns. Moreover, the

twenty-six

week period ended July 1, 2023 also did not reflect normal seasonal patterns. No assurances can be given regarding the extent to which or when trends common to the trucking industry and Landstar’s operations, in particular, will return to more typical,

pre-pandemic,

seasonal patterns.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to changes in interest rates as a result of its financing activities, primarily its borrowings on its revolving credit facility, if any, and investing activities with respect to investments held by the insurance segment.

On August 18, 2020, Landstar entered into the First Amended and Restated Credit Agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent. As previously disclosed in a Form ~~8-K~~ ~~filed with the SEC on~~ July 8,1, 2022, Landstar entered into the Second Amended and Restated Credit Agreement ~~dated July 1, 2022,~~(the “Credit Agreement”) with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent. The Second Amended and Restated Credit Agreement, which superseded and replaced the First Amended and Restated Credit Agreement, is referred to herein as the “Credit Agreement.” The Second Amended and Restated 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 ~~Second Amended and Restated~~ 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.

The revolving credit loans under the Credit Agreement as of ~~September 24, 2022,~~July 1, 2023, 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 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. During the entire ~~third~~second quarter of ~~2022~~2023 and as of ~~September 24, 2022~~July 1, 2023 and December ~~25, 2021,~~31, 2022, the Company had no borrowings outstanding under the Credit Agreement.

Long-term investments, all of which are

available-for-sale

and are carried at fair value, include primarily investment-grade bonds and asset-backed securities having maturities of up to five years. Assuming that the long-term portion of investments remains at ~~$111,457,000,~~$92,757,000, the balance at ~~September 24, 2022,~~July 1, 2023, a hypothetical increase or decrease in interest rates of 100 basis points would not have a material impact on future earnings on an annualized basis. Short-term investments consist of short-term investment-grade instruments and the current maturities of investment-grade corporate bonds and asset-backed securities. Accordingly, any future interest rate risk on these short-term investments would not be material to the Company’s operating results.

Assets and liabilities of the Company’s Canadian and Mexican operations are translated from their functional currency to U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average monthly exchange rates during the period. Adjustments resulting from the translation process are included in accumulated other comprehensive income. Transactional gains and losses arising from receivable and payable balances, including intercompany balances, in the normal course of business that are denominated in a currency other than the functional currency of the operation are recorded in the statements of income

when they occur. The assets held at the Company’s Canadian and Mexican subsidiaries at ~~September 24, 2022~~July 1, 2023 were collectively, as translated to U.S. dollars, ~~approximately 2%~~less than 3% of total consolidated assets. Accordingly, translation gains or losses of ~~50% or less~~approximately 30% related to the Canadian and Mexican operations would not be material.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Company

The ~~following table provides information regarding the Company’s~~Company did not purchase any shares of its common stock during the period from ~~June 26, 2022~~April 2, 2023 to ~~September 24, 2022,~~July 1, 2023, the Company’s ~~third~~second fiscal ~~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
June 25, 2022
            1,603,239
June 26, 2022 – July 23, 2022
   —      $ —      —      1,603,239
July 24, 2022 – August 20, 2022
   12,110    146.44    12,110    1,591,129
August 21, 2022 – September 24, 2022
   491,955    145.50    491,955    1,099,174







Total
   504,065    $ 145.52    504,065

quarter

On December 7, 2021, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,912,824 shares of the Company’s common stock from time to time in the open market and in privately negotiated transactions. On December 6, 2022, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,900,826 additional shares of the Company’s common stock from time to time in the open market and in privately negotiated transactions. As of ~~September 24, 2022,~~July 1, 2023, the Company had authorization to purchase in the aggregate up to ~~1,099,174~~2,910,339 shares of its common stock under ~~this program.~~these programs. No specific expiration date has been assigned to the December 7, 2021 ~~authorization.~~

~~Dividends~~

~~As previously disclosed in a Form~~ ~~8-K~~ ~~filed with the SEC on July 8,~~or December 6, 2022 authorizations.

Dividends

Landstar entered into the Second Amended and Restated Credit Agreement, dated July 1, 2022, with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock in the event 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, 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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~

During the thirteen-week period ended July 1, 2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Landstar’s securities that was intended to satisfy the affirmative defense conditions of Rule

10b5-1(c)

or any

“non-Rule

10b5-1

trading arrangement.”

Item 6. Exhibits

The exhibits listed on the Exhibit Index are furnished as part of this quarterly report on Form

10-Q.


	September 24, 2022			December 25, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	177,796		$	215,522
Short-term investments		50,637			35,778
Trade accounts receivable, less allowance of $10,464 and $7,074		1,133,681			1,154,314
Other receivables, including advances to independent contractors, less allowance of $9,877 and $8,125		87,241			101,124
Other current assets		35,493			16,162

Total current assets		1,484,848			1,522,900

Operating property, less accumulated depreciation and amortization of $383,458 and $344,099		321,585			317,386
Goodwill		41,004			40,768
Other assets		141,103			164,411

Total assets	$	1,988,540		$	2,045,465

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Cash overdraft	$	97,686		$	116,478
Accounts payable		644,054			604,130
Current maturities of long-term debt		37,375			36,561
Insurance claims		58,131			46,896
Dividends payable		—			75,387
Other current liabilities		104,272			130,531

Total current liabilities		941,518			1,009,983

Long-term debt, excluding current maturities		72,095			75,243
Insurance claims		55,765			49,509
Deferred income taxes and other noncurrent liabilities		45,989			48,720

Shareholders’ Equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,380,565 and 68,232,975 shares		684			682
Additional paid-in capital		255,486			255,148
Retained earnings		2,625,290			2,317,184
Cost of 32,455,300 and 30,539,235 shares of common stock in treasury		(1,992,886	)		(1,705,601	)
Accumulated other comprehensive loss		(15,401	)		(5,403	)

Total shareholders’ equity		873,173			862,010

Total liabilities and shareholders’ equity	$	1,988,540		$	2,045,465


	Thirty Nine Weeks Ended				Thirteen Weeks Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Revenue	$	5,761,795	$	4,592,551	$	1,816,132	$	1,734,299
Investment income		2,023		2,138		716		706
Costs and expenses:
Purchased transportation		4,512,341		3,583,197		1,416,323		1,356,671
Commissions to agents		465,759		356,997		154,125		135,295
Other operating costs, net of gains on asset sales/dispositions		34,878		27,117		13,356		10,572
Insurance and claims		96,265		75,198		31,445		29,569
Selling, general and administrative		165,199		158,720		53,519		59,198
Depreciation and amortization		42,627		36,532		14,582		12,288

Total costs and expenses		5,317,069		4,237,761		1,683,350		1,603,593

Operating income		446,749		356,928		133,498		131,412
Interest and debt expense		3,275		2,974		1,047		965

Income before income taxes		443,474		353,954		132,451		130,447
Income taxes		105,862		85,745		32,233		31,772

Net income	$	337,612	$	268,209	$	100,218	$	98,675

Diluted earnings per share	$	9.15	$	7.00	$	2.76	$	2.58

Average diluted shares outstanding		36,886,000		38,342,000		36,334,000		38,218,000

Dividends per common share	$	0.80	$	0.67	$	0.30	$	0.25


	Number of RSUs			Weighted Average Grant Date Fair Value

Outstanding at December 25, 2021		209,399		$	102.90
Granted		49,825		$	139.54
Shares earned in excess of target (1)		91,497		$	92.58
Vested shares, including shares earned in excess of target		(177,146	)	$	95.48
Forfeited		(21,989	)	$	113.85

Outstanding at September 24, 2022		151,586		$	115.80


	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value

Non-vested at December 25, 2021		56,436		$	125.16
Granted		25,354		$	152.54
Vested		(27,074	)	$	122.68
Forfeited		(6,921	)	$	144.45

Non-vested at September 24, 2022		47,795		$	138.30


	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)


Options outstanding at December 25, 2021		8,570		$	55.42
Exercised		(4,100	)	$	54.36

Options outstanding at September 24, 2022		4,470		$	56.40		0.4	$	386

Options exercisable at September 24, 2022		4,470		$	56.40		0.4	$	386


	Thirty Nine Weeks Ended
	September 24, 2022						September 25, 2021
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total

External revenue	$	5,702,959	$	58,836	$	5,761,795	$	4,539,561	$	52,990	$	4,592,551
Internal revenue				65,753		65,753				53,028		53,028
Investment income				2,023		2,023				2,138		2,138
Operating income		412,054		34,695		446,749		323,370		33,558		356,928
Expenditures on long-lived assets		21,096				21,096		18,561				18,561
Goodwill		41,004				41,004		40,980				40,980

	Thirteen Weeks Ended
	September 24, 2022						September 25, 2021
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,796,401	$	19,731	$	1,816,132	$	1,716,004	$	18,295	$	1,734,299
Internal revenue				12,883		12,883				9,533		9,533
Investment income				716		716				706		706
Operating income		120,164		13,334		133,498		123,410		8,002		131,412
Expenditures on long-lived assets		13,629				13,629		9,561				9,561


			Gross		Gross
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value

September 24, 2022
Money market investments	$	22,062	$	—	$	—	$	22,062
Asset-backed securities		19,742		—		2,666		17,076
Corporate bonds and direct obligations of government agencies		129,250		—		8,536		120,714
U.S. Treasury obligations		2,344		—		102		2,242

Total	$	173,398	$	—	$	11,304	$	162,094

December 25, 2021
Money market investments	$	8,750	$	—	$	—	$	8,750
Asset-backed securities		22,441		—		346		22,095
Corporate bonds and direct obligations of government agencies		137,916		1,406		966		138,356
U.S. Treasury obligations		2,342		50		—		2,392

Total	$	171,449	$	1,456	$	1,312	$	171,593


Finance leases:
Amortization of right-of-use assets	$	16,455
Interest on lease liability		2,117

Total finance lease cost		18,572

Operating leases:
Lease cost		2,587
Variable lease cost		—
Sublease income		(3,711	)

Total net operating lease income		(1,124	)

Total net lease cost	$	17,448


	Thirty Nine Weeks Ended						Thirteen Weeks Ended
	September 24,			September 25,			September 24,			September 25,
	2022			2021			2022			2021
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	3,022,297		$	2,502,025		$	914,154		$	918,115
Unsided/platform equipment		1,336,956			1,112,358			453,924			422,979
Less-than-truckload		105,994			85,551			35,343			30,819
Other truck transportation ⁽¹⁾		632,001			518,472			195,345			208,817

Total truck transportation		5,097,248			4,218,406			1,598,766			1,580,730
Rail intermodal		113,762			120,540			27,652			44,472
Ocean and air cargo carriers		475,156			191,951			164,252			84,111
Other ⁽²⁾		75,629			61,654			25,462			24,986

	$	5,761,795		$	4,592,551		$	1,816,132		$	1,734,299

Revenue on loads hauled via BCO Independent Contractors included in total truck transportation	$	2,043,772		$	1,899,313		$	627,809		$	690,257

Number of loads:
Truck transportation
Truckload:
Van equipment		1,130,263			1,037,516			366,513			359,263
Unsided/platform equipment		420,436			381,594			141,091			133,332
Less-than-truckload		142,740			135,038			45,912			49,943
Other truck transportation ⁽¹⁾		243,341			208,402			76,594			81,242

Total truck transportation		1,936,780			1,762,550			630,110			623,780
Rail intermodal		31,940			40,420			7,720			13,620
Ocean and air cargo carriers		34,410			29,650			11,520			10,190

		2,003,130			1,832,620			649,350			647,590

Loads hauled via BCO Independent Contractors included in total truck transportation		777,250			773,270			249,420			263,120

Revenue per load:
Truck transportation
Truckload:
Van equipment	$	2,674		$	2,412		$	2,494		$	2,556
Unsided/platform equipment		3,180			2,915			3,217			3,172
Less-than-truckload		743			634			770			617
Other truck transportation ⁽¹⁾		2,597			2,488			2,550			2,570
Total truck transportation		2,632			2,393			2,537			2,534
Rail intermodal		3,562			2,982			3,582			3,265
Ocean and air cargo carriers		13,809			6,474			14,258			8,254
Revenue per load on loads hauled via BCO Independent Contractors	$	2,629		$	2,456		$	2,517		$	2,623

Revenue by capacity type (as a % of total revenue):
Truck capacity providers:
BCO Independent Contractors		35	%		41	%		35	%		40	%
Truck Brokerage Carriers		53	%		50	%		53	%		51	%
Rail intermodal		2	%		3	%		2	%		3	%
Ocean and air cargo carriers		8	%		4	%		9	%		5	%
Other		1	%		1	%		1	%		1	%


	September 24, 2022		September 25, 2021
BCO Independent Contractors		10,742		10,955
Truck Brokerage Carriers:
Approved and active ⁽¹⁾		71,207		58,676
Other approved		30,222		24,602

		101,429		83,278

Total available truck capacity providers		112,171		94,233

Trucks provided by BCO Independent Contractors		11,644		11,746


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
June 25, 2022								1,603,239
June 26, 2022 – July 23, 2022		—	$	—		—		1,603,239
July 24, 2022 – August 20, 2022		12,110		146.44		12,110		1,591,129
August 21, 2022 – September 24, 2022		491,955		145.50		491,955		1,099,174

Total		504,065	$	145.52		504,065


Exhibit No.		Description

~~(10)~~(3)		~~Material Contracts~~

~~10.1+~~3.1		~~Landstar System, Inc. 2022 Directors~~Restated Certificate of Incorporation of the Company, dated May 10, 2023, including Certificate of Designation of Junior Participating Preferred Stock ~~Compensation Plan (Incorporated~~dated February 10, 1993 (incorporated by reference to ~~Appendix A~~Exhibit 3.1 to the Registrant’s ~~Definitive Proxy Statement~~Current Report on Form 8-K, filed on ~~March 29, 2022~~May 11, 2023 (Commission File No. 0-21238)).

~~10.2~~3.2		~~Second~~The Company’s Amended and Restated ~~Credit Agreement, dated~~Bylaws, as adopted as of July 1, 2022, among Landstar System Holdings, Inc., the Company, the lenders named therein, and JPMorgan Chase Bank, N.A. as Administrative Agent (including exhibits and schedules thereto). (IncorporatedMay 10, 2023 (incorporated by reference to Exhibit ~~10.1~~3.2 to the Registrant’s Current Report on Form 8-K, filed on ~~July 8, 2022~~May 11, 2023 (Commission File No. 0-21238)).

10.3+*		~~Letter agreement, dated July 1, 2022, between Landstar System, Inc. and Fred L. Pensotti~~

(31)		Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.1*		Chief Executive Officer certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Chief Financial Officer certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)		Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1**		Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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)


				LANDSTAR SYSTEM, INC.

Date: ~~October 28, 2022~~August 4, 2023				/s/ James B. Gattoni
				James B. Gattoni
				President and Chief Executive Officer

Date: ~~October 28, 2022~~August 4, 2023				/s/ James P. Todd
				James P. Todd
				Vice President, Chief Financial Officer and Assistant Secretary

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company