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 28, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-21238
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(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 | ||
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 Yes ☒ No ☐
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): 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): ☒ |
Accelerated filer |
☐ | ||||
Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
||||||
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 ☐ No 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 21, 2024 was 35,331,173 .
Index
2
| 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 |
3
PART I -
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 weeks ended September 28, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 28, 2024. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2023 Annual Report on Form
10-K.
4
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
September 28, 2024 |
December 30, 2023 |
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ASSETS |
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| Current Assets |
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| Cash and cash equivalents |
$ | $ | ||||||
| Short-term investments |
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| Trade accounts receivable, less allowance of $ |
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| Other receivables, including advances to independent contractors, less allowance of $ |
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| Other current assets |
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| Total current assets |
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| Operating property, less accumulated depreciation and amortization of $ |
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| Goodwill |
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| Other assets |
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| Total assets |
$ | $ | ||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities |
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| Cash overdraft |
$ | $ | ||||||
| Accounts payable |
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| Current maturities of long-term debt |
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| Insurance claims |
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| Dividends payable |
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| Contractor escrow |
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| Other current liabilities |
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| Total current liabilities |
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| Long-term debt, excluding current maturities |
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| Insurance claims |
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| Deferred income taxes and other noncurrent liabilities |
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| Shareholders’ Equity |
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| Common stock, $ |
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| Additional paid-in capital |
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| Retained earnings |
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| Cost of |
( |
) | ( |
) | ||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity |
$ | $ | ||||||
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See accompanying notes to consolidated financial statements.
5
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 28, 2024 |
September 30, 2023 |
September 28, 2024 |
September 30, 2023 |
|||||||||||||
| Revenue |
$ | $ | $ | $ | ||||||||||||
| Investment income |
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| Costs and expenses: |
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| Purchased transportation |
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| Commissions to agents |
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| Other operating costs, net of gains on asset sales/dispositions |
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| Insurance and claims |
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| Selling, general and administrative |
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| Depreciation and amortization |
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| Total costs and expenses |
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| Operating income |
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| Interest and debt (income) expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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| Income before income taxes |
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| Income taxes |
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| Net income |
$ | $ | $ | |||||||||||||
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| Basic and diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
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| Average basic and diluted shares outstanding |
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| Dividends per common share |
$ | $ | $ | $ | ||||||||||||
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See accompanying notes to consolidated financial statements.
6
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Thirty-Nine Weeks Ended |
Thirteen Weeks Ended |
|||||||||||||||
September 28, 2024 |
September 30, 2023 |
September 28, 2024 |
September 30, 2023 |
|||||||||||||
| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive (loss) income: |
||||||||||||||||
| Unrealized holding gains on available-for-sale $ |
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| Foreign currency translation (losses) gains |
( |
) | ( |
) | ( |
) | ||||||||||
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| Other comprehensive (loss) income |
( |
) | ( |
) | ||||||||||||
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| Comprehensive income |
$ | $ | $ | $ | ||||||||||||
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See accompanying notes to consolidated financial statements.
7
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirty-Nine Weeks Ended |
||||||||
September 28, 2024 |
September 30, 2023 |
|||||||
OPERATING ACTIVITIES |
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Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
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Non-cash interest charges |
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Provisions for losses on trade and other accounts receivable |
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Gains on sales/disposals of operating property |
( |
) | ( |
) | ||||
Deferred income taxes, net |
( |
) | ( |
) | ||||
Stock-based compensation |
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Changes in operating assets and liabilities: |
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Decrease in trade and other accounts receivable |
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Increase in other assets |
( |
) | ( |
) | ||||
Increase (decrease) in accounts payable |
( |
) | ||||||
Decrease in other liabilities |
( |
) | ( |
) | ||||
Increase (decrease) in insurance claims |
( |
) | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
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INVESTING ACTIVITIES |
||||||||
Sales and maturities of investments |
||||||||
Purchases of investments |
( |
) | ( |
) | ||||
Purchases of operating property |
( |
) | ( |
) | ||||
Proceeds from sales of operating property |
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NET CASH USED BY INVESTING ACTIVITIES |
( |
) | ( |
) | ||||
FINANCING ACTIVITIES |
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Decrease in cash overdraft |
( |
) | ( |
) | ||||
Dividends paid |
( |
) | ( |
) | ||||
Proceeds from exercises of stock options |
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Taxes paid in lieu of shares issued related to stock-based compensation plans |
( |
) | ( |
) | ||||
Purchases of common stock |
( |
) | ( |
) | ||||
Principal payments on finance lease obligations |
( |
) | ( |
) | ||||
NET CASH USED BY FINANCING ACTIVITIES |
( |
) | ( |
) | ||||
Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
(Decrease) increase in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents at beginning of period |
||||||||
Cash and cash equivalents at end of period |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
8
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Thirty-Nine and Thirteen Weeks Ended September 28, 2024 and September 30, 2023
(Dollars in thousands)
(Unaudited)
Common Stock |
Additional Paid-In |
Retained |
Treasury Stock at Cost |
Accumulated Other Comprehensive |
||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Shares |
Amount |
(Loss) Income |
Total |
|||||||||||||||||||||||||
| Balance December 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Net income |
||||||||||||||||||||||||||||||||
| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance March 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive loss |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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| Balance June 29, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Other comprehensive income |
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| Balance September 28, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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9
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Treasury Stock at Cost |
Accumulated Other Comprehensive (Loss) Income |
Total |
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Shares |
Amount |
Shares |
Amount |
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| Balance December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance April 1, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance July 1, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive loss |
( |
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| Balance September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
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See accompanying notes to consolidated financial statements.
10
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 and thirteen-week periods ended September 28, 2024 and September 30, 2023 (dollars in thousands):
Thirty-Nine Weeks Ended |
Thirteen Weeks Ended |
|||||||||||||||
| Mode |
September 28, 2024 |
September 30, 2023 |
September 28, 2024 |
September 30, 2023 |
||||||||||||
| Truck – BCO Independent Contractors |
% | % | % | % | ||||||||||||
| Truck – Truck Brokerage Carriers |
% | % | % | % | ||||||||||||
| Rail intermodal |
% | % | % | % | ||||||||||||
| Ocean and air cargo carriers |
% | % | % | % | ||||||||||||
| Truck Equipment Type |
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| Van equipment |
$ | $ | |
$ | |
$ | |
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| Unsided/platform equipment |
$ | |
$ | $ | $ | |||||||||||
| Less-than-truckload |
$ | $ | $ | $ | ||||||||||||
| Other truck transportation (1) |
$ | $ | $ | $ | ||||||||||||
| (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. |
11
(2) Share-based Payment Arrangements
As
of September 28, 2024, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors, the 2022 Directors Stock Compensation Plan (the “2022 DSCP”). 6,000,000 shares of the Company’s common stock were authorized for issuance under the 2011 EIP and 200,000 shares of the Company’s common stock were authorized for issuance under the 2022 DSCP. The 2011 EIP and 2022 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):
Thirty-Nine Weeks Ended |
Thirteen Weeks Ended |
|||||||||||||||
September 28, 2024 |
September 30, 2023 |
September 28, 2024 |
September 30, 2023 |
|||||||||||||
| Total cost of the Plans during the period |
$ | $ | $ | ( |
) | $ | |
|||||||||
| Amount of related income tax benefit recognized during the period |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
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| Net cost of the Plans during the period |
$ | $ | $ | ( |
) | $ | ||||||||||
| |
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|
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Included in income tax benefits recognized in the thirty-nine-week periods ended September 28, 2024 and September 30, 2023 were excess tax benefits from stock-based awards of $1,122,000 and $2,830,000 , respectively.
As of September 28, 2024, there were 181,450 shares of the Company’s common stock reserved for issuance under the 2022 DSCP and 2,800,060 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 |
Weighted Average Grant Date |
|||||||
RSUs |
Fair Value |
|||||||
| Outstanding at December 30, 2023 |
$ | |||||||
| Granted |
$ | |||||||
| Shares earned in excess of target (1) |
$ | |||||||
| Vested shares |
( |
) | $ | |
||||
| Forfeited |
( |
) | $ | |||||
| |
|
|||||||
| Outstanding at September 28, 2024 |
$ | |||||||
| |
|
|||||||
(1) |
Represents additional shares earned under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each of those awards. |
During the thirty-nine-week period ended September 28, 2024, the Company granted RSUs with a performance condition and RSUs with a market condition, as further described below. Outstanding RSUs at both December 30, 2023 and September 28, 2024 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2023 Annual Report on Form
10-K.
RSUs with a performance condition granted on February 2, 2024 may vest on January 31 of 2027, 2028 and 2029 based on growth in operating income and
pre-tax
income per diluted share from continuing operations as compared to the results from the 2023 fiscal year. On February 2, 2024, the Company granted 58,268 RSUs that vest based on a market condition. These RSUs may vest based on the achievement of the target Company’s total shareholder return (“TSR”) compound annual growth rate, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary, and are eligible to vest annually starting after the sixth anniversary of the grant date and concluding after the tenth anniversary of the grant date. The fair value of this RSU award was determined at the time of grant based on the expected achievement of the market condition. With respect to these RSU awards, the Company reports compensation expense ratably over the service period of the award based on the number of units granted multiplied by the grant date fair value of the RSU. Previously recognized compensation cost would be reversed only if the employee did not complete the requisite service period due to termination of employment.
The Company recognized approximately $408,000 and $1,503,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September 28, 2024 and September 30, 2023, respectively. As of September 28, 2024, there was a maximum of $40.7 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.6 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.
Non-vested
Restricted Stock and Deferred Stock Units The following table summarizes information regarding the Company’s outstanding shares of
non-vested
restricted stock and Deferred Stock Units (defined below) under the Plans: Number of Shares and Deferred Stock Units |
Weighted Average Grant Date Fair Value |
|||||||
Non-vested at December 30, 2023 |
$ | |||||||
Granted |
$ | |||||||
Vested |
( |
) | $ | |||||
Forfeited |
( |
) | $ | |||||
Non-vested at September 28, 2024 |
$ | |||||||
The fair value of each share of the Company’s common stock on the date of grant. Shares of 100 % on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of the recipient’s separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100 % on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.
non-vested
restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of non-vested
restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, in two equal annual installments on the first and second anniversary of the date of the grant or As of September 28, 2024, there was $5,754,000 of total unrecognized compensation cost related to 1.8 years.
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 Stock Options
The Company had no 218,000
non-vested
stock options granted under the Plans as of December 30, 2023 or September 28, 2024. The total intrinsic value of stock options exercised during the thirty-nine-week period ended September 30, 2023 was $.
(3) Income Taxes
The
provisions for income taxes for the 2024 and 2023 thirty-nine-week periods were based on estimated annual effective income tax rates of 24.3 % and 24.4 %, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2024 thirty-nine-week period was 23.4 %. The effective income tax rate was higher than the statutory federal income tax rate of 21 % in the 2024 period primarily attributable to state taxes, partially offset by federal tax credits. The effective income tax rate for the 2023 thirty-nine-week period was 24.0 %. The effective income tax rate was higher than the statutory federal income tax rate of 21 % in the 2023 period primarily attributable to state taxes.
13
(4) Earnings Per Share
Basic
non-vested
restricted stock and outstanding Deferred Stock Units. Diluted earnings per share are based on the weighted average number of common shares outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options. For each of the thirty-nine-week and thirteen-week periods ended September 28, 2024 and September 30, 2023, the weighted-average number of common shares outstanding is the same for purposes of the calculations of both basic and diluted earnings per share. During and as of the thirty-nine-week period ended September 28, 2024, there were 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) Additional Cash Flow Information
During the
2024 thirty-
nine-week period, Landstar paid income taxes and interest of $
and $
, respectively. During the
2023 thirty-
nine-week period, Landstar paid income taxes and interest of $
and $
, respectively. Landstar acquired operating property by entering into finance leases in the amount of $
in the
2024 thirty-
nine-week period. Landstar acquired $
of operating property for which the Company accrued a corresponding liability in accounts payable of $
and in other noncurrent liabilities of $
as of September
28,
2024. Landstar did not acquire any operating property by entering into finance leases in the
2023 thirty-
nine-week period. During the
2024 thirty-
nine-week period, the Company purchased its common stock at a total cost of $
, including $
in cash purchases and accrued excise tax of $
, which is included in other current liabilities in the consolidated balance sheet at September
28,
2024.
(6) Segment Information
The
ninefollowing
table summarizes information about the Company’s reportable business segments
as of and for the thirty--week and
thirteen-week periods ended September
28,
2024 and September
30,
2023 (in thousands):
Thirty-Nine Weeks Ended |
||||||||||||||||||||||||
September 28, 2024 |
September 30, 2023 |
|||||||||||||||||||||||
Transportation Logistics |
Insurance |
Total |
Transportation Logistics |
Insurance |
Total |
|||||||||||||||||||
External revenue |
$ | |
$ | |
$ | $ | |
$ | |
$ | ||||||||||||||
Internal revenue |
||||||||||||||||||||||||
Investment income |
||||||||||||||||||||||||
Operating income |
||||||||||||||||||||||||
Expenditures on long-lived assets |
||||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Thirteen Weeks Ended |
||||||||||||||||||||||||
September 28, 2024 |
September 30, 2023 |
|||||||||||||||||||||||
Transportation Logistics |
Insurance |
Total |
Transportation Logistics |
Insurance |
Total |
|||||||||||||||||||
External revenue |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Internal revenue |
||||||||||||||||||||||||
Investment income |
||||||||||||||||||||||||
Operating income |
||||||||||||||||||||||||
Expenditures on long-lived assets |
||||||||||||||||||||||||
In the thirty-nine-week periods ended September 28, 2024 and September 30, 2023, no 10
14
(7) Other Comprehensive Income
The
following table presents the
components
of and changes in accumulated other comprehensive (loss) income, net of related income taxes, as of and for the thirty-nine-week period ended September 28, 2024 (in thousands): Unrealized Holding (Losses) Gains on Available-for-Sale Securities |
Foreign Currency Translation |
Total |
||||||||||
| Balance as of December 30, 2023 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Other comprehensive income (loss) |
( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|||||||
| Balance as of September 28, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|
|
|||||||
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 period ended September 28, 2024.
(8) Investments
Investments
money market investments. Investments in the bond portfolio are reported as 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 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 statements of income, while unrealized losses considered to be a result of
were $available-for-sale
available-for-sale
non-credit-related
factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability,
which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities, commercial paper and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio The amortized cost and fair values of investments are as follows at September 28, 2024 and December 30, 2023 (in thousands):
available-for-sale
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| September 28, 2024 |
||||||||||||||||
| Money market investments |
$ | $ | $ | $ | ||||||||||||
| Asset-backed securities |
||||||||||||||||
| Corporate bonds, commercial paper and direct obligations of government agencies |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | |
$ | |
$ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| December 30, 2023 |
||||||||||||||||
| Money market investments |
$ | $ | $ | $ | ||||||||||||
| Asset-backed securities |
||||||||||||||||
| Corporate bonds, commercial paper and direct obligations of government agencies |
||||||||||||||||
| U.S. Treasury obligations |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
For those investments with unrealized losses at September 28, 2024 and December 30, 2023, the following table summarizes the duration of the unrealized loss (in thousands):
available-for-sale
Less than 12 months |
12 months or longer |
Total |
||||||||||||||||||||||
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
|||||||||||||||||||
| September 28, 2024 |
||||||||||||||||||||||||
| Asset-backed securities |
$ | $ | |
$ | $ | |
$ | $ | |
|||||||||||||||
| Corporate bonds, commercial paper, and direct obligations of government agencies |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| December 30, 2023 |
||||||||||||||||||||||||
| Asset-backed securities |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Corporate bonds, commercial paper, and direct obligations of government agencies |
||||||||||||||||||||||||
| U.S. Treasury obligations |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality. The Company expects to recover, through collection of all of the contractual cash flows of each security, the amortized cost basis of these securities as it does not intend to sell, and does not anticipate being required to sell, these securities before recovery of the cost basis. For these reasons, no losses have been recognized in the Company’s consolidated statements of income.
(9) Leases
Landstar’s
right-of-use
These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other 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.
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”
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 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.
right-of-use
As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate.
The components of lease cost for finance leases and operating leases for the thirty-nine weeks ended September 28, 2024 were (in thousands):
| Finance leases: |
||||
| Amortization of right-of-use |
$ | |||
| Interest on lease liability |
||||
| |
|
|||
| Total finance lease cost |
||||
| Operating leases: |
||||
| Lease cost |
||||
| Variable lease cost |
||||
| Sublease income |
( |
) | ||
| |
|
|||
| Total net operating lease income |
( |
) | ||
| |
|
|||
| Total net lease cost |
$ | |||
| |
|
A summary of the lease classification on the Company’s consolidated balance sheet as of September 28, 2024 is as follows (in thousands):
Assets:
| Operating lease right-of-use |
$ | |||||
| Finance lease assets |
|
|||||
| |
|
|||||
| Total lease assets |
$ | |||||
| |
|
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 28, 2024 (in thousands):
Finance Leases |
Operating Leases |
|||||||
| 2024 Remainder |
$ | $ | ||||||
| 2025 |
||||||||
| 2026 |
||||||||
| 2027 |
||||||||
| 2028 |
||||||||
| Thereafter |
||||||||
| |
|
|
|
|||||
| Total future minimum lease payments |
||||||||
| Less amount representing interest ( |
||||||||
| |
|
|
|
|||||
| Present value of minimum lease payments |
$ | $ | ||||||
| |
|
|
|
|||||
| Current maturities of long-term debt |
||||||||
| Long-term debt, excluding current maturities |
||||||||
| |
||||||||
| |
The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of September 28, 2024 were:
Finance Leases |
Operating Leases |
|||||||
| Weighted average remaining lease term (years) |
||||||||
| Weighted average discount rate |
% | % | ||||||
(10) Debt
Other
than the finance lease obligations as presented on the consolidated balance sheets, the Company had no
On July 1, 2022 , Landstar entered into a second amended and restated credit agreement with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (as further amended as of June 21, 2024, the “Credit Agreement”). The Credit Agreement, which matures July 1, 2027, provides for borrowing capacity in the form of a revolving credit facility of $300,000,000 , $45,000,000 of which may be utilized in the form of letters of credit. The Credit Agreement also includes an “accordion” feature providing for a possible increase of up to an aggregate amount of borrowing capacity of $600,000,000 . As of September 28, 2024, the Company had no borrowings outstanding under the Credit Agreement.
The revolving credit loans under the Credit Agreement, at the option of Landstar, bear interest at (i) a forward-looking term rate based on the secured overnight financing rate plus 0.10 % and an applicable margin ranging from 1.25 % to 2.00 %, or (ii) an alternate base rate plus an applicable margin ranging from 0.25 % to 1.00 %, in each case with the applicable margin determined based upon the Company’s Leverage Ratio, as defined in the Credit Agreement, at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The revolving credit facility bears a commitment fee, payable quarterly in arrears, of 0.20 % to 0.30 %, based on the Company’s Leverage Ratio at the end of the most recent applicable fiscal quarter for which financial statements have been
delivered
. The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum fixed charge coverage ratio, as described in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35 % or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.
The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value.
(11) Commitments and Contingencies
Short-term
non-current
portion of the bond portfolio of $non-current
investments, provide collateral for the $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) Change in Accounting Estimate for Self-Insured Claims