10-Q 1 d858305d10q.htm 10-Q 10-Q
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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
 
 
 
LANDSTAR SYSTEM, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
06-1313069
(State or other jurisdiction of
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):
 
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated
filer
 
  
Smaller reporting company
 
 
  
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

 

PART I – Financial Information

 

Item 1. Financial Statements (unaudited)   
Consolidated Balance Sheets as of September 28, 2024 and December 30, 2023      Page 5  
Consolidated Statements of Income for the Thirty-Nine and Thirteen Weeks Ended September 28, 2024 and September 30, 2023      Page 6  
Consolidated Statements of Comprehensive Income for the Thirty-Nine and Thirteen Weeks Ended September 28, 2024 and September 30, 2023      Page 7  
Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended September 28, 2024 and September 30, 2023      Page 8  
Consolidated Statements of Changes in Shareholders’ Equity for the Thirty-Nine and Thirteen Weeks Ended September 28, 2024 and September 30, 2023      Page 9  
Notes to Consolidated Financial Statements      Page 11  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      Page 21  
Item 3. Quantitative and Qualitative Disclosures About Market Risk      Page 34  
Item 4. Controls and Procedures      Page 34  
PART II – Other Information

 

Item 1. Legal Proceedings      Page 35  
Item 1A. Risk Factors      Page 35  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds      Page 36  
Item 5. Other Information      Page 37  
Item 6. Exhibits      Page 37  

Signatures

     Page 39  

 

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


2.50http://fasb.org/us-gaap/2024#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#DeferredIncomeTaxesAndOtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2024#PropertyPlantAndEquipmentNet
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 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
 
ASSETS
  
 
 
 
 
 
Current Assets
    
Cash and cash equivalents
   $ 468,830     $ 481,043  
Short-term investments
     62,451       59,661  
Trade accounts receivable, less allowance of $12,134 and $11,738
     694,633       743,762  
Other receivables, including advances to independent contractors, less allowance of $16,759 and $14,010
     51,533       43,339  
Other current assets
     33,947       24,936  
  
 
 
   
 
 
 
Total current assets
     1,311,394       1,352,741  
  
 
 
   
 
 
 
Operating property, less accumulated depreciation and amortization of $456,770 and $436,682
     289,248       284,300  
Goodwill
     41,122       42,275  
Other assets
     115,491       122,530  
  
 
 
   
 
 
 
Total assets
   $ 1,757,255     $ 1,801,846  
  
 
 
   
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current Liabilities
    
Cash overdraft
   $ 50,746     $ 61,541  
Accounts payable
     397,908       395,980  
Current maturities of long-term debt
     27,672       27,876  
Insurance claims
     43,370       41,825  
Dividends payable
           71,433  
Contractor escrow
     30,244       28,498  
Other current liabilities
     42,712       48,071  
  
 
 
   
 
 
 
Total current liabilities
     592,652       675,224  
  
 
 
   
 
 
 
Long-term debt, excluding current maturities
     44,834       43,264  
Insurance claims
     59,861       58,922  
Deferred income taxes and other noncurrent liabilities
     43,990       40,513  
Shareholders’ Equity
    
Common stock, $0.01 par value, authorized 160,000,000 shares, issued
68,559,269
and
68,497,324
shares
     686       685  
Additional
paid-in
capital
     255,398       254,642  
Retained earnings
     2,897,073       2,783,645  
Cost of 33,228,096 and 32,780,651 shares of common stock in treasury
     (2,128,684     (2,048,184
Accumulated other comprehensive loss
     (8,555     (6,865
  
 
 
   
 
 
 
Total shareholders’ equity
     1,015,918       983,923  
  
 
 
   
 
 
 
Total liabilities and shareholders’ equity
   $ 1,757,255     $ 1,801,846  
  
 
 
   
 
 
 
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
   $ 3,609,915     $ 4,098,877     $ 1,213,867     $ 1,289,345  
Investment income
     10,988       6,874       3,922       3,022  
Costs and expenses:
        
Purchased transportation
     2,799,384       3,141,234       943,805       986,743  
Commissions to agents
     295,801       363,397       98,703       115,244  
Other operating costs, net of gains on asset sales/dispositions
     44,138       40,998       15,144       15,158  
Insurance and claims
     83,830       86,971       30,398       29,540  
Selling, general and administrative
     162,613       159,071       51,252       50,975  
Depreciation and amortization
     44,001       44,498       15,371       14,359  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total costs and expenses
     3,429,767       3,836,169       1,154,673       1,212,019  
  
 
 
   
 
 
   
 
 
   
 
 
 
Operating income
     191,136       269,582       63,116       80,348  
Interest and debt (income) expense
     (4,455     (2,079     (1,169     (1,046
  
 
 
   
 
 
   
 
 
   
 
 
 
Income before income taxes
     195,591       271,661       64,285       81,394  
Income taxes
     45,838       65,254       14,252       19,741  
  
 
 
   
 
 
   
 
 
   
 
 
 
Net income
   $ 149,753     $ 206,407     $ 50,033       61,653  
  
 
 
   
 
 
   
 
 
   
 
 
 
Basic and diluted earnings per share
   $ 4.21     $ 5.74     $ 1.41     $ 1.71  
  
 
 
   
 
 
   
 
 
   
 
 
 
Average basic and diluted shares outstanding
     35,608,000       35,958,000       35,420,000       35,951,000  
  
 
 
   
 
 
   
 
 
   
 
 
 
Dividends per common share
   $ 1.02     $ 0.93     $ 0.36     $ 0.33  
  
 
 
   
 
 
   
 
 
   
 
 
 
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
   $ 149,753     $ 206,407      $ 50,033     $ 61,653  
Other comprehensive (loss) income:
         
Unrealized holding gains on
available-for-sale
investments, net of tax expense of $828,
$263, $624 and $49
     3,023       958        2,277       176  
Foreign currency translation (losses) gains
     (4,713     2,337        (1,354     (1,494
  
 
 
   
 
 
    
 
 
   
 
 
 
Other comprehensive (loss) income
     (1,690     3,295        923       (1,318
  
 
 
   
 
 
    
 
 
   
 
 
 
Comprehensive income
   $ 148,063     $ 209,702      $ 50,956     $ 60,335  
  
 
 
   
 
 
    
 
 
   
 
 
 
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
    
Net income
   $ 149,753     $ 206,407  
Adjustments to reconcile net income to net cash provided by operating activities:
    
Depreciation and amortization
     44,001       44,498  
Non-cash
interest charges
     198       198  
Provisions for losses on trade and other accounts receivable
     13,058       10,509  
Gains on sales/disposals of operating property
     (1,204     (3,846
Deferred income taxes, net
     (4,359     (5,595
Stock-based compensation
     3,573       4,270  
Changes in operating assets and liabilities:
    
Decrease in trade and other accounts receivable
     27,877       145,655  
Increase in other assets
     (7,884     (13,115
Increase (decrease) in accounts payable
     727       (62,652
Decrease in other liabilities
     (2,785     (15,734
Increase (decrease) in insurance claims
     2,484       (6,810
  
 
 
   
 
 
 
NET CASH PROVIDED BY OPERATING ACTIVITIES
     225,439       303,785  
  
 
 
   
 
 
 
INVESTING ACTIVITIES
    
Sales and maturities of investments
     81,072       93,326  
Purchases of investments
     (74,297     (86,115
Purchases of operating property
     (24,256     (15,394
Proceeds from sales of operating property
     6,265       6,631  
  
 
 
   
 
 
 
NET CASH USED BY INVESTING ACTIVITIES
     (11,216     (1,552
  
 
 
   
 
 
 
FINANCING ACTIVITIES
    
Decrease in cash overdraft
     (10,795     (44,886
Dividends paid
     (107,758     (105,302
Proceeds from exercises of stock options
           28  
Taxes paid in lieu of shares issued related to stock-based compensation plans
     (3,928     (9,186
Purchases of common stock
     (78,697     (15,433
Principal payments on finance lease obligations
     (22,872     (28,017
  
 
 
   
 
 
 
NET CASH USED BY FINANCING ACTIVITIES
     (224,050     (202,796
  
 
 
   
 
 
 
Effect of exchange rate changes on cash and cash equivalents
     (2,386     643  
  
 
 
   
 
 
 
(Decrease) increase in cash and cash equivalents
     (12,213     100,080  
Cash and cash equivalents at beginning of period
     481,043       339,581  
  
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 468,830     $ 439,661  
  
 
 
   
 
 
 
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
     68,497,324      $ 685      $ 254,642     $ 2,783,645       32,780,651      $ (2,048,184   $ (6,865   $ 983,923  
Net income
             47,096              47,096  
Dividends ($0.33 per share)
             (11,802            (11,802
Issuance of stock related to stock-based compensation plans
     50,229           (2,174       4,864        (886       (3,060
Stock-based compensation
           1,724                1,724  
Other comprehensive income
                    30       30  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance March 30, 2024
     68,547,553      $ 685      $ 254,192     $ 2,818,939       32,785,515      $ (2,049,070   $ (6,835   $ 1,017,911  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net income
             52,624              52,624  
Dividends ($0.33 per share)
             (11,777            (11,777
Purchases of common stock
               315,649        (56,995       (56,995
Issuance of stock related to stock-based compensation plans
     6,374        1            1,112        (201       (200
Stock-based compensation
           1,892                1,892  
Other comprehensive loss
                    (2,643     (2,643
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance June 29, 2024
     68,553,927      $ 686      $ 256,084     $ 2,859,786       33,102,276      $ (2,106,266   $ (9,478   $ 1,000,812  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net income
             50,033              50,033  
Dividends ($0.36 per share)
             (12,746            (12,746
Purchases of common stock
               121,270        (22,393       (22,393
Issuance of stock related to stock-based compensation plans
     5,342           (643       4,550        (25       (668
Stock-based compensation
           (43              (43
Other comprehensive income
                    923       923  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance September 28, 2024
     68,559,269      $ 686      $ 255,398     $ 2,897,073       33,228,096      $ (2,128,684   $ (8,555   $ 1,015,918  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
 
9

 
  
Common Stock
 
  
Additional

Paid-In

Capital
 
 
Retained

Earnings
 
 
Treasury Stock at Cost
 
 
Accumulated

Other

Comprehensive

(Loss) Income
 
 
Total
 
 
  
Shares
 
  
Amount
 
 
Shares
 
  
Amount
 
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 April 1, 2023
     68,483,963      $ 685      $ 253,138     $ 2,703,349       32,550,852      $ (2,009,327   $ (12,193   $ 935,652  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net income
             66,559              66,559  
Dividends ($0.30 per share)
             (10,780            (10,780
Issuance of stock related to stock-based compensation plans
     13,361           (926              (926
Stock-based compensation
           1,274                1,274  
Other comprehensive income
                    1,782       1,782  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance July 1, 2023
     68,497,324      $ 685      $ 253,486     $ 2,759,128       32,550,852      $ (2,009,327   $ (10,411   $ 993,561  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net income
             61,653              61,653  
Dividends ($0.33 per share)
             (11,862            (11,862
Issuance of stock related to stock-based compensation plans
               128        (24       (24
Stock-based compensation
           1,144                1,144  
Other comprehensive loss
                    (1,318     (1,318
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance September 30, 2023
     68,497,324      $ 685      $ 254,630     $ 2,808,919       32,550,980      $ (2,009,351   $ (11,729   $ 1,043,154  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
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
     38     38     38     39
Truck – Truck Brokerage Carriers
     52     54     52     52
Rail intermodal
     2     2     2     2
Ocean and air cargo carriers
     6     5     6     5
Truck Equipment Type
        
Van equipment
   $ 1,851,237     $  2,123,693     $  603,993     $  665,569  
Unsided/platform equipment
   $  1,093,753     $ 1,150,483     $ 369,758     $ 378,147  
Less-than-truckload
   $ 77,902     $ 90,770     $ 24,195     $ 28,097  
Other truck transportation (1)
   $ 242,853     $ 379,471     $ 93,178     $ 101,951  
 
(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
   $ 3,573      $ 4,270      $  (43    $  1,144  
Amount of related income tax benefit recognized during the period
     (1,997      (3,878      (313      (286
  
 
 
    
 
 
    
 
 
    
 
 
 
Net cost of the Plans during the period
   $ 1,576      $ 392      $  (356    $ 858  
  
 
 
    
 
 
    
 
 
    
 
 
 
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
     132,722      $ 138.93  
Granted
     102,762      $ 138.85  
Shares earned in excess of target
(1)
     1,791      $ 51.42  
Vested shares
     (45,057    $  115.69  
Forfeited
     (29,801    $ 140.20  
  
 
 
    
Outstanding at September 28, 2024
     162,417      $ 144.13  
  
 
 
    
 
(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.
 
12

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
     46,348      $ 158.38  
Granted
     31,525      $ 187.08  
Vested
     (25,647    $ 151.16  
Forfeited
     (4,707    $ 169.92  
  
 
 
    
Non-vested
at September 28, 2024
     47,519      $ 180.17  
  
 
 
    
The fair value of each share of
non-vested
restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of
non-vested
restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, in two equal annual installments on the first and second anniversary of the date of the grant or 100% on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of the recipient’s separation
from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.
As of September 28, 2024, there was $5,754,000 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 1.8 years.
Stock Options
The Company had no issued and outstanding vested or unvested stock options or unrecognized compensation costs related to
non-vested
stock options granted under the Plans as of 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 $218,000
.
(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
earnings per common share are based on the weighted average number of shares outstanding, which includes outstanding
non-vested
restricted stock and outstanding Deferred Stock Units. Diluted earnings per share are based on the weighted average number of common shares outstanding plus the 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 no outstanding stock options issued by the Company. For the thirty-nine-week period ended September 30, 2023, the impact on earnings per share of future compensation expense related to outstanding, unvested time-based awards was greater than the incremental impact of outstanding dilutive stock options, and would therefore have an anti-dilutive effect on earnings per share if included in the calculation of earnings per share. Accordingly, the Company had no reconciling items between the average number of common shares outstanding used to calculate basic earnings per common share and the average number of common shares and common share equivalents outstanding used to calculate diluted earnings per share during each of the 2024 and 2023 thirty-nine-week and thirteen-week periods.
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 $
45,638,000
and $
2,641,000
, respectively. During the
2023
thirty-
nine
-week period, Landstar paid income taxes and interest of $
68,136,000
and $
2,814,000
, respectively. Landstar acquired operating property by entering into finance leases in the amount of $
24,238,000
in the
2024
thirty-
nine
-week period. Landstar acquired $
6,690,000
of operating property for which the Company accrued a corresponding liability in accounts payable of $
1,201,000
and in other noncurrent liabilities of $
5,489,000
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 $
79,388,000
, including $
78,697,000
in cash purchases and accrued excise tax of $
691,000
, which is included in other current liabilities in the consolidated balance sheet at September 
28
,
2024
.
(6) Segment Information
The
following
table summarizes information about the Company’s reportable business
segments
as of and for the thirty-
nine
-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
   $  3,561,941      $  47,974      $ 3,609,915      $  4,043,824      $  55,053      $ 4,098,877  
Internal revenue
        65,411        65,411           64,138        64,138  
Investment income
        10,988        10,988           6,874        6,874  
Operating income
     141,070        50,066        191,136        222,827        46,755        269,582  
Expenditures on long-lived assets
     24,256           24,256        15,394           15,394  
Goodwill
     41,122           41,122        41,934           41,934  
 
 
  
Thirteen Weeks Ended
 
 
  
September 28, 2024
 
  
September 30, 2023
 
 
  
Transportation

Logistics
 
  
Insurance
 
  
Total
 
  
Transportation

Logistics
 
  
Insurance
 
  
Total
 
External revenue
   $ 1,198,334      $ 15,533      $ 1,213,867      $ 1,271,385      $ 17,960      $ 1,289,345  
Internal revenue
        12,065        12,065           11,960        11,960  
Investment income
        3,922        3,922           3,022        3,022  
Operating income
     47,618        15,498        63,116        63,974        16,374        80,348  
Expenditures on long-lived assets
     7,478           7,478        2,763           2,763  
In the thirty-nine-week periods ended September 28, 2024 and September 30, 2023, no single customer accounted for more than 10% of the Company’s consolidated revenue.
 
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
   $  (5,010    $  (1,855    $ (6,865
Other comprehensive income (loss)
     3,023        (4,713      (1,690
  
 
 
    
 
 
    
 
 
 
Balance as of September 28, 2024
   $  (1,987    $  (6,568    $ (8,555
  
 
 
    
 
 
    
 
 
 
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
include primarily investment-grade corporate bonds, asset-backed securities and commercial paper having maturities of up to five years (the “bond portfolio”) and
money market investments. Investments in the bond portfolio are reported as
available-for-sale
and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on
available-for-sale
investments to determine whether an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be a result of credit-related factors, are to be included as a charge in the statements of income, while unrealized losses considered to be a result of
non-credit-related
factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or
non-transferability,
which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities, commercial paper and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio
were $2,531,000 and $6,382,000 at September 28, 2024 and December 30, 2023, respectively.
 
15

The amortized cost and fair values of
available-for-sale
investments are as follows at September 28, 2024 and December 30, 2023 (in thousands):
 

 
  
Amortized
Cost
 
  
Gross
Unrealized
Gains
 
  
Gross
Unrealized
Losses
 
  
Fair Value
 
September 28, 2024
           
Money market investments
   $ 14,998      $      $      $ 14,998  
Asset-backed securities
     17,535        21        1,563        15,993  
Corporate bonds, commercial paper and direct obligations of government
agencies
     118,857        998        1,987        117,868  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 151,390      $  1,019      $  3,550      $ 148,859  
  
 
 
    
 
 
    
 
 
    
 
 
 
December 30, 2023
           
Money market investments
   $ 16,832      $      $      $ 16,832  
Asset-backed securities
     16,543               2,236        14,307  
Corporate bonds, commercial paper and direct obligations of government
agencies
     118,481        279        4,384        114,376  
U.S. Treasury obligations
     6,287        2        43        6,246  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 158,143      $ 281      $ 6,663      $ 151,761  
  
 
 
    
 
 
    
 
 
    
 
 
 
For those
available-for-sale
investments with unrealized losses at September 28, 2024 and December 30, 2023, the following table summarizes the duration of the unrealized loss (in thousands):
 

 
  
Less than 12 months
 
  
12 months or longer
 
  
Total
 
 
  
Fair

Value
 
  
Unrealized

Loss
 
  
Fair

Value
 
  
Unrealized

Loss
 
  
Fair

Value
 
  
Unrealized

Loss
 
September 28, 2024
  
  
  
  
  
  
Asset-backed securities
   $      $        $ 13,107      $  1,563      $ 13,107      $  1,563  
Corporate bonds, commercial paper, and direct obligations of government agencies
                   65,324        1,987        65,324        1,987  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $      $      $ 78,431      $ 3,550      $ 78,431      $ 3,550  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
December 30, 2023
                 
Asset-backed securities
   $      $      $ 14,307      $ 2,236      $ 14,307      $ 2,236  
Corporate bonds, commercial paper, and direct obligations of government agencies
     3,506        42        86,841        4,342        90,347        4,384  
U.S. Treasury obligations
                   2,305        43        2,305        43  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 3,506      $ 42      $ 103,453      $ 6,621      $ 106,959      $ 6,663  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality. The Company expects to recover, through collection of all of the contractual cash flows of each security, the amortized cost basis of these securities as it does not intend to sell, and does not anticipate being required to sell, these securities before recovery of the cost basis. For these reasons, no losses have been recognized in the Company’s consolidated statements of income.
(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.
 
16

These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other
build-out
clauses. Further, the leases do not contain contingent rent provisions. Landstar also rents certain trailing equipment to supplement the Company-owned trailer fleet under
“month-to-month”
lease terms, which are not required to be recorded on the balance sheet due to the less than twelve month lease term exemption. Sublease income is primarily comprised of weekly trailing equipment rentals to BCO Independent Contractors.
Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the
right-of-use
assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term.
As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining the incremental borrowing rate.
The components of lease cost for finance leases and operating leases for the thirty-nine weeks ended September 28, 2024 were (in thousands):
 

Finance leases:
  
Amortization of
right-of-use
assets
   $ 12,901  
Interest on lease liability
     1,863  
  
 
 
 
Total finance lease cost
     14,764  
Operating leases:
  
Lease cost
     2,883  
Variable lease cost
      
Sublease income
     (4,273
  
 
 
 
Total net operating lease income
     (1,390
  
 
 
 
Total net lease cost
   $ 13,374  
  
 
 
 
 
17

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
assets
 
Other assets
   $ 1,074  
Finance lease assets
 
Operating property, less accumulated
depreciation and amortization
     108,185  
    
 
 
 
Total lease assets
     $ 109,259  
    
 
 
 
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
   $ 8,069      $ 191  
2025
     28,968        533  
2026
     21,074        213  
2027
     10,686        175  
2028
     6,584        49  
Thereafter
     2,963         
  
 
 
    
 
 
 
Total future minimum lease payments
     78,344        1,161  
Less amount representing interest (1.6% to 6.5%)
     5,838        87  
  
 
 
    
 
 
 
Present value of minimum lease payments
   $ 72,506      $ 1,074  
  
 
 
    
 
 
 
 
               
               
Current maturities of long-term debt
     27,672     
Long-term debt, excluding current maturities
     44,834     
Other current liabilities
        618  
Deferred income taxes and other noncurrent liabilities
        456  
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)
     3.2       2.4  
Weighted average discount rate
     4.2     6.5
(10) Debt
Other
than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of September 28, 2024 and December 30, 2023.
On July 1, 2022, Landstar entered into a second amended and restated credit agreement with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (as further amended as of June 21, 2024, the “Credit Agreement”). The Credit Agreement, which matures July 1, 2027, provides for borrowing capacity in the form of a revolving credit facility of $300,000,000, $45,000,000 of which may be utilized in the form of letters of credit. The Credit Agreement also includes an “accordion” feature providing for a possible increase of up to an aggregate amount of borrowing capacity of $600,000,000. As of 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
.
 
18

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum fixed charge coverage ratio, as described in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed
2.5
to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.
The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value.
(11) Commitments and Contingencies
Short-term
investments include $62,451,000 in current maturities of investments held by the Company’s insurance segment at September 28, 2024. The
non-current
portion of the bond portfolio of $86,408,000 is included in other assets. The short-term investments, together with $18,790,000 of
non-current
investments, provide collateral for the $73,117,000 of letters of credit issued to guarantee payment of insurance claims. As of September 28, 2024, Landstar also had $35,250,000 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) Change in Accounting Estimate for Self-Insured Claims