Landstar System Earnings 2020-09-26

Landstar System Earnings 2020-09-26

LSTR 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

10-Q

Table of Contents

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 26, 2020

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

For the transition period from

Commission File Number:

0-21238

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)


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

13410 Sutton Park Drive South, Jacksonville, Florida

(Address of principal executive offices)

32224

(Zip Code)

(904)

398-9400

(Registrant’s telephone number, including area code)

N/A

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

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


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

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

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ☒ No ☐

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

non-accelerated

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

12b-2

of the Exchange Act. (Check one):

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

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

12b-2

of the Exchange Act). Yes ☐ 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 19, 2020 was

38,383,779

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Index


PART I – Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Balance Sheets as of September 26, 2020 and December 28, 2019		Page 4

Consolidated Statements of Income for the Thirty Nine and Thirteen Weeks Ended September 26, 2020 and September 28, 2019		Page 5

Consolidated Statements of Comprehensive Income for the Thirty Nine and Thirteen Weeks Ended September 26, 2020 and September 28, 2019		Page 6

Consolidated Statements of Cash Flows for the Thirty Nine Weeks Ended September 26, 2020 and September 28, 2019		Page 7

Consolidated Statements of Changes in Equity for the Thirty Nine and Thirteen Weeks Ended September 26, 2020 and September 28, 2019		Page 8

Notes to Consolidated Financial Statements		Page 10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		Page 19

Item 3. Quantitative and Qualitative Disclosures About Market Risk		Page 32

Item 4. Controls and Procedures		Page 32

PART II – Other Information

Item 1. Legal Proceedings		Page 33

Item 1A. Risk Factors		Page 33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		Page 34

Item 6. Exhibits		Page 34

Signatures		Page 36

EX – 31.1 Section 302 CEO Certification

EX – 31.2 Section 302 CFO Certification

EX – 32.1 Section 906 CEO Certification

EX – 32.2 Section 906 CFO Certification

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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 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 26, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 26, 2020.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report on Form

10-K.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)


	September 26, 2020			December 28, 2019

ASSETS
Current Assets
Cash and cash equivalents	$	218,554		$	319,515
Short-term investments		39,068			32,901
Trade accounts receivable, less allowance of $8,120 and $7,284		637,908			588,549
Other receivables, including advances to independent contractors, less allowance of $8,827 and $7,667		40,550			35,553
Other current assets		27,989			21,370

Total current assets		964,069			997,888

Operating property, less accumulated depreciation and amortization of $291,159 and $280,849		279,495			285,855
Goodwill		40,251			38,508
Other assets		108,390			105,460

Total assets	$	1,392,205		$	1,427,711


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Cash overdraft	$	47,459		$	53,878
Accounts payable		339,798			271,996
Current maturities of long-term debt		34,723			42,632
Insurance claims		46,019			44,532
Dividends payable		—			78,947
Contractor escrow		28,345			24,902
Other current liabilities		47,206			36,017

Total current liabilities		543,550			552,904

Long-term debt, excluding current maturities		52,570			70,212
Insurance claims		36,344			33,575
Deferred income taxes and other noncurrent liabilities		54,107			49,551

Shareholders’ Equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,181,418 and 68,083,419 shares		682			681
Additional paid-in capital		226,878			226,123
Retained earnings		2,065,999			1,962,161
Cost of 29,797,639 and 28,609,926 shares of common stock in treasury		(1,581,961	)		(1,465,284	)
Accumulated other comprehensive loss		(5,964	)		(2,212	)

Total shareholders’ equity		705,634			721,469

Total liabilities and shareholders’ equity	$	1,392,205		$	1,427,711

See accompanying notes to consolidated financial statements.

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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 26, 2020		September 28, 2019			September 26, 2020		September 28, 2019

Revenue	$	2,836,626	$	3,089,698		$	1,085,546	$	1,011,658
Investment income		2,716		3,736			714		1,315
Costs and expenses:
Purchased transportation		2,183,143		2,365,646			838,753		774,520
Commissions to agents		236,490		257,862			85,848		84,568
Other operating costs, net of gains/losses on asset sales/dispositions		23,035		28,531			7,361		10,431
Insurance and claims		66,563		55,248			21,855		23,969
Selling, general and administrative		124,779		120,717			38,851		38,152
Depreciation and amortization		34,212		33,045			11,240		10,695
Impairment of intangible and other assets		2,582		—			—		—

Total costs and expenses		2,670,804		2,861,049			1,003,908		942,335

Operating income		168,538		232,385			82,352		70,638
Interest and debt expense		2,936		2,278			1,008		764

Income before income taxes		165,602		230,107			81,344		69,874
Income taxes		38,567		52,452			19,458		16,619

Net income		127,035		177,655			61,886		53,255
Less: Net loss attributable to noncontrolling interest		—		(17	)		—		—

Net income attributable to Landstar System, Inc. and subsidiary	$	127,035	$	177,672		$	61,886	$	53,255

Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	3.28	$	4.45		$	1.61	$	1.35

Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	3.28	$	4.45		$	1.61	$	1.35


Average number of shares outstanding:
Earnings per common share		38,673,000		39,891,000			38,386,000		39,566,000

Diluted earnings per share		38,673,000		39,891,000			38,386,000		39,566,000


Dividends per common share	$	0.580	$	0.515		$	0.210	$	0.185

See accompanying notes to consolidated financial statements.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	Thirty Nine Weeks Ended					Thirteen Weeks Ended
	September 26, 2020			September 28, 2019		September 26, 2020		September 28, 2019

N et income attributable to Landstar System, Inc. and subsidiary	$	127,035		$	177,672	$	61,886	$	53,255
Other comprehensive (loss) income:
Unrealized holding gains on available-for-sale investments, net of tax expense of $413, $577, $75 and $83		1,510			2,112		273		307
Foreign currency translation (losses) gains		(5,262	)		42		908		(1,083	)

Other comprehensive (loss) income		(3,752	)		2,154		1,181		(776	)

Comprehensive income attributable to Landstar System, Inc. and subsidiary	$	123,283		$	179,826	$	63,067	$	52,479

See accompanying notes to consolidated financial statements.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Thirty Nine Weeks Ended
	September 26, 2020			September 28, 2019
OPERATING ACTIVITIES
Net income	$	127,035		$	177,655
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of operating property and intangible assets		34,212			33,045
Non-cash interest charges		222			190
Provisions for losses on trade and other accounts receivable		7,206			6,942
Gains on sales/disposals of operating property		(2,295	)		(1,188	)
Impairment of intangible and other assets		2,582			—
Deferred income taxes, net		4,758			7,151
Stock-based compensation		2,691			4,470
Changes in operating assets and liabilities:
(Increase) decrease in trade and other accounts receivable		(62,492	)		84,607
Increase in other assets		(13,492	)		(21,129	)
Increase (decrease) in accounts payable		66,815			(28,692	)
Increase (decrease) in other liabilities		14,050			(16,076	)
Increase in insurance claims		4,256			13,739

NET CASH PROVIDED BY OPERATING ACTIVITIES		185,548			260,714


INVESTING ACTIVITIES
Net changes in other short-term investments		131			—
Sales and maturities of investments		18,795			56,467
Purchases of investments		(21,102	)		(58,829	)
Purchases of operating property		(25,426	)		(15,199	)
Proceeds from sales of operating property		6,623			3,621
Consideration paid for acquisition		(2,766	)		—

NET CASH USED BY INVESTING ACTIVITIES		(23,745	)		(13,940	)


FINANCING ACTIVITIES
Decrease in cash overdraft		(6,419	)		(10,714	)
Dividends paid		(101,442	)		(20,589	)
Payment for debt issue costs		(959	)		—
Proceeds from exercises of stock options		676			629
Taxes paid in lieu of shares issued related to stock-based compensation plans		(3,326	)		(8,449	)
Purchases of common stock		(115,962	)		(88,578	)
Principal payments on finance lease obligations		(33,036	)		(34,141	)
Purchase of noncontrolling interest		—			(600	)

NET CASH USED BY FINANCING ACTIVITIES		(260,468	)		(162,442	)


Effect of exchange rate changes on cash and cash equivalents		(2,296	)		366


(Decrease) increase in cash and cash equivalents		(100,961	)		84,698
Cash and cash equivalents at beginning of period		319,515			199,736

Cash and cash equivalents at end of period	$	218,554		$	284,434

See accompanying notes to consolidated financial statements.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Thirty Nine and Thirteen Weeks Ended September 26, 2020 and

September

28, 2019

(In thousands, except share and per share amounts)

(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 28, 2019		68,083,419	$	681	$	226,123		$	1,962,161			28,609,926	$	(1,465,284	)	$	(2,212	)	$	721,469

Adoption of accounting standard (Note 15 )									(702)											(702	)

Net income									40,895											40,895

Dividends ($0.185 per share)									(7,336	)										(7,336	)

Purchases of common stock												1,178,970		(115,962	)					(115,962	)

Issuance of stock related to stock-based compensation plans		84,063		1		(1,781	)					8,078		(639	)					(2,419	)

Stock-based compensation						631														631

Other comprehensive loss																	(9,481	)		(9,481	)


Balance March 28, 2020		68,167,482	$	682	$	224,973		$	1,995,018			29,796,974	$	(1,581,885	)	$	(11,693	)	$	627,095


Net income									24,254											24,254

Dividends ($0.185 per share)									(7,099	)										(7,099	)

Issuance of stock related to stock-based compensation plans		9,305		—		(211	)					354		(36	)					(247	)

Stock-based compensation						570														570

Other comprehensive income																	4,548			4,548


Balance June 27, 2020		68,176,787	$	682	$	225,332		$	2,012,173			29,797,328	$	(1,581,921	)	$	(7,145	)	$	649,121


Net income									61,886											61,886

Dividends ($0.21 per share)									(8,060	)										(8,060	)

Issuance of stock related to stock-based compensation plans		4,631		—		56						311		(40	)					16

Stock-based compensation						1,490														1,490

Other comprehensive income																	1,181			1,181


Balance September 26, 2020		68,181,418	$	682	$	226,878			$ 2,065,999			29,797,639	$	(1,581,961	)	$	(5,964)		$	705,634

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	Landstar System, Inc. and Subsidiary Shareholders
	Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive			Non-controlling
	Shares		Amount		Capital			Earnings			Shares		Amount			(Loss) Income			Interests			Total

Balance December 29, 2018		67,870,962	$	679	$	226,852		$	1,841,279			27,755,001	$	(1,376,111	)	$	(5,875	)	$	2,309		$	689,133

Net income (loss)									63,317											(17	)		63,300

Dividends ($0.165 per share)									(6,629	)													(6,629	)

Purchases of common stock												124,481		(12,977	)								(12,977	)

Purchase of noncontrolling interests						1,842														(2,442	)		(600	)

Issuance of stock related to stock-based compensation plans		176,079		1		(7,081	)					5,199		(524	)								(7,604	)

Stock-based compensation						1,938																	1,938

Other comprehensive income																	1,549			150			1,699


Balance March 30, 2019		68,047,041	$	680	$	223,551		$	1,897,967			27,884,681	$	(1,389,612	)	$	(4,326	)	$	—		$	728,260


Net income									61,100														61,100

Dividends ($0.165 per share)									(6,628	)													(6,628	)

Purchases of common stock												549,929		(56,752	)								(56,752	)

Issuance of stock related to stock-based compensation plans		17,836		1		(431	)					572		(61	)								(491	)

Stock-based compensation						1,430																	1,430

Other comprehensive income																	1,381						1,381


Balance June 29, 2019		68,064,877	$	681	$	224,550		$	1,952,439			28,435,182	$	(1,446,425	)	$	(2,945	)	$	—		$	728,300


Net income									53,255														53,255

Dividends ($0.185 per share)									(7,332	)													(7,332	)

Purchases of common stock												174,658		(18,849	)								(18,849	)

Issuance of stock related to stock-based compensation plans		7,957		—		285						86		(10	)								275

Stock-based compensation						1,102																	1,102

Other comprehensive loss																	(776	)					(776	)


Balance September 28, 2019		68,072,834	$	681	$	225,937		$	1,998,362			28,609,926	$	(1,465,284	)	$	(3,721	)	$	—		$	755,975

See accompanying notes to consolidated financial statements.

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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 the percentage of consolidated revenue generated by

mode of transportation

and the dollar amount included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers hauled via equipment type during the thirty-nine-week and thirteen-week periods ended September 26, 2020 and September 28, 2019 (

dollars

in thousands):


	Thirty Nine Weeks Ended						Thirteen Weeks Ended
Mode	September 26, 2020			September 28, 2019			September 26, 2020			September 28, 2019

BCO Independent Contractors – Truck		46	%		45	%		46	%		46	%

Brokerage Carriers - Truck		46	%		47	%		46	%		46	%

Rail intermodal		3	%		3	%		3	%		3	%

Ocean and air cargo carriers		3	%		3	%		3	%		3	%

Equipment Type - Truck
Van equipment	$	1,694,916		$	1,799,421		$	666,582		$	575,042

Unsided/platform equipment	$	848,187		$	980,615		$	314,471		$	331,787

Less-than-truckload	$	70,984		$	73,475		$	25,125		$	25,367

(2)	Acquired Business

On May 6, 2020, Landstar System Holdings, Inc. formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”). Landstar Blue arranges truckload brokerage services while helping the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents. On June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company whose business focused on truckload brokerage services. Cash consideration paid for the acquisition was approximately $2,766,000. In addition, the Company assumed approximately $200,000 in liabilities consisting of additional contingent purchase price. The resulting goodwill arising from the acquisition was approximately $2,871,000. With respect to this goodwill, 100% is expected to be deductible by the Company for U.S. income tax purposes. Pro forma financial information for prior periods is not presented as the Company does not believe the acquisition to be material to the Company’s consolidated results. The results of operations for Landstar Blue are presented as part of the Company’s transportations logistics segment. Transaction costs for the acquisition were insignificant.

(3)	Share-based Payment Arrangements

As of September 26, 2020, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). No further grants can be made under the ESOSIP. The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock

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Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”). 6,000,000 shares of the Company’s common stock

were

authorized for issuance under the 2011 EIP and 115,000 shares of the Company’s common stock were authorized for issuance under the 2013 DSCP. The ESOSIP, 2011 EIP and 2013 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 26, 2020			September 28, 2019			September 26, 2020			September 28, 2019
Total cost of the Plans during the period	$	2,691		$	4,470		$	1,490		$	1,102

Amount of related income tax benefit recognized during the period		(1,618	)		(4,125	)		(483	)		(391	)


Net cost of the Plans during the period		$ 1,073		$	345		$	1,007		$	711

Included in income tax benefits recognized in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 were excess tax benefits from stock-based awards of $927,000 and $2,968,000, respectively.

As of September 26, 2020, there were 60,586 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,675,862 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Restricted Stock Units

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


	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 28, 2019		198,875		$	84.37
Granted		59,719		$	102.62
Shares earned in excess of target (1)		11,648		$	77.00
Vested shares, including shares earned in excess of target		(76,290	)	$	73.44
Forfeited		(10,987	)	$	100.55

Outstanding at September 26, 2020		182,965		$	93.44

(1)	Represents additional shares earned under the February 2, 2017 RSU awards as 2019 financial results exceeded target performance level.

During the thirty-nine-week period ended September 26, 2020, the Company granted RSUs with a performance condition. Outstanding RSUs at both December 28, 2019 and September 26, 2020 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2019 Annual Report on Form

10-K.

RSUs with a performance condition granted on January 31, 2020 may vest on January 31 of 2023, 2024 and 2025 based on growth in operating income and

pre-tax

income per diluted share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2019 fiscal year.

The Company recognized approximately $415,000 and $2,477,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019, respectively. As of September 26, 2020, there was a maximum of $34.6 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.1 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.

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Stock Options

The following table summarizes information regarding the Company’s outstanding stock options under the Plans:


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



Options outstanding at December 28, 2019		44,467		$	51.24
Exercised		(23,717	)	$	49.31

Options outstanding at September 26, 2020		20,750		$	53.44		1.9	$	1,499

Options exercisable at September 26, 2020		20,750		$	53.44		1.9	$	1,499

The total intrinsic value of stock options exercised during the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 was $1,599,000 and $1,877,000, respectively.

As of September 26, 2020, there was no unrecognized compensation cost related to stock options granted under the Plans.

Non-vested

Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of

non-vested

restricted stock and Deferred Stock Units (defined below) under the Plans:


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

Non-vested at December 28, 2019		64,808		$	98.24
Granted		26,604		$	111.88
Vested		(28,621	)	$	98.83
Forfeited		(2,351	)	$	106.34

Non-vested at September 26, 2020		60,440		$	103.65

The fair value of each share of

non-vested

restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2013 DSCP plan, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of September 26, 2020, there was $4,074,000 of total unrecognized compensation cost related to

non-vested

shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these

non-vested

shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 1.9 years.

(4)	Income Taxes

The provisions for income taxes for the 2020 and 2019 thirty-nine-week periods were each based on an estimated annual effective income tax rate of 24.2%, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2020 thirty-nine-week period was 23.3%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock-based awards and state

Table of Contents

tax

refunds. The provision for income taxes for the 2020 thirty-nine-week period was favorably impacted by $927,000 of excess tax benefits from stock-based awards. The effective income tax rate for the 2019 thirty-nine-week period was 22.8%, which was higher than the statutory

federal

come

tax rate of 21% primarily attributable to state taxes and the meals and

entertainment

exclusion, partially offset by excess tax benefits realized on stock-based awards. The provision for income taxes for the 2019 thirty-nine-week period was favorably impacted by $2,968,000 of excess tax benefits from stock-based awards.

(5)	Earnings Per Share

Earnings per common share attributable to Landstar System, Inc. and subsidiary are based on the weighted average number of shares outstanding, including outstanding

non-vested

restricted stock and outstanding Deferred Stock Units. Diluted earnings per share attributable to Landstar System, Inc. and subsidiary are based on the weighted average number of common shares and Deferred Stock Units outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options. During the 2020 and 2019 thirty-nine-week and thirteen-week periods,

in reference to the determination of diluted earnings per share,

the future compensation cost attributable to

outstanding

shares of

non-vested

restricted stock exceeded the

impact

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

For each of the thirty-nine-week periods ended September 26, 2020 and September 28, 2019, no options outstanding to purchase shares of common stock were antidilutive. Outstanding RSUs were excluded from the calculation of diluted earnings per share attributable to Landstar System, Inc. and subsidiary for all periods because the performance metric requirements or market condition for vesting had not been satisfied.

(6)	Additional Cash Flow Information

During the 2020 thirty-nine-week period, Landstar paid income taxes and interest of $28,761,000 and $3,087,000, respectively. During the 2019 thirty-nine-week period, Landstar paid income taxes and interest of $54,877,000 and $3,302,000, respectively. Landstar acquired operating property by entering into finance leases in the amounts of $7,485,000 and $6,481,000 in the 2020 and 2019 thirty-nine-week periods, respectively. In addition, during the 2020 thirty-nine-week period, Landstar acquired $1,068,000 of operating property for which the Company accrued a corresponding liability in accounts payable as of September 26, 2020. Capital expenditures are recorded as cash outflows from investing activities in the consolidated statement of cash flows in the period in which they are paid.

(7)	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 26, 2020 and September 28, 2019 (in thousands):


	Thirty Nine Weeks Ended
	September 26, 2020						September 28, 2019
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total

External revenue	$	2,795,056	$	41,570	$	2,836,626	$	3,047,329	$	42,369	$	3,089,698
Internal revenue				44,912		44,912				36,978		36,978
Investment income				2,716		2,716				3,736		3,736
Operating income		148,270		20,268		168,538		200,767		31,618		232,385
Expenditures on long-lived assets		25,426				25,426		15,199				15,199
Goodwill		40,251				40,251		38,232				38,232


	Thirteen Weeks Ended
	September 26, 2020						September 28, 2019
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total

External revenue	$	1,071,374	$	14,172	$	1,085,546	$	997,552	$	14,106	$	1,011,658
Internal revenue				9,078		9,078				9,611		9,611
Investment income

Price	114.15	EPS	6
Shares	40	P/E	19
MCap	4,554	P/FCF	17
Net Debt	-284	EBIT	317
TEV	4,269	TEV/EBIT	13
TTM 2019-09-28, in MM, except price, ratios

10-Q	2020-09-26	Filed 2020-10-30
10-Q	2020-06-27	Filed 2020-07-31
10-Q	2020-03-28	Filed 2020-05-01
10-K	2019-12-28	Filed 2020-02-21
10-Q	2019-09-28	Filed 2019-11-01
10-Q	2019-06-29	Filed 2019-08-02
10-Q	2019-03-30	Filed 2019-05-03
10-K	2018-12-29	Filed 2019-02-22
10-Q	2018-09-29	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-03
10-Q	2018-03-31	Filed 2018-05-04
10-K	2017-12-30	Filed 2018-02-23
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-07-01	Filed 2017-08-04
10-Q	2017-04-01	Filed 2017-05-05
10-K	2016-12-31	Filed 2017-02-24
10-Q	2016-09-24	Filed 2016-10-28
10-Q	2016-06-25	Filed 2016-07-29
10-Q	2016-03-26	Filed 2016-04-29
10-K	2015-12-26	Filed 2016-02-19
10-Q	2015-09-26	Filed 2015-10-30
10-Q	2015-06-27	Filed 2015-07-31
10-Q	2015-03-28	Filed 2015-05-01
10-K	2014-12-27	Filed 2015-02-23
10-Q	2014-09-27	Filed 2014-10-31
10-Q	2014-06-28	Filed 2014-08-01
10-Q	2014-03-29	Filed 2014-05-02
10-K	2013-12-28	Filed 2014-02-21
10-Q	2013-09-28	Filed 2013-11-01
10-Q	2013-06-29	Filed 2013-08-02
10-Q	2013-03-30	Filed 2013-05-03
10-K	2012-12-29	Filed 2013-02-21
10-Q	2012-09-29	Filed 2012-11-02
10-Q	2012-06-30	Filed 2012-08-03
10-Q	2012-03-31	Filed 2012-05-10
10-K	2011-12-31	Filed 2012-02-24
10-Q	2011-09-24	Filed 2011-10-28
10-Q	2011-06-25	Filed 2011-07-29
10-Q	2011-03-26	Filed 2011-04-29
10-K	2010-12-25	Filed 2011-02-23
10-Q	2010-09-25	Filed 2010-10-29
10-Q	2010-06-26	Filed 2010-07-30
10-Q	2010-03-27	Filed 2010-04-30
10-K	2009-12-26	Filed 2010-02-23

8-K	2020-11-17
8-K	2020-11-02
8-K	2020-10-21
8-K	2020-09-09
8-K	2020-08-18
8-K	2020-07-22
8-K	2020-05-19
8-K	2020-04-22
8-K	2020-01-29
8-K	2019-12-10
8-K	2019-10-23
8-K	2019-09-11
8-K	2019-07-24
8-K	2019-06-05
8-K	2019-05-30
8-K	2019-05-21
8-K	2019-04-24
8-K	2019-01-30
8-K	2018-10-24
8-K	2018-07-25
8-K	2018-05-22
8-K	2018-04-24
8-K	2018-04-03
8-K	2018-01-31

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EX-32.1	d45089dex321.htm
EX-32.2	d45089dex322.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company