Financial Performance - The third quarter of 2022 marked the best financial performance in Landstar's history, with revenue approximately 5% above the third quarter of 2021 [6] - Earnings per diluted share increased by 7% compared to the third quarter of 2021, aligning with the low end of guidance [7] - Gross profit was $185.7 million, down from $189.2 million in the same period last year, with a gross profit margin of 10.2% compared to 10.9% in 2021 [25][26] - Variable contribution margin decreased to 13.5% of revenue from 14% in the previous year, primarily due to a higher percentage of revenue from truck brokerage carriers [27] Business Line Performance - Truck revenue was up 1% year-over-year, driven by a 1% increase in truckload volume, while revenue from other transportation modes surged by 49% [7] - Revenue per mile on van equipment decreased sequentially since peaking in February 2022, with a notable decline in August 2022 [13][14] - Revenue per mile on loads hauled by BCOs via unsided equipment reached a record high, increasing by 5% year-over-year [17] Market Performance - Total truckload volume in July was 5% higher than the previous year, but August was flat, and September saw a 1% decline compared to September 2021 [18] - The growth rate in load count for key industry verticals slowed in the third quarter compared to the second quarter [19] - Substitute line haul volume decreased by 27% compared to the third quarter of 2021, attributed to softer consumer demand [20] Company Strategy and Industry Competition - The company continues to invest in technology and facilities while returning cash to shareholders through stock buybacks and dividends [45][46] - Management anticipates a challenging first half of 2023 due to difficult comparisons and a softening economy [54] - The company does not foresee significant M&A opportunities that would conflict with its business model, focusing instead on supporting its agent network [117] Management Commentary on Operating Environment and Future Outlook - Management noted a softening demand environment, with expectations for a muted holiday shipping season and a potential decline in truckload volume of 2% to 4% in the fourth quarter [41][42] - The effective income tax rate remained stable at 24.3%, with expectations of continued strong free cash flow generation even in a downturn [33][44] - Management expressed concerns about pricing volatility and its impact on revenue per load, emphasizing that volume changes have less impact on the business model [102] Other Important Information - The company ended the quarter with cash and short-term investments totaling $228 million, with operating cash flow generation exceeding any full fiscal year in the company's history [34] - The number of approved third-party carriers increased by 21% year-over-year, indicating a growing network [24] Q&A Session Summary Question: Macro outlook and customer feedback on inventory demand - Management noted a shift from expectations of a strong peak season to a more muted outlook, with customers now anticipating flat to soft demand [52] Question: Maintaining operating margins in a downturn - Management highlighted that fixed costs are low relative to variable contributions, allowing for some margin maintenance even in a revenue decline scenario [56] Question: Variable compensation and its impact - Current accrual for variable compensation in 2023 is about $31 million, with potential adjustments based on revenue performance [63] Question: Impact of housing market slowdown on flatbed demand - Management indicated that a slowdown in housing would negatively impact the unsided market, particularly in building products [74] Question: Strength in air and ocean transportation - The increase in air and ocean revenue was primarily rate-driven, with some contribution from new agents in those categories [80] Question: Revenue per load trends versus spot rates - Management discussed the decoupling of revenue per load from spot rates, attributing it to the nature of their business model and the stability provided by contracted rates [86]

Landstar System, Inc. (NASDAQ:LSTR) Q2 2022 Earnings Conference Call July 21, 2022 8:00 AM ET Company Participants Jim Gattoni - President & CEO Jim Todd - VP & CFO Rob Brasher - VP & CCO Joe Beacom - VP, Chief Safety & Operations Officer Conference Call Participants Jon Chappell - Evercore ISI Todd Fowler - KeyBanc Capital Markets Allison Poliniak - Wells Fargo Bascome Majors - Susquehanna Jack Atkins - Stephens Scott Group - Wolfe Research Scott Schneeberger - Oppenheimer Bruce Chan - Stifel Operator Good ...

Financial Performance - Second Quarter 2022 revenue reached $1975064000, a 257% increase compared to $1570718000 in the second quarter of 2021[19, 20] - Year-to-date revenue as of June 25, 2022, was $3945663000, a 380% increase compared to $2858252000 for the same period in 2021[14, 18] - Second Quarter 2022 gross profit was $208080000, compared to $174844000 in the second quarter of 2021, with gross profit margin at 105% and 111% respectively[29] - Year-to-date gross profit was $422646000, compared to $321975000 for the same period in 2021, with gross profit margin at 107% and 113% respectively[28] - Second Quarter 2022 variable contribution was $267520000, compared to $220784000 in the second quarter of 2021, with variable contribution margin at 135% and 141% respectively[32] - Year-to-date variable contribution was $538011000, compared to $410024000 for the same period in 2021, with variable contribution margin at 136% and 143% respectively[31] - Second Quarter 2022 operating income was $150418000, compared to $122248000 in the second quarter of 2021[40] - Year-to-date operating income was $313251000, compared to $225516000 for the same period in 2021[38] Operational Data - The company had approximately 1200 agents, over 25000 customers, and over 111000 capacity providers as of June 25, 2022[14] - Total available truck capacity providers reached 111126 as of June 25, 2022[44]

Financial Performance - The first quarter of 2022 marked the best-ever quarterly performance in the company's history, with revenue reaching an all-time record of $1.970 billion, a 53% increase compared to the first quarter of 2021 [8][11] - Gross profit for the first quarter was $214.6 million, up 46% from $147.1 million in the same period last year, with a gross profit margin of 10.9% [26][29] - Diluted earnings per share for the first quarter were also at an all-time high, reflecting strong overall financial performance [49] Business Line Performance - Truckload revenue per load in the first quarter set a record, exceeding the previous fourth quarter by 4%, with truck revenue per load increasing by 25%, 29%, and 17% year-over-year for January, February, and March respectively [12][16] - Revenue from new agents was $25 million in the first quarter, the second highest in the past 17 quarters, indicating strong growth in the agent network [22] - Loads hauled via BCOs increased by 7% year-over-year, with a record number of approved third-party carriers in the network, which increased by 39% [23] Market Data - The company experienced strong growth in truckload rates and volume, alongside increased revenue from ocean freight services due to rate hikes [11] - The demand for consumer durables and small packages via e-commerce drove a 17% increase in van volume compared to the first quarter of 2021 [21] - The overall truckload volume increased by 20% year-over-year, with January, February, and March showing increases of 17%, 30%, and 14% respectively [19] Strategic Direction and Industry Competition - The company continues to focus on profitable load volume growth and increasing available capacity, with expectations for a strong freight environment to persist, albeit at a decelerated growth rate [40][53] - The company is actively recruiting agents to capture market share in air and ocean freight, with a focus on maintaining a consistent level of service and profitability [66] Management Commentary on Operating Environment and Future Outlook - Management noted that while there are signs of softness in certain areas, overall demand remains robust, and the company does not see the extent of decline reported in the media [56][60] - The company anticipates that the second quarter will see revenue in the range of $2 billion to $2.5 billion, with diluted earnings per share expected to be between $3.22 and $3.32 [47] Other Important Information - The effective income tax rate for the first quarter was 22.8%, down from 24.4% in the previous year, with expectations to return to 24.5% in the second quarter [37] - The company returned $194 million to shareholders through dividends and share repurchases during the quarter [38] Q&A Session Summary Question: Insights on volume and demand trends - Management indicated expectations of a cooling demand but noted no significant weakness in specific sectors, with automotive showing strong recovery [56] Question: Flexibility of the Landstar model in different market cycles - Management emphasized the difficulty in predicting the extent of downturns but noted that costs are built into the system, making drastic declines less likely [59] Question: Trends in air and ocean business growth - Management acknowledged growth in ocean freight due to increased rates and volume, while air freight remains volatile [66] Question: Impact of Ukraine operations on guidance - Management expects steady trends from operations in Ukraine, with no significant disruptions anticipated [68] Question: Expectations around supply chain disruptions - Management noted that ongoing port congestion could create more freight volumes, positively impacting business [77] Question: Technology spending in downturns - Management plans to maintain technology spending to support agent services, regardless of market conditions [93] Question: Trailer procurement and inflation - Management indicated expectations of continued inflation in trailer costs, with potential procurement late in the year [95] Question: Impact of the convention on SG&A costs - Management noted an expected increase in SG&A costs due to the convention, estimated at $2.5 million to $3 million [97]

DESIGNED TO RESPOND BUILT TO DELIVER | --- | --- | |--------------------------|-------| | | | | Landstar System, Inc. | | | | | | Earnings Conference Call | | | | | | | | | First Quarter 2022 | | | April 20, 2022 | | Date Published: 04/20/2022 Forward Looking Statements Disclaimer: 2 The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Statements made in this slide presentation that are not based on historical facts are "forward looking statements." This pre ...

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) Landstar is a technology-enabled, asset-light provider of integrated transportation management solutions in North America - Landstar is a worldwide technology-enabled, asset-light provider of integrated transportation management solutions, offering services across multiple transportation modes (truckload, LTL, rail intermodal, air cargo, ocean cargo, expedited, heavy-haul/specialized, cross-border)[17](index=17&type=chunk)[19](index=19&type=chunk) - The company operates through a network of over **1,200 independent commission sales agents** and over **101,000 third-party capacity providers**[17](index=17&type=chunk) - Revenue for the most recently completed fiscal year (FY2021) was **$6.5 billion**, primarily generated throughout North America[18](index=18&type=chunk)[315](index=315&type=chunk) - Landstar reports results from two operating segments: **transportation logistics** and **insurance**[18](index=18&type=chunk)[25](index=25&type=chunk) [Introduction](index=4&type=section&id=Introduction) - Landstar System, Inc. was incorporated in January 1991 in Delaware and became a publicly held company in March 1993[16](index=16&type=chunk) - The principal executive offices are located in Jacksonville, Florida[16](index=16&type=chunk) [Description of Business](index=4&type=section&id=Description%20of%20Business) [Transportation Logistics Segment](index=4&type=section&id=Transportation%20Logistics%20Segment) [Truck Services](index=5&type=section&id=Truck%20Services) - Truck services contributed **91% of consolidated revenue** in fiscal year 2021, and 92% in both fiscal years 2020 and 2019[21](index=21&type=chunk) - In fiscal year 2021, revenue generated by BCO Independent Contractors was **40% of consolidated revenue**, and Truck Brokerage Carriers was **51%**[21](index=21&type=chunk) - Van equipment accounted for **59% of truck transportation revenue**, and unsided/platform trailing equipment for 26% in fiscal year 2021[21](index=21&type=chunk) - Landstar Blue, formed in May 2020, arranges truckload brokerage services and develops digital technologies; its revenue represented **less than 1%** of the transportation logistics segment revenue in fiscal years 2021 and 2020[22](index=22&type=chunk) [Rail Intermodal Services](index=5&type=section&id=Rail%20Intermodal%20Services) - Rail intermodal services contributed **2% of consolidated revenue** in fiscal year 2021, down from 3% in both fiscal years 2020 and 2019[23](index=23&type=chunk) - The segment has contracts with Class 1 domestic and Canadian railroads, short-line railroads, and major asset-based intermodal equipment providers[23](index=23&type=chunk) [Air and Ocean Services](index=5&type=section&id=Air%20and%20Ocean%20Services) - Air and ocean services contributed **5% of consolidated revenue** in fiscal year 2021, up from 3% in both fiscal years 2020 and 2019[24](index=24&type=chunk) - The Company is an IATA certified Indirect Air Carrier (IAC) and an FMC licensed Ocean Transportation Intermediary (OTI) as a non-vessel operating common carrier (NVOCC) and ocean freight forwarder[24](index=24&type=chunk) [Insurance Segment](index=5&type=section&id=Insurance%20Segment) - The insurance segment comprises Signature Insurance Company (wholly owned offshore subsidiary) and Risk Management Claim Services, Inc (RMCS)[25](index=25&type=chunk) - It provides risk and claims management services, reinsures certain risks of BCO Independent Contractors, and offers property and casualty insurance to Landstar's Operating Subsidiaries[25](index=25&type=chunk) - Revenue from the insurance segment represented approximately **1% of consolidated revenue** in fiscal years 2021, 2020, and 2019[25](index=25&type=chunk) [Factors Significant to the Company's Operations](index=6&type=section&id=Factors%20Significant%20to%20the%20Company's%20Operations) [Agent Network](index=6&type=section&id=Agent%20Network) - The Company's primary customer contact is through its network of over **1,200 independent commission sales agents**[17](index=17&type=chunk)[27](index=27&type=chunk) - Agent commissions are based on contractually agreed-upon percentages of revenue, or revenue less purchased transportation, or revenue less a retained percentage and purchased transportation[30](index=30&type=chunk) Million Dollar Agents Performance | Fiscal Year | Number of Million Dollar Agents | Average Revenue per Million Dollar Agent | Percent of Consolidated Revenue | | :---------- | :------------------------------ | :--------------------------------------- | :------------------------------ | | 2021 | 593 | $6,150,000 | 94% | | 2020 | 508 | $7,489,000 | 92% | | 2019 | 555 | $6,880,000 | 93% | - Annual terminations of Million Dollar Agents have typically been **less than 3%** of the total number[31](index=31&type=chunk) [Third Party Capacity](index=7&type=section&id=Third%20Party%20Capacity) [BCO Independent Contractors](index=7&type=section&id=BCO%20Independent%20Contractors) - The number of trucks provided by BCO Independent Contractors was **11,864** at December 25, 2021, an increase from 10,991 at December 26, 2020[37](index=37&type=chunk) - BCO Independent Contractors are compensated primarily based on a contractually agreed-upon percentage of revenue (**62-70% for tractor-only, 73-76% for tractor and trailing equipment**), with 100% of fuel surcharges passed through[35](index=35&type=chunk) - BCO Independent Contractor truck turnover was approximately **21%** in fiscal year 2021, down from 27% in fiscal year 2020[37](index=37&type=chunk) - In October 2020, the Company established field operations centers to support BCO recruitment and retention, incurring **$15.5 million** in commission program termination costs related to agent incentive buyouts[39](index=39&type=chunk) [Truck Brokerage Carriers](index=8&type=section&id=Truck%20Brokerage%20Carriers) - At December 25, 2021, the Company maintained a database of over **90,000 approved Truck Brokerage Carriers**[40](index=40&type=chunk) - Truck Brokerage Carriers are paid either a negotiated rate or a contractually agreed-upon fixed rate per load[40](index=40&type=chunk) [Railroads and Air and Ocean Cargo Carriers](index=8&type=section&id=Railroads%20and%20Air%20and%20Ocean%20Cargo%20Carriers) - The Company has contracts with Class 1 domestic and Canadian railroads, certain short-line railroads, and domestic and international airlines and ocean lines[42](index=42&type=chunk) [Trailing Equipment](index=8&type=section&id=Trailing%20Equipment) Trailing Equipment Mix (December 25, 2021) | Trailers by Type | Count | | :--------------- | :---- | | Van | 15,119 | | Unsided/platform | 2,991 | | Temperature-controlled | 197 | | **Total** | **18,307** | - At December 25, 2021, **14,160 trailers were owned by the Company**, 276 were rented, and 3,871 were provided by BCO Independent Contractors[44](index=44&type=chunk) - Approximately **31% of Landstar's truck transportation revenue** in fiscal year 2021 was generated on Landstar-provided trailing equipment[44](index=44&type=chunk) [Customers](index=8&type=section&id=Customers) - The Company's customer base is highly diversified across many industries, commodities, and geographic regions[45](index=45&type=chunk) - The top 100 customers accounted for approximately **46% of consolidated revenue** during both fiscal years 2021 and 2020[45](index=45&type=chunk) - No single customer accounted for **more than 4%** of the Company's 2021 revenue[47](index=47&type=chunk) [Technology](index=9&type=section&id=Technology) - Landstar focuses on providing integrated transportation management solutions emphasizing customer service and information coordination through digital technologies[48](index=48&type=chunk) - Since 2016, the Company has invested approximately **$90 million** in strategic digital development, including **$27 million** in fiscal year 2021[50](index=50&type=chunk) - Key digital tools include Agent TMS, Analytics (Microsoft Power BI), proprietary Pricing tools, LandstarOne™ mobile application, Clarity (freight tracking), Trailer Tools, and a Credit application[52](index=52&type=chunk) [Corporate Services](index=9&type=section&id=Corporate%20Services) - The Company provides administrative support services such as customer contract administration, credit review, pricing, billing, collections, third-party capacity settlement, safety/compliance management, and insurance claims handling[53](index=53&type=chunk) - Accepting customer credit risk and promptly paying agents and carriers provides a significant competitive advantage[53](index=53&type=chunk) [Competition](index=10&type=section&id=Competition) - Landstar competes in an extremely competitive and fragmented transportation and logistics services industry[54](index=54&type=chunk) - Competition is based on service, efficiency, and freight rates, influenced by economic environment, available capacity, and freight demand[55](index=55&type=chunk) [Self-Insured Claims](index=10&type=section&id=Self-Insured%20Claims) - Landstar retains liability for commercial trucking claims up to **$5 million per occurrence** and has an Initial Excess Policy for losses between $5 million and $10 million (aggregate limit of $15 million per policy year, $20 million for the three-year term)[56](index=56&type=chunk) - The Company maintains third-party insurance for liabilities exceeding $10 million, but availability has decreased and pricing has significantly increased due to **'Nuclear Verdicts'** (verdicts over $10 million)[57](index=57&type=chunk) - Premiums for excess coverage (over $10 million) **increased approximately $14 million (over 170%)** for the policy year ending April 30, 2021, and approximately **$3 million (19%)** for the policy year ending April 30, 2022[57](index=57&type=chunk) - The Company has increased its financial exposure to commercial trucking claims over $10 million; a hypothetical $100 million claim in FY2022 would result in an aggregate financial exposure of approximately **$18 million**[59](index=59&type=chunk) [Regulation](index=11&type=section&id=Regulation) - Operating Subsidiaries are regulated as motor carriers and/or brokers by the FMCSA and various state agencies[61](index=61&type=chunk) - The Company's air transportation activities are regulated by the U.S. Department of Transportation as an indirect air carrier, and ocean activities by the Federal Maritime Commission as an OTI[64](index=64&type=chunk) - The FMCSA's ELD mandate (effective Dec 18, 2017) has not adversely affected the Company's fleet size or capacity sourcing[63](index=63&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) - Truckload volumes for the quarter ending in March are typically lower than for the quarters ending in June, September, and December[66](index=66&type=chunk) [Human Capital Resources](index=12&type=section&id=Human%20Capital%20Resources) - As of December 25, 2021, the Company and its subsidiaries employed **1,399 individuals**[69](index=69&type=chunk) Employee Turnover Rate (US & Canada) | Year | Turnover Rate | | :--- | :------------ | | 2021 | 13% | | 2020 | 9% | | 2019 | 12% | - During 2020 and 2021, the Company implemented various steps to address employee safety and health amidst the COVID-19 pandemic, including remote work, health protocols, and financial relief programs for BCOs and agents[73](index=73&type=chunk)[75](index=75&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from accident severity, claims costs, reliance on third parties, and the COVID-19 pandemic [Operational Risks](index=13&type=section&id=Operational%20Risks) - Increased severity or frequency of accidents and unfavorable development of existing claims, particularly **'Nuclear Verdicts' (verdicts >$10 million)**, significantly impact commercial auto liability costs, reducing excess coverage availability and increasing pricing[73](index=73&type=chunk)[74](index=74&type=chunk)[76](index=76&type=chunk) - Dependence on a limited number of third-party insurance companies for excess coverage poses a risk, as availability and pricing are volatile[78](index=78&type=chunk) - The Company's reliance on independent commission sales agents (**593 agents generated 94% of FY2021 consolidated revenue**) and third-party capacity providers makes it vulnerable to agent turnover, capacity shortages, and inability to pass through increased costs[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The COVID-19 pandemic caused significant disruptions, including a rapid decrease in demand in Q2 2020 followed by unprecedented strength in 2021, and continues to pose risks to demand, agent network operations, and capacity availability[83](index=83&type=chunk)[84](index=84&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - Disruptions or failures in the Company's computer systems, including cyber incidents, could significantly impact operations, damage reputation, and incur substantial costs, with insurance potentially being inadequate[89](index=89&type=chunk)[90](index=90&type=chunk) [Economic, Competitive and Industry Risks](index=17&type=section&id=Economic%2C%20Competitive%20and%20Industry%20Risks) - Decreased demand for transportation services due to economic slowdowns, customer business cycles, or changes in U.S. trade relationships could materially adversely affect operating results[93](index=93&type=chunk)[94](index=94&type=chunk) - Substantial industry competition, including from digital freight brokers and 3PLs, creates downward pressure on freight rates and requires continuous investment in technology to maintain competitiveness[95](index=95&type=chunk)[96](index=96&type=chunk) [Legal, Tax, Regulatory and Compliance Risks](index=17&type=section&id=Legal%2C%20Tax%2C%20Regulatory%20and%20Compliance%20Risks) - Potential changes in the legal classification of independent contractors (e.g., **California's AB 5**) could materially adversely affect Landstar's operating model and increase costs if unable to pass them to customers[97](index=97&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Regulatory and legislative changes, such as more stringent environmental, climate change, or safety/security regulations could affect industry economics, demand, and the availability or cost of truck capacity[103](index=103&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - New FMCSA regulations, such as expanded drug and alcohol testing requirements and changes to the CSA program, have the potential to remove operators from service or impact the aggregate number of available trucks[105](index=105&type=chunk)[106](index=106&type=chunk) [General Risk Factors](index=20&type=section&id=General%20Risk%20Factors) - Potential increases in federal, state, or local taxes could adversely affect financial performance if costs cannot be passed through to customers[109](index=109&type=chunk) - Claims of intellectual property infringement could result in increased licensing costs or cease and desist orders, adversely affecting business and results of operations[110](index=110&type=chunk) [Item 1B. Unresolved Staff Comments](index=19&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - There are no unresolved staff comments[111](index=111&type=chunk) [Item 2. Properties](index=19&type=section&id=Item%202.%20Properties) Landstar owns or leases properties in the U.S., Canada, and Mexico, with key facilities in Florida, Illinois, and Texas - The Company owns or leases properties in the U.S., Canada, and Mexico for operations and administrative staff[112](index=112&type=chunk) - Primary facilities are located in Jacksonville, Florida (corporate headquarters) and Rockford, Illinois; a key freight staging and transload facility is in Laredo, Texas[112](index=112&type=chunk) - A network of owned and leased field operations centers supports BCO Independent Contractor recruitment and retention[112](index=112&type=chunk) [Item 3. Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various claims and litigation arising from normal business operations, many covered by insurance - The Company is involved in certain claims and pending litigation arising from the normal conduct of business[113](index=113&type=chunk)[211](index=211&type=chunk)[314](index=314&type=chunk) - Many of these claims are covered in whole or in part by insurance[113](index=113&type=chunk)[211](index=211&type=chunk)[314](index=314&type=chunk) - Management believes adequate provisions have been made, and the ultimate outcome will not have a material adverse effect on financial condition, but could impact results of operations in a given quarter or year[211](index=211&type=chunk)[314](index=314&type=chunk) [Item 4. Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[114](index=114&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Landstar's stock (LSTR) trades on NASDAQ; the company actively repurchases shares and maintains equity compensation plans [Market Information](index=21&type=section&id=Market%20Information) - The Company's Common Stock is listed and traded on the NASDAQ Global Select Market under the symbol "LSTR"[117](index=117&type=chunk) - As of February 11, 2022, **37,294,677 shares of Common Stock were outstanding**[6](index=6&type=chunk) - The reported last sale price per share on January 21, 2022, was **$162.88**[117](index=117&type=chunk) [Purchases of Equity Securities by the Company](index=21&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Company) Common Stock Purchases (Q4 2021) | Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :----------------------------- | :--------------------------- | | Oct. 24, 2021 – Nov. 20, 2021 | 272,151 | $173.48 | | Nov. 21, 2021 – Dec. 25, 2021 | 144,657 | $174.76 | | **Total** | **416,808** | **$173.92** | - During fiscal year 2021, the Company purchased **733,854 shares** of its Common Stock at a total cost of **$122,722,000**[201](index=201&type=chunk)[311](index=311&type=chunk) - As of December 25, 2021, the Company had authorization to purchase up to **3,000,000 additional shares** of its Common Stock[118](index=118&type=chunk)[201](index=201&type=chunk)[311](index=311&type=chunk) [Equity Compensation Plan Information](index=21&type=section&id=Equity%20Compensation%20Plan%20Information) Securities Authorized for Issuance Under Equity Compensation Plans (December 25, 2021) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted-average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :------------------------------------ | :----------------------------------------------------------------- | :--------------------------------------------------- | :------------------------------------------------------------------------------------------ | | Equity Compensation Plans Approved by Security Holders | 8,570 | $55.42 | 3,559,598 | | Equity Compensation Plans Not Approved by Security Holders | 0 | 0 | 0 | - The Company maintains the 2013 Directors Stock Compensation Plan (2013 DSCP) and the 2011 Equity Incentive Plan (2011 EIP)[119](index=119&type=chunk)[293](index=293&type=chunk) [Financial Model Shareholder Returns](index=22&type=section&id=Financial%20Model%20Shareholder%20Returns) - A graph illustrates the return on a $100 investment in the Company's Common Stock, the Standard and Poor's 500 Stock Index, and the Dow Jones Transportation Stock Index for the period from December 31, 2016, through December 25, 2021, assuming reinvestment of dividends[120](index=120&type=chunk) [Item 6. Reserved](index=22&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - This item is reserved[122](index=122&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Landstar achieved record FY2021 revenue of $6.54 billion, a 58% YoY increase, driven by strong demand and tight capacity [Forward-Looking Statements](index=23&type=section&id=Forward-Looking%20Statements) - Statements not based on historical facts are "forward-looking statements" and are subject to uncertainties and risks[122](index=122&type=chunk) - Key risks include the impact of COVID-19, increased accident claims, dependence on third-party insurance/agents/capacity, decreased demand, trade relationships, competition, cyber incidents, regulatory changes, and intellectual property[122](index=122&type=chunk) [Introduction](index=23&type=section&id=Introduction) - Landstar is a worldwide technology-enabled, asset-light provider of integrated transportation management solutions, primarily operating throughout North America[123](index=123&type=chunk)[124](index=124&type=chunk) - The Company's network includes over **1,200 independent commission sales agents** and over **101,000 third-party capacity providers**[123](index=123&type=chunk) - Revenue for the most recently completed fiscal year (FY2021) was **$6.5 billion**[124](index=124&type=chunk) FY2021 Consolidated Revenue by Capacity Type | Capacity Type | % of Consolidated Revenue | | :------------------------ | :------------------------ | | BCO Independent Contractors | 40% | | Truck Brokerage Carriers | 51% | | Rail intermodal | 2% | | Air and Ocean Cargo Carriers | 5% | [Changes in Financial Condition and Results of Operations](index=24&type=section&id=Changes%20in%20Financial%20Condition%20and%20Results%20of%20Operations) [Revenue](index=25&type=section&id=Revenue) Million Dollar Agents Performance | Fiscal Year | Number of Million Dollar Agents | Average Revenue generated per Million Dollar Agent | Percent of consolidated revenue generated by Million Dollar Agents | | :---------- | :------------------------------ | :--------------------------------------- | :--------------------------------------------------------------- | | 2021 | 593 | $6,150,000 | 94% | | 2020 | 508 | $7,489,000 | 92% | | 2019 | 555 | $6,880,000 | 93% | Revenue and Loads by Mode (Fiscal Years 2021-2019) | Category | 2021 (in thousands) | 2020 (in thousands) | 2019 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | | **Revenue generated through:** | | | | | Truck transportation | $5,963,218 | $3,815,781 | $3,765,329 | | Rail intermodal | $159,974 | $114,313 | $118,305 | | Ocean and air cargo carriers | $327,160 | $132,180 | $121,485 | | Other (reinsurance, intra-Mexico) | $87,216 | $70,707 | $79,458 | | **Total Revenue** | **$6,537,568** | **$4,132,981** | **$4,084,577** | | **Number of loads:** | | | | | Total truck transportation | 2,429,310 | 1,969,140 | 2,006,260 | | Rail intermodal | 52,310 | 46,280 | 47,590 | | Ocean and air cargo carriers | 41,450 | 31,900 | 30,110 | | **Revenue per load (Truck transportation):** | | | | | Van equipment | $2,478 | $1,921 | $1,795 | | Unsided/platform equipment | $2,968 | $2,441 | $2,537 | | Less-than-truckload | $639 | $598 | $632 | | Other truck transportation | $2,563 | $1,971 | $1,679 | | **Revenue per load (Other modes):** | | | | | Rail intermodal | $3,058 | $2,470 | $2,486 | | Ocean and air cargo carriers | $7,893 | $4,144 | $4,035 | [Expenses](index=27&type=section&id=Expenses) Available Truck Capacity Providers (End of Fiscal Year) | Category | Dec. 25, 2021 | Dec. 26, 2020 | Dec. 28, 2019 | | :-------------------------- | :------------ | :------------ | :------------ | | BCO Independent Contractors | 11,057 | 10,242 | 9,554 | | Truck Brokerage Carriers (Approved & Active) | 64,476 | 46,053 | 39,497 | | Other Approved | 25,870 | 22,972 | 16,820 | | **Total Available Truck Capacity Providers** | **101,403** | **79,267** | **65,871** | | Trucks provided by BCO Independent Contractors | 11,864 | 10,991 | 10,243 | - Purchased transportation is the largest component of costs and expenses, varying directly with the percentage of consolidated revenue generated through BCO Independent Contractors and other third-party capacity providers[139](index=139&type=chunk) - Commissions to agents vary directly with the percentage of consolidated revenue from different modes and reinsurance premiums, and inversely with purchased transportation as a percentage of revenue for certain services[140](index=140&type=chunk) - Other operating costs primarily include maintenance for Company-provided trailing equipment, BCO Independent Contractor recruiting and qualification costs, and trailer rental costs[141](index=141&type=chunk) - Insurance and claims costs are influenced by potential liability from trucking accidents, with the Company retaining significant self-insured liability and facing increasing premiums for excess coverage due to 'Nuclear Verdicts'[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Selling, general and administrative costs are primarily driven by employee compensation and benefits, which accounted for approximately **75% of these costs** in fiscal year 2021[148](index=148&type=chunk) - Depreciation and amortization primarily relate to trailing equipment and information technology hardware and software[149](index=149&type=chunk) [Gross Profit, Variable Contribution, Gross Profit Margin and Variable Contribution Margin](index=29&type=section&id=Gross%20Profit%2C%20Variable%20Contribution%2C%20Gross%20Profit%20Margin%20and%20Variable%20Contribution%20Margin) Gross Profit and Variable Contribution Metrics (in thousands) | Metric | 2021 | 2020 | 2019 | | :-------------------------- | :--------- | :--------- | :--------- | | Revenue | $6,537,568 | $4,132,981 | $4,084,577 | | Variable costs of revenue | $5,621,876 | $3,533,630 | $3,469,700 | | Other costs of revenue | $194,682 | $165,924 | $163,363 | | Total costs of revenue | $5,816,558 | $3,699,554 | $3,633,063 | | **Gross profit** | **$721,010** | **$433,427** | **$451,514** | | **Gross profit margin** | **11.0%** | **10.5%** | **11.1%** | | **Variable contribution** | **$915,692** | **$599,351** | **$614,877** | | **Variable contribution margin** | **14.0%** | **14.5%** | **15.1%** | - Variable contribution and variable contribution margin are non-GAAP measures used by management to evaluate financial performance and budgeting, reflecting variable costs at a shipment-by-shipment level[151](index=151&type=chunk) [Operating income as a percentage of gross profit and operating income as a percentage of variable contribution](index=30&type=section&id=Operating%20income%20as%20a%20percentage%20of%20gross%20profit%20and%20operating%20income%20as%20a%20percentage%20of%20variable%20contribution) Operating Income Ratios | Metric | 2021 | 2020 | 2019 | | :------------------------------------ | :----- | :----- | :----- | | Operating income | $505,668 | $252,950 | $298,904 | | Operating income as % of gross profit | 70.1% | 58.4% | 66.2% | | Operating income as % of variable contribution | 55.2% | 42.2% | 48.6% | - The increase in operating income as a percentage of gross profit and variable contribution from fiscal year 2020 to 2021 was due to scaling fixed cost infrastructure across a larger gross profit/variable contribution base[157](index=157&type=chunk)[158](index=158&type=chunk) - The decrease in these ratios from fiscal year 2019 to 2020 was primarily due to one-time costs related to agent incentive buyouts and impairment charges[157](index=157&type=chunk)[158](index=158&type=chunk) [Fiscal Year Ended December 25, 2021 Compared to Fiscal Year Ended December 26, 2020](index=31&type=section&id=Fiscal%20Year%20Ended%20December%2025%2C%202021%20Compared%20to%20Fiscal%20Year%20Ended%20December%2026%2C%202020) - Revenue increased by **$2,404,587,000 (58%)** to $6,537,568,000 in FY2021, driven by a **29% increase in revenue per load** and a **23% increase in loads hauled**[160](index=160&type=chunk) - The significant revenue increase was primarily due to strong consumer demand for durable goods and e-commerce, ongoing supply chain disruptions, and recovery from COVID-19 demand lows in 2020[161](index=161&type=chunk) - Truck transportation revenue **increased 56%** to $5,963,218,000, while multimode transportation revenue (rail, air, ocean) **increased 98%** to $487,134,000[162](index=162&type=chunk)[166](index=166&type=chunk) - Net income was **$381,524,000 ($9.98 diluted EPS)** in FY2021, compared to $192,106,000 ($4.98 diluted EPS) in FY2020[178](index=178&type=chunk) [Fiscal Year Ended December 26, 2020 Compared to Fiscal Year Ended December 28, 2019](index=34&type=section&id=Fiscal%20Year%20Ended%20December%2026%2C%202020%20Compared%20to%20Fiscal%20Year%20Ended%20December%2028%2C%202019) - Revenue increased by **$48,404,000 (1%)** to $4,132,981,000 in FY2020, driven by a **3% increase in revenue per load**, partially offset by a 2% decrease in loads hauled[179](index=179&type=chunk) - Net income was **$192,106,000 ($4.98 diluted EPS)** in FY2020, compared to $227,720,000 ($5.72 diluted EPS) in FY2019[197](index=197&type=chunk) - FY2020 net income was unfavorably impacted by **$15,494,000 ($0.31 diluted EPS)** from agent incentive buyout costs, **$12,593,000 ($0.25 diluted EPS)** from COVID-19 relief payments, and **$2,582,000 ($0.05 diluted EPS)** from non-cash impairment charges on Mexico subsidiary assets[197](index=197&type=chunk) - Purchased transportation increased to **77.3% of revenue** (from 76.6% in FY2019) due to higher Truck Brokerage Carrier rates and COVID-19 relief payments to BCOs[187](index=187&type=chunk) [Capital Resources and Liquidity](index=36&type=section&id=Capital%20Resources%20and%20Liquidity) Working Capital and Cash from Operations | Metric | Dec. 25, 2021 | Dec. 26, 2020 | Dec. 28, 2019 | | :-------------------------- | :------------ | :------------ | :------------ | | Working capital | $512,917,000 | $402,038,000 | $444,984,000 | | Current ratio | 1.5 to 1 | 1.5 to 1 | 1.8 to 1 | | Cash provided by operating activities | $276,740,000 | $210,717,000 | $307,840,000 | Dividends Paid and Share Repurchases | Fiscal Year | Dividends Paid (per share) | Aggregate Dividends Paid (in thousands) | Shares Purchased (in thousands) | Cost of Shares Purchased (in thousands) | | :---------- | :------------------------- | :-------------------------------------- | :------------------------------ | :-------------------------------------- | | 2021 | $0.92 | $35,191 | 733,854 | $122,722 | | 2020 | $0.79 | $30,557 | 1,178,970 | $115,962 | | 2019 | $0.70 | $27,891 | 849,068 | $88,578 | - A special cash dividend of **$2.00 per share ($75,387,000 in aggregate)** was declared on December 7, 2021, payable on January 21, 2022[199](index=199&type=chunk) - The Company has a **$250,000,000 revolving credit facility** (matures August 18, 2023) with no outstanding borrowings as of December 25, 2021, and **$216,830,000 available** for future borrowings[203](index=203&type=chunk)[205](index=205&type=chunk) - Anticipated capital expenditures for fiscal year 2022 include approximately **$116,000,000 for new trailing equipment**, **$23,000,000 for IT hardware and software**, and **$16,000,000 for buildings and improvements**[208](index=208&type=chunk) [Legal Proceedings](index=38&type=section&id=Legal%20Proceedings) - The Company is involved in certain claims and pending litigation arising from the normal conduct of business, many of which are covered by insurance[211](index=211&type=chunk) - Management believes adequate provisions have been made for probable losses, and the ultimate outcome will not have a material adverse effect on financial condition, but could impact results of operations in a given quarter or year[211](index=211&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) - The Company provides for estimated costs of self-insured claims primarily on an actuarial basis, with estimates continually revised as new information becomes available[212](index=212&type=chunk) Net Unfavorable Adjustments to Prior Years' Claims Estimates (in thousands) | Fiscal Year | Amount | | :---------- | :----- | | 2021 | $9,708 | | 2020 | $9,196 | | 2019 | $16,679 | - Significant variances from management's estimates could affect quarterly/annual earnings, but are not expected to significantly affect long-term financial condition[213](index=213&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Landstar is exposed to interest rate and foreign currency risks, though neither is expected to have a material impact [Interest Rate Risk](index=38&type=section&id=Interest%20Rate%20Risk) - The Company is exposed to changes in interest rates from its revolving credit facility and investments held by the insurance segment[214](index=214&type=chunk) - The Credit Agreement provides a **$250,000,000 revolving credit facility**, with interest rates tied to the Eurocurrency rate or an alternate base rate plus applicable margins[215](index=215&type=chunk)[217](index=217&type=chunk) - **No borrowings were outstanding** under the Credit Agreement during fiscal years 2021 and 2020[217](index=217&type=chunk) - A hypothetical **100 basis point increase or decrease in interest rates** is not expected to have a material impact on future earnings[218](index=218&type=chunk) [Foreign Currency Exchange Rate Risk](index=39&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) - Assets and liabilities of Canadian and Mexican operations are translated to U.S. dollars at balance sheet date exchange rates, and revenue/expense accounts at average monthly rates[219](index=219&type=chunk) - Assets held at Canadian and Mexican subsidiaries were approximately **3% of total consolidated assets** at December 25, 2021[219](index=219&type=chunk) - Translation gains or losses of **40% or less** related to Canadian and Mexican operations would not be material[219](index=219&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Landstar's audited consolidated financial statements for fiscal years 2019, 2020, and 2021 [Consolidated Balance Sheets](index=40&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec. 25, 2021 | Dec. 26, 2020 | | :------------------------------------ | :------------ | :------------ | | Total Current Assets | $1,522,900 | $1,208,175 | | Total Assets | $2,045,465 | $1,653,799 | | Total Current Liabilities | $1,009,983 | $806,137 | | Total Liabilities and Shareholders' Equity | $2,045,465 | $1,653,799 | | Total Shareholders' Equity | $862,010 | $691,835 | [Consolidated Statements of Income](index=41&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income Highlights (in thousands, except per share amounts) | Metric | 2021 | 2020 | 2019 | | :------------------------------------ | :--------- | :--------- | :--------- | | Revenue | $6,537,568 | $4,132,981 | $4,084,577 | | Total costs and expenses | $6,034,757 | $3,883,430 | $3,790,714 | | Operating income | $505,668 | $252,950 | $298,904 | | Income before income taxes | $501,692 | $248,997 | $295,763 | | Income taxes | $120,168 | $56,891 | $68,060 | | Net income attributable to Landstar System, Inc. and subsidiary | $381,524 | $192,106 | $227,720 | | Diluted earnings per share attributable to Landstar System, Inc. and subsidiary | $9.98 | $4.98 | $5.72 | | Dividends per common share | $2.92 | $2.79 | $2.70 | [Consolidated Statements of Comprehensive Income](index=42&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 2021 | 2020 | 2019 | | :------------------------------------ | :--------- | :--------- | :--------- | | Net income attributable to Landstar System, Inc. and subsidiary | $381,524 | $192,106 | $227,720 | | Other comprehensive (loss) income | $(3,404) | $213 | $3,663 | | Comprehensive income attributable to Landstar System, Inc. and subsidiary | $378,120 | $192,319 | $231,383 | [Consolidated Statements of Cash Flows](index=43&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 2021 | 2020 | 2019 | | :------------------------------------ | :--------- | :--------- | :--------- | | Net cash provided by operating activities | $276,740 | $210,717 | $307,840 | | Net cash used by investing activities | $(73,344) | $(28,419) | $(18,556) | | Net cash used by financing activities | $(232,947) | $(252,032) | $(170,565) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(29,783) | $(70,161) | $119,779 | | Cash, cash equivalents and restricted cash at end of period | $219,571 | $249,354 | $319,515 | [Consolidated Statements of Changes in Equity](index=44&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Consolidated Statements of Changes in Equity Highlights (in thousands) | Metric | Dec 25, 2021 | Dec 26, 2020 | Dec 28, 2019 | | :------------------------------------ | :----------- | :----------- | :----------- | | Balance at beginning of period | $691,835 | $721,469 | $689,133 | | Net income | $381,524 | $192,106 | $227,720 | | Dividends | $(110,578) | $(107,327) | $(106,838) | | Purchases of common stock | $(122,722) | $(115,962) | $(88,578) | | Stock-based compensation | $27,537 | $4,639 | $4,236 | | Other comprehensive (loss) income | $(3,404) | $213 | $3,663 | | **Balance at end of period** | **$862,010** | **$691,835** | **$721,469** | [Notes to Consolidated Financial Statements](index=45&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail Landstar's accounting policies, including revenue recognition, insurance claims, and financial instruments [(1) Significant Accounting Policies](index=45&type=section&id=%281%29%20Significant%20Accounting%20Policies) - Revenue from freight transportation services is recognized on a gross basis over the freight transit period using a days-in-transit output method[240](index=240&type=chunk) - Landstar retains liability for commercial trucking claims up to **$5 million per occurrence** and has increased its financial exposure to claims exceeding $10 million due to rising costs and reduced excess coverage availability[244](index=244&type=chunk)[245](index=245&type=chunk) - Goodwill is reviewed annually for impairment using a qualitative assessment, and **no historical impairment has occurred**[255](index=255&type=chunk) - Share-based payment arrangements include restricted stock units (RSUs), non-vested restricted stock, Deferred Stock Units, and stock options, with fair values determined by market value or the Black-Scholes model[257](index=257&type=chunk)[258](index=258&type=chunk) [(2) Acquired Business](index=49&type=section&id=%282%29%20Acquired%20Business) - On June 15, 2020, Landstar Blue acquired an independent agent focused on truckload brokerage services for approximately **$2,766,000 in cash**, resulting in approximately **$2,871,000 in goodwill**[264](index=264&type=chunk) [(3) Other Comprehensive Income](index=50&type=section&id=%283%29%20Other%20Comprehensive%20Income) Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | Dec 25, 2021 | Dec 26, 2020 | Dec 28, 2019 | | :------------------------------------ | :----------- | :----------- | :----------- | | Unrealized Holding (Losses) Gains on Available-for-Sale Securities | $113 | $2,808 | $1,120 | | Foreign Currency Translation (Losses) Gains | $(5,516) | $(4,807) | $(3,332) | | **Total Accumulated Other Comprehensive (Loss) Income** | **$(5,403)** | **$(1,999)** | **$(2,212)** | [(4) Investments](index=50&type=section&id=%284%29%20Investments) - Investments primarily consist of investment-grade corporate bonds and asset-backed securities with maturities up to five years, and money market investments, carried at fair value[268](index=268&type=chunk) - Fair value is determined using Level 1 inputs (U.S. Treasury, money market) and Level 2 inputs (corporate bonds, asset-backed securities, government agencies)[268](index=268&type=chunk) - Net unrealized gains on the bond portfolio were **$144,000** at December 25, 2021, and **$3,578,000** at December 26, 2020[268](index=268&type=chunk) - Short-term and non-current investments provide collateral for **$72,267,000** of letters of credit issued to guarantee payment of insurance claims[271](index=271&type=chunk) [(5) Income Taxes](index=52&type=section&id=%285%29%20Income%20Taxes) Income Tax Provisions (in thousands) | Category | 2021 | 2020 | 2019 | | :--------- | :--------- | :--------- | :--------- | | Current | $123,958 | $55,761 | $63,293 | | Deferred | $(3,790) | $1,130 | $4,767 | | **Total Income Taxes** | **$120,168** | **$56,891** | **$68,060** | - The net deferred tax liability was **$39,108,000** at December 25, 2021, compared to $42,898,000 at December 26, 2020[274](index=274&type=chunk) - The actual effective income tax rate was **24.0% in FY2021**, 22.8% in FY2020, and 23.0% in FY2019[177](index=177&type=chunk)[196](index=196&type=chunk) - As of December 25, 2021, the Company had **$2,344,000 of net unrecognized tax benefits**[275](index=275&type=chunk) [(6) Operating Property](index=53&type=section&id=%286%29%20Operating%20Property) Total Operating Property, Net (in thousands) | Date | Amount | | :----------- | :--------- | | Dec. 25, 2021 | $317,386 | | Dec. 26, 2020 | $296,996 | - Landstar acquired operating property by entering into finance leases totaling **$48,674,000 in FY2021**, $31,633,000 in FY2020, and $29,054,000 in FY2019[277](index=277&type=chunk) [(7) Retirement Plan](index=53&type=section&id=%287%29%20Retirement%20Plan) - Landstar sponsors a 401(k) defined contribution plan for U.S. full-time employees, contributing 100% of the first 3% and 50% of the next 2% of employee contributions[278](index=278&type=chunk) Retirement Plan Expense (in thousands) | Fiscal Year | Expense | | :---------- | :-------- | | 2021 | $2,374 | | 2020 | $2,417 | | 2019 | $2,427 | [(8) Debt](index=53&type=section&id=%288%29%20Debt) - The Company had **no outstanding debt** other than finance lease obligations as of December 25, 2021, and December 26, 2020[280](index=280&type=chunk) - A **$250,000,000 revolving credit facility**, maturing on August 18, 2023, was in place, with no borrowings outstanding during fiscal years 2021 and 2020[281](index=281&type=chunk)[283](index=283&type=chunk) - The Company is in compliance with all debt covenants under the Credit Agreement, which include maintaining a minimum Fixed Charge Coverage Ratio and a maximum Leverage Ratio[284](index=284&type=chunk) [(9) Leases](index=54&type=section&id=%289%29%20Leases) - Landstar's noncancelable leases primarily comprise finance leases for new trailing equipment (5-year term with a $1 purchase option) and operating leases for facilities and office space[287](index=287&type=chunk) - Total net lease cost for finance and operating leases was **$22,267,000** in fiscal year 2021[291](index=291&type=chunk) Present Value of Minimum Lease Payments (December 25, 2021, in thousands) | Lease Type | Amount | | :----------- | :--------- | | Finance Leases | $111,804 | | Operating Leases | $2,051 | [(10) Share-Based Payment Arrangements](index=56&type=section&id=%2810%29%20Share-Based%20Payment%20Arrangements) [Restricted Stock Units](index=56&type=section&id=Restricted%20Stock%20Units) - As of December 25, 2021, there were **209,399 outstanding Restricted Stock Units (RSUs)** with a weighted average grant date fair value of $102.90[295](index=295&type=chunk) - RSUs with performance conditions granted in 2019, 2020, and 2021 vest based on growth in operating income and pre-tax income per diluted share[297](index=297&type=chunk)[298](index=298&type=chunk) - The Company recognized approximately **$24,197,000 of share-based compensation expense** related to RSU awards in fiscal year 2021[300](index=300&type=chunk) [Non-vested Restricted Stock and Deferred Stock Units](index=57&type=section&id=Non-vested%20Restricted%20Stock%20and%20Deferred%20Stock%20Units) - As of December 25, 2021, there were **56,436 non-vested shares of restricted stock and Deferred Stock Units outstanding**, with a weighted average grant date fair value of $125.16[301](index=301&type=chunk) - These awards generally vest in three equal annual installments or 100% on the first or fifth anniversary of the grant date[302](index=302&type=chunk) - Total unrecognized compensation cost related to these awards was **$3,880,000** as of December 25, 2021, expected to be recognized over a weighted average period of 1.9 years[303](index=303&type=chunk) [Stock Options](index=58&type=section&id=Stock%20Options) - The Company **did not grant any stock options** during its 2019, 2020, or 2021 fiscal years[304](index=304&type=chunk) - As of December 25, 2021, there were **8,570 outstanding stock options** with a weighted average exercise price of $55.42 and a remaining contractual term of 0.9 years[306](index=306&type=chunk) - The total intrinsic value of options outstanding and exercisable was **$1,001,000** at December 25, 2021[308](index=308&type=chunk) [Directors' Stock Compensation Plan](index=59&type=section&id=Directors'%20Stock%20Compensation%20Plan) - Eligible Directors receive restricted shares or Deferred Stock Units equal to **$110,000** divided by the fair market value of a share of Common Stock[310](index=310&type=chunk) Compensation Cost for Directors' Stock Compensation Plan (in thousands) | Fiscal Year | Compensation Cost | | :---------- | :------------------ | | 2021 | $669 | | 2020 | $660 | | 2019 | $660 | [(11) Equity](index=59&type=section&id=%2811%29%20Equity) - As of December 25, 2021, the Company was authorized to purchase up to **3,000,000 additional shares** of its Common Stock under authorized programs[311](index=311&type=chunk) - The Company has **2,000,000 shares of preferred stock** authorized and unissued[312](index=312&type=chunk) [(12) Commitments and Contingencies](index=59&type=section&id=%2812%29%20Commitments%20and%20Contingencies) - At December 25, 2021, Landstar had **$72,267,000 of letters of credit** secured by investments and **$33,170,000 of letters of credit** outstanding under its Credit Agreement[313](index=313&type=chunk) - The Company is involved in claims and pending litigation, for which management believes adequate provisions have been made, and the ultimate outcome is not expected to materially adversely affect financial condition[314](index=314&type=chunk) [(13) Segment Information](index=59&type=section&id=%2813%29%20Segment%20Information) - Landstar operates two reportable segments: **transportation logistics** and **insurance**[315](index=315&type=chunk) External Revenue by Segment (in thousands) | Segment | 2021 External Revenue | 2020 External Revenue | 2019 External Revenue | | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Transportation Logistics | $6,465,711 | $4,076,519 | $4,028,336 | | Insurance | $71,857 | $56,462 | $56,241 | | **Total External Revenue** | **$6,537,568** | **$4,132,981** | **$4,084,577** | Operating Income by Segment (in thousands) | Segment | 2021 Operating Income | 2020 Operating Income | 2019 Operating Income | | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Transportation Logistics | $464,282 | $221,210 | $258,742 | | Insurance | $41,386 | $31,740 | $40,162 | | **Total Operating Income** | **$505,668** | **$252,950** | **$298,904** | [(14) Change in Accounting Estimate for Self-Insured Claims](index=61&type=section&id=%2814%29%20Change%20in%20Accounting%20Estimate%20for%20Self-Insured%20Claims) - The Company experienced unfavorable development of prior year self-insured claims estimates, impacting operating income, net income, and diluted EPS[322](index=322&type=chunk) Adverse Effect of Unfavorable Claims Development (in thousands, except per share) | Metric | 2021 | 2020 | 2019 | | :------------------------------------ | :--------- | :--------- | :--------- | | Operating income | $9,708 | $9,196 | $16,679 | | Net income attributable to Landstar System, Inc. and subsidiary | $7,359 | $6,989 | $12,683 | | Diluted earnings per share attributable to Landstar System, Inc. and subsidiary | $0.19 | $0.18 | $0.32 | [(15) Impairment of Intangible and Other Assets](index=62&type=section&id=%2815%29%20Impairment%20of%20Intangible%20and%20Other%20Assets) - During the 2020 second fiscal quarter, the Company recorded a non-cash impairment charge of **$2,582,000** related to customer contract and related customer relationship intangible assets of its Mexico subsidiaries[325](index=325&type=chunk) - This impairment was due to negative macroeconomic trends in Mexico, which caused updated financial projections for these assets to be substantially below original acquisition expectations[325](index=325&type=chunk) [(16) Recent Accounting Pronouncements](index=62&type=section&id=%2816%29%20Recent%20Accounting%20Pronouncements) - The Company adopted ASU 2016-13 (Credit Losses) on December 29, 2019, resulting in a **$702,000 cumulative adjustment** to retained earnings under the modified retrospective transition method[326](index=326&type=chunk) [Report of Independent Registered Public Accounting Firm](index=63&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - KPMG LLP issued an **unqualified opinion** on the consolidated financial statements for the three-year period ended December 25, 2021, in conformity with U.S. GAAP[329](index=329&type=chunk) - KPMG LLP also issued an **unqualified opinion** on the effectiveness of the Company's internal control over financial reporting as of December 25, 2021[330](index=330&type=chunk) - The critical audit matter identified was the evaluation of the **self-insurance claims liability** due to the inherent uncertainty in the frequency and severity of claims and the assumptions for future developments[334](index=334&type=chunk)[336](index=336&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=64&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure matters - There were no changes in and disagreements with accountants on accounting and financial disclosure[340](index=340&type=chunk) [Item 9A. Controls and Procedures](index=64&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end [Disclosure Controls and Procedures](index=65&type=section&id=Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the Company's disclosure controls and procedures were **effective** as of December 25, 2021, to provide reasonable assurance for timely and accurate reporting[341](index=341&type=chunk) [Internal Control Over Financial Reporting](index=65&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) - Management assessed the effectiveness of the Company's internal control over financial reporting as of December 25, 2021, using the COSO (2013) framework[345](index=345&type=chunk) - Based on this assessment, management concluded that the Company maintained **effective internal control** over financial reporting[347](index=347&type=chunk) [Attestation Report of the Registered Public Accounting Firm](index=67&type=section&id=Attestation%20Report%20of%20the%20Registered%20Public%20Accounting%20Firm) - KPMG LLP issued an **unqualified opinion** on the effectiveness of the Company's internal control over financial reporting as of December 25, 2021[351](index=351&type=chunk) [Changes in Internal Control Over Financial Reporting](index=68&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were **no significant changes** in the Company's internal control over financial reporting during the fourth fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[358](index=358&type=chunk) [Item 9B. Other Information](index=67&type=section&id=Item%209B.%20Other%20Information) This item reports no other information - No other information is reported under this item[359](index=359&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=67&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - This item is not applicable[359](index=359&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=68&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, officers, and governance is incorporated by reference from the company's Proxy Statement - Information concerning Directors, Executive Officers, Corporate Governance, Audit Committee, and Section 16(a) compliance is incorporated by reference from the definitive Proxy Statement[362](index=362&type=chunk) - The Company has adopted a Code of Ethics and Business Conduct applicable to all directors and employees, available on its website[363](index=363&type=chunk) [Item 11. Executive Compensation](index=68&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement - Information concerning Executive Compensation is incorporated by reference from the definitive Proxy Statement[364](index=364&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=68&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from Part II, Item 5 and the company's Proxy Statement - Information regarding security ownership of certain beneficial owners and management is incorporated by reference from Part II, Item 5 of this report and the definitive Proxy Statement[365](index=365&type=chunk)[366](index=366&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=68&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on director independence is incorporated by reference from the company's Proxy Statement - Information regarding Director Independence is incorporated by reference from the definitive Proxy Statement[367](index=367&type=chunk) [Item 14. Principal Accounting Fees and Services](index=68&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the Proxy Statement - Information concerning Principal Accounting Fees and Services is incorporated by reference from the definitive Proxy Statement[368](index=368&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=69&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, supplementary data, and exhibits filed with the report [(a)(1) Financial Statements and Supplementary Data](index=70&type=section&id=%28a%29%281%29%20Financial%20Statements%20and%20Supplementary%20Data) - The report includes Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Statements of Changes in Equity, Notes to Consolidated Financial Statements, and the Report of Independent Registered Public Accounting Firm[371](index=371&type=chunk) [(2) Financial Statement Schedules](index=70&type=section&id=%282%29%20Financial%20Statement%20Schedules) - Financial statement schedules have been omitted because the required information is included in the consolidated financial statements or notes, or is not applicable[372](index=372&type=chunk) [(3) Exhibits](index=70&type=section&id=%283%29%20Exhibits) - A comprehensive list of exhibits is provided, including Articles of Incorporation, By-Laws, Specimen of Common Stock Certificate, Description of Securities, Material Contracts (e.g., Credit Agreement, Executive Incentive Compensation Plan, Equity Incentive Plan), List of Subsidiaries, Consents of experts and counsel, Powers of Attorney, and Certifications (CEO, CFO)[373](index=373&type=chunk)[376](index=376&type=chunk) [Signatures](index=72&type=section&id=Signatures) The report is duly signed on behalf of Landstar System, Inc by its CEO, CFO, and other directors on February 18, 2022 - The report is signed by James B. Gattoni (President and Chief Executive Officer) and Federico L. Pensotti (Vice President and Chief Financial Officer), along with other directors[383](index=383&type=chunk)[384](index=384&type=chunk) - The signing date for the report is **February 18, 2022**[382](index=382&type=chunk)[384](index=384&type=chunk)

Financial Performance - Landstar System achieved record-breaking annual performance in 2021, with record diluted earnings per share (DEPS) of $2.99 in the fourth quarter[1] - Q4 2021 revenue reached a record $1.945 billion, a 50% increase compared to $1.296 billion in Q4 2020[1] - Net income for Q4 2021 was $113.3 million, or $2.99 DEPS, compared to $65.1 million, or $1.70 DEPS, in Q4 2020[1] - Operating income grew to a quarterly record of $148.7 million in Q4 2021, a 76% increase from $84.4 million in Q4 2020[1] - Gross profit in Q4 2021 was $209.8 million, an all-time quarterly record, compared to $141.7 million in Q4 2020[2] - Variable contribution reached a record $263.3 million in Q4 2021, compared to $182.4 million in Q4 2020[2] - Fiscal year 2021 revenue was approximately $6.5 billion, an annual record, $1.9 billion higher than the previous record set in 2018[8] - Diluted earnings per share in 2021 was an annual record of $9.98, an increase of $3.80, or 61% from the prior fiscal year record of $6.18 in 2018[8] Operational Highlights - Truck transportation revenue in Q4 2021 was $1.745 billion, representing 90% of revenue, compared to $1.202 billion, or 93% of revenue, in Q4 2020[5] - Revenue hauled by rail, air, and ocean cargo carriers was $174.6 million, or 9% of revenue, in Q4 2021, compared to $75.7 million, or 6% of revenue, in Q4 2020[5] - Truckload transportation revenue via van equipment in Q4 2021 was $1.024 billion, a 45% increase compared to $706.7 million in Q4 2020[6] - Truckload transportation revenue via unsided/platform equipment in Q4 2021 was $436.7 million, a 40% increase compared to $311.3 million in Q4 2020[6]

Financial Data and Key Metrics Changes - Landstar's fiscal year 2021 revenue reached $6.5 billion, a 58% increase from 2020 [7] - Operating income doubled compared to 2020, with earnings per share more than doubling from $4.98 in 2020 to $9.98 in 2021 [8] - Fourth quarter revenue was a record $1.945 billion, 50% higher than the previous fourth quarter [13] - Gross profit for the fourth quarter was $209.8 million, up 48% from $141.7 million in the previous year [28] - Variable contribution increased by 44% to $263.3 million in the fourth quarter [31] Business Line Data and Key Metrics Changes - Revenue from van and unsided/platform equipment increased by 45% and 40% respectively, contributing to 75% of fourth quarter revenue [13] - Other truck transportation revenue increased by $95 million or 61% compared to the previous fourth quarter [14] - Ocean cargo revenue increased by 266% over the previous fourth quarter, with a 127% increase in average rates [22] - The number of loads hauled via truck increased by 22% compared to the previous fourth quarter [17] Market Data and Key Metrics Changes - Landstar operates primarily in the spot market for US truck transportation, where truck rates are influenced by market demand and available capacity [15] - Revenue per load for van and unsided/platform equipment exceeded the previous fourth quarter by 20% [15] - The customer base remains highly diversified, with revenue from the top 100 customers contributing 44% of total revenue in the fourth quarter [23] Company Strategy and Development Direction - Landstar is focused on investing in its network, technology, and capacity to support long-term growth [42] - The company anticipates a transition from spot to contract rates as shippers begin to lock in long-term contracts [58] - The brokerage business is expected to continue growing as a percentage of total revenue, reflecting a shift in the business model [75] Management's Comments on Operating Environment and Future Outlook - The operating environment remains strong, with expectations for record performance in the first quarter of 2022 [45] - Revenue guidance for the first quarter of 2022 is estimated between $1.7 billion and $1.75 billion, representing a 32% to 36% increase from the previous year [46] - Management acknowledges potential challenges in the second half of 2022, including a possible softening in demand [58] Other Important Information - The effective income tax rate for the fourth quarter was 23.3%, slightly higher than the previous year's 22% [40] - The company returned $235 million to shareholders in 2021 through dividends and share repurchases [41] Q&A Session Summary Question: Expectations for 2022 and seasonal trends - Management expects a strong start to 2022 but anticipates a potential softening in demand later in the year [58] Question: Pricing and volume environment in January - Pricing remains elevated, while volume may be impacted by weather disruptions [81] Question: Sustainability of brokerage volume growth - Brokerage volume growth is seen as sustainable, driven by market demand and diversification [85] Question: Preparing agents and carriers for potential market inflection - Management emphasizes the importance of communication and information sharing with agents to navigate market changes [93] Question: Impact of vaccine mandates on freight flows - No significant disruption has been observed at the US-Mexico border, while some challenges exist at the northern border [117]

Landstar System, Inc. (NASDAQ:LSTR) Q3 2021 Earnings Conference Call October 21, 2021 8:00 AM ET Company Participants Jim Gattoni - President and Chief Executive Officer Fred Pensotti - Vice President and Chief Financial Officer Rob Brasher - Vice President and Chief Commercial Officer Joe Beacom - Vice President and Chief Safety and Operations Officer Conference Call Participants Bascome Majors - Susquehanna Jack Atkins - Stephens Scott Schneeberger - Oppenheimer Stephanie Moore - Truist Bruce Chan - Stife ...

Landstar System, Inc. 13410 Sutton Park Drive, South For Immediate Release Contacts: Jim Gattoni (CEO) Fred Pensotti (CFO) Landstar System, Inc. www.landstar.com July 21, 2021 904-398-9400 LANDSTAR SYSTEM REPORTS ALL-TIME QUARTERLY RECORD DILUTED EARNINGS PER SHARE OF $2.40 IN THE 2021 SECOND QUARTER Jacksonville, FL - Landstar System, Inc. (NASDAQ: LSTR) reported all-time quarterly record net income of $92.3 million, or $2.40 per diluted share, in the 2021 second quarter, on record quarterly revenue of $1. ...