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 30, 2017~~

March

26, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission File Number:

0-21238

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)


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

13410 Sutton Park Drive South, Jacksonville, Florida

(Address of principal executive offices)

32224

(Zip Code)

(904)

398-9400

(Registrant’s telephone number, including area code)

N/A

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

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


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

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

Yes ☑☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files):

Yes ☑☒ No ☐

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

non-accelerated

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

12b-2

of the Exchange Act. (Check one):


Large accelerated filer	☑☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐


		Emerging growth company	☐

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

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

12b-2

of the Exchange Act).

Yes ☐ No ☑

☒

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of the close of business on ~~October 23, 2017~~April 18, 2022 was ~~41,965,797.~~

37,127,333.

Index


PART I – Financial Information

Item 1. Financial Statements (unaudited)

~~Item 1.~~~~Financial Statements (unaudited)~~

Consolidated Balance Sheets as of ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016~~25, 2021			Page 4

Consolidated Statements of Income for the ~~Thirty Nine and~~ Thirteen Weeks Ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016~~March 27, 2021			Page 5

Consolidated Statements of Comprehensive Income for the ~~Thirty Nine and~~ Thirteen Weeks Ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016~~March 27, 2021			Page 6

Consolidated Statements of Cash Flows for the ~~Thirty Nine~~Thirteen Weeks Ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016~~March 27, 2021			Page 7

Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity for the ~~Thirty Nine~~Thirteen Weeks Ended ~~September 30, 2017~~March 26, 2022 and March 27, 2021			Page 8

Notes to Consolidated Financial Statements			Page 9

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations			Page 16 17

Item 3.Quantitative and Qualitative Disclosures About Market Risk			Page 28

Item 4.Controls and Procedures			Page 28 29

PART II – Other Information

~~PART II –~~~~Other Information~~

Item 1. Legal Proceedings			Page 29

Item 1A. Risk Factors			Page 29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			Page 29 31

Item 6. Exhibits			Page 30

~~Signatures~~			~~Page~~ 32

Signatures			Page 34
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

PART I -

FINANCIAL INFORMATION

Item 1. Financial Statements

The interim consolidated financial statements contained herein reflect all adjustments (all of a normal, recurring nature) which, in the opinion of management, are necessary for a fair statement of the financial condition, results of operations, cash flows and changes in shareholders’ equity for the periods presented. They have been prepared in accordance with Rule

10-01

of Regulation

S-X

and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the ~~thirty-nine~~thirteen weeks ended ~~September 30, 2017~~March 26, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December ~~30, 2017.~~

31, 2022.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s ~~2016~~2021 Annual Report on Form

10-K.

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)

   September 30,
2017 December 31,
2016
ASSETS
Current Assets

Cash and cash equivalents
   $ 249,741 $ 178,897
Short-term investments
   45,687 66,560
Trade accounts receivable, less allowance of $6,163 and $5,161
   546,826 463,102
Other receivables, including advances to independent contractors, less allowance of $6,306 and $5,523
   18,704 18,567
Other current assets
   16,925 10,281


Total current assets
   877,883 737,407


Operating property, less accumulated depreciation and amortization of $210,018 and $190,374
   261,465 272,843
Goodwill
   39,914 31,134
Other assets
   84,077 55,207


Total assets
   $ 1,263,339 $ 1,096,591


LIABILITIES AND EQUITY
Current Liabilities

Cash overdraft
   $ 33,853 $ 36,251
Accounts payable
   269,389 219,409
Current maturities of long-term debt
   40,610 45,047
Insurance claims
   34,211 26,121
Other current liabilities
   68,854 53,483


Total current liabilities
   446,917 380,311


Long-term debt, excluding current maturities
   76,792 93,257
Insurance claims
   32,804 26,883
Deferred income taxes and other noncurrent liabilities
   52,853 53,583
Equity

Landstar System, Inc. and subsidiary shareholders’ equity

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,715,290 and 67,585,675 shares
   677 676
Additional paid-in capital
   205,396 199,414
Retained earnings
   1,613,590 1,512,993
Cost of 25,749,493 and 25,747,541 shares of common stock in treasury
   (1,167,600 ) (1,167,437 )
Accumulated other comprehensive loss
   (1,708 ) (3,089 )


Total Landstar System, Inc. and subsidiary shareholders’ equity
   650,355 542,557
Noncontrolling interest
   3,618 —


Total equity
   653,973 542,557


Total liabilities and equity
   $ 1,263,339 $ 1,096,591


	March 26, 2022			December 25, 2021
ASSETS
Current Assets
Cash and cash equivalents	$	146,025		$	215,522
Short-term investments		35,679			35,778
Trade accounts receivable, less allowance of $7,940 and $7,074		1,223,123			1,154,314
Other receivables, including advances to independent contractors, less allowance of $8,838 and $8,125		123,231			101,124
Other current assets		10,441			16,162

Total current assets		1,538,499			1,522,900

Operating property, less accumulated depreciation and amortization of $356,988 and $344,099		307,044			317,386
Goodwill		40,945			40,768
Other assets		159,325			164,411

Total assets	$	2,045,813		$	2,045,465

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Cash overdraft	$	96,215		$	116,478
Accounts payable		626,337			604,130
Current maturities of long-term debt		34,983			36,561
Insurance claims		52,644			46,896
Dividends payable		—			75,387
Accrued income taxes		50,280			18,403
Other current liabilities		89,793			112,128

Total current liabilities		950,252			1,009,983

Long-term debt, excluding current maturities		137,289			75,243
Insurance claims		51,132			49,509
Deferred income taxes and other noncurrent liabilities		50,991			48,720

Shareholders’ Equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,370,151 and 68,232,975 shares		684			682
Additional paid-in capital		248,230			255,148
Retained earnings		2,432,699			2,317,184
Cost of 31,242,818 and 30,539,235 shares of common stock in treasury		(1,816,149	)		(1,705,601	)
Accumulated other comprehensive loss		(9,315	)		(5,403	)

Total shareholders’ equity		856,149			862,010

Total liabilities and shareholders’ equity	$	2,045,813		$	2,045,465

See accompanying notes to consolidated financial statements.

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 30,
2017 September 24,
2016    September 30,
2017 September 24,
2016
Revenue
   $ 2,594,772 $ 2,274,805    $ 943,430 $ 787,938
Investment income
   1,733 1,100    711 357
Costs and expenses:

Purchased transportation
   1,989,938 1,730,745    726,827 601,002
Commissions to agents
   210,678 189,075    76,598 65,144
Other operating costs, net of gains on asset sales/dispositions
   22,497 21,484    8,097 7,492
Insurance and claims
   46,333 42,795    17,927 12,488
Selling, general and administrative
   123,179 106,211    43,995 34,692
Depreciation and amortization
   29,961 26,109    10,130 9,016




Total costs and expenses
   2,422,586 2,116,419    883,574 729,834




Operating income
   173,919 159,486    60,567 58,461
Interest and debt expense
   2,559 2,725    657 948




Income before income taxes
   171,360 156,761    59,910 57,513
Income taxes
   59,047 58,985    17,490 21,235




Net income
   112,313 97,776    42,420 36,278
Less: Net loss attributable to noncontrolling interest
   (23 ) —      (23 ) —




Net income attributable to Landstar System, Inc. and subsidiary
   $ 112,336 $ 97,776    $ 42,443 $ 36,278




Earnings per common share attributable to Landstar System, Inc. and subsidiary
   $ 2.68 $ 2.32    $ 1.01 $ 0.86




Diluted earnings per share attributable to Landstar System, Inc. and subsidiary
   $ 2.67 $ 2.31    $ 1.01 $ 0.86




Average number of shares outstanding:

Earnings per common share
   41,924,000 42,223,000    41,957,000 42,039,000




Diluted earnings per share
   42,013,000 42,341,000    42,028,000 42,170,000




Dividends per common share
   $ 0.28 $ 0.25    $ 0.10 $ 0.09


	Thirteen Weeks Ended
	March 26, 2022		March 27, 2021
Revenue	$	1,970,599	$	1,287,534
Investment income		721		684
Costs and expenses:
Purchased transportation		1,550,330		998,285
Commissions to agents		149,778		100,009
Other operating costs, net of gains on asset sales/dispositions		11,141		7,642
Insurance and claims		30,768		21,505
Selling, general and administrative		52,713		45,408
Depreciation and amortization		13,757		12,101

Total costs and expenses		1,808,487		1,184,950

Operating income		162,833		103,268
Interest and debt expense		1,123		1,042

Income before income taxes		161,710		102,226
Income taxes		36,871		24,986

Net income	$	124,839	$	77,240

Diluted earnings per share	$	3.34	$	2.01

Average diluted shares outstanding		37,418,000		38,404,000

Dividends per common share	$	0.25	$	0.21

See accompanying notes to consolidated financial statements.

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

   Thirty Nine Weeks Ended
   September 30,
2017 September 24,
2016
OPERATING ACTIVITIES

Net income
   $ 112,313 $ 97,776
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of operating property and intangible assets
   29,961 26,109
Non-cash interest charges
   189 175
Provisions for losses on trade and other accounts receivable
   5,643 4,076
Gains on sales/disposals of operating property
   (900 ) (3,221 )
Deferred income taxes, net
   (708 ) 8,925
Stock-based compensation
   3,660 2,718
Changes in operating assets and liabilities:

(Increase) decrease in trade and other accounts receivable
   (89,504 ) 50,957
(Increase) decrease in other assets
   (8,671 ) 3,820
Increase (decrease) in accounts payable
   53,290 (25,074 )
Increase (decrease) in other liabilities
   12,980 (5,436 )
Increase in insurance claims
   14,011 10,472


NET CASH PROVIDED BY OPERATING ACTIVITIES
   132,264 171,297


INVESTING ACTIVITIES

Sales and maturities of investments
   42,917 30,580
Purchases of investments
   (44,423 ) (31,938 )
Purchases of operating property
   (8,800 ) (17,833 )
Proceeds from sales of operating property
   3,594 8,622
Consideration paid for acquisitions
   (8,199 ) —


NET CASH USED BY INVESTING ACTIVITIES
   (14,911 ) (10,569 )


FINANCING ACTIVITIES

Decrease in cash overdraft
   (2,398 ) (7,884 )
Dividends paid
   (11,739 ) (10,572 )
Payment for debt issue costs
   —   (1,048 )
Proceeds from exercises of stock options
   2,531 1,440
Taxes paid in lieu of shares issued related to stock-based compensation plans
   (371 ) (1,715 )
Excess tax benefits from stock-based awards
   —   343
Purchases of common stock
   —   (50,516 )
Principal payments on capital lease obligations
   (35,662 ) (35,147 )


NET CASH USED BY FINANCING ACTIVITIES
   (47,639 ) (105,099 )


Effect of exchange rate changes on cash and cash equivalents
   1,130 656


Increase in cash and cash equivalents
   70,844 56,285
Cash and cash equivalents at beginning of period
   178,897 114,520


Cash and cash equivalents at end of period
   $ 249,741 $ 170,805


	Thirteen Weeks Ended
	March 26, 2022			March 27, 2021
OPERATING ACTIVITIES
Net income	$	124,839		$	77,240
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,757			12,101
Non-cash interest charges		112			112
Provisions for losses on trade and other accounts receivable		2,626			547
Gains on sales/disposals of operating property		(165	)		(24	)
Deferred income taxes, net		1,324			(1,110	)
Stock-based compensation		1,995			4,029
Changes in operating assets and liabilities:
(Increase) decrease in trade and other accounts receivable		(93,542	)		33,440
Decrease in other assets		2,531			6,175
Increase in accounts payable		22,207			33,935
Increase in other liabilities		11,910			13,008
Increase (decrease) in insurance claims		7,371			(109,562	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		94,965			69,891


INVESTING ACTIVITIES
Sales and maturities of investments		12,420			7,957
Purchases of investments		(13,428	)		(8,716	)
Purchases of operating property		(3,609	)		(4,076	)
Proceeds from sales of operating property		643			500

NET CASH USED BY INVESTING ACTIVITIES		(3,974	)		(4,335	)


FINANCING ACTIVITIES
(Decrease) increase in cash overdraft		(20,263	)		6
Dividends paid		(84,711	)		(84,837	)
Proceeds from exercises of stock options		56			77
Taxes paid in lieu of shares issued related to stock-based compensation plans		(10,183	)		(1,241	)
Borrowings on revolving credit facility		70,000			0
Purchases of common stock		(109,332	)		0
Principal payments on finance lease obligations		(9,532	)		(9,778	)

NET CASH USED BY FINANCING ACTIVITIES		(163,965	)		(95,773	)


Effect of exchange rate changes on cash and cash equivalents		815			252


Decrease in cash, cash equivalents and restricted cash		(72,159	)		(29,965	)
Cash, cash equivalents and restricted cash at beginning of period		219,571			249,354

Cash, cash equivalents and restricted cash at end of period	$	147,412		$	219,389

See accompanying notes to consolidated financial statements.

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

~~Thirty Nine~~

Thirteen Weeks Ended ~~September 30, 2017~~

March 26, 2022 and March 27, 2021

(Dollars in thousands)

(Unaudited)

   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 31, 2016
   67,585,675    $ 676    $ 199,414    $ 1,512,993 25,747,541    $ (1,167,437 ) $ (3,089 ) —   $ 542,557
Net income (loss)
            112,336    (23 ) 112,313
Dividends ($0.28 per share)
            (11,739 )    (11,739 )
Issuance of stock related to stock-based compensation plans
   129,615    1    2,322    1,952    (163 ) 2,160
Stock-based compensation
         3,660       3,660
Other comprehensive income
               1,381 1,381
Acquired business and noncontrolling interests
               3,641 3,641










Balance September 30, 2017
   67,715,290    $ 677    $ 205,396    $ 1,613,590 25,749,493    $ (1,167,600 ) $ (1,708 ) $ 3,618 $ 653,973


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

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


	Common Stock				Additional Paid-In Capital			Retained Earnings			Treasury Stock at Cost					Accumulated Other Comprehensive Loss			Total
	Shares		Amount		Additional Paid-In Capital			Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Total
Balance December 26, 2020		68,183,702	$	682	$	228,875		$	2,046,238			29,797,639	$	(1,581,961	)	$	(1,999	)	$	691,835
Net income									77,240											77,240
Dividends ($0.21 per share)									(8,067	)										(8,067	)
Issuance of stock related to stock-based compensation plans		28,594		—		(307	)					6,087		(857	)					(1,164	)
Stock-based compensation						4,029														4,029
Other comprehensive loss																	(954	)		(954	)

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

See accompanying notes to consolidated financial statements.

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all adjustments (all of a normal, recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation.

~~Landstar owns, through various subsidiaries, a controlling interest~~

(1)	Significant Accounting Policies

Revenue from Contracts with Customers – Disaggregation of Revenue

The following table summarizes (i) the percentage of consolidated revenue generated by mode of transportation and (ii) the total amount of truck transportation revenue hauled by BCO Independent Contractors and Truck Brokerage Carriers generated by equipment type during the thirteen-week periods ended March 26, 2022 and March 27, 2021 (dollars in Landstar Metro, S.A.P.I. de C.V., a transportation logistics company (“Landstar Metro”), and Landstar Metro Servicios S.A.P.I. de C.V., a services company (“Landstar Servicios”), each based in Mexico City, Mexico. Given Landstar’s controlling interest in eachthousands):


	Thirteen Weeks Ended
Mode	March 26, 2022			March 27, 2021
Truck – BCO Independent Contractors		37	%		44	%
Truck – Truck Brokerage Carriers		52	%		49	%
Rail intermodal		2	%		2	%
Ocean and air cargo carriers		8	%		4	%

Truck Equipment Type
Van equipment	$	1,081,206		$	729,402
Unsided/platform equipment	$	408,757		$	297,485
Less-than-truckload	$	33,720		$	25,670
Other truck transportation (1)	$	227,601		$	140,932

(1)

Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.

(2)	Share-based Payment Arrangements

As of Landstar Metro and Landstar Servicios, the accounts of Landstar Metro and Landstar Servicios have been consolidated herein and a noncontrolling interest has been recorded for the noncontrolling investors’ interests in the net assets and operations of Landstar Metro and Landstar Servicios.

~~(1) Acquired Business and Noncontrolling Interests~~

During 2017, the Company incorporated each of Landstar Metro and Landstar Servicios. On September 20, 2017, Landstar Metro acquired substantially all of the assets of the asset-light transportation logistics business of Fletes Avella, S.A. de C.V., a Mexican transportation logistics company. Cash consideration paid in the quarter for the acquisition was approximately $8,199,000. In addition, the Company assumed approximately $2,200,000 in liabilities consisting of additional contingent purchase price and associated indirect taxes. In connection with the acquisition, individuals affiliated with the seller subscribed in the aggregate for a 30% equity interest in each of Landstar Metro and Landstar Servicios. The asset acquisition by Landstar Metro was accounted for as a business combination in accordance with Accounting Standards Codification 805,~~Business Combinations~~ (“ASC 805”). The resulting goodwill arising from the acquisition was approximately $8,800,000. With respect to this goodwill, 70% is expected to be deductible by the Company for U.S. income tax purposes, and following the purchase of the noncontrolling interests by the Company, up to 100% of this goodwill would be expected to be deductible by the Company. Pro forma financial information for prior periods is not presented as the Company does not believe the acquisition to be material to our consolidated results. The results of operations from Landstar Metro and Landstar Servicios are presented as part of the Company’s transportations logistics segment. It is not anticipated that Landstar Metro and Landstar Servicios will have a material effect on the revenue and earnings of the Company for the remainder of fiscal year 2017. During the thirty-nine-week period ended September 30, 2017, the Company incurred approximately $1,000,000, or $0.01 per common share ($0.01 per diluted share), in~~one-time~~ ~~costs related to the completion of the acquisition and subscription of thenon-controlling~~ ~~interests.~~

~~As it relates to the noncontrolling interests of Landstar Metro and Landstar Servicios,~~March 26, 2022, the Company has the option to purchase, and the minority equityholders have the option to sell, during the period commencing on the third anniversary of September 20, 2017, the closing date of the subscription by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. The noncontrolling interests are also subject to customary restrictions on transfer, including a right of first refusal in favor of the Company.

~~(2) Share-based Payment Arrangements~~

~~As of September 30, 2017, the Company had two~~an 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 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 30,
2017    September 24,
2016    September 30,
2017    September 24,
2016
Total cost of the Plans during the period
   $ 3,660    $ 2,718    $ 1,423    $ 652
Amount of related income tax benefit
recognized during the period
   (2,492 )    (1,128 )    (678 )    (292 )








Net cost of the Plans during the period
   $ 1,168    $ 1,590    $ 745    $ 360


	Thirteen Weeks Ended
	March 26, 2022			March 27, 2021
Total cost of the Plans during the period	$	1,995		$	4,029
Amount of related income tax benefit recognized during the period		(3,360	)		(1,341	)

Net cost of the Plans during the period	$	(1,365	)	$	2,688

Included in income tax benefits recognized in the ~~thirty-nine-week~~thirteen-week periods ended ~~September 30, 2017~~March 26, 2022 and September 24, 2016 were income tax benefits of $310,000 and $261,000, respectively, recognized on disqualifying dispositions of the Company’s common stock by employees who obtained shares of common stock through exercises of incentive stock options. Also included in income tax benefits recognized in the thirty-nine-week period ended September 30, 2017March 27, 2021 were excess tax benefits from stock-based awards of ~~$868,000, as required by the Company’s adoption of Accounting Standards Update2016-09~~ ~~during the first fiscal quarter of 2017. See Note 11, Recent Accounting Pronouncements, for further information.~~

$2,869,000 and $343,000, respectively.

As of ~~September 30, 2017,~~March 26, 2022, there were ~~78,682~~56,502 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and ~~4,725,200~~3,230,826 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 31, 2016
   378,238    $ 50.46
Granted
   67,769    $ 76.85
Forfeited
   (58,779 )    $ 46.00



Outstanding at September 30, 2017
   387,228    $ 55.75


	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 25, 2021		209,399		$	102.90
Granted		49,405		$	139.78
Shares earned in excess of target (1)		91,497		$	92.58
Vested shares, including shares earned in excess of target		(174,366	)	$	96.14
Forfeited		(15,044	)	$	103.31

Outstanding at March 26, 2022		160,891		$	115.64

(1)	Represents additional shares earned under each of the February 2, 2017; February 2, 2018 and February 1, 2019 RSU awards as fiscal year 2021 financial results exceeded target performance level.

During the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017,~~March 26, 2022, the Company granted RSUs with a performance condition. RSUs with a performance condition granted on February 2, 2017 may vest on January 31 of 2020, 2021 and 2022 based on growth in operating income and diluted earnings per share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2016 fiscal year. Outstanding RSUs at both December ~~31, 2016~~25, 2021 and ~~September 30, 2017~~March 26, 2022 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s ~~2016~~2021 Annual Report on Form

10-K.

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

pre-tax

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

The Company recognized approximately ~~$2,254,000~~$

1,301,000 and ~~$1,322,000~~$3,223,000 of share-based compensation expense related to RSU awards in the ~~thirty-nine-week~~thirteen-week periods ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016,~~March 27, 2021, respectively. As of ~~September 30, 2017,~~March 26, 2022, there was a maximum of ~~$32.1~~$27.3 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately ~~2.8~~3.9 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.

~~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 31, 2016
   372,561 $ 48.24
Exercised
   (134,461 ) $ 46.38
Forfeited
   (1,200 ) $ 55.67



Options outstanding at September 30, 2017
   236,900 $ 49.25    4.0    $ 11,940



Options exercisable at September 30, 2017
   217,000 $ 48.59    3.9    $ 11,081

~~The total intrinsic value of stock options exercised during the thirty-nine-week periods ended September 30, 2017 and September 24, 2016 was $5,303,000 and $1,938,000, respectively.~~

~~As of September 30, 2017, there was $91,000 of total unrecognized compensation cost related tonon-vested~~ ~~stock options granted under the Plans. The unrecognized compensation cost related to thesenon-vested~~ ~~options is expected to be recognized during 2017.~~

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 31, 2016
   28,409    $ 58.91
Granted
   42,123    $ 84.26
Vested
   (16,227 )    $ 61.50



Non-vested at September 30, 2017
   54,305    $ 77.80


		Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 25, 2021			56,436		$	125.16
Granted			17,008		$	152.44
Vested	��		(21,500	)	$	110.16
Forfeited			(2,302	)	$	108.59

Non-vested at March 26, 2022			49,642		$	141.77

The fair value of each share of

non-vested

restricted stock issued and Deferred Stock Unit granted under the Plans ~~are~~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 ~~will~~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 30, 2017,~~March 26, 2022, there was ~~$3,353,000~~$5,555,000 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 ~~3.0~~2.4 years.

~~(3) Income Taxes~~

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 25, 2021		8,570		$	55.42
Exercised		(3,500	)	$	54.01

Options outstanding at March 26, 2022		5,070		$	56.40		0.8	$	495

Options exercisable at March 26, 2022		5,070		$	56.40		0.8	$	495

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 26, 2022 and March 27, 2021 was $369,000 and $521,000, respectively.

As of March 26, 2022, there was no unrecognized compensation cost related to stock options granted under the Plans.

(3)	Income Taxes

The provisions for income taxes for ~~both~~ the ~~2017~~2022 and ~~2016 thirty-nine-week~~2021 thirteen-week periods were based on an estimated annual effective income tax ~~rates~~rate of ~~37.8%~~24.5% and ~~38.1%~~24.4

%, respectively, adjusted for discrete events, such as benefits resulting from ~~disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options.~~stock-based awards. The estimated annual effective income tax ~~rates for the 2017 and 2016 thirty-nine-week periods were 34.5% and 37.6%, respectively. The effective income tax~~ rate for the 2017 thirty-nine week period was lower than the statutory federal income tax rate primarily as a result of federal domestic production activities deductions and research and development credits recognized as discrete items during the thirteen-week period ended September 30, 2017, partially offset by the effect of state taxes and the meals and entertainment exclusion. The effective income tax rate for the 2016 thirty-nine-week period was higher than the statutory federal income tax rate

of 21

% in both periods primarily ~~as a result of~~attributable to state taxes and

non-deductible

executive compensation. The effective income tax rate for the ~~meals and entertainment exclusion.~~

~~During~~2022 thirteen-week period w

as 22.8

%, which was lower than the ~~first fiscal quarter~~estimated annual effective income tax rate of ~~2017, the Company adopted ASU2016-09,~~ ~~as further described in footnote 11. As required by ASU2016-09,~~ ~~the Company recognized $868,000 of~~24.5%, primarily attributable to excess tax benefits realized on stock-based ~~awards in its provision~~awards. The effective income tax rate for the 2021 thirteen-week period o

f 24.4

% was equal to the estimated annual effective income ~~taxes in~~tax rate during the ~~thirty-nine-week period ended September 30, 2017.~~

~~(4) Earnings Per Share~~

2021 period.

(4)	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.

~~The following table provides a reconciliation of~~ During the ~~average number of common shares outstanding used to calculate earnings per common share attributable to Landstar System, Inc.~~2022 and ~~subsidiary~~2021 thirteen-week periods, in reference to the ~~average number~~determination of ~~common shares and common share equivalents outstanding used to calculate~~ diluted earnings per share, the future compensation cost attributable to ~~Landstar System, Inc. and subsidiary (in thousands):~~

   Thirty Nine Weeks Ended    Thirteen Weeks Ended
   September 30,
2017    September 24,
2016    September 30,
2017    September 24,
2016
Average number of common shares outstanding
   41,924    42,223    41,957    42,039
Incremental shares from assumed exercises of stock options
   89    118    71    131








Average number of common shares and common share equivalents outstanding
   42,013    42,341    42,028    42,170

outstanding shares of

non-vested

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

For each of the ~~thirty-nine-week~~thirteen-week periods ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016, no~~March 27, 2021, 0 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.

~~(5) Additional Cash Flow Information~~

(5)	Additional Cash Flow Information

During the ~~2017 thirty-nine-week~~2022 thirteen-week period, Landstar paid income taxes and interest of ~~$65,688,000~~$2,031,000 and ~~$2,981,000,~~$1,029,000, respectively. During the ~~2016 thirty-nine-week~~2021 thirteen-week period, Landstar paid income taxes and interest of ~~$48,615,000~~$353,000 and ~~$2,730,000,~~$983,000, respectively. Landstar ~~acquired~~did 0t acquire any operating property by entering into ~~capital~~finance leases in either the amounts of $14,760,000 and $46,456,000 in the 2017 and 2016 thirty-nine-week periods, respectively. In addition, during the 2017 thirty-nine-week period Landstar acquired $945,000 of operating property for which the Company accrued a corresponding liability in accounts payable as of September 30, 2017 related to the completion of a new freight staging and transload facility in Laredo, TX. The Company had unpaid capital expenditure purchases included in accounts payable of $1,988,000 and $5,298,000 at September 30, 2017 and December 31, 2016, respectively. Capital expenditure purchases are recorded as cash outflows from investing activities in the consolidated statement of cash flows in the period in which they are paid.

~~(6) Segment Information~~

2022 or 2021 thirteen-week periods.

(6)	Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the ~~thirty-nine-week and~~ thirteen-week periods ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016~~March 27, 2021 (in thousands):

   Thirty Nine Weeks Ended
   September 30, 2017    September 24, 2016
   Transportation
Logistics    Insurance    Total    Transportation
Logistics    Insurance    Total
External revenue
   $ 2,559,847    $ 34,925    $ 2,594,772    $ 2,240,169    $ 34,636    $ 2,274,805
Internal revenue
      29,773    29,773       28,890    28,890
Investment income
      1,733    1,733       1,100    1,100
Operating income
   148,693    25,226    173,919    133,342    26,144    159,486
Expenditures on long-lived assets
   8,800       8,800    17,833       17,833
Goodwill
   39,914       39,914    31,134       31,134

   Thirteen Weeks Ended
   September 30, 2017    September 24, 2016
   Transportation
Logistics    Insurance    Total    Transportation
Logistics    Insurance    Total
External revenue
   $ 931,692    $ 11,738    $ 943,430    $ 776,397    $ 11,541    $ 787,938
Internal revenue
      7,335    7,335       7,229    7,229
Investment income
      711    711       357    357
Operating income
   54,181    6,386    60,567    47,541    10,920    58,461
Expenditures on long-lived assets
   2,172       2,172    8,878       8,878


	Thirteen Weeks Ended
	March 26, 2022						March 27, 2021
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,951,339	$	19,260	$	1,970,599	$	1,270,499	$	17,035	$	1,287,534
Internal revenue				12,884		12,884				9,534		9,534
Investment income				721		721				684		684
Operating income		151,946		10,887		162,833		89,732		13,536		103,268
Expenditures on long-lived assets		3,609				3,609		4,076				4,076
Goodwill		40,945				40,945		40,732				40,732

In the ~~thirty-nine and~~ thirteen-week periods ended ~~September 30, 2017~~March 26, 2022 and ~~September 24, 2016, no~~March 27, 2021, 0 single customer accounted for more than 10% of the Company’s consolidated revenue.

~~(7) Other Comprehensive Income~~

(7)	Other Comprehensive Income

The following table presents the components of and changes in accumulated other comprehensive income ~~attributable to Landstar System, Inc. and subsidiary,~~(loss), net of related income taxes, as of and for the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017~~March 26, 2022 (in thousands):

   Unrealized
Holding (Losses)
Gains on
Available-for-Sale
Securities    Foreign Currency
Translation    Total
Balance as of December 31, 2016
   $ (71 )    $ (3,018 )    $ (3,089 )
Other comprehensive income
   251    1,130    1,381






Balance as of September 30, 2017
   $ 180    $ (1,888 )    $ (1,708 )


	Unrealized Holding Gains (Losses) on Available-for-Sale Securities			Foreign Currency Translation			Total
Balance as of December 25, 2021	$	113		$	(5,516	)	$	(5,403	)
Other comprehensive (loss) income		(5,187	)		1,275			(3,912	)

Balance as of March 26, 2022	$	(5,074	)	$	(4,241	)	$	(9,315	)

Amounts reclassified from accumulated other comprehensive income to investment income due to the realization of previously unrealized gains and losses in the accompanying consolidated statements of income were not significant for the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017.~~

~~(8) Investments~~

March 26, 2022.

(8)	Investments

Investments include primarily investment-grade corporate bonds and ~~U.S. Treasury obligations~~asset-backed securities having maturities of up to five years (the “bond portfolio”). and money market investments. Investments in the bond portfolio are reported as

available-for-sale

and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on

available-for-sale

investments to determine whether ~~such losses are other-than-temporary.~~an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be ~~other-than-temporary,~~a result of credit-related factors, are to be included as a charge in the statement of income, while unrealized losses considered to be ~~temporary~~a result of noncredit-related factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices

in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or

non-transferability,

which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to U.S. Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $6,464,000 at March 26, 2022, while unrealized gains, net of unrealized losses, on the investments in the bond portfolio were ~~$278,000 at September 30, 2017, while unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $109,000~~$144,000 at December ~~31, 2016, respectively.~~

25, 2021.

The amortized cost and fair values of

available-for-sale

investments are as follows at ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016~~25, 2021 (in thousands):

   Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair Value
September 30, 2017

Money market investments
   $ 16,823    $ —      $ —      $ 16,823
Asset-backed securities
   3,497    2    5    3,494
Corporate bonds and direct obligations of government agencies
   84,885    373    91    85,167
U.S. Treasury obligations
   5,496    —      1    5,495








Total
   $ 110,701    $ 375    $ 97    $ 110,979








December 31, 2016

Money market investments
   $ 12,395    $ —      $ —      $ 12,395
Asset-backed securities
   4,027    3    19    4,011
Corporate bonds and direct obligations of government agencies
   70,069    150    239    69,980
U.S. Treasury obligations
   23,037    2    6    23,033








Total
   $ 109,528    $ 155    $ 264    $ 109,419


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 26, 2022
Money market investments	$	14,913	$	—	$	—	$	14,913
Asset-backed securities		21,259		—		1,435		19,824
Corporate bonds and direct obligations of government agencies		133,645		212		5,203		128,654
U.S. Treasury obligations		2,342		—		38		2,304

Total	$	172,159	$	212	$	6,676	$	165,695


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

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

For those

available-for-sale

investments with unrealized losses at ~~September 30, 2017~~March 26, 2022 and December ~~31, 2016,~~25, 2021, the following table summarizes the duration of the unrealized loss (in thousands):

   Less than 12 months    12 months or longer    Total
   Fair
Value    Unrealized
Loss    Fair
Value    Unrealized
Loss    Fair
Value    Unrealized
Loss
September 30, 2017

Asset-backed securities
   $ —      $ —      $ 2,311    $ 5    $ 2,311    $ 5
Corporate bonds and direct obligations of government agencies
   15,429    21    13,215    70    28,644    91
U.S. Treasury obligations
   5,495    1    —      —      5,495    1












Total
   $ 20,924    $ 22    $ 15,526    $ 75    $ 36,450    $ 97












December 31, 2016

Asset-backed securities
   $ 1,363    $ 6    $ 2,314    $ 13    $ 3,677    $ 19
Corporate bonds and direct obligations of government agencies
   28,809    195    1,367    44    30,176    239
U.S. Treasury obligations
   12,734    6    —      —      12,734    6












Total
   $ 42,906    $ 207    $ 3,681    $ 57    $ 46,587    $ 264


	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
March 26, 2022
Asset-backed securities	$	19,824	$	1,435	$	—	$	—	$	19,824	$	1,435
Corporate bonds and direct obligations of government agencies		96,962		4,768		4,147		435		101,109		5,203
U.S. Treasury obligations		2,304		38		—		—		2,304		38

Total	$	119,090	$	6,241	$	4,147	$	435	$	123,237	$	6,676


December 25, 2021
Asset-backed securities	$	22,095	$	346	$	—	$	—	$	22,095	$	346
Corporate bonds and direct obligations of government agencies		72,526		966		—		—		72,526		966

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

The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality. The Company expects to recover, through collection of all of the contractual cash flows of each security, the amortized cost basis of these securities as it does not intend to sell, and does not anticipate being required to sell, these securities before recovery of the cost basis. For these reasons, no losses have been recognized in the Company’s consolidated statements of income.

(9)

Leases

Landstar’s

noncancelable leases are primarily comprised of finance leases for the acquisition of new trailing equipment. Each finance lease for the acquisition of trailing equipment is a five year lease with a $1 purchase option for the applicable equipment at lease expiration. Substantially all of Landstar’s operating lease

right-of-use

assets and operating lease liabilities represent leases for facilities maintained in support of the Company’s network of BCO Independent Contractors and office space used to conduct Landstar’s business. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other

build-out

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

“month-to-month”

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

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

right-of-use

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

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

The components

of lease cost for finance leases and operating leases for the thirteen weeks ended March 26, 2022 were (in thousands):


Finance leases:
Amortization of right-of-use assets	$	5,327
Interest on lease liability		700

Total finance lease cost		6,027

Operating leases:
Lease cost		926
Variable lease cost		—
Sublease income		(1,213	)

Total net operating lease income		(287	)

Total net lease cost	$	5,740

A summary of the lease classification on our consolidated balance sheet as of March 26, 2022 is as follows (in thousands):

Assets:



Operating lease right-of-use assets	Other assets	$	1,916
Finance lease assets	Operating property, less accumulated depreciation and amortization		137,818

Total lease assets		$	139,734

Liabilities:

The following table reconciles the undiscounted cash flows for the finance and operating leases to the finance and operating lease liabilities recorded on the balance sheet at March 26, 2022 (in thousands):


	Finance Leases		Operating Leases
2022 Remainder	$	28,777	$	583
2023		31,916		638
2024		22,045		534
2025		15,820		282
2026		7,668		0
Thereafter		—		—

Total future minimum lease payments		106,226		2,037
Less amount representing interest (1.6% to 4.4%)		3,954		121

Present value of minimum lease payments	$	102,272	$	1,916


Current maturities of long-term debt		34,983
Long-term debt, excluding current maturities		67,289
Other current liabilities				744
Deferred income taxes and other noncurrent liabilities				1,172

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of March 26, 2022 were:


	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.4			3.4
Weighted average discount rate		2.5	%		4.0	%

(10)

Debt

In addition to the finance lease obligations as presented on the consolidated balance sheets, the Company had

$70,000,000

in outstanding debt as of March 26, 2022, consisting of borrowings under the Company’s revolving credit facility. The Company had

borrowings under the revolving credit facility as of December 25, 2021.

On August 18, 2020, Landstar entered into an amended and restated credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement, which matures on August 18, 2023, provides $250,000,000 of borrowing capacity in the form of a revolving credit facility, $35,000,000 of which may be utilized in the form of letters of credit. The Credit Agreement includes an “accordion” feature providing for a possible increase up to an aggregate borrowing capacity of $400,000,000.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum Fixed Charge Coverage Ratio, as defined in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these ~~securities~~covenants are presently considered by management to be ~~other-than-temporary at September 30, 2017.~~

~~(9) Commitments~~materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.

The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates that adjust monthly and, ~~Contingencies~~

as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value.

(11)	Commitments and Contingencies

Short-term investments include ~~$45,687,000~~$34,292,000 in current maturities of investments and $1,387,000 in restricted cash held by the Company’s insurance segment at ~~September 30, 2017.~~March 26, 2022. The

non-current

portion of the bond portfolio of ~~$65,292,000~~$131,403,000 is included in other assets. The short-term investments, together with ~~$20,979,000~~$44,463,000 of

non-current

investments, provide collateral for the ~~$59,999,000~~$72,267,000 of letters of credit issued to guarantee payment of insurance claims. As of ~~September 30, 2017,~~March 26, 2022, Landstar also had ~~$33,127,000~~$33,170,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

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

~~(10) Change in Accounting Estimate for Self-Insured Claims~~

The following table summarizes the effect of the increase (decrease) in the cost of insurance claims resulting from unfavorable (favorable) development of prior year self-insured claims estimates on operating income, net income attributable to Landstar System, Inc. and subsidiary and earnings per share attributable to Landstar System, Inc. and subsidiary amounts in the consolidated statements of income for the thirty-nine-week and thirteen-week periods ended September 30, 2017 and September 24, 2016 (in thousands, except per share amounts):

   Thirty Nine Weeks Ended    Thirteen Weeks Ended
   September 30,
2017    September 24,
2016    September 30,
2017    September 24,
2016
Operating income
   $ 1,327    $ 698    $ 1,124    $ (2,118 )
Net income attributable to Landstar System, Inc. and subsidiary
   825    431    699    (1,309 )
Earnings per share attributable to Landstar System, Inc. and subsidiary
   $ 0.02    $ 0.01    $ 0.02    $ (0.03 )
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary
   $ 0.02    $ 0.01    $ 0.02    $ (0.03 )

~~(11) Recent Accounting Pronouncements~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update2014-09-~~~~Revenue from Contracts with Customers~~ ~~(“ASU2014-09”).~~ ~~ASU2014-09~~ is a comprehensive revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. The standard requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU~~2014-09~~ becomes effective for us January 1, 2018 and permits either a full retrospective or a modified retrospective transition approach. We plan to adopt this new standard on January 1, 2018 under the modified retrospective transition method with a cumulative adjustment to retained earnings instead of retrospectively adjusting prior periods. We anticipate the adoption of this standard will change the timing of revenue recognition for most of our transportation business from at delivery to over the transit period as our performance obligation is completed. Due to our average length of haul for our truckload movements as well as our corresponding direct costs of revenue, purchased transportation and commissions to agents, we do not expect this change to have a material impact on our results of operations, financial position or cash flows once implemented.

~~In February 2016, the FASB issued Accounting Standards Update2016-02~~ –~~Leases~~ ~~(“ASU2016-02”).~~ ~~ASU2016-02~~ ~~requires a company to recognize aright-of-use~~ asset and lease liability for the obligation to make lease payments measured at the present value of the lease payments for all leases with terms greater than twelve months. Companies are required to use a modified retrospective transition approach to recognize leases at the beginning of the earliest period presented. ASU~~2016-02~~ ~~is effective for annual reporting periods beginning after December 15, 2018, and interim periods therein, and early adoption is permitted. ASU2016-02~~ ~~is not expected to have a material impact on the Company’s financial statements.~~

~~In March 2016, the FASB issued Accounting Standards Update2016-09~~ –~~Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ ~~(“ASU2016-09”),~~ which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU~~2016-09~~ ~~is effective for annual periods beginning after December 15, 2016, and interim periods therein. As such, the Company adopted ASU2016-09~~ during the first quarter of 2017 with an effective date of January 1, 2017. As a result of the adoption, the Company recognized excess tax benefits in the consolidated statement of income of $868,000 for the thirty-nine-week period ended September 30, 2017. Prior period amounts have not been reclassified.

~~In June 2016, the FASB issued Accounting Standards Update2016-13–~~~~Financial Instruments –~~~~Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(“ASU2016-13”),~~ ~~which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU2016-13~~ ~~is effective for annual periods beginning after December 15, 2019, and interim periods therein. The Company is currently evaluating the impact of ASU2016-13~~ ~~on its financial statements.~~

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

The following discussion should be read in conjunction with the interim consolidated financial statements and notes thereto included herein, and with the Company’s audited financial statements and notes thereto for the fiscal year ended December ~~31, 2016~~25, 2021 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the ~~2016~~2021 Annual Report on Form

10-K.

FORWARD-LOOKING STATEMENTS

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

10-Q

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

(COVID-19)

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

10-K

for the ~~2016~~2021 fiscal year,

described in Item 1A “Risk Factors”, in this report or in Landstar’s other Securities and Exchange Commission filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

~~Introduction~~

Introduction

Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. ~~(together,~~(collectively referred to herein with their subsidiaries and other affiliated companies as “Landstar” or the “Company”), is a worldwide technology-enabled, asset-light provider of integrated transportation management solutions. The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to ~~enterprise-wide~~comprehensive third party logistics solutions to ~~manage~~meet all of a customer’s transportation needs. Landstar provides services principally throughout the United States and to a lesser extent in Canada and Mexico, and between the United States and Canada, Mexico and other countries around the world. The Company’s services emphasize safety, information coordination and customer service and are delivered through a network of over 1,200 independent commission sales agents and over 108,000 third party capacity providers, primarily truck capacity providers, linked together by a series of ~~technological applications~~digital technologies which are provided and coordinated by the Company. The nature of the Company’s business is such that a significant portion of its operating costs varies directly with revenue.

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

non-exclusive

contractual arrangements (the “Truck Brokerage Carriers”), air cargo carriers, ocean cargo carriers and railroads. Through this network of agents and capacity providers linked together by Landstar’s ~~information technology systems,~~ecosystem of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of ~~$3.2~~$6.5 billion during the most recently completed fiscal year. The Company reports the results of two operating segments: the transportation logistics segment and the insurance segment.

The transportation logistics segment provides a wide range of integrated transportation management solutions. Transportation services are provided by Landstar’s “Operating Subsidiaries”: Landstar Ranger, Inc., Landstar Inway, Inc., Landstar Ligon, Inc., Landstar Gemini, Inc., Landstar Transportation Logistics, Inc., Landstar Global Logistics, Inc., Landstar Express America, Inc., Landstar Canada, Inc.,

Landstar Metro, S.A.P.I. de C.V., and as further described below, Landstar Blue. Transportation services offered by the Company include truckload and less-than-truckload transportation and other truck transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage. Examples of the industries serviced by the transportation logistics segment include automotive ~~products,~~parts and assemblies, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics ~~ammunition and explosives~~ and military equipment. In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-than-truckload service providers. ~~Each of the~~The independent commission sales agents ~~has the opportunity to~~ market ~~all of the~~ services provided by the transportation logistics segment. Billings for freight transportation services are typically charged to customers on a per shipment basis for the physical transportation of freight and are referred to as transportation revenue. During the ~~thirty-nine~~thirteen weeks ended ~~September 30, 2017,~~March 26, 2022, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately ~~47%~~37%, ~~47%~~52% and 3%2%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3%8% of the Company’s consolidated revenue in the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017.~~

~~During 2017,~~March 26, 2022.

On May 6, 2020, the Company ~~incorporated~~formed a new subsidiary that was subsequently renamed Landstar ~~Metro, S.A.P.I. de C.V.,~~Blue, LLC (“Landstar Blue”). Landstar Blue arranges truckload brokerage services with a ~~transportation logistics company (“~~focus on the contract services market. Landstar ~~Metro”),~~Blue also helps the Company to develop and test digital technologies and processes for the benefit of all Landstar ~~Metro Servicios S.A.P.I. de C.V., a services company (“~~independent commission sales agents. On June 15, 2020, Landstar ~~Servicios”), each based in Mexico City, Mexico. On September 20, 2017, Landstar Metro acquired substantially all~~Blue completed the acquisition of an independent agent of the ~~assets of the asset-light transportation logistics~~Company whose business of a Mexican transportation logistics company. In connection with the acquisition, individuals affiliated with the seller subscribed in the aggregate for a 30% equity interest in each of Landstar Metro and Landstar Servicios. Landstar Metro provides freight and logistics services within the country of Mexico and in conjunction with Landstar’s U.S./Mexico cross-borderfocused on truckload brokerage services. ~~Landstar Servicios provides various administrative, financial, operational, safety and compliance services to Landstar Metro.~~ The results of operations from Landstar ~~Metro and Landstar Servicios~~Blue are presented as part of the Company’s transportation logistics segment. ~~The Company expects that Landstar Metro and Landstar Servicios will not have a material effect on its revenues and earnings for the remainder of fiscal year 2017.~~ Revenue from Landstar ~~Metro and Landstar Servicios~~Blue represented less than 1% of the Company’s transportation logistics segment revenue in the ~~2017 thirty-nine-week period.~~

thirteen-week period ended March 26, 2022.

The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, ~~(“Signature”),~~ and Risk Management Claim Services, Inc. ~~This~~The insurance segment provides risk and claims management services to certain of Landstar’s operating subsidiaries. In addition, it reinsures certain risks of the Company’s BCO Independent Contractors and provides certain property and casualty insurance directly to certain of Landstar’s operating subsidiaries. Revenue at the insurance segment represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature. Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017.~~

Mar

ch 26, 2022.

Changes in Financial Condition and Results of ~~Operations~~

Operati

ons

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

Revenue

While customer demand, which is subject to overall economic conditions, ultimately drives increases or decreases in revenue, the Company primarily relies on its independent commission sales agents to establish customer relationships and generate revenue opportunities. Management’s emphasis with respect to revenue growth is on revenue generated by independent commission sales agents who on an annual basis generate $1 million or more of Landstar revenue (“Million Dollar Agents”). Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents, ~~and~~ increasing the revenue opportunities generated by existing independent commission sales ~~agents.~~agents and providing its independent commission sales agents with digital technologies they may use to grow revenue and increase efficiencies at their businesses. During the ~~2016~~2021 fiscal year, ~~502~~593 independent commission sales agents generated $1 million or more of Landstar revenue and thus qualified as Million Dollar Agents. During the ~~2016~~2021 fiscal year, the average revenue generated by a Million Dollar Agent was ~~$5,831,000~~$6,150,000 and revenue generated by Million Dollar Agents in the aggregate represented ~~92%~~94% of consolidated revenue.

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

   Thirty Nine Weeks Ended    Thirteen Weeks Ended
   September 30,
2017    September 24,
2016    September 30,
2017    September 24,
2016
Revenue generated through (in thousands):

Truck transportation

Truckload:

Van equipment
   $ 1,529,402    $ 1,351,980    $ 550,484    $ 465,785
Unsided/platform equipment
   825,194    700,369    304,536    248,939
Less-than-truckload
   65,397    54,066    22,598    18,139








Total truck transportation
   2,419,993    2,106,415    877,618    732,863
Rail intermodal
   68,570    76,987    24,213    24,650
Ocean and air cargo carriers
   70,708    56,500    29,523    18,790
Other (1)
   35,501    34,903    12,076    11,635








   $ 2,594,772    $ 2,274,805    $ 943,430    $ 787,938








Revenue on loads hauled via BCO Independent Contractors included in total truck transportation
   $ 1,211,564    $ 1,086,848    $ 435,479    $ 379,196
Number of loads:

Truck transportation

Truckload:

Van equipment
   942,894    847,208    329,329    291,089
Unsided/platform equipment
   362,936    331,226    126,509    112,192
Less-than-truckload
   98,740    84,316    34,232    28,589








Total truck transportation
   1,404,570    1,262,750    490,070    431,870
Rail intermodal
   32,040    36,120    11,080    11,940
Ocean and air cargo carriers
   18,150    14,910    6,210    5,130








   1,454,760    1,313,780    507,360    448,940

Loads hauled via BCO Independent Contractors included in total truck transportation
   686,830    630,880    232,970    216,220
Revenue per load:

Truck transportation

Truckload:

Van equipment
   $ 1,622    $ 1,596    $ 1,672    $ 1,600
Unsided/platform equipment
   2,274    2,114    2,407    2,219
Less-than-truckload
   662    641    660    634
Total truck transportation
   1,723    1,668    1,791    1,697
Rail intermodal
   2,140    2,131    2,185    2,064
Ocean and air cargo carriers
   3,896    3,789    4,754    3,663
Revenue per load on loads hauled via BCO Independent Contractors
   $ 1,764    $ 1,723    $ 1,869    $ 1,754

Revenue by capacity type (as a % of total revenue):

Truck capacity providers:

BCO Independent Contractors
   47 % 48 % 46 % 48 %
Truck Brokerage Carriers
   47 % 45 % 47 % 45 %
Rail intermodal
   3 % 3 % 3 % 3 %
Ocean and air cargo carriers
   3 % 2 % 3 % 2 %
Other
   1 % 2 % 1 % 1 %


	Thirteen Weeks Ended
	March 26, 2022		March 27, 2021
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	1,081,206	$	729,402
Unsided/platform equipment		408,757		297,485
Less-than-truckload		33,720		25,670
Other truck transportation (1)		227,601		140,932

Total truck transportation		1,751,284		1,193,489
Rail intermodal		42,688		31,708
Ocean and air cargo carriers		152,057		47,600
Other (2)		24,750		14,737

	$	1,970,599	$	1,287,534

Revenue on loads hauled via BCO Independent Contractors included in total truck transportation	$	727,574	$	560,114

Number of loads:
Truck transportation
Truckload:
Van equipment		376,268		321,212
Unsided/platform equipment		131,829		114,263
Less-than-truckload		47,843		40,692
Other truck transportation (1)		85,930		59,663

Total truck transportation		641,870		535,830
Rail intermodal		12,630		11,700
Ocean and air cargo carriers		11,560		9,230

		666,060		556,760

Loads hauled via BCO Independent Contractors included in total truck transportation		262,240		245,950

Revenue per load:
Truck transportation
Truckload:
Van equipment	$	2,873	$	2,271
Unsided/platform equipment		3,101		2,604
Less-than-truckload		705		631
Other truck transportation (1)		2,649		2,362
Total truck transportation		2,728		2,227
Rail intermodal		3,380		2,710
Ocean and air cargo carriers		13,154		5,157

Revenue per load on loads hauled via BCO Independent Contractors	$	2,774	$	2,277


Revenue by capacity type (as a % of total revenue):
Truck capacity providers:
BCO Independent Contractors	37	%	44	%
Truck Brokerage Carriers	52	%	49	%
Rail intermodal	2	%	2	%
Ocean and air cargo carriers	8	%	4	%
Other	1	%	1	%

⁽¹⁾

(1)

(2)

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

Expenses

Purchased transportation

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

   September 30,
2017    September 24,
2016
BCO Independent Contractors
   8,939    8,889
Truck Brokerage Carriers:

Approved and active⁽¹⁾
   32,925    30,860
Other approved
   15,138    15,691




   48,063    46,551




Total available truck capacity providers
   57,002    55,440




Trucks provided by BCO Independent Contractors
   9,548    9,510


	March 26, 2022		March 27, 2021
BCO Independent Contractors		11,089		10,498
Truck Brokerage Carriers:
Approved and active (1)		68,859		49,538
Other approved		28,094		23,246

		96,953		72,784

Total available truck capacity providers		108,042		83,282


Trucks provided by BCO Independent Contractors		11,935		11,268

⁽¹⁾

(1)

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

The Company incurs costs that are directly related to the transportation of freight that include purchased transportation and commissions to agents. The Company incurs indirect costs associated with the transportation of freight that include other operating costs and insurance and claims. In addition, the Company incurs selling, general and administrative costs essential to administering its business operations. Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets which, in general, are used to benchmark costs incurred on a monthly basis.

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

of revenue also increases or decreases in relation to the availability of truck brokerage capacity and with changes in the price of fuel on revenue generated from shipments hauled by Truck Brokerage Carriers. The Company passes 100% of fuel surcharges billed to customers for freight hauled by BCO Independent Contractors to its BCO Independent Contractors. These fuel surcharges are excluded from revenue and the cost of purchased transportation. Purchased transportation costs are recognized ~~upon~~over the ~~completion of~~ freight ~~delivery.~~

transit period as the performance obligation to the customer is completed.

Commissions to agents

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

~~The Company defines gross profit~~transit period as ~~revenue less~~ the cost of purchased transportation and commissions to agents. Gross profit divided by revenue is referred to as gross profit margin. The Company’s operating margin is defined as operating income divided by gross profit.

~~In general, gross profit margin on revenue generated by BCO Independent Contractors represents a fixed percentage of revenue due~~performance obligation to the ~~nature~~customer is completed.

Other operating costs, net of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents. For revenue generated by Truck Brokerage Carriers, gross profit margin is either fixed or variable as a percent of revenue, dependinggains on the contract with each individual independent commission sales agent. Under certain contracts with independent commission sales agents, the Company retains a fixed percentage of revenue and the agent retains the amount remaining less the cost of purchased transportation (the “retention contracts”). Gross profit margin on revenue generated by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature as the Company’s contracts with independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of net revenue for these type of loads. Approximately 54% of the Company’s consolidated revenue in the thirty-nine-week period ended September 30, 2017 was generated under contracts that have a fixed gross profit margin while 46% was under contracts that have a variable gross profit margin.

asset sales/dispositions

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

Insurance and claims

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

Effective May 1, 2019, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “Initial Excess Policy”) with a third party insurance company. For commercial trucking claims, Landstar retains liability up to $5,000,000 per occurrence. In addition, for commercial trucking claims exceeding its $5,000,000 per occurrence self-insured retention, the Company retains liability up to an additional $700,000 in the aggregate on any claims incurred on or after May 1, ~~2016~~2019 through April 30, ~~2017,~~2022, the Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $15 million for each policy year, an aggregate limit of $20 million for the

thirty-six

month term ended April 30, 2022, and options to increase such aggregate limits for

pre-established

amounts of additional premium. If aggregate losses under the Initial Excess Policy exceed either the annual aggregate limit or the aggregate limit for the three year period ending April 30, 2022, and the Company did not elect to increase such aggregate limits for a

pre-established

amount of additional premium, Landstar would retain liability of up to $10 million per occurrence, inclusive of its $5 million self-insured retention for commercial trucking claims during the remainder of the applicable policy year(s). Moreover, as a result of the Company’s aggregate loss experience since it entered into the Initial Excess Policy, the Initial Excess Policy required the Company to pay additional premium relating to its existing coverage up to a

pre-established

maximum amount of $3.5 million, which was provided for in insurance and claims costs for the Company’s 2020 fiscal first quarter.

The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of $10 million. These third party arrangements provide coverage on a per occurrence or aggregated basis. In recent years, there has been a significant increase in the occurrence of trials in courts throughout the United States involving catastrophic injury and fatality claims against commercial motor carriers that have resulted in verdicts in excess of $10 million. Within the transportation logistics industry, these verdicts are often referred to as “Nuclear Verdicts.” The increase in Nuclear Verdicts has had a significant impact on the cost of commercial auto liability claims throughout the United States. Due to the increasing cost of commercial auto liability claims, the availability of excess coverage has significantly decreased, and the pricing associated with such excess coverage, to the extent available, has significantly increased. With respect to the annual policy year ended April 30, 2021, as compared to the annual policy year ended April 30, 2020, the Company experienced an increase of approximately $14 million, or over 170%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Effective May 1, 2021, with respect to the annual policy year ending April 30, 2022, as compared to the annual policy year ended April 30, 2021, the Company experienced an increase of approximately $3 million, or 19%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Moreover, the Company increased the level of its financial exposure to commercial trucking claims in excess of $10 million, including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage. For example, with respect to a hypothetical claim in the amount of $35 million incurred during the annual policy year ending April 30, 2022, the Company would have an aggregate financial exposure of approximately $10 million. Furthermore, the Company’s third party insurance arrangements provide excess coverage up to an uppermost coverage layer, in excess of which the Company retains additional ~~$500,000~~financial exposure. No assurances can be given that the availability of excess coverage for commercial trucking claims will not continue to deteriorate, that the pricing associated with such excess coverage, to the extent available, will not continue to increase, nor that insurance coverage from third party insurers for excess coverage of commercial trucking claims will even be available on commercially reasonable terms at certain levels. Moreover, the occurrence of a Nuclear Verdict, or the settlement of a catastrophic injury and/or fatality claim that could have otherwise resulted in a Nuclear Verdict, could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

Further, the ~~aggregate on any claims incurred on or after May 1, 2017 through April 30, 2018. The~~ Company ~~also~~ retains liability of up to $1,000,000 for each general liability claim, up to $250,000 for each workers’ compensation claim and up to $250,000 for each cargo claim. In addition, under reinsurance arrangements by Signature of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $500,000, $1,000,000 or $2,000,000 with respect to certain occupational accident claims and up to $750,000 with respect to certain workers’ compensation claims. The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage. A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

Selling, general and administrative

During the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017,~~March 26, 2022, employee compensation and benefits accounted for approximately ~~seventy percent~~70% of the Company’s selling, general and administrative costs.

Employee compensation and benefits include wages and employee benefit costs as well as incentive compensation and stock-based compensation expense. Incentive compensation and stock-based compensation expense is highly variable in nature in comparison to wages and employee benefit costs.

Depreciation and amortization

Depreciation and amortization primarily relate to depreciation of trailing equipment and information technology hardware and software.

Costs of revenue

The ~~following table sets forth~~Company incurs costs of revenue related to the ~~percentage relationship~~transportation of freight and, to a much lesser extent, to reinsurance premiums received by Signature. Costs of revenue include variable costs of revenue and other costs of revenue. Variable costs of revenue include purchased transportation and commissions to agents, ~~both being direct~~as these costs are entirely variable on a

shipment-by-shipment

basis. Other costs of revenue include fixed costs of revenue and semi-variable costs of revenue, where such costs may vary over time based on certain economic factors or operational metrics such as the number of Company-controlled trailers, the number of BCO Independent Contractors, the frequency and severity of insurance claims, the number of miles traveled by BCO Independent Contractors, or the number and/or scale of information technology projects in process or

in-service

to support revenue generating activities, rather than on a

shipment-by-shipment

basis. Other costs of revenue associated with the transportation of freight include: (i) other operating costs, primarily consisting of trailer maintenance and BCO Independent Contractor recruiting and qualification costs, as reported in the Company’s Consolidated Statements of Income, (ii) transportation-related insurance premiums paid and claim costs incurred, included as a portion of insurance and claims in the Company’s Consolidated Statements of Income, (iii) costs incurred related to internally developed software including ASC

350-40

amortization, implementation costs, hosting costs and other support costs utilized to support our independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company’s Consolidated Statements of Income; and (iv) depreciation on Company-owned trailing equipment, included as a portion of depreciation and amortization in the Company’s Consolidated Statements of Income. Other costs of revenue associated with reinsurance premiums received by Signature are comprised of broker commissions and other fees paid related to the administration of insurance programs to BCO Independent Contractors and are included in selling, general and administrative in the Company’s Consolidated Statements of Income. In addition to costs of revenue, the Company incurs various other costs relating to its business, including most selling, general and administrative costs and portions of costs attributable to insurance and claims and depreciation and amortization. Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets that, in general, are used to benchmark costs incurred on a monthly basis.

Gross Profit, Variable Contribution, Gross Profit Margin and Variable Contribution Margin

The following table sets forth calculations of gross profit, defined as revenue less costs of revenue, and gross profit margin defined as gross profit divided by revenue, for the periods indicated. The Company refers to revenue less variable costs of revenue as “variable contribution” and ~~indirect~~variable contribution divided by revenue as “variable contribution margin”. Variable contribution and variable contribution margin are each

non-GAAP

financial measures. The closest comparable GAAP financial measures to variable contribution and variable contribution margin are, respectively, gross profit and gross profit margin. The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a

shipment-by-shipment

level attributable to our transportation network of third-party capacity providers and independent commission sales agents in order to provide services to our customers. The Company believes variable contribution and variable contribution margin are important performance measurements and management considers variable contribution and variable contribution margin in evaluating the Company’s financial performance and in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs.

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


	Thirteen Weeks Ended
	March 26, 2022			March 27, 2021
Revenue	$	1,970,599		$	1,287,534

Costs of revenue:
Purchased transportation		1,550,330			998,285
Commissions to agents		149,778			100,009

Variable costs of revenue		1,700,108			1,098,294
Trailing equipment depreciation		9,083			8,907
Information technology costs		4,046			2,938
Insurance-related costs (1)		31,655			22,622
Other operating costs		11,141			7,642

Other costs of revenue		55,925			42,109

Total costs of revenue		1,756,033			1,140,403

Gross profit	$	214,566		$	147,131

Gross profit margin		10.9	%		11.4	%
Plus: other costs of revenue		55,925			42,109

Variable contribution	$	270,491		$	189,240

Variable contribution margin		13.7	%		14.7	%

(1)

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

In general, variable contribution margin on revenue generated by BCO Independent Contractors represents a fixed percentage due to the nature of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents. For revenue generated by Truck Brokerage Carriers, variable contribution margin may be either a fixed or variable percentage, depending on the contract with each individual independent commission sales agent. Variable contribution margin on revenue generated from shipments hauled by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature, as the Company’s contracts with independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of the amount represented by revenue less purchased transportation for these types of shipments. Approximately 41% of the Company’s consolidated revenue in the thirteen-week period ended March 26, 2022 was generated under transactions that pay a fixed percentage of revenue to the third party capacity provider and/or agents while 59% was generated under transactions that pay a variable percentage of revenue to the third party capacity provider and/or agents.

Operating income as a percentage of gross profit ~~for the periods indicated:~~

   Thirty Nine Weeks Ended Thirteen Weeks Ended
   September 30,
2017 September 24,
2016 September 30,
2017 September 24,
2016
Revenue
   100.0 % 100.0 % 100.0 % 100.0 %
Purchased transportation
   76.7 76.1 77.0 76.3
Commissions to agents
   8.1 8.3 8.1 8.3


Gross profit margin
   15.2 % 15.6 % 14.8 % 15.5 %


Gross profit
   100.0 % 100.0 % 100.0 % 100.0 %
Investment income
   0.4 0.3 0.5 0.3
Indirect costs and expenses:

Other operating costs, net of gains on asset sales/dispositions
   5.7 6.1 5.8 6.2
Insurance and claims
   11.8 12.1 12.8 10.3
Selling, general and administrative
   31.3 29.9 31.4 28.5
Depreciation and amortization
   7.6 7.4 7.2 7.4


Total costs and expenses
   56.3 55.4 57.2 52.3


Operating margin
   44.1 % 44.9 % 43.3 % 48.0 %

~~Management believes that~~and operating income as a ~~discussion~~percentage of ~~indirect costs~~variable contribution

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

non-GAAP

financial measure calculated as operating income divided by variable contribution. The Company believes that operating income as a percentage of variable contribution is useful and meaningful to ~~potential~~ investors for the following principal reasons: ~~(1)~~(i) the variable costs of revenue for a significant portion of the business are highly influenced by short-term market-based trends in the freight transportation industry, whereas other costs, including other costs of revenue, are much less impacted by short-term freight market trends; (ii) disclosure of ~~these relative measures (i.e., each indirect operating cost line item as a percentage of gross profit)~~this measure allows investors to better

understand the underlying trends in the Company’s results of operations; ~~(2) due to the generally fixed nature of these indirect costs (other than insurance and claims costs), these relative measures are~~(iii) this measure is meaningful to investors’ evaluations of the Company’s management of ~~its indirect~~ costs attributable to ~~operations; (3)~~operations other than the purely variable costs associated with purchased transportation and commissions to agents that the Company incurs to provide services to our customers; and (iv) management considers this financial information in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative ~~costs; and (4) this information facilitates comparisons by investors~~costs.


	Thirteen Weeks Ended
	March 26, 2022			March 27, 2021
Gross profit	$	214,566		$	147,131
Operating income	$	162,833		$	103,268
Operating income as % of gross profit		75.9	%		70.2	%

Variable contribution	$	270,491		$	189,240
Operating income	$	162,833		$	103,268
Operating income as % of variable contribution		60.2	%		54.6	%

The increase in operating income as a percentage of gross profit from the ~~Company’s results~~2021 thirteen-week period to the ~~results~~2022 thirteen-week period resulted from operating income increasing at a more rapid percentage rate than the increase in gross profit, as the Company was able to scale our fixed cost infrastructure, primarily certain components of ~~othernon-asset~~ ~~or asset-light companies~~selling, general and administrative costs, across a larger gross profit base.

The increase in operating income as a percentage of variable contribution from the transportation and logistics services industry who report “net revenue” in Management Discussion and Analysis, which represents revenue less the cost of purchased transportation. The difference between the Company’s use of the term “gross profit” and use of the term “net revenue” by other companies in the transportation and logistics services industry is due2021 thirteen-week period to the ~~direct~~2022 thirteen-week period resulted from operating income increasing at a more rapid percentage rate than the increase in variable contribution, as the Company was able to scale our fixed cost infrastructure, primarily certain components of ~~commissions to agents under the Landstar business model, whereas~~selling, general and administrative costs, as well as our other ~~companies in this industry generally have no commissions to agents.~~

costs of revenue, across a larger variable contribution base.

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

~~THIRTY NINE~~

THIRTEEN WEEKS ENDED ~~SEPTEMBER 30, 2017~~MARCH 26, 2022 COMPARED TO ~~THIRTY NINE~~THIRTEEN WEEKS ENDED ~~SEPTEMBER 24, 2016~~

MARCH 27, 2021

Revenue for the ~~2017 thirty-nine-week~~2022 thirteen-week period was ~~$2,594,772,000,~~$1,970,599,000, an increase of ~~$319,967,000,~~$683,065,000, or ~~14%~~53%, compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period. Transportation revenue increased ~~$319,678,000,~~$680,840,000, or ~~14%~~54%. The increase in transportation revenue was attributable to increased revenue per load of approximately 28% and an increased number of loads hauled of approximately ~~11% and increased revenue per load of approximately 3%.~~20% compared to the 2021 thirteen-week period. Reinsurance premiums were ~~$34,925,000~~$19,260,000 and ~~$34,636,000~~$17,035,000 for the ~~2017~~2022 and ~~2016 thirty-nine-week~~2021 thirteen-week periods, respectively.

The increase in revenue from reinsurance premiums was primarily attributable to an increase in the average number of trucks provided by BCO Independent Contractors and an increase in the aggregate value of equipment insured by BCO Independent Contractors under a physical damage program reinsured by Signature in the 2022 thirteen-week period compared to the 2021 thirteen-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the ~~2017 thirty-nine-week~~2022 thirteen-week period was ~~$2,419,993,000,~~$1,751,284,000, representing ~~93%~~89% of total revenue, an increase of ~~$313,578,000,~~$557,795,000, or ~~15%~~47%, compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period. ~~The~~Revenue per load on loads hauled by third party truck capacity providers increased approximately 22% compared to the 2021 thirteen-week period, and the number of loads hauled by third party truck capacity providers increased approximately ~~11%~~20% in the ~~2017 thirty-nine-week~~2022 thirteen-week period compared to the ~~2016 thirty-nine-week period,~~2021 thirteen-week period.

The increase in revenue per load on loads hauled via truck was primarily due to a continuation into the 2022 first fiscal quarter of the extremely tight truck capacity environment experienced during the fourth fiscal quarter of 2021, which resulted in less readily available truck capacity as compared to the 2021 thirteen-week period. Revenue per load on loads hauled via van equipment increased 27%, revenue per load on loads hauled via unsided/platform equipment increased 19%, revenue per load on less-than-truckload loadings increased 12% and revenue per load on loads hauled via other truck transportation increased ~~approximately 3%~~12% as compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period. Revenue per load on loads hauled via truck increased 25% in January, 29% in February and 17% in March, respectively, as compared to the corresponding periods in 2021, as the comparisons to prior year periods became more challenging in March due to an atypical increase in truck revenue per load of 11% on a sequential basis from fiscal February 2021 to fiscal March 2021.

The increase in the number of loads hauled via truck compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period was due to a broad-based increase in demand ~~across many customers~~for the Company’s truck transportation services, particularly van services and ~~industries for Landstar’s various~~power-only services included in other truck ~~service offerings. The increase in revenue per load on loads~~transportation services. Loads hauled via ~~truck of 3% was primarily due to an 8% increase in revenue per load on~~van equipment increased 17%, loads hauled via unsided/platform equipment ~~inclusive~~increased 15%, loads hauled via less-than-truckload increased 18% and loads hauled via other truck transportation increased 44% as compared to the 2021 thirteen-week period. The number of ~~a 10% increase~~loads hauled via truck increased 17% in ~~heavy/specialized revenue per load,~~January, 30% in February and 14% in March, respectively, as compared to the corresponding periods in 2021, as the comparisons to prior year periods became more challenging in March due to (1) the impact of ~~higher diesel fuel costs~~the Russian invasion of Ukraine on one independent commission sales agency that maintains administrative operations in Ukraine and (2) an atypical increase in the number of loads hauled via ~~Truck Brokerage Carriers.~~ truck from fiscal February 2021 to fiscal March 2021 that resulted from severe winter weather experienced during the last week of fiscal February 2021, which shifted truck volume in 2021 from fiscal February to fiscal March.

Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were ~~$46,479,000~~$37,485,000 and ~~$37,723,000~~$19,234,000 in the ~~2017~~2022 and ~~2016 thirty-nine-week~~2021 thirteen-week periods, respectively. It should be noted that billings to many customers of the Company’s truck brokerage services ~~require~~include a single

all-in

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

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the ~~2017 thirty-nine-week~~2022 thirteen-week period was ~~$139,278,000,~~$194,745,000, or 5%10% of total revenue, an increase of ~~$5,791,000,~~$115,437,000, or 4%146%, compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period. Revenue per load on revenue generated by multimode capacity providers increased approximately 6%112% in the ~~2017 thirty-nine-week~~2022 thirteen-week period compared to the ~~2016 thirty-nine-week~~2021 thirteen-week period, ~~while~~and the number of loads hauled by multimode capacity providers ~~decreased~~increased approximately 2%16% over the same period. ~~The increase in revenue~~Revenue per load ~~of 6% was~~on loads hauled by multimode capacity providers increased for all modes, primarily ~~driven by an increase in revenue per load generated by air cargo carriers, entirely attributable~~due to strong U.S. and global economic recoveries coupled with the impact of global supply chain disruptions which were particularly acute with respect to international ocean and air ~~loadings provided in support of disaster relief efforts~~freight. Revenue per load on loads hauled via ocean, air and rail intermodal increased 128%, 122% and 25%, respectively, during the ~~2017 thirty-nine-week~~2022 thirteen-week period as compared to the 2021 thirteen-week period. ~~Also, revenue~~Revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity. The ~~decrease~~increase in the number of loads hauled by multimode capacity providers was due to a 64% increase in ocean loadings and an ~~11% decrease~~8% increase in rail ~~intermodal loads, entirely attributable to decreased~~ loadings, ~~at two specific agencies,~~ partially offset by a ~~22%~~32% decrease in air loadings. The 64% increase in ~~loads hauled by air and~~ ocean ~~cargo carriers. The 22% increase in loads hauled by air and ocean cargo carriers was broad-based across many customers.~~

Purchased transportation was 76.7% and 76.1% of revenue in the 2017 and 2016 thirty-nine-week periods, respectively. The increase in purchased transportation as a percentage of revenue was primarily due to an increased rate of purchased transportation paid to Truck Brokerage Carriers and a decrease in the percentage of revenue contributed by BCO Independent Contractors, which typically has a lower rate of purchased transportation than revenue generated by Truck Brokerage Carriers. Commissions to agents were 8.1% and 8.3% of revenue in the 2017 and 2016 thirty-nine-week periods, respectively. The decrease in commissions to agents as a percentage of revenue was primarily attributable to a decreased net revenue margin on revenue generated by Truck Brokerage Carriers.

Investment income was $1,733,000 and $1,100,000 in the 2017 and 2016 thirty-nine-week periods, respectively. The increase in investment income was primarily due to higher average rates of return on investments during the 2017 period and a higher average investment balance held by the insurance segment in the 2017 period.

Other operating costs increased $1,013,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 5.7% of gross profit in the 2017 period compared to 6.1% of gross profit in the 2016 period. The increase in other operating costs compared to the prior year was primarily due to decreased gains on sales of used trailing equipment and an increased provision for contractor bad debt, partially offset by decreased trailing equipment maintenance costs due to a lower average age of the Company-owned trailer fleet. The decrease in other operating costs as a percentage of gross profit was caused by the effect of increased gross profit, partially offset by the increase in other operating costs.

Insurance and claims increased $3,538,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 11.8% of gross profit in the 2017 period compared to 12.1% of gross profit in the 2016 period. The increase in insurance and claims expense compared to prior year was due to increased severity of current year claims in the 2017 period, increased net unfavorable development of prior years’ claims in the 2017 period and increased insurance premiums on the Company’s commercial trucking liability coverage. Unfavorable development of prior years’ claims was $1,327,000 and $698,000 in the 2017 and 2016 thirty-nine-week periods, respectively. The decrease in insurance and claims as a percent of gross profit was caused by the effect of increased gross profit, partially offset by the increase in insurance and claims costs.

Selling, general and administrative costs increased $16,968,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 31.3% of gross profit in the 2017 period compared to 29.9% of gross profit in the 2016 period. The increase in selling, general and administrative costs compared to prior year was attributable to a $13,634,000 provision for incentive compensation in the 2017 thirty-nine-week period compared to an $875,000 provision in the 2016 thirty-nine-week period and increased wages. The increase in selling, general and administrative costs as a percent of gross profit was due primarily to the increase in selling, general and administrative costs, partially offset by the effect of increased gross profit.

Depreciation and amortization increased $3,852,000 in the 2017 thirty-nine-week period compared to the 2016 thirty-nine-week period and represented 7.6% of gross profit in the 2017 period compared to 7.4% of gross profit in the 2016 period. The increase in depreciation and amortization expenses was due to an increased number of owned trailers in response to increased customer demand for the Company’s drop and hook services and a lower average age of the trailer fleet during the 2017 thirty-nine-week period as compared to the 2016 thirty-nine-week period. The increase in depreciation and amortization as a percentage of gross profit was primarily due to the increased depreciation costs, partially offset by the effect of increased gross profit.

~~Interest and debt expense in the 2017 thirty-nine-week period decreased $166,000 compared to the 2016 thirty-nine-week period.~~

The provisions for income taxes for the 2017 and 2016 thirty-nine-week periods were based on estimated annual effective income tax rates of 37.8% and 38.1%, respectively, adjusted for discrete events, such as benefits resulting from disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options. The effective income tax rates for the 2017 and 2016 thirty-nine-week periods were 34.5% and 37.6%, respectively. The effective income tax rate for the 2017 thirty-nine week period was lower than the 35% statutory federal income tax rate primarily as a result of federal domestic production activities deductions and research and development credits recognized as discrete items during the thirteen-week period ended September 30, 2017, partially offset by the effect of state taxes and the meals and entertainment exclusion. The effective income tax rate for the 2016 thirty-nine-week period was higher than the statutory federal income tax rate primarily as a result of state taxes and the meals and entertainment exclusion. The effective income tax rate in the 2017 thirty-nine-week period of 34.5% was less than the 37.8% estimated annual effective income tax rate primarily as a result of federal domestic production activities deductions and research and development credits recognized during 2017 of approximately $5,200,000, excess tax benefits recognized on stock-based compensation arrangements resulting from the Company’s adoption of ASU~~2016-09~~ during 2017 and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through the exercises of incentive stock options in the 2017 period. The effective income tax rate in the 2016 thirty-nine-week period of 37.6% was less than the 38.1% estimated annual effective income tax rate primarily due to certain federal income tax credits realized in the 2016 period and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options in the 2016 period.

The net loss attributable to noncontrolling interest of $23,000 in the 2017 thirty-nine-week period represents the noncontrolling investors’ 30% share of the net loss incurred by Landstar Metro and Landstar Servicios.

Net income attributable to the Company was $112,336,000, or $2.68 per common share ($2.67 per diluted share), in the 2017 thirty-nine-week period. Net income attributable to the Company was $97,776,000, or $2.32 per common share ($2.31 per diluted share), in the 2016 thirty-nine-week period.

~~THIRTEEN WEEKS ENDED SEPTEMBER 30, 2017 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 24, 2016~~

Revenue for the 2017 thirteen-week period was $943,430,000, an increase of $155,492,000, or 20%, compared to the 2016 thirteen-week period. Transportation revenue increased $155,295,000, or 20%. The increase in transportation revenue was attributable to an increased number of loads hauled of approximately 13% and increased revenue per load of approximately 6%. The Company recognized approximately $23,000,000 in revenue, on approximately 16,000 loads, in the 2017 third quarter in support of local, state and federal relief efforts related to recent hurricanes that impacted Texas, the southeastern United States and Puerto Rico. Reinsurance premiums were $11,738,000 and $11,541,000 for the 2017 and 2016 thirteen-week periods, respectively.

Truck transportation revenue generated by third party capacity providers for the 2017 thirteen-week period was $877,618,000, representing 93% of total revenue, an increase of $144,755,000, or 20%, compared to the 2016 thirteen-week period. The number of loads hauled by third party truck capacity providers increased approximately 13% in the 2017 thirteen-week period compared to the 2016 thirteen-week period, and revenue per load increased approximately 6% compared to the 2016 thirteen-week period. The

~~increase in the number of loads hauled via truck compared to the 2016 thirteen-week period~~loadings was due to a broad-based increase in demand across many customers ~~and industries~~ for ~~Landstar’s various truck service offerings and~~ the ~~impact of approximately 16,000 loads hauled in support of disaster relief efforts. The~~Company’s ocean services, whereas the 8% increase in revenue per load on loads hauled via truck of 6% was due to a tighter freight environment experienced during the 2017 thirteen-week period, which resulted in less readily available truck capacity as compared to the 2016 thirteen-week period, and the impact of higher diesel fuel costs on loads hauled via Truck Brokerage Carriers. The freight environment during the 2017 thirteen-week period was also impacted by the hurricanes experienced in Texas and the southeastern United States, which further tightened capacity in the latter part of the quarter. Revenue per load on loads hauled via unsided/platform equipment increased 8%, revenue per load on loads hauled via van equipment increased 5% and revenue per load on less-than-truckloadrail loadings increased 4% as compared to the 2016 thirteen-week period. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $16,171,000 and $14,016,000 in the 2017 and 2016 thirteen-week periods, respectively.

Transportation revenue generated by multimode capacity providers for the thirteen-week period ended September 30, 2017 was $53,736,000, or 6% of total revenue, an increase of $10,296,000, or 24%, compared to the 2016 thirteen-week period, primarily attributable to approximately $9,000,000 of revenue generated in support of disaster relief efforts. Revenue per load on revenue generated by multimode capacity providers increased approximately 22% compared to the prior year period and the number of loads hauled by multimode capacity providers in the 2017 thirteen-week period increased approximately 1% compared to the 2016 thirteen-week period. The increase in revenue per load of 22% was primarily attributable to ~~the impact of~~one specific agency. The 32% decrease in air loadings ~~provided in support of disaster relief efforts during the 2017 thirteen-week period. The increase in loads hauled by multimode capacity providers~~ was primarily due to a 21% increase in loads hauled by air and ocean cargo carriers, where the demand was broad-based across many customers, partially offset by a 7% decrease in loads hauled by rail intermodal loads, entirely attributable to decreased loadings at one specific ~~agency.~~

customer.

Purchased transportation was ~~77.0%~~78.7% and ~~76.3%~~77.5% of revenue in the ~~2017~~2022 and ~~2016~~2021 thirteen-week periods, respectively. The increase in purchased transportation as a percentage of revenue was primarily due to (i) an increased percentage of revenue generated by Truck Brokerage Carriers, which typically has a higher rate of purchased transportation than revenue generated by BCO Independent Contractors; (ii) an increased percentage of revenue generated by multimode capacity providers, which typically has a higher rate of purchased transportation than third party truck capacity providers; and (iii) to a lesser extent, an increased rate of purchased transportation paid to Truck Brokerage Carriers, ~~and~~partially offset by a ~~decrease in the percentage~~lower rate of purchased transportation on revenue ~~contributed~~generated by BCO Independent Contractors due to an increased percentage of revenue generated by BCO Independent Contractors who use their own tractors and Landstar-owned trailers, which ~~typically~~ has a lower rate of purchased transportation than revenue generated by ~~Truck Brokerage Carriers.~~BCO Independent Contractors who use their own tractors and their own trailers. Commissions to agents were ~~8.1%~~7.6% and ~~8.3%~~7.8% of revenue in the ~~2017~~2022 and ~~2016~~2021 thirteen-week periods, respectively. The decrease in commissions to agents as a percentage of revenue was primarily attributable to an increased cost of purchased transportation as a ~~decreased net~~percentage of revenue ~~margin~~ on revenue generated by Truck Brokerage Carriers.

Investment income was ~~$711,000~~$721,000 and ~~$357,000~~$684,000 in the ~~2017~~2022 and ~~2016~~2021 thirteen-week periods, respectively. The increase in investment income was due to higher average rates of return on investments during the 2017 period and a higher average investment balance held by the insurance segment in the 2017 period.

Other operating costs increased ~~$605,000~~$3,499,000 in the ~~2017~~2022 thirteen-week period compared to the ~~2016~~2021 thirteen-week ~~period and represented 5.8% of gross profit in the 2017 period compared to 6.2% of gross profit in the 2016~~ period. The increase in other operating costs compared to the prior year was primarily due to ~~decreased gains on sales of used trailing equipment, partially offset by decreased~~increased trailing equipment maintenance ~~costs. The decrease in other operating~~ costs as a ~~percentage~~result of ~~gross profit was caused by~~(i) increased labor and parts costs as the ~~effect~~Company retained older equipment to support current business levels; and (ii) an increased average trailer fleet size during the 2022 thirteen-week period, an increased provision for contractor bad debt and the impact of ~~increased gross profit, partially offset by~~ the ~~increase in other operating costs.~~

resumption of large

in-person

events for the Company’s BCO Independent Contractors and independent commission sales agents.

Insurance and claims increased ~~$5,439,000~~$9,263,000 in the ~~2017~~2022 thirteen-week period compared to the ~~2016~~2021 thirteen-week ~~period and represented 12.8% of gross profit in the 2017 period compared to 10.3% of gross profit in the 2016~~ period. The increase in insurance and claims expense compared to the prior year was primarily due to ~~increased~~the impact of net unfavorable development of prior years’ claims in the ~~2017~~2022 thirteen-week period, ~~and~~as well as increased severity of current year trucking claims ~~in particular, related to a single severe accident in~~during the ~~2017 period. Unfavorable development of prior years’ claims was $1,124,000 in the 2017 thirteen-week~~2022 period ~~whereas favorable development of prior year’s claims was $2,118,000 in the 2016 thirteen-week period. The~~and an increase in insurance premiums, primarily for commercial auto and ~~claims as a percent of gross profit was caused by~~excess liability coverage. During the ~~increase in~~2022 and 2021 thirteen-week periods, insurance and claims costs ~~partially offset by the effect~~included $4,273,000 of ~~increased gross profit.~~

net unfavorable and $292,000 of net favorable adjustments to prior years’ claims estimates, respectively.

Selling, general and administrative costs increased ~~$9,303,000~~$7,305,000 in the ~~2017~~2022 thirteen-week period compared to the ~~2016~~2021 thirteen-week ~~period and represented 31.4% of gross profit in the 2017 period compared to 28.5% of gross profit in the 2016~~ period. The increase in selling, general and administrative costs compared to prior year was ~~primarily~~ attributable to a $6,848,000 provision for incentive compensation in the 2017 thirteen-week period compared to a $427,000 provision in the 2016 thirteen-week period as the Company is significantly exceeding earnings targets during the 2017 period,increased wages and employee benefit costs, an increased provision for customer bad debt and an increased provision for incentive compensation, partially offset by decreased stock-based compensation ~~expense and increased wages. The increase~~expense. Included in selling, general and administrative costs ~~as a percent~~was stock-based compensation expense of ~~gross profit was due primarily to~~$1,995,000 and $4,029,000 for the ~~increase in selling, general~~2022 and ~~administrative costs, partially offset by~~2021 thirteen-week periods, respectively, and incentive compensation expense of $5,199,000 and $4,289,000 for the ~~effect of increased gross profit.~~

2022 and 2021 thirteen-week periods, respectively.

Depreciation and amortization increased ~~$1,114,000~~$1,656,000 in the ~~2017~~2022 thirteen-week period compared to the ~~2016~~2021 thirteen-week ~~period and represented 7.2% of gross profit in the 2017 period compared to 7.4% of gross profit in the 2016~~ period. The increase in depreciation and amortization expenses was primarily due to an increased number of owned trailers in response to increased customer demand for the Company’s drop and hook services. The decrease in depreciation and amortization as a percentage of gross profit was primarily due to the effect of increased gross profit, partially offset by increased depreciation ~~and amortization expense.~~

on information technology assets.

Interest and debt expense in the ~~2017~~2022 thirteen-week period ~~decreased $291,000~~increased $81,000 compared to the ~~2016~~2021 thirteen-week period. The ~~decrease~~increase in interest and debt expense was primarily attributable to increased ~~interest income earned~~average borrowings on ~~deposits held at~~ the ~~transportation logistics segment.~~

Company’s revolving credit facility during the 2022 period, as the Company had no borrowings during the 2021 period.

The provisions for income taxes for the ~~2017~~2022 and ~~2016~~2021 thirteen-week periods were each based on an estimated annual effective income tax ~~rates~~rate of ~~37.8%~~24.5% and ~~38.1%~~24.4%, respectively, adjusted for discrete events, such as benefits resulting from ~~disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options.~~stock-based awards. The estimated annual effective income tax ~~rates for~~rate was higher than the ~~2017~~statutory federal income tax rate of 21% in both periods primarily attributable to state taxes and ~~2016 thirteen-week periods were 29.2% and 36.9%, respectively.~~nondeductible executive compensation. The effective income tax rate for the ~~2017~~2022 thirteen-week period was 22.8%, which was lower than the ~~statutory federal~~estimated annual effective income tax rate of 24.5%, primarily as a result of federal domestic production activities deductions and research and development credits recognized as discrete items during the thirteen-week period ended September 30, 2017, partially offset by the effect of state taxes and the meals and entertainment exclusion.attributable to excess tax benefits realized on stock-based awards. The effective income tax rate for the 2016 thirteen-week period was higher than the 35% statutory federal income tax rate primarily as a result of state taxes and the meals and entertainment exclusion. The effective income tax rate in the 20172021 thirteen-week period of ~~29.2%~~24.4% was ~~less than~~equal to the ~~37.8%~~ estimated annual effective income tax rate ~~primarily as a result of federal domestic production activities deductions and research and development credits recognized as discrete items~~ during the ~~thirteen-week period ended September 30, 2017, excess tax benefits recognized on stock-based compensation arrangements resulting from the Company’s adoption of ASU2016-09~~ ~~during 2017 and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through the exercises of incentive stock options~~2021 period.

Net income was $124,839,000, or $3.34 per diluted share, in the 2017 period. The effective income tax rate in the 2016 thirteen-week period of 36.9% was less than the 38.1% estimated annual effective income tax rate primarily due to certain federal income tax credits realized in the 2016 period and disqualifying dispositions of the Company’s common stock by employees who obtained the stock through exercises of incentive stock options in the 2016 period.

The net loss attributable to noncontrolling interest of $23,000 in the 2017 thirteen-week period represents the noncontrolling investors’ 30% share of the net loss incurred by Landstar Metro and Landstar Servicios.

~~Net income attributable to the Company was $42,443,000, or $1.01 per common share ($1.01 per diluted share), in the 2017~~2022 thirteen-week period. Net income ~~attributable to the Company~~ was ~~$36,278,000,~~$77,240,000, or ~~$0.86 per common share ($0.86~~$2.01 per diluted ~~share),~~share, in the ~~2016~~2021 thirteen-week period.

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were ~~$430,966,000~~$588,247,000 and ~~2.0~~1.6 to 1, respectively, at ~~September 30, 2017,~~March 26, 2022, compared with ~~$357,096,000~~$512,917,000 and ~~1.9~~1.5 to 1, respectively, at December ~~31, 2016.~~25, 2021. Landstar has historically operated with current ratios within the range of 1.5 to 1 to 2.0 to 1. Cash provided by operating activities was ~~$132,264,000~~$94,965,000 in the ~~2017 thirty-nine-week~~2022 thirteen-week period compared with ~~$171,297,000~~$69,891,000 in the ~~2016 thirty-nine-week~~2021 thirteen-week period. The ~~decrease~~increase in cash flow provided by operating activities for fiscal year 2021 was primarily attributable to increased net income, partially offset by the ~~timing of collections of trade receivables.~~

~~The Company declared and paid $0.28 per share, or $11,739,000~~53% increase in ~~the aggregate, in cash dividends during the thirty-nine-week period ended September 30, 2017.~~ revenue year-over-year, which increased net receivables, defined as accounts receivable less accounts payable.

The Company declared and paid $0.25 per share, or ~~$10,572,000~~$9,324,000 in the aggregate, in cash dividends during the ~~thirty-nine-week~~thirteen-week period ended ~~September 24, 2016.~~March 26, 2022 and, during such period, also paid $75,387,000 of dividends payable which were declared during fiscal year 2021 and included in current liabilities in the consolidated balance sheet at December 25, 2021. The Company declared and paid $0.21 per share, or $8,067,000 in the aggregate, in cash dividends during the thirteen-week period ended March 27, 2021 and, during such period,

also paid $76,770,000 of dividends payable which were declared during fiscal year 2020 and included in current liabilities in the consolidated balance sheet at December 26, 2020. During the ~~thirty-nine-week~~thirteen-week period ended ~~September 30, 2017,~~March 26, 2022, the Company purchased 693,550 shares of its common stock at a total cost of $109,332,000. During the thirteen-week period ended March 27, 2021, the Company did not purchase any shares of its common stock. As of ~~September 30, 2017,~~March 26, 2022, the Company may purchase in the aggregate up to ~~1,036,125~~2,306,450 shares of its common stock under its authorized stock purchase ~~program.~~programs. Long-term debt, including current maturities, was ~~$117,402,000~~$172,272,000 at ~~September 30, 2017, $20,902,000 lower~~March 26, 2022, $60,468,000 higher than at December ~~31, 2016.~~

~~Equity~~25, 2021.

Shareholders’ equity was ~~$653,973,000,~~$856,149,000, or ~~85%~~83% of total capitalization (defined as long-term debt including current maturities plus equity), at ~~September 30, 2017,~~March 26, 2022, compared to ~~$542,557,000,~~$862,010,000, or ~~80%~~89% of total capitalization, at December ~~31, 2016.~~25, 2021. The ~~increase~~decrease in shareholders’ equity was primarily athe result of ~~net income, partially offset by~~purchases of shares of the Company’s common stock, taxes paid in lieu of shares issued related to stock-based compensation plans and dividends declared by the Company in the ~~2017 thirty-nine-week period.~~

2022 thirteen-week period, partially offset by net income.

On ~~June 2, 2016,~~August 18, 2020, Landstar entered into aan amended and restated credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement, which matures on ~~June 2, 2021,~~August 18, 2023, provides $250,000,000 of borrowing capacity in the form of a revolving credit facility, ~~$50,000,000~~$35,000,000 of which may be utilized in the form of ~~letter~~letters of ~~credit guarantees.~~credit. The Credit Agreement includes an “accordion” feature providing for a possible increase up to an aggregate borrowing ~~amount~~capacity of $400,000,000. ~~The Company’s prior credit agreement was terminated on June 2, 2016.~~

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum Fixed Charge Coverage Ratio, as defined in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.

At ~~September 30, 2017,~~March 26, 2022, the Company had no$70,000,000 in borrowings outstanding and ~~$33,127,000~~$33,170,000 of letters of credit outstanding under the Credit Agreement. At ~~September 30, 2017,~~March 26, 2022, there was ~~$216,873,000~~$146,830,000 available for future borrowings under the Credit Agreement. In addition, the Company has ~~$59,999,000~~$72,267,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments and restricted cash totaling ~~$66,666,000~~$80,142,000 at ~~September 30, 2017.~~March 26, 2022. Investments, all of which are carried at fair value, include primarily investment-grade bonds and ~~U.S. Treasury obligations~~asset-backed securities having maturities of up to five years. Fair value of investments is based primarily on quoted market prices. See ~~Notes~~“Notes to Consolidated Financial ~~Statements~~Statements” included herein for further discussion on measurement of fair value of investments.

Historically, the Company has generated sufficient operating cash flow to meet its debt service requirements, fund continued growth, both organic and through acquisitions, complete or execute share purchases of its common stock under authorized share purchase programs, pay dividends and meet working capital needs. As an asset-light provider of integrated transportation management solutions, the Company’s annual capital requirements for operating property are generally for trailing equipment and information technology hardware and software. In addition, a significant portion of the trailing equipment used by the Company is provided by third party capacity providers, thereby reducing the Company’s capital requirements. During the ~~2017 thirty-nine-week~~2022 thirteen-week period, the Company purchased ~~$8,800,000~~$3,609,000 of operating property. Included in the $8,800,000 of purchases of operating property during the 2017 thirty-nine-week period is $4,255,000 related to a freight staging and transload facility in Laredo, Texas for which the Company accrued a corresponding liability in accounts payable as of December 31, 2016. Landstar also acquired $945,000 of operating property relating to the completion of the Laredo property for which the Company accrued a corresponding liability in accounts payable as of September 30, 2017. Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year ~~2017~~2022 approximately ~~$36,000,000~~$81,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment. On September 20, 2017 the Company completed the Landstar Metro acquisition, as described in footnote 1 to our unaudited consolidated financial statements. Cash consideration paid in the quarter for the acquisition was approximately $8,199,000. In addition, the Company assumed approximately $2,200,000 in liabilities consisting of additional contingent purchase price and associated indirect taxes.

~~As it relates to thenon-controlling~~ interests of Landstar Metro and Landstar Servicios, the Company has the option to purchase, and the minority equityholders have the option to sell, during the period commencing on the third anniversary of September 20, 2017, the closing date of the subscription by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. The noncontrolling interests are also subject to customary restrictions on transfer, including a right of first refusal in favor of the Company.

Management believes that cash flow from operations combined with the Company’s borrowing capacity under the Credit Agreement will be adequate to meet Landstar’s debt service requirements, fund continued growth, both internal and through acquisitions, pay dividends, complete the authorized share purchase ~~program~~programs and meet working capital needs.

LEGAL MATTERS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The allowance for doubtful accounts for both trade and other receivables represents management’s estimate of the amount of outstanding receivables that will not be collected. Historically, management’s estimates for uncollectible receivables have been materially correct. Although management believes the amount of the allowance for both trade and other receivables at September 30, 2017 is appropriate, a prolonged period of low or no economic growth may adversely affect the collection of these receivables. In addition, liquidity concerns and/or unanticipated bankruptcy proceedings at any of the Company’s larger customers in which the Company is carrying a significant receivable could result in an increase in the provision for uncollectible receivables and have a significant impact on the Company’s results of operations in a given quarter or year. However, it is not expected that an uncollectible accounts receivable resulting from an individual customer would have a significant impact on the Company’s financial condition. Conversely, a more robust economic environment or the recovery of a previously provided for uncollectible receivable from an individual customer may result in the realization of some portion of the estimated uncollectible receivables.

Landstar provides for the estimated costs of self-insured claims primarily on an actuarial basis. The amount recorded for the estimated liability for claims incurred is based upon the facts and circumstances known on the applicable balance sheet date. The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by management. The Company continually revises its existing claim estimates as new or revised information becomes available on the status of each claim. Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates. During the ~~2017~~2022 and ~~2016 thirty-nine-week~~2021 thirteen-week periods, insurance and claims costs included ~~$1,327,000 and $698,000~~$4,273,000 of net unfavorable and $292,000 of net favorable adjustments to prior years’ claims estimates, respectively. It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims ~~reserve~~liability at ~~September 30, 2017.~~

The Company utilizes certain income tax planning strategies to reduce its overall cost of income taxes. If the Company were to be subject to an audit, it is possible that certain strategies might be disallowed resulting in an increased liability for income taxes. Certain of these tax planning strategies result in a level of uncertainty as to whether the related tax positions taken by the Company would result in a recognizable benefit. The Company has provided for its estimated exposure attributable to such tax positions due to the corresponding level of uncertainty with respect to the amount of income tax benefit that may ultimately be realized. Management believes that the provision for liabilities resulting from the uncertainty in certain income tax positions is appropriate. To date, the Company has not experienced an examination by governmental revenue authorities that would lead management to believe that the Company’s past provisions for exposures related to the uncertainty of such income tax positions are not appropriate.

March 26, 2022.

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

~~EFFECTS OF INFLATION~~

Management does not believe inflation has had a material impact on the results of operations or financial condition of Landstar in the past five years. However, inflation in excess of historic trends might have an adverse effect on the Company’s results of operations in the future.

SEASONALITY

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

~~Depending upon the specific type of borrowing, borrowings~~

The revolving credit loans under the Credit Agreement, at the option of Landstar, bear interest at (i) the Eurocurrency rate plus an applicable margin ranging from 1.25% to 2.00%, or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 1.00%, in each case with the applicable margin determined based upon the Company’s Leverage Ratio, as defined in the Credit Agreement, at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The revolving credit facility bears a commitment fee, payable in arrears, of 0.25% to 0.35%, based on ~~either (a)~~ the ~~prime rate, (b)~~Company’s Leverage Ratio at the ~~Federal Reserve Bank~~end of ~~New York rate plus 0.5% or (c)~~ the ~~London Interbank Offered Rate, plus 1.25%.~~most recent applicable fiscal quarter for which financial statements have been delivered. As of ~~September 30, 2017 and during~~March 26, 2022, the ~~entire 2017 third~~weighted average interest rate on borrowings outstanding was 1.66%. During the first quarter of 2022, the average outstanding balance under the Credit Agreement was approximately $33,077,000. Assuming that debt levels on the Credit Agreement remain at $70,000,000, the balance at March 26, 2022, a hypothetical increase of 100 basis points in current rates provided for under the Credit Agreement is estimated to result in an increase in interest expense of $700,000 on an annualized basis. As of December 25, 2021, the Company had no borrowings outstanding under the Credit Agreement.

Long-term investments, all of which are

available-for-sale

and are carried at fair value, include primarily investment-grade bonds and ~~U.S. Treasury obligations~~asset-backed securities having maturities of up to five years. Assuming that the long-term portion of investments remains at ~~$65,292,000,~~$131,403,000, the balance at ~~September 30, 2017,~~March 26, 2022, a hypothetical increase or decrease in interest rates of 100 basis points would not have a material impact on future earnings on an annualized basis. Short-term investments consist of short-term investment-grade instruments and the current maturities of investment-grade corporate bonds and ~~U.S. Treasury obligations.~~asset-backed securities. Accordingly, any future interest rate risk on these short-term investments would not be material to the Company’s operating results.

Assets and liabilities of the Company’s Canadian and Mexican operations are translated from their functional currency to U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average monthly exchange rates during the period. Adjustments resulting from the translation process are included in accumulated other comprehensive income. Transactional gains and losses arising from receivable and payable balances, including intercompany balances, in the normal course of business that are denominated in a currency other than the functional currency of the operation are recorded in the statements of income when they occur. The assets held at the Company’s Canadian and Mexican subsidiaries at ~~September 30, 2017~~March 26, 2022 were collectively, as translated to U.S. dollars, approximately 3%2% of total consolidated assets. Accordingly, ~~any~~ translation ~~gain~~gains or ~~loss~~losses of 50% or less related to the Canadian and Mexican operations would not be material.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report on Form

10-Q,

an evaluation was carried out, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule

13a-15(e)

promulgated under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2017~~March 26, 2022 to provide reasonable assurance that information required to be disclosed by the Company in reports that it filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no ~~significant~~ changes in the Company’s internal control over financial reporting during the ~~Company’s fiscal~~first quarter ~~ended September 30, 2017~~of 2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules

13a-15

and

15d-15

under the Securities Exchange Act of 1934, as amended, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In designing and evaluating disclosure controls and procedures, Company management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitation in any control system, no evaluation or implementation of a control system can provide complete assurance that all control issues and all possible instances of fraud have been or will be detected.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

~~The Company is involved in certain claims~~

See Part I, Item 2, “

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

Operations — Legal Matters

”

Item 1A. Risk Factors

~~Acquired business and noncontrolling interests.~~During 2017, Landstar Metro, a recently formed subsidiary of the Company, acquired substantially all of the assets of the asset-light transportation logistics business of a Mexican transportation logistics company. In connection with the acquisition, individuals affiliated with the seller subscribed in the aggregate for a 30% equity interest in each of Landstar Metro and its sister company, Landstar Servicios. As it relates to the noncontrolling interests of Landstar Metro and Landstar Servicios, the Company has the option to purchase, and the minority equityholders have the option to sell, during the period commencing on the third anniversary of September 20, 2017, the closing date of the subscription by the minority equityholders (the “Closing Date”), and at any time after the fourth anniversary of the Closing Date, at fair value all but not less than all of the noncontrolling interests in Landstar Metro and Landstar Servicios. No assurances can be provided regarding the exercise of the option to purchase by the Company or the option to sell by the minority equityholders, or the amount that may be required to be paid to purchase the minority interests should either option be exercised.

For a discussion identifying ~~additional~~ risk factors and other important factors that could cause actual results to differ materially from those anticipated, see the discussions under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form

10-K

for the fiscal year ended December ~~31, 2016~~25, 2021 and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements” in this Quarterly Report on Form

10-Q.

Except as set forth below, there have been no material changes to the Risk Factors described in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form

10-K

for the fiscal year ended December 25, 2021 as filed with the SEC.

Increased severity or frequency of accidents and other claims or a material unfavorable development of existing claims.

As noted above in Item 1, “Business — Factors Significant to the Company’s Operations — Self-Insured Claims,” potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. For periods prior to May 1, 2019, Landstar retains liability for commercial trucking claims up to $5 million per occurrence and maintains various third party insurance arrangements for liabilities in excess of its $5 million self-insured retention. Effective May 1, 2019, the Company entered into a new three year

commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “Initial Excess Policy”) with a third party insurance company. For commercial trucking claims incurred on or after May 1, 2019 through April 30, 2022, the Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $15 million for each policy year, an aggregate limit of $20 million for the

thirty-six

month term ended April 30, 2022, and options to increase such aggregate limits for

pre-established

The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of $10 million. These third party arrangements provide coverage on a per occurrence or aggregated basis. In recent years, there has been a significant increase in the occurrence of trials in courts throughout the United States involving catastrophic injury and fatality claims against commercial motor carriers that have resulted in verdicts in excess of $10 million. Within the transportation logistics industry, these verdicts are often referred to as “Nuclear Verdicts.” The increase in Nuclear Verdicts has had a significant impact on the cost of commercial auto liability claims throughout the United States. Due to the increasing cost of commercial auto liability claims, the availability of excess coverage has significantly decreased, and the pricing associated with such excess coverage, to the extent available, has significantly increased. With respect to the annual policy year ending April 30, 2021, as compared to the annual policy year ended April 30, 2020, the Company experienced an increase of approximately $14 million, or over 170%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Effective May 1, 2021, with respect to the annual policy year ending April 30, 2022, as compared to the annual policy year ended April 30, 2021, the Company experienced an increase of approximately $3 million, or 19%, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. Moreover, the Company increased the level of its financial exposure to commercial trucking claims in excess of $10 million, including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage. For example, with respect to a hypothetical claim in the amount of $35 million incurred during the annual policy year ending April 30, 2022, the Company would have an aggregate financial exposure of approximately $10 million. Furthermore, the Company’s third party insurance arrangements provide excess coverage up to an uppermost coverage layer, in excess of which the Company retains additional financial exposure. No assurances can be given that the availability of excess coverage for commercial trucking claims will not continue to deteriorate, that the pricing associated with such excess coverage, to the extent available, will not continue to increase, nor that insurance coverage from third party insurers for excess coverage of commercial trucking claims will even be available on commercially reasonable terms at certain levels. Moreover, the occurrence of a Nuclear Verdict, or the settlement of a catastrophic injury and/or fatality claim that could have otherwise resulted in a Nuclear Verdict, could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

Further, the Company retains liability of up to $1,000,000 for each general liability claim, up to $250,000 for each workers’ compensation claim and up to $250,000 for each cargo claim. In addition, under reinsurance arrangements by Signature of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $500,000, $1,000,000 or $2,000,000 with respect to certain occupational accident claims and up to $750,000 with respect to certain workers’ compensation claims. The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage. A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

Dependence on independent commission sales agents.

As noted above in Item 1, “Business — Factors Significant to the Company’s Operations — Agent Network,” the Company markets its services primarily through independent commission sales agents. During fiscal year 2021, 593 agents generated revenue for Landstar of at least $1 million each, or in the aggregate approximately 94% of Landstar’s consolidated revenue. Included among these Million Dollar Agents, 115 agents generated at least $10,000,000 of Landstar revenue during the 2021 fiscal year, or in the aggregate approximately 71% of Landstar’s consolidated revenue. Of these larger agencies, one such Landstar independent commission sales agency, itself with a very diversified customer base, generated approximately $740,000,000, or 11%, of Landstar’s consolidated revenue and approximately 7% of Landstar’s consolidated variable contribution in fiscal year 2021.

A number of these larger agencies, including the largest of Landstar’s independent commission sales agents, maintain business operations in countries outside of North America where the risks of doing business may be different than in the United States or Canada due to geopolitical, legal or other risks associated with doing business in such foreign jurisdictions. There can be no assurance regarding the potential disruption and impact adverse geopolitical developments in these foreign jurisdictions could have on the ability of certain large independent commission sales agents to generate and maintain business operations in support of significant amounts of Landstar revenue. As disclosed in a Current Report on Form

8-K

filed by the Company on February 28, 2022, the largest Landstar independent commission sales agency referenced above, while based in the United States, has significant administrative operations located in eastern Ukraine. The administrative operations of this agency were significantly disrupted during the onset of the Russian invasion of Ukraine. The Company also has another of its largest independent commission sales agencies, as measured by revenue generated in fiscal year 2021, that is based in the United States but conducts a portion of its operations in western Ukraine. The priority for Landstar and both of these agencies is the safety and well-being of these agencies’ Ukrainian workforces and their families. It should also be noted that load volumes arranged by these two independent commission sales agencies with significant administrative operations located in Ukraine were significantly less impacted to date than initially anticipated by the Company at the onset of the Russian invasion. Nevertheless, no assurances can be provided regarding the conflict between Russia and Ukraine and the extent of potential future operational disruption the conflict may have on either of these Landstar agencies and the related impact of these disruptions on the Company.

Landstar competes with motor carriers and other third parties for the services of independent commission sales agents. Landstar has historically experienced very limited agent turnover in the number of its Million Dollar Agents. There can be no assurances, however, that Landstar will continue to experience very limited turnover of its Million Dollar Agents in the future. Landstar’s contracts with its agents, including its Million Dollar Agents, are typically terminable without cause upon 10 to 30 days’ notice by either party and generally contain significant but not unqualified

non-compete

provisions limiting the ability of a former agent to compete with Landstar for a specified period of time post-termination, and other restrictive covenants. The loss of some of the Company’s Million Dollar Agents and/or a significant decrease in revenue generated by Million Dollar Agents could have a material adverse effect on Landstar, including its results of operations and revenue.

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

Purchases of Equity Securities by the Company

The ~~Company did not~~following table provides information regarding the Company’s purchase ~~any shares~~ of its common stock during the period from ~~July 2, 2017~~December 25, 2021 to ~~September 30, 2017,~~March 26, 2022, the Company’s ~~third~~first fiscal ~~quarter.~~

quarter:


Fiscal Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares That May Yet Be Purchased Under the Programs
December 25, 2021								3,000,000
December 26, 2021 – January 22, 2022		—	$	—		—		3,000,000
January 23, 2022 – February 19, 2022		571,871		158.72		571,871		2,428,129
February 20, 2022 – March 26, 2022		121,679		152.56		121,679		2,306,450

Total		693,550	$	157.64		693,550

On ~~May 19, 2015,~~December 7, 2021, the Landstar System, Inc. Board of Directors authorized the Company to ~~increase the number of~~purchase up to 1,912,824 additional shares of the Company’s ~~common stock that the Company is authorized to purchase~~Common Stock from time to time in the open market and in privately negotiated ~~transactions under a previously announced~~transactions. On December 9, 2019, the Landstar System, Inc. Board of Directors authorized the Company to purchase ~~program~~up to ~~3,000,000 shares.~~1,849,068 shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. As of ~~September 30, 2017,~~March 26, 2022, the Company ~~has~~had authorization to purchase ~~1,036,125~~in the aggregate up to 2,306,450 shares of its ~~common stock~~Common Stock under ~~this program.~~these programs. No specific expiration date has been assigned to the ~~May 19, 2015 authorization.~~

December 7, 2021 or December 9, 2019 authorizations.

Dividends

~~During the thirty-nine-week period ended September 30, 2017, Landstar paid dividends as follows:~~


~~Dividend Amount~~ ~~per Share~~	~~Declaration~~ ~~Date~~	~~Record~~ ~~Date~~	~~Payment~~ ~~Date~~
~~$0.09~~	~~January 30, 2017~~	~~February 20, 2017~~	~~March 17, 2017~~
~~$0.09~~	~~April 25, 2017~~	~~May 11, 2017~~	~~June 2, 2017~~
~~$0.10~~	~~July 25, 2017~~	~~August 14, 2017~~	~~September 1, 2017~~

On ~~June 2, 2016,~~August 18, 2020, Landstar entered into aan amended and restated credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock in the event there is a default under the Credit Agreement. In addition, the Credit Agreement, under certain circumstances, limits the amount of such cash dividends and other distributions to stockholders to

the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio, as defined in the Credit Agreement, would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter.


	September 30, 2017			December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	249,741		$	178,897
Short-term investments		45,687			66,560
Trade accounts receivable, less allowance of $6,163 and $5,161		546,826			463,102
Other receivables, including advances to independent contractors, less allowance of $6,306 and $5,523		18,704			18,567
Other current assets		16,925			10,281

Total current assets		877,883			737,407

Operating property, less accumulated depreciation and amortization of $210,018 and $190,374		261,465			272,843
Goodwill		39,914			31,134
Other assets		84,077			55,207

Total assets	$	1,263,339		$	1,096,591

LIABILITIES AND EQUITY
Current Liabilities
Cash overdraft	$	33,853		$	36,251
Accounts payable		269,389			219,409
Current maturities of long-term debt		40,610			45,047
Insurance claims		34,211			26,121
Other current liabilities		68,854			53,483

Total current liabilities		446,917			380,311

Long-term debt, excluding current maturities		76,792			93,257
Insurance claims		32,804			26,883
Deferred income taxes and other noncurrent liabilities		52,853			53,583
Equity
Landstar System, Inc. and subsidiary shareholders’ equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 67,715,290 and 67,585,675 shares		677			676
Additional paid-in capital		205,396			199,414
Retained earnings		1,613,590			1,512,993
Cost of 25,749,493 and 25,747,541 shares of common stock in treasury		(1,167,600	)		(1,167,437	)
Accumulated other comprehensive loss		(1,708	)		(3,089	)

Total Landstar System, Inc. and subsidiary shareholders’ equity		650,355			542,557
Noncontrolling interest		3,618			—

Total equity		653,973			542,557

Total liabilities and equity	$	1,263,339		$	1,096,591


	Thirty Nine Weeks Ended					Thirteen Weeks Ended
	September 30, 2017			September 24, 2016		September 30, 2017			September 24, 2016
Revenue	$	2,594,772		$	2,274,805	$	943,430		$	787,938
Investment income		1,733			1,100		711			357
Costs and expenses:
Purchased transportation		1,989,938			1,730,745		726,827			601,002
Commissions to agents		210,678			189,075		76,598			65,144
Other operating costs, net of gains on asset sales/dispositions		22,497			21,484		8,097			7,492
Insurance and claims		46,333			42,795		17,927			12,488
Selling, general and administrative		123,179			106,211		43,995			34,692
Depreciation and amortization		29,961			26,109		10,130			9,016

Total costs and expenses		2,422,586			2,116,419		883,574			729,834

Operating income		173,919			159,486		60,567			58,461
Interest and debt expense		2,559			2,725		657			948

Income before income taxes		171,360			156,761		59,910			57,513
Income taxes		59,047			58,985		17,490			21,235

Net income		112,313			97,776		42,420			36,278
Less: Net loss attributable to noncontrolling interest		(23	)		—		(23	)		—

Net income attributable to Landstar System, Inc. and subsidiary	$	112,336		$	97,776	$	42,443		$	36,278

Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	2.68		$	2.32	$	1.01		$	0.86

Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	2.67		$	2.31	$	1.01		$	0.86

Average number of shares outstanding:
Earnings per common share		41,924,000			42,223,000		41,957,000			42,039,000

Diluted earnings per share		42,013,000			42,341,000		42,028,000			42,170,000

Dividends per common share	$	0.28		$	0.25	$	0.10		$	0.09


	Thirteen Weeks Ended
	March 26, 2022			March 27, 202 2
Net income	$	124,839		$	77,240
Other comprehensive loss:
Unrealized holding losses on available-for-sale investments, net of tax benefits of $1,421 and $147		(5,187	)		(534	)
Foreign currency translation gains (losses)		1,275			(420	)

Other comprehensive loss		(3,912	)		(954	)

Comprehensive income	$	120,927		$	76,286


	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 31, 2016		67,585,675	$	676	$	199,414	$	1,512,993			25,747,541	$	(1,167,437	)	$	(3,089	)		—		$	542,557
Net income (loss)								112,336											(23	)		112,313
Dividends ($0.28 per share)								(11,739	)													(11,739	)
Issuance of stock related to stock-based compensation plans		129,615		1		2,322					1,952		(163	)								2,160
Stock-based compensation						3,660																3,660
Other comprehensive income																1,381						1,381
Acquired business and noncontrolling interests																			3,641			3,641

Balance September 30, 2017		67,715,290	$	677	$	205,396	$	1,613,590			25,749,493	$	(1,167,600	)	$	(1,708	)	$	3,618		$	653,973


	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016		378,238		$	50.46
Granted		67,769		$	76.85
Forfeited		(58,779	)	$	46.00

Outstanding at September 30, 2017		387,228		$	55.75


	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)
Options outstanding at December 31, 2016		372,561		$	48.24
Exercised		(134,461	)	$	46.38
Forfeited		(1,200	)	$	55.67

Options outstanding at September 30, 2017		236,900		$	49.25		4.0	$	11,940

Options exercisable at September 30, 2017		217,000		$	48.59		3.9	$	11,081


	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2016		28,409		$	58.91
Granted		42,123		$	84.26
Vested		(16,227	)	$	61.50

Non-vested at September 30, 2017		54,305		$	77.80


	Thirty Nine Weeks Ended
	September 30, 2017						September 24, 2016
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	2,559,847	$	34,925	$	2,594,772	$	2,240,169	$	34,636	$	2,274,805
Internal revenue				29,773		29,773				28,890		28,890
Investment income				1,733		1,733				1,100		1,100
Operating income		148,693		25,226		173,919		133,342		26,144		159,486
Expenditures on long-lived assets		8,800				8,800		17,833				17,833
Goodwill		39,914				39,914		31,134				31,134


	Unrealized Holding (Losses) Gains on Available-for-Sale Securities			Foreign Currency Translation			Total
Balance as of December 31, 2016	$	(71	)	$	(3,018	)	$	(3,089	)
Other comprehensive income		251			1,130			1,381

Balance as of September 30, 2017	$	180		$	(1,888	)	$	(1,708	)


	Thirty Nine Weeks Ended				Thirteen Weeks Ended
	September 30, 2017		September 24, 2016		September 30, 2017		September 24, 2016
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	1,529,402	$	1,351,980	$	550,484	$	465,785
Unsided/platform equipment		825,194		700,369		304,536		248,939
Less-than-truckload		65,397		54,066		22,598		18,139

Total truck transportation		2,419,993		2,106,415		877,618		732,863
Rail intermodal		68,570		76,987		24,213		24,650
Ocean and air cargo carriers		70,708		56,500		29,523		18,790
Other (1)		35,501		34,903		12,076		11,635

	$	2,594,772	$	2,274,805	$	943,430	$	787,938

Revenue on loads hauled via BCO Independent Contractors included in total truck transportation	$	1,211,564	$	1,086,848	$	435,479	$	379,196

Number of loads:
Truck transportation
Truckload:
Van equipment		942,894		847,208		329,329		291,089
Unsided/platform equipment		362,936		331,226		126,509		112,192
Less-than-truckload		98,740		84,316		34,232		28,589

Total truck transportation		1,404,570		1,262,750		490,070		431,870
Rail intermodal		32,040		36,120		11,080		11,940
Ocean and air cargo carriers		18,150		14,910		6,210		5,130

		1,454,760		1,313,780		507,360		448,940


Loads hauled via BCO Independent Contractors included in total truck transportation		686,830		630,880		232,970		216,220

Revenue per load:
Truck transportation
Truckload:
Van equipment	$	1,622	$	1,596	$	1,672	$	1,600
Unsided/platform equipment		2,274		2,114		2,407		2,219
Less-than-truckload		662		641		660		634
Total truck transportation		1,723		1,668		1,791		1,697
Rail intermodal		2,140		2,131		2,185		2,064
Ocean and air cargo carriers		3,896		3,789		4,754		3,663
Revenue per load on loads hauled via BCO Independent Contractors	$	1,764	$	1,723	$	1,869	$	1,754


Exhibit No.		Description

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

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

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

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

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

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

101.INS*		Inline XBRL Instance ~~Document~~Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL ~~Labels~~Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	LANDSTAR SYSTEM, INC.

Date: ~~November 3, 2017~~April 29, 2022	/s/ James B. Gattoni
		James B. Gattoni
		President and Chief Executive Officer



Date: ~~November 3, 2017~~April 29, 2022	/s/ Federico L. ~~Kevin Stout~~Pensotti
		Federico L. ~~Kevin Stout~~Pensotti
		Vice President and Chief
	Financial Officer