LANDSTAR SYSTEM INC

Landstar System, Inc. is a technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third party capacity providers and employees. The Company offers services across multiple transportation modes, with the ability to arrange for individual shipments of freight to comprehensive third party logistics solutions. 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 are delivered through a network of approximately 960 independent commission sales agents and over 70,000 third party capacity providers, primarily truck capacity providers, linked together by a series of digital technologies. The transportation and logistics services industry is extremely competitive and fragmented.

Landstar competes primarily in the transportation and logistics services industry with truckload carriers, third party logistics companies, digital freight brokers, intermodal transportation and logistics service providers, railroads, less-than-truckload carriers and other asset-light transportation and logistics service providers. Management believes Landstar has more independent commission sales agents than any other asset-light integrated transportation management solutions company in the United States. Management also believes the Company has the largest fleet of truckload BCO Independent Contractors in the United States. Management believes that Landstar's overall size, service offerings and availability of a wide range of equipment, together with its geographically dispersed local independent agent network, present the Company with significant competitive advantages over many transportation and logistics service providers. The Company's top 100 customers accounted for approximately 46% of consolidated revenue during both fiscal years 2025 and 2024. No customer accounted for more than 8% of the Company's 2025 revenue.

Landstar generates revenue by providing integrated transportation management solutions, primarily through independent commission sales agents, and exclusively utilizes third party capacity providers to transport customers' freight. 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. The nature of the Company's business is such that a significant portion of its operating costs varies directly with revenue. The Company's use of capacity provided by third parties allows it to maintain a lower level of capital investment, resulting in lower fixed costs and a higher return on invested capital. 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, including truckload, less-than-truckload and other truck transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, hazardous materials, cold chain/temperature-controlled, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage. Truck transportation services contributed 91% of consolidated revenue in fiscal year 2025, 90% of consolidated revenue in fiscal year 2024 and 91% of consolidated revenue in fiscal year 2023. During fiscal year 2025, revenue generated by BCO Independent Contractors and Truck Brokerage Carriers was 38% and 53%, respectively, of consolidated revenue. Also during fiscal year 2025, truck transportation revenue generated via van equipment and unsided/platform trailing equipment was 54% and 35%, respectively, of truck transportation revenue and less-than-truckload and other truck transportation revenue was 2% and 9%, respectively, of truck transportation revenue. The rail intermodal services contributed 2% of consolidated revenue in each of fiscal years 2025, 2024 and 2023. The air and ocean services contributed 5% of consolidated revenue in fiscal year 2025, 6% of consolidated revenue in fiscal year 2024 and 5% of consolidated revenue in fiscal year 2023.

The insurance segment is comprised of Signature Insurance Company, a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to certain of Landstar's Operating Subsidiaries, reinsures certain risks of the Company's BCO Independent Contractors and provides certain property and casualty insurance and reinsurance 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 of loss is ultimately borne by Signature. Revenue at the insurance segment represented approximately 1% of the Company's consolidated revenue in each of fiscal years 2025, 2024 and 2023.

During fiscal year 2025, the Company entered into an arrangement with a financial advisor to actively market its Mexican subsidiary, Landstar Metro, S.A.P.I. de C.V., and to consider other strategic alternatives for this subsidiary, which may involve a sale or other disposition in whole or in part of Landstar Metro during the Company's 2026 fiscal year. In connection with this decision, the Company recorded a non-cash impairment charge of $7,530,000 ¹ to goodwill within the transportation logistics segment and an impairment on assets held for sale of $10,678,000 ². The Company also recorded an $8,963,000 ³ impairment charge related to the decision to wind-down an alternative transportation management system and a $4,999,000 ⁴ impairment charge relating to the carrying value of a non-controlling equity investment in Cavnue, LLC. During fiscal year 2025, the Company purchased 1,281,863 ⁵ shares of its Common Stock at a total cost of $180,901,000 ⁶, including $179,139,000 ⁷ in cash purchases and accrued excise tax of $1,762,000 ⁸. The Company declared and paid $1.56 ⁹ per share, or $54,126,000 ¹⁰ in the aggregate, in cash dividends during fiscal year 2025, and also declared a special cash dividend of $2.00 ¹¹ per share, or $68,117,000 ¹² in the aggregate, payable on January 21, 2026. The Company received $12,000,000 ¹³ of cash payments from third party reinsurance providers in the form of a "no claims bonus" due to favorable loss experience. The Company identified a supply chain fraud relating to its international freight forwarding operations, resulting in a $4.8 ¹⁴ million pre-tax expense, or $0.10 ¹⁵ per basic and diluted share.

Revenue for fiscal year 2025 was $4,743,760,000 ¹⁶, a decrease of $75,485,000 ¹⁷, or 2%, compared to fiscal year 2024. Net income was $115,007,000 ¹⁸, or $3.31 ¹⁹ per basic and diluted share, in fiscal year 2025, compared to net income of $195,946,000 ²⁰, or $5.51 ²¹ per basic and diluted share, in fiscal year 2024. Operating income was $151,577,000 ²² in fiscal year 2025, compared to $248,907,000 ²³ in fiscal year 2024. Cash provided by operating activities was $224,882,000 ²⁴ in fiscal year 2025, compared to $286,561,000 ²⁵ in fiscal year 2024. Gross profit margin was 8.5% ²⁶ in fiscal year 2025, compared to 9.5% ²⁷ in fiscal year 2024. Variable contribution margin was 14.1% ²⁸ in both fiscal years 2025 and 2024.

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. 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, increasing the revenue opportunities generated by existing independent commission sales agents and providing its independent commission sales agents with digital technologies they may use to grow revenue and increase efficiencies at their businesses. The Company had 457 ²⁹ and 485 ³⁰ agents that each generated at least $1 million in Landstar revenue during fiscal years 2025 and 2024, respectively. Landstar revenue from the Million Dollar Agents in the aggregate represented 95% ³¹ and 94% ³² of consolidated revenue in 2025 and 2024, respectively. Included among the Company's Million Dollar Agents, the Company had 77 ³³ independent sales agencies that generated at least $10 million in Landstar revenue during the 2025 fiscal year, which in aggregate comprised approximately 68% ³⁴ of Landstar's consolidated revenue.

Landstar believes that AI represents the next major acceleration of its strategy and will provide opportunities to strengthen the safety, security and service value proposition the Company offers to its customers. Management believes AI can be a strategic enhancement to the competitive advantage of the Landstar business model and a powerful enabler of our entrepreneurial ecosystem. Landstar's AI strategy is evolutionary, building on the strong digital foundation already in place. Since the launch of Landstar 2020 in 2016, the Company has invested approximately $220 ³⁵ million in these strategic development efforts, including approximately $28 ³⁶ million and $34 ³⁷ million, respectively, in fiscal years 2025 and 2024. The Company has also established an AI task force that is working with transportation-focused agentic AI startups and established technology companies to accelerate AI applications across the shipment lifecycle and within agent offices.

The filing does not contain a specific margin or cost outlook for the upcoming period.

Landstar anticipates acquiring either by purchase or lease financing approximately $104,000,000 ³⁸ in new trailing equipment, primarily to replace older trailing equipment in fiscal year 2026. Landstar anticipates spending approximately $12,000,000 ³⁹ on information technology hardware and software in fiscal year 2026, $6,000,000 ⁴⁰ of which relates to either building or buying software applications that enhance or add to the Company's technology ecosystem. In addition, Landstar anticipates spending approximately $3,000,000 ⁴¹ on buildings and improvements in fiscal year 2026.

During fiscal year 2025, the Company purchased 1,281,863 ⁴² shares of its Common Stock at a total cost of $180,901,000 ⁴³, including $179,139,000 ⁴⁴ in cash purchases and accrued excise tax of $1,762,000 ⁴⁵. As of December 27, 2025, the Company had authorization to purchase in the aggregate up to 1,266,118 ⁴⁶ shares of its Common Stock under its authorized stock purchase programs. The Company declared and paid $1.56 ⁴⁷ per share, or $54,126,000 ⁴⁸ in the aggregate, in cash dividends during fiscal year 2025. On December 4, 2025, the Company announced that its Board of Directors declared a special cash dividend of $2.00 ⁴⁹ per share, or $68,117,000 ⁵⁰ in the aggregate, payable on January 21, 2026. Since paying its first cash dividend in August 2005, the Company has paid approximately $1,087,000,000 ⁵¹ in cash dividends in the aggregate to its stockholders, inclusive of the $2.00 per share special dividend paid on January 21, 2026.

The transportation industry historically has experienced cyclical financial results as a result of slowdowns in economic activity, the business cycles of customers, and other economic factors beyond Landstar's control. There is significant uncertainty in the marketplace as to the potential actions of the U.S. government with respect to international trade policy, and the impact of tariffs may significantly adversely impact our customers, our industry, and our business. The U.S. government has made significant changes in U.S. trade policy, including the imposition on April 2, 2025, of a baseline tariff of 10% on product imports from almost all countries and individualized higher tariffs on certain other countries. On February 20, 2026, the U.S. Supreme Court ruled that the U.S. government cannot use the International Emergency Economic Powers Act to impose tariffs, overturning certain recent tariffs announced throughout 2025, including those on global imports from China, Canada and Mexico. This decision creates uncertainty about the immediate path forward for many supply chains.

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. Since the annual policy year ended April 30, 2020, as compared to the annual policy year ending May 31, 2026, the Company experienced an increase of approximately $22 ⁵² million, or approximately 400% ⁵³, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $10 million. With respect to a single hypothetical claim in the amount of $65 ⁵⁴ million incurred during the annual policy year ending May 31, 2026, the Company would have an aggregate financial exposure of approximately $36 ⁵⁵ million.

The Company retains liability through a self-insured retention for commercial trucking claims up to $5 million per occurrence ⁵⁶. Since the annual policy year ended April 30, 2020, the Company experienced an increase of approximately $22 million, or approximately 400%, in the premiums charged by third party insurance companies for excess coverage for commercial trucking liabilities in excess of $10 million ⁵⁷. With respect to a single hypothetical claim in the amount of $65 million incurred during the annual policy year ending May 31, 2026, the Company would have an aggregate financial exposure of approximately $36 million ⁵⁸. During fiscal year 2025, two independent commission sales agencies each generated over 10% of Landstar's consolidated revenue, or in the aggregate approximately $994,000,000, or 21%, of Landstar's consolidated revenue ⁵⁹. The second largest of Landstar's independent commission sales agents by revenue maintains administrative operations in Ukraine, which were significantly disrupted during the onset of the Russian invasion and continue to be affected by the ongoing conflict ⁶⁰. The Company's financial results for fiscal year 2025 included a $4.8 million pre-tax expense, or $0.10 per basic and diluted share, relating to a supply chain fraud matter ⁶¹.

Management's message emphasizes the Company's position as a technology-enabled, asset-light provider of integrated transportation management solutions, delivering safe, specialized transportation services through a network of agents, third party capacity providers and employees.The strategic priorities emphasized include increasing revenue through the Million Dollar Agent network, empowering the network through technology-based tools including AI, and controlling costs, particularly insurance and claims. 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. 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.