LANDSTAR SYSTEM INC

Item 8.

Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Fiscal Years Ended December 27, 2025,

December 28, 2024 and December 30, 2023

(In thousands, except share and per share amounts)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (“LSHI”). Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation.

Estimates

The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates.

Fiscal Year

Landstar’s fiscal year is the 52 or 53 week period ending the last Saturday in December.

Revenue Recognition

The nature of the Company’s freight transportation services and its performance obligations to customers, regardless of the mode of transportation used to perform such services, relate to the safe and

on-time

pick-up

and delivery of a customer’s freight on a

shipment-by-shipment

basis. Landstar customers are typically invoiced on a

shipment-by-shipment

basis at a

pre-defined

rate, payable thirty to sixty

(30-60)

days after the customer’s receipt of such invoice. Payment terms to customers do not contain a significant financing component and the amount owed by the customer does not contain variable terms, embedded or otherwise. We have determined that revenue recognition over the freight transit period provides a faithful depiction of the transfer of services to the customer as our obligation for which we are primarily responsible for fulfilling is performed over the transit period. Accordingly, transportation revenue billed to a customer for the physical transportation of freight and related direct freight expenses are recognized on a gross basis over the freight transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a given shipment based upon the

pick-up

date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determining the transit period and how much of it has been completed as of a given reporting date may therefore require management to make judgments that affect the timing of revenue recognized. With respect to shipments with a

pick-up

date in one reporting period and a delivery date in another, the Company recognizes such transportation revenue based on relative transit time in each reporting period. A days in transit output method is used to measure the progress of the performance of the Company’s freight transportation services as of the reporting date and a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Reinsurance premiums of the insurance segment are recognized over the period earned, which is usually on a m

onthl

y basis. Fuel surcharges billed to customers for freight hauled by independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the “BCO Independent Contractors”) are excluded from revenue and paid in entirety to the BCO Independent Contractors.

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 fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023 (dollars in thousands):

Insurance Claim Costs

Landstar provides, primarily on an actuarially determined basis, for the estimated costs of cargo, property, casualty, general liability and workers’ compensation claims both reported and for claims incurred but not reported.

Landstar retains liability through a self-insured retention for commercial trucking claims up to $5 million per occurrence. The Company also maintains third party insurance arrangements providing coverage for commercial trucking liabilities in excess of $5

million. Historically, these third party insurance arrangements were based on policy year periods beginning on May 1 and ending on the subsequent April 30. Beginning with the policy year period commencing May 1, 2025, the Company and its third party insurance providers adjusted the applicable policy year period, beginning in 2026, to commence on June 1 and end on the subsequent May 31. All applicable third party insurance arrangements with a policy period ending April 30, 2026, have been amended to provide for a policy period ending May 31, 2026, as reflected below.

Effective May 1, 2023, the Company entered into a three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “2023 Initial Excess Policy”) with a third party insurance company. For commercial trucking claims incurred on or after May 1, 2023 through May 31, 2026, the 2023 Initial Excess Policy provides for an aggregate deductible of $18 million over the thirty-seven month term ending May 31, 2026. After payment of the deductible, the 2023 Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $15 million for the thirty-seven month term ending May 31, 2026.

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. The Company from year to year manages 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 structured arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentia

ls bet

ween proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage.

Further, the Company retains liability of up to $2,000,000 for each general liability claim, $250,000 for each workers’ compensation claim and $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.

Tires

Tires purchased as part of trailing equipment are capitalized as part of the cost of the e

quipm

ent. Replacement tires are charged to expense when placed in service.

Cash and Cash Equivalents

Included in cash and cash equivalents are all investments, except those provided for collateral, with an original maturity of 3 months or less.

Financial Instruments

The Company’s financial instruments include cash equivalents, short and long-term investments, trade and other accounts receivable, accounts payable, other accrued liabilities, and long-term debt plus current maturities (“Debt”). The carrying value of cash equivalents, trade and other accounts receivable, accounts payable, current insurance claims and other accrued liabilities approximates fair value as the assets and liabilities are short term in nature. Short and long-term investments are carried at fair value as further described in Note 3 in the Company’s consolidated financial statements. The Company’s Debt includes borrowings under the Company’s revolving credit facility, to the extent there are any, plus borrowings relating to finance lease obligations used to finance trailing equipment. The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates that adjust monthly and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value.

Trade and Other Receivables

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. Estimates are used to determine the allowance for doubtful accounts for both trade and other receivables and are generally based on specific identification, historical collection results, current economic trends and changes in payment trends. Following is a summary of the activity in the allowance for doubtful accounts for fiscal years ending December 27, 2025, December 28, 2024 and December 30, 2023 (in thousands):

Other Receivables and Other Assets

The Company provides financing to certain independent commission sales agents. Generally, these notes receivable include personal guarantees, may be collateralized by the assets and equity of the borrower and are due in periodic installments, including principal and interest payments, for terms of one to seven years. Notes receivable are recorded at amortized cost, net of the allowance for doubtful accounts. At December 27, 2025 and December 28, 2024, the Company had $30,761,000 and $26,606,000, respectively, of gross notes receivable from independent commission sales agents. The current portion is included within other receivables and the long-term portion is included in other assets in the consolidated balance sheets.

Operating Property

Operating property is recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Buildings and improvements are being depreciated over 30 years. Trailing equipment is being depreciated over 7 to 10 years. Information technology hardware and software is generally being depreciated over 3 to 7 years.

The Company evaluates its operating property whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with ASC 360,

Property, Plant and Equipment

. When such events or changes in circumstances occur, a recoverability test is performed based on projected undiscounted cash flows expected to be realized from the use and eventual disposition of the asset or asset group. An impairment is recorded for any excess of the carrying amount over the estimated fair value. Fair value is determined based on quoted market values, discounted cash flows or external appraisals, as appropriate.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets of acquired businesses. The Company hastwo

reporting units within the transportation logistics segment that report goodwill. The Company reviews its goodwill balance annually for impairment for each reporting unit, unless circumstances dictate more frequent assessments, and in accordance with ASU

2011-08,

Testing Goodwill for Impairment

. ASU

2011-08

permits an initial assessment, commonly referred to as “step zero,” of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and also provides a basis for determining whether it is necessary to perform the quantitative analysis required by ASC Topic 350.

As further discussed in Note 14, during the third fiscal quarter of 2025, in connection with the decision to actively market Landstar Metro (as defined below), management identified a triggering event to perform a quantitative goodwill impairment test. As part of its analysis, the Company used a combination of the discounted cash flow method and the market approach. Based on the quantitative assessment, the Company concluded that Landstar Metro’s goodwill was impaired and recorded a

non-cash

impairment charge of $

7,530,000

to goodwill within the transportation logistics segment. In the fourth fiscal quarter of 2025, the Company performed its annual qualitative assessment of remaining goodwill and determined it was more likely than not that the fair value of each of its reporting units would be greater than its carrying amount. Therefore, the Company determined it was not necessary to perform the quantitative goodwill impairment test. During fiscal year 2025, the change in the carrying amount of goodwill was primarily due to the $

7,530,000

impairment

, with the remaining change due to net foreign currency translation.

Income Taxes

Income tax expense is equal to the current year’s liability for income taxes and a provision for deferred income taxes. Deferred tax assets and liabilities are recorded for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Share-Based Payments

The Company’s share-based payment arrangements include restricted stock units (“RSU”),

restricted stock, Deferred Stock Units and stock options. The fair value of an RSU with a performance condition is determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. With respect to RSU awards with a performance condition, the Company reports compensation expense ratably over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU. The fair value of an RSU with a market condition is determined at the time of grant based on the expected achievement of the market condition at the end of each vesting period. With respect to RSU awards with a market condition, the Company recognizes compensation expense ratably over the requisite service period under an award based on the fair market value of the award at the time of grant, regardless of whet

her

the market condition is satisfied. Previously recognized compensation cost would be reversed, however, if the employee terminated employment prior to completing such requisite service period. The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes pricing model and recognizes compensation cost for stock option awards expected to vest on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated at grant date based on historical experience and anticipated employee turnover. The fair values of each share of

restricted stock issued and Deferred Stock Unit granted are based on the fair value of a share of the Company’s Common Stock on the date of grant and compensation costs for

restricted stock and Deferred Stock Units are recognized on a straight-line basis over the requisite service period for the award.

Earnings Per Share

Basic earnings per common share are based on the weighted average number of common shares outstanding, which includes outstanding

restricted stock and outstanding Deferred Stock Units. Diluted earnings per share are based on the weighted average number of common shares outstanding plus the dilutive effect of outstanding stock awards, if applicable. Outstanding RSUs were excluded from the calculation of diluted earnings per share for all fiscal years because the performance metric requirements or market condition for vesting had not been satisfied. During and as of the fiscal years ended December 27, 2025 and December 28, 2024, there were no outstanding stock options issued by the Company. During the fiscal year ended December 30, 2023, the impact on earnings per share of future compensation expense related to outstanding, unvested time-based awards was greater than the incremental impact of outstanding dilutive stock options, and would therefore have an anti-dilutive effect on earnings per share if included in the calculation of earnings per share. Accordingly, the Company hadno reconciling items between the average number of common shares outstanding used to calculate basic earnings per common share and the average number of common shares and common share equivalents outstanding used to calculate diluted earnings per share during the fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023.

Dividends Payable

On December 4, 2025, the Company announced that its Board of Directors declared a special cash dividend of $2.00 per share payable on January 21, 2026 to stockholders of record of its Common Stock as of January 6, 2026. Dividends payable of $68,117,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 27, 2025.

On December 9, 2024, the Company announced that its Board of Directors declared a special cash dividend of $2.00 per share payable on January 21, 2025 to stockholders of record of its Common Stock as of January 7, 2025. Dividends payable of $70,632,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 28, 2024.

Foreign Currency Translation

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.

(2) Other Comprehensive Income

The following table presents the components of and changes in accumulated other comprehensive income (loss), net of related income taxes, as of and for the fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023 (in thousands):

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 fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023.

(3) Investments

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

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

investments to determine whether an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be a result of credit-related factors, are to be included as a charge in the statement of income, while unrealized losses considered to be a result of

non-credit-related

factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or

non-transferability,

which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to U.S. Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities, commercial paper and direct obligations of government agencies. Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $504,000 and $3,573,000 at December 27, 2025 and December 28, 2024, respectively.

The amortized cost and fair values of

investments are as follows at December 27, 2025 and December 28, 2024 (in thousands):

For those

investments with unrealized losses at December 27, 2025 and December 28, 2024, the following table summarizes the duration of the unrealized loss (in thousands):

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.

Short-term investments include $55,531,000 in current maturities of investments held by the Company’s insurance segment at December 27, 2025. The

non-current

portion of the bond portfolio of $91,482,000 is included in other assets. The short-term investments, together with $28,170,000 of

non-current

investments, provide collateral for the $75,331,000 of letters of credit issued to guarantee payment of insurance claims.

Investment income represents the earnings on the insurance segment’s assets. Investment income earned from the assets of the in

sur

ance segment are included as a component of operating income as the investment of these assets is critical to providing collateral, liquidity and earnings with respect to the operation of the Company’s insurance programs.

(4) Income Taxes

The provisions for income taxes consisted of the following (in thousands):

The provision for income taxes was based on income before income taxes which consisted of the following (in thousands):

Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities consisted of the following (in thousands):

The following table summarizes the differences between income taxes calculated at the federal income tax rate of 21% on income before income taxes and the provisions for income taxes (in thousands):

The Company files a consolidated U.S. federal income tax return. The Company or its subsidiaries file state tax returns in the majority of the U.S. state tax jurisdictions. With few exceptions, the Company and its subsidiaries are no longer subject to U.S. federal or state income tax examinations by tax authorities for 2021 and prior years. The Company’s wholly-owned Canadian subsidiary, Landstar Canada, Inc., is subject to Canadian income and other taxes. The Company’s wholly-owned Mexican subsidiaries, Landstar Holdings, S. de R.L.C.V. and Landstar Metro, S.A.P.I. de C.V., are subject to Mexican income and other taxes. The Company’s Canadian and Mexican subsidiaries also may each be subject to U.S. income and other taxes.

As of December 27, 2025 and December 28, 2024, the Company had $3,953,000 and $5,396,000, respectively, of net unrecognized tax benefits representing the provision for the uncertainty of certain tax positions plus a component of interest and penalties. Estimated interest and penalties on the provision for the uncertainty of certain tax positions is included in income tax expense. At December 27, 2025 and December 28, 2024, there was $1,345,000 and $1,793,000, respectively, accrued for estimated interest and penalties related to the uncertainty of certain tax positions. The Company does not currently anticipate any significant increase or decrease to the unrecognized tax benefit during fiscal year 2026.

The following table summarizes the rollforward of the total amounts of gross unrecognized tax benefits for fiscal years 2025 and 2024 (in thousands):

Landstar paid income taxes of $51,451,000 in fiscal year 2025, $47,528,000 in fiscal year 2024 and $92,695,000 in fiscal year 2023, which consisted of the following (in thousands):

(5) Operating Property

Operating property is summarized as follows (in thousands):

Included above is $152,921,000 in fiscal year 2025 and $175,464,000 in fiscal year 2024 of operating property under finance leases, $108,385,000 and $131,770,000, respectively, net of accumulated depreciation and amortization. Landstar acquired operating property by entering into finance leases in the amount of $7,732,000 in fiscal year 2025, $62,194,000 in fiscal year 2024 and $4,093,000 in fiscal year 2023.

(6) Retirement Plan

Landstar sponsors an Internal Revenue Code section 401(k) defined contri

buti

on plan for the benefit of U.S. domiciled full-time employees who have completed three months of service. Eligible employees make voluntary contributions up to 75% of their base salary, subject to certain limitations. Landstar contributes an amount equal to 100% of the first 3% and 50% of the next 2% of such contributions, subject to certain limitations.

The expense for the Company-sponsored defined contribution plan included in selling, general and administrative expense was $2,868,000 in fiscal year 2025, $2,805,000 in fiscal year 2024 and $2,812,000 in fiscal year 2023.

(7) Debt

Other than the finance lease obligations as presented on the consolidated balance sheets, the Company hadno outstanding debt as of December 27, 2025 and December 28, 2024.

On July 1, 2022, Landstar entered into a second amended and restated credit agreement with a bank syndicate led by JPMorgan Chase Bank, N.A., as administrative agent (as further amended as of June 21, 2024, the “Credit Agreement”). The Credit Agreement, which matures July 1, 2027, provides for borrowing capacity in the form of a revolving credit facility of $300,000,000, $45,000,000 of which may be utilized in the form of letters of credit. The Credit Agreement also includes an “accordion” feature providing for a possible increase of up to an aggregate amount of borrowing capacity of $600,000,000. As of December 27, 2025, the Company hadno borrowings outstanding under the Credit Agreement.

The revolving credit loans under the Credit Agreement, at the option of Landstar, bear interest at (i) a forward-looking term rate based on the secured overnight financing rate plus 0.10% and an applicable margin ranging from 1.25% to 2.00%, or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 1.00%, in each case with the applicable margin determined based upon the Company’s Leverage Ratio, as defined in the Credit Agreement, at the end of the most recent applicable fiscal quarter for which financial statements have been delivered. The revolving credit facility bears a commitment fee, payable quarterly in arrears, of 0.20% to 0.30%, based on the Company’s Leverage Ratio at the end of the most recent applicable fiscal quarter for which financial statements have been delivered.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum fixed charge coverage ratio, as described in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed

2.5

to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35%

or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.

The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value.

Landstar paid interest of $5,326,000 in fiscal year 2025, $3,813,000 in fiscal year 2024 and $3,604,000 in fiscal year 2023.

(8) 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 afive 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 infor

matio

n available at the lease commencement date in determining the present value of the lease payments. Landstar has a centrally managed treasury function; therefore, based on the applicable lease terms and the current economic environment, the Company applies a portfolio approach for determining t

he

incremental borrowing rate.

The components of lease cost for finance leases and operating leases for the fiscal year ended December 27, 2025 were (in thousands):

Total net operating lease income, net of rent expense under operating leases, was $1,769,000 and $1,853,000 in fiscal years 2024 and 2023, respectively.

A summary of the lease classification on the Company’s consolidated balance sheet as of December 27, 2025 is as follows (in thousands):

Assets:

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 December 27, 2025 (in thousands):

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of December 27, 2025 we

re:

(9) Share-Based Payment Arrangements

As of December 27, 2025, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors, the 2022 Directors Stock Compensation Plan (the “2022 DSCP”).6,000,000 shares of the Company’s Common Stock were authorized for issuance under the 2011 EIP and 200,000 shares of the Company’s Common Stock were authorized for issuance under the 2022 DSCP. The 2011 EIP and 2022 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.”Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):

Included in income tax benefits recognized in the fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023 were tax deficiencies (excess tax benefits) from stock-based awards

of $106,000,

(

$1,122,000

)

and

(

$2,830,000

)

, respectively.

As of December 27, 2025, there were 172,859 shares of the Company’s Common Stock reserved for issuance under the 2022 DSCP and 2,681,782 shares of the Company’s Common Stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

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

During fiscal years 2025, 2024 and 2023, the Company granted RSUs with a performance condition. During fiscal years 2025 and 2024, the Company also granted RSUs with a market condition.

RSUs with a performance condition granted on January 31, 2025 and February 3, 2025 may vest on January 31 of 2028, 2029 and 2030 based on growth in operating income and

pre-tax

income per diluted share from continuing operations as compared to the results from the 2024 fiscal year. RSUs with a performance condition granted on February 2, 2024 may vest on January 31 of 2027, 2028 and 2029 based on growth in operating income and

pre-tax

income per diluted share from continuing operations as compared to the results from the 2023 fiscal year. RSUs with a performance condition granted on February 3, 2023 may vest on January 31 of 2026, 2027 and 2028 based on growth in operating income and

pre-tax

income per diluted share from continuing operations as compared to the results from the 2022 fiscal year. At the time of grant, the target number of common shares available for issuance under the January 31, 2025, February 2, 2024 and February 3, 2023 grants equals

% of the number of RSUs granted, and the maximum number of common shares available for issuance under the January 31, 2025, February 2, 2024 and February 3, 2023 grants equals

% of the number of RSUs credited to the recipient. In the event actual results exceed the target, the number of shares that will be granted will exceed the number of RSUs granted. The fair value of an RSU with a performance condition was determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. The discount rate due to lack of marketability used for RSU award grants with a performance condition for all periods was

%. With respect to RSU awards with a performance condition, the Company reports compensation expense over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU at the time of grant.

On January 31, 2025 and February 2, 2024, the Company granted

6,050

and

58,268

RSUs, respectively, that vest based on a market condition. These RSUs may vest based on the achievement of the target Company’s total shareholder return (“TSR”) compound annual growth rate, adjusted to reflect dividends (if any) paid during the periods and capital adjustments as may be necessary, and are eligible to vest annually starting after the sixth anniversary of the grant date and concluding after the tenth anniversary of the grant date. The fair value of these RSU awards was determined at the time of grants based on the expected achievement of the market condition. With respect to these RSU awards, the Company reports compensation expense ratably over the service period of the awards based on the number of units granted multiplied by the grant date fair value of the RSU. Previously recognized compensation cost would be reversed only if the employee did not complete the requisite service period due to termination of employment.

The

Company recognized approximately $

1,102,000

, ($

800,000

)

and $

581,000

of share-based compensation expense (benefit) related to RSU awards in fiscal years 2025, 2024 and 2023, respectively. As of December 27, 2025, there was a maximum of $

51.2

million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately

2.8

years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.

Non-vested

Restricted Stock and Deferred Stock Units

The 2011 EIP provides the Compensation Committee of the Board of Directors with the authority to issue shares of Common Stock of the Company, subject to certain vesting and other restrictions on transfer (“restricted stock”).

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

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

The fair value of each share of

restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share ofthe Company’s Common Stock on the date of grant. Shares of

restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of grant or the third, fourth and fifth anniversary of the date of the grant, in two equal annual installments on the first and second anniversary of the date of the grant or 100% on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s Common Stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s Common Stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of December 27, 2025, there was $4,549,000 of total unrecognized compensation cost related to

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

shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 1.6 years.

Stock Options

The Company did not grant any stock options during its 2023, 2024 or 2025 fiscal years. Options outstanding under the Plans generally become exercisable in either five equal annual installments commencing on the first anniversary of the date of grant or 100% on the fifth anniversary from the date of grant, subject to acceleration in certain circumstances. All options granted under the Plans expire on the tenth anniversary of the date of grant. Under the Plans, the exercise price of each option equals the fair market value of the Company’s Common Stock on the date of grant.

The fair value of each option grant on its grant date was calculated using the Black-Scholes option pricing model. The Company utilized historical data, including exercise patterns and employee departure behavior, in estimating the term that options will be outstanding. Expected volatility was based on historical volatility and other factors, such as expected changes in volatility arising from planned changes to the Company’s business, if any. The risk-free interest rate was based on the yield of zero coupon U.S. Treasury bonds for terms that approximated the terms of the options granted.

The Company hadno issued and outstanding vested or unvested stock options or unrecognized compensation costs related to

stock options granted under the Plans as of or for the fiscal years ended December 27, 2025 and December 28, 2024.

The following table summarizes information regarding the Company’s outstanding stock options under the Plans for fiscal year 2023:

The total

intrinsic value of stock options exercised during fiscal year 2023 was $

218,000

.

Directors’ Stock Compensation Plan

Directors of the Company who are not employees of the Company (each an “Eligible Director”) are entitled under the 2022 DSCP to receive a grant of such number of restricted shares of the Company’s Common Stock or Deferred Stock Units equal to the quotient of $150,000 divided by the fair market value of a share of Common Stock on the date immediately following the date of each annual meeting of the stockholders of the Company (an “Annual Meeting”). In fiscal year 2025,8,591 restricted shares were granted to Eligible Directors. In fiscal year 2024,5,810 restricted shares were granted to Eligible Directors. In fiscal year 2023,5,957 restricted shares were granted to Eligible Directors. No Deferred Stock Units were issued in fiscal years 2025, 2024 or 2023. Restricted shares granted in 2025, 2024 and 2023 vest on the date of the next Annual Meeting. During fiscal years 2025, 2024 and 2023, $1,062,000, $1,053,000 and $1,050,000, respectively, of compensation cost was recorded for the grant of these restricted shares.

(10) Equity

On December 7, 2021, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,912,824 shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. This program was completed during fiscal year 2025. On December 6, 2022, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,900,826 additional shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. On December 4, 2023, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 319,332 additional shares of its Common Stock from time to time in the open market and in privately negotiated transactions under its share purchase program. As of December 27, 2025, the Company had authorization to purchase in the aggregate up to 1,266,118 shares of its Common Stock under these programs. No specific expiration date has been assigned to the December 6, 2022 or December 4, 2023 authorizations. During fiscal year 2025, Landstar purchased a total of 1,281,863 shares of its Common Stock at a total cost of $180,901,000 pursuant to its previously announced stock purchase program, including $179,139,000 in cash purchases and accrued excise tax of $1,762,000, which is included in other current liabilities in the consolidated balance sheet at December 27, 2025. The Company also paid $717,000 in excise tax on its common stock purchases, which was included in other current liabilities in the consolidated balance sheet at December 28, 2024.

The Company has 2,000,000 shares of preferred stock authorized and unissued.

(11) Commitments and Contingencies

At December 27, 2025, in addition to the $75,331,000 letters of credit secured by investments, Landstar had $34,916,000 of letters of credit outstanding under the Company’s Credit Agreement.

As previously disclosed by the Company in its Quarterly Report on Form

10-Q

for the 2025 second quarter filed with the SEC on July 29, 2025, the Current Report on Form

8-K

filed with the SEC on August 13, 2025, the Quarterly Report on Form

10-Q

for the 2025 third quarter filed with the SEC on October 28, 2025, and the Current Report on Form

8-K

filed with the SEC on January 21, 2026, a trial verdict (the “Verdict”) was rendered on August 6, 2025 in state court in El Paso County, Texas, in the matter of Eduardo Cabral, et. al. v. Landstar Ranger, Inc., et. al. (the “Cabral Matter”). As previously disclosed, the Verdict included a determination by the jury that Landstar Ranger, Inc. (“Landstar Ranger”) acted as a broker and not as a motor carrier with respect to the transportation of the shipment involved in a tragic accident. The Verdict also determined total monetary damages of

$

22.8

million and that

% of such damages, or $

3.42

million, was attributable to Landstar Ranger, with the remainder of the total monetary damages attributable to the hauling motor carrier and the hauling motor carrier’s employee truck driver. On January 13, 2026, the trial court entered a judgment (the “Judgment”) with respect to the Verdict that found Landstar Ranger financially responsible for

%, rather than

%, of the $

22.8

million of monetary damages awarded to the plaintiffs, plus

pre-judgment

interest. As a result of the Judgment, the Company recorded a

pre-tax

charge of approximately $

5.7

million during the 2025 fiscal fourth quarter to insurance and claim costs. As also previously disclosed, during fiscal year 2025, the company received cash payments of $

12,000,000

from third party reinsurance providers in the form of a “no claims bonus” due to favorable loss experience with respect to claims incurred during the applicable policy period. In connection with the Judgment, the Company has reclassified this “no claims bonus” from current liabilities to current insurance claims in the consolidated balance sheet as of December 27, 2025. The Company intends to vigorously appeal the Cabral Matter, including the Judgment; however, no assurances can be provided as to the probability of success with respect to any potential appeals relating to the Cabral Matter, generally, or the Judgment, specifically, or the ultimate outcome of any such appeals. The total cost associated with the Cabral Matter, which may include post-judgment interest, bonding-related costs and legal and other professional fees, will depend on many factors and the ultimate financial impact, as well as the timing of the ultimate resolution of this matter, are difficult to predict.

The Company is involved in certain other 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 and reasonably estimable losses with respect to the resolution of all such claims and pending litigation and that the ultimate outcome, after provisions therefor, will not have a material adverse effect on the financial condition of the Company, but could have a material effect on the results of operations in a given quarter or year.

(12) Segment Information

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 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 ecosystem of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $4.7 billion during the most recently completed fiscal year. The Company reports the results oftwo 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 offered by the Company include 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

(“haz-mat”),

cold chain/temperature-controlled, 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 parts and assemblies, consumer durables, building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics, military equipment and general commodities. In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-than-truckload service providers. The independent commission sales agents market 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. The results of operations from Landstar Blue and Landstar Metro are presented as part of the Company’s transportation logistics segment.

The insurance segment is comprised of Signature Insurance Company (“Signature”), 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. In addition, it reinsures certain risks of the Company’s BCO Independent Contractors and provides certain property and casualty insurance and reinsurance 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. Internal revenue for premiums billed by the insurance segment to the transportation logistics segment is calculated each fiscal period based primarily on an actuarial calculation of historical loss experience and is believed to approximate the cost that would have been incurred by the transportation logistics segment had similar insurance been obtained from an unrelated third party.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”) is our Chief Executive Officer. The CODM evaluates each segment’s performance and makes decisions about resource allocations primarily based on operating income, which is the principal financial metric utilized to monitor budgeted versus actual results by segment of the Company. Asset information by segment is not regularly provided to the CODM for purposes of evaluating performance or allocating resources, and therefore such information has not been presented.

No single customer accounted for more than 10% of the Company’s consolidated revenue in fiscal years 2025, 2024 and 2023. Substantially all of the Company’s revenue is generated in North America, primarily through customers located in the United States.

The following tables summarize information about the Company’s reportable business segments as of and for the fiscal years ending December 27, 2025, December 28, 2024 and December 30, 2023 (in thousands):

(13) Change in Accounting Estimate for Self-Insured Claims

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 within its various programs.

The following table summarizes the adverse effect of the increase in the cost of insurance claims resulting from net unfavorable development of prior year self-insured claims estimates on operating income, net income and basic and diluted earnings per share set forth in the consolidated statements of income for the fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023 (in thousands, except per share amounts):

The unfavorable development of prior years’ claims during the fiscal year ended December 27, 2025 was primarily attributable to several specific commercial trucking claims, including approximately $5.7 million related to the Judgment in the Cabral Matter, and elevated cargo loss experience as a result of fraud and theft in the supply chain. The unfavorable development of prior years’ claims in the fiscal years ended December 28, 2024 and December 30, 2023 was primarily attributable in each year to several specific claims.

(14) Held for Sale Subsidiary

During the 2025 fiscal year, 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. (“Landstar Metro”) 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. The Company determined that this planned divestiture does not represent a strategic shift that would be expected to have a significant effect on our consolidated results of operations, and therefore the results of Landstar Metro are not reported as discontinued operations. It is not anticipated that a sale or other disposition of Landstar Metro will adversely affect the Company’s ability to provide U.S.-Mexico cross-border services, given that Landstar Metro is principally engaged in intra-Mexico truck transportation services.

In connection with the decision to actively market Landstar Metro, management identified a triggering event to perform a quantitative goodwill impairment test. Based on the quantitative assessment, the Company concluded that Landstar Metro’s goodwill was impaired and recorded a

non-cash

impairment charge of $7,530,000 to goodwill within the transportation logistics segment. Further, based on the expected fair value of Landstar Metro, net of costs to sell, the Company recognized an impairment on assets held for sale of $10,678,000. Both impairments are included in impairment of intangible and other assets within the Company’s consolidated statements of income. No assurances can be provided that there will not be additional charges and expenses incurred by the Company in connection with this sale process or upon any ultimate disposition of Landstar Metro.

As of December 27, 2025, the assets and liabilities of Landstar Metro are presented as held for sale at carrying value. A summary of assets and liabilities associated with Landstar Metro that are held for sale, is presented below (in thousands):

(15) Impairment of Software Assets

During the 2025 fiscal year, the Company performed a strategic review of its operations. In connection with this strategic review, management evaluated its transportation management systems (“TMSs”), including the Landstar TMS, a cloud-based platform for truckload freight agent workflow, and the Blue TMS, a cloud-based platform built specifically to service the truckload brokerage contract services market. Management determined that the Landstar TMS, rather than the Blue TMS, would be the Company’s primary TMS used in the future to service the truckload brokerage contract services market. As a result of this decision, the Company also determined to wind-down the Blue TMS and, in connection therewith, the Company performed a recoverability test with respect to potential impairment of the software assets associated with the Blue TMS and determined estimated fair value based on discounted cash flows. The Company subsequently recorded an $

8,963,000

impairment charge within its transportation logistics segment, which is included in impairment of intangible and other assets within the Company’s consolidated statements of income.

(16) Impairment of Equity Investment

In 2022, the Company acquired a minority equity investment in Cavnue, LLC (“Cavnue”), a privately held

start-up

company focused on combining technology and road infrastructure to unlock the full potential of connected and autonomous vehicles. This

non-controlling

investment in units of Cavnue is considered an investment in

non-marketable

equity securities without a readily determinable market value. The carrying value of the

non-marketable

equity securities is adjusted to fair value upon observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative).

During the 2025 fiscal year, the Company determined that there were indicators of potential impairment related to the value of its equity investment in Cavnue related to the financial performance of the company and its ability to raise additional capital to finance continued investment in its operations. As such, the Company recorded a impairment charge for the carrying value of its investment in Cavnue of $

4,999,000

during the fiscal year ended December 27, 2025, which is included in impairment of intangible and other assets within the Company’s consolidated statements of income. The Company subsequently fully divested itself of its interests in Cavnue in January 2026.

(17) Recent Accounting Pronouncements

Adoption of New Accounting Standards

In December 2023, the FASB issued ASU

2023-09,

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

(“ASU

2023-09”),

which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. ASU

2023-09

is effective for annual periods beginning after December 15, 2024. The Company adopted ASU

2023-09

on December 27, 2025 retrospectively to all prior periods presented in the consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In November 2024, the FASB issued ASU

2024-03,

Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic

220-40):

Disaggregation of Income Statement Expenses

(“ASU

2024-03”),

which expands disclosures about certain categories of expenses. ASU

2024-03

is effective for annual periods beginning after December 15, 2026. The Company is currently evaluating the impact of ASU

2024-03

on its consolidated financial statements and disclosures.

(18) Supply Chain Fraud Matter

During the last week of the Company’s 2025 first fiscal quarter, the Company identified a supply chain fraud (the “Supply Chain Fraud Matter”) relating to the Company’s international freight forwarding operations. The Supply Chain Fraud Matter did not involve the Company’s core North American truckload services. In connection with the Supply Chain Fraud Matter, consolidated revenue and purchased transportation as reported in the Company’s fiscal year 2024, 2023 and 2022 financial results were each overstated by approximately 2%,1%, and less than 0.5%, respectively. As the overstated amount of revenue was approximately equal to the overstated amount of purchased transportation, the impact on each of operating income and net income, as reported, was less than 1% in fiscal year 2024 and less than 0.2% in fiscal years 2023 and 2022, respectively.

The Company performed a quantitative and qualitative analysis of the impact of the Supply Chain Fraud Matter in respect of the 2025 first fiscal quarter and the financial statements for each prior fiscal year period during which identified instances of fraud relating to this matter occurred. In connection therewith, the Company concluded that such impact was immaterial with respect to each such fiscal period. The Company’s financial results for the fiscal year ended December 27, 2025 included a $4.8 million

pre-tax

expense, or $0.10 per basic and diluted share, relating to the Supply Chain Fraud Matter. This expense reflects the total currently anticipated aggregate adverse financial impact to Landstar relating to the Supply Chain Fraud Matter, net of certain actual and anticipated recoveries and before taking into account the cost of legal and other professional fees as well as additional potential recoveries in the future. This expense was reflected in the fiscal year 2025 provision for contractor bad debt expense within other operating costs on the Company’s consolidated statements of income. As of the December 27, 2025 consolidated balance sheet, this amount was included in the allowance for doubtful accounts related to other receivables.

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Landstar System, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Landstar System, Inc. and subsidiary (the Company) as of December 27, 2025 and December 28, 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended December 27, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2025 and December 28, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 27, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 27, 2025, based on criteria established in

issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February

, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Self-insurance claims liability

As discussed in Note 1 to the consolidated financial statements, the liability for insurance claims includes the actuarially determined estimated costs of cargo, property, casualty, general liability, and workers’ compensation claims, both reported and for claims incurred but not reported, up to the Company’s retained amount per claim, which is referred to as the self-insurance claims liability. The Company’s estimated costs of insurance claims include assumptions regarding the frequency and severity of claims and are based upon the facts and circumstances known as of the applicable balance sheet date. The Company’s liability for insurance claims as of December 27, 2025 was $150,049,000, which includes the self-insurance claims liability.

We identified the evaluation of the self-insurance claims liability as a critical audit matter. Specialized skills were needed to evaluate the Company’s estimate of the self-insurance claims liability. This evaluation included assumptions related to the potential for the development in future periods of claims both reported and incurred but not reported as of the balance sheet date and the impact of those developments on the estimated liability associated with such claims. In addition, a higher degree of subjective auditor judgment was required to evaluate the Company’s estimate of the self-insurance claims liability due to the inherent uncertainty in the frequency and severity of claims.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s self-insurance claims process, including a control related to the development of the assumptions used to estimate the self-insurance claims liability. We involved actuarial professionals with specialized skills and knowledge, who assisted in assessing the actuarial model used by the Company, including the external actuarial report obtained by the Company, to estimate the self-insurance claims liability for consistency with generally accepted actuarial standards. The actuarial professionals also developed an estimate of the range of the self-insurance claims liability using the Company’s historical claims data. We compared the estimated range of the self-insurance claims liability to the amount recorded by the Company. We tested a sample of the claims data used in the actuarial model by comparing the data to underlying claims details. For certain claims, we obtained letters received directly from the Company’s external legal counsel to evaluate the liability recorded. Additionally, we assessed the development of the self-insurance claims liability in the current year compared to recent historical trends and considered implications on the current year assumptions. We also assessed facts and circumstances received by the Company after the balance sheet date, but before the consolidated financial statements were issued, and the impact, if any, of such facts and circumstances on the self-insurance claims liability.

/s/

KPMG LLP

We have served as the Company’s auditor since 1988.

Jacksonville, Florida

February 23, 2026