What changed in this filing

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Item 1. Financial Statements

2020-07-31 compared with 2020-05-01 · 214 added, 127 removed, 296 unchanged (54% of the section changed)

4 unchanged sentences

and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

Operating results for the thirteen weeks ended March 28, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 26, 2020.

Operating results for the twenty six weeks ended June 27, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 26, 2020.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report on Form 10-K.

37 unchanged sentences

(Dollars in thousands, except per share amounts)

Twenty Six Weeks Ended

Thirteen Weeks Ended

7 unchanged sentences

Depreciation and amortization

Impairment of intangible and other assets

Total costs and expenses

18 unchanged sentences

(Dollars in thousands)

Twenty Six Weeks Ended

Thirteen Weeks Ended

2 unchanged sentences

Other comprehensive (loss) income:

Unrealized holding (losses) gains on available-for-sale

investments, net of tax (benefit) expense of $( 432 ), and $ 272

Unrealized holding gains on available-for-sale

investments, net of

tax expense of $ 338 , $ 494 , $ 770 and $ 222

Foreign currency translation (losses) gains

7 unchanged sentences

(Dollars in thousands)

Thirteen Weeks Ended

Twenty Six Weeks Ended

OPERATING ACTIVITIES

4 unchanged sentences

Gains on sales/disposals of operating property

Impairment of intangible and other assets

Deferred income taxes, net

2 unchanged sentences

Decrease in trade and other accounts receivable

Decrease in other assets

Increase (decrease) in accounts payable

Increase in other assets

Decrease in accounts payable

Increase (decrease) in other liabilities

Increase (decrease) in insurance claims

Increase in insurance claims

NET CASH PROVIDED BY OPERATING ACTIVITIES

5 unchanged sentences

Proceeds from sales of operating property

Consideration paid for acquisition

NET CASH USED BY INVESTING ACTIVITIES

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Thirteen Weeks Ended March 28, 2020 and March 30, 2019

(Dollars in thousands)

Twenty Six and Thirteen Weeks Ended June 27, 2020 and June 29, 2019

(In thousands, except share and per share amounts)

Treasury Stock at Cost

Comprehensive

(Loss) Income

Balance December 28, 2019

Adoption of accounting standard (Note 1 4

Dividends ($ 0.185 per share)

Dividends ($ 0.185

Purchases of common stock

Issuance of stock related to stock-based compensation plans

Issuance of stock related to stock-based

compensation plans

Stock-based compensation

1 unchanged sentence

Balance March 28, 2020

Dividends ($ 0.185

Issuance of stock related to stock-based

compensation plans

Stock-based compensation

Other comprehensive income

Balance June 27, 2020

Landstar System, Inc.

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Comprehensive

Non-controlling

(Loss) Income

Non-controlling

Balance December 29, 2018

Net income (loss)

Dividends ($ 0.165 per

Purchases of common

noncontrolling

Issuance of stock related

to stock-based

compensation plans

Other comprehensive

Dividends ($ 0.165

Purchases of common stock

Purchase of noncontrolling interests

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive income

Balance March 30, 2019

Dividends ($ 0.165

Purchases of common stock

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive income

Balance June 29, 2019

See accompanying notes to consolidated financial statements.

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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.

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.

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Revenue from Contracts with Customers – Disaggregation of Revenue

During the thirteen weeks ended March 28, 2020, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 46 %, 46 % and 3 % respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3 % of the Company’s consolidated revenue in the thirteen-week period ended March 28, 2020.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended March 28, 2020 was $ 545,307,000 hauled via van equipment, $ 286,328,000 hauled via unsided/platform equipment and $ 22,941,000 of less-than-truckload.

During the thirteen weeks ended March 30, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 43 %, 49 % and 3 %, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3 % of the Company’s consolidated revenue in the thirteen-week period ended March 30, 2019.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended March 30, 2019 was $ 619,014,000 hauled via van equipment, $ 310,721,000 hauled via unsided/platform equipment and $ 23,376,000 of less-than-truckload.

During the twenty six weeks ended June 27, 2020, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 46 %, 46 % and 3 % respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3 % of the Company’s consolidated revenue in the twenty-six-week

period ended June 27, 2020.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week

period ended June 27, 2020 was $ 1,028,334,000 hauled via van equipment, $ 533,716,000 hauled via unsided/platform equipment and $ 45,859,000 of less-than-truckload.

During the twenty six weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44 %, 48 % and 3 %, respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3 % of the Company’s consolidated revenue in the twenty-six-week

period ended June 29, 2019.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week

period ended June 29, 2019 was $ 1,224,379,000 hauled via van equipment, $ 648,828,000 hauled via unsided/platform equipment and $ 48,108,000 of less-than-truckload.

During the thirteen weeks ended June 27, 2020, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 46 %, 46 % and 3 % respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 4 % of the Company’s consolidated revenue in the thirteen-week period ended June 27, 2020.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 27, 2020 was $ 483,027,000 hauled via van equipment, $ 247,388,000 hauled via unsided/platform equipment and $ 22,918,000 of less-than-truckload.

During the thirteen weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45 %, 47 % and 3 % respectively, of the Company’s consolidated revenue.

Collectively, revenue generated by air and ocean cargo carriers represented approximately 3 % of the Company’s consolidated revenue in the thirteen-week period ended June 29, 2019.

Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 29, 2019 was $ 605,365,000 hauled via van equipment, $ 338,107,000 hauled via unsided/platform equipment and $ 24,732,000 of less-than-truckload.

Acquired Business

On May 6, 2020, Landstar System Holdings, Inc.

formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”).

Landstar Blue arranges truckload brokerage services while helping the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents.

On June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company whose business focused on truckload brokerage services.

Cash consideration paid for the acquisition was approximately

2,701 , 000 .

In addition, the Company assumed approximately $ 200,000 in liabilities consisting of additional contingent purchase price.

The resulting goodwill arising from the acquisition was approximately

With respect to this goodwill, 100 % is expected to be deductible by the Company for U.S.

income tax purposes.

ma financial information for prior periods is not presented as the Company does not believe the acquisition to be material to the Company’s consolidated results.

The results of operations for Landstar Blue are presented as part of the Company’s transportations logistics segment.

Transaction costs for the acquisition were insignificant.

Share-based Payment Arrangements

As of March 28, 2020, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”).

As of June 27, 2020, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”).

No further grants can be made under the ESOSIP.

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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):

Twenty Six Weeks Ended

Thirteen Weeks Ended

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Net cost of the Plans during the period

Included in income tax benefits recognized in the thirteen-week periods ended March 28, 2020 and March 30, 2019 were excess tax benefits from stock-based awards of $ 706,000 and $ 2,571,000 , respectively.

Also included in income tax benefits recognized in the thirteen-week periods ended March 28, 2020 and March 30, 2019 were income tax benefits of $ 12,000 and $ 16,000 , 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.

As of March 28, 2020, there were 66,454 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,692,315 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Included in income tax benefits recognized in the twenty-six-week

periods ended June 27, 2020 and June 29, 2019 were excess tax benefits from stock-based awards of $ 829,000 and $ 2,871,000 , respectively.

As of June 27, 2020, there were 60,586 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,683,524 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Restricted Stock Units

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Vested shares, including shares earned in excess of target

Outstanding at March 28, 2020

Outstanding at June 27, 2020

Represents shares earned in excess of target under the February 2, 2017 RSU awards as actual results exceeded the target under the awards as a result of fiscal year 2019 results.

During the thirteen-week period ended March 28, 2020, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 28, 2019 and March 28, 2020 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2019 Annual Report on Form 10-K.

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

income per diluted

share from continuing operations attributable to Landstar System, Inc.

During the twenty-six-week

period ended June 27, 2020, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 28, 2019 and June 27, 2020 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2019 Annual Report on Form 10-K.

RSUs with a performance condition granted on January 31, 2020 may vest on January

31 of 2023, 2024 and 2025 based on growth in operating income and pre-tax

income per diluted share from continuing operations attributable to Landstar System, Inc.

and subsidiary as compared to the results from the 2019 fiscal year.

The Company recognized approximately ($ 136,000 ) and $ 1,307,000 of share-based compensation (benefit)/expense related to RSU awards in the thirteen-week periods ended March 28, 2020 and March 30, 2019, respectively.

As of March 28, 2020, there was a maximum of $ 35.2 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.6 years.

The Company recognized approximately ($ 308,000 ) and $ 2,062,000 of share-based compensation (benefit)/expense related to RSU awards in the twenty-six-week

periods ended June 27, 2020 and June 29, 2019, respectively.

As of June 27, 2020, there was a maximum of $ 35.3 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.3 years.

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

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Options outstanding at December 28, 2019

Options outstanding at March 28, 2020

Options exercisable at March 28, 2020

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 28, 2020 and March 30, 2019 was $ 1,023,000 and $ 944,000 , respectively.

As of March 28, 2020, there was no unrecognized compensation cost related to stock options granted under the Plans.

Options outstanding at June 27, 2020

Options exercisable at June 27, 2020

The total intrinsic value of stock options exercised during the twenty-six-week

periods ended June 27, 2020 and June 29, 2019 was $ 1,071,000 and $ 1,269,000 , respectively.

As of June 27, 2020, there was no unrecognized compensation cost related to stock options granted under the Plans.

Restricted Stock and Deferred Stock Units

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at December 28, 2019

at March 28, 2020

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant.

Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100 % on the first or fifth anniversary of the date of the grant.

at June 27, 2020

The fair value of each share of non-vested

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

Shares of non-vested

restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100 % on the first or fifth anniversary of the date of the grant.

For restricted stock awards granted under the 2013 DSCP plan, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company.

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However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of March 28, 2020, there was $ 5,174,000 of total unrecognized compensation cost related to non-vested

As of June 27, 2020, there was $ 4,841,000 of total unrecognized compensation cost related to non-vested

shares of restricted stock and Deferred Stock Units granted under the Plans.

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shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.1 years.

The provisions for income taxes for the 2020 and 2019 thirteen-week periods were each based on an estimated annual effective income tax rate of 24.2 %, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2020 thirteen-week period was 22.9 %, which was higher than the statutory federal income tax rate of 21 % primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock based awards.

The effective income tax rate for the 2019 thirteen-week period was 21.0 %, which approximated the statutory federal income tax rate of 21 %.

The provision for income taxes for the 2019 thirteen-week period was favorably impacted by $ 2,571,000 of excess tax benefits from stock-based awards, which essentially offset the impact of state taxes and the meals and entertainment exclusion.

The provisions for income taxes for the 2020 and 2019 twenty-six-week

periods were each based on an estimated annual effective income tax rate of 24.2 %, adjusted for discrete events, such as benefits resulting from stock-based awards.

The effective income tax rate for the 2020 twenty-six-week

period was 22.7 %, which was higher than the statutory federal income tax rate of 21 % primarily

attributable to state taxes and the meals and entertainment exclusion, partially offset by state tax refunds and excess tax benefits realized on stock -

based awards.

The effective income tax rate for the 2019 twenty-six-week

period was 22.4 %, which was higher than the statutory federal income tax rate of 21 % primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock -

The provision for income taxes for the 2019 twenty-six-week

period was favorably impacted by $ 2,871,000 of excess tax benefits from stock-based awards.

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.

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 the average number of common shares outstanding used to calculate earnings per common share attributable to Landstar System, Inc.

and subsidiary to the average number of common shares and common share equivalents outstanding used to calculate diluted earnings per share attributable to Landstar System, Inc.

and subsidiary (in thousands):

Thirteen Weeks Ended

Average number of common shares outstanding

Incremental shares from assumed exercises of stock options

Average number of common shares and common share equivalents outstanding

For each of the thirteen-week periods ended March 28, 2020 and March 30, 2019, no options outstanding to purchase shares of common stock were antidilutive.

During the 2020 and 2019 twenty-six-week and thirteen-week periods ,

the future compensation cost attributable to shares of

non-vested restricted stock exceeded

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

For each of the twenty-six-week

periods ended June 27, 2020 and June 29, 2019, no options outstanding to purchase shares of common stock were antidilutive.

Outstanding RSUs were excluded from the calculation of diluted earnings per share attributable to Landstar System, Inc.

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Additional Cash Flow Information

During the 2020 thirteen-week period, Landstar paid income taxes and interest of $ 7,000 and $ 1,079,000 , respectively.

During the 2019 thirteen-week period, Landstar received income tax refunds, net of income tax payments, of $ 3,624,000 and paid interest of $ 1,198,000 .

Landstar did no t acquire any operating property by entering into finance leases in either the 2020 or 2019 thirteen-week periods.

During the 2020 twenty-six-week

period, Landstar paid income taxes and interest of $ 16,198,000 and $ 2,057,000 , respectively.

During the 2019 twenty-six-week

period, Landstar paid income taxes and interest of $ 39,180,000 and $ 2,286,000 , respectively.

Landstar acquired operating property by entering into finance leases in the amount of $ 7,485,000 in the 2020 twenty-six-week

Landstar did no t acquire any operating property by entering into finance leases in the 2019 twenty-six-week

In addition, during the 2020 twenty-six-week

period, Landstar acquired $

1,440,000 of operating property for which the Comp a

ny accrued a corresponding liability in accounts payable as of June 27, 2020.

Capital expenditures are recorded as cash outflows from investing activities in the consolidated statement of cash flows in the period in which they are paid.

Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the thirteen-week periods ended March 28, 2020 and March 30, 2019 (in thousands):

The following table summarizes information about the Company’s reportable business segments as of and for the twenty-six-week

and thirteen week periods ended June 27, 2020 and June 29, 2019 (in thousands):

Twenty Six Weeks Ended

June 27, 2020

June 29, 2019

Transportation

External revenue

Internal revenue

Investment income

Operating income

Expenditures on long-lived assets

Thirteen Weeks Ended

March 28, 2020

March 30, 2019

June 27, 2020

June 29, 2019

Transportation

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Expenditures on long-lived assets

In the thirteen-week periods ended March 28, 2020 and March 30, 2019, no single customer accounted for more than 10 % of the Company’s consolidated revenue.

In the twenty-six-week

periods ended June 27, 2020 and June 29, 2019, no single customer accounted for more than 10 % of the Company’s consolidated revenue.

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 thirteen-week period ended March 28, 2020 (in thousands):

Holding Gains

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 twenty-six-week

period ended June 27, 2020 (in thousands):

Holding Gains on

Available-for-Sale

Balance as of December 28, 2019

Other comprehensive loss

Balance as of March 28, 2020

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 thirteen-week period ended March 28, 2020.

Other comprehensive gain (loss)

Balance as of June 27, 2020

period ended June 27, 2020.

Investments include primarily investment-grade corporate bonds and U.S.

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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 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 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.

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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 $ 584,000 at March 28, 2020, while unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $ 1,427,000 at December 28, 2019, respectively.

Unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $ 3,002,000 and $ 1,427,000 at June 27, 2020 and December 28, 2019, respectively.

The amortized cost and fair values of available-for-sale

investments are as follows at March 28, 2020 and December 28, 2019 (in thousands):

March 28, 2020

investments are as follows at June 27, 2020 and December 28, 2019 (in thousands):

June 27, 2020

Money market investments

Asset-backed securities

Corporate bonds and direct obligations of government agencies

Corporate bonds and direct obligations of

government agencies

Treasury obligations

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Asset-backed securities

Corporate bonds and direct obligations of government agencies

Treasury obligations

Corporate bonds and direct obligations of

government agencies

Treasury obligation s

For those available-for-sale

investments with unrealized losses at March 28, 2020 and December 28, 2019, the following table summarizes the duration of the unrealized loss (in thousands):

investments with unrealized losses at June 27, 2020 and December 28, 2019, the following table summarizes the duration of the unrealized loss (in thousands):

Less than 12 months

12 months or longer

March 28, 2020

June 27, 2020

Asset-backed securities

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government agencies

Treasury obligations

The Company believes that unrealized losses on investments were primarily due to the widening of credit spreads in the fixed income market related to the coronavirus (“COVID-19”)

worldwide pandemic.

Treasury obligation s

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.

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therefore, based on the applicable lease terms and the current economic environment, we apply a portfolio approach for determining the incremental borrowing rate.

The components of lease cost for finance leases and operating leases for the thirteen weeks ended March 28, 2020 were (in thousands):

The components of lease cost for finance leases and operating leases for the twenty six weeks ended June 27, 2020 were (in thousands):

Finance leases:

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Total lease cost

A summary of the lease classification on our consolidated balance sheet as of March 28, 2020 is as follows (in thousands):

A summary of the lease classification on our consolidated balance sheet as of June 27, 2020 is as follows (in thousands):

Operating lease right-of-use

Finance lease assets

Finance lease asset s

Operating property, less accumulated depreciation and amortization

Total lease assets

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 28, 2020 (in thousands):

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 June 27, 2020 (in thousands):

2020 Remainder

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Long-term debt, excluding current maturities

Other current liabilities

Other current liabilitie s

Deferred income taxes and other noncurrent liabilities

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of March 28, 2020 were:

Finance Leases

Operating Leases

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of June 27, 2020 were:

Weighted average remaining lease term (years)

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Commitments and Contingencies

Short-term investments include $ 33,627,000 in current maturities of investments held by the Company’s insurance segment at March 28, 2020.

Short-term investments include $ 36,274,000 in current maturities of investments held by the Company’s insurance segment at June 27, 2020.

The non-current

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investments, provide collateral for the $ 61,503,000 of letters of credit issued to guarantee payment of insurance claims.

As of March 28, 2020, Landstar also had $ 34,368,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

As of June 27, 2020, Landstar also had $ 34,156,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc.

and Landstar Ranger, Inc.

(together, the “Defendants”).

The complaint purported to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” The complaint asserted claims based on the alleged misclassification of Mr.

Tanious as an independent contractor and alleged violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition.

Tanious was a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc.

On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S.

Fischer of the United State District Court for the Central District of California.

On August 22, 2019, the Court issued an order, among other things, striking all class allegations from the complaint and stating that this matter would proceed as an individual action.

On June 15, 2020, the Court issued an order granting the Defendants’ motion to transfer venue to the United States District Court for the Middle District of Florida, where the matter was assigned to Judge Marcia Morales Howard.

On June 24, 2020, the Court, sua sponte

, issued an order striking the first amended complaint that was deemed by the Court to have been filed by the plaintiff on March 23, 2020.

On July 6, 2020, the plaintiff filed a voluntary dismissal without prejudice of all remaining claims relating to this action.

On July 15, 2020, the Court issued an order granting the voluntary dismissal of this action in full.

The Company is involved in certain claims and pending litigation arising from the normal conduct of business.

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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.

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.

The following table summarizes the effect of the increase in the cost of insurance claims resulting from unfavorable 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 set forth in the consolidated statements of income for the twenty-six-week

and thirteen-week periods ended June 27, 2020 and June 29, 2019 (in thousands, except per share amounts):

Twenty Six Weeks Ended

Thirteen Weeks Ended

Operating income

Net income attributable to Landstar System, Inc.

and subsidiary

Earnings per share attributable to Landstar System, Inc.

and subsidiary

Diluted earnings per share attributable to Landstar System, Inc.

and subsidiary

Impairment of Intangible and Other Assets

During the 2020 second fiscal quarter, the Company recorded a non-cash

impairment charge of $ 2,582 ,000

in respect of certain assets, primarily customer contract and related customer relationship intangible assets, acquired on September 20, 2017, along with substantially all of the other assets of the asset-light transportation logistics business of Fletes Avella, S.A.

(“Fletes Avella”).

As previously disclosed in Item 1A.

Risk Factors in the Company’s Form 10-Q

for the 2020 first quarter, negative macroeconomic trends in Mexico, including issues in the international oil and gas sector, have caused significant disruptions in the M e

xican economy.

Accordingly, management performed impairment tests of the carrying values of certain assets that primarily relate to intra-Mexico business acquired as a part of the Fletes Avella acquisition.

The impairment tests resulted in an impairment charge of

2,582,000 , as the negative macroeconomic trends in Mexico have caused current financial projections relating to these intangible assets to be substantially below those originally anticipat e

d at the acquisition date.

There was no corresponding goodwill impairment charge recorded as the fair value of the Company’s Mexico and cross-border reporting unit continues to significantly exceed its carrying value as of June 27, 2020.

Recent Accounting Pronouncements

8 unchanged sentences

on December 29, 2019, under the modified retrospective transition method resulting in a $ 702,000 cumulative adjustment to retained earnings.

(12) Subsequent Events

was first identified in Wuhan, China in December 2019.

outbreak was subsequently declared a pandemic by the World Health Organization on March 11, 2020.

pandemic has caused significant disruptions in the global economy, which significantly intensified in the United States in late March and early April 2020, and has fueled concerns that it will lead to a global recession.

These conditions are expected to continue and worsen in the near term.

This could have a material adverse impact on the demand for our services and our ability to obtain financing on favorable terms or at all.

The situation continues to evolve rapidly and its effects, both short and long-term, remain unknown.

In connection with the impact of the COVID-19

pandemic, the Company experienced a significant decline in truckload volumes during the last week of its fiscal quarter ended March 28, 2020.

The Company believes the COVID-19

pandemic is likely to have a significant adverse impact on truckload volumes in its 2020 second fiscal quarter.

Although it does not appear the impact of the COVID-19

pandemic had a significant impact on truckload pricing in the 2020 first quarter, no assurance can be given regarding the potential impact of the pandemic on truckload pricing in future periods, including the 2020 second quarter.

The extent to which the COVID-19

pandemic impacts the Company’s results in the 2020 second quarter as well as in future quarters will depend on future developments that are highly uncertain and cannot be predicted, including the duration of the pandemic, new information that may emerge concerning the severity of the pandemic, the actions taken to contain its impact and the role of federal, state and local governments in lifting stay-at-home

orders and taking other measures that will be needed to help the economy transition back to more normal operating conditions.

In an effort to support BCO Independent Contractors and independent commission sales agents in the Landstar network, the Company announced that for each load delivered by a BCO Independent Contractor with a confirmed delivery date from April 1, 2020 through April 30, 2020, the Company will pay an extra $ 50 to both the BCO hauling the load and the Landstar agent dispatching the load.

The Company subsequently announced the extension of this program through May 15, 2020.

The Company estimates that Landstar BCOs will deliver between 60,000 and 70,000 loads in April 2020 and 30,000 to 35,000 from May 1, 2020 through May 15, 2020.

In addition, if a Landstar BCO tests positive for COVID-19

or is placed under a mandatory quarantine by a public health authority, the Company will provide up to $ 2,000 to the affected BCO.

Further, in the event that current market conditions persist, it is possible that Landstar will provide additional financial support to its independent agents and/or BCO Independent Contractors during the 2020 second quarter as part of the Company’s pandemic relief efforts.

These pandemic relief efforts will have an impact on the Company’s financial results for the 2020 second quarter.

Moreover, the COVID-19

virus continues to spread in areas where we provide services.

While we have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with respect to the COVID-19

pandemic and such measures may not adequately protect our business from the impact of such events.

The Landstar network includes over 1,200 independent agent locations throughout North America where such independent agents provide shipment

coordination and dispatch services, freight tracking, trailer management and numerous other operational functions.

Similarly, the Landstar network includes tens of thousands of truck capacity providers who operate throughout North America without any Landstar truck terminals.

Management believes the decentralized nature of our model provides resiliency to Landstar’s freight operations in an environment where social distancing can disrupt centralized business structures.

A significant impact to our independent agent network and/or a significant decrease in available truck capacity providers due to illness or government restrictions related to the COVID-19

pandemic could have a material adverse effect on our ability to source capacity to service our customers and could have a significant impact on Landstar, including our results of operations, revenue and cash flows.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements