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Item 1. Financial Statements

2021-04-30 compared with 2020-10-30 · 119 added, 281 removed, 253 unchanged (61% of the section changed)

Financial Statements

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

They have been prepared in accordance with Rule 10-01

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

Operating results for the thirty nine weeks ended September 26, 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 thirteen weeks ended March 27, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 25, 2021.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

3 unchanged sentences

(Dollars in thousands, except per share amounts)

September 26,

Current Assets

13 unchanged sentences

Dividends payable

Contractor escrow

Other current liabilities

16 unchanged sentences

(Dollars in thousands, except per share amounts)

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 26,

September 28,

September 26,

September 28,

Investment income

2 unchanged sentences

Commissions to agents

Other operating costs, net of gains/losses on asset sales/dispositions

Other operating costs, net of gains on asset sales/dispositions

Insurance and claims

1 unchanged sentence

Depreciation and amortization

Impairment of intangible and other assets

Total costs and expenses

2 unchanged sentences

Income before income taxes

Net loss attributable to noncontrolling interest

Net income attributable to Landstar System, Inc.

and subsidiary

Earnings per common share attributable to Landstar System, Inc.

and subsidiary

Diluted earnings per share attributable to Landstar System, Inc.

and subsidiary

Average number of shares outstanding:

Earnings per common share

Diluted earnings per share

Average diluted shares outstanding

Dividends per common share

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(Dollars in thousands)

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 26,

September 28,

September 26,

September 28,

N et income attributable to Landstar System, Inc.

and subsidiary

Other comprehensive (loss) income:

Unrealized holding gains on available-for-sale

investments, net of tax expense of $ 413 , $ 577 , $ 75 and $ 83

Foreign currency translation (losses) gains

Other comprehensive (loss) income

Comprehensive income attributable to Landstar System, Inc.

and subsidiary

Other comprehensive loss:

Unrealized holding losses on available-for-sale

investments, net of tax benefits of $ 147 and $ 432

Foreign currency translation losses

Other comprehensive loss

Comprehensive income

See accompanying notes to consolidated financial statements.

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(Dollars in thousands)

Thirty Nine Weeks Ended

September 26,

September 28,

Thirteen Weeks Ended

OPERATING ACTIVITIES

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Gains on sales/disposals of operating property

Impairment of intangible and other assets

Deferred income taxes, net

1 unchanged sentence

Changes in operating assets and liabilities:

(Increase) decrease in trade and other accounts receivable

Increase in other assets

Increase (decrease) in accounts payable

Increase (decrease) in other liabilities

Increase in insurance claims

Decrease in trade and other accounts receivable

Decrease in other assets

Increase in accounts payable

Increase in other liabilities

(Decrease) increase in insurance claims

NET CASH PROVIDED BY OPERATING ACTIVITIES

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Proceeds from sales of operating property

Consideration paid for acquisition

NET CASH USED BY INVESTING ACTIVITIES

FINANCING ACTIVITIES

Decrease in cash overdraft

Increase (decrease) in cash overdraft

Dividends paid

Payment for debt issue costs

Proceeds from exercises of stock options

2 unchanged sentences

Principal payments on finance lease obligations

Purchase of noncontrolling interest

NET CASH USED BY FINANCING ACTIVITIES

Effect of exchange rate changes on cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Thirty Nine and Thirteen Weeks Ended September 26, 2020 and September

(In thousands, except share and per share amounts)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Thirteen Weeks Ended March 27, 2021 and March 28, 2020

(Dollars in thousands)

Treasury Stock at Cost

Comprehensive

(Loss) Income

Balance December 26, 2020

Adoption of accounting standard

Dividends ($ 0.21 per share)

Purchases of common stock

Issuance of stock related to stock-based compensation plans

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Balance March 27, 2021

Dividends ($ 0.185 per share)

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive income

Balance June 27, 2020

Dividends ($ 0.21 per share)

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive income

Balance September 26, 2020

Landstar System, Inc.

and Subsidiary Shareholders

Treasury Stock at Cost

Comprehensive

Non-controlling

(Loss) Income

Balance December 28, 2019

Net income (loss)

Dividends ($ 0.165 per

Purchases of common

noncontrolling

Issuance of stock related

to stock-based

compensation plans

Other comprehensive

Adoption of accounting standard

Dividends ($ 0.185 per share)

Purchases of common stock

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive loss

Balance March 28, 2020

Dividends ($ 0.165 per

Purchases of common

Issuance of stock related

to stock-based

compensation plans

Other comprehensive

Balance June 29, 2019

Dividends ($ 0.185 per

Purchases of common

Issuance of stock related

to stock-based

compensation plans

Other comprehensive

Balance September 28,

See accompanying notes to consolidated financial statements.

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Revenue from Contracts with Customers – Disaggregation of Revenue

The following table summarizes the percentage of consolidated revenue generated by mode of transportation

and the dollar amount included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers hauled via equipment type during the thirty-nine-week and thirteen-week periods ended September 26, 2020 and September 28, 2019 ( dollars

in thousands):

Thirty Nine Weeks Ended

The following table summarizes (i) the percentage of consolidated revenue generated by mode of transportation and (ii) the total amount of truck transportation revenue hauled by BCO Independent Contractors and Truck Brokerage Carriers

generated by equipment type during the thirteen-week periods ended March 27, 2021

and March 28, 2020

(dollars in thousands):

Thirteen Weeks Ended

September 26,

September 28,

September 26,

September 28,

BCO Independent Contractors –

Brokerage Carriers -

Truck – BCO Independent Contractors

Truck – Truck Brokerage Carriers

Rail intermodal

Ocean and air cargo carriers

Equipment Type - Truck

Truck Equipment Type

Van equipment

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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 $ 2,766 ,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 $ 2,871,000 .

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

income tax purposes.

Pro forma 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 September 26, 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.

The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock

Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”).

6,000,000 shares of the Company’s common stock

authorized for issuance under the 2011 EIP and 115,000 shares of the Company’s common stock were authorized for issuance under the 2013 DSCP.

The ESOSIP, 2011 EIP and 2013 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):

Thirty Nine Weeks Ended

As of March 27, 2021, 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 and no stock options previously

granted under the ESOSIP are unvested or unexercised as of March 27, 2021.

The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated as of May 17, 2016, the “2013

6,000,000 shares of the Company’s common stock were authorized for issuance under the 2011 EIP and

115,000 shares of the Company’s common stock were authorized for issuance under the 2013 DSCP.

The ESOSIP, 2011 EIP and 2013 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.”

Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):

Thirteen Weeks Ended

September 26,

September 28,

September 26,

September 28,

Total cost of the Plans during the period

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Net cost of the Plans during the period

Included in income tax benefits recognized in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 were excess tax benefits from stock-based awards of $ 927,000 and $ 2,968,000 , respectively.

As of September 26, 2020, there were 60,586 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,675,862 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 thirteen-week periods ended March 27, 2021 and March 28, 2020 were excess tax benefits from stock-based awards of $ 343,000 and $ 706,000 , respectively.

As of March 27, 2021, there were 60,586 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,521,140 shares of the Company’s common stock reserved for issuance under the 2011

Restricted Stock Units

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Outstanding at December 26, 2020

Shares earned in excess of target (1)

Vested shares, including shares earned in excess of target

Outstanding at September 26, 2020

Represents additional shares earned under the February 2, 2017 RSU awards as 2019 financial results exceeded target performance level.

During the thirty-nine-week period ended September 26, 2020, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 28, 2019 and September 26, 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.

Vested shares

Outstanding at March 27, 2021

During the thirteen-week period ended March 27, 2021, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 26, 2020 and March 27, 2021 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2020 Annual Report on Form 10-K.

RSUs with a performance condition granted on January 29, 2021 may vest on January 31 of 2024, 2025 and 2026 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 $ 415,000 and $ 2,477,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019, respectively.

As of September 26, 2020, there was a maximum of $ 34.6 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.1 years.

income per diluted share from continuing operations as compared to the results from the 2020 fiscal year, adjusted to reflect the add back of non-cash

impairment charges recorded in the Company’s 2020 fiscal year related to certain assets, primarily customer contract and related customer relationship intangible assets, held by the Company’s Mexican subsidiaries.

The Company recognized approximately $ 3,223,000 and ($ 136,000 ) of share-based compensation expense/(benefit) related to RSU awards in the thirteen-week periods ended March 27, 2021

and March 28, 2020, respectively.

As of March 27, 2021

, there was a maximum of $ 39.8 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.4 years.

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

Stock Options

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

Weighted Average

Exercise Price

Weighted Average

Aggregate Intrinsic

Options outstanding at December 28, 2019

Options outstanding at September 26, 2020

Options exercisable at September 26, 2020

The total intrinsic value of stock options exercised during the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 was $ 1,599,000 and $ 1,877,000 , respectively.

As of September 26, 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 26, 2020

at September 26, 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.

at March 27, 2021

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.

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

As of September 26, 2020, there was $ 4,074,000 of total unrecognized compensation cost related to non-vested

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

The unrecognized compensation cost related to these non-vested

shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 1.9 years.

The provisions for income taxes for the 2020 and 2019 thirty-nine-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 thirty-nine-week period was 23.3 %, 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 and state

The provision for income taxes for the 2020 thirty-nine-week period was favorably impacted by $ 927,000 of excess tax benefits from stock-based awards.

The effective income tax rate for the 2019 thirty-nine-week period was 22.8 %, which was higher than the statutory

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 provision for income taxes for the 2019 thirty-nine-week period was favorably impacted by $ 2,968,000 of excess tax benefits from stock-based awards.

As of March 27, 2021, there was $ 5,054,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred

Stock Units granted under the Plans.

The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.4 years.

Stock Options

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

Weighted Average

Exercise Price per

Weighted Average

Aggregate Intrinsic

Options outstanding at December 26, 2020

Options outstanding at March 27, 2021

Options exercisable at March 27, 2021

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 27, 2021 and March 28, 2020 was $ 521,000 and $ 1,023,000 , respectively.

As of March 27, 2021, there was no unrecognized compensation cost related to stock options granted under the Plans.

The provisions for income taxes for the 2021 and 2020 thirteen-week periods were based on estimated annual effective income tax rates of 24.4 % and 24.2 %, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The increase in the estimated annual effective income tax rate was primarily attributable to increased anticipated nondeductible executive compensation during the 2021 period.

The effective income tax rate for the 2021 thirteen-week period was 24.4 %, which was higher than the statutory federal income tax rate of 21 % primarily attributable to state taxes and non-deductible

executive compensation, partially offset by excess tax benefits realized on 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.

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

Earnings per common share 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.

During the 2020 and 2019 thirty-nine-week and thirteen-week periods,

in reference to the determination of diluted earnings per share,

the future compensation cost attributable to outstanding

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 thirty-nine-week periods ended September 26, 2020 and September 28, 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.

and subsidiary for all periods because the performance metric requirements or market condition for vesting had not been satisfied.

Diluted earnings per share 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.

During the 2021 and 2020 thirteen-week periods, in reference to the determination of diluted earnings per share, the future compensation cost attributable to outstanding shares of non-vested

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

For each of the thirteen-week periods ended March 27, 2021 and March 28, 2020, no options outstanding to purchase shares of common stock were antidilutive.

Outstanding RSUs were excluded from the calculation of diluted earnings per share for all periods because the performance metric requirements or market condition for vesting had not been satisfied.

Additional Cash Flow Information

During the 2020 thirty-nine-week period, Landstar paid income taxes and interest of $ 28,761,000 and $ 3,087,000 , respectively.

During the 2019 thirty-nine-week period, Landstar paid income taxes and interest of $ 54,877,000 and $ 3,302,000 , respectively.

Landstar acquired operating property by entering into finance leases in the amounts of $ 7,485,000 and $ 6,481,000 in the 2020 and 2019 thirty-nine-week periods, respectively.

In addition, during the 2020 thirty-nine-week period, Landstar acquired $ 1,068,000 of operating property for which the Company accrued a corresponding liability in accounts payable as of September 26, 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.

During the 2021 thirteen-week period, Landstar paid income taxes and interest of $ 353,000 and $ 983,000 , respectively.

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

Landstar did no t acquire any operating property by entering into finance leases in either the 2021 or 2020 thirteen-week periods.

Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the thirty-nine-week and thirteen week periods ended September 26, 2020 and September 28, 2019 (in thousands):

Thirty Nine Weeks Ended

September 26, 2020

September 28, 2019

Transportation

External revenue

Internal revenue

Investment income

Operating income

Expenditures on long-lived assets

The following table summarizes information about the Company’s reportable business segments as of and for the thirteen-week periods ended March 27, 2021 and March 28, 2020 (in thousands):

Thirteen Weeks Ended

September 26, 2020

September 28, 2019

March 27, 2021

March 28, 2020

Transportation

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Expenditures on long-lived assets

In the thirty-nine-week periods ended September

26, 2020 and September 28, 2019, no single customer accounted

for more than 10 % of the Company’s consolidated revenue.

In the thirteen-week periods ended March 27, 2021 and March 28, 2020, 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 thirty-nine-week period ended September 26, 2020 (in thousands):

Holding Gains on

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 27, 2021 (in thousands):

Holding Gains

Available-for-Sale

Foreign Currency

Balance as of December 26, 2020

Other comprehensive gain (loss)

Balance as of September 26, 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 thirty-nine-week period ended September 26, 2020.

Other comprehensive loss

Balance as of March 27, 2021

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

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Fair value of the bond portfolio was determined using Level 1 inputs related to U.S.

Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities and direct obligations of government agencies.

Unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $ 3,350,000 and $ 1,427,000 at September 26, 2020 and December 28, 2019, respectively.

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 gains, net of unrealized losses, on the investments in the bond portfolio were $ 2,897,000 at March 27, 2021 and $ 3,578,000 at December 26, 2020, respectively.

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

investments are as follows at September 26, 2020 and December 28, 2019 (in thousands):

September 26, 2020

investments are as follows at March 27, 2021 and December 26, 2020 (in thousands):

March 27, 2021

Money market investments

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For those available-for-sale

investments with unrealized losses at September 26, 2020 and December 28, 2019, the following table summarizes the duration of the unrealized loss (in thousands):

investments with unrealized losses at March 27, 2021 and December 26, 2020, the following table summarizes the duration of the unrealized loss (in thousands):

Less than 12 months

12 months or longer

September 26, 2020

March 27, 2021

Asset-backed securities

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Corporate bonds and direct obligations of government agencies

Treasury obligations

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.

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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.

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

Further, the leases do not contain contingent rent provisions.

Landstar also leases certain trailing equipment to supplement the Company-

owned trailer fleet under “month-to-month”

Landstar also leases 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.

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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 thirty nine weeks ended September 26, 2020 were (in thousands):

The components of lease cost for finance leases and operating leases for the thirteen weeks ended March 27, 2021 were (in thousands):

Finance leases:

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Sublease income

operating lease income

A summary of the lease classification on our consolidated balance sheet as of September 26, 2020 is as follows (in thousands):

Operating lease right-of-use assets

Total net operating lease income

Total net lease cost

A summary of the lease classification on our consolidated balance sheet as of March 27, 2021 is as follows (in thousands):

Operating lease right-of-use

Finance lease assets

1 unchanged sentence

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 September 26, 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 March 27, 2021 (in thousands) :

2021 Remainder

Total future minimum lease payments

Total future minimum lease paym

Less amount representing interest ( 1.9 % to 4.4 %)

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Other current liabilities

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 September 26, 2020 were:

Deferred income taxes and other noncurrent liabilitie s

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of March 27, 2021 were:

Finance Leases

2 unchanged sentences

Weighted average discount rate

Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of September 26, 2020 and December 28, 2019.

On June 2, 2016 , Landstar entered into a credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent, which was amended and restated on August 18, 2020 to extend the maturity date to August 2023 and amend certain other terms (as so amended and restated, the “Credit Agreement”).

The Credit Agreement provides $ 250,000,000 of borrowing capacity in the form of a revolving credit facility, $ 35,000,000 of which may be utilized in the form of letters of credit.

Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of March 27, 2021 and December 26, 2020.

On August 18, 2020 , Landstar entered into an amended and restated credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”).

The Credit Agreement, which matures on August 18, 2023, provides $ 250,000,000 of borrowing capacity in the form of a revolving credit facility, $ 35,000,000 of which may be utilized in the form of letters of credit.

The Credit Agreement includes an “accordion” feature providing for a possible increase up to an aggregate borrowing capacity of $ 400,000,000 .

1 unchanged sentence

The revolving credit facility bears a commitment fee, payable quarterly in arrears, of 0.25 % to 0.35 %, based on the Company’s Leverage Ratio at the end of the most recent applicable fiscal quarter for which financial statements have been delivered.

As of September 26, 2020 and December 28, 2019, the Company had no borrowings outstanding under the Credit Agreement.

As of March 27, 2021 and December 26, 2020, the Company had no borrowings outstanding under the Credit Agreement.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness.

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Commitments and Contingencies

Short-term investments include $ 39,068,000 in current maturities of investments held by the Company’s insurance segment at September 26, 2020.

Short-term investments include $ 41,407,000 in current maturities of investments held by the Company’s insurance segment at March 27, 2021.

The non-current

2 unchanged sentences

investments, provide collateral for the $ 64,934,000 of letters of credit issued to guarantee payment of insurance claims.

As of September 26, 2020, Landstar also had $ 33,618,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

As of March 27, 2021, Landstar also had $ 33,620,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

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

1 unchanged sentence

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 thirty-nine-week and thirteen-week periods ended September 26, 2020 and September 28, 2019 (in thousands, except per share amounts):

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 26,

September 28,

September 26,

September 28,

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

The unfavorable development

of prior years’ claims in the thirty-nine-week period ended September 26, 2020 and the thirty

-nine-week period ended September 28, 2019 were each attributable to several claims as well as actuarially determined adjustments to prior year commercial trucking loss estimates.

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 have caused significant disruptions in the Mexican 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 anticipated 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 September 26, 2020.

Recent Accounting Pronouncements

Adoption of New Accounting Standards

In June 2016, the FASB issued Accounting Standards Update 2016-13–

Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

(“ASU 2016-13”),

which requires measurement and recognition of expected versus incurred credit losses for financial assets held.

The Company adopted ASU 2016-13

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

Subsequent Event

In October 2020, the Company announced a new initiative in support of its BCO Independent Contractor network relating to its regional field operations centers located in the United States and Canada.

It is the intent of the Company that this network of field operations centers will further support the Company’s efforts in recruiting and retaining BCO Independent Contractors.

In connection with this initiative, the Company expects to record a provision of approximately

during the 2020 fourth fiscal quarter relating to anticipated buyouts of certain incentive commission arrangements with several of its independent commission sales agents due to the Company’s discontinuation of a BCO recruitment and retention program that involved those agents.

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