What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-23 · 163 added, 160 removed, 640 unchanged (34% of the section changed)

7 unchanged sentences

Short-term investments

Trade accounts receivable, less allowance of $ 8,670 and $ 7,284

Trade accounts receivable, less allowance of $

Other receivables, including advances to independent contractors, less allowance of $ 8,125 and $ 7,239

2 unchanged sentences

Operating property, less accumulated depreciation and amortization of $ 344,099 and $ 299,407

LIABILITIES AND EQUITY

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

16 unchanged sentences

Total shareholders’ equity

Total liabilities and equity

Total liabilities and shareholders’ equity

See accompanying notes to consolidated financial statements.

8 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

10 unchanged sentences

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

7 unchanged sentences

and subsidiary

Other comprehensive income (loss):

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

investments, net of tax expense (benefit) of $ 463 , $ 561 , $( 206 )

Other comprehensive (loss) income:

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

investments, net of tax (benefit) expense of ($ 739 ), $ 463 , $ 561

Foreign currency translation (losses) gains

Other comprehensive income (loss)

Other comprehensive (loss) income

Comprehensive income attributable to Landstar System, Inc.

17 unchanged sentences

(Increase) decrease in trade and other accounts receivable

Increase in other assets

Decrease (increase) in other assets

Increase (decrease) in accounts payable

Increase (decrease) in other liabilities

Increase in insurance claims

(Decrease) increase in insurance claims

NET CASH PROVIDED BY OPERATING ACTIVITIES

16 unchanged sentences

Purchase of noncontrolling interest

Payment of contingent consideration

Payment of deferred consideration

NET CASH USED BY FINANCING ACTIVITIES

Effect of exchange rate changes on cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

(Decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

See accompanying notes to consolidated financial statements.

11 unchanged sentences

Balance December 29, 2018

Adoption of accounting standards (Note 1)

Net income (loss)

1 unchanged sentence

Purchases of common stock

Transaction with noncontrolling interests

Purchase noncontrolling interests

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive (loss) income

Other comprehensive income

Balance December 28, 2019

Net income (loss)

Adoption of accounting standards (Note 16)

Dividends ($ 2.79 per share)

Purchases of common stock

Purchase noncontrolling interests

Issuance of stock related to stock-based compensation plans

Issuance of stock related to

compensation plans

Stock-based compensation

1 unchanged sentence

Balance December 26, 2020

Adoption of accounting standards (Note 1 6

Dividends ($ 2.92 per share)

Purchases of common stock

Issuance of stock related to stock-based compensation plans

Issuance of stock related to

compensation plans

Stock-based compensation

Other comprehensive income

Other comprehensive loss

Balance December 25, 2021

30 unchanged sentences

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.

Adoption of Topic 606, “Revenue from Contracts with Customers”

The Company adopted Accounting Standards Update 2014-09

– Revenue from Contracts with Customers

(“ASU 2014-09”)

on December 31, 2017 under the modified retrospective transition method resulting in a $ 773,000 cumulative adjustment to retained earnings.

Our reported results for 2020, 2019 and 2018 are presented under Topic 606 .

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)

truck transportation revenue hauled

by BCO Independent Contractors and Truck Brokerage Carriers generated by

equipment type during the fiscal years ended December 26, 2020, December 28, 2019 and December 29, 2018 (dollars in thousands):

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 25, 2021, December 26, 2020 and December 28, 2019 (dollars in thousands):

Fiscal Years Ended

7 unchanged sentences

Less-than-truckload

Other truck transportation (1)

Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment.

Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.

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.

For periods prior to May 1, 2019, Landstar retains liability for commercial trucking claims up to $ 5,000,000 per occurrence and maintains various third party insurance arrangements for liabilities in excess of its $ 5,000,000 self-insured retention.

Effective May 1, 2019, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $ 5,000,000 and $ 10,000,000 (the “Initial Excess Policy”) with a third party insurance company.

For commercial trucking claims incurred on or after May 1, 2019 through April 30, 2022, the Initial Excess Policy provides for a limit for a single loss of $ 5,000,000 , with an aggregate limit of $ 15,000,000 for each policy year, an aggregate limit of $ 20,000,000 for the thirty-six

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

For periods prior to May 1, 2019, Landstar retains liability for commercial trucking claims up to $ 5 million

per occurrence and maintains various third party insurance arrangements for liabilities in excess of its $

self-insured retention.

Effective May 1, 2019, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $

(the “Initial Excess Policy”) with a third party insurance company.

For commercial trucking claims incurred on or after May 1, 2019 through April 30, 2022, the Initial Excess Policy provides for a limit for a single loss of $

with an aggregate limit of $

for each policy year, an aggregate limit of $

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

pre-established

amounts of additional premium.

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

amount of additional premium, Landstar would retain liability of up to $ 10,000,000 per occurrence, inclusive of its $ 5,000,000 self-insured retention for commercial trucking claims during the remainder of the applicable policy year(s).

s a result of the Company’s aggregate loss experience since it entered into the Initial Excess Policy, the Initial Excess Policy required the Company to

pay additional premium up to a pre-established maximum amount of $ 3,500,000 ,

pre-established

amount of additional premium, Landstar would retain liability of up to $

per occurrence, inclusive of its $

self-insured retention for commercial trucking claims during the remainder of the applicable policy year(s).

Moreover, as a result of the Company’s aggregate loss experience since it entered into the Initial Excess Policy, the Initial Excess Policy required the Company to pay additional premium relating to its existing coverage up to a

pre-established

maximum amount of $

which was provided for in insurance and claims costs for the Company’s 2020 fiscal first quarter.

The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of $ 10,000,000 .

The Company als o

maintains third party insurance arrangements providing excess coverage f o

r commercial trucking liabilities in excess of $ 10

These third party arrangements provide coverage on a per occurrence or aggregated basis.

Due to the increasing cost of commercial auto liability claims throughout the United States in recent years, the availability of such excess coverage has significantly decreased and the pricing associated with such excess coverage, to the extent available, has significantly increased.

Effective May 1, 2020 with respect to the annual policy year ending April 30, 2021, the Company experienced an increase of approximately $ 14 million, or over 170 %, in the premiums charged by third party insurance companies to the Company for excess coverage for commercial trucking liabilities in excess of $ 10,000,000 .

In addition, third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of Landstar’s self-insured retention generally require that the Company fund settlement payments to claimants and seek reimbursement from the Company’s third party insurance providers, as applicable.

In connection with settlements of claims in excess of the Company’s $ 5 million self-insured retention, the Company accrues for such anticipated settlement payments and records a corresponding receivable for amounts the Company expects to collect from its third party insurance providers following the payment of such settlement amounts.

On the Company’s consolidated balance sheet as of December 26, 2020, the Company has an aggregate accrual of current liabilities in insurance claims for anticipated payments of settlement amounts above our self-insured retention of

In recent years,

increased the level of its financial exposure to commercial trucking claims in excess of $ 10

including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other arrangements with third party insurance companies, based on the availability of coverage within certain excess insurance coverage layers and estimated cost differentials between proposed premiums from third party insurance companies and historical and actuarially projected losses experienced by the Company at various levels of excess insurance coverage

addition, third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of Landstar’s self-insured retention generally require that the Company fund settlement payments to claimants and seek reimbursement from the Company’s third party insurance providers, as applicable.

In connection with settlements of claims in excess of the Company’s $

5 million self-insured retention, the Company accrues for such anticipated settlement payments and records a corresponding receivable for amounts the Company expects to collect from its third party insurance providers following the payment of such settlement amounts.

On the Company’s consolidated balance sheet as of December 26, 2020, the Company had an aggregate accrual of current liabilities in insurance claims for anticipated payments of settlement amounts above our self-insured retention of $

104,000,000 , and a corresponding amount of current assets included in other receivables.

The Company believes it is reasonably assured that it will collect these receivables from its third party insurance providers following its payment of the settlement amounts included in its accrual.

The Company evaluates collectability of these receivables based on the credit worthiness and surplus of the applicable third party insurance provider, along with its prior experience and contractual terms with such third party insurance provider.

Those insurance claims in excess of the Company’s self-insured retention were paid, and full collection from the Company’s excess insurers occurred, during the Company’s 2021 first fiscal quarter.

Further, the Company retains liability of up to $ 1,000,000 for each general liability claim, up to $ 250,000 for each workers’ compensation claim and up to $ 250,000 for each cargo claim.

2 unchanged sentences

Replacement tires are charged to expense when placed in service.

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

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

At December 25, 2021, the Company had $ 4,049,000 of restricted cash held by the Company’s insurance segment included in the short-term investments balance of $ 35,778 ,000, providing collateral, along with certain other investments as further described in footnote 4, for the letters of credit issued to guarantee payment of insurance claims.

Financial Instruments

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Trailing equipment is being depreciated over 7 to 10 years.

Information technology hardware and software included in other equipment is generally being depreciated over 3 to 7 years.

Information technology hardware and software is generally being depreciated over 3 to 7 years.

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

has two reporting units within the transportation logistics segment that report goodwill.

The Company has two 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,

8 unchanged sentences

Share-Based Payments

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

restricted stock and Deferred Stock Units.

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

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

restricted stock, Deferred Stock Units and stock options.

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.

3 unchanged sentences

Forfeitures are estimated at grant date based on historical experience and anticipated employee turnover.

The fair values of each share of non-vested 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 non-vested restricted stock and Deferred Stock Units are recognized on a straight-line basis over the requisite service period for the award.

The fair values of each share of non-vested

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 non-vested

restricted stock and Deferred Stock Units are recognized on a straight-line basis ov e

r the requisite service period for the award.

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 attributable to Landstar System, Inc.

and subsidiary are based on the weighted average number of shares outstanding, including outstanding non-vested

restricted stock and outstanding Deferred Stock Units.

Diluted earnings

per share attributable to Landstar System, Inc.

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):

Average number of common shares outstanding

Incremental shares from assumed exercises of stock options

Average number of common shares and common share equivalents outstanding

During the fiscal years ended December 25, 2021, December 26, 2020 and December 28, 2019, in reference to the determination of diluted earnings per share attributable to Landstar System, Inc.

and subsidiary, 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 the fiscal years ended December 25, 2021, December 26, 2020 and December 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.

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.

Dividends Payable

9 unchanged sentences

Acquired Business

On May 6, 2020, the C

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 May 6, 2020, the Company formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”).

Landstar Blue arranges truckload brokerage services

with a focus on the contract services market.

Landstar Blue also helps

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 $

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

In addition, the Company assumed approximately $

200,000 in liabilities consisting of additional contingent purchase price, of which $

168 ,000 was remitted during the Company’s 2021 second fiscal quarter.

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.

With respect to this goodwill,

is expected to be

deductible by th e

Company for U

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.

sults of opera tions for Landstar Blue are presented as part of the Company’s transportations logistics segment.

Transaction costs for the acquisition were insignificant.

4 unchanged sentences

Available-for-Sale

Foreign Currency

Balance as of December 29, 2018

Other comprehensive loss

Balance as of December 29, 2018

Other comprehensive income

2 unchanged sentences

Balance as of December 26, 2020

Other comprehensive loss

Balance as of December 25, 2021

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 25, 2021, December 26, 2020 and December 28, 2019

(4) Investments

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

Treasury obligations having maturities of up to five years (the “bond portfolio”) and money market investments.

Investments include primarily investment-grade corporate bonds and asset-backed securities having maturities of up to five years (the “bond portfolio”) and money market investments.

Investments in the bond portfolio are reported as available-for-sale

2 unchanged sentences

Management performs an analysis of the nature of the unrealized losses on available-for-sale

investments to determine whether an allowance for credit loss is appropriate.

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 to determine whether an allowance for credit loss is necessary.

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.

28 unchanged sentences

Corporate bonds and direct obligations of government agencies

Treasury obligations

The Company believes unrealized l o

sses 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 $ 41,375,000 in current maturities of investments held by the Company’s insurance segment at December 26, 2020.

The non-current

portion of the bond portfolio of $ 81,216,000 is included in other assets.

The short-term investments, together with $ 30,774,000 of non-current

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

Short-term investments include $ 31,729,000 in current maturities of investments and $ 4,049 ,000

cash held by the Company’s insurance segment at December

portion of the bond portfolio of $

139,864,000 is included in other assets.

The short-term investments, together with $

44,069,000 of

investments, provide collateral for the $

72,267,000 of letters of credit issued to guarantee payment of insurance claims.

Investment income represents the earnings on the insurance segment’s assets.

14 unchanged sentences

Net deferred tax liability

The following table summarizes the differences between income taxes calculated at the federal income tax rates of 21 % for 2020, 2019, and 2018 on income before income taxes and the provisions for income taxes (in thousands):

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

Income taxes at federal income tax rate

4 unchanged sentences

Share-based payments

Section 199 deductions and R&D credits

Research and development credits

The Company files a consolidated U.S.

6 unchanged sentences

The Company’s wholly-owned Mexican subsidiaries, Landstar Holdings, S.

de R.L.C.V., Landstar Metro, S.A.P.I.

and Landstar Metro Servicios S.A.P.I.

and Landstar Metro, S.A.P.I.

de C.V., are subject to Mexican income and other taxes.

3 unchanged sentences

Estimated interest and penalties on the provision for the uncertainty of certain tax positions is included in income tax expense.

At December 26, 2020 and December 28, 2019 ,

there was $ 648,000 and $ 690,000 , respectively, accrued for estimated interest and penalties related to the uncertainty of certain tax positions.

At December 25, 2021 and December 26, 2020, there was $ 658,000 and $ 648,000 , 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 2022.

11 unchanged sentences

Trailing equipment

Information technology hardware and software

Other equipment

7 unchanged sentences

domiciled full-time employees who have completed six months of service.

The Company reduced the employee service requirement to three months of service as of January 1, 2022.

Eligible employees make voluntary contributions up to 75 % of their base salary, subject to certain limitations.

2 unchanged sentences

Other than the finance lease obligations as presented on the consolidated balance sheets, the Company had no outstanding debt as of December 25, 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.

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 .

18 unchanged sentences

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”

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 our BCO Independent Contractors.

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.

4 unchanged sentences

Landstar has a centrally managed treasury function;

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

therefore, based on the applicable lease terms and the current economic environment,

the Company applies

a portfolio approach for determining the incremental borrowing rate.

The components of lease cost for finance leases and operating leases as of December 25, 2021 were (in thousands):

8 unchanged sentences

Total net lease cost

Total net operating lease income, net of rent expense under operating leases, was $ 1,620,000 in fiscal year 2020.

Total rent expense, net of sublease rent income, under operating leases was $ 490,000 in fiscal year 2019.

Total sublease rent income, net of rent expense, under operating leases was $ 868,000 in fiscal year 2018.

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

A summary of the lease classification on

the Company’s

consolidated balance sheet as of December

2021 is as follows (in thousands):

Operating lease right-of-use

2 unchanged sentences

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 December 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 December 25, 2021 (in thousands):

Total future minimum lease payments

11 unchanged sentences

(10) Share-Based Payment Arrangements

As of Decemb e

r 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.

As of December 25, 2021, 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 Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”).

6,000,000 shares of the Company’s Common Stock were authorized for issuance under the 2011 EIP and 115,000 shares of the Company’s Common Stock were authorized for issuance under the 2013 DSCP.

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

The 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):

Total cost of the Plans during the period

2 unchanged sentences

Included in income tax benefits recognized in the fiscal years ended December 25, 2021, December 26, 2020 and December 28, 2019 were excess tax benefits from stock-based awards of $ 1,057,000 , $ 941,000 and $ 3,019,000 , respectively.

As of December 26, 2020, there were 60,586 shares of the Company’s Common Stock reserved for issuance under the 2013 DSCP and 3,672,286 shares of the Company’s Common Stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

As of December 25, 2021, there were 56,782 shares of the Company’s Common Stock reserved for issuance under the 2013 DSCP and 3,502,816 shares of the Company’s Common Stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

3 unchanged sentences

Outstanding at December 29, 2018

Shares earned in excess of target (1)

Vested shares, including shares earned in excess of target

Outstanding at December 28, 2019

7 unchanged sentences

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

Represents shares earned in excess of target under the May 1, 2015 RSU award as total shareholder return exceeded the target under the award.

During fiscal years 2019, 2020 and 2021, the Company granted RSUs with a performance condition.

During fiscal years 2018 and 2019, the Company also issued RSUs with a market condition, as further described below.

During fiscal year 2019, the Company also issued RSUs with a market condition, as further described below.

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 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.

RSUs with a performance condition granted on January 31, 2020 may vest on January 31 of 2023, 2024 and 2025.

RSUs with a performance condition granted on February 1, 2019 may vest on January 31 of 2022, 2023 and 2024.

RSUs with a performance condition granted on February 2, 2018 may vest on January 31 of 2021, 2022 and 2023.

RSUs with a performance condition granted

on January 31, 2020, February 1, 2019 and February 2, 2018 vest based on growth in operating income and pre-tax

RSUs with a performance condition granted on January 31, 2020 and February 1, 2019 vest 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 a base year, being the year immediately preceding the year of grant.

At the time of grant, the target number of common shares available for issuance under the January 31, 2020, February 1, 2019 and February 2, 2018 grants equals

100 % of the number of RSUs granted, and the maximum number of common shares available for issuance under the January 31, 2020, February 1, 2019 and February 2, 2018 grants equals

200 % of the number of RSUs credited to the recipient.

At the time of grant, the target number of common shares available for issuance under the January 29, 2021, January 31, 2020 and February 1, 2019 grants equals 100 % of the number of RSUs granted, and the maximum number of common shares available for issuance under the January 29, 2021, January 31, 2020 and February 1, 2019 grants equals 200 % 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.

3 unchanged sentences

During fiscal year 2019, the Company granted 9,725 RSUs that vest based on a market condition.

During fiscal year 2018, the Company granted 9,324 RSUs that vest based on a market condition.

The RSUs granted in 2019 may vest on June 30 of 2023, 2024 and 2025, and the RSUs granted in 2018 may vest on June 30 of 2022, 2023 and 2024, in each case based on the Company’s total shareholder return (“TSR”) compound annual growth rate over the vesting periods, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary.

The RSUs granted in 2019 may vest on June 30 of 2023, 2024 and 2025 based on the Company’s total shareholder return (“TSR”) compound annual growth rate over the vesting periods, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary.

The maximum number of common shares available for issuance under each grant equals 150 % of the number of RSUs granted.

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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 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.

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, 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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Exercise Price

$ 51.99 - $ 56.40

Options Exercisable

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Exercise Price

$ 51.99 - $ 56.40

At December 25, 2021, the total intrinsic value of options outstanding and exercisable was $ 1,001,000 .

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Directors of the Company who are not employees of the Company (each an “Eligible Director”) are entitled under the 2013 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 $ 110,000 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 2020, 4,890 restricted shares and 978 Deferred Stock Units were granted to Eligible Directors.

In fiscal year 2021, 3,804 restricted shares were granted to Eligible Directors.

In fiscal year 2020, 4,890 restricted shares and 978 Deferred Stock Units were granted to Eligible Directors.

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Restricted shares and Deferred Stock Units granted in 2019, 2020 and 2021 vest on the date of the next Annual Meeting.

During each of fiscal years 2020, 2019 and 2018, $ 660,000 of compensation cost was recorded for the grant of these restricted shares and Deferred Stock Units.

During fiscal years 2021, 2020 and 2019, $ 669,000 , $ 660,000 and $ 660,000 , respectively, of compensation cost was recorded for the grant of these restricted shares and Deferred Stock Units.

On December 7, 2021, the Landstar System, Inc.

Board of Directors authorized the Company to purchase up to 1,849,068 additional

shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions.

As of December 26, 2020, the Company had authorization to purchase in the aggregate up to 1,821,030 shares of its Common Stock under this program.

No specific expiration date has been assigned to the December 9, 2019 authorization.

During fiscal year 2020, Landstar purchased a total of 1,178,970 shares of its Common Stock at a total cost of $ 115,962 ,000 pursuant to its previously announced stock purchase programs.

Board of Directors authorized the Company to purchase up to 1,912,824 additional shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions.

On December 9, 2019, the Landstar System, Inc.

Board of Directors authorized the Company to purchase up to 1,849,068 shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions.

As of December 25, 2021, the Company had authorization to purchase in the aggregate up to 3,000,000 shares of its Common Stock under these programs.

No specific expiration date has been assigned to the December 7, 2021 or December 9, 2019 authorizations.

During fiscal year 2021, Landstar purchased a total of 733,854 shares of its Common Stock at a total cost of $ 122,722 ,000 pursuant to its previously announced stock purchase program.

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

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At December 25, 2021, in addition to the $ 72,267,000 letters of credit secured by investments, Landstar had $ 33,170,000 of 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.

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

Many of these claims are covered in whole or in part by insurance.

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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 series of digital technologies, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $ 4.1 billion during the most recently completed fiscal year.

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 $ 6.5 billion during the most recently completed fiscal year.

The Company reports the results of two operating segments:

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The transportation logistics segment provides a wide range of integrated transportation management solutions.

Transportation services offered by the Company include truckload and less-than-truckload transportation, rail intermodal, air cargo, ocean cargo, expedited ground and air delivery of time-critical freight, heavy-haul/specialized, U.S.-Canada and U.S.-Mexico cross-border, intra-Mexico, intra-Canada, project cargo and customs brokerage.

Examples of the industries serviced by the transportation logistics segment include automotive parts and assemblies, consumer durables,

building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics and military equipment.

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, 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 and military equipment.

In addition, the transportation logistics segment provides transportation services to other transportation companies, including third party logistics and less-than-truckload service providers.

Each of the independent commission sales agents has the opportunity to market all of the services provided by the transportation logistics segment.

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, Landstar Metro and Landstar Servicios are presented as part of the Company’s transportation logistics segment.

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.

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Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates.

The following table summarizes the adverse

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.

The following table summarizes the adverse 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.

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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 fiscal year s

ended December 26, 2020 and December 28, 2019 was

attributable in each year

to several specific

claims as well as actuarially determined adjustments to prior year commercial trucking loss estimates.

The unfavorable development of prior years’ claims in the fiscal year ended December 25, 2021 was primarily attributable to five claims.

The unfavorable development of prior years’ claims in fiscal years ended December 26, 2020 and December 28, 2019 was attributable in each year to several specific claims as well as actuarially determined adjustments to prior year commercial trucking loss estimates.

(15) Impairment of Intangible and Other Assets

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(“Fletes Avella”).

During the 2020 second fiscal quarter negative macroeconomic trends in Mexico caused significant disruptions in the Mexican economy.

During the 2020 second fiscal quarter negative macroeconomic trends in Mexico during the first half of 2020, including issues in the international oil and gas sector, 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 caused updated

financial projections relating to these intangible assets to be substantially below those originally anticipated at the acquisition date.

The impairment tests resulted in an impairment charge of $ 2,582 ,000, as the negative macroeconomic trends in Mexico caused updated financial projections as of the end of the 2020 second quarter 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 December 25, 2021.

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We have audited the accompanying consolidated balance sheets of Landstar System, Inc.

and subsidiary (the Company) as of December 26, 2020 and December 28, 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018, 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 26, 2020 and December 28, 2019, and the results of its operations and its cash flows for each of the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018, in conformity with U.S.

and subsidiary (the Company) as of December 25, 2021 and December 26, 2020, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the fiscal years in the three-year period ended December 25, 2021, 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 25, 2021 and December 26, 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 25, 2021, in conformity with U.S.

generally accepted accounting principles.

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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-K

Item 8. Financial Statements and Supplementary Data