What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-10-29 · 105 added, 182 removed, 274 unchanged (51% of the section changed)

2 unchanged sentences

They have been prepared in accordance with Rule

of Regulation S-X

of Regulation

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 25, 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.

Operating results for the thirteen weeks ended March 26, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2022.

LANDSTAR SYSTEM, INC.

2 unchanged sentences

(Dollars in thousands, except per share amounts)

September 25,

Current Assets

13 unchanged sentences

Dividends payable

Accrued income taxes

Other current liabilities

16 unchanged sentences

(Dollars in thousands, except per share amounts)

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Investment income

6 unchanged sentences

Depreciation and amortization

Impairment of intangible and other assets

Total costs and expenses

10 unchanged sentences

(Dollars in thousands)

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Other comprehensive (loss) income:

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

investments, net of tax (benefit) expense of ($ 347 ), $ 413 , ($ 104 ) and $ 75

Other comprehensive loss:

Unrealized holding losses on available-for-sale

investments, net of tax benefits of $ 1,421 and $ 147

Foreign currency translation gains (losses)

Other comprehensive (loss) income

Other comprehensive loss

Comprehensive income

4 unchanged sentences

(Dollars in thousands)

Thirty Nine Weeks Ended

September 25,

September 26,

Thirteen Weeks Ended

OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of operating property and intangible assets

Depreciation and amortization

interest charges

1 unchanged sentence

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 in trade and other accounts receivable

Increase in other assets

(Increase) decrease in trade and other accounts receivable

Decrease in other assets

Increase in accounts payable

Increase in other liabilities

(Decrease) increase in insurance claims

Increase (decrease) in insurance claims

NET CASH PROVIDED BY OPERATING ACTIVITIES

INVESTING ACTIVITIES

Net changes in other short-term investments

Sales and maturities of investments

2 unchanged sentences

Proceeds from sales of operating property

Consideration paid for acquisition

NET CASH USED BY INVESTING ACTIVITIES

FINANCING ACTIVITIES

Increase (decrease) in cash overdraft

(Decrease) increase in cash overdraft

Dividends paid

Payment for debt issue costs

Proceeds from exercises of stock options

Taxes paid in lieu of shares issued related to stock-based compensation plans

Borrowings on revolving credit facility

Purchases of common stock

Principal payments on finance lease obligations

Payment of deferred consideration

NET CASH USED BY FINANCING ACTIVITIES

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Decrease 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.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Thirty Nine and Thirteen Weeks Ended September 25, 2021 and September 26, 2020

Thirteen Weeks Ended March 26, 2022 and March 27, 2021

(Dollars in thousands)

1 unchanged sentence

Comprehensive

(Loss) Income

Balance December 25, 2021

Dividends ($ 0.25 per share)

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive loss

Balance March 27, 2021

Dividends ($ 0.21 per share)

Purchases of common stock

Issuance of stock related to stock-based compensation plans

Stock-based compensation

Other comprehensive income

Balance June 26, 2021

Dividends ($ 0.25 per share)

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

Other comprehensive loss

Balance September 25, 2021

Balance March 26, 2022

Treasury Stock at Cost

Comprehensive

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

Stock-based compensation

Issuance of stock related to stock-based

compensation plans

Other comprehensive loss

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

See accompanying notes to consolidated financial statements.

10 unchanged sentences

Revenue from Contracts with Customers – Disaggregation of Revenue

The following table summarizes (i) the percentage of consolidated revenue generated by mode of transportation and (ii) the total amount of truck transportation revenue hauled by BCO Independent Contractors and Truck Brokerage Carriers generated by equipment type during the thirty-nine-week and thirteen-week periods ended September 25, 2021 and September 26, 2020 (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 26, 2022 and March 27, 2021 (dollars in thousands):

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Truck – BCO Independent Contractors

10 unchanged sentences

Share-based Payment Arrangements

As of September 25, 2021, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”).

As of March 26, 2022, 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”).

1 unchanged sentence

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):

Thirty Nine Weeks Ended

Thirteen Weeks Ended

September 25,

September 26,

September 25,

September 26,

Total cost of the Plans during the period

1 unchanged sentence

Net cost of the Plans during the period

Included in income tax benefits recognized in the thirty-nine-week periods ended September 25, 2021 and September 26, 2020 were excess tax benefits from stock-based awards of $ 1,039,000 and $ 927,000 , respectively.

As of September 25, 2021, there were 56,782 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,505,880 shares of the Company’s common stock reserved for issuance under the 2011 EIP.

Included in income tax benefits recognized in the thirteen-week periods ended March 26, 2022 and March 27, 2021 were excess tax benefits from stock-based awards of $ 2,869,000 and $ 343,000 , respectively.

As of March 26, 2022, there were 56,502 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,230,826 shares of the Company’s common stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

3 unchanged sentences

Shares earned in excess of target (1)

Vested shares

Outstanding at September 25, 2021

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 the thirty-nine-week period ended September 25, 2021, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 26, 2020 and September 25, 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.

Vested shares, including shares earned in excess of target

Outstanding at March 26, 2022

Represents additional shares earned under each of the February 2, 2017;

February 2, 2018 and February 1, 2019 RSU awards as fiscal year 2021 financial results exceeded target performance level.

During the thirteen-week period ended March 26, 2022, the Company granted RSUs with a performance condition.

Outstanding RSUs at both December 25, 2021 and March 26, 2022 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2021 Annual Report on Form 10-K.

RSUs with a performance condition granted on January 28, 2022 may vest on January 31 of 2025, 2026 and 2027 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.

The Company recognized

approximately $

16,223,000 and $

415,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September

2021 and September

2020 , respectively.

As of September

2021 , there was a maximum of $

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

With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will

determined based on future operating results.

income per diluted share from continuing operations as compared to the results from the 2021 fiscal year.

The Company recognized approximately $

1,301,000 and $ 3,223,000 of share-based compensation expense related to RSU awards in the thirteen-week periods ended March 26, 2022 and March 27, 2021, respectively.

As of March 26, 2022, there was a maximum of $ 27.3 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.9 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.

Restricted Stock and Deferred Stock Units

2 unchanged sentences

Number of Shares

and Deferred Stock

Weighted Average

at December 25, 2021

at September 25, 2021

at March 26, 2022

The fair value of each share of non-vested

2 unchanged sentences

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.

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.

Deferred Stock Units become vested 100 % on the first anniversary of the date of the grant.

1 unchanged sentence

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

As of September

2021 , there was $

4,726,000 of total unrecognized compensation cost related to

As of March 26, 2022, there was $ 5,555,000 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

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

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:

Exercise Price

Weighted Average

Exercise Price per

Weighted Average

Aggregate Intrinsic

Options outstanding at December 25, 2021

Options outstanding at September 25, 2021

Options exercisable at September 25, 2021

The total intrinsic value of

stock options exercised during the thirty-nine-week periods ended September

2021 and September

644,000 and $

1,599,000 , respectively.

As of September

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

(3) Income Taxes

The provisions for income taxes for the 2021 and 2020 thirty-nine-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 thirty-nine-week period was 24.2 %, which was higher than the statutory federal income tax rate of 21 % primarily attributable to state taxes and nondeductible executive compensation, partially offset by excess tax benefits realized on 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 tax refunds.

Options outstanding at March 26, 2022

Options exercisable at March 26, 2022

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 26, 2022 and March 27, 2021 was $ 369,000 and $ 521,000 , respectively.

As of March 26, 2022, there was no unrecognized compensation cost related to stock options granted under the Plans.

The provisions for income taxes for the 2022 and 2021 thirteen-week periods were based on an estimated annual effective income tax rate of 24.5 % and 24.4 %, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards.

The estimated annual effective income tax rate was higher than the statutory federal income tax rate

of 21 % in both periods primarily attributable to state taxes and non-deductible

executive compensation.

The effective income tax rate for the 2022 thirteen-week period w

as 22.8 %, which was lower than the estimated annual effective income tax rate of 24.5 %, primarily attributable to excess tax benefits realized on stock-based awards.

The effective income tax rate for the 2021 thirteen-week period o

f 24.4 % was equal to the estimated annual effective income tax rate during the 2021 period.

Earnings Per Share

2 unchanged sentences

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 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

During the 2022 and 2021 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 thirty-nine-week periods ended September 25, 2021 and September 26, 2020, no options outstanding to purchase shares of common stock were antidilutive.

For each of the thirteen-week periods ended March 26, 2022 and March 27, 2021, 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 2021 thirty-nine-week period, Landstar paid income taxes and interest of $ 71,823,000 and $ 2,780,000 , respectively.

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

Landstar acquired operating property by entering into finance leases in the amounts of $ 23,080,000 and $ 7,485,000 in the 2021 and 2020 thirty-nine-week periods, respectively.

During the 2022 thirteen-week period, Landstar paid income taxes and interest of $ 2,031,000 and $ 1,029,000 , respectively.

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

Landstar did no t acquire any operating property by entering into finance leases in either the 2022 or 2021 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 25, 2021 and September 26, 2020 (in thousands):

Thirty Nine Weeks Ended

September 25, 2021

September 26, 2020

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 26, 2022 and March 27, 2021 (in thousands):

Thirteen Weeks Ended

September 25, 2021

September 26, 2020

March 26, 2022

March 27, 2021

Transportation

5 unchanged sentences

Expenditures on long-lived assets

In the thirty-nine-week and thirteen-week periods ended September 25, 2021 and September 26, 2020, no single customer accounted for more than 10 % of the Company’s consolidated revenue.

In the thirteen-week periods ended March 26, 2022 and March 27, 2021, 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 25, 2021 (in thousands):

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 26, 2022 (in thousands):

Holding Gains

Available-for-Sale

Foreign Currency

Balance as of December 25, 2021

Other comprehensive (loss) gain

Balance as of September 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 thirty-nine-week period ended September 25, 2021.

(8) 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.

Other comprehensive (loss) income

Balance as of March 26, 2022

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

11 unchanged sentences

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 $ 1,971,000 at September 25, 2021 and $ 3,578,000 at December 26, 2020, respectively.

Unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $ 6,464,000 at March 26, 2022, while unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $ 144,000 at December 25, 2021.

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

investments are as follows at September 25, 2021 and December 26, 2020 (in thousands):

September 25, 2021

investments are as follows at March 26, 2022 and December 25, 2021 (in thousands):

March 26, 2022

Money market investments

8 unchanged sentences

For those available-for-sale

investments with unrealized losses at September 25, 2021 and December 26, 2020, the following table summarizes the duration of the unrealized loss (in thousands):

investments with unrealized losses at March 26, 2022 and December 25, 2021, the following table summarizes the duration of the unrealized loss (in thousands):

Less than 12 months

12 months or longer

September 25, 2021

March 26, 2022

Asset-backed securities

Corporate bonds and direct obligations of government agencies

Treasury obligations

December 25, 2021

Asset-backed securities

Corporate bonds and direct obligations of government agencies

Corporate bonds and direct obligations of

government agencies

The Company believes unrealized losses on investments were primarily caused by rising interest rates rather than changes in credit quality.

1 unchanged sentence

For these reasons, no losses have been recognized in the Company’s consolidated statements of income.

Landstar’s noncancelable leases are primarily comprised of finance leases for the acquisition of new trailing equipment.

Each finance lease for the acquisition of trailing equipment is a

five year lease with a $

1 purchase option for the applicable equipment at lease expiration.

Substantially all of Landstar’s operating lease

noncancelable leases are primarily comprised of finance leases for the acquisition of new trailing equipment.

Each finance lease for the acquisition of trailing equipment is a five year lease with a $ 1 purchase option for the applicable equipment at lease expiration.

Substantially all of Landstar’s operating lease right-of-use

assets and operating lease liabilities represent leases for facilities maintained in support of the Company’s network of BCO Independent Contractors and office space used to conduct Landstar’s business.

These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other

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 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.

The components of lease cost for finance leases and operating leases for the thirty nine weeks ended September 25, 2021 were (in thousands):

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 for the thirteen weeks ended March 26, 2022 were (in thousands):

Finance leases:

7 unchanged sentences

Total net lease cost

A summary of the lease classification on our consolidated balance sheet as of September 25, 2021 is as follows (in thousands):

A summary of the lease classification on our consolidated balance sheet as of March 26, 2022 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 25, 2021 (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 26, 2022 (in thousands):

2022 Remainder

6 unchanged sentences

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 25, 2021 were:

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of March 26, 2022 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 25, 2021 and December 26, 2020.

In addition to the finance lease obligations as presented on the consolidated balance sheets, the Company had

in outstanding debt as of March 26, 2022, consisting of borrowings under the Company’s revolving credit facility.

The Company had

borrowings under the revolving credit facility as of December 25, 2021.

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”).

3 unchanged sentences

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 25, 2021 and December 26, 2020, the Company had no borrowings outstanding under the Credit Agreement.

As of March 26, 2022, the weighted average interest rate on borrowings outstanding was 1.66 %.

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

8 unchanged sentences

Commitments and Contingencies

Short-term investments include $ 36,644,000 in current maturities of investments held by the Company’s insurance segment at September 25, 2021.

Short-term investments include $ 34,292,000 in current maturities of investments and $ 1,387,000 in restricted cash held by the Company’s insurance segment at March 26, 2022.

The non-current

2 unchanged sentences

investments, provide collateral for the $ 72,267,000 of letters of credit issued to guarantee payment of insurance claims.

As of September 25, 2021, Landstar also had $ 33,577,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

As of March 26, 2022, Landstar also had $ 33,170,000 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.

(12) 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 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 related 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 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 significantly exceeded its carrying value as of June 27, 2020.

The fair value of the Company’s Mexico and cross-border reporting unit continues to significantly exceed its carrying value as of September 25, 2021.

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