| Significant Accounting Policies | (1) Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (“LSHI”). Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation. Estimates The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Fiscal Year Landstar’s fiscal year is the 52 or 53 week period ending the last Saturday in December. Revenue Recognition The nature of the Company’s freight transportation services and its performance obligations to customers, regardless of the mode of transportation used to perform such services, relate to the safe and on-time pick-up shipment-by-shipment shipment-by-shipment pre-defined (30-60) pick-up pick-up Revenue from Contracts with Customers – Disaggregation of Revenue The following table summarizes (i) the percentage of consolidated revenue generated by mode of transportation and (ii) the total amount of truck transportation revenue hauled by BCO Independent Contractors and Truck Brokerage Carriers generated by equipment type during the fiscal years ended December 25, 2021, December 26, 2020 and December 28, 2019 (dollars in thousands):
Fiscal Years Ended
Mode December 25, 2021 December 26, 2020 December 28, 2019
Truck – BCO Independent Contractors 40 % 45 % 45 %
Truck – Truck Brokerage Carriers 51 % 47 % 47 %
Rail intermodal 2 % 3 % 3 %
Ocean and air cargo carriers 5 % 3 % 3 %
Truck Equipment Type
Van equipment $ 3,525,830 $ 2,192,254 $ 2,095,345
Unsided/platform equipment $ 1,549,037 $ 1,119,272 $ 1,254,781
Less-than-truckload $ 117,505 $ 97,546 $ 98,324
Other truck transportation (1) $ 770,846 $ 406,709 $ 316,879
(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 million per occurrence and maintains various third party insurance arrangements for liabilities in excess of its $ million self-insured retention. Effective May 1, 2019, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $ million and $ million (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 $ million , with an aggregate limit of $ million for each policy year, an aggregate limit of $ million for the thirty-six 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 $ million per occurrence, inclusive of its $ million 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 $ million , which was provided for in insurance and claims costs for the Company’s 2020 fiscal first quarter. o o million . These third party arrangements provide coverage on a per occurrence or aggregated basis. In recent years, the Company has increased the level of its financial exposure to commercial trucking claims in excess of $10 million , including through the use of additional self-insurance, deductibles, aggregate loss limits, quota shares and other 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 . 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 $ 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 $ , and a corresponding amount of current assets included in other receivables. 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. In addition, under reinsurance arrangements by Signature of certain risks of the Company’s BCO Independent Contractors, the Company retains liability of up to $500,000, $1,000,000 or $2,000,000 with respect to certain occupational accident claims and up to $750,000 with respect to certain workers’ compensation claims. Tires Tires purchased as part of trailing equipment are capitalized as part of the cost of the equipment. Replacement tires are charged to expense when placed in service. 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. Financial Instruments The Company’s financial instruments include cash equivalents, short and long-term investments, trade and other accounts receivable, accounts payable, other accrued liabilities, and long-term debt plus current maturities (“Debt”). The carrying value of cash equivalents, trade and other accounts receivable, accounts payable, current insurance claims and other accrued liabilities approximates fair value as the assets and liabilities are short term in nature. Short and long-term investments are carried at fair value as further described in Note 4 in the Company’s consolidated financial statements. The Company’s Debt includes borrowings under the Company’s revolving credit facility, to the extent there are any, plus borrowings relating to finance lease obligations used to finance trailing equipment. The interest rates on borrowings under the revolving credit facility are typically tied to short-term interest rates that adjust monthly and, as such, carrying value approximates fair value. Interest rates on borrowings under finance leases approximate the interest rates that would currently be available to the Company under similar terms and, as such, carrying value approximates fair value. Trade and Other Receivables The allowance for doubtful accounts for both trade and other receivables represents management’s estimate of the amount of outstanding receivables that will not be collected. Estimates are used to determine the allowance for doubtful accounts for both trade and other receivables and are generally based on specific identification, historical collection results, current economic trends and changes in payment trends. Following is a summary of the activity in the allowance for doubtful accounts for fiscal years ending December 25, 2021, December 26, 2020 and December 28, 2019 (in thousands):
Balance at Beginning of Period Charged to Costs and Expenses Write-offs, Net of Recoveries Balance at End of Period
For the Fiscal Year Ended December 25, 2021
Trade receivables $ 8,670 $ 1,735 $ (3,331 ) $ 7,074
Other receivables 8,399 4,050 (2,938 ) 9,511
Other non-current 264 (63 ) (1 ) 200
$ 17,333 $ 5,722 $ (6,270 ) $ 16,785
For the Fiscal Year Ended December 26, 2020
Trade receivables $ 7,284 $ 6,121 $ (4,735 ) $ 8,670
Other receivables 8,806 3,291 (3,698 ) 8,399
Other non-current 260 3 1 264
$ 16,350 $ 9,415 $ (8,432 ) $ 17,333
For the Fiscal Year Ended December 28, 2019
Trade receivables $ 6,413 $ 4,309 $ (3,438 ) $ 7,284
Other receivables 7,211 5,518 (3,923 ) 8,806
Other non-current 256 4 — 260
$ 13,880 $ 9,831 $ (7,361 ) $ 16,350
Operating Property Operating property is recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Buildings and improvements are being depreciated over 30 years. Trailing equipment is being depreciated over 7 to 10 years. Information technology hardware and software is generally being depreciated over 3 to 7 years. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets of acquired businesses. 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, Testing Goodwill for Impairment 2011-08 Income Taxes Income tax expense is equal to the current year’s liability for income taxes and a provision for deferred income taxes. Deferred tax assets and liabilities are recorded for the future tax effects attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. Share-Based Payments The Company’s share-based payment arrangements include restricted stock units (“RSU”), non-vested award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU. The fair value of an RSU with a market condition is determined at the time of grant based on the expected achievement of the market condition at the end of each vesting period. With respect to RSU awards with a market condition, the Company recognizes compensation expense ratably over the requisite service period under an award based on the fair market value of the award at the time of grant, regardless of whether the market condition is satisfied. Previously recognized compensation cost would be reversed, however, if the employee terminated employment prior to completing such requisite service period. The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes pricing model and recognizes compensation cost for stock option awards expected to vest on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated at grant date based on historical experience and anticipated employee turnover. The fair values of each share of non-vested non-vested e 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 non-vested 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 for all periods because the performance metric requirements or market condition for vesting had not been satisfied. Dividends Payable On December 7, 2021, the Company announced that its Board of Directors declared a special cash dividend of $2.00 per share payable on January 21, 2022, to stockholders of record of its Common Stock as of January 7, 2022. Dividends payable of $75,387,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 25, 2021. On December 8, 2020, the Company announced that its Board of Directors declared a special cash dividend of $2.00 per share payable on January 22, 2021, to stockholders of record of its Common Stock as of January 8, 2021. Dividends payable of $76,770,000 related to this special dividend were included in current liabilities in the consolidated balance sheet at December 26, 2020. Foreign Currency Translation Assets and liabilities of the Company’s Canadian and Mexican operations are translated from their functional currency to U.S. dollars using exchange rates in effect at the balance sheet date and revenue and expense accounts are translated at average monthly exchange rates during the period. Adjustments resulting from the translation process are included in accumulated other comprehensive income. Transactional gains and losses arising from receivable and payable balances, including intercompany balances, in the normal course of business that are denominated in a currency other than the functional currency of the operation are recorded in the statements of income when they occur. |
