| 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 30, 2023, December 31, 2022 and December 25, 2021 (dollars in thousands):
Fiscal Years Ended
December 30, 2023 December 31, 2022 December 25, 2021
Mode
Truck – BCO Independent Contractors 38 % 35 % 40 %
Truck – Truck Brokerage Carriers 53 % 54 % 51 %
Rail intermodal 2 % 2 % 2 %
Ocean and air cargo carriers 5 % 8 % 5 %
Truck Equipment Type
Van equipment $ 2,742,281 $ 3,892,085 $ 3,525,830
Unsided/platform equipment $ 1,490,393 $ 1,760,357 $ 1,549,037
Less-than-truckload $ 117,683 $ 142,438 $ 117,505
Other truck transportation (1) $ 479,173 $ 835,959 $ 770,846
(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. Landstar retains liability through a self-insured retention for commercial trucking claims up to $5 million per occurrence. Effective May 1, 2019, the Company entered into a three year commercial auto liability insurance arrangement for losses incurred between $5 million and $10 million (the “2019 Initial Excess Policy”) with a third party insurance company. The Company subsequently extended the 2019 Initial Excess Policy for one additional policy year, from May 1, 2022 through April 30, 2023. For commercial trucking claims incurred on or after May 1, 2022 through April 30, 2023, the extended 2019 Initial Excess Policy provides for a limit for a single loss of $5 million, with an aggregate limit of $10 million for the policy period ended April 30, 2023. Effective May 1, 2023, the Company entered into a new three year commercial auto liability insurance arrangement for losses incurred between $ 5 18 thirty-six thirty-six The Company also maintains third party insurance arrangements providing excess coverage for commercial trucking liabilities in excess of These third party arrangements provide coverage on a per occurrence or aggregated basis. The Company from year to year manages the level of its financial exposure to commercial trucking claims in excess Further, the Company retains liability of up to $2,000,000 for each general liability claim, $250,000 for each workers’ compensation claim and $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. At December 30, 2023 and December 31, 2022, the Company had no restricted cash held by the Company’s insurance segment. At December 25, 2021, the Company had 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 3 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 30, 2023, December 31, 2022 and December 25, 2021 (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 30, 2023
Trade receivables $ 12,121 $ 5,704 $ (6,087 ) $ 11,738
Other receivables 11,745 8,325 (4,694 ) 15,376
Other non-current 203 3 — 206
$ 24,069 $ 14,032 $ (10,781 ) $ 27,320
For the Fiscal Year Ended December 31, 2022
Trade receivables $ 7,074 $ 7,354 $ (2,307 ) $ 12,121
Other receivables 9,511 4,863 (2,629 ) 11,745
Other non-current 200 3 — 203
$ 16,785 $ 12,220 $ (4,936 ) $ 24,069
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
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 non-vested non-vested Earnings Per Share Basic earnings per common share are based on the weighted average number of common shares outstanding, which includes outstanding non-vested For the fiscal years ended December 30, 2023, December 31, 2022 and December 25, 2021, no options outstanding to purchase shares of Common Stock were antidilutive. As of December 30, 2023, there were no outstanding options issued by the Company . Dividends Payable On December 4, 2023, the Company announced that its Board of Directors declared a special cash dividend of $2.00 per share payable on On 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. |
