10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 

Commission File Number: 0-21238

 

LANDSTAR SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-1313069
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

13410 Sutton Park Drive South, Jacksonville, Florida

(Address of principal executive offices)

32224

(Zip Code)

(904) 398-9400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LSTR	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files):    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No   ☒

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of the close of business on July 22, 2019 was 39,629,695.

Index

PART I – Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of June 29, 2019 and December 29, 2018	Page 4
Consolidated Statements of Income for the Twenty Six and Thirteen Weeks Ended June 29, 2019 and June 30, 2018	Page 5
Consolidated Statements of Comprehensive Income for the Twenty Six and Thirteen Weeks Ended June 29, 2019 and June 30, 2018	Page 6
Consolidated Statements of Cash Flows for the Twenty Six Weeks Ended June 29, 2019 and June 30, 2018	Page 7
Consolidated Statements of Changes in Equity for the Twenty Six and Thirteen Weeks Ended June 29, 2019 and June 30, 2018	Page 8
Notes to Consolidated Financial Statements	Page 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Page 30
Item 4. Controls and Procedures	Page 31
PART II – Other Information
Item 1. Legal Proceedings	Page 31
Item 1A. Risk Factors	Page 32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	Page 32
Item 6. Exhibits	Page 33
Signatures	Page 35

EX – 31.1 Section 302 CEO Certification

EX – 31.2 Section 302 CFO Certification

EX – 32.1 Section 906 CEO Certification

EX – 32.2 Section 906 CFO Certification

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The interim consolidated financial statements contained herein reflect all adjustments (all of a normal, recurring nature) which, in the opinion of management, are necessary for a fair statement of the financial condition, results of operations, cash flows and changes in equity for the periods presented. They have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the twenty six weeks ended June 29, 2019 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 28, 2019.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2018 Annual Report on Form 10-K.  

3

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

(Unaudited)

	June 29, 2019			December 29, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	250,212		$	199,736
Short-term investments		35,138			40,058
Trade accounts receivable, less allowance of $6,744 and $6,413		594,122			691,604
Other receivables, including advances to independent contractors, less allowance of $7,729 and $6,216		27,212			23,744
Other current assets		32,619			16,287
Total current assets		939,303			971,429
Operating property, less accumulated depreciation and amortization of $264,910 and $250,153		269,246			284,032
Goodwill		38,407			38,232
Other assets		101,737			86,871
Total assets	$	1,348,693		$	1,380,564
LIABILITIES AND EQUITY
Current Liabilities
Cash overdraft	$	43,620		$	55,339
Accounts payable		285,569			314,134
Current maturities of long-term debt		39,194			43,561
Insurance claims		41,254			40,176
Accrued compensation		11,372			29,489
Contractor escrow		25,530			25,202
Other current liabilities		27,711			27,917
Total current liabilities		474,250			535,818
Long-term debt, excluding current maturities		65,573			84,864
Insurance claims		31,016			30,429
Deferred income taxes and other noncurrent liabilities		49,554			40,320
Equity
Landstar System, Inc. and subsidiary shareholders’ equity
Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,064,877 and 67,870,962 shares		681			679
Additional paid-in capital		224,550			226,852
Retained earnings		1,952,439			1,841,279
Cost of 28,435,182 and 27,755,001 shares of common stock in treasury		(1,446,425	)		(1,376,111	)
Accumulated other comprehensive loss		(2,945	)		(5,875	)
Total Landstar System, Inc. and subsidiary shareholders’ equity		728,300			686,824
Noncontrolling interest		—			2,309
Total equity		728,300			689,133
Total liabilities and equity	$	1,348,693		$	1,380,564

See accompanying notes to consolidated financial statements.

4

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 29, 2019			June 30, 2018			June 29, 2019		June 30, 2018
Revenue	$	2,078,040		$	2,230,712		$	1,045,040	$	1,182,786
Investment income		2,421			1,752			1,283		891
Costs and expenses:
Purchased transportation		1,591,126			1,727,237			799,371		916,940
Commissions to agents		173,294			176,524			87,623		94,399
Other operating costs, net of gains on asset sales/dispositions		18,100			15,210			9,861		7,606
Insurance and claims		31,279			38,899			16,286		21,539
Selling, general and administrative		82,565			94,249			41,297		48,998
Depreciation and amortization		22,350			21,766			11,034		10,769
Total costs and expenses		1,918,714			2,073,885			965,472		1,100,251
Operating income		161,747			158,579			80,851		83,426
Interest and debt expense		1,514			1,639			709		839
Income before income taxes		160,233			156,940			80,142		82,587
Income taxes		35,833			36,975			19,042		20,095
Net income		124,400			119,965			61,100		62,492
Less: Net loss attributable to noncontrolling interest		(17	)		(75	)		—		(31	)
Net income attributable to Landstar System, Inc. and subsidiary	$	124,417		$	120,040		$	61,100	$	62,523
Earnings per common share attributable to Landstar System, Inc. and subsidiary	$	3.11		$	2.88		$	1.53	$	1.51
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	3.11		$	2.87		$	1.53	$	1.51
Average number of shares outstanding:
Earnings per common share		40,053,000			41,744,000			39,945,000		41,450,000
Diluted earnings per share		40,053,000			41,795,000			39,945,000		41,491,000
Dividends per common share	$	0.330		$	0.300		$	0.165	$	0.150

See accompanying notes to consolidated financial statements.

5

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

	Twenty Six Weeks Ended					Thirteen Weeks Ended
	June 29, 2019		June 30, 2018			June 29, 2019		June 30, 2018
Net income attributable to Landstar System, Inc. and subsidiary	$	124,417	$	120,040		$	61,100	$	62,523
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale investments, net of tax expense (benefit) of $494, ($233), $222 and ($42)		1,805		(883	)		810		(153	)
Foreign currency translation gains (losses)		1,125		(1,239	)		571		(1,580	)
Other comprehensive income (loss)		2,930		(2,122	)		1,381		(1,733	)
Comprehensive income attributable to Landstar System, Inc. and subsidiary	$	127,347	$	117,918		$	62,481	$	60,790

See accompanying notes to consolidated financial statements.

6

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Twenty Six Weeks Ended
	June 29, 2019			June 30, 2018
OPERATING ACTIVITIES
Net income	$	124,400		$	119,965
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of operating property and intangible assets		22,350			21,766
Non-cash interest charges		126			126
Provisions for losses on trade and other accounts receivable		4,194			4,297
Gains on sales/disposals of operating property		(1,219	)		(988	)
Deferred income taxes, net		5,060			5,585
Stock-based compensation		3,368			8,102
Changes in operating assets and liabilities:
Decrease (increase) in trade and other accounts receivable		89,820			(48,651	)
Increase in other assets		(22,808	)		(16,537	)
(Decrease) increase in accounts payable		(28,565	)		20,161
Decrease in other liabilities		(14,315	)		(4,488	)
Increase in insurance claims		1,665			3,691
NET CASH PROVIDED BY OPERATING ACTIVITIES		184,076			113,029
INVESTING ACTIVITIES
Sales and maturities of investments		41,345			18,399
Purchases of investments		(42,812	)		(19,653	)
Purchases of operating property		(9,224	)		(4,121	)
Proceeds from sales of operating property		3,219			2,939
NET CASH USED BY INVESTING ACTIVITIES		(7,472	)		(2,436	)
FINANCING ACTIVITIES
(Decrease) increase in cash overdraft		(11,719	)		3,123
Dividends paid		(13,257	)		(75,481	)
Proceeds from exercises of stock options		343			1,039
Taxes paid in lieu of shares issued related to stock-based compensation plans		(8,438	)		(2,812	)
Purchases of common stock		(69,729	)		(105,488	)
Principal payments on finance lease obligations		(23,658	)		(22,768	)
Purchase of noncontrolling interest		(600	)		—
Payment of contingent consideration		—			(985	)
NET CASH USED BY FINANCING ACTIVITIES		(127,058	)		(203,372	)
Effect of exchange rate changes on cash and cash equivalents		930			(996	)
Increase (decrease) in cash and cash equivalents		50,476			(93,775	)
Cash and cash equivalents at beginning of period		199,736			242,416
Cash and cash equivalents at end of period	$	250,212		$	148,641

See accompanying notes to consolidated financial statements.

7

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Twenty Six and Thirteen Weeks Ended June 29, 2019 and June 30, 2018

(Dollars in thousands)

(Unaudited)

	Landstar System, Inc. and Subsidiary Shareholders
	Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive			Non-controlling
	Shares		Amount		Capital			Earnings			Shares		Amount			(Loss) Income			Interests			Total
Balance December 29, 2018		67,870,962	$	679	$	226,852		$	1,841,279			27,755,001	$	(1,376,111	)	$	(5,875	)	$	2,309		$	689,133
Net income (loss)									63,317											(17	)		63,300
Dividends ($0.165 per share)									(6,629	)													(6,629	)
Purchases of common stock												124,481		(12,977	)								(12,977	)
Purchase of noncontrolling interests						1,842														(2,442	)		(600	)
Issuance of stock related to stock-based compensation plans		176,079		1		(7,081	)					5,199		(524	)								(7,604	)
Stock-based compensation						1,938																	1,938
Other comprehensive income																	1,549			150			1,699
Balance March 30, 2019		68,047,041	$	680	$	223,551		$	1,897,967			27,884,681	$	(1,389,612	)	$	(4,326	)	$	—		$	728,260
Net income									61,100														61,100
Dividends ($0.165 per share)									(6,628	)													(6,628	)
Purchases of common stock												549,929		(56,752	)								(56,752	)
Issuance of stock related to stock-based compensation plans		17,836		1		(431	)					572		(61	)								(491	)
Stock-based compensation						1,430																	1,430
Other comprehensive income																	1,381						1,381
Balance June 29, 2019		68,064,877	$	681	$	224,550		$	1,952,439			28,435,182	$	(1,446,425	)	$	(2,945	)	$	—		$	728,300

8

	Landstar System, Inc. and Subsidiary Shareholders
	Common Stock				Additional Paid-In			Retained			Treasury Stock at Cost					Accumulated Other Comprehensive			Non-controlling
	Shares		Amount		Capital			Earnings			Shares		Amount			Loss			Interests			Total
Balance December 30, 2017		67,740,380	$	677	$	209,599		$	1,611,158			25,749,493	$	(1,167,600	)	$	(3,162	)	$	3,205		$	653,877
Adoption of accounting standards									773														773
Net income (loss)									57,517											(44	)		57,473
Dividends ($0.15 per share)									(6,308	)													(6,308	)
Purchases of common stock												14,354		(1,508	)								(1,508	)
Issuance of stock related to stock-based compensation plans		95,784		1		(1,376	)					4,822		(350	)								(1,725	)
Stock-based compensation						3,710																	3,710
Other comprehensive (loss) income																	(389	)		377			(12	)
Balance March 31, 2018		67,836,164	$	678	$	211,933		$	1,663,140			25,768,669	$	(1,169,458	)	$	(3,551	)	$	3,538		$	706,280
Net income (loss)									62,523											(31	)		62,492
Dividends ($0.15 per share)									(6,188	)													(6,188	)
Purchases of common stock												985,646		(103,980	)								(103,980	)
Issuance of stock related to stock-based compensation plans		11,528				3						495		(51	)								(48	)
Stock-based compensation						4,392																	4,392
Other comprehensive loss																	(1,733	)		(282	)		(2,015	)
Balance June 30, 2018		67,847,692	$	678	$	216,328		$	1,719,475			26,754,810	$	(1,273,489	)	$	(5,284	)	$	3,225		$	660,933

See accompanying notes to consolidated financial statements.

9

LANDSTAR SYSTEM, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all adjustments (all of a normal, recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation.

(1) Significant Accounting Policies

Revenue from Contracts with Customers – Disaggregation of Revenue

During the twenty six weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44%, 48% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the twenty-six-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 29, 2019 was $1,224,379,000 hauled via van equipment, $648,828,000 hauled via unsided/platform equipment and $48,108,000 of less-than-truckload. During the twenty six weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the twenty-six-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 30, 2018 was $1,369,476,000 hauled via van equipment, $664,045,000 hauled via unsided/platform equipment and $50,948,000 of less-than-truckload.

During the thirteen weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 47% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the thirteen-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 29, 2019 was $605,365,000 hauled via van equipment, $338,107,000 hauled via unsided/platform equipment and $24,732,000 of less-than-truckload. During the thirteen weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the thirteen-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 30, 2018 was $713,341,000 hauled via van equipment, $364,676,000 hauled via unsided/platform equipment and $27,364,000 of less-than-truckload.

10

(2) Share-based Payment Arrangements

As of June 29, 2019, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). No further grants can be made under the ESOSIP. The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”). 6,000,000 shares of the Company’s common stock 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):

	Twenty Six Weeks  Ended						Thirteen Weeks  Ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Total cost of the Plans during the period	$	3,368		$	8,102		$	1,430		$	4,392
Amount of related income tax benefit recognized during the period		(3,734	)		(3,468	)		(672	)		(1,217	)
Net cost of the Plans during the period	$	(366	)	$	4,634		$	758		$	3,175

Included in income tax benefits recognized in the twenty-six-week periods ended June 29, 2019 and June 30, 2018 were excess tax benefits from stock-based awards of $2,871,000 and $1,426,000, respectively. Also included in income tax benefits recognized in the twenty-six-week periods ended June 29, 2019 and June 30, 2018 were income tax benefits of $38,000 and $64,000, respectively, recognized on disqualifying dispositions of the Company’s common stock by employees who obtained shares of common stock through exercises of incentive stock options.

As of June 29, 2019, there were 66,454 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,995,988 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 29, 2018		292,345		$	66.31
Granted		58,542		$	95.70
Shares earned in excess of target(1)		71,172		$	54.78
Vested shares, including shares earned in excess of target		(226,981	)	$	53.27
Forfeited		(5,822	)	$	84.39
Outstanding at June 29, 2019		189,256		$	86.14

(1) Represents shares earned in excess of target under the January 27, 2015 and January 29, 2016 RSU awards as actual results exceeded the target under both awards as a result of fiscal year 2018 results and under the May 1, 2015 RSU award as total shareholder return exceeded the target under the award.

During the twenty-six-week period ended June 29, 2019, the Company granted RSUs with a performance condition. RSUs with a performance condition granted on February 1, 2019 may vest on January 31 of 2022, 2023 and 2024 based on growth in operating income and pre-tax income per share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2018 fiscal year. Outstanding RSUs at both December 29, 2018 and June 29, 2019 include RSUs with a performance condition and RSUs with a market condition, as further described in the Company’s 2018 Annual Report on Form 10-K.

11

The Company recognized approximately $2,062,000 and $6,975,000 of share-based compensation expense related to RSU awards in the twenty-six-week periods ended June 29, 2019 and June 30, 2018, respectively. As of June 29, 2019, there was a maximum of $26.4 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.5 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.

Stock Options

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

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)
Options outstanding at December 29, 2018		89,114		$	50.44
Exercised		(22,700	)	$	49.45
Options outstanding at June 29, 2019		66,414		$	50.77		2.7	$	3,800
Options exercisable at June 29, 2019		66,414		$	50.77		2.7	$	3,800

The total intrinsic value of stock options exercised during the twenty-six-week periods ended June 29, 2019 and June 30, 2018 was $1,269,000 and $3,203,000, respectively.

As of June 29, 2019, there was no unrecognized compensation cost related to stock options granted under the Plans.

Non-vested Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:

	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 29, 2018		55,987		$	93.66
Granted		30,338		$	102.76
Vested		(21,165	)	$	92.66
Non-vested at June 29, 2019		65,160		$	98.22

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first or fifth anniversary of the date of the grant. 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. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of June 29, 2019, there was $4,996,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.3 years.

(3) Income Taxes

The provisions for income taxes for the 2019 and 2018 twenty-six-week periods were based on estimated annual effective income tax rates of 24.2% and 24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2019 twenty-six-week period was 22.4%, which was higher than the statutory federal income tax rate of 21%

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primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock based awards. The provision for income taxes for the 2019 twenty-six-week period was favorably impacted by $2,871,000) of excess tax benefits from stock-based awards. The effective income tax rate for the 2018 twenty-six-week period was 23.6)%, which was higher than the statutory federal income tax rate of 21)% primarily attributable to state taxes, the elimination of the performance-based compensation exception under Section 162(m) by the Tax Cuts and Jobs Act (the “Tax Reform Act”) and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock based awards.

(4) 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 restricted stock and outstanding Deferred Stock Units. Diluted earnings per share attributable to Landstar System, Inc. and subsidiary are based on the weighted average number of common shares and Deferred Stock Units outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options.  

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):

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Average number of common shares outstanding		40,053		41,744		39,945		41,450
Incremental shares from assumed exercises of stock options		—		51		—		41
Average number of common shares and common share equivalents outstanding		40,053		41,795		39,945		41,491

For each of the twenty-six-week periods ended June 29, 2019 and June 30, 2018, 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.

(5) Additional Cash Flow Information

During the 2019 twenty-six-week period, Landstar paid income taxes and interest of $39,180,000 and $2,286,000, respectively. During the 2018 twenty-six-week period, Landstar paid income taxes and interest of $40,062,000 and $1,886,000, respectively. Landstar did not acquire any operating property by entering into finance leases in the 2019 twenty-six-week period. Landstar acquired operating property by entering into finance leases in the amount of $1,617,000 in the 2018 twenty-six-week period. Capital expenditures are recorded as cash outflows from investing activities in the consolidated statement of cash flows in the period in which they are paid.

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(6) Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands):

	Twenty Six Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	2,049,777	$	28,263	$	2,078,040	$	2,205,561	$	25,151	$	2,230,712
Internal revenue				27,367		27,367				22,917		22,917
Investment income				2,421		2,421				1,752		1,752
Operating income		135,919		25,828		161,747		146,298		12,281		158,579
Expenditures on long-lived assets		9,224				9,224		4,121				4,121
Goodwill		38,407				38,407		38,704				38,704
	Thirteen Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,030,816	$	14,224	$	1,045,040	$	1,169,921	$	12,865	$	1,182,786
Internal revenue				17,753		17,753				15,419		15,419
Investment income				1,283		1,283				891		891
Operating income		68,336		12,515		80,851		78,998		4,428		83,426
Expenditures on long-lived assets		4,648				4,648		307				307

In the twenty-six-week periods ended June 29, 2019 and June 30, 2018, no) single customer accounted for more than 10)% of the Company’s consolidated revenue.

(7) Other Comprehensive Income

The following table presents the components of and changes in accumulated other comprehensive income attributable to Landstar System, Inc. and subsidiary, net of related income taxes, as of and for the twenty-six-week period ended June 29, 2019 (in thousands):

	Unrealized Holding (Losses) Gains on Available-for-Sale Securities			Foreign  Currency Translation			Total
Balance as of December 29, 2018	$	(930	)	$	(4,945	)	$	(5,875	)
Other comprehensive income		1,805			1,125			2,930
Balance as of June 29, 2019	$	875		$	(3,820	)	$	(2,945	)

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 twenty-six-week period ended June 29, 2019.

(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. Investments in the bond portfolio are reported as available-for-sale and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on available-for-sale investments to determine whether such losses are other-than-temporary. 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 other-than-temporary, are to be included as a charge in the statement of income, while unrealized losses

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considered to be temporary are to be included as a component of equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to U.S. Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities and direct obligations of government agencies. Unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $1,115,000 at June 29, 2019, while unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $1,184,000 at December 29, 2018, respectively.

The amortized cost and fair values of available-for-sale investments are as follows at June 29, 2019 and December 29, 2018 (in thousands):    

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 29, 2019
Money market investments	$	17,207	$	—	$	—	$	17,207
Asset-backed securities		112		—		—		112
Corporate bonds and direct obligations of government agencies		96,282		1,155		49		97,388
U.S. Treasury obligations		1,104		9		—		1,113
Total	$	114,705	$	1,164	$	49	$	115,820
December 29, 2018
Money market investments	$	11,714	$	—	$	—	$	11,714
Asset-backed securities		624		—		4		620
Corporate bonds and direct obligations of government agencies		101,021		33		1,213		99,841
Total	$	113,359	$	33	$	1,217	$	112,175

For those available-for-sale investments with unrealized losses at June 29, 2019 and December 29, 2018, the following table summarizes the duration of the unrealized loss (in thousands):

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 29, 2019
Corporate bonds and direct obligations of government agencies	$	288	$	1	$	17,420	$	48	$	17,708	$	49
December 29, 2018
Asset-backed securities	$	—	$	—	$	620	$	4	$	620	$	4
Corporate bonds and direct obligations of government agencies		45,960		354		42,803		859		88,763		1,213
Total	$	45,960	$	354	$	43,423	$	863	$	89,383	$	1,217

The Company expects to recover 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, the Company does not consider the unrealized losses on these securities to be other-than-temporary at June 29, 2019.  

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(9) Leases

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 right-of-use assets and operating lease liabilities represent leases for orientation centers for BCO Independent Contractors and office space used to conduct Landstar’s business. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. 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” 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. 

Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the right-of-use assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term.

As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. 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 twenty six weeks ended June 29, 2019 were (in thousands):

Finance leases:
Amortization of right-of-use assets	$	13,132
Interest on lease liability		1,928
Total finance lease cost		15,060
Operating leases:
Lease cost		2,280
Variable lease cost		—
Sublease income		(2,571	)
Total operating lease (income)/cost		(291	)
Total lease cost	$	14,769

A summary of the lease classification on our consolidated balance sheet as of June 29, 2019 is as follows (in thousands):

Assets:

Operating lease right-of-use assets	Other assets	$	2,929
Finance lease assets	Operating property, less accumulated  depreciation and amortization		152,206
Total lease assets		$	155,135

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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 June 29, 2019 (in thousands):

	Finance Leases		Operating Leases
2019 Remainder	$	21,586	$	445
2020		39,475		681
2021		25,065		616
2022		15,902		622
2023		8,875		551
Thereafter		—		301
Total future minimum lease payments		110,903		3,216
Less amount representing interest (2.1% to 4.4%)		6,136		287
Present value of minimum lease payments	$	104,767	$	2,929
Current maturities of long-term debt		39,194
Long-term debt, excluding current maturities		65,573
Other current liabilities				715
Deferred income taxes and other noncurrent liabilities				2,214

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of June 29, 2019 were:

	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.2			4.6
Weighted average discount rate		3.2	%		4.0	%

(10) Commitments and Contingencies

Short-term investments include $35,138,000 in current maturities of investments held by the Company’s insurance segment at June 29, 2019. The non-current portion of the bond portfolio of $80,682,000 is included in other assets. The short-term investments, together with $33,199,000 of non-current investments, provide collateral for the $61,503,000 of letters of credit issued to guarantee payment of insurance claims. As of June 29, 2019, Landstar also had $34,367,000 of additional letters of credit outstanding under the Company’s Credit Agreement. 

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc. and Landstar Ranger, Inc. (together, the “Defendants”). The complaint purports to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S. Fischer of the United State District Court for the Central District of California. Mr. Tanious is a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc. The complaint asserts claims based on the alleged misclassification of Mr. Tanious as an independent contractor and alleges violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition. Mr. Tanious is seeking, on behalf of himself and the purported class, payment of minimum wages, restitution and certain statutory damages and penalties, including compensatory, consequential, general, liquidated and special damages. None of the California Labor Code provisions under which Mr. Tanious seeks relief apply to independent contractors. Due to a number of factors including the preliminary status of this matter, the Company does not believe it is in a position to conclude whether or not there is a reasonable possibility of an adverse outcome in this case or what damages, if any, the plaintiffs would be awarded should they prevail on all or any part of their claims. However, the Company believes it has meritorious defenses and it intends to assert these defenses vigorously.  

The 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. 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. 

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(11) Change in Accounting Estimate for Self-Insured Claims

Landstar provides for the estimated costs of self-insured claims primarily on an actuarial basis. The amount recorded for the estimated liability for claims incurred is based upon the facts and circumstances known on the applicable balance sheet date. The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by management. The Company continually revises its existing claim estimates as new or revised information becomes available on the status of each claim. Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates.

The following table summarizes the effect of the increase in the cost of insurance claims resulting from unfavorable development of prior year self-insured claims estimates on operating income, net income attributable to Landstar System, Inc. and subsidiary and earnings per share attributable to Landstar System, Inc. and subsidiary set forth in the consolidated statements of income for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands, except per share amounts):    

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Operating income	$	2,900	$	8,244	$	1,493	$	5,686
Net income attributable to Landstar System, Inc. and subsidiary		2,198		6,224		1,131		4,293
Earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10

The unfavorable development of prior years’ claims in the thirteen-week period ended June 30, 2018 was primarily attributable to three claims.

(12) Recent Accounting Pronouncements

Adoption of New Accounting Standards

In February 2016, the FASB issued Accounting Standards Update 2016-02 – Leases (“ASU 2016-02”), amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2016-02 requires a company to recognize a right-of-use asset and lease liability for the obligation to make lease payments measured as the present value of the lease payments for all leases with terms greater than twelve months. The ASU requires adoption using a modified retrospective transition approach with either (1) periods prior to the adoption date being recast or (2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. The Company adopted this standard on December 30, 2018 using the cumulative-effect adjustment approach. No cumulative-effect adjustment was recognized as the amount was not material. The Company recognized $2,929,000 as of June 29, 2019 in right-of-use assets and corresponding lease obligations as the result of the adoption of ASU 2016-02. See Note 9 for additional information regarding the impact of adopting ASU 2016-02 to Landstar’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update 2016-13– Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the interim consolidated financial statements and notes thereto included herein, and with the Company’s audited financial statements and notes thereto for the fiscal year ended December 29, 2018 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2018 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this document that are not based on historical facts are “forward-looking statements.” This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; U.S. foreign trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; catastrophic loss of a Company facility; intellectual property; unclaimed property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2018 fiscal year, described in Item 1A “Risk Factors”, in this report or in Landstar’s other Securities and Exchange Commission filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Introduction

Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (together, referred to herein as “Landstar” or the “Company”), is a worldwide asset-light provider of integrated transportation management solutions. The Company offers services to its customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to enterprise-wide solutions to manage all of a customer’s transportation needs. Landstar provides services principally throughout the United States and to a lesser extent in Canada and Mexico, and between the United States and Canada, Mexico and other countries around the world. The Company’s services emphasize safety, information coordination and customer service and are delivered through a network of over 1,200 independent commission sales agents and approximately 68,000 third party capacity providers, primarily truck capacity providers, linked together by a series of technological applications which are provided and coordinated by the Company. The nature of the Company’s business is such that a significant portion of its operating costs varies directly with revenue.

Landstar markets its integrated transportation management solutions primarily through independent commission sales agents and exclusively utilizes third party capacity providers to transport customers’ freight. Landstar’s independent commission sales agents enter into contractual arrangements with the Company and are responsible for locating freight, making that freight available to Landstar’s capacity providers and coordinating the transportation of the freight with customers and capacity providers. The Company’s third party capacity providers consist of independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the “BCO Independent Contractors”), unrelated trucking companies who provide truck capacity to the Company under non-exclusive 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 information technology systems, Landstar operates an integrated transportation management solutions business primarily throughout North America with revenue of $4.6 billion during the most recently completed fiscal year. The Company reports the results of two operating segments: the transportation logistics segment and the insurance segment.

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 products, 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

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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. During the twenty six weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44%, 48% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the twenty-six-week period ended June 29, 2019.

Landstar Metro, S.A.P.I. de C.V. (“Landstar Metro”) provides freight and logistics services within the country of Mexico and in conjunction with Landstar’s U.S./Mexico cross-border services. Landstar Metro Servicios S.A.P.I. de C.V. (“Landstar Servicios”) provides various administrative, financial, operational, safety and compliance services to Landstar Metro. The results of operations from Landstar Metro and Landstar Servicios are presented as part of the Company’s transportation logistics segment. On January 29, 2019, Landstar acquired all of the remaining equity interests in Landstar Metro and Landstar Servicios held by their former minority equityholders. Accordingly, as of such date, Landstar Metro and Landstar Servicios each became wholly owned subsidiaries of the Company. Revenue from Landstar Metro represented less than 1% of the Company’s transportation logistics segment revenue in the twenty-six-week period ended June 29, 2019.

The insurance segment is comprised of Signature Insurance Company, a wholly owned offshore insurance subsidiary (“Signature”), and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to certain of Landstar’s operating subsidiaries. In addition, it reinsures certain risks of the Company’s BCO Independent Contractors and provides certain property and casualty insurance directly to certain of Landstar’s operating subsidiaries. Revenue at the insurance segment represents reinsurance premiums from third party insurance companies that provide insurance programs to BCO Independent Contractors where all or a portion of the risk is ultimately borne by Signature. Revenue at the insurance segment represented approximately 1% of the Company’s consolidated revenue for the twenty-six-week period ended June 29, 2019.

Changes in Financial Condition and Results of Operations

Management believes the Company’s success principally depends on its ability to generate freight revenue through its network of independent commission sales agents and to safely and efficiently deliver freight utilizing third party capacity providers. Management believes the most significant factors to the Company’s success include increasing revenue, sourcing capacity and controlling costs, including insurance and claims.

While customer demand, which is subject to overall economic conditions, ultimately drives increases or decreases in revenue, the Company primarily relies on its independent commission sales agents to establish customer relationships and generate revenue opportunities. Management’s emphasis with respect to revenue growth is on revenue generated by independent commission sales agents who on an annual basis generate $1 million or more of Landstar revenue (“Million Dollar Agents”). Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents, increasing the revenue opportunities generated by existing independent commission sales agents and providing its independent commission sales agents with technology-based tools they may use to grow revenue and increase efficiencies at their businesses. During the 2018 fiscal year, 608 independent commission sales agents generated $1 million or more of Landstar revenue and thus qualified as Million Dollar Agents. During the 2018 fiscal year, the average revenue generated by a Million Dollar Agent was $7,150,000 and revenue generated by Million Dollar Agents in the aggregate represented 94% of consolidated revenue.

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Management monitors business activity by tracking the number of loads (volume) and revenue per load by mode of transportation. Revenue per load can be influenced by many factors other than a change in price. Those factors include the average length of haul, freight type, special handling and equipment requirements, fuel costs and delivery time requirements. For shipments involving two or more modes of transportation, revenue is generally classified by the mode of transportation having the highest cost for the load. The following table summarizes this information by trailer type for truck transportation and by mode for all others:

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 29,			June 30,			June 29,			June 30,
	2019			2018			2019			2018
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment	$	1,224,379		$	1,369,476		$	605,365		$	713,341
Unsided/platform equipment		648,828			664,045			338,107			364,676
Less-than-truckload		48,108			50,948			24,732			27,364
Total truck transportation		1,921,315			2,084,469			968,204			1,105,381
Rail intermodal		58,585			61,587			28,570			32,295
Ocean and air cargo carriers		58,893			51,506			28,224			28,029
Other(1)		39,247			33,150			20,042			17,081
	$	2,078,040		$	2,230,712		$	1,045,040		$	1,182,786
Revenue on loads hauled via BCO Independent Contractors included in total truck transportation	$	923,928		$	998,953		$	474,620		$	527,803
Number of loads:
Truck transportation
Truckload:
Van equipment		686,901			691,866			345,080			354,947
Unsided/platform equipment		260,920			255,334			135,750			135,543
Less-than-truckload		74,549			70,670			39,240			37,250
Total truck transportation		1,022,370			1,017,870			520,070			527,740
Rail intermodal		23,880			26,840			11,420			13,560
Ocean and air cargo carriers		14,810			13,030			7,300			6,700
		1,061,060			1,057,740			538,790			548,000
Loads hauled via BCO Independent Contractors included in total truck transportation		483,660			480,890			248,810			247,710
Revenue per load:
Truck transportation
Truckload:
Van equipment	$	1,782		$	1,979		$	1,754		$	2,010
Unsided/platform equipment		2,487			2,601			2,491			2,690
Less-than-truckload		645			721			630			735
Total truck transportation		1,879			2,048			1,862			2,095
Rail intermodal		2,453			2,295			2,502			2,382
Ocean and air cargo carriers		3,977			3,953			3,866			4,183
Revenue per load on loads hauled via BCO Independent Contractors	$	1,910		$	2,077		$	1,908		$	2,131
Revenue by capacity type (as a % of total revenue):
Truck capacity providers:
BCO Independent Contractors		44	%		45	%		45	%		45	%
Truck Brokerage Carriers		48	%		49	%		47	%		49	%
Rail intermodal		3	%		3	%		3	%		3	%
Ocean and air cargo carriers		3	%		2	%		3	%		2	%
Other		2	%		1	%		2	%		1	%

(1) Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.

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Also critical to the Company’s success is its ability to secure capacity, particularly truck capacity, at rates that allow the Company to profitably transport customers’ freight. The following table summarizes the number of available truck capacity providers on the dates indicated:

	June 29, 2019		June 30, 2018
BCO Independent Contractors		9,879		9,501
Truck Brokerage Carriers:
Approved and active(1)		40,097		37,045
Other approved		17,790		15,406
		57,887		52,451
Total available truck capacity providers		67,766		61,952
Trucks provided by BCO Independent Contractors		10,587		10,155

(1) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.

The Company incurs costs that are directly related to the transportation of freight that include purchased transportation and commissions to agents. The Company incurs indirect costs associated with the transportation of freight that include other operating costs and insurance and claims. In addition, the Company incurs selling, general and administrative costs essential to administering its business operations. Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets which, in general, are used to benchmark costs incurred on a monthly basis.

Purchased transportation represents the amount a BCO Independent Contractor or other third party capacity provider is paid to haul freight. The amount of purchased transportation paid to a BCO Independent Contractor is primarily based on a contractually agreed-upon percentage of revenue generated by loads hauled by the BCO Independent Contractor. Purchased transportation paid to a Truck Brokerage Carrier is based on either a negotiated rate for each load hauled or, to a lesser extent, a contractually agreed-upon fixed rate per load. Purchased transportation paid to railroads is based on either a negotiated rate for each load hauled or a contractually agreed-upon fixed rate per load. Purchased transportation paid to air cargo carriers is generally based on a negotiated rate for each load hauled and purchased transportation paid to ocean cargo carriers is generally based on contractually agreed-upon fixed rates. Purchased transportation as a percentage of revenue for truck brokerage, rail intermodal and ocean cargo services is normally higher than that of BCO Independent Contractor and air cargo services. Purchased transportation is the largest component of costs and expenses and, on a consolidated basis, increases or decreases as a percentage of consolidated revenue in proportion to changes in the percentage of consolidated revenue generated through BCO Independent Contractors and other third party capacity providers and external revenue from the insurance segment, consisting of reinsurance premiums. Purchased transportation as a percent of revenue also increases or decreases in relation to the availability of truck brokerage capacity and with changes in the price of fuel on revenue generated by Truck Brokerage Carriers. The Company passes 100% of fuel surcharges billed to customers for freight hauled by BCO Independent Contractors to its BCO Independent Contractors. These fuel surcharges are excluded from revenue and the cost of purchased transportation. Purchased transportation costs are recognized over the transit period as the performance obligation to the customer is completed.

Commissions to agents are based on contractually agreed-upon percentages of revenue or net revenue, defined as revenue less the cost of purchased transportation, or net revenue less a contractually agreed upon percentage of revenue retained by Landstar. Commissions to agents as a percentage of consolidated revenue will vary directly with fluctuations in the percentage of consolidated revenue generated by the various modes of transportation and reinsurance premiums and with changes in net revenue margin, defined as net revenue divided by revenue, on services provided by Truck Brokerage Carriers, railroads, air cargo carriers and ocean cargo carriers. Commissions to agents are recognized over the freight transit period as the performance obligation to the customer is completed.

The Company defines gross profit as revenue less the cost of purchased transportation and commissions to agents. Gross profit divided by revenue is referred to as gross profit margin. The Company’s operating margin is defined as operating income divided by gross profit.

In general, gross profit margin on revenue generated by BCO Independent Contractors represents a fixed percentage of revenue due to the nature of the contracts that pay a fixed percentage of revenue to both the BCO Independent Contractors and independent commission sales agents. For revenue generated by Truck Brokerage Carriers, gross profit margin is either fixed or variable as a percent of revenue, depending on the contract with each individual independent commission sales agent. Under certain contracts with independent commission sales agents, the Company retains a fixed percentage of revenue and the agent retains the amount remaining less the cost of purchased transportation (the “retention contracts”). Gross profit margin on revenue generated by railroads, air cargo carriers, ocean cargo carriers and Truck Brokerage Carriers, other than those under retention contracts, is variable in nature as the Company’s contracts with

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independent commission sales agents provide commissions to agents at a contractually agreed upon percentage of net revenue for these types of loads. Approximately 51% of the Company’s consolidated revenue in the twenty-six-week period ended June 29, 2019 was generated under contracts that have a fixed gross profit margin while 49% was under contracts that have a variable gross profit margin.

Maintenance costs for Company-provided trailing equipment and BCO Independent Contractor recruiting and qualification costs are the largest components of other operating costs. Also included in other operating costs are trailer rental costs, the provision for uncollectible advances and other receivables due from BCO Independent Contractors and independent commission sales agents and gains/losses, if any, on sales of Company-owned trailing equipment.

With respect to insurance and claims cost, potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. For commercial trucking claims, Landstar retains liability 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. For commercial trucking claims incurred on or after May 1, 2019 through April 30, 2022, the new three year policy provides for a limit for a single loss of $5,000,000, with an aggregate limit of $10,000,000 for each policy year, an aggregate limit of $15,000,000 for the thirty-six month term ended April 30, 2022, and options to increase such aggregate limits for pre-established amounts of additional premium. The Company continues to maintain third party insurance arrangements providing excess coverage on a per occurrence basis for liabilities in excess of $10,000,000. In addition, for commercial trucking claims incurred through April 30, 2019 that exceed the Company’s $5,000,000 per occurrence self-insured retention, the Company retains liability up to an additional $700,000 in the aggregate on any claims incurred on or after May 1, 2016 through April 30, 2017, up to an additional $500,000 in the aggregate on any claims incurred on or after May 1, 2017 through April 30, 2018 and up to an additional $350,000 in the aggregate on any claims incurred on or after May 1, 2018 through April 30, 2019. The Company also 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. The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage. A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

During the twenty-six-week period ended June 29, 2019, employee compensation and benefits accounted for approximately sixty-five percent of the Company’s selling, general and administrative costs.

Depreciation and amortization primarily relate to depreciation of trailing equipment and information technology hardware and software.

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The following table sets forth the percentage relationship of purchased transportation and commissions to agents, both being direct costs, to revenue and indirect costs as a percentage of gross profit for the periods indicated:

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Purchased transportation		76.6			77.4			76.5			77.5
Commissions to agents		8.3			7.9			8.4			8.0
Gross profit margin		15.1	%		14.7	%		15.1	%		14.5	%
Gross profit		100.0	%		100.0	%		100.0	%		100.0	%
Investment income		0.8			0.5			0.8			0.5
Indirect costs and expenses:
Other operating costs, net of gains on asset sales/dispositions		5.8			4.7			6.2			4.4
Insurance and claims		10.0			11.9			10.3			12.6
Selling, general and administrative		26.3			28.8			26.1			28.6
Depreciation and amortization		7.1			6.7			7.0			6.3
Total costs and expenses		49.2			52.0			49.7			51.9
Operating margin		51.6	%		48.5	%		51.2	%		48.7	%

Management believes that a discussion of indirect costs as a percentage of gross profit is useful and meaningful to potential investors for the following principal reasons: (1) disclosure of these relative measures (i.e., each indirect operating cost line item as a percentage of gross profit) allows investors to better understand the underlying trends in the Company’s results of operations; (2) due to the generally fixed nature of these indirect costs (other than insurance and claims costs), these relative measures are meaningful to investors’ evaluations of the Company’s management of its indirect costs attributable to operations; (3) management considers this financial information in its decision-making, such as budgeting for infrastructure, trailing equipment and selling, general and administrative costs; and (4) this information facilitates comparisons by investors of the Company’s results to the results of other non-asset or asset-light companies in the transportation and logistics services industry who report “net revenue” in Management Discussion and Analysis, which represents revenue less the cost of purchased transportation. The difference between the Company’s use of the term “gross profit” and use of the term “net revenue” by other companies in the transportation and logistics services industry is due to the direct cost of commissions to agents under the Landstar business model, whereas other companies in this industry generally have no commissions to agents.

Also, as previously mentioned, the Company reports two operating segments: the transportation logistics segment and the insurance segment. External revenue at the insurance segment, representing reinsurance premiums, has historically been relatively consistent at 2% or less of consolidated revenue and generally corresponds directly with the number of trucks provided by BCO Independent Contractors. The discussion of indirect cost line items in Management’s Discussion and Analysis of Financial Condition and Results of Operations considers the Company’s costs on a consolidated basis rather than on a segment basis. Management believes this presentation format is the most appropriate to assist users of the financial statements in understanding the Company’s business for the following reasons: (1) the insurance segment has no other operating costs; (2) discussion of insurance and claims at either segment without reference to the other may create confusion amongst investors and potential investors due to intercompany arrangements and specific deductible programs that affect comparability of financial results by segment between various fiscal periods but that have no effect on the Company from a consolidated reporting perspective; (3) selling, general and administrative costs of the insurance segment comprise less than 10% of consolidated selling, general and administrative costs and have historically been relatively consistent on a year-over-year basis; and (4) the insurance segment has no depreciation and amortization.

TWENTY SIX WEEKS ENDED JUNE 29, 2019 COMPARED TO TWENTY SIX WEEKS ENDED JUNE 30, 2018

Revenue for the 2019 twenty-six-week period was $2,078,040,000, a decrease of $152,672,000, or 7%, compared to the 2018 twenty-six-week period. Transportation revenue decreased $155,784,000, or 7%. The decrease in transportation revenue was attributable to decreased revenue per load of approximately 8%, while the number of loads hauled was approximately flat compared to the 2018 twenty-

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six-week period. Reinsurance premiums were $28,263,000 and $25,151,000 for the 2019 and 2018 twenty-six-week periods, respectively. The increase in revenue from reinsurance premiums was primarily attributable to the increase in the average number of trucks provided by BCO Independent Contractors in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period.

Truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers (together, the “third party truck capacity providers”) for the 2019 twenty-six-week period was $1,921,315,000, representing 92% of total revenue, a decrease of $163,154,000, or 8%, compared to the 2018 twenty-six-week period. Revenue per load on loads hauled by third party truck capacity providers decreased approximately 8% in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period, while the number of loads hauled by third party truck capacity providers was approximately flat compared to the 2018 twenty-six-week period. The decrease in revenue per load on loads hauled via truck was primarily due to a softer freight demand environment experienced during the 2019 twenty-six-week period, which resulted in more readily available truck capacity as compared to the 2018 twenty-six-week period. Revenue per load on loads hauled via van equipment decreased 10%, revenue per load on loads hauled via unsided/platform equipment decreased 4% and revenue per load on less-than-truckload loadings decreased 10% as compared to the 2018 twenty-six-week period. Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $41,321,000 and $46,902,000 in the 2019 and 2018 twenty-six-week periods, respectively. It should be noted that billings to many customers of the Company’s truck brokerage services include a single all-in rate that does not separately identify fuel surcharges on loads hauled via Truck Brokerage Carriers. Accordingly, the overall impact of changes in fuel prices on revenue and revenue per load on loads hauled via truck is likely to be greater than that indicated.

Transportation revenue generated by rail intermodal, air cargo and ocean cargo carriers (collectively, the “multimode capacity providers”) for the 2019 twenty-six-week period was $117,478,000, or 6% of total revenue, an increase of $4,385,000, or 4%, compared to the 2018 twenty-six-week period. Revenue per load on revenue generated by multimode capacity providers increased approximately 7% in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period, while the number of loads hauled by multimode capacity providers decreased approximately 3% over the same period. The increase in revenue per load of 7% on loads hauled by multimode capacity providers was primarily attributable to increased revenue per load on ocean loads and an increase in ocean loads as a percentage of multimode loads, as ocean loads typically generate a higher revenue per load compared to loads hauled by rail or air cargo carriers. Also, revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity. The decrease in the number of loads hauled by multimode capacity providers was entirely due to an 11% decrease in rail intermodal loadings, mostly attributable to decreased loadings at three specific agencies.

Purchased transportation was 76.6% and 77.4% of revenue in the 2019 and 2018 twenty-six-week periods, respectively. The decrease in purchased transportation as a percentage of revenue was primarily due to a decreased rate of purchased transportation paid on Truck Brokerage Carrier revenue. Commissions to agents were 8.3% and 7.9% of revenue in the 2019 and 2018 twenty-six-week periods, respectively. The increase in commissions to agents as a percentage of revenue was primarily attributable to an increased net revenue margin on revenue generated by Truck Brokerage Carriers.

Investment income was $2,421,000 and $1,752,000 in the 2019 and 2018 twenty-six-week periods, respectively. The increase in investment income was primarily attributable to higher average rates of return on investments in the 2019 twenty-six-week period.

Other operating costs increased $2,890,000 in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period and represented 5.8% of gross profit in the 2019 period compared to 4.7% of gross profit in the 2018 period. The increase in other operating costs compared to the prior year was primarily due to increased trailing equipment maintenance costs as a result of an increased number of Company-owned trailers. The increase in other operating costs as a percentage of gross profit was caused by the increase in other operating costs and the effect of decreased gross profit.

Insurance and claims decreased $7,620,000 in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period and represented 10.0% of gross profit in the 2019 period compared to 11.9% of gross profit in the 2018 period. The decrease in insurance and claims expense compared to prior year was primarily due to decreased net unfavorable development of prior years’ claims and decreased severity of current year claims in the 2019 period. Net unfavorable development of prior years’ claims was $2,900,000 and $8,244,000 in the 2019 and 2018 twenty-six-week periods, respectively. The decrease in insurance and claims as a percent of gross profit was caused by the decrease in insurance and claims costs, partially offset by the effect of decreased gross profit.

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Selling, general and administrative costs decreased $11,684,000 in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period and represented 26.3% of gross profit in the 2019 period compared to 28.8% of gross profit in the 2018 period. The decrease in selling, general and administrative costs compared to prior year was attributable to a decreased provision for incentive compensation and decreased stock-based compensation expense, partially offset by increased wages. Included in selling, general and administrative costs is incentive compensation expense of $1,911,000 and $9,482,000 for the 2019 and 2018 twenty-six-week periods, respectively, and stock-based compensation expense of $3,368,000 and $8,102,000 for the 2019 and 2018 twenty-six-week periods, respectively. The decrease in selling, general and administrative costs as a percent of gross profit was due to the decrease in selling, general and administrative costs, partially offset by the effect of decreased gross profit.

Depreciation and amortization increased $584,000 in the 2019 twenty-six-week period compared to the 2018 twenty-six-week period and represented 7.1% of gross profit in the 2019 period compared to 6.7% of gross profit in the 2018 period. The increase in depreciation and amortization expenses was primarily due to an increased number of Company-owned trailers. The increase in depreciation and amortization as a percentage of gross profit was due to the effect of decreased gross profit and increased depreciation.

Interest and debt expense in the 2019 twenty-six-week period decreased $125,000 compared to the 2018 twenty-six-week period. The decrease in interest and debt expense was primarily attributable to increased interest income earned on cash balances held by the transportation logistics segment.

The provisions for income taxes for the 2019 and 2018 twenty-six-week periods were based on estimated annual effective income tax rates of 24.2% and 24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2019 twenty-six-week period was 22.4%, 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. The effective income tax rate for the 2018 twenty-six-week period was 23.6%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes, the Tax Cuts and Jobs Act’s (the “Tax Reform Act”) elimination of the performance-based compensation exception under Section 162(m) and the meals and entertainment exclusion. The effective income tax rate in the 2019 twenty-six-week period of 22.4% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2019 twenty-six-week period. The effective income tax rate in the 2018 twenty-six-week period of 23.6% was lower than the 24.5% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2018 twenty-six-week period.

The net loss attributable to noncontrolling interest of $17,000 and $75,000 in the 2019 and 2018 twenty-six-week periods, respectively, represents the former noncontrolling investors’ share of the net loss incurred by Landstar Metro and Landstar Servicios.

Net income attributable to the Company was $124,417,000, or $3.11 per common share ($3.11 per diluted share), in the 2019 twenty-six-week period. Net income attributable to the Company was $120,040,000, or $2.88 per common share ($2.87 per diluted share), in the 2018 twenty-six-week period.

THIRTEEN WEEKS ENDED JUNE 29, 2019 COMPARED TO THIRTEEN WEEKS ENDED JUNE 30, 2018

Revenue for the 2019 thirteen-week period was $1,045,040,000, a decrease of $137,746,000, or 12%, compared to the 2018 thirteen-week period. Transportation revenue decreased $139,105,000, or 12%. The decrease in transportation revenue was attributable to decreased revenue per load of approximately 11%, and a decreased number of loads hauled of approximately 2%. Reinsurance premiums were $14,224,000 and $12,865,000 for the 2019 and 2018 thirteen-week periods, respectively. The increase in revenue from reinsurance premiums was primarily attributable to the increase in the average number of trucks provided by BCO Independent Contractors in the 2019 thirteen-week period compared to the 2018 thirteen-week period.

Truck transportation revenue generated by third party truck capacity providers for the 2019 thirteen-week period was $968,204,000, representing 93% of total revenue, a decrease of $137,177,000, or 12%, compared to the 2018 thirteen-week period. Revenue per load on loads hauled by third party truck capacity providers decreased approximately 11% in the 2019 thirteen-week period compared to the 2018 thirteen-week period and the number of loads hauled by third party truck capacity providers decreased approximately 1% compared to the 2018 thirteen-week period. The decrease in revenue per load on loads hauled via truck was primarily due to a softer freight demand environment experienced during the 2019 thirteen-week period, which resulted in more readily available truck capacity as compared to the 2018 thirteen-week period. Revenue per load on loads hauled via van equipment decreased 13%, revenue per load on loads hauled via unsided/platform equipment decreased 7% and revenue per load on less-than-truckload loadings decreased 14% as compared to the 2018 thirteen-week period. The decrease in the number of loads hauled via truck compared to the 2018 thirteen-week period was entirely

26

attributable to a decrease in demand for the Company’s truckload services provided via van equipment. Fuel surcharges billed to customers on revenue generated by BCO Independent Contractors are excluded from revenue. Fuel surcharges on Truck Brokerage Carrier revenue identified separately in billings to customers and included as a component of Truck Brokerage Carrier revenue were $20,334,000 and $24,657,000 in the 2019 and 2018 thirteen-week periods, respectively.

Transportation revenue generated by multimode capacity providers for the 2019 thirteen-week period was $56,794,000, or 5% of total revenue, a decrease of $3,530,000, or 6%, compared to the 2018 thirteen-week period. The number of loads hauled by multimode capacity providers decreased approximately 8% in the 2019 thirteen-week period compared to the 2018 thirteen-week period, while revenue per load on revenue generated by multimode capacity providers increased approximately 2% over the same period. The decrease in the number of loads hauled by multimode capacity providers was entirely due to a 16% decrease in rail intermodal loadings, mostly attributable to decreased loadings at two specific agencies. The increase in revenue per load of 2% on loads hauled by multimode capacity providers was primarily attributable to increased revenue per load on rail intermodal loads. Also, revenue per load on revenue generated by multimode capacity providers is influenced by many factors, including revenue mix among the various modes of transportation used, length of haul, complexity of freight, density of freight lanes, fuel costs and availability of capacity.

Purchased transportation was 76.5% and 77.5% of revenue in the 2019 and 2018 thirteen-week periods, respectively. The decrease in purchased transportation as a percentage of revenue was primarily due to a decreased rate of purchased transportation paid on Truck Brokerage Carrier revenue and an increased percentage of revenue contributed by BCO Independent Contractors, which typically has a lower rate of purchased transportation than revenue generated by Truck Brokerage Carriers. Commissions to agents were 8.4% and 8.0% of revenue in the 2019 and 2018 thirteen-week periods, respectively. The increase in commissions to agents as a percentage of revenue was primarily attributable to an increased net revenue margin on revenue generated by Truck Brokerage Carriers.

Investment income was $1,283,000 and $891,000 in the 2019 and 2018 thirteen-week periods, respectively. The increase in investment income was attributable to higher average rates of return on investments and a higher average investment balance held by the insurance segment in the 2019 thirteen-week period.

Other operating costs increased $2,255,000 in the 2019 thirteen-week period compared to the 2018 thirteen-week period and represented 6.2% of gross profit in the 2019 period compared to 4.4% of gross profit in the 2018 period. The increase in other operating costs compared to the prior year was primarily due to an increased provision for contractor bad debt and increased trailing equipment maintenance costs as a result of an increased number of Company-owned trailers. The increase in other operating costs as a percentage of gross profit was caused by the increase in other operating costs and the effect of decreased gross profit.

Insurance and claims decreased $5,253,000 in the 2019 thirteen-week period compared to the 2018 thirteen-week period and represented 10.3% of gross profit in the 2019 period compared to 12.6% of gross profit in the 2018 period. The decrease in insurance and claims expense compared to prior year was primarily due to decreased net unfavorable development of prior years’ claims and decreased severity of current year claims in the 2019 period. Net unfavorable development of prior years’ claims was $1,493,000 and $5,686,000 in the 2019 and 2018 thirteen-week periods, respectively. The decrease in insurance and claims as a percent of gross profit was caused by the decrease in insurance and claims costs, partially offset by the effect of decreased gross profit.

Selling, general and administrative costs decreased $7,701,000 in the 2019 thirteen-week period compared to the 2018 thirteen-week period and represented 26.1% of gross profit in the 2019 period compared to 28.6% of gross profit in the 2018 period. The decrease in selling, general and administrative costs compared to prior year was attributable to a decreased provision for incentive compensation, decreased stock-based compensation expense and a decreased provision for customer bad debt, partially offset by increased wages. Included in selling, general and administrative costs is incentive compensation expense of $873,000 and $5,351,000 for the 2019 and 2018 thirteen-week periods, respectively, and stock-based compensation expense of $1,430,000 and $4,392,000 for the 2019 and 2018 thirteen-week periods, respectively. The decrease in selling, general and administrative costs as a percent of gross profit was due primarily to the decrease in selling, general and administrative costs, partially offset by the effect of decreased gross profit.

Depreciation and amortization increased $265,000 in the 2019 thirteen-week period compared to the 2018 thirteen-week period and represented 7.0% of gross profit in the 2019 period compared to 6.3% of gross profit in the 2018 period. The increase in depreciation and amortization expenses was primarily due to increased depreciation on information technology assets and increased depreciation on an increased number of Company-owned trailers. The increase in depreciation and amortization as a percentage of gross profit was due to increased depreciation costs and the effect of decreased gross profit.

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Interest and debt expense in the 2019 thirteen-week period decreased $130,000 compared to the 2018 thirteen-week period. The decrease in interest and debt expense was primarily attributable to increased interest income earned on cash balances held by the transportation logistics segment.

The provisions for income taxes for the 2019 and 2018 thirteen-week periods were based on estimated annual effective income tax rates of 24.2% and 24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2019 thirteen-week period was 23.8%, 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. The effective income tax rate for the 2018 thirteen-week period was 24.3%, which was higher than the statutory federal income tax rate of 21% primarily attributable to state taxes, the Tax Reform Act’s elimination of the performance-based compensation exception under Section 162(m) and the meals and entertainment exclusion. The effective income tax rate in the 2019 thirteen-week period of 23.8% was lower than the 24.2% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2019 thirteen-week period. The effective income tax rate in the 2018 thirteen-week period of 24.3% was lower than the 24.5% estimated annual effective income tax rate primarily due to excess tax benefits recognized on stock-based compensation arrangements in the 2018 thirteen-week period.

The net loss attributable to noncontrolling interest of $31,000 in the 2018 thirteen-week period represents the former noncontrolling investors’ share of the net loss incurred by Landstar Metro and Landstar Servicios.

Net income attributable to the Company was $61,100,000, or $1.53 per common share ($1.53 per diluted share), in the 2019 thirteen-week period. Net income attributable to the Company was $62,523,000, or $1.51 per common share ($1.51 per diluted share), in the 2018 thirteen-week period.

CAPITAL RESOURCES AND LIQUIDITY

Working capital and the ratio of current assets to current liabilities were $465,053,000 and 2.0 to 1, respectively, at June 29, 2019, compared with $435,611,000 and 1.8 to 1, respectively, at December 29, 2018. Landstar has historically operated with current ratios within the range of 1.5 to 1 to 2.0 to 1. Cash provided by operating activities was $184,076,000 in the 2019 twenty-six-week period compared with $113,029,000 in the 2018 twenty-six-week period. The increase in cash flow provided by operating activities was primarily attributable to the timing of collections of trade receivables.

The Company declared and paid $0.33 per share, or $13,257,000 in the aggregate, in cash dividends during the twenty-six-week period ended June 29, 2019. The Company declared and paid $0.30 per share, or $12,496,000 in the aggregate, in cash dividends during the twenty-six-week period ended June 30, 2018 and, during such period, also paid $62,985,000 of dividends payable which were declared during fiscal year 2017 and included in current liabilities in the consolidated balance sheet at December 30, 2017. During the twenty-six-week period ended June 29, 2019, the Company purchased 674,410 shares of its common stock at a total cost of $69,729,000. During the twenty-six-week period ended June 30, 2018, the Company purchased 1,000,000 shares of its common stock at a total cost of $105,488,000. As of June 29, 2019, the Company may purchase in the aggregate up to 1,325,590 shares of its common stock under its authorized stock purchase programs. Long-term debt, including current maturities, was $104,767,000 at June 29, 2019, $23,658,000 lower than at December 29, 2018.

Equity was $728,300,000, or 87% of total capitalization (defined as long-term debt including current maturities plus equity), at June 29, 2019, compared to $689,133,000, or 84% of total capitalization, at December 29, 2018. The increase in equity was primarily a result of net income, partially offset by purchases of shares of the Company’s common stock and dividends declared by the Company in the 2019 twenty-six-week period.

On June 2, 2016, Landstar entered into a 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 June 2, 2021, provides $250,000,000 of borrowing capacity in the form of a revolving credit facility, $50,000,000 of which may be utilized in the form of letter of credit guarantees. The Credit Agreement includes an “accordion” feature providing for a possible increase up to an aggregate borrowing amount of $400,000,000. The Company’s prior credit agreement was terminated on June 2, 2016.

The Credit Agreement contains a number of covenants that limit, among other things, the incurrence of additional indebtedness. The Company is required to, among other things, maintain a minimum Fixed Charge Coverage Ratio, as defined in the Credit Agreement, and maintain a Leverage Ratio, as defined in the Credit Agreement, below a specified maximum. The Credit Agreement provides for a

28

restriction on cash dividends and other distributions to stockholders on the Company’s capital stock to the extent there is a default under the Credit Agreement. In addition, the Credit Agreement under certain circumstances limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter. The Credit Agreement provides for an event of default in the event that, among other things, a person or group acquires 35% or more of the outstanding capital stock of the Company or obtains power to elect a majority of the Company’s directors or the directors cease to consist of a majority of Continuing Directors, as defined in the Credit Agreement. None of these covenants are presently considered by management to be materially restrictive to the Company’s operations, capital resources or liquidity. The Company is currently in compliance with all of the debt covenants under the Credit Agreement.

At June 29, 2019, the Company had no borrowings outstanding and $34,367,000 of letters of credit outstanding under the Credit Agreement. At June 29, 2019, there was $215,633,000 available for future borrowings under the Credit Agreement. In addition, the Company has $61,503,000 in letters of credit outstanding as collateral for insurance claims that are secured by investments totaling $68,337,000 at June 29, 2019. Investments, all of which are carried at fair value, include primarily investment-grade bonds and U.S. Treasury obligations having maturities of up to five years. Fair value of investments is based primarily on quoted market prices. See “Notes to Consolidated Financial Statements” included herein for further discussion on measurement of fair value of investments.

Historically, the Company has generated sufficient operating cash flow to meet its debt service requirements, fund continued growth, both organic and through acquisitions, complete or execute share purchases of its common stock under authorized share purchase programs, pay dividends and meet working capital needs. As an asset-light provider of integrated transportation management solutions, the Company’s annual capital requirements for operating property are generally for trailing equipment and information technology hardware and software. In addition, a significant portion of the trailing equipment used by the Company is provided by third party capacity providers, thereby reducing the Company’s capital requirements. During the 2019 twenty-six-week period, the Company purchased $9,224,000 of operating property. Landstar anticipates acquiring either by purchase or lease financing during the remainder of fiscal year 2019 approximately $61,000,000 in operating property, consisting primarily of new trailing equipment to replace older trailing equipment and information technology equipment.

On January 29, 2019, Landstar acquired all of the remaining equity interests in Landstar Metro and Landstar Servicios then held by the minority equityholders. Accordingly, as of such date, Landstar Metro and Landstar Servicios each became wholly owned subsidiaries of the Company. Cash consideration paid in the 2019 first quarter to purchase these remaining equity interests was $600,000.

Management believes that cash flow from operations combined with the Company’s borrowing capacity under the Credit Agreement will be adequate to meet Landstar’s debt service requirements, fund continued growth, both internal and through acquisitions, pay dividends, complete the authorized share purchase programs and meet working capital needs.

LEGAL MATTERS

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc. and Landstar Ranger, Inc. (together, the “Defendants”). The complaint purports to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S. Fischer of the United State District Court for the Central District of California. Mr. Tanious is a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc. The complaint asserts claims based on the alleged misclassification of Mr. Tanious as an independent contractor and alleges violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition. Mr. Tanious is seeking, on behalf of himself and the purported class, payment of minimum wages, restitution and certain statutory damages and penalties, including compensatory, consequential, general, liquidated and special damages. None of the California Labor Code provisions under which Mr. Tanious seeks relief apply to independent contractors. Due to a number of factors including the preliminary status of this matter, the Company does not believe it is in a position to conclude whether or not there is a reasonable possibility of an adverse outcome in this case or what damages, if any, the plaintiffs would be awarded should they prevail on all or any part of their claims. However, the Company believes it has meritorious defenses and it intends to assert these defenses vigorously.

29

The 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. 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Landstar provides for the estimated costs of self-insured claims primarily on an actuarial basis. The amount recorded for the estimated liability for claims incurred is based upon the facts and circumstances known on the applicable balance sheet date. The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by management. The Company continually revises its existing claim estimates as new or revised information becomes available on the status of each claim. Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates. During the 2019 and 2018 twenty-six-week periods, insurance and claims costs included $2,900,000 and $8,244,000 of net unfavorable adjustments to prior years’ claims estimates, respectively. It is reasonably likely that the ultimate outcome of settling all outstanding claims will be more or less than the estimated claims reserve at June 29, 2019.

Significant variances from management’s estimates for the ultimate resolution of self-insured claims could be expected to positively or negatively affect Landstar’s earnings in a given quarter or year. However, management believes that the ultimate resolution of these items, given a range of reasonably likely outcomes, will not significantly affect the long-term financial condition of Landstar or its ability to fund its continuing operations.

EFFECTS OF INFLATION

Management does not believe inflation has had a material impact on the results of operations or financial condition of Landstar in the past five years. However, inflation in excess of historic trends might have an adverse effect on the Company’s results of operations in the future.

SEASONALITY

Landstar’s operations are subject to seasonal trends common to the trucking industry. Truckload shipments for the quarter ending in March are typically lower than for the quarters ending June, September and December.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to changes in interest rates as a result of its financing activities, primarily its borrowings on its revolving credit facility, and investing activities with respect to investments held by the insurance segment.

On June 2, 2016, Landstar entered into a 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 June 2, 2021, provides $250,000,000 of borrowing capacity in the form of a revolving credit facility, $50,000,000 of which may be utilized in the form of letter of credit guarantees. The Credit Agreement includes an “accordion” feature providing for a possible increase up to an aggregate borrowing amount of $400,000,000.

Depending upon the specific type of borrowing, borrowings under the Credit Agreement bear interest based on either (a) the prime rate, (b) the Federal Reserve Bank of New York rate plus 0.5% or (c) the London Interbank Offered Rate, plus 1.25%. As of June 29, 2019 and during the entire 2019 second quarter, the Company had no borrowings outstanding under the Credit Agreement.

Long-term investments, all of which are available-for-sale and are carried at fair value, include primarily investment-grade bonds and U.S. Treasury obligations having maturities of up to five years. Assuming that the long-term portion of investments remains at $80,682,000, the balance at June 29, 2019, a hypothetical increase or decrease in interest rates of 100 basis points would not have a material impact on future earnings on an annualized basis. Short-term investments consist of short-term investment-grade instruments and the current maturities of investment-grade corporate bonds and U.S. Treasury obligations. Accordingly, any future interest rate risk on these short-term investments would not be material to the Company’s operating results.

30

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. The assets held at the Company’s Canadian and Mexican subsidiaries at June 29, 2019 were, as translated to U.S. dollars, approximately 4% of total consolidated assets. Accordingly, any translation gain or loss related to the Canadian and Mexican operations would not be material.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, an evaluation was carried out, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 29, 2019 to provide reasonable assurance that information required to be disclosed by the Company in reports that it filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no significant changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended June 29, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In designing and evaluating disclosure controls and procedures, Company management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitation in any control system, no evaluation or implementation of a control system can provide complete assurance that all control issues and all possible instances of fraud have been or will be detected.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc. and Landstar Ranger, Inc. (together, the “Defendants”). The complaint purports to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S. Fischer of the United State District Court for the Central District of California. Mr. Tanious is a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc. The complaint asserts claims based on the alleged misclassification of Mr. Tanious as an independent contractor and alleges violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition. Mr. Tanious is seeking, on behalf of himself and the purported class, payment of minimum wages, restitution and certain statutory damages and penalties, including compensatory, consequential, general, liquidated and special damages. None of the California Labor Code provisions under which Mr. Tanious seeks relief apply to independent contractors. Due to a number of factors including the preliminary status of this matter, the Company does not believe it is in a position to conclude whether or not there is a reasonable possibility of an adverse outcome in this case or what damages, if any, the plaintiffs would be awarded should they prevail on all or any part of their claims. However, the Company believes it has meritorious defenses and it intends to assert these defenses vigorously.

The 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. 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.

31

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the Risk Factors described in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 as filed with the SEC.

Increased severity or frequency of accidents and other claims or a material unfavorable development of existing claims. As noted in Item 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018, “Business — Factors Significant to the Company’s Operations — Self-Insured Claims,” potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. For commercial trucking claims, Landstar retains liability 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. For commercial trucking claims incurred on or after May 1, 2019 through April 30, 2022, the new three year policy provides for a limit for a single loss of $5,000,000, with an aggregate limit of $10,000,000 for each policy year, an aggregate limit of $15,000,000 for the thirty-six month term ended April 30, 2022, and options to increase such aggregate limits for pre-established amounts of additional premium. The Company continues to maintain third party insurance arrangements providing excess coverage on a per occurrence basis for liabilities in excess of $10,000,000. The Company also 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. The Company’s exposure to liability associated with accidents incurred by Truck Brokerage Carriers, railroads and air and ocean cargo carriers who transport freight on behalf of the Company is reduced by various factors including the extent to which such carriers maintain their own insurance coverage. A material increase in the frequency or severity of accidents, cargo claims or workers’ compensation claims or the material unfavorable development of existing claims could have a material adverse effect on Landstar’s cost of insurance and claims and its results of operations.

For a discussion identifying additional risk factors and other important factors that could cause actual results to differ materially from those anticipated, see the discussions under Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Consolidated Financial Statements” in this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Company

The following table provides information regarding the Company’s purchase of its common stock during the period from March 31, 2019 to June 29, 2019, the Company’s second fiscal quarter:

Fiscal Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Maximum Number of Shares That May Yet Be Purchased Under the Programs
March 30, 2019								1,875,519
March 31, 2019 – April 27, 2019		—	$	—		—		1,875,519
April 28, 2019 – May 25, 2019		324,891		106.20		324,891		1,550,628
May 26, 2019 – June 29, 2019		225,038		98.86		225,038		1,325,590
Total		549,929	$	103.20		549,929

On December 11, 2017, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,963,875 shares of the Company’s common stock from time to time in the open market and in privately negotiated transactions. On January 23, 2019, the Landstar System, Inc. Board of Directors authorized the Company to purchase up to 1,000,000 additional shares of the Company’s Common Stock from time to time in the open market and in privately negotiated transactions. As of June 29, 2019, the Company had authorization to purchase in the aggregate up to 1,325,590 shares of its common stock under these programs. No specific expiration date has been assigned to either the December 11, 2017 or January 23, 2019 authorizations.

32

Dividends

On June 2, 2016, Landstar entered into a credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Agreement”). The Credit Agreement provides for a restriction on cash dividends and other distributions to stockholders on the Company’s capital stock in the event there is a default under the Credit Agreement. In addition, the Credit Agreement, under certain circumstances, limits the amount of such cash dividends and other distributions to stockholders to the extent that, after giving effect to any payment made to effect such cash dividend or other distribution, the Leverage Ratio, as defined in the Credit Agreement, would exceed 2.5 to 1 on a pro forma basis as of the end of the Company’s most recently completed fiscal quarter.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed on the Exhibit Index are furnished as part of this quarterly report on Form 10-Q.

33

EXHIBIT INDEX

Registrant’s Commission File No.: 0-21238

Exhibit No.		Description
	(31)	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.1*	Chief Executive Officer certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2*	Chief Financial Officer certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	(32)	Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.1**	Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2**	Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS*	XBRL Instance Document the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
	101.SCH*	XBRL Schema Document
	101.CAL*	XBRL Calculation Linkbase Document
	101.DEF*	XBRL Definition Linkbase Document
	101.LAB*	XBRL Labels Linkbase Document
	101.PRE*	XBRL Presentation Linkbase Document

* Filed herewith

** Furnished herewith

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LANDSTAR SYSTEM, INC.
Date: August 2, 2019	/s/ James B. Gattoni
	James B. Gattoni
	President and
	Chief Executive Officer
Date: August 2, 2019	/s/ L. Kevin Stout
	L. Kevin Stout
	Vice President and Chief
	Financial Officer

35

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, James B. Gattoni, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Landstar System, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2019

/s/ James B. Gattoni

James B. Gattoni

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, L. Kevin Stout, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Landstar System, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2019

/s/ L. Kevin Stout

L. Kevin Stout

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landstar System, Inc. (the “Company”) on Form 10-Q for the period ending June 29, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. Gattoni, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2019

/s/ James B. Gattoni

James B. Gattoni

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Landstar System, Inc. (the “Company”) on Form 10-Q for the period ending June 29, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, L. Kevin Stout, Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 2, 2019

/s/ L. Kevin Stout

L. Kevin Stout

Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 29, 2019	Jul. 22, 2019
Document and Entity Information [Abstract]
Amendment Flag	false
Document Type	10-Q
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Document Quarterly Report	true
Entity Central Index Key	0000853816
Document Transition Report	false
Current Fiscal Year End Date	--12-28
Document Period End Date	Jun. 29, 2019
Entity Registrant Name	LANDSTAR SYSTEM INC
Entity Filer Category	Large Accelerated Filer
Trading Symbol	LSTR
Title of 12(b) Security	Common Stock
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		39,629,695
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity File Number	0-21238
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	06-1313069
Entity Address, Address Line One	13410 Sutton Park Drive South
Entity Address, City or Town	Jacksonville
Entity Address, Postal Zip Code	32224
City Area Code	904
Local Phone Number	398-9400
Entity Address, State or Province	FL

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Current Assets
Cash and cash equivalents	$ 250,212	$ 199,736
Short-term investments	35,138	40,058
Trade accounts receivable, less allowance of $6,744 and $6,413	594,122	691,604
Other receivables, including advances to independent contractors, less allowance of $7,729 and $6,216	27,212	23,744
Other current assets	32,619	16,287
Total current assets	939,303	971,429
Operating property, less accumulated depreciation and amortization of $264,910 and $250,153	269,246	284,032
Goodwill	38,407	38,232
Other assets	101,737	86,871
Total assets	1,348,693	1,380,564
Current Liabilities
Cash overdraft	43,620	55,339
Accounts payable	285,569	314,134
Current maturities of long-term debt	39,194	43,561
Insurance claims	41,254	40,176
Accrued compensation	11,372	29,489
Contractor escrow	25,530	25,202
Other current liabilities	27,711	27,917
Total current liabilities	474,250	535,818
Long-term debt, excluding current maturities	65,573	84,864
Insurance claims	31,016	30,429
Deferred income taxes and other noncurrent liabilities	49,554	40,320
Equity
Landstar System, Inc. and subsidiary shareholders' equity Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,064,877 and 67,870,962 shares	681	679
Additional paid-in capital	224,550	226,852
Retained earnings	1,952,439	1,841,279
Cost of 28,435,182 and 27,755,001 shares of common stock in treasury	(1,446,425)	(1,376,111)
Accumulated other comprehensive loss	(2,945)	(5,875)
Total Landstar System, Inc. and subsidiary shareholders' equity	728,300	686,824
Noncontrolling interest		2,309
Total equity	728,300	689,133
Total liabilities and equity	$ 1,348,693	$ 1,380,564

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Allowance on trade accounts receivable	$ 6,744	$ 6,413
Allowance on other receivables	7,729	6,216
Accumulated depreciation and amortization on operating property	$ 264,910	$ 250,153
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized shares	160,000,000	160,000,000
Common stock, issued shares	68,064,877	67,870,962
Treasury stock, shares	28,435,182	27,755,001

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Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Revenue	$ 1,045,040	$ 1,182,786	$ 2,078,040	$ 2,230,712
Investment income	1,283	891	2,421	1,752
Costs and expenses:
Purchased transportation	799,371	916,940	1,591,126	1,727,237
Commissions to agents	87,623	94,399	173,294	176,524
Other operating costs, net of gains on asset sales/dispositions	9,861	7,606	18,100	15,210
Insurance and claims	16,286	21,539	31,279	38,899
Selling, general and administrative	41,297	48,998	82,565	94,249
Depreciation and amortization	11,034	10,769	22,350	21,766
Total costs and expenses	965,472	1,100,251	1,918,714	2,073,885
Operating income	80,851	83,426	161,747	158,579
Interest and debt expense	709	839	1,514	1,639
Income before income taxes	80,142	82,587	160,233	156,940
Income taxes	19,042	20,095	35,833	36,975
Net income	61,100	62,492	124,400	119,965
Less: Net loss attributable to noncontrolling interest	0	(31)	(17)	(75)
Net income attributable to Landstar System, Inc. and subsidiary	$ 61,100	$ 62,523	$ 124,417	$ 120,040
Earnings per common share attributable to Landstar System, Inc. and subsidiary	$ 1.53	$ 1.51	$ 3.11	$ 2.88
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$ 1.53	$ 1.51	$ 3.11	$ 2.87
Average number of shares outstanding:
Earnings per common share	39,945,000	41,450,000	40,053,000	41,744,000
Diluted earnings per share	39,945,000	41,491,000	40,053,000	41,795,000
Dividends per common share	$ 0.165	$ 0.150	$ 0.330	$ 0.300

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Net income attributable to Landstar System, Inc. and subsidiary	$ 61,100	$ 62,523	$ 124,417	$ 120,040
Other comprehensive income (loss):
Unrealized holding gains (losses) on available-for-sale investments, net of tax expense (benefit) of $494, ($233), $222 and ($42)	810	(153)	1,805	(883)
Foreign currency translation gains (losses)	571	(1,580)	1,125	(1,239)
Other comprehensive income (loss)	1,381	(1,733)	2,930	(2,122)
Comprehensive income attributable to Landstar System, Inc. and subsidiary	$ 62,481	$ 60,790	$ 127,347	$ 117,918

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Unrealized holding gains (losses) on available-for-sale investments, tax expense (benefit)	$ 222	$ (42)	$ 494	$ (233)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
OPERATING ACTIVITIES
Net income	$ 124,400	$ 119,965
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of operating property and intangible assets	22,350	21,766
Non-cash interest charges	126	126
Provisions for losses on trade and other accounts receivable	4,194	4,297
Gains on sales/disposals of operating property	(1,219)	(988)
Deferred income taxes, net	5,060	5,585
Stock-based compensation	3,368	8,102
Changes in operating assets and liabilities:
Decrease (increase) in trade and other accounts receivable	89,820	(48,651)
Increase in other assets	(22,808)	(16,537)
(Decrease) increase in accounts payable	(28,565)	20,161
Decrease in other liabilities	(14,315)	(4,488)
Increase in insurance claims	1,665	3,691
NET CASH PROVIDED BY OPERATING ACTIVITIES	184,076	113,029
INVESTING ACTIVITIES
Sales and maturities of investments	41,345	18,399
Purchases of investments	(42,812)	(19,653)
Purchases of operating property	(9,224)	(4,121)
Proceeds from sales of operating property	3,219	2,939
NET CASH USED BY INVESTING ACTIVITIES	(7,472)	(2,436)
FINANCING ACTIVITIES
(Decrease) increase in cash overdraft	(11,719)	3,123
Dividends paid	(13,257)	(75,481)
Proceeds from exercises of stock options	343	1,039
Taxes paid in lieu of shares issued related to stock-based compensation plans	(8,438)	(2,812)
Purchases of common stock	(69,729)	(105,488)
Principal payments on finance lease obligations	(23,658)	(22,768)
Purchase of noncontrolling interest	(600)
Payment of contingent consideration		(985)
NET CASH USED BY FINANCING ACTIVITIES	(127,058)	(203,372)
Effect of exchange rate changes on cash and cash equivalents	930	(996)
Increase (decrease) in cash and cash equivalents	50,476	(93,775)
Cash and cash equivalents at beginning of period	199,736	242,416
Cash and cash equivalents at end of period	$ 250,212	$ 148,641

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Consolidated Statements of Changes in Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock at Cost	Accumulated Other Comprehensive (Loss) Income	Non-controlling Interests
Beginning Balance (in shares) at Dec. 30, 2017		67,740,380			25,749,493
Beginning Balance at Dec. 30, 2017	$ 653,877	$ 677	$ 209,599	$ 1,611,158	$ (1,167,600)	$ (3,162)	$ 3,205
Net income (loss)	57,473			57,517			(44)
Dividends	(6,308)			(6,308)
Purchases of common stock (in shares)					14,354
Purchases of common stock	(1,508)				$ (1,508)
Issuance of stock related to stock-based compensation plans (in shares)		95,784			4,822
Issuance of stock related to stock-based compensation plans	(1,725)	$ 1	(1,376)		$ (350)
Stock-based compensation	3,710		3,710
Other comprehensive (loss) income	(12)					(389)	377
Ending Balance (in shares) at Mar. 31, 2018		67,836,164			25,768,669
Ending Balance at Mar. 31, 2018	706,280	$ 678	211,933	1,663,140	$ (1,169,458)	(3,551)	3,538
Beginning Balance (in shares) at Dec. 30, 2017		67,740,380			25,749,493
Beginning Balance at Dec. 30, 2017	653,877	$ 677	209,599	1,611,158	$ (1,167,600)	(3,162)	3,205
Net income (loss)	119,965
Ending Balance (in shares) at Jun. 30, 2018		67,847,692			26,754,810
Ending Balance at Jun. 30, 2018	660,933	$ 678	216,328	1,719,475	$ (1,273,489)	(5,284)	3,225
Adoption of accounting standards	773			773
Beginning Balance (in shares) at Mar. 31, 2018		67,836,164			25,768,669
Beginning Balance at Mar. 31, 2018	706,280	$ 678	211,933	1,663,140	$ (1,169,458)	(3,551)	3,538
Net income (loss)	62,492			62,523			(31)
Dividends	(6,188)			(6,188)
Purchases of common stock (in shares)					985,646
Purchases of common stock	(103,980)				$ (103,980)
Issuance of stock related to stock-based compensation plans (in shares)		11,528			495
Issuance of stock related to stock-based compensation plans	(48)		3		$ (51)
Stock-based compensation	4,392		4,392
Other comprehensive (loss) income	(2,015)					(1,733)	(282)
Ending Balance (in shares) at Jun. 30, 2018		67,847,692			26,754,810
Ending Balance at Jun. 30, 2018	660,933	$ 678	216,328	1,719,475	$ (1,273,489)	(5,284)	3,225
Beginning Balance (in shares) at Dec. 29, 2018		67,870,962			27,755,001
Beginning Balance at Dec. 29, 2018	689,133	$ 679	226,852	1,841,279	$ (1,376,111)	(5,875)	2,309
Net income (loss)	63,300			63,317			(17)
Dividends	(6,629)			(6,629)
Purchases of common stock (in shares)					124,481
Purchases of common stock	(12,977)				$ (12,977)
Purchase of noncontrolling interests	(600)		1,842				(2,442)
Issuance of stock related to stock-based compensation plans (in shares)		176,079			5,199
Issuance of stock related to stock-based compensation plans	(7,604)	$ 1	(7,081)		$ (524)
Stock-based compensation	1,938		1,938
Other comprehensive (loss) income	1,699					1,549	150
Ending Balance (in shares) at Mar. 30, 2019		68,047,041			27,884,681
Ending Balance at Mar. 30, 2019	728,260	$ 680	223,551	1,897,967	$ (1,389,612)	(4,326)
Beginning Balance (in shares) at Dec. 29, 2018		67,870,962			27,755,001
Beginning Balance at Dec. 29, 2018	689,133	$ 679	226,852	1,841,279	$ (1,376,111)	(5,875)	2,309
Net income (loss)	124,400
Ending Balance (in shares) at Jun. 29, 2019		68,064,877			28,435,182
Ending Balance at Jun. 29, 2019	728,300	$ 681	224,550	1,952,439	$ (1,446,425)	(2,945)	0
Beginning Balance (in shares) at Mar. 30, 2019		68,047,041			27,884,681
Beginning Balance at Mar. 30, 2019	728,260	$ 680	223,551	1,897,967	$ (1,389,612)	(4,326)
Net income (loss)	61,100			61,100
Dividends	(6,628)			(6,628)
Purchases of common stock (in shares)					549,929
Purchases of common stock	(56,752)				$ (56,752)
Issuance of stock related to stock-based compensation plans (in shares)		17,836			572
Issuance of stock related to stock-based compensation plans	(491)	$ 1	(431)		$ (61)
Stock-based compensation	1,430		1,430
Other comprehensive (loss) income	1,381					1,381
Ending Balance (in shares) at Jun. 29, 2019		68,064,877			28,435,182
Ending Balance at Jun. 29, 2019	$ 728,300	$ 681	$ 224,550	$ 1,952,439	$ (1,446,425)	$ (2,945)	$ 0

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Consolidated Statements of Changes in Equity (Parenthetical) - $ / shares	3 Months Ended				6 Months Ended
	Jun. 29, 2019	Mar. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 29, 2019	Jun. 30, 2018
Dividends per common share	$ 0.165	$ 0.165	$ 0.150	$ 0.15	$ 0.330	$ 0.300

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Business Description

6 Months Ended

Jun. 29, 2019

Business Description and Basis of Presentation [Text Block]

The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all adjustments (all of a normal, recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of the consolidated financial statements requires the use of management’s estimates. Actual results could differ from those estimates. Landstar System, Inc. and its subsidiary are herein referred to as “Landstar” or the “Company.” Significant intercompany accounts have been eliminated in consolidation.

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Significant Accounting Policies

6 Months Ended

Jun. 29, 2019

Significant Accounting Policies

(1) Significant Accounting Policies

Revenue from Contracts with Customers – Disaggregation of Revenue

During the twenty six weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44%, 48% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the twenty-six-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 29, 2019 was $1,224,379,000 hauled via van equipment, $648,828,000 hauled via unsided/platform equipment and $48,108,000 of less-than-truckload. During the twenty six weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the twenty-six-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 30, 2018 was $1,369,476,000 hauled via van equipment, $664,045,000 hauled via unsided/platform equipment and $50,948,000 of less-than-truckload.

During the thirteen weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 47% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the thirteen-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 29, 2019 was $605,365,000 hauled via van equipment, $338,107,000 hauled via unsided/platform equipment and $24,732,000 of less-than-truckload. During the thirteen weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the thirteen-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 30, 2018 was $713,341,000 hauled via van equipment, $364,676,000 hauled via unsided/platform equipment and $27,364,000 of less-than-truckload.

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Share-Based Payment Arrangements

6 Months Ended

Jun. 29, 2019

Share-Based Payment Arrangements

(2) Share-based Payment Arrangements

As of June 29, 2019, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). No further grants can be made under the ESOSIP. The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”). 6,000,000 shares of the Company’s common stock 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):

	Twenty Six Weeks  Ended						Thirteen Weeks  Ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Total cost of the Plans during the period	$	3,368		$	8,102		$	1,430		$	4,392
Amount of related income tax benefit recognized during the period		(3,734	)		(3,468	)		(672	)		(1,217	)
Net cost of the Plans during the period	$	(366	)	$	4,634		$	758		$	3,175

Included in income tax benefits recognized in the twenty-six-week periods ended June 29, 2019 and June 30, 2018 were excess tax benefits from stock-based awards of $2,871,000 and $1,426,000, respectively. Also included in income tax benefits recognized in the twenty-six-week periods ended June 29, 2019 and June 30, 2018 were income tax benefits of $38,000 and $64,000, respectively, recognized on disqualifying dispositions of the Company’s common stock by employees who obtained shares of common stock through exercises of incentive stock options.

As of June 29, 2019, there were 66,454 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,995,988 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 29, 2018		292,345		$	66.31
Granted		58,542		$	95.70
Shares earned in excess of target(1)		71,172		$	54.78
Vested shares, including shares earned in excess of target		(226,981	)	$	53.27
Forfeited		(5,822	)	$	84.39
Outstanding at June 29, 2019		189,256		$	86.14

(1) Represents shares earned in excess of target under the January 27, 2015 and January 29, 2016 RSU awards as actual results exceeded the target under both awards as a result of fiscal year 2018 results and under the May 1, 2015 RSU award as total shareholder return exceeded the target under the award.

During the twenty-six-week period ended June 29, 2019, the Company granted RSUs with a performance condition. RSUs with a performance condition granted on February 1, 2019 may vest on January 31 of 2022, 2023 and 2024 based on growth in operating income and pre-tax income per share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2018 fiscal year. Outstanding RSUs at both December 29, 2018 and June 29, 2019 include RSUs with a performance condition and RSUs with a market condition, as further described in the Company’s 2018 Annual Report on Form 10-K.

The Company recognized approximately $2,062,000 and $6,975,000 of share-based compensation expense related to RSU awards in the twenty-six-week periods ended June 29, 2019 and June 30, 2018, respectively. As of June 29, 2019, there was a maximum of $26.4 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.5 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.

Stock Options

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

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)
Options outstanding at December 29, 2018		89,114		$	50.44
Exercised		(22,700	)	$	49.45
Options outstanding at June 29, 2019		66,414		$	50.77		2.7	$	3,800
Options exercisable at June 29, 2019		66,414		$	50.77		2.7	$	3,800

The total intrinsic value of stock options exercised during the twenty-six-week periods ended June 29, 2019 and June 30, 2018 was $1,269,000 and $3,203,000, respectively.

As of June 29, 2019, there was no unrecognized compensation cost related to stock options granted under the Plans.

Non-vested Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:

	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 29, 2018		55,987		$	93.66
Granted		30,338		$	102.76
Vested		(21,165	)	$	92.66
Non-vested at June 29, 2019		65,160		$	98.22

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first or fifth anniversary of the date of the grant. 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. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of June 29, 2019, there was $4,996,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.3 years.

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Income Taxes

6 Months Ended

Jun. 29, 2019

Income Taxes

(3) Income Taxes

The provisions for income taxes for the 2019 and 2018 twenty-six-week periods were based on estimated annual effective income tax rates of 24.2% and 24.5%, respectively, adjusted for discrete events, such as benefits resulting from stock-based awards. The effective income tax rate for the 2019 twenty-six-week period was 22.4%, 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. The provision for income taxes for the 2019 twenty-six-week period was favorably impacted by $2,871,000) of excess tax benefits from stock-based awards. The effective income tax rate for the 2018 twenty-six-week period was 23.6)%, which was higher than the statutory federal income tax rate of 21)% primarily attributable to state taxes, the elimination of the performance-based compensation exception under Section 162(m) by the Tax Cuts and Jobs Act (the “Tax Reform Act”) and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock based awards.

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Earnings Per Share

6 Months Ended

Jun. 29, 2019

Earnings Per Share

(4) 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 restricted stock and outstanding Deferred Stock Units. Diluted earnings per share attributable to Landstar System, Inc. and subsidiary are based on the weighted average number of common shares and Deferred Stock Units outstanding plus the incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options.  

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):

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Average number of common shares outstanding		40,053		41,744		39,945		41,450
Incremental shares from assumed exercises of stock options		—		51		—		41
Average number of common shares and common share equivalents outstanding		40,053		41,795		39,945		41,491

For each of the twenty-six-week periods ended June 29, 2019 and June 30, 2018, 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.

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Additional Cash Flow Information

6 Months Ended

Jun. 29, 2019

Additional Cash Flow Information

(5) Additional Cash Flow Information

During the 2019 twenty-six-week period, Landstar paid income taxes and interest of $39,180,000 and $2,286,000, respectively. During the 2018 twenty-six-week period, Landstar paid income taxes and interest of $40,062,000 and $1,886,000, respectively. Landstar did not acquire any operating property by entering into finance leases in the 2019 twenty-six-week period. Landstar acquired operating property by entering into finance leases in the amount of $1,617,000 in the 2018 twenty-six-week period. Capital expenditures are recorded as cash outflows from investing activities in the consolidated statement of cash flows in the period in which they are paid.

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Segment Information

6 Months Ended

Jun. 29, 2019

Segment Information

(6) Segment Information

The following table summarizes information about the Company’s reportable business segments as of and for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands):

	Twenty Six Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	2,049,777	$	28,263	$	2,078,040	$	2,205,561	$	25,151	$	2,230,712
Internal revenue				27,367		27,367				22,917		22,917
Investment income				2,421		2,421				1,752		1,752
Operating income		135,919		25,828		161,747		146,298		12,281		158,579
Expenditures on long-lived assets		9,224				9,224		4,121				4,121
Goodwill		38,407				38,407		38,704				38,704
	Thirteen Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,030,816	$	14,224	$	1,045,040	$	1,169,921	$	12,865	$	1,182,786
Internal revenue				17,753		17,753				15,419		15,419
Investment income				1,283		1,283				891		891
Operating income		68,336		12,515		80,851		78,998		4,428		83,426
Expenditures on long-lived assets		4,648				4,648		307				307

In the twenty-six-week periods ended June 29, 2019 and June 30, 2018, no) single customer accounted for more than 10)% of the Company’s consolidated revenue.

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Other Comprehensive Income

6 Months Ended

Jun. 29, 2019

Other Comprehensive Income

(7) Other Comprehensive Income

The following table presents the components of and changes in accumulated other comprehensive income attributable to Landstar System, Inc. and subsidiary, net of related income taxes, as of and for the twenty-six-week period ended June 29, 2019 (in thousands):

	Unrealized Holding (Losses) Gains on Available-for-Sale Securities			Foreign  Currency Translation			Total
Balance as of December 29, 2018	$	(930	)	$	(4,945	)	$	(5,875	)
Other comprehensive income		1,805			1,125			2,930
Balance as of June 29, 2019	$	875		$	(3,820	)	$	(2,945	)

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 twenty-six-week period ended June 29, 2019.

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Investments

6 Months Ended

Jun. 29, 2019

Investments

(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. Investments in the bond portfolio are reported as available-for-sale and are carried at fair value. Investments maturing less than one year from the balance sheet date are included in short-term investments and investments maturing more than one year from the balance sheet date are included in other assets in the consolidated balance sheets. Management performs an analysis of the nature of the unrealized losses on available-for-sale investments to determine whether such losses are other-than-temporary. 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 other-than-temporary, are to be included as a charge in the statement of income, while unrealized losses

considered to be temporary are to be included as a component of equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, are classified within Level 2. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Any transfers between levels are recognized as of the beginning of any reporting period. Fair value of the bond portfolio was determined using Level 1 inputs related to U.S. Treasury obligations and money market investments and Level 2 inputs related to investment-grade corporate bonds, asset-backed securities and direct obligations of government agencies. Unrealized gains, net of unrealized losses, on the investments in the bond portfolio were $1,115,000 at June 29, 2019, while unrealized losses, net of unrealized gains, on the investments in the bond portfolio were $1,184,000 at December 29, 2018, respectively.

The amortized cost and fair values of available-for-sale investments are as follows at June 29, 2019 and December 29, 2018 (in thousands):    

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 29, 2019
Money market investments	$	17,207	$	—	$	—	$	17,207
Asset-backed securities		112		—		—		112
Corporate bonds and direct obligations of government agencies		96,282		1,155		49		97,388
U.S. Treasury obligations		1,104		9		—		1,113
Total	$	114,705	$	1,164	$	49	$	115,820
December 29, 2018
Money market investments	$	11,714	$	—	$	—	$	11,714
Asset-backed securities		624		—		4		620
Corporate bonds and direct obligations of government agencies		101,021		33		1,213		99,841
Total	$	113,359	$	33	$	1,217	$	112,175

For those available-for-sale investments with unrealized losses at June 29, 2019 and December 29, 2018, the following table summarizes the duration of the unrealized loss (in thousands):

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 29, 2019
Corporate bonds and direct obligations of government agencies	$	288	$	1	$	17,420	$	48	$	17,708	$	49
December 29, 2018
Asset-backed securities	$	—	$	—	$	620	$	4	$	620	$	4
Corporate bonds and direct obligations of government agencies		45,960		354		42,803		859		88,763		1,213
Total	$	45,960	$	354	$	43,423	$	863	$	89,383	$	1,217

The Company expects to recover 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, the Company does not consider the unrealized losses on these securities to be other-than-temporary at June 29, 2019.  

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Leases

6 Months Ended

Jun. 29, 2019

Leases

(9) Leases

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 right-of-use assets and operating lease liabilities represent leases for orientation centers for BCO Independent Contractors and office space used to conduct Landstar’s business. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. 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” 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. 

Most of Landstar’s operating leases include one or more options to renew. The exercise of lease renewal options is typically at Landstar’s sole discretion, and, as such, the majority of renewals to extend the lease terms are not included in the right-of-use assets and lease liabilities as they are not reasonably certain of exercise. Landstar regularly evaluates the renewal options, and when they are reasonably certain of exercise, Landstar includes the renewal period in the lease term.

As most of Landstar’s operating leases do not provide an implicit rate, Landstar utilized its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. 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 twenty six weeks ended June 29, 2019 were (in thousands):

Finance leases:
Amortization of right-of-use assets	$	13,132
Interest on lease liability		1,928
Total finance lease cost		15,060
Operating leases:
Lease cost		2,280
Variable lease cost		—
Sublease income		(2,571	)
Total operating lease (income)/cost		(291	)
Total lease cost	$	14,769

A summary of the lease classification on our consolidated balance sheet as of June 29, 2019 is as follows (in thousands):

Assets:

Operating lease right-of-use assets	Other assets	$	2,929
Finance lease assets	Operating property, less accumulated  depreciation and amortization		152,206
Total lease assets		$	155,135

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 June 29, 2019 (in thousands):

	Finance Leases		Operating Leases
2019 Remainder	$	21,586	$	445
2020		39,475		681
2021		25,065		616
2022		15,902		622
2023		8,875		551
Thereafter		—		301
Total future minimum lease payments		110,903		3,216
Less amount representing interest (2.1% to 4.4%)		6,136		287
Present value of minimum lease payments	$	104,767	$	2,929
Current maturities of long-term debt		39,194
Long-term debt, excluding current maturities		65,573
Other current liabilities				715
Deferred income taxes and other noncurrent liabilities				2,214

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of June 29, 2019 were:

	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.2			4.6
Weighted average discount rate		3.2	%		4.0	%

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Commitments and Contingencies

6 Months Ended

Jun. 29, 2019

Commitments and Contingencies

(10) Commitments and Contingencies

Short-term investments include $35,138,000 in current maturities of investments held by the Company’s insurance segment at June 29, 2019. The non-current portion of the bond portfolio of $80,682,000 is included in other assets. The short-term investments, together with $33,199,000 of non-current investments, provide collateral for the $61,503,000 of letters of credit issued to guarantee payment of insurance claims. As of June 29, 2019, Landstar also had $34,367,000 of additional letters of credit outstanding under the Company’s Credit Agreement. 

On January 25, 2019, a purported class action was filed in the Superior Court of the State of California for the County of San Bernardino against Landstar System, Inc. and Landstar Ranger, Inc. (together, the “Defendants”). The complaint purports to bring this action on behalf of Hany Tanious, as an individual, and “all owner operators who performed work for the Defendants, and who were classified as independent contractors, during the four years preceding the filing of this action through the present.” On June 11, 2019, the Defendants filed a Notice of Removal that resulted in the removal of the case from state court to federal court, where it was assigned to Judge Dale S. Fischer of the United State District Court for the Central District of California. Mr. Tanious is a truck owner-operator and formerly an independent contractor who was a party to an independent contractor operating agreement with Landstar Ranger, Inc. The complaint asserts claims based on the alleged misclassification of Mr. Tanious as an independent contractor and alleges violations under California law relating to overtime, minimum wage, meal and rest breaks, failure to reimburse certain expenses, wage statements, waiting time and unfair competition. Mr. Tanious is seeking, on behalf of himself and the purported class, payment of minimum wages, restitution and certain statutory damages and penalties, including compensatory, consequential, general, liquidated and special damages. None of the California Labor Code provisions under which Mr. Tanious seeks relief apply to independent contractors. Due to a number of factors including the preliminary status of this matter, the Company does not believe it is in a position to conclude whether or not there is a reasonable possibility of an adverse outcome in this case or what damages, if any, the plaintiffs would be awarded should they prevail on all or any part of their claims. However, the Company believes it has meritorious defenses and it intends to assert these defenses vigorously.  

The 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. 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. 

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Change in Accounting Estimate for Self-Insured Claims

6 Months Ended

Jun. 29, 2019

Change in Accounting Estimate for Self-Insured Claims

(11) Change in Accounting Estimate for Self-Insured Claims

Landstar provides for the estimated costs of self-insured claims primarily on an actuarial basis. The amount recorded for the estimated liability for claims incurred is based upon the facts and circumstances known on the applicable balance sheet date. The ultimate resolution of these claims may be for an amount greater or less than the amount estimated by management. The Company continually revises its existing claim estimates as new or revised information becomes available on the status of each claim. Historically, the Company has experienced both favorable and unfavorable development of prior years’ claims estimates.

The following table summarizes the effect of the increase in the cost of insurance claims resulting from unfavorable development of prior year self-insured claims estimates on operating income, net income attributable to Landstar System, Inc. and subsidiary and earnings per share attributable to Landstar System, Inc. and subsidiary set forth in the consolidated statements of income for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands, except per share amounts):    

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Operating income	$	2,900	$	8,244	$	1,493	$	5,686
Net income attributable to Landstar System, Inc. and subsidiary		2,198		6,224		1,131		4,293
Earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10

The unfavorable development of prior years’ claims in the thirteen-week period ended June 30, 2018 was primarily attributable to three claims.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 29, 2019

Recent Accounting Pronouncements

(12) Recent Accounting Pronouncements

Adoption of New Accounting Standards

In February 2016, the FASB issued Accounting Standards Update 2016-02 – Leases (“ASU 2016-02”), amended by ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2016-02 requires a company to recognize a right-of-use asset and lease liability for the obligation to make lease payments measured as the present value of the lease payments for all leases with terms greater than twelve months. The ASU requires adoption using a modified retrospective transition approach with either (1) periods prior to the adoption date being recast or (2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. The Company adopted this standard on December 30, 2018 using the cumulative-effect adjustment approach. No cumulative-effect adjustment was recognized as the amount was not material. The Company recognized $2,929,000 as of June 29, 2019 in right-of-use assets and corresponding lease obligations as the result of the adoption of ASU 2016-02. See Note 9 for additional information regarding the impact of adopting ASU 2016-02 to Landstar’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update 2016-13– Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. The Company is currently evaluating the impact of ASU 2016-13 on its financial statements.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 29, 2019

Revenue Recognition

Revenue from Contracts with Customers – Disaggregation of Revenue

During the twenty six weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 44%, 48% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the twenty-six-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 29, 2019 was $1,224,379,000 hauled via van equipment, $648,828,000 hauled via unsided/platform equipment and $48,108,000 of less-than-truckload. During the twenty six weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the twenty-six-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the twenty-six-week period ended June 30, 2018 was $1,369,476,000 hauled via van equipment, $664,045,000 hauled via unsided/platform equipment and $50,948,000 of less-than-truckload.

During the thirteen weeks ended June 29, 2019, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 47% and 3% respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 3% of the Company’s consolidated revenue in the thirteen-week period ended June 29, 2019. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 29, 2019 was $605,365,000 hauled via van equipment, $338,107,000 hauled via unsided/platform equipment and $24,732,000 of less-than-truckload. During the thirteen weeks ended June 30, 2018, revenue generated by BCO Independent Contractors, Truck Brokerage Carriers and railroads represented approximately 45%, 49% and 3%, respectively, of the Company’s consolidated revenue. Collectively, revenue generated by air and ocean cargo carriers represented approximately 2% of the Company’s consolidated revenue in the thirteen-week period ended June 30, 2018. Included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers during the thirteen-week period ended June 30, 2018 was $713,341,000 hauled via van equipment, $364,676,000 hauled via unsided/platform equipment and $27,364,000 of less-than-truckload.

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Share-Based Payment Arrangements (Tables)

6 Months Ended

Jun. 29, 2019

Amounts Recognized in Financial Statements with Respect to Plans

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

	Twenty Six Weeks  Ended						Thirteen Weeks  Ended
	June 29, 2019			June 30, 2018			June 29, 2019			June 30, 2018
Total cost of the Plans during the period	$	3,368		$	8,102		$	1,430		$	4,392
Amount of related income tax benefit recognized during the period		(3,734	)		(3,468	)		(672	)		(1,217	)
Net cost of the Plans during the period	$	(366	)	$	4,634		$	758		$	3,175

Summary of Information Regarding Stock Options

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

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)
Options outstanding at December 29, 2018		89,114		$	50.44
Exercised		(22,700	)	$	49.45
Options outstanding at June 29, 2019		66,414		$	50.77		2.7	$	3,800
Options exercisable at June 29, 2019		66,414		$	50.77		2.7	$	3,800

Restricted Stock Units (RSUs)

Schedule of Information on Restricted Stock Units

As of June 29, 2019, there were 66,454 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,995,988 shares of the Company’s common stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 29, 2018		292,345		$	66.31
Granted		58,542		$	95.70
Shares earned in excess of target(1)		71,172		$	54.78
Vested shares, including shares earned in excess of target		(226,981	)	$	53.27
Forfeited		(5,822	)	$	84.39
Outstanding at June 29, 2019		189,256		$	86.14

(1) Represents shares earned in excess of target under the January 27, 2015 and January 29, 2016 RSU awards as actual results exceeded the target under both awards as a result of fiscal year 2018 results and under the May 1, 2015 RSU award as total shareholder return exceeded the target under the award.

Non Vested Restricted Stock and Deferred Stock Units

Schedule of Information on Non-Vested Restricted Stock and Deferred Stock Units

Non-vested Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:

	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 29, 2018		55,987		$	93.66
Granted		30,338		$	102.76
Vested		(21,165	)	$	92.66
Non-vested at June 29, 2019		65,160		$	98.22

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Earnings Per Share (Tables)

6 Months Ended

Jun. 29, 2019

Earnings Per Share [Abstract]

Reconciliation of Average Number of Common Shares Outstanding to Average Number of Diluted Shares Outstanding

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):

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Average number of common shares outstanding		40,053		41,744		39,945		41,450
Incremental shares from assumed exercises of stock options		—		51		—		41
Average number of common shares and common share equivalents outstanding		40,053		41,795		39,945		41,491

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Segment Information (Tables)

6 Months Ended

Jun. 29, 2019

Information Regarding Reportable Business Segments

The following table summarizes information about the Company’s reportable business segments as of and for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands):

	Twenty Six Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	2,049,777	$	28,263	$	2,078,040	$	2,205,561	$	25,151	$	2,230,712
Internal revenue				27,367		27,367				22,917		22,917
Investment income				2,421		2,421				1,752		1,752
Operating income		135,919		25,828		161,747		146,298		12,281		158,579
Expenditures on long-lived assets		9,224				9,224		4,121				4,121
Goodwill		38,407				38,407		38,704				38,704
	Thirteen Weeks Ended
	June 29, 2019						June 30, 2018
	Transportation Logistics		Insurance		Total		Transportation Logistics		Insurance		Total
External revenue	$	1,030,816	$	14,224	$	1,045,040	$	1,169,921	$	12,865	$	1,182,786
Internal revenue				17,753		17,753				15,419		15,419
Investment income				1,283		1,283				891		891
Operating income		68,336		12,515		80,851		78,998		4,428		83,426
Expenditures on long-lived assets		4,648				4,648		307				307

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Other Comprehensive Income (Tables)

6 Months Ended

Jun. 29, 2019

Components of and Changes in Accumulated Other Comprehensive Income, Net of Related Income Taxes

The following table presents the components of and changes in accumulated other comprehensive income attributable to Landstar System, Inc. and subsidiary, net of related income taxes, as of and for the twenty-six-week period ended June 29, 2019 (in thousands):

	Unrealized Holding (Losses) Gains on Available-for-Sale Securities			Foreign  Currency Translation			Total
Balance as of December 29, 2018	$	(930	)	$	(4,945	)	$	(5,875	)
Other comprehensive income		1,805			1,125			2,930
Balance as of June 29, 2019	$	875		$	(3,820	)	$	(2,945	)

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Investments (Tables)

6 Months Ended

Jun. 29, 2019

Amortized Cost and Fair Value of Available-for-Sale Investments

The amortized cost and fair values of available-for-sale investments are as follows at June 29, 2019 and December 29, 2018 (in thousands):    

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 29, 2019
Money market investments	$	17,207	$	—	$	—	$	17,207
Asset-backed securities		112		—		—		112
Corporate bonds and direct obligations of government agencies		96,282		1,155		49		97,388
U.S. Treasury obligations		1,104		9		—		1,113
Total	$	114,705	$	1,164	$	49	$	115,820
December 29, 2018
Money market investments	$	11,714	$	—	$	—	$	11,714
Asset-backed securities		624		—		4		620
Corporate bonds and direct obligations of government agencies		101,021		33		1,213		99,841
Total	$	113,359	$	33	$	1,217	$	112,175

Schedule of Unrealized Loss on Available-for-Sale Investments

For those available-for-sale investments with unrealized losses at June 29, 2019 and December 29, 2018, the following table summarizes the duration of the unrealized loss (in thousands):

	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 29, 2019
Corporate bonds and direct obligations of government agencies	$	288	$	1	$	17,420	$	48	$	17,708	$	49
December 29, 2018
Asset-backed securities	$	—	$	—	$	620	$	4	$	620	$	4
Corporate bonds and direct obligations of government agencies		45,960		354		42,803		859		88,763		1,213
Total	$	45,960	$	354	$	43,423	$	863	$	89,383	$	1,217

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Leases (Tables)

6 Months Ended

Jun. 29, 2019

Lease, Cost [Table Text Block]

The components of lease cost for finance leases and operating leases for the twenty six weeks ended June 29, 2019 were (in thousands):

Finance leases:
Amortization of right-of-use assets	$	13,132
Interest on lease liability		1,928
Total finance lease cost		15,060
Operating leases:
Lease cost		2,280
Variable lease cost		—
Sublease income		(2,571	)
Total operating lease (income)/cost		(291	)
Total lease cost	$	14,769

Schedule Of Supplemental Balance Sheet In formation Related To Leases [Table Text Block]

A summary of the lease classification on our consolidated balance sheet as of June 29, 2019 is as follows (in thousands):

Assets:

Operating lease right-of-use assets	Other assets	$	2,929
Finance lease assets	Operating property, less accumulated  depreciation and amortization		152,206
Total lease assets		$	155,135

Finance And Operating Lease Maturity [Table Text Block]

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 June 29, 2019 (in thousands):

	Finance Leases		Operating Leases
2019 Remainder	$	21,586	$	445
2020		39,475		681
2021		25,065		616
2022		15,902		622
2023		8,875		551
Thereafter		—		301
Total future minimum lease payments		110,903		3,216
Less amount representing interest (2.1% to 4.4%)		6,136		287
Present value of minimum lease payments	$	104,767	$	2,929
Current maturities of long-term debt		39,194
Long-term debt, excluding current maturities		65,573
Other current liabilities				715
Deferred income taxes and other noncurrent liabilities				2,214

Schedule Discount Rate And Lease Term Used In Calculating Lease Liabilities And Assets [Table Text Block]

The weighted average remaining lease term and the weighted average discount rate for finance and operating leases as of June 29, 2019 were:

	Finance Leases			Operating Leases
Weighted average remaining lease term (years)		3.2			4.6
Weighted average discount rate		3.2	%		4.0	%

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Change in Accounting Estimate for Self-Insured Claims (Tables)

6 Months Ended

Jun. 29, 2019

Effect of Increase in Cost of Insurance and Claims

The following table summarizes the effect of the increase in the cost of insurance claims resulting from unfavorable development of prior year self-insured claims estimates on operating income, net income attributable to Landstar System, Inc. and subsidiary and earnings per share attributable to Landstar System, Inc. and subsidiary set forth in the consolidated statements of income for the twenty-six-week and thirteen-week periods ended June 29, 2019 and June 30, 2018 (in thousands, except per share amounts):    

	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018
Operating income	$	2,900	$	8,244	$	1,493	$	5,686
Net income attributable to Landstar System, Inc. and subsidiary		2,198		6,224		1,131		4,293
Earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$	0.05	$	0.15	$	0.03	$	0.10

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Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 1,045,040,000	$ 1,182,786,000	$ 2,078,040,000	$ 2,230,712,000
BCO Independent Contractor
Disaggregation of Revenue [Line Items]
Consolidated revenue, percentage	45.00%	45.00%	44.00%	45.00%
Truck Brokerage Carriers
Disaggregation of Revenue [Line Items]
Consolidated revenue, percentage	47.00%	49.00%	48.00%	49.00%
Railroads
Disaggregation of Revenue [Line Items]
Consolidated revenue, percentage	3.00%	3.00%	3.00%	3.00%
Air and Ocean Cargo Carriers
Disaggregation of Revenue [Line Items]
Consolidated revenue, percentage	3.00%	2.00%	3.00%	2.00%
BCO Independent Contractor and Truck Brokerage Carriers | Van Equipment
Disaggregation of Revenue [Line Items]
Revenue	$ 605,365,000	$ 713,341,000	$ 1,224,379,000	$ 1,369,476,000
BCO Independent Contractor and Truck Brokerage Carriers | Unsided/Platform Equipment
Disaggregation of Revenue [Line Items]
Revenue	338,107,000	364,676,000	648,828,000	664,045,000
BCO Independent Contractor and Truck Brokerage Carriers | Less than Truckload
Disaggregation of Revenue [Line Items]
Revenue	$ 24,732,000	$ 27,364,000	$ 48,108,000	$ 50,948,000

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Share-Based Payment Arrangements - Additional Information (Detail)	6 Months Ended
	Jun. 29, 2019 USD ($) EquityPlan shares	Jun. 30, 2018 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employee equity incentive plans | EquityPlan	2
Income tax benefit realized on disqualifying dispositions of stock acquired by exercise of incentive stock options	$ 38,000	$ 64,000
Excess tax benefit from stock-based awards	2,871,000	1,426,000
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized share-based compensation expense	2,062,000	6,975,000
Unrecognized compensation cost, other than options	$ 26,400,000
Unrecognized compensation cost expected to be recognized over period, years	3 years 6 months
Non Vested Restricted Stock and Deferred Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, other than options	$ 4,996,000
Unrecognized compensation cost expected to be recognized over period, years	2 years 3 months 18 days
Terms of award	the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first or fifth anniversary of the date of the grant. 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.
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of stock options exercised during periods	$ 1,269,000	$ 3,203,000
2011 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for issuance | shares	6,000,000
2013 Directors Stock Compensation Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized for issuance | shares	115,000
Common stock reserved for issuance | shares	66,454
2013 Directors Stock Compensation Plan | Deferred Stock Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock vesting percentage	100.00%
Other Stock Compensation Plans
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for issuance | shares	3,995,988

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Amounts Recognized in Financial Statements with Respect to Plans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total cost of the Plans during the period	$ 1,430	$ 4,392	$ 3,368	$ 8,102
Amount of related income tax benefit recognized during the period	(672)	(1,217)	(3,734)	(3,468)
Net cost of the Plans during the period	$ 758	$ 3,175	$ (366)	$ 4,634

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Schedule of Information on Restricted Stock Units (Detail) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 29, 2019 $ / shares shares
Number of Shares
Beginning Balance | shares	292,345
Granted | shares	58,542
Shares earned in excess of target | shares	71,172
Vested shares, including shares earned in excess of target | shares	(226,981)
Forfeited | shares	(5,822)
Ending Balance | shares	189,256
Weighted Average Grant Date Fair Value
Beginning Balance | $ / shares	$ 66.31
Granted | $ / shares	95.70
Shares earned in excess of target | $ / shares	54.78
Vested shares, including shares earned in excess of target | $ / shares	53.27
Forfeited | $ / shares	84.39
Ending Balance | $ / shares	$ 86.14

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Summary of Information Regarding Stock Options (Detail) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 29, 2019 USD ($) $ / shares shares
Number of Options
Beginning Balance, number of options | shares	89,114
Exercised, number of options | shares	(22,700)
Ending Balance, number of options | shares	66,414
Weighted Average Exercise Price per Share
Beginning Balance, Weighted Average Exercise Price per Share | $ / shares	$ 50.44
Exercised, Weighted Average Exercise Price per Share | $ / shares	49.45
Ending Balance, Weighted Average Exercise Price per Share | $ / shares	$ 50.77
Options Exercisable, Number of Options
Options exercisable at the ending, Number of Options | shares	66,414
Options Exercisable, Weighted Average Exercise Price per Share
Options exercisable at the ending, Weighted Average Exercise Price per Share | $ / shares	$ 50.77
Weighted Average Remaining Contractual Term (years)
Options outstanding at June 29, 2019	2 years 8 months 12 days
Options exercisable at June 29, 2019	2 years 8 months 12 days
Aggregate Intrinsic Value
Options outstanding at June 29, 2019 | $	$ 3,800
Options exercisable at June 29, 2019 | $	$ 3,800

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Schedule of Information on Non - Vested Restricted Stock Units (Detail) - Non Vested Restricted Stock and Deferred Stock Units	6 Months Ended
	Jun. 29, 2019 $ / shares shares
Number of Shares and Deferred Stock Units
Beginning Balance | shares	55,987
Granted | shares	30,338
Vested | shares	(21,165)
Ending Balance | shares	65,160
Weighted Average Grant Date Fair Value
Beginning Balance | $ / shares	$ 93.66
Granted | $ / shares	102.76
Vested | $ / shares	92.66
Ending Balance | $ / shares	$ 98.22

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Income Taxes - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Income Taxes [Line Items]
Corporate income tax rate	21.00%	21.00%
Excess tax benefit from stock-based awards	$ 2,871,000	$ 1,426,000
Estimated annual effective income tax rate	24.20%	24.50%
Effective income tax rate	22.40%	23.60%

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Reconciliation of Average Number of Common Shares and Common Share Equivalents Outstanding (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
Average number of common shares outstanding	39,945,000	41,450,000	40,053,000	41,744,000
Incremental shares from assumed exercises of stock options	0	41,000	0	51,000
Average number of common shares and common share equivalents outstanding	39,945,000	41,491,000	40,053,000	41,795,000

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Earnings Per Share - Additional Information (Detail) - shares	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options excluded from calculation of diluted earnings per share, antidilutive	0	0

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Additional Cash Flow Information - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Supplemental Cash Flow Information [Abstract]
Income taxes paid	$ 39,180,000	$ 40,062,000
Purchase of operating property by finance lease	0	1,617,000
Interest paid	$ 2,286,000	$ 1,886,000

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Segment Information - Additional Information (Detail) - Customer	6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Number of customers accounting for 10 percent or more of total revenue	0	0
No single customer accounted for benchmark percentage to be considered major customer	10.00%	10.00%

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Information Regarding Reportable Business Segments (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018	Dec. 29, 2018
Segment Reporting Information [Line Items]
External revenue	$ 1,045,040	$ 1,182,786	$ 2,078,040	$ 2,230,712
Internal revenue	17,753	15,419	27,367	22,917
Investment income	1,283	891	2,421	1,752
Operating income	80,851	83,426	161,747	158,579
Expenditures on long-lived assets	4,648	307	9,224	4,121
Goodwill	38,407	38,704	38,407	38,704	$ 38,232
Transportation Logistics
Segment Reporting Information [Line Items]
External revenue	1,030,816	1,169,921	2,049,777	2,205,561
Operating income	68,336	78,998	135,919	146,298
Expenditures on long-lived assets	4,648	307	9,224	4,121
Goodwill	38,407	38,704	38,407	38,704
Insurance
Segment Reporting Information [Line Items]
External revenue	14,224	12,865	28,263	25,151
Internal revenue	17,753	15,419	27,367	22,917
Investment income	1,283	891	2,421	1,752
Operating income	$ 12,515	$ 4,428	$ 25,828	$ 12,281

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Components of and Changes in Accumulated Other Comprehensive Income, Net of Related Income Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance			$ 686,824
Other comprehensive income (loss)	$ 1,381	$ (1,733)	2,930	$ (2,122)
Ending Balance	728,300		728,300
Unrealized Holding (Losses) Gains on Available-for-Sale Securities
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance			(930)
Other comprehensive income (loss)			1,805
Ending Balance	875		875
Foreign Currency Translation
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance			(4,945)
Other comprehensive income (loss)			1,125
Ending Balance	(3,820)		(3,820)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance			(5,875)
Ending Balance	$ (2,945)		$ (2,945)

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Investments - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 29, 2019	Dec. 29, 2018
Debt Securities, Available-for-sale [Line Items]
Investments maximum maturity period	5 years
Unrealized gain (loss), net of unrealized gains/losses, on the investments in the bond portfolio	$ 1,115,000	$ (1,184,000)

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Amortized Cost and Fair Value of Available-for-Sale Investments (Detail) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 114,705	$ 113,359
Gross Unrealized Gains	1,164	33
Gross Unrealized Losses	49	1,217
Fair Value	115,820	112,175
Money market investments
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	17,207	11,714
Fair Value	17,207	11,714
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	112	624
Gross Unrealized Losses		4
Fair Value	112	620
Corporate bonds and direct obligations of government agencies
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	96,282	101,021
Gross Unrealized Gains	1,155	33
Gross Unrealized Losses	49	1,213
Fair Value	97,388	$ 99,841
U.S. Treasury obligations
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	1,104
Gross Unrealized Gains	9
Fair Value	$ 1,113

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Schedule of Unrealized Loss on Available-for-Sale Investments (Detail) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Debt Securities, Available-for-sale [Line Items]
Available-for-sale investments with unrealized losses, Less than 12 months, Fair Value		$ 45,960
Available-for-sale investments with unrealized losses, Less than 12 months, Unrealized Loss		354
Available-for-sale investments with unrealized losses, 12 months or longer, Fair Value		43,423
Available-for-sale investments with unrealized losses, 12 months or longer, Unrealized Loss		863
Available-for-sale investments with unrealized losses, Fair Value, Total		89,383
Available-for-sale investments with unrealized losses, Unrealized Loss, Total		1,217
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale investments with unrealized losses, Less than 12 months, Fair Value
Available-for-sale investments with unrealized losses, Less than 12 months, Unrealized Loss
Available-for-sale investments with unrealized losses, 12 months or longer, Fair Value		620
Available-for-sale investments with unrealized losses, 12 months or longer, Unrealized Loss		4
Available-for-sale investments with unrealized losses, Fair Value, Total		620
Available-for-sale investments with unrealized losses, Unrealized Loss, Total		4
Corporate bonds and direct obligations of government agencies
Debt Securities, Available-for-sale [Line Items]
Available-for-sale investments with unrealized losses, Less than 12 months, Fair Value	$ 288	45,960
Available-for-sale investments with unrealized losses, Less than 12 months, Unrealized Loss	1	354
Available-for-sale investments with unrealized losses, 12 months or longer, Fair Value	17,420	42,803
Available-for-sale investments with unrealized losses, 12 months or longer, Unrealized Loss	48	859
Available-for-sale investments with unrealized losses, Fair Value, Total	17,708	88,763
Available-for-sale investments with unrealized losses, Unrealized Loss, Total	$ 49	$ 1,213

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Leases - Additional Information (Detail)	Jun. 29, 2019 USD ($)
Leases Disclosure [Line Items]
Finance Lease Option to Purchase Option Value	$ 1
Lessee, Finance Lease, Term of Contract	5 years

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Leases - Components of Lease Cost for Finance Leases and Operating Leases (Detail) $ in Thousands	6 Months Ended
	Jun. 29, 2019 USD ($)
Finance leases:
Amortization of right-of-use assets	$ 13,132
Interest on lease liability	1,928
Total finance lease cost	15,060
Operating leases:
Lease cost	2,280
Sublease income	(2,571)
Total operating lease (income)/cost	(291)
Total lease cost	$ 14,769

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Leases - Classification on our Consolidated Balance Sheet (Detail) $ in Thousands	Jun. 29, 2019 USD ($)
Total lease assets	$ 155,135
Other Assets [Member]
Operating lease right-of-use assets	2,929
Property Plant and Equipment Net [Member]
Finance lease assets	$ 152,206

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Leases - Undiscounted Cash Flows for the Finance and Operating Leases (Detail) - USD ($) $ in Thousands	Jun. 29, 2019	Dec. 29, 2018
Operating Leased Assets [Line Items]
2019 Remainder	$ 21,586
2020	39,475
2021	25,065
2022	15,902
2023	8,875
Total future minimum lease payments	110,903
Less amount representing interest (2.1% to 4.4%)	6,136
Present value of minimum lease payments	104,767
Current maturities of long-term debt	39,194	$ 43,561
Long-term debt, excluding current maturities	65,573	$ 84,864
2019 Remainder	445
2020	681
2021	616
2022	622
2023	551
Thereafter	301
Total future minimum lease payments	3,216
Less amount representing interest (2.1% to 4.4%)	287
Present value of minimum lease payments	2,929
Other current liabilities [Member]
Operating Leased Assets [Line Items]
Operating lease, liability, current	715
Deferred income taxes and other noncurrent liabilities [Member]
Operating Leased Assets [Line Items]
Operating lease, liability, non-current	$ 2,214

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Leases - Undiscounted Cash Flows for the Finance and Operating Leases (Parenthetical) (Details)	Jun. 29, 2019
Maximum [Member]
Finance lease Interest rate percentage	4.40%
Minimum [Member]
Finance lease Interest rate percentage	2.10%

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Leases - Weighted Average Remaining Lease Term and the Weighted Average Discount Rate for Finance and Operating leases (Detail)	Jun. 29, 2019
Weighted average remaining lease term (years)	3 years 2 months 12 days
Weighted average discount rate	3.20%
Weighted average remaining lease term (years)	4 years 7 months 6 days
Weighted average discount rate	4.00%

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Commitments and Contingencies - Additional Information (Detail)	Jun. 29, 2019 USD ($)
Current Investments | Collateral Pledged [Member]
Commitments and Contingencies Disclosure [Line Items]
Investments providing collateral for letters of credit to guarantee insurance claims	$ 35,138,000
Non-Current Investments
Commitments and Contingencies Disclosure [Line Items]
Total non-current investments	80,682,000
Non-Current Investments | Collateral Pledged [Member]
Commitments and Contingencies Disclosure [Line Items]
Investments providing collateral for letters of credit to guarantee insurance claims	33,199,000
Revolving Credit Facility
Commitments and Contingencies Disclosure [Line Items]
Letters of credit outstanding	34,367,000
Guarantee Payment of Insurance Claims
Commitments and Contingencies Disclosure [Line Items]
Letters of credit outstanding	$ 61,503,000

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Effect of Increase in Cost of Insurance and Claims (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 29, 2019	Jun. 30, 2018	Jun. 29, 2019	Jun. 30, 2018
Change in Accounting Estimate [Line Items]
Operating income	$ 80,851	$ 83,426	$ 161,747	$ 158,579
Net income attributable to Landstar System, Inc. and subsidiary	$ 61,100	$ 62,523	$ 124,417	$ 120,040
Earnings per share attributable to Landstar System, Inc. and subsidiary	$ 1.53	$ 1.51	$ 3.11	$ 2.88
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$ 1.53	$ 1.51	$ 3.11	$ 2.87
Development of Prior Year Self Insured Claims Estimates
Change in Accounting Estimate [Line Items]
Operating income	$ 1,493	$ 5,686	$ 2,900	$ 8,244
Net income attributable to Landstar System, Inc. and subsidiary	$ 1,131	$ 4,293	$ 2,198	$ 6,224
Earnings per share attributable to Landstar System, Inc. and subsidiary	$ 0.03	$ 0.10	$ 0.05	$ 0.15
Diluted earnings per share attributable to Landstar System, Inc. and subsidiary	$ 0.03	$ 0.10	$ 0.05	$ 0.15

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Recent Accounting Pronouncements - Additional Information (Detail)	Jun. 29, 2019 USD ($)
Accounting Standards Update 2016-02 [Member]
Assets and Liabilities, Lessee [Abstract]
Right-of-use assets	$ 2,929,000