Index
| PART I – Financial Information | ||
| Page 4 | ||
| Page 5 | ||
| Page 6 | ||
| Page 7 | ||
| Page 8 | ||
| Page 10 | ||
| Page 19 | ||
| Page 32 | ||
| Page 32 | ||
| PART II – Other Information | ||
| Page 33 | ||
| Page 33 | ||
| Page 34 | ||
| Page 34 | ||
| Page 36 | ||
| 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 -
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 thirty nine weeks ended September 26, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 26, 2020.These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report on Form
10-K.
3
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
September 26, 2020 |
December 28, 2019 |
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| ASSETS | ||||||||
| Current Assets |
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| Cash and cash equivalents |
$ | $ | ||||||
| Short-term investments |
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| Trade accounts receivable, less allowance of $ |
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| Other receivables, including advances to independent contractors, less allowance of $ |
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| Other current assets |
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| Total current assets |
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| Operating property, less accumulated depreciation and amortization of $ |
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| Goodwill |
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| Other assets |
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| Total assets |
$ | $ | ||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities |
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| Cash overdraft |
$ | $ | ||||||
| Accounts payable |
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| Current maturities of long-term debt |
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| Insurance claims |
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| Dividends payable |
— | |||||||
| Contractor escrow |
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| Other current liabilities |
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| Total current liabilities |
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| Long-term debt, excluding current maturities |
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| Insurance claims |
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| Deferred income taxes and other noncurrent liabilities |
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| Shareholders’ Equity |
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| Common stock, $ |
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| Additional paid-in capital |
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| Retained earnings |
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| Cost of |
( |
) | ( |
) | ||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity |
$ | $ | ||||||
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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)
Thirty Nine Weeks Ended |
Thirteen Weeks Ended |
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September 26, 2020 |
September 28, 2019 |
September 26, 2020 |
September 28, 2019 |
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| Revenue |
$ | $ | $ | $ | ||||||||||||
| Investment income |
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| Costs and expenses: |
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| Purchased transportation |
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| Commissions to agents |
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| Other operating costs, net of gains/losses on asset sales/dispositions |
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| Insurance and claims |
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| Selling, general and administrative |
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| Depreciation and amortization |
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| Impairment of intangible and other assets |
— | — | — | |||||||||||||
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| Total costs and expenses |
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| Operating income |
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| Interest and debt expense |
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| Income before income taxes |
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| Income taxes |
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| Net income |
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| Less: Net loss attributable to noncontrolling interest |
— | ( |
) | — | — | |||||||||||
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| Net income attributable to Landstar System, Inc. and subsidiary |
$ | $ | $ | $ | ||||||||||||
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| Earnings per common share attributable to Landstar System, Inc. and subsidiary |
$ | $ | $ | $ | ||||||||||||
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| Diluted earnings per share attributable to Landstar System, Inc. and subsidiary |
$ | $ | $ | $ | ||||||||||||
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| Average number of shares outstanding: |
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| Earnings per common share |
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| Diluted earnings per share |
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| Dividends per common share |
$ | $ | $ | $ | ||||||||||||
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See accompanying notes to consolidated financial statements.
5
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
Thirty Nine Weeks Ended |
Thirteen Weeks Ended |
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September 26, 2020 |
September 28, 2019 |
September 26, 2020 |
September 28, 2019 |
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| N et income attributable to Landstar System, Inc. and subsidiary |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive (loss) income: |
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| Unrealized holding gains on available-for-sale |
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| Foreign currency translation (losses) gains |
( |
) | ( |
) | ||||||||||||
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| Other comprehensive (loss) income |
( |
) | ( |
) | ||||||||||||
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| Comprehensive income attributable to Landstar System, Inc. and subsidiary |
$ | $ | $ | $ | ||||||||||||
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See accompanying notes to consolidated financial statements.
6
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirty Nine Weeks Ended |
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September 26, 2020 |
September 28, 2019 |
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| OPERATING ACTIVITIES |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization of operating property and intangible assets |
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| Non-cash interest charges |
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| Provisions for losses on trade and other accounts receivable |
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| Gains on sales/disposals of operating property |
( |
) | ( |
) | ||||
| Impairment of intangible and other assets |
— | |||||||
| Deferred income taxes, net |
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| Stock-based compensation |
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| Changes in operating assets and liabilities: |
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| (Increase) decrease in trade and other accounts receivable |
( |
) | ||||||
| Increase in other assets |
( |
) | ( |
) | ||||
| Increase (decrease) in accounts payable |
( |
) | ||||||
| Increase (decrease) in other liabilities |
( |
) | ||||||
| Increase in insurance claims |
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| NET CASH PROVIDED BY OPERATING ACTIVITIES |
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| INVESTING ACTIVITIES |
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| Net changes in other short-term investments |
— | |||||||
| Sales and maturities of investments |
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| Purchases of investments |
( |
) | ( |
) | ||||
| Purchases of operating property |
( |
) | ( |
) | ||||
| Proceeds from sales of operating property |
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| Consideration paid for acquisition |
( |
) | — | |||||
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| NET CASH USED BY INVESTING ACTIVITIES |
( |
) | ( |
) | ||||
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| FINANCING ACTIVITIES |
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| Decrease in cash overdraft |
( |
) | ( |
) | ||||
| Dividends paid |
( |
) | ( |
) | ||||
| Payment for debt issue costs |
( |
) | — | |||||
| Proceeds from exercises of stock options |
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| Taxes paid in lieu of shares issued related to stock-based compensation plans |
( |
) | ( |
) | ||||
| Purchases of common stock |
( |
) | ( |
) | ||||
| Principal payments on finance lease obligations |
( |
) | ( |
) | ||||
| Purchase of noncontrolling interest |
— | ( |
) | |||||
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| NET CASH USED BY FINANCING ACTIVITIES |
( |
) | ( |
) | ||||
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| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
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| (Decrease) increase in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period |
$ | $ | ||||||
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See accompanying notes to consolidated financial statements.
7
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Thirty Nine and Thirteen Weeks Ended September 26, 2020 and
September
28, 2019 (In thousands, except share and per share amounts)
(Unaudited)
Common Stock |
Additional Paid-In |
Retained |
Treasury Stock at Cost |
Accumulated Other Comprehensive |
||||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Shares |
Amount |
(Loss) Income |
Total |
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| Balance December 28, 2019 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | |
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| Adoption of accounting standard (Note 15 ) |
( |
( |
) | |||||||||||||||||||||||||||||
| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive loss |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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| Balance March 28, 2020 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
— | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance June 27, 2020 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | ||||||||||||||||||||||
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| Net income |
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| Dividends ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
— | ( |
) | |||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance September 26, 2020 |
$ | $ | $ |
$ | ( |
) | $ |
( |
$ | |||||||||||||||||||||||
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8
Landstar System, Inc. and Subsidiary Shareholders |
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Common Stock |
Additional Paid-In |
Retained |
Treasury Stock at Cost |
Accumulated Other Comprehensive |
Non-controlling |
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Shares |
Amount |
Capital |
Earnings |
Shares |
Amount |
(Loss) Income |
Interests |
Total |
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| Balance December 29, 2018 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | $ | |
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| Net income (loss) |
( |
) | ||||||||||||||||||||||||||||||||||
| Dividends ($ share) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interests |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance March 30, 2019 |
$ | $ | $ | |
$ | ( |
) | $ |
( |
) |
$ | $ | ||||||||||||||||||||||||
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| Net income |
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| Dividends ($ share) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive income |
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| Balance June 29, 2019 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | $ | |||||||||||||||||||||||||
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| Net income |
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| Dividends ($ share) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Purchases of common stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Issuance of stock related to stock-based compensation plans |
— | ( |
) | |||||||||||||||||||||||||||||||||
| Stock-based compensation |
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| Other comprehensive loss |
( |
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| Balance September 28, 2019 |
$ | $ | $ | $ | ( |
) | $ |
( |
) |
$ | $ | |||||||||||||||||||||||||
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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
The following table summarizes the percentage of consolidated revenue generated by
mode of transportation
and the dollar amount included in truck transportation revenue generated by BCO Independent Contractors and Truck Brokerage Carriers hauled via equipment type during the thirty-nine-week and thirteen-week periods ended September 26, 2020 and September 28, 2019 (dollars
in thousands): Thirty Nine Weeks Ended |
Thirteen Weeks Ended |
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Mode |
September 26, 2020 |
September 28, 2019 |
September 26, 2020 |
September 28, 2019 |
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BCO Independent Contractors – |
% | % | % | % | ||||||||||||
Brokerage Carriers - |
% | % | % | % | ||||||||||||
Rail intermodal |
% | % | % | % | ||||||||||||
Ocean and air cargo carriers |
% | % | % | % | ||||||||||||
Equipment Type - Truck |
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Van equipment |
$ | |
$ | |
$ | |
$ | |
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Unsided/platform equipment |
$ | $ | $ | $ | ||||||||||||
Less-than-truckload |
$ | $ | $ | $ | ||||||||||||
(2) |
Acquired Business |
On May 6, 2020, Landstar System Holdings, Inc. formed a new subsidiary that was subsequently renamed Landstar Blue, LLC (“Landstar Blue”). Landstar Blue arranges truckload brokerage services while helping the Company to develop and test digital technologies and processes for the benefit of all Landstar independent commission sales agents. On June 15, 2020, Landstar Blue completed the acquisition of an independent agent of the Company whose business focused on truckload brokerage services. Cash consideration paid for the acquisition was approximately $2,766 ,000. In addition, the Company assumed approximately $200,000 in liabilities consisting of additional contingent purchase price. The resulting goodwill arising from the acquisition was approximately $2,871,000 . With respect to this goodwill, 100 % is expected to be deductible by the Company for U.S. income tax purposes. Pro forma financial information for prior periods is not presented as the Company does not believe the acquisition to be material to the Company’s consolidated results. The results of operations for Landstar Blue are presented as part of the Company’s transportations logistics segment. Transaction costs for the acquisition were insignificant.
(3) |
Share-based Payment Arrangements |
As of September 26, 2020, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). No further grants can be made under the ESOSIP. The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock
10
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 Thirty Nine Weeks Ended |
Thirteen Weeks Ended |
|||||||||||||||
September 26, 2020 |
September 28, 2019 |
September 26, 2020 |
September 28, 2019 |
|||||||||||||
Total cost of the Plans during the period |
$ | $ | $ | |
$ | |
||||||||||
Amount of related income tax benefit recognized during the period |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net cost of the Plans during the period |
$ |
$ | $ | $ | ||||||||||||
Included in income tax benefits recognized in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 were excess tax benefits from stock-based awards of $927,000 and $2,968,000 , respectively.
As of September 26, 2020, there were 60,586 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 3,675,862 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 28, 2019 |
$ | |||||||
Granted |
$ | |
||||||
Shares earned in excess of target (1) |
$ | |||||||
Vested shares, including shares earned in excess of target |
( |
) | $ | |||||
Forfeited |
( |
) | $ | |||||
Outstanding at September 26, 2020 |
$ | |||||||
(1) |
Represents additional shares earned under the February 2, 2017 RSU awards as 2019 financial results exceeded target performance level. |
During the thirty-nine-week period ended September 26, 2020, the Company granted RSUs with a performance condition. Outstanding RSUs at both December 28, 2019 and September 26, 2020 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2019 Annual Report on Form
10-K.
RSUs with a performance condition granted on January 31, 2020 may vest on January 31 of 2023, 2024 and 2025 based on growth in operating income and
pre-tax
income per diluted share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2019 fiscal year.The Company recognized approximately $415,000 and $2,477,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September 26, 2020 and September 28, 2019, respectively. As of September 26, 2020, there was a maximum of $34.6 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.1 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.
11
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 28, 2019 |
$ | |
||||||||||||||
Exercised |
( |
) | $ | |||||||||||||
Options outstanding at September 26, 2020 |
$ | $ | |
|||||||||||||
Options exercisable at September 26, 2020 |
$ | $ | ||||||||||||||
The total intrinsic value of stock options exercised during the thirty-nine-week periods ended September 26, 2020 and September 28, 2019 was $1,599,000 and $1,877,000 , respectively.
As of September 26, 2020, 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 28, 2019 |
$ | |||||||
Granted |
$ | |||||||
Vested |
( |
) | $ | |||||
Forfeited |
( |
) | $ | |||||
Non-vested at September 26, 2020 |
$ | |||||||
The fair value of each share of 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.
non-vested
restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the As of September 26, 2020, there was $4,074,000 of total unrecognized compensation cost related to 1.9 years.
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 (4) |
Income Taxes |
The provisions for income taxes for the 2020 and 2019 thirty-nine-week periods were each based on an estimated annual effective income tax rate of 24.2 23.3 %, which was higher than the statutory federal income tax rate of 21 % primarily attributable to state taxes and the meals and entertainment exclusion, partially offset by excess tax benefits realized on stock-based awards and state
12
tax
refunds. The provision for income taxes for the 2020 thirty-nine-week period was favorably impacted by $927,000 of excess tax benefits from stock-based awards. The effective income tax rate for the 2019 thirty-nine-week period was 22.8 %, which was higher than the statutory
federal
in
come
tax rate of 21 % primarily attributable to state taxes and the meals and 2,968,000 of excess tax benefits from stock-based awards.
entertainment
exclusion, partially offset by excess tax benefits realized on stock-based awards. The provision for income taxes for the 2019 thirty-nine-week period was favorably impacted by $(5) |
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. During the 2020 and 2019 thirty-nine-week and thirteen-week periods,in reference to the determination of diluted earnings per share,
the future compensation cost attributable to outstanding
shares of non-vested
restricted stock exceeded theimpact
of
incremental shares that would have been outstanding upon the assumed exercise of all dilutive stock options.For each of the thirty-nine-week periods ended September 26, 2020 and September 28, 2019, no
(6) |
Additional Cash Flow Information |
During the 2020 thirty-nine-week period, Landstar paid income taxes and interest of $28,761,000 and $3,087,000 , respectively. During the 2019 thirty-nine-week period, Landstar paid income taxes and interest of $54,877,000 and $3,302,000 , respectively. Landstar acquired operating property by entering into finance leases in the amounts of $7,485,000 and $6,481,000 in the 2020 and 2019 thirty-nine-week periods, respectively. In addition, during the 2020 thirty-nine-week period, Landstar acquired $1,068,000 of operating property for which the Company accrued a corresponding liability in accounts payable as of September 26, 2020. 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.
(7) |
Segment Information |
The following table summarizes information about the Company’s reportable business segments as of and for the thirty-nine-week and thirteen week periods ended September 26, 2020 and September 28, 2019 (in thousands):
Thirty Nine Weeks Ended |
||||||||||||||||||||||||
September 26, 2020 |
September 28, 2019 |
|||||||||||||||||||||||
Transportation Logistics |
Insurance |
Total |
Transportation Logistics |
Insurance |
Total |
|||||||||||||||||||
External revenue |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||
Internal revenue |
||||||||||||||||||||||||
Investment income |
||||||||||||||||||||||||
Operating income |
||||||||||||||||||||||||
Expenditures on long-lived assets |
||||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
Thirteen Weeks Ended |
||||||||||||||||||||||||
September 26, 2020 |
September 28, 2019 |
|||||||||||||||||||||||
Transportation Logistics |
Insurance |
Total |
Transportation Logistics |
Insurance |
Total |
|||||||||||||||||||
External revenue |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||
Internal revenue |
||||||||||||||||||||||||
Investment income |
||||||||||||||||||||||||
Operating income |
||||||||||||||||||||||||
Expenditures on long-lived assets |
||||||||||||||||||||||||
13
In the thirty-nine-week periods ended no 10
September
26, 2020 and September 28, 2019, accounted
for more than (8) |
Other Comprehensive Income |
The following table
presents
the components
of and changes in accumulated other comprehensive income (loss), net of related income taxes, as of and for the thirty-nine-week period ended September 26, 2020 (in thousands): Unrealized Holding Gains on Available-for-Sale Securities |
Foreign Currency Translation |
Total |
||||||||||
Balance as of December 28, 2019 |
$ | |
$ | ( |
) | $ | ( |
) | ||||
Other comprehensive gain (loss) |
( |
) | ( |
) | ||||||||
Balance as of September 26, 2020 |
$ | $ | ( |
) | $ | ( |
) | |||||
Amounts reclassified from accumulated other comprehensive income to investment income due to the realization of previously unrealized gains and losses in the accompanying consolidated statements of income were not significant for the thirty-nine-week period ended September 26, 2020.
(9) |
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 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 investments to determine whether an allowance for credit loss is necessary. Unrealized losses, representing the excess of the purchase price of an investment over its fair value as of the end of a period, considered to be a result of credit-related factors, are to be included as a charge in the statement of income, while unrealized losses considered to be a result of noncredit-related factors are to be included as a component of shareholders’ equity. Investments whose values are based on quoted market prices in active markets are classified within Level 1. 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 3,350,000 and $1,427,000 at September 26, 2020 and December 28, 2019, respectively.
available-for-sale
available-for-sale
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
4
The amortized cost and fair values of investments are as follows at September 26, 2020 and December 28, 2019 (in thousands):
available-for-sale
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
September 26, 2020 |
||||||||||||||||
Money market investments |
$ | $ | — | $ | — | $ | ||||||||||
Asset-backed securities |
— | |||||||||||||||
Corporate bonds and direct obligations of government agencies |
||||||||||||||||
U.S. Treasury obligations |
— | |||||||||||||||
Total |
$ | |
$ | |
$ | $ | |
|||||||||
December 28, 2019 |
||||||||||||||||
Money market investments |
$ | $ | — | $ | — | $ | ||||||||||
Asset-backed securities |
— | |||||||||||||||
Corporate bonds and direct obligations of government agencies |
||||||||||||||||
U.S. Treasury obligations |
||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
For those investments with unrealized losses at September 26, 2020 and December 28, 2019, the following table summarizes the duration of the unrealized loss (in thousands):
available-for-sale
Less than 12 months |
12 months or longer |
Total |
||||||||||||||||||||||
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
|||||||||||||||||||
September 26, 2020 |
||||||||||||||||||||||||
Asset-backed securities |
$ | $ | $ | — | $ | — | $ | $ | ||||||||||||||||
Corporate bonds and direct obligations of government agencies |
— | — | ||||||||||||||||||||||
Total |
$ | $ | |
$ | — | $ | — | $ | $ | |
||||||||||||||
December 28, 2019 |
||||||||||||||||||||||||
Asset-backed securities |
$ | $ | $ | — | $ | — | $ | $ | ||||||||||||||||
Corporate bonds and direct obligations of government agencies |
||||||||||||||||||||||||
U.S. Treasury obligations |
— | — | ||||||||||||||||||||||
Total |
||||||||||||||||||||||||