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Commitments and Contingencies

Short-term investments include $33,408,000 in current maturities of investments and $3,225,000 of cash equivalents held by the Company’s insurance segment at June 28, 2014. The non-current portion of the bond portfolio of $70,124,000 is included in other assets. The short-term investments, together with $34,600,000 of non-current investments, provide collateral for the $64,432,000 of letters of credit issued to guarantee payment of insurance claims. As of June 28, 2014, Landstar also had $33,000,000 of additional letters of credit outstanding under the Company’s Credit Agreement.

As further described in periodic and current reports previously filed by the Company with the Securities and Exchange Commission (the “SEC”), in connection with an accident that occurred in February 2007 involving a BCO Independent Contractor leased to Landstar Ranger, Inc., on September 23, 2011, a jury sitting in a state court in Cobb County, Georgia, entered a damage award of approximately $40.2 million against Landstar Ranger, Inc., Landstar System Holdings, Inc. and Landstar System, Inc. (the “Landstar Defendants”). On May 28, 2013, the trial court entered an amended judgment that added approximately $1.0 million of pre-judgment interest, $14.0 million of attorney fees and post-judgment interest at the rate of 6.25% per annum from and after September 23, 2011 on the aggregate sum of approximately $55.2 million awarded to the plaintiffs. Such amount in the aggregate is referred to herein as the “Damage Award”. Under the terms of the commercial trucking insurance program that Landstar had in place in 2007, Landstar retained liability for up to $5 million with respect to the accident giving rise to the Damage Award and had third party insurance and/or reinsurance policies in place that were expected to provide coverage for all amounts in excess of such retained liability, including all related out-of-pocket expenses, such as the costs of an appeal bond and interest. The Company recorded a $5 million charge representing its self-insured retention in respect of this accident in the consolidated financial results of the Company in the 2007 first quarter.

On July 9, 2014, while an appeal of the Damage Award filed by the Landstar Defendants was pending before the Court of Appeals of the State of Georgia, the plaintiffs and the Landstar Defendants entered into an agreement in principle providing for the settlement of all claims of the plaintiffs against the Landstar Defendants for $42.0 million (the “Settlement Amount”). In connection therewith, on July 9, 2014, the plaintiffs filed a Motion to Dismiss Appeal stating that the parties have agreed to compromise and settle all claims asserted by the plaintiffs against the Landstar Defendants. Under the terms of the Company’s insurance policies, the Company is the primary obligor of the amount of the Settlement Amount, and as such, the Company has reported a $40.5 million receivable from the third party insurance providers in other receivables and a corresponding liability of the same amount in insurance claims in the consolidated balance sheets at June 28, 2014. No assurances can be given regarding the impact of the Damage Award or the Settlement Amount on the premiums charged by the Company’s third party insurers from time to time for commercial trucking insurance.

The Company is involved in certain claims and pending litigation, including those described herein, 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.