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Commitments and Contingencies

Short-term investments include $32,685,000 in current maturities of investments and $4,979,000 of cash equivalents held by the Company’s insurance segment at September 27, 2014. The non-current portion of the bond portfolio of $70,805,000 is included in other assets. The short-term investments, together with $35,318,000 of non-current investments, provide collateral for the $66,182,000 of letters of credit issued to guarantee payment of insurance claims. As of September 27, 2014, Landstar also had $33,045,000 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 (the “Accident”) that occurred in February 2007 involving a BCO Independent Contractor leased to Landstar Ranger, Inc., a trial court in Cobb County, Georgia entered an amended judgment on May 28, 2013 against Landstar Ranger, Inc., Landstar System Holdings, Inc. and Landstar System, Inc. (the “Landstar Defendants”) awarding the plaintiffs an aggregate sum of approximately $55.2 million plus post-judgment interest at the rate of 6.25% per annum from and after September 23, 2011 (the “Damage Award”). As previously disclosed in the Company’s Quarterly Report on Form 10-Q for its 2014 second quarter, while an Appeal of the Damage Award was pending before the Court of Appeals of the State of Georgia, on July 9, 2014, 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. Pursuant to the settlement and release agreement executed by the parties on August 13, 2014, all sums payable to the plaintiffs under such agreement have been paid in full and the plaintiffs have released and discharged the Landstar Defendants from all liability arising out of the Accident.

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. 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. Third party insurance and/or reinsurance policies provided coverage to the Landstar Defendants for all amounts related to the Accident in excess of such retained liability, including all related out-of-pocket expenses, such as the costs of an appeal bond and interest. No assurances can be given regarding the impact of the Damage Award or the settlement thereof 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.