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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 and earnings per share amounts in the consolidated statements of income for the twenty-six-week and thirteen-week periods ended June 25, 2016 and June 27, 2015 (in thousands, except per share amounts):


	Twenty Six Weeks Ended				Thirteen Weeks Ended
	June 25, 2016		June 27, 2015		June 25, 2016		June 27, 2015
Operating income	$	2,816	$	5,474	$	738	$	833
Net income		1,740		3,383		456		515

Earnings per share	$	0.04	$	0.08	$	0.01	$	0.01
Diluted earnings per share	$	0.04	$	0.08	$	0.01	$	0.01

The unfavorable development of prior years’ claims in the twenty-six-week period ended June 27, 2015 primarily related to the impact of the March 13, 2015 verdict further described in reports previously filed by the Company with the Securities and Exchange Commission.