Segment Information

12 Months Ended

Dec. 31, 2016

Segment Information

(12) Segment Information

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 $3.2 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, 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, ammunition and explosives 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 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.

The insurance segment is comprised of Signature Insurance Company (“Signature”), a wholly owned offshore insurance subsidiary, 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. Internal revenue for premiums billed by the insurance segment to the transportation logistics segment is calculated each fiscal period based primarily on an actuarial calculation of historical loss experience and is believed to approximate the cost that would have been incurred by the transportation logistics segment had similar insurance been obtained from an unrelated third party.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates a segment’s performance based on operating income.

No single customer accounted for more than 10% of the Company’s consolidated revenue in fiscal years 2016, 2015 and 2014. Substantially all of the Company’s revenue is generated in North America, primarily through customers located in the United States.

The following tables summarize information about the Company’s reportable business segments as of and for the fiscal years ending December 31, 2016, December 26, 2015 and December 27, 2014 (in thousands):

	Transportation
	Logistics		Insurance		Total
2016
External revenue	$	3,121,210	$	46,424	$	3,167,634
Internal revenue				36,118		36,118
Investment income				1,502		1,502
Interest and debt expense		3,794				3,794
Depreciation and amortization		35,796				35,796
Operating income		187,813		35,438		223,251
Expenditures on long-lived assets		22,645				22,645
Goodwill		31,134				31,134
Capital lease additions		61,504				61,504
Total assets		913,667		182,924		1,096,591
2015
External revenue	$	3,276,677	$	44,414	$	3,321,091
Internal revenue				31,342		31,342
Investment income				1,396		1,396
Interest and debt expense		2,949				2,949
Depreciation and amortization		29,102				29,102
Operating income		207,883		33,823		241,706
Expenditures on long-lived assets		4,804				4,804
Goodwill		31,134				31,134
Capital lease additions		49,491				49,491
Total assets		842,550		148,968		991,518
2014
External revenue	$	3,145,413	$	39,377	$	3,184,790
Internal revenue				28,164		28,164
Investment income				1,381		1,381
Interest and debt expense		3,177				3,177
Depreciation and amortization		27,575				27,575
Operating income		193,914		30,458		224,372
Expenditures on long-lived assets		10,539				10,539
Goodwill		31,134				31,134
Capital lease additions		47,232				47,232
Total assets		911,193		126,423		1,037,616