(2)

Share-based Payment Arrangements

As of March 31, 2018, 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 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 115,000 shares of the Company’s common stock were authorized for issuance under the 2013 DSCP. The ESOSIP, 2011 EIP and 2013 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):


	Thirteen Weeks Ended
	March 31, 2018			April 1, 2017
Total cost of the Plans during the period	$	3,710		$	994
Amount of related income tax benefit recognized during the period		(2,251	)		(1,127	)

Net cost of the Plans during the period	$	1,459		$	(133	)

Included in income tax benefits recognized in the thirteen-week periods ended March 31, 2018 and April 1, 2017 were income tax benefits of $50,000 and $221,000, respectively, recognized on disqualifying dispositions of the Company’s common stock by employees who obtained shares of common stock through exercises of incentive stock options. Also included in income tax benefits recognized in the thirteen-week periods ended March 31, 2018 and April 1, 2017 were excess tax benefits from stock-based awards of $1,298,000 and $563,000, respectively.

As of March 31, 2018, there were 78,682 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 4,519,920 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			Weighted Average Grant Date
	RSUs			Fair Value
Outstanding at December 30, 2017		387,372		$	55.75
Granted		55,651		$	103.47
Vested		(67,971	)	$	53.92
Forfeited		(92,880	)	$	52.36

Outstanding at March 31, 2018		282,172		$	66.72

During the thirteen-week period ended March 31, 2018, the Company granted RSUs with a performance condition. RSUs with a performance condition granted on February 2, 2018 may vest on January 31 of 2021, 2022 and 2023 based on growth in operating income and pre-tax income per share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to the results from the 2017 fiscal year. Outstanding RSUs at both December 30, 2017 and March 31, 2018 include RSUs with a performance condition and RSUs with a market condition, as further described in the Company’s 2017 Annual Report on Form 10-K.

The Company recognized approximately $3,153,000 and $524,000 of share-based compensation expense related to RSU awards in the thirteen-week periods ended March 31, 2018 and April 1, 2017, respectively. As of March 31, 2018, there was a maximum of $30.2 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.5 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.

Stock Options

The following table summarizes information regarding the Company’s outstanding stock options under the Plans:


						Weighted Average
	Number of			Weighted Average Exercise Price		Remaining Contractual		Aggregate Intrinsic
	Options			per Share		Term (years)		Value (000s)
Options outstanding at December 30, 2017		189,040		$	49.34
Exercised		(40,418	)	$	48.42

Options outstanding at March 31, 2018		148,622		$	49.59		3.7	$	8,927

Options exercisable at March 31, 2018		147,622		$	49.53		3.7	$	8,875

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 31, 2018 and April 1, 2017 was $2,463,000 and $3,620,000, respectively.

As of March 31, 2018, there was no unrecognized compensation cost related to non-vested 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 30, 2017		54,755		$	78.02
Granted		16,863		$	114.13
Vested		(9,819	)	$	65.27
Forfeited		(1,757	)	$	71.12

Non-vested at March 31, 2018		60,042		$	90.45

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the 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 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 will 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.

As of March 31, 2018, there was $4,236,000 of total unrecognized compensation cost related to 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 2.9 years.