Share-Based Payment Arrangements

3 Months Ended

Mar. 30, 2019

(2) Share-based Payment Arrangements

As of March 30, 2019, 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 30, 2019			March 31, 2018
Total cost of the Plans during the period	$	1,938		$	3,710
Amount of related income tax benefit recognized during the period		(3,062	)		(2,251	)
Net cost of the Plans during the period	$	(1,124	)	$	1,459

Included in income tax benefits recognized in the thirteen-week periods ended March 30, 2019 and March 31, 2018 were excess tax benefits from stock-based awards of $2,571,000 and $1,298,000, respectively. Also included in income tax benefits recognized in the thirteen-week periods ended March 30, 2019 and March 31, 2018 were income tax benefits of $16,000 and $50,000, 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.

As of March 30, 2019, there were 72,742 shares of the Company’s common stock reserved for issuance under the 2013 DSCP and 4,015,762 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 RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 29, 2018		292,345		$	66.31
Granted		57,548		$	95.71
Shares earned in excess of target (1)		67,729		$	55.94
Vested shares, including shares earned in excess of target		(216,652	)	$	54.29
Forfeited		(3,410	)	$	79.99
Outstanding at March 30, 2019		197,560		$	84.26

(1)	Represents shares earned in excess of target under the January 27, 2015 and January 29, 2016 RSU awards as actual results exceeded the target under both awards as a result of fiscal year 2018 results.

During the thirteen-week period ended March 30, 2019, the Company granted RSUs with a performance condition. RSUs with a performance condition granted on February 1, 2019 may vest on January 31 of 2022, 2023 and 2024 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 2018 fiscal year. Outstanding RSUs at both December 29, 2018 and March 30, 2019 include RSUs with a performance condition and RSUs with a market condition, as further described in the Company’s 2018 Annual Report on Form 10-K.

The Company recognized approximately $1,307,000 and $3,153,000 of share-based compensation expense related to RSU awards in the thirteen-week periods ended March 30, 2019 and March 31, 2018, respectively. As of March 30, 2019, there was a maximum of $27.5 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.8 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:


	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (000s)
Options outstanding at December 29, 2018		89,114		$	50.44
Exercised		(16,400	)	$	49.34
Options outstanding at March 30, 2019		72,714		$	50.68		2.9	$	4,269
Options exercisable at March 30, 2019		72,714		$	50.68		2.9	$	4,269

The total intrinsic value of stock options exercised during the thirteen-week periods ended March 30, 2019 and March 31, 2018 was $944,000 and $2,463,000, respectively.

As of March 30, 2019, there was no unrecognized compensation cost related to 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 29, 2018		55,987		$	93.66
Granted		21,050		$	102.83
Vested		(13,772	)	$	85.40
Non-vested at March 30, 2019		63,265		$	98.51

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 30, 2019, there was $4,718,000 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 2.5 years.