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<SEC-DOCUMENT>0000853816-02-000004.txt : 20020415
<SEC-HEADER>0000853816-02-000004.hdr.sgml : 20020415
ACCESSION NUMBER: 0000853816-02-000004
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011229
FILED AS OF DATE: 20020321
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: LANDSTAR SYSTEM INC
CENTRAL INDEX KEY: 0000853816
STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213]
IRS NUMBER: 061313069
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1226
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-21238
FILM NUMBER: 02581241
BUSINESS ADDRESS:
STREET 1: 13410 SUTTON PARK DRIVE SOUTH
CITY: JACKSONVILLE
STATE: FL
ZIP: 32224
BUSINESS PHONE: 9043901234
MAIL ADDRESS:
STREET 1: LANDSTAR SYSTEM INC
STREET 2: 13410 SUTTON PARK DRIVE SOUTH
CITY: JACKSONVILLE
STATE: FL
ZIP: 32224
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form_10k01.txt
<TEXT>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2001
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission File Number: 0-21238
-------
LANDSTAR SYSTEM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1313069
------------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
13410 Sutton Park Drive South, Jacksonville, Florida 32224
- -------------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(904) 398-9400
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value Common Stock Rights
---------------------------- -------------------
(Title of class) (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
1
<PAGE>
Documents Incorporated by Reference
Portions of the following documents are incorporated by reference in this
Form 10-K as indicated herein:
Part of 10-K into
Document which incorporated
-------- ------------------
2001 Annual Report to Shareholders Part II
Proxy Statement relating to Part III
Landstar System, Inc.'s Annual
Meeting of Shareholders
The number of shares of the registrant's common stock, par value $.01 per
share, (the "Common Stock") outstanding as of the close of business on
March 15, 2002 was 8,105,753; and the aggregate market value of the voting
stock held by non-affiliates of the registrant was $757,861,419 (based on the
$94.400 per share closing price on that date, as reported by NASDAQ National
Market System). In making this calculation, the registrant has assumed,
without admitting for any purpose, that all directors and executive officers
of the registrant, and no other person, are affiliates.
2
<PAGE>
LANDSTAR SYSTEM, INC.
2001 Annual Report on Form 10-K
Table of Contents
<TABLE>
<CAPTION>
Part I
Page
----
<S> <C>
Item 1. Business 4
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 7a. Quantitative and Qualitative Disclosures about
Market Risk 15
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 15
Part III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 16
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 16
Signatures 18
Index to Exhibits 20
</TABLE>
3
<PAGE>
Part I
Item 1. - Business
General
Landstar System, Inc. (herein referred to as "Landstar" or the "Company")
was incorporated in January 1991 under the laws of the State of
Delaware and acquired all of the capital stock of its predecessor, Landstar
System Holdings, Inc. ("LSHI") on March 28, 1991. LSHI owns directly or
indirectly all of the common stock of Landstar Ranger, Inc. ("Landstar
Ranger"), Landstar Inway, Inc. ("Landstar Inway"), Landstar Ligon, Inc.
("Landstar Ligon"), Landstar Gemini, Inc. ("Landstar Gemini"),
Landstar Carrier Services, Inc., Landstar Logistics, Inc.
("Landstar Logistics"), Landstar Express America, Inc.
("Landstar Express America"), Landstar Contractor Financing, Inc. ("LCFI"),
Landstar Capacity Services, Inc., Risk Management Claim Services, Inc.
("RMCS"), Signature Technology Services, Inc. ("STSI") and Signature Insurance
Company ("Signature"). Landstar Ranger, Landstar Inway, Landstar Ligon,
Landstar Gemini, Landstar Logistics and Landstar Express America are
collectively herein referred to as Landstar's "Operating Subsidiaries." The
Company's principal executive offices are located at 13410 Sutton Park Drive
South, Jacksonville, Florida 32224 and its telephone number is (904) 398-9400.
The Company's website is www.landstar.com.
Historical Background
In March 1991, Landstar acquired LSHI in a buy-out organized by Kelso &
Company, Inc. ("Kelso"). Investors in the acquisition included Kelso
Investment Associates IV L.P. ("KIA IV"), an affiliate of Kelso, ABS MB
Limited Partnership ("ABSMB"), an affiliate of DB Alex. Brown LLC
(formerly known as Alex. Brown & Sons Incorporated), and certain
management employees of Landstar and its subsidiaries (the "Management
Stockholders"). In March 1993, Landstar completed a recapitalization
(the "Recapitalization") that increased shareholders' equity, reduced
indebtedness and improved the Company's operating and financial flexibility.
The Recapitalization involved three principal components: (i) the initial
public offering (the "IPO") of 5,387,000 shares of Common Stock, at an
initial price to the public of $13 per share, (ii) the retirement
of all $38 million outstanding principal amount of LSHI's 14% Senior
Subordinated Notes due 1998 (the "14% Notes"), and (iii) the refinancing of
the Company's then existing senior debt facility with a senior bank credit
agreement. In October 1993, the Company completed a secondary
public offering. Immediately subsequent to the offering, KIA IV no longer
owned any shares of Landstar Common Stock, and affiliates of DB Alex. Brown LLC
retained approximately 1% of the Common Stock outstanding.
4
<PAGE>
During the first quarter of 1995, Landstar, through different subsidiaries of
LSHI, acquired the businesses and net assets of Intermodal Transport Company
("ITCO"), a California-based intermodal marketing company, LDS Truck Lines,
Inc., a California-based drayage company, and T.L.C. Lines, Inc., a Missouri-
based temperature-controlled and long-haul, time sensitive dry van carrier.
Also in the 1995 first quarter, Landstar, through another subsidiary of LSHI,
acquired all of the outstanding common stock of Express America Freight
Systems, Inc., ("Express"), a North Carolina-based air freight and truck
expedited service provider. The businesses acquired from ITCO and Express
comprise the majority of the multimodal segment's operations, and are now
operated through Landstar Logistics and Landstar Express America, respectively.
On December 18, 1996, the Company announced a plan to restructure its Landstar
T.L.C. and Landstar Poole operations, in addition to the relocation of its
Shelton, Connecticut corporate office headquarters to Jacksonville, Florida in
the second quarter of 1997. The plan to restructure Landstar T.L.C. included
the merger of the operations of Landstar T.L.C. into Landstar Inway, the
closing of the Landstar T.L.C. headquarters in St. Clair, Missouri and the
disposal of all of Landstar T.L.C.'s company-owned tractors. The restructuring
was completed during 1997.
In March 1997, Landstar formed Signature, a wholly-owned offshore insurance
subsidiary. Signature reinsures certain property, casualty and occupational
accident risks of certain independent contractors who have contracted to haul
freight for Landstar. In addition, Signature provides certain property and
casualty insurance directly to Landstar's operating subsidiaries.
On August 22, 1998, Landstar Poole, which comprised the entire company-owned
tractor segment, completed the sale of all of its tractors and trailers,
certain operating assets and the Landstar Poole business to Schneider
National, Inc. for $40,435,000 in cash. Accordingly, the financial results
of this segment have been reported as discontinued operations.
Description of Business
Landstar, a non asset based provider of transportation capacity, provides
transportation services to shippers throughout the United States and, to
a lesser extent, between the United States, Canada and Mexico. These business
services, which emphasize safe transportation, information coordination and
customer service, are delivered through a network of independent sales agents
and independent contractors linked together by a series of technological
applications. Through this network, Landstar operates a $1.4 billion
transportation services business throughout North America, providing truckload
services, truck brokerage services, intermodal transportation services and
expedited time definite air and ground transportation services.
Landstar provides transportation services to a variety of industries, including
iron and steel, automotive products, paper, lumber and building products,
5
<PAGE>
aluminum, chemicals, foodstuffs, heavy machinery, ammunition and explosives,
and military hardware. Landstar's transportation services include a full array
of truckload transportation utilizing a wide range of specialized equipment
including dry vans of various sizes, flatbeds, including drop decks and light
specialty trailers, and temperature-controlled vans and containers, dedicated
contract and logistics solutions, including freight optimization and less than
truckload freight consolidations, truck brokerage and expedited land and air
delivery of time-critical freight.
The Company has three reportable business segments. These are the carrier,
multimodal and insurance segments. The following table provides financial
information relating to the Company's reportable business segments as of and
for the fiscal years ending 2001, 2000 and 1999 (dollars in thousands):
<TABLE>
<CAPTION> Fiscal Year
------------------------------------
2001 2000 1999
----- ----- -----
<S> <C> <C> <C>
Revenue from unaffiliated customers:
Carrier segment $1,098,268 $1,117,042 $1,111,912
Multimodal segment 270,849 277,087 250,395
Insurance segment 23,654 24,363 25,776
Inter-segment revenue:
Carrier segment $ 28,587 $ 34,669 $ 35,194
Multimodal segment 2,367 1,241 196
Insurance segment 27,313 21,919 21,790
Operating income:
Carrier segment $ 76,105 $ 88,507 $ 86,282
Multimodal segment 5,343 9,346 7,949
Insurance segment 30,644 24,464 27,141
Other (35,706) (39,704) (39,658)
Identifiable assets:
Carrier segment $ 234,164 $ 256,690 $ 251,922
Multimodal segment 47,795 54,294 57,337
Insurance segment 46,440 33,267 28,180
Other 36,252 26,111 28,002
</TABLE>
The carrier segment consists of Landstar Ranger, Landstar Inway, Landstar
Ligon and Landstar Gemini. The carrier segment provides truckload
transportation for a wide range of general commodities over irregular
routes with its fleet of dry and specialty vans and unsided trailers,
including flatbed, drop deck and specialty. It also provides short-to-long haul
movement of containers by truck, dedicated power-only truck capacity and truck
brokerage. The carrier segment markets its services primarily through
independent commission
6
<PAGE>
sales agents and exclusively utilizes tractors provided by independent
contractors. The nature of the carrier segment business is such that a
significant portion of its operating costs varies directly with revenue. At
December 29, 2001, the carrier segment operated a fleet of approximately 8,450
tractors, provided by over 7,220 independent contractors, and 14,519 trailers,
6,067 of which are supplied by independent contractors. Approximately 70% of
the trailers available to the carrier segment are provided by independent
contractors or are leased by the Company at rental rates that vary with the
revenue generated by the trailer. The carrier segment's trailer fleet is
comprised of 10,320 dry vans, 3,285 flatbeds, 687 specialty and 227
refrigerated vans. The carrier segment has a network of more than 880
independent commission sales agents. Independent commission sales agents in
the carrier segment receive a commission generally between 5% and 8% of the
revenue they generate. The use of independent contractors enables the carrier
segment to utilize a large fleet of revenue equipment while minimizing capital
investment and fixed costs, thereby enhancing return on investment. Independent
contractors who provide tractor power receive a percentage of the revenue
generated for the freight hauled and a larger percentage for providing both a
tractor and trailer. The carrier segment also utilizes capacity provided by
third party truck brokerage services. Truck brokerage services are paid a
negotiated rate for each load they haul.
The multimodal segment is comprised of Landstar Logistics and Landstar Express
America. Transportation services provided by the multimodal segment include the
arrangement of intermodal moves, contract logistics, truck brokerage and
emergency and expedited ground and air freight. The multimodal segment markets
its services through independent commission sales agents and utilizes capacity
provided by independent contractors, including railroads and air cargo
carriers. Multimodal independent sales agents generally receive a percentage
of the gross profit, revenue less the cost of the transportation, from each
load they generate. Independent contractors who provide truck capacity to the
multimodal segment are compensated based on a percentage of the revenue
generated by the haul depending on the type and timing of the shipment.
Railroads and air cargo carriers receive a fixed amount per load. The nature of
the multimodal segment business is such that a significant portion of its
operating costs also varies directly with revenue. At December 29, 2001, the
multimodal segment operated a fleet of 332 trucks, provided by approximately
267 independent contractors. Multimodal segment independent contractors provide
cargo vans and straight trucks that are utilized for emergency and expedited
freight services. The multimodal segment has a network of approximately 170
independent commission sales agents.
The insurance segment is comprised of Signature, a wholly-owned offshore
insurance subsidiary and RMCS. The insurance segment provides risk and claims
management services for Landstar's operating companies. In addition, it
reinsures certain property, casualty and occupational accident risks of certain
independent contractors who have contracted to haul freight for Landstar and
provides certain property and casualty insurance directly to Landstar's
operating subsidiaries.
Landstar's business strategy is to offer high quality, specialized
transportation services through its transportation group to service-sensitive
customers. Landstar focuses on providing transportation services which
emphasize customer service and information coordination among its independent
commission sales agents, customers and capacity providers, rather
than the volume-driven approach of generic dry van carriers. Landstar intends
to continue developing appropriate systems and technologies that offer
7
<PAGE>
integrated transportation solutions to meet the total
transportation needs of its customers.
The Company's overall size, geographic coverage, equipment and service
capability offer the Company significant competitive marketing and operating
advantages. These advantages allow the Company to meet the needs of even the
largest shippers and thereby qualify it as a "core carrier." Increasingly, the
larger shippers are substantially reducing the number of authorized carriers
in favor of a small number of core carriers whose size and diverse service
capability enable these core carriers to satisfy most of the shippers'
transportation needs. Examples of national account customers include the U.S.
Department of Defense and shippers in particular industries such as the three
major U.S. automobile manufacturers.
Management believes the Company has a number of significant competitive
advantages, including:
TECHNOLOGY. Management believes leadership in the development and application
of technology is an ongoing part of providing high quality service at
competitive prices. Landstar manages its carrier and multimodal segments'
technology programs centrally through its information services department.
DIVERSITY OF SERVICES OFFERED. The Company offers its customers a wide range
of transportation services through the carrier and multimodal groups, including
a fleet of diverse trailing equipment and extensive geographic coverage.
Examples of the specialized services offered include a large fleet of flatbed
trailers, multi-axle trailers capable of hauling extremely heavy or oversized
loads, drivers certified to handle ammunition and explosive shipments for the
U.S. Department of Defense, emergency and expedited surface and air cargo
services and intermodal capability with railroads and steamship lines,
including short-to-medium haul movement of ocean-going containers between U.S.
ports and inland cities.
The following table illustrates the diversity of this equipment as of
December 29, 2001:
<TABLE>
<CAPTION>
<S> <C>
Trailers:
Vans 10,194
Specialty Vans 143
Temperature-Controlled 227
Flatbeds, Including Drop Decks and Low Boys 3,286
Other Specialized Flatbeds 687
------
Total 14,537
======
</TABLE>
8
<PAGE>
MARKETING NETWORK. Landstar's network of more than 1,000 independent
commission sales agents results in regular contact with shippers at the local
level and the capability to be highly responsive to shippers' changing needs.
The agent network enables Landstar to be responsive both in providing
specialized equipment to both large and small shippers and in providing
capacity on short notice from the Company's large fleet to high volume
shippers. Through its agent network, the Company believes it offers smaller
shippers a level of service comparable to that typically reserved for larger
customers. Examples of services that Landstar is able to make available through
the agent network to smaller shippers include the ability to provide
transportation services on short notice (often within hours from notification
to time of pick-up), multiple pick-up and delivery points, electronic data
interchange capability and access to specialized equipment. In addition, a
number of the Company's agents specialize in certain types of freight and
transportation services (such as oversized or heavy loads). An agent in the
carrier segment is typically paid a percentage of the revenue generated through
that agent, with volume-based incentives. An agent in the multimodal segment is
typically paid a contractually agreed-upon percentage of the gross profit on
revenue generated through that agent. During 2001, 357 agents generated
revenue for Landstar of at least $1 million each, or approximately $1.2 billion
of Landstar's total revenue. The majority of the agents who generate revenue of
$1 million or more have chosen to represent Landstar exclusively. The typical
Landstar agent maintains a relationship with a number of shippers and services
these shippers by providing a base of operations for independent contractors,
both single-unit and multi-unit contractors. Contracts with agents are
typically terminable upon 30 days' notice. Historically, Landstar has
experienced very limited agent turnover among its larger-volume agents.
The carrier segment and multimodal segment emphasize programs to support the
agents' operations and to establish pricing parameters. Each operating
subsidiary contracts directly with customers and generally assumes the credit
risk and liability for freight losses or damages.
The independent commission sales agents are responsible for locating freight
and making that freight available to the Company's independent contractors and
coordinating the transportation of the freight with independent contractors.
The carrier segment's independent commission sales agents use the
Company's Landstar Electronic Administrative Dispatch System (LEADS) software
program which enables its independent commission sales agents to dispatch
freight and process most administrative procedures and then communicate that
information to Landstar and its independent contractors via the worldwide web.
The multimodal segment's independent commission sales agents use other Landstar
proprietary software to process customer shipments and communicate the
necessary information to independent contractors and Landstar. The Company's
web-based available freight and truck information system provides a listing of
available trucks to the Company's independent commission sales agents.
The carrier segment and multimodal segment hold regular regional agent meetings
for their independent commission sales agents and Landstar holds an annual
company-wide agent convention.
INDEPENDENT CONTRACTORS. Landstar operates the largest fleet of truckload
independent contractors in North America. This provides marketing, operating,
safety, recruiting, retention and financial advantages to the Company. Most
of the Company's truckload independent contractors are compensated based on
a fixed percentage of the revenue generated from the freight they haul. This
percentage generally ranges from 60% to 70% where the independent contractor
provides a tractor and from 75% to 79% where the independent contractor
9
<PAGE>
provides both a tractor and trailer. The independent contractor must pay all
the expenses of operating his/her equipment, including driver wages and
benefits, fuel, physical damage insurance, maintenance, highway use taxes
and debt service.
The Company maintains an internet site through which independent contractors
can view a complete listing of all the Company's available freight, allowing
them to consider size, origin and destination when planning trips.
In 2001, Landstar's truck turnover ratio was approximately 60%. A significant
portion of this turnover was attributable to independent contractors who had
been independent contractors with the Company for less than one year.
Management believes that factors that tend to limit turnover include the
Company's extensive agent network, the Company's programs to reduce the
operating costs of its independent contractors and Landstar's reputation for
quality, service and reliability. Management believes, however, that a
reduction in the amount of available freight may cause an increase in truck
turnover.
The Landstar Contractors' Advantage Purchasing Program leverages Landstar's
purchasing power to provide discounts to the independent contractors when they
purchase equipment, fuel, tires and other items. In addition, LCFI provides a
source of funds at competitive interest rates to the independent contractors to
purchase tractors, trailers or mobile communication equipment.
Landstar also benefits from its use of independent contractors. This allows the
Company to maintain a lower level of capital investment, which results in lower
fixed costs.
CORPORATE SERVICES. Significant advantages result from the collective
expertise and corporate services afforded by Landstar's corporate
management. The primary services provided are:
safety purchasing
strategic planning human resource management
technology and management information systems finance
legal accounting, budgeting and taxes
operator and equipment compliance quality programs
risk management insurance services
Competition
Landstar competes primarily in the transportation services industry.
The transportation services industry is extremely competitive and fragmented.
Landstar competes primarily with truckload carriers, intermodal
transportation service providers, railroads, less-than-truckload carriers,
third party broker carriers and other non-asset based transportation service
providers.
Management believes that competition for the freight transported by the Company
is based primarily on service and efficiency and, to a lesser degree, on
freight rates alone. Management believes that Landstar's overall size and
availability of a wide range of equipment, together with its geographically
dispersed local independent agent network, present the Company with significant
competitive advantages over many transportation service providers.
The Company also competes with motor carriers for the services of
independent contractors and with motor carriers and other transportation
services companies for the services of independent commission sales agents,
10
<PAGE>
contracts with whom are terminable upon short notice. The Company's overall
size, coupled with its reputation for good relations with agents and
independent contractors, have enabled the Company to attract a sufficient
number of qualified agents and independent contractors.
Insurance and Claims
Potential liability associated with accidents in the trucking portion of the
transportation services industry is severe and occurrences are unpredictable.
Landstar retains liability for each individual commercial trucking claim up to
$1,000,000 through April 30, 2001 and $5,000,000 thereafter. The Company also
retains liability for each general liability claim up to $1,000,000, $250,000
for each workers' compensation claim and $250,000 for each cargo claim. The
Company provides, primarily on an actuarially determined basis, for the
estimated cost of property, casualty and general liability claims reported and
for claims incurred but not reported. Although Landstar has an active training
and safety program, there can be no assurance that the frequency or severity of
accidents will not increase in the future, that there will not be unfavorable
development of existing claims or that insurance premiums will not increase. A
material increase in the frequency or severity of accidents or the unfavorable
development of existing claims can be expected to adversely affect Landstar's
operating results. Management believes that Landstar realizes significant
savings in insurance premiums by retaining a larger amount of risk than might
be prudent for a smaller company.
Potential Changes in Fuel Taxes
From time to time, various legislative proposals are introduced to increase
federal, state, or local taxes, including taxes on motor fuels. The Company
cannot predict whether, or in what form, any increase in such taxes applicable
to the transportation services provided by the Company will be enacted and, if
enacted, whether or not the Company will be able to reflect the increases in
prices to customers. Competition from other transportation service companies
including those that provide non-trucking modes of transportation and
intermodal transportation would be likely to increase if state or federal taxes
on fuel were to increase without a corresponding increase in taxes imposed upon
other modes of transportation.
Independent Contractor Status
From time to time, various legislative or regulatory proposals are introduced
at the federal or state levels to change the status of independent contractors'
classification to employees for either employment tax purposes (withholding,
social security, Medicare and unemployment taxes) or other benefits
available to employees. Currently, most individuals are classified as
employees or independent contractors for employment tax purposes based on 20
"common-law" factors rather than any definition found in the Internal Revenue
Code or Internal Revenue Service regulations. In addition, under Section 530
of the Revenue Act of 1978, taxpayers that meet certain criteria may treat an
individual as an independent contractor for employment tax purposes if they
have been audited without being told to treat similarly situated workers as
employees, if they have received a ruling from the Internal Revenue Service
or a court decision affirming their treatment, or if they are following a
long-standing recognized practice.
11
<PAGE>
Although management is unaware of any proposals currently pending that would
change the employee/independent contractor classification of independent
contractors currently doing business with the Company, the costs associated
with potential changes, if any, in the employee/independent contractor
classification could adversely affect Landstar's results of operations if
Landstar were unable to reflect them in its fee arrangements with the
independent contractors and agents or in the prices charged to its customers.
Regulation
Each of the Operating Subsidiaries is a motor carrier which is regulated by
the United States Department of Transportation ("DOT") and by various state
agencies. The DOT has broad powers, generally governing activities such as the
regulation of, to a limited degree, motor carrier operations, rates, accounting
systems, periodic financial reporting and insurance. Subject to federal and
state regulatory authorities or regulation, the Company may transport most
types of freight to and from any point in the United States over any route
selected by the Company.
The trucking industry is subject to possible regulatory and legislative changes
(such as increasingly stringent environmental and/or safety/security
regulations or limits on vehicle weight and size) that may affect the economics
of the industry by requiring changes in operating practices or by changing the
demand for common or contract carrier services or the cost of providing
truckload services.
Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. All of the Company's drivers are required to have
national commercial driver's licenses and are subject to mandatory drug and
alcohol testing. The DOT's national commercial driver's license and drug and
alcohol testing requirements have not adversely affected the availability of
qualified drivers to the Company.
At December 25, 1999, approximately 100 Landstar Ranger drivers were
represented by the International Brotherhood of Teamsters (the "Teamsters").
The vast majority of these unionized drivers participated in the Teamsters'
Central States Southeast and Southwest Areas Pension Fund (the "Fund"). Under
a prior collective bargaining agreement, Landstar Ranger was required to make
contributions to various Teamster pension funds for 205 drivers regardless of
the actual number of unionized drivers. Effective April 1, 2000, a new
collective bargaining agreement required Landstar Ranger to make pension
contributions for only the actual number of unionized drivers. As a result of
the elimination of the requirement to make contributions for more than the
actual number of unionized drivers, the Trustees of the Fund terminated
participation in the Fund by Landstar Ranger effective October 1, 2000. The
Trustees of the Fund regard this action as a withdrawal by Landstar Ranger.
In the third quarter of 2000, the Company recorded a charge in the amount of
$2,230,000 for the cost of withdrawal from the Fund.
12
<PAGE>
Seasonality
Landstar's operations are subject to seasonal trends common to the trucking
industry. Results of operations for the quarter ending in March are typically
lower than the quarters ending in June, September and December due to reduced
shipments and higher operating costs in the winter months.
Employees
As of December 29, 2001, the Company and its subsidiaries employed
1,231 individuals. Approximately 50 Landstar Ranger drivers (out of a total
of approximately 4,600) are members of the International Brotherhood of
Teamsters. The Company considers relations with its employees to be good.
Item 2. - Properties
The Company owns or leases various properties in the U.S. for the Company's
operations and administrative staff that support the independent commission
sales agents and independent contractors. The carrier segment's primary
facilities are located in Jacksonville, Florida and Rockford, Illinois.
The multimodal segment's primary facilities are located in Jacksonville,
Florida. In addition, the Company's corporate headquarters are located in
Jacksonville, Florida. The Rockford, Illinois facility of the carrier segment
is owned by the Company. All other primary facilities are leased.
Management believes that Landstar's owned and leased properties are adequate
for its current needs and that leased properties can be retained or replaced
at acceptable cost.
Item 3. - Legal Proceedings
The Company is routinely a party to litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred
in the transportation of freight. The Company maintains insurance which covers
liability amounts in excess of retained liabilities from personal injury and
property damages claims.
13
<PAGE>
Item 4. - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 2001.
Part II
Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters
The Common Stock of the Company is quoted through the National Association of
Securities Dealers, Inc. National Market System (the "NASDAQ National Market
System") under the symbol "LSTR." The following table sets forth the high and
low reported sale prices for the Common Stock as quoted through the NASDAQ
National Market System for the periods indicated.
<TABLE>
<CAPTION>
Calendar Period 2001 Market Price 2000 Market Price
--------------- ----------------- -----------------
<S> <C> <C> <C> <C>
High Low High Low
First Quarter $ 72.875 $ 55.250 $ 64.625 $ 38.063
Second Quarter 72.000 62.500 69.750 48.531
Third Quarter 81.140 60.000 60.625 42.500
Fourth Quarter 75.840 60.500 59.000 37.625
</TABLE>
The reported last sale price per share of the Common Stock as quoted through
the NASDAQ National Market System on March 15, 2002 was $94.400 per share. As
of such date, Landstar had 8,105,753 shares of Common Stock outstanding. As
of March 15, 2001, the Company had 64 stockholders of record of its Common
Stock. However, the Company estimates that it has a significantly greater
number of stockholders because a substantial number of the Company's
shares are held by brokers or dealers for their customers in street name.
The Company has not paid any cash dividends on the Common Stock within the past
three years and does not intend to pay dividends on the Common Stock for the
foreseeable future. The declaration and payment of any future dividends will
be determined by the Company's Board of Directors, based on Landstar's results
of operations, financial condition, cash requirements, certain corporate law
requirements and other factors deemed relevant.
Item 6. - Selected Financial Data
The information required by this Item is set forth under the caption "Selected
Consolidated Financial Data" in Exhibit 13 attached hereto, and is
incorporated by reference in this Annual Report on Form 10-K. This
information is also included on page 44 of the Company's 2001 Annual Report to
Shareholders.
14
<PAGE>
Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Exhibit 13 attached hereto, and is incorporated by reference in
this Annual Report on Form 10-K. This information is also included on pages
21 to 27 of the Company's 2001 Annual Report to Shareholders.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The Company has a credit agreement with a syndicate of banks and JPMorgan
Chase Bank, as the administrative agent, (the "Third Amended and
Restated Credit Agreement") that provides $175,000,000 of borrowing
capacity. Borrowings under the Third Amended and Restated Credit Agreement
bear interest at rates equal to, at the option of Landstar, either (i) the
greatest of (a) the prime rate as publicly announced from time to time by
JPMorgan Chase Bank, (b) the three month CD rate adjusted for statutory
reserves and FDIC assessment costs plus 1% and (c) the federal funds
effective rate plus 1/2%, or, (ii) the rate at the time offered to JPMorgan
Chase Bank in the Eurodollar market for amounts and periods comparable to
the relevant loan plus a margin that is determined based on the level of the
Company's Leverage Ratio, as defined in the Third Amended and Restated Credit
Agreement. The margin is subject to an increase of .125% if the aggregate
amount outstanding under the Third Amended and Restated Credit Agreement
exceeds 50% of the total borrowing capacity. As of December 29, 2001, the
weighted average interest rate on borrowings outstanding was 2.81%. During
fiscal 2001, the average outstanding balance under the Third Amended and
Restated Credit Agreement (combined with borrowings that were
outstanding on the Second Amended and Restated Credit Agreement from
December 30, 2000 to December 20, 2001 which was refinanced on
December 20, 2001 with funds received on the Third Amended and Restated Credit
Agreement) was $89,929,000. Based on the borrowing rates in the Third Amended
and Restated Credit Agreement and the repayment terms, the fair value of the
outstanding borrowings as of December 29, 2001 was estimated to approximate
carrying value.
The Third Amended and Restated Credit Agreement expires on
January 5, 2005. The amount outstanding on the Third Amended and Restated
Credit Agreement is payable upon the expiration of the Third Amended
and Restated Credit Agreement.
Item 8. - Financial Statements and Supplementary Data
The information required by this Item is set forth under the captions
"Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of Changes
in Shareholders' Equity," "Notes to Consolidated Financial Statements,"
"Independent Auditors' Report" and "Quarterly Financial Data" in Exhibit 13
attached hereto, and are incorporated by reference in this Annual Report on
Form 10-K. This information is also included on pages 28 through 43 of the
Company's 2001 Annual Report to Shareholders.
Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
15
<PAGE>
Part III
Item 10. - Directors and Executive Officers of the Registrant
The information required by this Item concerning the Directors (and nominees
for Directors) and Executive Officers of the Company is set forth under the
captions "Election of Directors," "Directors of the Company," "Information
Regarding Board of Directors and Committees," and "Executive Officers of the
Company" on pages 2 through 8, and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" on page 17 of the Company's definitive Proxy
Statement for its annual meeting of shareholders filed with the Securities and
Exchange Commission pursuant to Regulation 14A, and is incorporated herein by
reference.
Item 11. - Executive Compensation
The information required by this Item is set forth under the captions
"Compensation of Directors and Executive Officers," "Summary Compensation
Table," "Fiscal Year-End Option Values," "Report of the Compensation
Committee on Executive Compensation," "Performance Comparison" and
"Key Executive Employment Protection Agreements" on pages 9 through 15 of
the Company's definitive Proxy Statement for its annual meeting of shareholders
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
and is incorporated herein by reference.
Item 12. - Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the caption "Security
Ownership by Management and Others" on pages 16 through 18 of the Company's
definitive Proxy Statement for its annual meeting of shareholders filed with
the Securities and Exchange Commission pursuant to Regulation 14A, and is
incorporated herein by reference.
Item 13. - Certain Relationships and Related Transactions
The information required by this Item is set forth under the caption
"Indebtedness of Management" on pages 12 and 13 of the Company's definitive
Proxy Statement for its annual meeting of shareholders filed with the
Securities and Exchange Commission pursuant to Regulation 14A, and is
incorporated herein by reference.
Part IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
Financial statements of the Company and related notes thereto, together with
the report thereon of KPMG LLP dated February 5, 2002, are in Exhibit 13
attached hereto, and are incorporated by reference in this Annual Report on
Form 10-K. This information is also included on pages 28 through 42 of the
Company's 2001 Annual Report to Shareholders.
16
<PAGE>
(2) Financial Statement Schedules
The report of the Company's independent public accountants with respect to the
financial statement schedules listed below appears on page 23 of this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
Schedule Number Description Page
- --------------- ----------- ----
<S> <C> <C>
I Condensed Financial Information of Registrant
Parent Company Only Balance Sheet Information S-1
I Condensed Financial Information of Registrant
Parent Company Only Statement of Income Information S-2
I Condensed Financial Information of Registrant
Parent Company Only Statement of Cash
Flows Information S-3
II Valuation and Qualifying Accounts
For the Fiscal Year Ended December 29, 2001 S-4
II Valuation and Qualifying Accounts
For the Fiscal Year Ended December 30, 2000 S-5
II Valuation and Qualifying Accounts
For the Fiscal Year Ended December 25, 1999 S-6
</TABLE>
All other financial statement schedules not listed above have been omitted
because the required information is included in the consolidated financial
statements or the notes thereto, or is not applicable or required.
(3) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report (see "Exhibit Index").
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER OF THE COMPANY WHO
SO REQUESTS IN WRITING, A COPY OF ANY EXHIBITS, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. ANY SUCH REQUEST SHOULD BE DIRECTED TO LANDSTAR
SYSTEM, INC., ATTENTION: INVESTOR RELATIONS, 13410 SUTTON PARK DRIVE SOUTH,
JACKSONVILLE, FLORIDA 32224.
(b)The Company's Form 8-K filed with the Securities and Exchange Commission on
December 21, 2001 reported the execution of the "Third Amended and Restated
Credit Agreement" as of December 20, 2001.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LANDSTAR SYSTEM, INC.
By: Henry H. Gerkens
----------------------------------------
Henry H. Gerkens
President & Chief Operating Officer
By: Robert C. LaRose
----------------------------------------
Robert C. LaRose
Vice President, Chief Financial Officer
and Secretary
Date: March 21, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Jeffrey C. Crowe Chairman of the Board and Chief March 21, 2002
- ------------------- Executive Officer; Principal
Jeffrey C. Crowe Executive Officer
Henry H. Gerkens Director, President and Chief March 21, 2002
- ------------------- Operating Officer
Henry H. Gerkens
Robert C. LaRose Vice President, Chief Financial March 21, 2002
- ------------------- Officer and Secretary; Principal
Robert C. LaRose Accounting Officer
* Director March 21, 2002
- -------------------
David G. Bannister
* Director March 21, 2002
- -------------------
Ronald W. Drucker
18
<PAGE>
* Director March 21, 2002
- -------------------
Merritt J. Mott
* Director March 21, 2002
- -------------------
William S. Elston
* Director March 21, 2002
- -------------------
Diana M. Murphy
Robert C. LaRose Attorney In Fact *
- -------------------
By: Robert C. LaRose
19
<PAGE>
EXHIBIT INDEX
Form 10-K for fiscal year ended 12/29/01
Exhibit No. Description
- ----------- -----------
(1) Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Asset Purchase Agreement by and between Landstar Poole, Inc.
as the seller, and Landstar System, Inc., as the guarantor, and Schneider
National, Inc., as the purchaser, dated as of July 15, 1998. (Incorporated by
reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 27, 1998 (Commission File No. 0-21238))
(3) Articles of Incorporation and Bylaws:
3.1 Amended and Restated Certificate of Incorporation of the
Company dated February 9, 1993 and Certificate of Designation of Junior
Participating Preferred Stock. (Incorporated by reference to Exhibit 3.1 to
the Registrant's Registration Statement on Form S-1 (Registration No. 33-
57174))
3.2 The Company's Bylaws, as amended and restated on February 9,
1993. (Incorporated by reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1. (Registration No. 33-57174))
(4) Instruments defining the rights of security holders,
including indentures:
4.1 Specimen of Common Stock Certificate. (Incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1
(Registration No. 33-57174))
4.2 Rights Agreement, dated as of February 10, 1993, between the
Company and Chemical Bank, as Rights Agent. (Incorporated by reference to
Exhibit 4.14 of Amendment No. 1 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-57174))
4.3 The Company agrees to furnish copies of any instrument defining
the rights of holders of long-term debt of the Company and its respective
consolidated subsidiaries that does not exceed 10% of the total assets of the
Company and its respective consolidated subsidiaries to the Securities and
Exchange Commission upon request.
4.4 Second Amended and Restated Credit Agreement, dated
October 10, 1997, among LSHI, Landstar, the lenders named therein and The
Chase Manhattan Bank as administrative agent (including exhibits and schedules
thereto).(Incorporated by reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 27, 1997
(Registration No. 0-21238))
20
<PAGE>
Exhibit Index (continued)
Form 10-K for fiscal year ended 12/29/01
Exhibit No. Description
- ----------- -----------
4.6 First Amendment, dated October 30, 1998, to the Second Amended
and Restated Credit Agreement, dated October 10, 1997, among LSHI, Landstar,
the lenders named therein and The Chase Manhattan Bank as administrative agent.
(Incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 26, 1998)
4.7 Second Amendment, dated September 8, 1999, to the Second
Amended and Restated Credit Agreement, dated as of October 10, 1997.
(Incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 25, 1999)
4.8 First Amendment of the Rights Agreement, dated December 22, 2000,
between the Company and Mellon Investor Services, LLC, as successor by merger
to Chemical Bank.
4.9 Third Amended and Restated Credit Agreement, dated December 20,
2001, among LSHI, Landstar, the lenders named therein and JPMorgan Chase
Bank as administrative agent (including exhibits and schedules thereto).
(Incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-K filed
on December 21, 2001 (Registration No. 0-21238))
(10) Material Contracts:
10.1+ Landstar System, Inc. 1993 Stock Option Plan. (Incorporated by
reference to Exhibit 10.1 to the Registrant's Registration Statement on Form
S-1. (Registration No. 33-67666))
10.2 Form of Indemnification Agreement between the Company and each
of the directors and executive officers of the Company. (Incorporated by
reference to Exhibit 10.7 of Amendment No. 1 to the Registrant's Registration
Statement on Form S-1. (Registration No. 33-57174))
10.3+ LSHI Management Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 25, 1993. (Commission File No. 0-21238))
10.4+ Landstar System, Inc. 1994 Director's Stock Option Plan.
(Incorporated by reference to Exhibit 99 to the Registrant's Registration
Statement on Form S-8 filed July 5, 1995. (Registration No. 33-94304))
10.5+ Key Executive Employment Protection Agreement dated
January 30, 1998 between Landstar System, Inc. and certain officers of the
Company. (Incorporated by reference to Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 27, 1997 (Commission
File NO. 0-21238))
21
<PAGE>
Exhibit Index (continued)
Form 10-K for fiscal year ended 12/29/01
Exhibit No. Description
- ----------- -----------
10.6+ Amendment to the Landstar System, Inc. 1993 Stock Option
Plan (Incorporated by reference to Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 27, 1997 (Commission
File No. 0-21238))
10.7+ Form of Promissory Notes between the Company and certain
directors, executive officers and management of the Company.
10.8+ First Amendment to the Landstar System, Inc. 1994 Directors Stock
Option Plan
10.9+ Second Amendment to the Landstar System, Inc. 1994 Directors Stock
Option Plan
(11) Statement re: Computation of Per Share Earnings:
11.1* Landstar System, Inc. and Subsidiary Calculation of Earnings
Per Common Share
11.2* Landstar System, Inc. and Subsidiary Calculation of Diluted
Earnings Per Share
(13) Annual Report to Shareholders, Form 10-Q or Quarterly Report to
Shareholders:
13.1* Excerpts from the 2001 Annual Report to Shareholders
(21) Subsidiaries of the Registrant:
21.1* List of Subsidiary Corporations of the Registrant
(23) Consents of Experts and Counsel:
23.1* Consent of KPMG LLP as Independent Auditors of the Registrant
(24) Power of Attorney:
24.1* Powers of Attorney
___________________
+management contract or compensatory plan or arrangement
*Filed herewith.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Landstar System, Inc.:
Under date of February 5, 2002, we reported on the consolidated balance sheets
of Landstar System, Inc. and subsidiary as of December 29, 2001 and December
30, 2000, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the fiscal years ended December 29,
2001, December 30, 2000 and December 25, 1999, as contained in the 2001 annual
report to shareholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 2001. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedules
as listed in Item 14 (a)(2). These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
KPMG LLP
Stamford, Connecticut
February 5, 2002
23
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY BALANCE SHEET INFORMATION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Dec. 29, Dec. 30,
2001 2000
-------- --------
<S> <C> <C>
Assets
- ------
Investment in Landstar System Holdings, Inc.,
net of advances $117,440 $107,859
-------- --------
Total assets $117,440 $107,859
======== ========
Liabilities and Shareholders' Equity
- -----------------------------------
Shareholders' equity:
Common stock, $.01 par value, authorized
20,000,000 shares, issued 13,328,834
and 13,233,874 shares $ 133 $ 132
Additional paid-in capital 75,036 71,325
Retained earnings 258,162 215,368
Cost of 5,241,841 and 4,741,841 shares of
common stock in treasury (209,926) (172,727)
Notes receivable arising from exercise of
stock options (5,965) (6,239)
-------- --------
Total shareholders' equity 117,440 107,859
-------- --------
Total liabilities and shareholders' equity $117,440 $107,859
======== ========
</TABLE>
S-1
24
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY STATEMENT OF INCOME INFORMATION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------
Dec. 29, Dec. 30, Dec. 25,
2001 2000 1999
---------- ---------- ----------
<S> <C> <C> <C>
Equity in undistributed earnings
of Landstar System Holdings, Inc. $ 42,838 $ 45,296 $ 46,018
Income taxes 44 102 81
---------- ---------- -----------
Net income $ 42,794 $ 45,194 $ 45,937
========== ========== ===========
Earnings per common share $ 5.13 $ 5.15 $ 4.60
========== ========== ===========
Diluted earnings per share $ 5.01 $ 5.03 $ 4.55
========== ========== ===========
Average number of shares
outstanding:
Earnings per common share 8,336,000 8,781,000 9,982,000
========== ========== ===========
Diluted earnings per share 8,546,000 8,981,000 10,102,000
========== ========== ===========
</TABLE>
S-2
25
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT COMPANY ONLY STATEMENT OF CASH FLOWS INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
Dec. 29, Dec. 30, Dec. 25,
2001 2000 1999
---------- ---------- -----------
<S> <C> <C> <C>
Operating Activities
- --------------------
Net income $ 42,794 $ 45,194 $ 45,937
Adjustments to reconcile net income
to net cash used by
operating activities:
Equity in undistributed earnings of
Landstar System Holdings, Inc. (42,838) (45,296) (46,018)
---------- ---------- -----------
Net Cash Used By Operating
Activities (44) (102) (81)
---------- ---------- -----------
Investing Activities
- --------------------
Additional investments in and advances
from Landstar System Holdings,
Inc., net 34,082 46,144 51,172
---------- ---------- -----------
Net Cash Provided By Investing
Activities 34,082 46,144 51,172
---------- ---------- -----------
Financing Activities
- --------------------
Proceeds from sales of common stock 3,161 143 293
Purchases of common stock (37,199) (46,185) (51,384)
---------- ---------- ----------
Net Cash Used By Financing
Activities (34,038) (46,042) (51,091)
---------- ---------- ----------
Change in cash 0 0 0
Cash at beginning of period 0 0 0
---------- ---------- ----------
Cash at end of period $ 0 $ 0 $ 0
========== ========== ==========
</TABLE>
S-3
26
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001
(Dollars in thousands)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------ ------ ------ ------ ------
Balance Additions
at --------------------------
Beginning Charged to Charged to Balance
of Costs and Other Accounts Deductions at End
Description Period Expenses Describe Describe (A) of Period
- ----------- --------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Deducted from trade
receivables $ 4,450 $ 4,384 $ - $ (4,418) $ 4,416
Deducted from other
receivables 5,089 3,958 - (4,307) 4,740
Deducted from other non-
current receivables 1,816 (189) - (1,399) 228
------- --------- ----------- -------- -------
$11,355 $ 8,153 $ - $ (10,124) $ 9,384
======= ========= =========== ======== =======
</TABLE>
(A) Write-offs, net of recoveries.
S-4
27
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000
(Dollars in thousands)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------ ------ ------ ------ ------
Balance Additions
at --------------------------
Beginning Charged to Charged to Balance
of Costs and Other Accounts Deductions at End
Description Period Expenses Describe Describe(A) of Period
- ----------- --------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Deducted from trade
receivables $ 4,002 $ 1,915 $ - $ (1,467) $ 4,450
Deducted from other
receivables 5,033 2,479 - (2,423) 5,089
Deducted from other
non-current
receivables 1,626 198 - (8) 1,816
------- --------- --------- -------- -------
$10,661 $ 4,592 $ - $ (3,898) $11,355
======= ========= ========= ======== =======
</TABLE>
(A) Write-offs, net of recoveries.
S-5
28
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEAR ENDED DECEMBER 25, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------ ------ ------ ------ ------
Balance Additions
at --------------------------
Beginning Charged to Charged to Balance
of Costs and Other Accounts Deductions at End
Description Period Expenses Describe Describe(A) of Period
- ----------- --------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Deducted from trade
receivables $ 6,428 $ 94 $ - $ (2,520) $ 4,002
Deducted from other
receivables 4,007 1,226 - (200) 5,033
Deducted from other non-
current receivables 303 1,323 - - 1,626
------- --------- --------- -------- -------
$10,738 $ 2,643 $ - $ (2,720) $10,661
======= ========= ========= ======== =======
</TABLE>
(A) Write-offs, net of recoveries.
S-6
29
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>3
<FILENAME>ex_11-1.txt
<TEXT>
<PAGE>
EXHIBIT 11.1
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CALCULATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal Years Ended
December 29, December 30, December 25,
2001 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net income $ 42,794 $ 45,194 $ 45,937
============ ============ ============
Average number of common shares
outstanding 8,336 8,781 9,982
============ ============ ============
Earnings per common share $ 5.13 $ 5.15 $ 4.60
============ ============ ============
</TABLE>
30
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<FILENAME>ex_11-2.txt
<TEXT>
<PAGE>
EXHIBIT 11.2
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CALCULATION OF DILUTED EARNINGS PER SHARE
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal Years Ended
December 29, December 30, December 25,
2001 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net income $ 42,794 $ 45,194 $ 45,937
============ ============ ============
Average number of common shares
outstanding 8,336 8,781 9,982
Plus: Incremental shares from
assumed exercise of stock
options 210 200 120
------------ ------------ ------------
Average number of common shares
and incremental shares
outstanding 8,546 8,981 10,102
============ ============ ============
Diluted earnings per share $ 5.01 $ 5.03 $ 4.55
============ ============ ============
</TABLE>
31
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>ex_13-1.txt
<TEXT>
<PAGE>
EXHIBIT 13.1
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Introduction
Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc.
("Landstar" or the "Company"), provide transportation services to a variety
of market niches throughout the United States and to a lesser extent in Canada
and between the United States and Canada and Mexico through its operating
subsidiaries. The Company has three reportable business segments. These are the
carrier, multimodal and insurance segments.
The carrier segment consists of Landstar Ranger, Inc. ("Landstar Ranger"),
Landstar Inway, Inc., Landstar Ligon, Inc. ("Landstar Ligon") and Landstar
Gemini, Inc. The carrier segment provides truckload transportation for a wide
range of general commodities over irregular routes with its fleet of dry and
specialty vans and unsided trailers, including flatbed, drop deck and
specialty. It also provides short-to-long haul movement of containers by truck,
dedicated power-only truck capacity and truck brokerage. The carrier segment
markets its services primarily through independent commission sales agents and
utilizes tractors provided by independent contractors. The nature of the
carrier segment's business is such that a significant portion of its operating
costs varies directly with revenue. The carrier segment typically contributes
approximately 79% of Landstar's consolidated revenue.
The multimodal segment is comprised of Landstar Logistics, Inc. and Landstar
Express America, Inc. Transportation services provided by the
multimodal segment include the arrangement of intermodal
moves, contract logistics, truck brokerage and emergency and expedited ground
and air freight. The multimodal segment markets its services through
independent commission sales agents and utilizes capacity provided by
independent contractors, including railroads and air cargo carriers. The nature
of the multimodal segment's business is such that a significant portion of its
operating costs also varies directly with revenue. The multimodal segment
typically contributes approximately 19% of Landstar's consolidated revenue.
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 Landstar's operating companies.
In addition, it reinsures certain property, casualty and occupational accident
risks of certain independent contractors who have contracted to haul freight
for Landstar and provides certain property and casualty insurance directly to
Landstar's operating subsidiaries. The insurance segment typically contributes
approximately 2% of Landstar's consolidated revenue.
32
<PAGE>
Purchased transportation represents the amount an independent contractor
is paid to haul freight and is primarily based on a contractually agreed-
upon percentage of revenue generated by the haul for truck capacity provided by
independent contractors. Purchased transportation for the brokerage services
operations of the carrier segment and multimodal segment are based on a
negotiated rate for each load hauled. Purchased transportation for the
intermodal services operations and the air freight operations of the multimodal
segment is based on a contractually agreed-upon fixed rate. Purchased
transportation as a percentage of revenue for the intermodal services
operations and brokerage services is normally higher than that of Landstar's
other transportation operations. Purchased transportation is the largest
component of costs and expenses and, on a consolidated basis, increases or
decreases in proportion to the revenue generated through independent
contractors. Commissions to agents are primarily based on contractually
agreed-upon percentages of revenue at the carrier segment and of gross profit,
revenue less the cost of purchased transportation, at the multimodal segment.
Commissions to agents as a percentage of consolidated revenue will vary
directly with the percentage of consolidated revenue contributed by the carrier
segment, multimodal segment and Signature and increases or decreases in gross
profit at the multimodal segment.
Trailing equipment rent and maintenance costs are the largest components of
other operating costs.
Potential liability associated with accidents in the trucking industry is
severe and occurrences are unpredictable. A material increase in the
frequency or severity of accidents or workers' compensation claims or the
unfavorable development of existing claims can be expected to adversely affect
Landstar's operating income. Landstar retains liability for each individual
commercial trucking claim up to $1,000,000 per occurrence through
April 30, 2001 and $5,000,000 per occurrence thereafter. The Company also
retains liability for each general liability claim up to $1,000,000, $250,000
for each workers' compensation claim and $250,000 for each cargo claim.
Employee compensation and benefits account for over half of the Company's
selling, general and administrative expense. Other significant components of
selling, general and administrative expense are communications costs and rent
expense.
Depreciation and amortization primarily relates to depreciation of trailing
equipment and management information services equipment.
33
<PAGE>
The following table sets forth the percentage relationships of expense items to
revenue for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Years
------------------------
2001 2000 1999
------ ------ ------
<S> <C> <C> <C>
Revenue 100.0% 100.0% 100.0%
Investment income 0.3 0.3 0.2
Costs and expenses:
Purchased transportation 74.0 73.8 73.6
Commissions to agents 7.9 8.0 8.0
Other operating costs 2.3 2.1 2.2
Insurance and claims 2.4 2.2 2.5
Selling, general and administrative 7.2 7.1 7.2
Depreciation and amortization 1.0 0.9 0.8
Non-recurring costs 0.4
------ ------ ------
Total costs and expenses 94.8 94.5 94.3
------ ------ ------
Operating income 5.5 5.8 5.9
Interest and debt expense 0.5 0.6 0.3
------ ------ ------
Income before income taxes 5.0 5.2 5.6
Income taxes 1.9 2.0 2.3
------ ------ ------
Net income 3.1% 3.2% 3.3%
====== ====== ======
</TABLE>
FISCAL YEAR ENDED DECEMBER 29, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
2000
Revenue for the fiscal year 2001 was $1,392,771,000, a decrease of
$25,721,000, or 1.8%, compared to revenue for the 2000 fiscal year. Revenue
decreased $18,774,000, $6,238,000 and $709,000 at the carrier,
multimodal and insurance segments, respectively. The decrease was primarily
attributable to the extra week in the 53-week fiscal year 2000
compared to the 52-week fiscal year 2001. As a result, revenue miles
(volume) decreased approximately 3% compared to fiscal year 2000, which was
partially offset by an increase in revenue per revenue mile (price) of
approximately 1%, which reflected improved freight quality primarily at the
multimodal segment.
Investment income at the insurance segment was $3,567,000 and $4,317,000
for fiscal year 2001 and 2000, respectively. The decrease in investment income
was primarily due to a reduced rate of return, attributable to the decline in
interest rates, on investments held by the insurance segment.
Purchased transportation was 74.0% of revenue in 2001 compared with 73.8% in
2000. The increase in purchased transportation as a percentage of revenue was
primarily attributable to
34
<PAGE>
increased rates charged by third party capacity providers at the multimodal
segment as a result of higher fuel costs, increased brokerage revenue at the
carrier segment and decreased premium revenue at the insurance segment.
Commissions to agents were 7.9% of revenue in 2001 and 8.0% of revenue in 2000.
The decrease in commissions to agents as a percentage of revenue was
primarily due to the increased purchased transportation costs incurred at
the multimodal segment which negatively impacted gross profit, and resulted
in lower agent commissions. Other operating costs were 2.3% of revenue in 2001
compared with 2.1% in 2000. The increase in other operating costs as a
percentage of revenue was primarily due to higher net trailer costs, an
increased provision for contractor bad debts and increased independent
contractor recruiting and qualification costs. Insurance and claims were 2.4%
of revenue in 2001 compared with 2.2% in 2000 primarily due to greater
favorable development of prior year claims in 2000 than realized in 2001,
partially offset by reduced premiums for commercial trucking liability
insurance and increased brokerage revenue as a percentage of total revenue,
which has a lower claims risk profile. The reduction in premiums for
commercial trucking liability insurance was attributable to the increase
in the level of self-insured retention from $1,000,000 to
$5,000,000 per occurrence effective May 1, 2001. Selling, general and
administrative costs were 7.2% of revenue in 2001 and 7.1% in 2000. The
increase in selling, general and administrative costs as a percentage of
revenue was primarily due to an increased provision for customer bad debts
and increased wages and benefits, partially offset by a decrease in the
provision for bonuses under the Company's management incentive compensation
plan. Depreciation and amortization was 1.0% of revenue in 2001 and 0.9% of
revenue in 2000. The increase in depreciation and amortization as a percentage
of revenue was due to an increase in Company-owned trailing equipment.
Interest and debt expense was 0.5% of revenue in 2001 and 0.6% of revenue in
2000. This decrease was primarily attributable to lower interest rates.
At December 25, 1999, approximately 100 Landstar Ranger
drivers were represented by the International Brotherhood of Teamsters
(the "Teamsters"). The vast majority of these unionized drivers participated
in the Teamsters' Central States Southeast and Southwest Areas Pension Fund
(the "Fund"). Under a prior collective bargaining agreement, Landstar Ranger
was required to make contributions to various Teamster pension funds for 205
drivers regardless of the actual number of unionized drivers. Effective
April 1, 2000, a new collective bargaining agreement required Landstar Ranger
to make pension contributions for only the actual number of unionized drivers.
As a result of the elimination of the requirement to make contributions
for more than the actual number of unionized drivers, the Trustees of the
Fund terminated participation in the Fund by Landstar Ranger effective
October 1, 2000. The Trustees of the Fund regard this action as a withdrawal
by Landstar Ranger. Landstar Ranger recorded a charge in the third quarter of
2000 in the amount of $2,230,000 for the cost of withdrawal from the Fund.
35
<PAGE>
On March 28, 2000, the Company announced a plan to restructure the operations
of Landstar Ligon and to relocate its headquarters from Madisonville,
Kentucky to Jacksonville, Florida in June of 2000. As a result of the
restructuring and relocation, a one-time charge in the amount of $3,040,000 was
recorded during the second quarter of 2000 representing approximately
$1,370,000 of employee and office relocation costs, $1,000,000 of severance
costs and $670,000 of other costs. The restructuring and relocation were
substantially completed by September 23, 2000.
The provisions for income taxes for the 2001 and 2000 fiscal years were based
on an effective income tax rate of 38.5%, which is
higher than the statutory federal income tax rate primarily as a result of
state income taxes, amortization of certain goodwill and the meals and
entertainment exclusion. At December 29, 2001, the valuation allowance of
$491,000 was attributable to deferred state income tax benefits, which
primarily represented state operating loss carryforwards at one subsidiary.
The valuation allowance and goodwill will be reduced by $463,000
when realization of deferred state income tax benefits becomes likely.
The Company believes that deferred income tax benefits, net of the valuation
allowance, are more likely than not to be realized because of the Company's
ability to generate future taxable earnings.
Net income was $42,794,000, or $5.13 per common share ($5.01 per diluted
share), in 2001 compared with $45,194,000, or $5.15 per common share ($5.03
per diluted share), in 2000. After deducting related income tax benefits of
$2,105,000, the non-recurring costs reduced net income by $3,165,000 in 2000.
Excluding non-recurring costs, net income would have been $48,359,000, or
$5.51 per common share ($5.38 per diluted share) in 2000.
FISCAL YEAR ENDED DECEMBER 30, 2000 COMPARED TO FISCAL YEAR ENDED DECEMBER 25,
1999
Revenue for the fiscal year 2000 was $1,418,492,000, an increase of
$30,409,000, or 2.2%, over revenue for the 1999 fiscal year. The increase
was attributable to higher revenue at the carrier and multimodal
segments of $5,130,000 and $26,692,000, respectively, partially offset by a
decrease in revenue of $1,413,000 at the insurance segment. The increase was
36
<PAGE>
primarily attributable to the extra week in the 53-week fiscal year 2000
compared to the 52-week fiscal year 1999. Overall, revenue per revenue
mile increased approximately 3%, partially offset by a decrease in revenue
miles of approximately 1%. The decrease in revenue from the prior year at
the insurance segment was primarily attributable to reduced independent
contractor participation in the insurance programs reinsured by Signature.
Investment income at the insurance segment was $4,317,000 and $2,502,000
for fiscal year 2000 and 1999, respectively.
Purchased transportation was 73.8% of revenue in 2000 compared with 73.6% in
1999. The increase in purchased transportation as a percentage of revenue was
primarily attributable to increased revenue contributed by the multimodal
segment which tends to have a higher cost of purchased transportation and
decreased premium revenue at the insurance segment. In addition, purchased
transportation costs at the multimodal segment were generally higher due to
increased rates charged by its third party capacity providers as a result of
higher fuel costs. Commissions to agents were 8.0% of revenue in 2000 and 1999.
Other operating costs were 2.1% of revenue in 2000 compared with 2.2% in 1999.
The decrease in other operating costs as a percentage of revenue was primarily
attributable to the increase in the percentage of revenue contributed by the
multimodal segment which does not incur trailer rent or trailer maintenance
costs. Insurance and claims were 2.2% of revenue in 2000 compared with 2.5% in
1999 primarily due to increased revenue at the multimodal segment which has a
lower claims risk profile and lower accident frequency and severity in 2000.
Selling, general and administrative costs were 7.1% of revenue in 2000
and 7.2% in 1999. The decrease in selling, general and administrative
costs as a percentage of revenue was primarily due to a decrease in the
provision for bonuses under the Company's incentive compensation plan.
Depreciation and amortization was 0.9% of revenue in 2000 and 0.8% of
revenue in 1999. The increase in depreciation and amortization as a
percent of revenue was due to an increase in company-owned trailing
equipment.
Interest and debt expense was 0.6% of revenue in 2000 and 0.3% of revenue in
1999. This increase was primarily attributable to increased average borrowings
on the senior credit facility, which were used to finance a portion of the
Company's stock repurchase program, increased capital lease obligations for
trailing equipment and higher interest rates.
The provisions for income taxes for the 2000 and 1999 fiscal years were based
on an effective income tax rate of 38.5% and 40.5%, respectively, which is
higher than the statutory federal income tax rate primarily as a result of
state income taxes, amortization of certain goodwill and the meals and
entertainment exclusion. The decrease in the effective income tax rate
was attributable to the implementation of certain state income tax
planning strategies.
Net income was $45,194,000, or $5.15 per common share ($5.03 per diluted
share), in 2000 compared with $45,937,000, or $4.60 per common share ($4.55
per diluted share), in 1999. After deducting related income tax benefits of
$2,105,000, the non-recurring costs reduced net income by $3,165,000 in 2000.
Excluding non-recurring costs, net income would have been $48,359,000, or
$5.51 per common share ($5.38 per diluted share) in 2000.
37
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
On December 20, 2001, Landstar renegotiated its existing credit agreement with
a syndicate of banks and JPMorgan Chase Bank, as administrative agent (the
"Third Amended and Restated Credit Agreement"). The Third Amended and
Restated Credit Agreement provides $175,000,000 of borrowing capacity in the
form of a revolving credit facility, $50,000,000 of which may be utilized in
the form of letter of credit guarantees. At December 29, 2001, Landstar had
commitments for letters of credit outstanding in the amount of $19,929,000,
primarily as collateral for estimated insurance claims, $9,080,000 of which
were supported by the Third Amended and Restated Credit Agreement and
$10,849,000 secured by assets deposited with a financial institution. The
Third Amended and Restated Credit Agreement expires on January 5, 2005.
Borrowings under the Third Amended and Restated Credit Agreement bear interest
at rates equal to, at the option of Landstar, either (i) the greatest of (a)
the prime rate as publicly announced from time to time by JPMorgan Chase
Bank, (b) the three month CD rate adjusted for statutory reserves and FDIC
assessment costs plus 1% and (c) the federal funds effective rate plus 1/2%,
or, (ii) the rate at the time offered to JPMorgan Chase Bank in the
Eurodollar market for amounts and periods comparable to the relevant loan plus
a margin that is determined based on the level of the Company's Leverage Ratio,
as defined in the Third Amended and Restated Credit Agreement. The margin is
subject to an increase of .125% if the aggregate amount outstanding under the
Third Amended and Restated Credit Agreement exceeds 50% of the total
borrowing capacity. As of December 29, 2001, the margin was equal to 87.5/100
of 1%. The unused portion
38
<PAGE>
of the Third Amended and Restated Credit Agreement carries a commitment fee
determined based on the level of the Leverage Ratio, as therein defined. As of
December 29, 2001, the commitment fee for the unused portion of the Third
Amended and Restated Credit Agreement was 0.250%. At December 29, 2001, the
weighted average interest rate on borrowings outstanding under the Third
Amended and Restated Credit Agreement was 2.81%.
The Third Amended and Restated Credit Agreement contains a number of covenants
that limit, among other things, the incurrence of additional indebtedness, the
incurrence of operating or capital lease obligations and the purchase of
operating property. The Third Amended and Restated Credit Agreement also
requires Landstar to meet certain financial tests. Landstar is required to,
among other things, maintain minimum levels of Net Worth, as defined in the
Third Amended and Restated Credit Agreement, and Interest and Fixed Charge
Coverages, as therein defined. Under the most restrictive covenant, Landstar
exceeded the required Interest Coverage level by $11,719,000 at
December 29, 2001.
The Third Amended and Restated Credit Agreement provides for an event of
default related to a person or group acquiring 25% or more of the outstanding
capital stock of the Company or obtaining the power to elect a majority of the
Company's directors.
Borrowings under the Third Amended and Restated Credit Agreement are
unsecured, however, the Company and all but one of Landstar System Holdings,
Inc.'s ("LSHI") subsidiaries guarantee LSHI's obligations under the Third
Amended and Restated Credit Agreement.
Shareholders' equity was $117,440,000, or 54% of total capitalization,
at December 29, 2001, compared with $107,859,000, or 53% of total
capitalization, at December 30, 2000. The increase in shareholders' equity
as a percentage of total capitalization was primarily a result of current
year net income, partially offset by the purchase of 500,000 shares of the
Company's common stock at a total cost of $37,199,000. As of December 29, 2001,
the Company may purchase an additional 500,000 shares of its common stock
under its authorized stock purchase program. Long-term debt including current
maturities was $101,874,000 at December 29, 2001, $7,231,000 higher than at
December 30, 2000, primarily as a result of financing a portion of the stock
purchase program with borrowings under the Company's credit agreement. Working
capital and the ratio of current assets to current liabilities were
$121,808,000 and 1.92 to 1, respectively, at December 29, 2001, compared with
$94,718,000 and 1.61 to 1, respectively, at December 30, 2000. Landstar has
historically operated with current ratios approximating 1.5 to 1. Cash provided
by operating activities was $49,794,000 in 2001 compared with $54,047,000 in
2000. The decrease in cash provided by operating activities was primarily
attributable to the timing of collection of accounts receivable and reduced
earnings. During the 2001 fiscal year, Landstar purchased $5,443,000 of
operating property. Landstar anticipates it will acquire approximately
$28,000,000 of operating property during fiscal year 2002 either by purchase
or by lease financing.
39
<PAGE>
Management believes that cash flow from operations combined with its borrowing
capacity under the Third Amended and Restated Credit Agreement will be
adequate to meet Landstar's debt service requirements, fund continued growth,
both internal and through acquisitions, complete any purchases under its
announced stock purchase program and meet working capital needs.
Management does not believe inflation has had a material impact on the results
of operations or financial condition of Landstar in the past five years.
However, inflation higher than that experienced in the past five years might
have an adverse effect on the Company's results of operations.
Landstar is involved in certain claims and pending litigation arising from the
normal conduct of business. Based on the 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 claims and pending litigation and that the ultimate outcome, after
provisions thereof, will not have a material adverse effect on the financial
condition of Landstar, but could have a material effect on the results of
operations in a given quarter or year.
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
The allowance for doubtful accounts for both trade and other receivables
represents management's estimate of the amount of outstanding receivables
that will not be collected. During 2001, the Company experienced an
abnormally high level of bad debt expense. Management believes this
resulted from the difficult economic environment experienced by the Company's
customers and independent contractors. Although management believes the amount
of the allowance for both trade and other receivables at December 29, 2001
is appropriate, a prolonged period of low or no economic growth may adversely
affect the collection of these receivables. Correspondingly, a more robust
economic environment may result in the realization of some portion of the
estimated uncollectible receivables.
As described in the accounting policy footnote to the financial statements,
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
balance sheet date. The ultimate resolution of these claims may be for an
amount greater or less than the amount estimated by management.
Significant variances from management's estimates for the amount of
uncollectible receivables or for the ultimate resolution of claims can
be expected to positively or negatively affect Landstar's operating income
in a given quarter or year. However, management believes that the ultimate
resolution of these items, given a range of reasonably likely outcomes, will
not significantly affect the long-term financial condition of Landstar or its
ability to fund its continuing operations.
In June 2001, the Financial Accounting Standards Board issued statement of
financial accounting standard (SFAS) No. 142, "Goodwill and Other Intangible
Assets." This Statement, effective for fiscal years beginning after
December 15, 2001, establishes standards for recognizing and measuring
goodwill and other intangible assets. Management believes other
than the elimination of amortization expense for goodwill currently reflected
on the Company's balance sheet, the adoption of this Statement will not
materially affect the financial position or results of operations of the
Company.
40
<PAGE>
In August 2001, the Financial Accounting Standards Board issued SFAS No.143,
"Accounting for Asset Retirement Obligations." This Statement, effective
for fiscal years beginning after June 15, 2002, requires an enterprise to
record the fair value of an asset retirement obligation as a liability in
the period in which it incurs a legal obligation associated with the
retirement of a tangible long-lived asset. The enterprise is also to record
a corresponding increase to the carrying amount of the long-lived asset.
Management believes that this Statement will not have a material effect on the
financial position or results of operations of the Company.
In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This
Statement, effective for fiscal years beginning after December 15, 2001,
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
to be Disposed Of," and addresses the financial accounting and reporting for
the impairment or disposal of long-lived assets. Management believes that the
adoption of this Statement will not have a material effect on the financial
position or results of operations of the Company.
FORWARD-LOOKING STATEMENTS
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995. Statements contained in this document that are
not based on historical facts are "forward-looking statements." This
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-K statement contain forward-
looking statements, such as statements which relate to Landstar's business
objectives, plans, strategies and expectations. Terms such as "anticipates,"
"believes," "estimates," "plans," "predicts," "may," "should," "will," the
negative thereof and similar expressions are intended to identify forward-
looking statements. Such statements are by nature subject to uncertainties and
risks, including but not limited to; an increase in the frequency or severity
of accidents or workers' compensation claims; unfavorable development of
existing accident claims; a downturn in domestic economic growth or
growth in the transportation sector; and other operational, financial or legal
risks or uncertainties detailed in Landstar's SEC filings from time to time.
These risks and uncertainties could cause actual results or events to differ
materially from historical results or those anticipated. Investors should not
place undue reliance on such forward-looking statements, and the Company
undertakes no obligation to publicly update or revise any forward-looking
statements.
SEASONALITY
Landstar's operations are subject to seasonal trends common to the trucking
industry. Results of operations for the quarter ending in March are typically
lower than the quarters ending June, September and December due to reduced
shipments and higher operating costs in the winter months.
41
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION> December 29, December 30,
2001 2000
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 47,886 $ 32,926
Short-term investments 2,982 1,500
Trade accounts receivable, less allowance
of $4,416 and $4,450 185,206 195,398
Other receivables, including advances to independent
contractors, less allowance of $4,740
and $5,089 13,779 13,122
Prepaid expenses and other current assets 4,020 6,062
-------- --------
Total current assets 253,873 249,008
-------- --------
Operating property, less accumulated depreciation
and amortization of $44,455 and $37,497 68,532 76,049
Goodwill, less accumulated amortization of $10,209
and $8,993 31,134 32,474
Deferred income taxes and other assets 11,112 12,831
-------- --------
Total assets $364,651 $370,362
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 13,018 $ 17,496
Accounts payable 55,813 63,002
Current maturities of long-term debt 9,965 9,766
Insurance claims 21,602 23,364
Accrued compensation 2,091 8,277
Other current liabilities 29,576 32,385
-------- --------
Total current liabilities 132,065 154,290
-------- --------
Long-term debt, excluding current maturities 91,909 84,877
Insurance claims 21,585 23,336
Deferred income taxes 1,652
Shareholders' equity:
Common stock, $.01 par value, authorized 20,000,000
shares, issued 13,328,834 and
13,233,874 shares 133 132
Additional paid-in capital 75,036 71,325
Retained earnings 258,162 215,368
Cost of 5,241,841 and 4,741,841 shares of common
stock in treasury (209,926) (172,727)
Notes receivable arising from exercise of stock options (5,965) (6,239)
-------- --------
Total shareholders' equity 117,440 107,859
-------- --------
Total liabilities and shareholders' equity $364,651 $370,362
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
42
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION> Fiscal Years Ended
December 29, December 30, December 25,
2001 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 1,392,771 $ 1,418,492 $ 1,388,083
Investment income 3,567 4,317 2,502
Costs and expenses:
Purchased transportation 1,030,454 1,046,183 1,022,203
Commissions to agents 110,513 113,721 111,666
Other operating costs 32,750 29,568 30,000
Insurance and claims 32,930 31,935 34,064
Selling, general and administrative 99,762 100,516 99,240
Depreciation and amortization 13,543 13,003 11,698
Non-recurring costs 5,270
------------ ------------ ------------
Total costs and expenses 1,319,952 1,340,196 1,308,871
------------ ------------ ------------
Operating income 76,386 82,613 81,714
Interest and debt expense 6,802 9,127 4,509
------------ ------------ ------------
Income before income taxes 69,584 73,486 77,205
Income taxes 26,790 28,292 31,268
------------ ------------ ------------
Net income $ 42,794 $ 45,194 $ 45,937
============ ============ ============
Earnings per common share $ 5.13 $ 5.15 $ 4.60
============ ============ ============
Diluted earnings per share $ 5.01 $ 5.03 $ 4.55
============ ============ ============
Average number of shares outstanding:
Earnings per common share 8,336,000 8,781,000 9,982,000
Diluted earnings per share 8,546,000 8,981,000 10,102,000
See accompanying notes to consolidated financial statements.
</TABLE> 43
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Fiscal Years Ended
December 29, December 30, December 25,
2001 2000 1999
(Dollars in thousands) ------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 42,794 $ 45,194 $ 45,937
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of operating property 12,327 11,787 10,482
Amortization of goodwill 1,216 1,216 1,216
Non-cash interest charges 97 324 324
Provisions for losses on trade and other accounts receivable 8,153 4,592 2,643
Losses (gains) on sales of operating property (273) (244) 708
Deferred income taxes, net 1,776 3,911 1,788
Non-cash charge in lieu of income taxes 124 43
Changes in operating assets and liabilities:
Decrease (increase) in trade and other accounts receivable 1,382 8,230 (37,534)
Decrease (increase) in prepaid expenses and other assets 1,194 (1,405) (1,329)
Increase (decrease) in accounts payable (7,189) (4,320) 16,698
Increase (decrease) in other liabilities (8,294) (7,410) 7,146
Decrease in insurance claims (3,513) (7,871) (4,497)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 49,794 54,047 43,582
------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of investments (496) (1,435) (5,005)
Maturities of investments 1,484 1,060
Purchases of operating property (5,443) (7,305) (12,716)
Proceeds from sales of operating property 906 1,958 2,132
------------ ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (3,549) (5,722) (15,589)
------------ ------------ ------------
FINANCING ACTIVITIES
Increase (decrease) in cash overdraft (4,478) (1,975) 4,725
Borrowings on revolving credit facility 135,500 27,500 21,500
Principal payments on long-term debt and capital lease obligations (128,269) (18,603) (6,087)
Proceeds from exercise of stock options 3,161 143 293
Purchases of common stock (37,199) (46,185) (51,384)
------------ ------------ ------------
NET CASH USED BY FINANCING ACTIVITIES (31,285) (39,120) (30,953)
------------ ------------ ------------
Increase (decrease) in cash 14,960 9,205 (2,960)
Cash at beginning of period 32,926 23,721 26,681
------------ ------------ ------------
Cash at end of period $ 47,886 $ 32,926 $ 23,721
============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
44
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Fiscal Years Ended December 29, 2001,
December 30, 2000 and December 25, 1999
(Dollars in thousands)
<TABLE>
<CAPTION> Notes
Treasury Stock Receivable
Common Stock Additional at Cost Arising from
----------------- Paid-In Retained ------------------- Exercise of
Shares Amount Capital Earnings Shares Amount Stock Options Total
---------- ------ ------- -------- --------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 26, 1998 13,041,574 $ 130 $65,198 $124,237 2,618,041 $(76,176) $ (1,541) $111,848
Net income 45,937 45,937
Purchases of common stock 1,291,000 (51,384) (51,384)
Exercises of stock options
and related income tax
benefit 22,400 1 635 (153) 483
---------- ------ ------- -------- --------- --------- ------------- --------
Balance December 25, 1999 13,063,974 131 65,833 170,174 3,909,041 (127,560) (1,694) 106,884
Net income 45,194 45,194
Purchases of common stock 864,000 (46,185) (46,185)
Exercises of stock options
and related income tax
benefit 169,900 1 5,048 (4,545) 504
Incentive compensation paid
in common stock 444 (31,200) 1,018 1,462
---------- ------ ------- -------- --------- --------- ------------- --------
Balance December 30, 2000 13,233,874 132 71,325 215,368 4,741,841 (172,727) (6,239) 107,859
Net income 42,794 42,794
Purchases of common stock 500,000 (37,199) (37,199)
Exercises of stock options
and related income tax
benefit 94,960 1 3,711 274 3,986
---------- ------ ------- -------- --------- --------- ------------- --------
Balance December 29, 2001 13,328,834 $ 133 $75,036 $258,162 5,241,841 $(209,926) $ (5,965) $117,440
========== ====== ======= ======== ========= ========= ============= ========
See accompanying notes to consolidated financial statements.
</TABLE>
45
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Landstar System,
Inc. and its subsidiary Landstar System Holdings, Inc. ("LSHI"). Landstar
System, Inc. and its subsidiary are herein referred to as "Landstar" or the
"Company." Significant inter-company accounts have been eliminated in
consolidation. The preparation of the consolidated financial statements
requires the use of management's estimates. Actual results could differ from
those estimates.
Fiscal Year
Landstar's fiscal year is the 52 or 53 week period ending the last Saturday in
December.
Revenue Recognition
Revenue and the related direct freight expenses are recognized upon completion
of freight delivery.
Insurance Claim Costs
Landstar provides, primarily on an actuarially determined basis, for the
estimated costs of cargo, property, casualty, general liability and workers'
compensation claims both reported and for claims incurred but not reported.
Landstar retains liability for each individual commercial trucking claim up to
$1,000,000 per occurrence through April 30, 2001 and $5,000,000 per occurrence
thereafter. The Company also retains liability for each general liability
claim up to $1,000,000, $250,000 for each workers' compensation claim and
$250,000 for each cargo claim.
Tires
Tires purchased as part of trailing equipment are capitalized as part of the
cost of the equipment. Replacement tires are charged to expense when placed in
service.
Investments
Investments, all of which are intended to be held to maturity, consist of
investment grade bonds having maturities of up to five years and are carried
at amortized cost, which approximates fair value. Short-term investments
represent the current portion of these bonds. There are $1,407,000 and
$3,877,000 of these bonds included in other assets at December 29, 2001 and
December 30, 2000, respectively.
Operating Property
Operating property is recorded at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the related assets.
Trailing equipment is being depreciated over 7 years.
Goodwill
Goodwill represents the excess of purchase cost over the estimated fair value
of net assets acquired. It is being amortized on a straight-line basis over
periods of twenty and forty years. The Company assesses the recoverability of
goodwill by determining whether the amortization of the goodwill balance over
its remaining useful life can be recovered through projected undiscounted
future operating cash flows. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using a
discount rate reflecting the Company's current average cost of funds.
46
<PAGE>
Income Taxes
Income tax expense is equal to the current year's liability for income taxes
and a provision for deferred income taxes. Deferred tax assets and
liabilities are recorded for the future tax effects attributable to temporary
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using the enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences
are expected to be recovered or settled.
Stock-based Compensation
Compensation cost for the Company's stock options is measured as the excess,
if any, of the quoted market price of the Company's stock at the date of grant
over the exercise price of the stock option.
Earnings Per Share
Earnings per common share amounts are based on the weighted average number of
common shares outstanding and diluted earnings per share amounts are based on
the weighted average number of common shares outstanding plus the incremental
shares that would have been outstanding upon the assumed exercise of all
dilutive stock options.
(2) Non-recurring Costs
At December 25, 1999, approximately 100 Landstar Ranger, Inc.
("Landstar Ranger") drivers were represented by the International Brotherhood
of Teamsters (the "Teamsters"). The vast majority of these unionized drivers
participated in the Teamsters' Central States Southeast and Southwest Areas
Pension Fund (the "Fund"). Under a prior collective bargaining agreement,
Landstar Ranger was required to make contributions to various Teamster pension
funds for 205 drivers regardless of the actual number of unionized drivers.
Effective April 1, 2000, a new collective bargaining agreement required
Landstar Ranger to make pension contributions for only the actual number of
unionized drivers. As a result of the elimination of the requirement to make
contributions for more than the actual number of unionized drivers, the
Trustees of the Fund terminated participation in the Fund by Landstar Ranger
effective October 1, 2000. The Trustees of the Fund regard this action as a
withdrawal by Landstar Ranger. In the third quarter of 2000, the Company
recorded a charge in the amount of $2,230,000 for the cost of withdrawal from
the Fund. After deducting related income tax benefits of $880,000, this charge
reduced fiscal year 2000 net income by $1,350,000, or $0.15 per common share
($0.15 per diluted share).
On March 28, 2000, the Company announced a plan to restructure the operations
of Landstar Ligon, Inc. and to relocate its headquarters from Madisonville,
Kentucky to Jacksonville, Florida in June of 2000. As a result of this
restructuring and relocation, a one-time charge in the amount of $3,040,000
was recorded during the second quarter of 2000 representing approximately
$1,370,000 of employee and office relocation costs, $1,000,000 of severance
costs and $670,000 of other costs. The restructuring and relocation were
substantially completed by September 23, 2000. After deducting related income
tax benefits of $1,225,000, this one-time restructuring charge reduced fiscal
year 2000 net income by $1,815,000, or $0.21 per common share ($0.20 per
diluted share).
47
<PAGE>
(3) Income Taxes
The provisions for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal Years
------------------------------
2001 2000 1999
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $23,636 $21,525 $24,931
State 1,254 2,813 4,549
------- ------- -------
24,890 24,338 29,480
Deferred:
Federal 1,454 4,208 1,019
State 322 (297) 769
------ ------- -------
1,776 3,911 1,788
Non-cash charge in lieu of income taxes 124 43
------- ------- -------
Income taxes $26,790 $28,292 $31,268
======= ======= =======
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 2001 Dec. 30, 2000
------------- -------------
<S> <C> <C>
Deferred tax assets:
Receivable valuations $ 4,128 $ 4,221
Deferred state income tax benefits 1,700 1,587
State net operating loss carryforwards 1,933 1,885
Self-insured claims 3,252 4,881
Other 5,052 3,530
--------- ---------
16,065 16,104
Valuation allowance (491) (615)
--------- ---------
$ 15,574 $ 15,489
========= =========
Deferred tax liabilities:
Operating property $ 11,378 $ 9,731
Other 5,848 5,634
--------- ---------
$ 17,226 $ 15,365
========= =========
</TABLE>
48
<PAGE>
At December 29, 2001, the valuation allowance of $491,000 was attributable to
deferred state income tax benefits, which primarily represented state
operating loss carryforwards at one subsidiary. The valuation allowance and
goodwill will be reduced by $463,000 when realization of deferred state
income tax benefits becomes likely.
The following table summarizes the differences between income taxes calculated
at the federal income tax rate of 35% on income before income taxes
and the provisions for income taxes (in thousands):
<TABLE>
<CAPTION>
Fiscal Years
----------------------------
2001 2000 1999
---- ---- ----
<S> <C> <C> <C>
Income taxes at federal income tax rate $24,354 $25,720 $27,022
State income taxes, net of federal income
tax benefit 1,024 1,635 3,457
Amortization of goodwill 258 258 258
Meals and entertainment exclusion 892 597 472
Other, net 262 82 59
------- -------- --------
Income taxes $26,790 $28,292 $31,268
======= ======= =======
</TABLE>
Landstar paid income taxes of $24,778,000 in 2001, $25,089,000 in 2000 and
$28,659,000 in 1999.
(4) Operating Property
Operating property is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 2001 Dec. 30, 2000
------------- -------------
<S> <C> <C>
Land $ 2,045 $ 2,097
Leasehold improvements 8,307 8,341
Buildings and improvements 7,963 7,963
Trailing equipment 71,957 72,257
Other equipment 22,715 22,888
-------- --------
112,987 113,546
Less accumulated depreciation and amortization 44,455 37,497
-------- --------
$ 68,532 $ 76,049
======== ========
</TABLE>
Included above is $57,393,000 in 2001 and $60,811,000 in 2000 of operating
property under capital leases, $37,224,000 and $44,458,000, respectively, net
of accumulated amortization. Landstar did not acquire any property by entering
into capital leases in 2001. Landstar acquired operating property by entering
49
<PAGE>
into capital leases in the amount of $18,448,000 in 2000 and $17,445,000
in 1999.
(5) Pension Plans
Landstar sponsors an Internal Revenue Code section 401(k) defined contribution
plan for the benefit of full-time employees who have completed one year of
service. Eligible employees make voluntary contributions up to 16% of their
base salary, subject to certain limitations. Landstar contributes an amount
equal to 100% of the first 3% and 50% of the next 2% of such contributions,
subject to certain limitations.
Prior to the October 1, 2000 withdrawal (see note 2), Landstar Ranger made
contributions in accordance with a negotiated labor contract (generally based
on the number of weeks worked) to union sponsored multi-employer pension plans.
The expense for the Company-sponsored defined contribution plan was
$1,090,000 in 2001, $1,105,000 in 2000 and $1,082,000 in 1999. The expense
for union-sponsored plans, excluding the estimated cost of withdrawal
(see note 2), was $935,000 in 2000 and $1,351,000 in 1999.
(6) Debt
Long-term debt is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 29, 2001 Dec. 30, 2000
------------- -------------
<S> <C> <C>
Capital leases $27,374 $37,143
Revolving credit facility 74,500 57,500
------- -------
101,874 94,643
Less current maturities 9,965 9,766
------- -------
Total long-term debt $91,909 $84,877
======= =======
</TABLE>
On December 20, 2001, Landstar renegotiated its existing Credit Agreement with
a syndicate of banks and JPMorgan Chase Bank, as administrative agent (the
"Third Amended and Restated Credit Agreement"). The Third Amended and
Restated Credit Agreement provides $175,000,000 of borrowing capacity in the
form of a revolving credit facility, $50,000,000 of which may be utilized in
the form of letter of credit guarantees. The Third Amended and Restated Credit
Agreement expires on January 5, 2005.
50
<PAGE>
Borrowings under the Third Amended and Restated Credit Agreement bear interest
at rates equal to, at the option of Landstar, either (i) the greatest of (a)
the prime rate as publicly announced from time to time by JPMorgan Chase
Bank, (b) the three month CD rate adjusted for statutory reserves and FDIC
assessment costs plus 1% and (c) the federal funds effective rate plus 1/2%,
or, (ii) the rate at the time offered to JPMorgan Chase Bank in the
Eurodollar market for amounts and periods comparable to the relevant loan plus
a margin that is determined based on the level of the Company's Leverage Ratio,
as defined in the Third Amended and Restated Credit Agreement. The margin is
subject to an increase of .125% if the aggregate amount outstanding under the
Third Amended and Restated Credit Agreement exceeds 50% of the total borrowing
capacity. As of December 29, 2001, the margin was equal to 87.5/100 of 1%. The
unused portion of the Third Amended and Restated Credit Agreement carries a
commitment fee determined based on the level of the Company's Leverage Ratio,
as therein defined. As of December 29, 2001, the commitment fee for the unused
portion of the Third Amended and Restated Credit Agreement was 0.250%. At
December 29, 2001, the weighted average interest rate on borrowings outstanding
under the Third Amended and Restated Credit Agreement was 2.81%. Based on the
borrowing rates in the Third Amended and Restated Credit Agreement and the
repayment terms, the fair value of the outstanding borrowings under the Third
Amended and Restated Credit Agreement was estimated to approximate carrying
value.
The Third Amended and Restated Credit Agreement contains a number of covenants
that limit, among other things, the incurrence of additional indebtedness, the
incurrence of operating or capital lease obligations and the purchase of
operating property. The Third Amended and Restated Credit Agreement also
requires Landstar to meet certain financial tests. Landstar is required to,
among other things, maintain minimum levels of Net Worth, as defined in the
Third Amended and Restated Credit Agreement, and Interest and Fixed Charge
Coverages, as therein defined. Under the most restrictive covenant, Landstar
exceeded the required Interest Coverage level by approximately
$11,719,000 at December 29, 2001.
The Third Amended and Restated Credit Agreement provides for an event of
default related to a person or group acquiring 25% or more of the outstanding
capital stock of the Company or obtaining the power to elect a majority of the
Company's directors.
Borrowings under the Third Amended and Restated Credit Agreement are
unsecured, however, the Company and all but one of LSHI's subsidiaries
guarantee LSHI's obligations under the Third Amended and Restated Credit
Agreement.
The amount outstanding on the Third Amended and Restated Credit Agreement
is due and payable on January 5, 2005. There are no other installments of
long-term debt, excluding capital lease obligations, maturing in the next five
years.
Landstar paid interest of $7,874,000 in 2001, $9,658,000 in 2000 and
$4,484,000 in 1999.
(7) Leases
The future minimum lease payments under all noncancelable leases at
December 29, 2001, principally for trailing equipment and the Company's
headquarters facility in Jacksonville, Florida, are shown in the
following table (in thousands):
51
PAGE>
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2002 $11,581 $ 3,206
2003 10,093 2,687
2004 6,876 2,110
2005 2,178 2,066
2006 2,023
Thereafter 16,183
------- ---------
30,728 $ 28,275
=========
Less amount representing interest
(5.9% to 8.3%) 3,354
Present value of minimum -------
lease payments $27,374
=======
</TABLE>
Total rent expense, net of sublease income, was
$19,976,000 in 2001, $19,620,000 in 2000 and $19,322,000 in 1999.
(8) Stock Option Plans
The Company maintains two stock option plans. Under the 1993 Stock Option Plan,
as amended, (the "Plan"), the Compensation Committee of the Board of Directors
may grant options to Company employees for up to 1,115,000 shares of common
stock. Under the 1994 Directors Stock Option Plan, as amended, (the "DSOP"),
outside members of the Board of Directors will be granted up to an aggregate of
210,000 options to purchase common stock. Under the DSOP, each outside Director
will be granted 9,000 options to purchase common stock upon election or
re-election to the Board of Directors.
All options granted under the Plan through December 29, 2001 become exercisable
in five equal annual installments and three equal annual installments under
the DSOP, commencing on the first anniversary of the date of grant, subject
to acceleration in certain circumstances, and expire on the tenth anniversary
of the date of grant. Under the plans, the exercise price of each option equals
the market price of the Company's stock on the date of grant. At
December 29, 2001, there were 867,840 shares of the Company's stock reserved
for issuance upon exercise of options granted under the plans.
52
<PAGE>
Information regarding the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------- --------------------------
Weighted Average Weighted Average
Exercise Price Exercise Price
Shares Per Share Shares Per Share
-------- ----------------- -------- ----------------
<S> <C> <C> <C> <C>
Options at December 26, 1998 520,300 $ 30.25 203,900 $ 26.40
Granted 71,600 $ 36.33
Exercised (22,400) $ 19.88
Forfeited (300) $ 25.50
--------
Options at December 25, 1999 569,200 $ 31.42 286,520 $ 28.53
Granted 107,400 $ 47.79
Exercised (169,900) $ 27.59
Forfeited (1,800) $ 25.50
--------
Options at December 30, 2000 504,900 $ 36.21 212,060 $ 31.19
Granted 198,100 $ 66.05
Exercised (94,960) $ 30.41
Forfeited (46,520) $ 50.25
--------
Options at December 29, 2001 561,520 $ 46.56 207,680 $ 34.43
========
</TABLE>
The fair value of each option grant on its grant date was calculated using
the Black-Scholes option pricing model with the following assumptions for
grants made in 2001, 2000 and 1999: risk-free interest rate of 5.0% in 2001 and
6.0% in both 2000 and 1999, expected lives of 5 years and no dividend yield.
The expected volatility used in calculating the fair market value of stock
options granted was 40% in 2001, 41% in 2000 and 38% in 1999. The weighted
average grant date fair value of stock options granted was $28.32, $21.61 and
$15.71 per share in 2001, 2000 and 1999, respectively.
The following table summarizes stock options outstanding at December 29, 2001:
<TABLE>
<CAPTION>
Options Outstanding
-------------------
Range of Exercise Weighted Average Weighted Average
Prices Number Outstanding Remaining Contractual Exercise Price
Per Share Dec. 29, 2001 Life (years) Per Share
----------------- ------------------ --------------------- ----------------
<S> <C> <C> <C>
$22.531 - $35.734 174,280 5.9 $ 30.60
$35.735 - $46.875 197,740 7.4 $ 42.36
$46.876 - $69.266 189,500 9.3 $ 65.63
----------------
$22.531 - $69.266 561,520 7.6 $ 46.56
================
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Options Exercisable
-------------------
Range of Exercise Number Weighted Average
Prices Exercisable Exercise Price
Per Share Dec. 29, 2001 Per Share
----------------- ---------------- ----------------
<S> <C> <C>
$22.531 - $38.900 121,620 $ 29.67
$38.901 - $56.891 86,060 $ 41.16
----------------
$22.531 - $56.891 207,680 $ 34.43
================
</TABLE>
The Company accounts for its stock option plans using the intrinsic value
method as prescribed in Accounting Principal Board Opinion No. 25, "Accounting
for Stock Issued to Employees." Had compensation cost for the Company's stock
option plans been determined using the fair value at grant date method as
prescribed by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the effect on net income and
earnings per common share for the fiscal year would have been $1,274,000, or
$0.15 per common share, in 2001, $1,145,000, or $0.13 per common share, in 2000
and $966,000, or $0.10 per common share, in 1999.
(9) Shareholders' Equity
During 2001, Landstar purchased 500,000 shares of its common stock at a total
cost of $37,199,000 pursuant to a previously announced stock purchase program.
As of December 29, 2001, Landstar may purchase an additional 500,000 shares of
its common stock under its authorized stock purchase program.
During 1998, the Company established an employee stock option loan program.
Under the terms of the program, the Company will provide employees
financing in order for them to exercise fully vested stock options. The
loans are full recourse with the principal repayable in lump sum on the fifth
anniversary of the loan. During 2001, 2000 and 1999, $1,098,000, $4,596,000 and
$384,000 of such loans were issued, respectively.
The Company has 2,000,000 shares of preferred stock authorized and unissued.
Under the terms of a Shareholder Rights Agreement (the "Agreement"), as
amended, a preferred stock purchase right (the "Right") accompanies each
outstanding share of common stock. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of preferred stock at an exercise
price of $60. Within the time limits and under the circumstances specified in
the Agreement, the Rights entitle the holder to acquire shares of common stock
in the Company, or the surviving Company in a business combination, having a
value of two times the exercise price. The Rights may be redeemed prior to
becoming exercisable by action of the Board of Directors at a redemption price
of $.01 per Right. The Rights expire February 10, 2003. Until a Right is
exercised, it has no rights including, without limitation, the right to vote
or to receive dividends.
54
<PAGE>
(10) Segment Information
The Company has three reportable business segments. These are the carrier,
multimodal and insurance segments. The carrier segment provides truckload
transportation for a wide range of general commodities over irregular
routes with its fleet of dry and specialty vans and unsided trailers,
including flatbed, drop deck and specialty. It also provides short-to-long
haul movement of containers by truck, dedicated power-only
truck capacity and truck brokerage. The carrier segment markets its services
primarily through independent commission sales agents and utilizes tractors
provided by independent contractors. Transportation services provided by the
multimodal segment include the arrangement of intermodal moves, contract
logistics, truck brokerage and emergency and expedited ground and air freight.
The multimodal segment markets its services through independent commission
sales agents and utilizes capacity provided by independent contractors,
including railroads and air cargo carriers. The nature of the carrier and
multimodal segments' business is such that a significant portion of their
operating costs varies directly with revenue. The insurance segment provides
risk and claims management services to Landstar's operating companies. In
addition, it reinsures certain property, casualty, and occupational accident
risks of certain independent contractors who have contracted to haul freight
for Landstar and provides certain property and casualty insurance directly to
Landstar's operating subsidiaries.
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.
Inter-segment revenue for transactions between the carrier and multimodal
segments is based on quoted rates which are believed to approximate the cost
that would have been incurred had similar services been obtained from an
unrelated third party. Inter-segment revenue between the insurance segment
and the carrier and multimodal segments is calculated each fiscal period
based on an actuarial calculation of historical loss experience and is
believed to approximate the cost that would have been incurred had similar
insurance been obtained from an unrelated third party.
No single customer accounts for more than 10% of consolidated revenue.
However, during 2001 approximately 14% of the Company's revenue was
attributable to the automotive industry. Substantially all of the Company's
revenue is generated in the United States.
55
<PAGE>
The following tables summarize information about the Company's reportable
business segments as of and for the fiscal years ending December 29, 2001,
December 30, 2000 and December 25, 1999 (in thousands):
<TABLE>
<CAPTION>
2001
Carrier Multimodal Insurance Other Total
------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
External revenue $1,098,268 $ 270,849 $ 23,654 $1,392,771
Internal revenue 28,587 2,367 27,313 58,267
Investment income 3,567 3,567
Interest and debt expense $ 6,802 6,802
Depreciation and
amortization 8,382 783 4,378 13,543
Operating income 76,105 5,343 30,644 (35,706) 76,386
Expenditures on
long-lived assets 2,994 159 2,290 5,443
Total assets 234,164 47,795 46,440 36,252 364,651
2000
Carrier Multimodal Insurance Other Total
------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
External revenue $1,117,042 $ 277,087 $ 24,363 $1,418,492
Internal revenue 34,669 1,241 21,919 57,829
Investment income 4,317 4,317
Interest and debt expense $ 9,127 9,127
Depreciation and
amortization 7,999 905 4,099 13,003
Non-recurring costs 5,270 5,270
Operating income 88,507 9,346 24,464 (39,704) 82,613
Expenditures on
long-lived assets 687 177 6,441 7,305
Capital lease additions 18,448 18,448
Total assets 256,690 54,294 33,267 26,111 370,362
1999
Carrier Multimodal Insurance Other Total
------- ---------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
External revenue $1,111,912 $ 250,395 $ 25,776 $1,388,083
Internal revenue 35,194 196 21,790 57,180
Investment income 2,502 2,502
Interest and debt expense $ 4,509 4,509
Depreciation and
amortization 7,107 982 3,609 11,698
Operating income 86,282 7,949 27,141 (39,658) 81,714
Expenditures on
long-lived assets 374 137 12,205 12,716
Capital lease additions 17,445 17,445
Total assets 251,922 57,337 28,180 28,002 365,441
</TABLE>
56
<PAGE>
(11) Commitments and Contingencies
At December 29, 2001, Landstar had commitments for letters of
credit outstanding in the amount of $19,929,000, primarily as
collateral for estimated insurance claims, $9,080,000 of which were
supported by the Third Amended and Restated Credit Agreement and
$10,849,000 secured by assets deposited with a financial institution.
Landstar is involved in certain claims and pending litigation arising from the
normal conduct of business. 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 claims and pending litigation and that the ultimate outcome, after
provisions thereof, will not have a material adverse effect on the financial
condition of Landstar, but could have a material effect on the results of
operations in a given quarter or year.
57
<PAGE>
Independent Auditors' Report
- ----------------------------
Landstar System, Inc. and Subsidiary
The Board of Directors and Shareholders
Landstar System, Inc.:
We have audited the accompanying consolidated balance sheets of Landstar
System, Inc. and subsidiary as of December 29, 2001 and December 30, 2000, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years ended December 29, 2001, December 30, 2000
and December 25, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Landstar System,
Inc. and subsidiary as of December 29, 2001 and December 30, 2000, and the
results of their operations and their cash flows for the fiscal years ended
December 29, 2001, December 30, 2000 and December 25, 1999 in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Stamford, Connecticut
February 5, 2002
58
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
QUARTERLY FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
2001 2001 2001 2001
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 347,788 $ 355,684 $ 358,018 $ 331,281
========== ========== ========== ==========
Operating income $ 20,093 $ 21,000 $ 19,486 $ 15,807
---------- ---------- ---------- ----------
Income before income taxes $ 18,820 $ 19,403 $ 17,776 $ 13,585
Income taxes 7,243 7,473 6,843 5,231
---------- ---------- ---------- ----------
Net income $ 11,577 $ 11,930 $ 10,933 $ 8,354
========== ========== ========== ==========
Earnings per common share (1) $ 1.43 $ 1.45 $ 1.29 $ 0.98
========== ========== ========== ==========
Diluted earnings per share (1) $ 1.40 $ 1.41 $ 1.26 $ 0.96
========== ========== ========== ==========
</TABLE>
59
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
QUARTERLY FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
2000 2000 2000 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 380,575 $ 352,356 $ 358,555 $ 327,006
========== ========== ========== ==========
Operating income $ 27,953 $ 21,456 $ 17,715 $ 15,489
---------- ---------- ---------- ----------
Income before income taxes $ 25,069 $ 19,036 $ 15,597 $ 13,784
Income taxes 9,167 7,520 6,160 5,445
---------- ---------- ---------- ----------
Net income $ 15,902 $ 11,516 $ 9,437 $ 8,339
========== ========== ========== ==========
Earnings per common share (1) $ 1.89 $ 1.33 $ 1.06 $ 0.91
========== ========== ========== ==========
Diluted earnings per share (1) $ 1.85 $ 1.30 $ 1.04 $ 0.89
========== ========== ========== ==========
</TABLE>
(1) Due to the changes in the number of average common shares and common
stock equivalents outstanding during the year, earnings per share amounts for
each quarter do not necessarily add to the earnings per share amounts for the
full year.
60
<PAGE>
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years
2001 2000 1999 1998 1997
------------------------------------------------------------
Income Statement Data:
Revenue $1,392,771 $1,418,492 $1,388,083 $1,283,607 $1,219,311
Investment income 3,567 4,317 2,502 1,689
Costs and expenses:
Purchased transportation 1,030,454 1,046,183 1,022,203 950,343 898,746
Commissions to agents 110,513 113,721 111,666 101,409 98,425
Other operating costs 32,750 29,568 30,000 27,516 32,747
Insurance and claims 32,930 31,935 34,064 39,388 42,885
Selling, general and administrative 99,762 100,516 99,240 95,028 85,586
Depreciation and amortization 13,543 13,003 11,698 10,158 11,354
Non-recurring costs 5,270 3,247
--------- --------- --------- --------- ---------
Total costs and expenses 1,319,952 1,340,196 1,308,871 1,223,842 1,172,990
--------- --------- --------- --------- ---------
Operating income 76,386 82,613 81,714 61,454 46,321
Interest and debt expense 6,802 9,127 4,509 3,503 2,705
--------- --------- --------- --------- ---------
Income from continuing operations
before income taxes 69,584 73,486 77,205 57,951 43,616
Income taxes 26,790 28,292 31,268 23,470 18,188
--------- --------- --------- --------- ---------
Income from continuing operations 42,794 45,194 45,937 34,481 25,428
Discontinued operations, net of
income taxes (22,589) (738)
--------- --------- --------- --------- ---------
Net income $ 42,794 $ 45,194 $ 45,937 $ 11,892 $ 24,690
========= ========= ========= ========= =========
Earnings per common share:
Income from continuing operations $ 5.13 $ 5.15 $ 4.60 $ 3.13 $ 2.03
Loss from discontinued
operations (2.05) (0.06)
--------- --------- --------- --------- ---------
Earnings per common share $ 5.13 $ 5.15 $ 4.60 $ 1.08 $ 1.97
========= ========= ========= ========= =========
Diluted earnings per share:
Income from continuing operations $ 5.01 $ 5.03 $ 4.55 $ 3.10 $ 2.02
Loss from discontinued
operations (2.03) (0.06)
--------- --------- --------- --------- ---------
Diluted earnings per share $ 5.01 $ 5.03 $ 4.55 $ 1.07 $ 1.96
========= ========= ========= ========= =========
<CAPTION>
61
<PAGE>
Dec. 29, Dec. 30, Dec. 25, Dec. 26, Dec. 27,
2001 2000 1999 1998 1997
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $ 364,651 $ 370,362 $ 365,441 $ 313,665 $ 357,179
Long-term debt, including
current maturities 101,874 94,643 67,298 34,440 50,446
Shareholders' equity 117,440 107,859 106,884 111,848 151,696
</TABLE>
62
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>ex_21-1.txt
<TEXT>
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARY CORPORATIONS OF LANDSTAR SYSTEM, INC.
Jurisdiction % of Voting
Name of Incorporation Securities Owned
- ---- ---------------- ----------------
Subsidiary of Landstar System, Inc.:
Landstar System Holdings, Inc. Delaware 100
Subsidiaries of Landstar System Holdings, Inc.:
Landstar Express America, Inc. North Carolina 100
Landstar Inway, Inc. Delaware 100
Also d/b/a Inway Nationwide Transportation Services
Also d/b/a Independent Freightways, Inc.
Landstar Logistics, Inc. Delaware 100
Landstar Ligon, Inc. Delaware 100
Also d/b/a Ligon Contract Services in Kentucky
Landstar Acquisition Corporation Alabama 100
(formerly Landstar Poole, Inc.)
Landstar Ranger, Inc. Delaware 100
Also d/b/a Ranger/Landstar, Inc. in South Carolina
Risk Management Claim Services, Inc. Kentucky 100
Also d/b/a RMCS, Inc. in Alabama and California
Landstar Carrier Services, Inc. Delaware 100
Landstar Contractor Financing, Inc. Delaware 100
Landstar Gemini, Inc. Delaware 100
Also d/b/a Gemini Transportation Services of
Greensburg, PA in Ontario and New Jersey
Also d/b/a GTSI Transportation Services in Ontario
Landstar Capacity Services, Inc. Delaware 100
Signature Insurance Company Cayman Islands, BWI 100
Signature Technology Services, Inc. Delaware 100
Subsidiary of Landstar Gemini, Landstar Inway,
Landstar Ligon and Landstar Ranger:
Landstar Corporate Services, Inc. Delaware 100
Subsidiary of Landstar Inway, Inc.
Landstar T.L.C., Inc. Delaware 100
63
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>ex_23-1.txt
<TEXT>
<PAGE>
Exhibit 23.1
Independent Auditors' Consent
The Board of Directors
Landstar System, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-76340 and No 33-94304) on Form S-8 of Landstar System, Inc. of our reports
dated February 5, 2002, relating to the consolidated balance sheets of
Landstar System, Inc. and subsidiary as of December 29, 2001 and December 30,
2000, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the fiscal years ended December 29,
2001, December 30, 2000, and December 25, 1999, and all related schedules,
which reports appear in the December 29, 2001 annual report on Form 10-K of
Landstar System, Inc.
KPMG LLP
Stamford, Connecticut
March 21, 2002
64
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>8
<FILENAME>ex_24-1.txt
<TEXT>
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
Landstar System, Inc.
Annual Report on Form 10-K
for fiscal year ended 12/29/01
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Henry H. Gerkens and Robert C. LaRose, and each of
them, with full power in each to act without the other, his true and lawful
attorney-in-fact and agent, in his name, place and stead to execute on his
behalf, as an officer and/or director of Landstar System, Inc.
(the "Company"), the Annual Report on Form 10-K of the Company for the fiscal
year ended December 29, 2001, and file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission (the "SEC") pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), and any and all other instruments
which either of said attorneys-in-fact and agents deems necessary or advisable
to enable the Company to comply with the Act, the rules, regulations and
requirements of the SEC in respect thereof, giving and granting to each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing whatsoever necessary or appropriate to be done in and
about the premises as fully to all intents as he might or could do if
personally present at the doing thereof, with full power of substitution and
resubstitution, hereby ratifying and confirming all that his said attorneys-in-
fact and agents or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
David G. Bannister
--------------------------
David G. Bannister
DATED: February 6, 2002
65
<PAGE>
POWER OF ATTORNEY
Landstar System, Inc.
Annual Report on Form 10-K
for fiscal year ended 12/29/01
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Henry H. Gerkens and Robert C. LaRose, and each of
them, with full power in each to act without the other, his true and lawful
attorney-in-fact and agent, in his name, place and stead to execute on his
behalf, as an officer and/or director of Landstar System, Inc.
(the "Company"), the Annual Report on Form 10-K of the Company for the fiscal
year ended December 29, 2001, and file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission (the "SEC") pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), and any and all other instruments
which either of said attorneys-in-fact and agents deems necessary or advisable
to enable the Company to comply with the Act, the rules, regulations and
requirements of the SEC in respect thereof, giving and granting to each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing whatsoever necessary or appropriate to be done in and
about the premises as fully to all intents as he might or could do if
personally present at the doing thereof, with full power of substitution and
resubstitution, hereby ratifying and confirming all that his said attorneys-in-
fact and agents or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Ronald W. Drucker
--------------------------
Ronald W. Drucker
DATED: February 6, 2002
66
<PAGE>
POWER OF ATTORNEY
Landstar System, Inc.
Annual Report on Form 10-K
for fiscal year ended 12/29/01
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Henry H. Gerkens and Robert C. LaRose, and each of
them, with full power in each to act without the other, his true and lawful
attorney-in-fact and agent, in his name, place and stead to execute on his
behalf, as an officer and/or director of Landstar System, Inc.
(the "Company"), the Annual Report on Form 10-K of the Company for the fiscal
year ended December 29, 2001, and file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission (the "SEC") pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), and any and all other instruments
which either of said attorneys-in-fact and agents deems necessary or advisable
to enable the Company to comply with the Act, the rules, regulations and
requirements of the SEC in respect thereof, giving and granting to each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing whatsoever necessary or appropriate to be done in and
about the premises as fully to all intents as he might or could do if
personally present at the doing thereof, with full power of substitution and
resubstitution, hereby ratifying and confirming all that his said attorneys-in-
fact and agents or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
William S. Elston
--------------------------
William S. Elston
DATED: February 6, 2002
67
<PAGE>
POWER OF ATTORNEY
Landstar System, Inc.
Annual Report on Form 10-K
for fiscal year ended 12/29/01
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Henry H. Gerkens and Robert C. LaRose, and each of
them, with full power in each to act without the other, his true and lawful
attorney-in-fact and agent, in his name, place and stead to execute on his
behalf, as an officer and/or director of Landstar System, Inc.
(the "Company"), the Annual Report on Form 10-K of the Company for the fiscal
year ended December 29, 2001, and file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission (the "SEC") pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), and any and all other instruments
which either of said attorneys-in-fact and agents deems necessary or advisable
to enable the Company to comply with the Act, the rules, regulations and
requirements of the SEC in respect thereof, giving and granting to each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing whatsoever necessary or appropriate to be done in and
about the premises as fully to all intents as he might or could do if
personally present at the doing thereof, with full power of substitution and
resubstitution, hereby ratifying and confirming all that his said attorneys-in-
fact and agents or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Diana M. Murphy
--------------------------
Diana M. Murphy
DATED: February 6, 2002
68
<PAGE>
POWER OF ATTORNEY
Landstar System, Inc.
Annual Report on Form 10-K
for fiscal year ended 12/29/01
KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby make,
constitute and appoint Henry H. Gerkens and Robert C. LaRose, and each of
them, with full power in each to act without the other, his true and lawful
attorney-in-fact and agent, in his name, place and stead to execute on his
behalf, as an officer and/or director of Landstar System, Inc.
(the "Company"), the Annual Report on Form 10-K of the Company for the fiscal
year ended December 29, 2001, and file the same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission (the "SEC") pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), and any and all other instruments
which either of said attorneys-in-fact and agents deems necessary or advisable
to enable the Company to comply with the Act, the rules, regulations and
requirements of the SEC in respect thereof, giving and granting to each of said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing whatsoever necessary or appropriate to be done in and
about the premises as fully to all intents as he might or could do if
personally present at the doing thereof, with full power of substitution and
resubstitution, hereby ratifying and confirming all that his said attorneys-in-
fact and agents or substitutes may or shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the date
indicated below.
Merritt J. Mott
--------------------------
Merritt J. Mott
DATED: February 6, 2002
69
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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