UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 30, 2002
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
(Address of principal executive offices)
32224
(Zip Code)
(904) 398-9400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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 ( )
The number of shares of the registrant's Common Stock, par value $.01 per
share, outstanding as of the close of business on May 3, 2002 was
8,117,953.
PART I
FINANCIAL INFORMATION
Index
Item 1
Consolidated Balance Sheets as of March 30, 2002
and December 29, 2001 ............................................... Page 3
Consolidated Statements of Income for the Thirteen Weeks
Ended March 30, 2002 and March 31, 2001 ......................... Page 4
Consolidated Statements of Cash Flows for the Thirteen Weeks
Ended March 30, 2002 and March 31, 2001 ......................... Page 5
Consolidated Statement of Changes in Shareholders'
Equity for the Thirteen Weeks Ended March 30, 2002 .................. Page 6
Notes to Consolidated Financial Statements............................. Page 7
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ Page 9
Item 3
Quantitative and Qualitative Disclosures About Market Risk............. Page 14
Item 1. Financial Statements
The interim consolidated financial statements contained herein reflect
all adjustments (all of a normal, recurring nature) which, in the opinion of
management, are necessary for a fair statement of the financial condition,
results of operations, cash flows and changes in shareholders' equity
for the periods presented. They have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Operating results for the thirteen weeks ended March 30, 2002
are not necessarily indicative of the results that may be expected for the
entire fiscal year ending December 28, 2002.
These interim financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
2001 Annual Report on Form 10-K.
2
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
March 30, Dec. 29,
2002 2001
---------- ------------
ASSETS
Current assets:
Cash $ 59,840 $ 47,886
Short-term investments 1,305 2,982
Trade accounts receivable, less allowance of $3,982
and $4,416 179,379 185,206
Other receivables, including advances to independent
contractors, less allowance of $5,135 and $4,740 22,530 13,779
Prepaid expenses and other current assets 3,482 4,020
---------- -----------
Total current assets 266,536 253,873
---------- -----------
Operating property, less accumulated depreciation
and amortization of $46,684 and $44,455 66,142 68,532
Goodwill 31,134 31,134
Other assets 14,380 11,112
---------- -----------
Total assets $ 378,192 $ 364,651
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 14,758 $ 13,018
Accounts payable 59,484 55,813
Current maturities of long-term debt 10,084 9,965
Insurance claims 22,820 21,602
Other current liabilities 41,599 31,667
---------- -----------
Total current liabilities 148,745 132,065
---------- -----------
Long-term debt, excluding current maturities 76,879 91,909
Insurance claims 22,735 21,585
Deferred income taxes 1,207 1,652
Shareholders' equity:
Common stock, $.01 par value, authorized 20,000,000
shares, issued 13,347,594 and 13,328,834 shares 133 133
Additional paid-in capital 75,630 75,036
Retained earnings 266,676 258,162
Cost of 5,241,841 shares of common stock in
treasury (209,926) (209,926)
Notes receivable arising from exercise of stock options (3,887) (5,965)
---------- -----------
Total shareholders' equity 128,626 117,440
---------- -----------
Total liabilities and shareholders' equity $ 378,192 $ 364,651
========== ===========
See accompanying notes to consolidated financial statements.
3
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
-----------------------
March 30, March 31,
2002 2001
---------- ----------
Revenue $ 335,693 $ 331,281
Investment income 563 1,056
Costs and expenses:
Purchased transportation 247,188 244,155
Commissions to agents 26,088 26,117
Other operating costs 8,106 8,103
Insurance and claims 10,907 7,803
Selling, general and administrative 26,048 26,862
Depreciation and amortization 2,879 3,490
---------- ----------
Total costs and expenses 321,216 316,530
---------- ----------
Operating income 15,040 15,807
Interest and debt expense 1,308 2,222
---------- ----------
Income before income taxes 13,732 13,585
Income taxes 5,218 5,231
---------- ----------
Net income $ 8,514 $ 8,354
========== ==========
Earnings per common share $ 1.05 $ 0.98
========== ==========
Diluted earnings per share $ 1.02 $ 0.96
========== ==========
Average number of shares outstanding:
Earnings per common share 8,097,000 8,512,000
========== ==========
Diluted earnings per share 8,364,000 8,730,000
========== ==========
See accompanying notes to consolidated financial statements.
4
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended
---------------------------
March 30, March 31,
2002 2000
----------- -----------
OPERATING ACTIVITIES
Net income $ 8,514 $ 8,354
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of operating property 2,879 3,186
Amortization of goodwill 304
Non-cash interest charges 68 81
Provisions for losses on trade and other accounts receivable 1,428 1,305
Losses (gains) on sales of operating property 6 (102)
Deferred income taxes, net (445) 68
Changes in operating assets and liabilities:
Decrease (increase) in trade and other accounts receivable (4,352) 2,220
Decrease in prepaid expenses and other assets 2,601 2,469
Increase (decrease) in accounts payable 3,671 (2,375)
Increase (decrease) in other liabilities 9,932 (3,963)
Increase (decrease) in insurance claims 2,368 (3,897)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,670 7,650
----------- -----------
INVESTING ACTIVITIES
Maturities of investments 2,000 498
Purchases of investments (5,722)
Purchases of operating property (715) (1,309)
Proceeds from sales of operating property 220 307
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (4,217) (504)
----------- -----------
FINANCING ACTIVITIES
Increase (decrease) in cash overdraft 1,740 (1,899)
Proceeds from exercise of stock options 2,672 154
Principal payments on long-term debt and capital lease obligations (14,911) (10,482)
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (10,499) (12,227)
----------- -----------
Increase (decrease) in cash 11,954 (5,081)
Cash at beginning of period 47,886 32,926
----------- -----------
Cash at end of period $ 59,840 $ 27,845
=========== ===========
See accompanying notes to consolidated financial statements.
5
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
Thirteen Weeks Ended March 30, 2002
(Dollars in thousands)
(Unaudited)
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
---------- ------- --------- --------- --------- --------- ------------- ---------
Balance December 29, 2001 13,328,834 $ 133 $ 75,036 $ 258,162 5,241,841 $(209,926) $ (5,965) $ 117,440
Net income 8,514 8,514
Exercises of stock options 18,760 594 2,078 2,672
---------- ------- --------- --------- --------- --------- ------------- ---------
Balance March 30, 2002 13,347,594 $ 133 $ 75,630 $ 266,676 5,241,841 $(209,926) $ (3,887) $ 128,626
========== ======= ========= ========= ========= ========= ============= =========
See accompanying notes to consolidated financial statements.
6
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The consolidated financial statements include the accounts of Landstar System,
Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all
adjustments (all of a normal, recurring nature) which are, in the opinion of
management, necessary for a fair statement of the results for the periods
presented. The preparation of the consolidated financial statements requires
the use of management's estimates. Actual results could differ from those
estimates. Landstar System, Inc. and its subsidiary are herein referred to as
"Landstar" or the "Company."
(1) Income Taxes
The provisions for income taxes for the 2002 and 2001 thirteen-week
periods were based on estimated full year combined effective income
tax rates of approximately 38.0% and 38.5%, respectively, which are
higher than the statutory federal income tax rate primarily as a result of
state income taxes and the meals and entertainment exclusion in both years
and the amortization of certain goodwill in the 2001 period.
(2) 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.
(3) Goodwill
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets" in the first quarter of fiscal year 2002.
SFAS No. 142 eliminated the requirement to amortize goodwill and requires that
it be tested for impairment on an annual basis. During the first quarter of
2002 the Company completed the transitional goodwill impairment test and
determined that the fair value of each reporting unit exceeded the carrying
value of the net assets of each reporting unit. Accordingly, no impairment
loss was recognized. Adoption of SFAS No. 142 resulted in the elimination of
goodwill amortization expense beginning with the first quarter of 2002. During
the first quarter of 2001, the Company recorded $304,000 of goodwill
amortization expense. Elimination of this amortization expense would have
resulted in net income of $8,658,000 in the first quarter of 2001, or an
increase of $0.04 in earnings per share ($0.03 per diluted share). The Company
has no other intangible assets subject to the provisions of SFAS No. 142.
(4) Additional Cash Flow Information
During the 2002 period, Landstar paid income taxes and interest of
$25,000 and $1,097,000, respectively. During the 2001 period, Landstar
paid income taxes and interest of $354,000 and $2,371,000, respectively.
7
(5) Segment Information
The following tables summarize information about Landstar's reportable
business segments as of and for the thirteen weeks ended March 30, 2002
and March 31, 2001 (in thousands):
Thirteen Weeks Ended March 30, 2002
------------------------------------------
Carrier Multimodal Insurance Other Total
------- ---------- --------- ----- -----
External revenue $ 269,963 $ 58,719 $ 7,011 $ 335,693
Investment income 563 563
Internal revenue 5,146 515 6,609 12,270
Operating income 16,856 1,140 5,322 $ (8,278) 15,040
Goodwill 20,496 10,638 31,134
Thirteen Weeks Ended March 31, 2001
------------------------------------------
Carrier Multimodal Insurance Other Total
------- ---------- --------- ----- -----
External revenue $ 263,385 $ 61,829 $ 6,067 $ 331,281
Investment income 1,056 1,056
Internal revenue 6,639 482 5,366 12,487
Operating income 17,034 586 7,196 $ (9,009) 15,807
Goodwill 21,123 11,047 32,170
(6) Commitments and Contingencies
At March 30, 2002, Landstar had commitments for letters of
credit outstanding in the amount of $19,929,000, primarily as
collateral for insurance claims. The commitments for letters of credit
outstanding included $9,080,000 under 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 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.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the attached
interim consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the fiscal year
ended December 29, 2001 and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the 2001 Annual Report to
Shareholders.
RESULTS OF OPERATIONS
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 Inway, Inc.,
Landstar Ligon, Inc. 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 and 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 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.
9
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.
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 and multimodal segments is 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 generated by the carrier segment, the 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. Landstar retains
liability for each individual unladen truckers liability claim
(claims incurred while the vehicle is being operated without
a trailer attached or is being operated with an attached trailer which
does not contain or carry any cargo) up to $25,000 per occurrence through
December 31, 2001 and $1,000,000 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.
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.
10
The following table sets forth the percentage relationships of
income and expense items to revenue for the periods indicated:
Thirteen Weeks Ended
------------------------
March 30, March 31,
2002 2001
---------- ----------
Revenue 100.0% 100.0%
Investment income 0.2 0.3
Costs and expenses:
Purchased transportation 73.6 73.7
Commissions to agents 7.8 7.9
Other operating costs 2.4 2.4
Insurance and claims 3.2 2.4
Selling, general and administrative 7.8 8.1
Depreciation and amortization 0.9 1.0
------- ------
Total costs and expenses 95.7 95.5
------- ------
Operating income 4.5 4.8
Interest and debt expense 0.4 0.7
------- ------
Income before income taxes 4.1 4.1
Income taxes 1.6 1.6
------- ------
Net income 2.5% 2.5%
======= ======
THIRTEEN WEEKS ENDED MARCH 30, 2002 COMPARED TO THIRTEEN WEEKS
ENDED MARCH 31, 2001
Revenue for the 2002 thirteen-week period was $335,693,000, an increase of
$4,412,000, or 1.3%, over the 2001 thirteen-week period. The increase was
attributable to increased revenue of $6,578,000 and $944,000 at the carrier and
insurance segments, respectively, partially offset by decreased revenue at the
multimodal segment of $3,110,000. Overall, revenue per revenue mile (price)
decreased approximately 3%, while revenue miles (volume) were approximately 5%
higher than 2001. The increase in premium revenue at the insurance segment was
primarily attributable to an increase in the level of reinsurance underwritten
for unladen truckers liability from $25,000 per occurrence to $1,000,000 per
occurrence effective January 1, 2002. Investment income at the insurance
segment was $563,000 and $1,056,000 in the 2002 and 2001 periods,
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 73.6% and 73.7% of revenue in 2002 and 2001,
respectively. Commissions to agents were 7.8% and 7.9% of revenue in 2002
and 2001, respectively. The decrease in purchased transportation and
commissions to agents as a percentage of revenue was primarily due to the
increased premium revenue at the insurance segment.
11
Other operating costs were 2.4% of revenue in both 2002 and 2001.
Insurance and claims were 3.2% of revenue in 2002 compared with 2.4% of revenue
in 2001. The increase in insurance and claims as a percentage of revenue was
primarily attributable to the increased level of risk assumed for the unladen
truckers liability program effective January 1, 2002, favorable development
of prior year claims in 2001, an increase in the percentage of revenue
generated through independent contractors, which has a higher risk profile
than revenue generated through broker carriers, and unfavorable development
of prior year claims in 2002, partially offset by reduced premiums for
commercial trucking liability insurance related to the increase in the level
of self-insured retention from $1,000,000 per occurrence to $5,000,000 per
occurrence effective May 1, 2001. Selling, general and administrative costs
were 7.8% of revenue in 2002 compared with 8.1% of revenue in 2001. The
decrease in selling, general and administrative costs as a percentage of
revenue was primarily due to decreased wages, benefits and travel and
entertainment expense, partially offset by an increased provision for
customer bad debts. Depreciation and amortization was 0.9% of revenue in 2002
and 1.0% of revenue in 2001. The decrease in depreciation and amortization as
a percentage of revenue was primarily due to the January 1, 2002
implementation of SFAS No. 142, which eliminated the amortization of goodwill.
Interest and debt expense was 0.4% and 0.7% of revenue in 2002 and 2001,
respectively. This decrease was primarily attributable to the effect of
lower interest rates and decreased capital lease obligations for trailing
equipment.
The provisions for income taxes for the 2002 and 2001 thirteen-week periods
were based on estimated full year combined effective income tax rates of
approximately 38.0% and 38.5%, respectively, which are higher than the
statutory federal income tax rate primarily as a result of state income taxes
and the meals and entertainment exclusion in both years and the
amortization of certain goodwill in the 2001 period. The decrease in the
effective income tax rate was primarily attributable to the elimination of
goodwill amortization in 2002.
Net income was $8,514,000, or $1.05 per common share ($1.02 per diluted
share), in the 2002 period compared with $8,354,000, or $0.98 per common share
($0.96 per diluted share), in the 2001 period. Excluding goodwill amortization
net income for the 2001 period would have been $8,658,000, or $1.02
per common share ($0.99 per diluted share).
12
CAPITAL RESOURCES AND LIQUIDITY
Shareholders' equity increased to $128,626,000 at March 30, 2002 compared
with $117,440,000 at December 29, 2001, primarily as a result of net income for
the period. Shareholders' equity was 60% and 54% of total capitalization at
March 30, 2002 and December 29, 2001, respectively. As of March 30, 2002, the
Company may purchase 500,000 shares of its common stock under its authorized
stock purchase program.
Working capital and the ratio of current assets to current liabilities were
$117,791,000 and 1.79 to 1, respectively, at March 30, 2002, compared with
$121,808,000 and 1.92 to 1, respectively, at December 29, 2001. Landstar has
historically operated with current ratios within the range of 1.5 to 1 to 2.0
to 1. Cash provided by operating activities was $26,670,000 in the 2002
thirteen-week period compared with $7,650,000 in the 2001 thirteen-week period.
The increase in cash flow provided by operating activities was primarily
attributable to timing of payments. During the 2002 period, Landstar purchased
$715,000 of operating property. Management anticipates acquiring approximately
$27,000,000 of operating property during the remainder of fiscal year 2002
either by purchase or lease financing.
Management believes that cash flow from operations combined with the Company's
borrowing capacity under its revolving credit agreement will be adequate to
meet Landstar's debt service requirements, fund continued growth, both internal
and through acquisitions, and meet working capital needs.
INFLATION
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.
13
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 is typically lower than the quarters ending June, September
and December due to reduced shipments and higher operating costs in
the winter months.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company maintains 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 in the form of a revolving credit facility, $50,000,000 of
which may be utilized in the form of letter of credit guarantees.
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. There have been no
significant changes that would affect the information provided in
Item 7a of the 2001 Annual Report on Form 10-K regarding quantitative
and qualitative disclosures about market risk.
14
PART II
OTHER INFORMATION
Item 1. 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.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
15
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed on the Exhibit Index are filed as part
of this quarterly report on Form 10-Q.
(b) Form 8-K
None
16
EXHIBIT INDEX
Registrant's Commission File No.: 0-21238
Exhibit No. Description
- ------------ -----------
(11) Statement re: Computation of Per Share Earnings:
11.1 * Landstar System, Inc. and Subsidiary Calculation of Earnings
Per Common Share for the Thirteen Weeks Ended March 30, 2002
and March 31, 2001
11.2 * Landstar System, Inc. and Subsidiary Calculation of Diluted
Earnings Per Share for the Thirteen Weeks Ended March 30,
2002 and March 31, 2001
__________________
* Filed herewith
17
SIGNATURES
Pursuant to the requirements 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.
Date: May 10, 2002 Henry H. Gerkens
----------------------------
Henry H. Gerkens
President and Chief Operating
Officer
Date: May 10, 2002 Robert C. LaRose
----------------------------
Robert C. LaRose
Vice President, Chief Financial
Officer and Secretary
18