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"), serve a variety of different market niches
through its operating subsidiaries which employ different operating strategies.
Four of Landstar's subsidiaries, Landstar Ranger, Inc. ("Landstar Ranger"),
Landstar Inway, Inc. ("Landstar Inway"), Landstar Ligon, Inc., and Landstar
Gemini, Inc. (collectively, the "Owner-Operator Companies"), provide truckload
transportation services through independent contractors and independent
commission sales agents. The nature of the Owner-Operator Companies' business
is such that a significant portion of their operating costs vary directly with
revenue. Landstar Poole, Inc. ("Landstar Poole") and Landstar T.L.C., Inc.
("Landstar T.L.C.") provide truckload transportation services using both
company-owned and leased equipment driven by company-employed drivers and
independent contractors. The percentage of Landstar Poole's total revenue
generated through independent contractors was approximately 44% in 1996, 29% in
1995 and 17% in 1994. The percentage of Landstar T.L.C.'s total revenue
generated through independent contractors was approximately 65% in 1996 and 62%
in 1995. During the fourth quarter of 1996, the Company announced its plan to
restructure the operations of both Landstar Poole and Landstar T.L.C. The
Landstar Poole restructuring plan includes the transfer of the variable cost
business component of Landstar Poole to Landstar Ranger and the disposal of 175
company-owned tractors. The Landstar T.L.C. restructuring plan includes the
merger of Landstar T.L.C. into Landstar Inway and the disposal of all the
company-owned tractors. Another Landstar subsidiary, Landstar Logistics, Inc.
("Landstar Logistics"), provides customers with contract logistics and
intermodal services. Contract logistics services include single source
alternatives, truck brokerage and other transportation solutions for large
customers. Intermodal transportation services primarily involves arranging for
the movement of customers' goods by a combination of rail and truck. Both the
railroad and drayage carriers utilized by Landstar Logistics are independent
contractors. Landstar Express America, Inc. ("Landstar Express America"),
provides air and surface expedited transportation services through independent
contractors, including air cargo carriers, and principally utilizes independent
commission sales agents.
During the first quarter of 1995, Landstar, through different subsidiaries of
Landstar System Holdings, Inc. ("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.("TLC"), 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 business
acquired from ITCO comprises the majority of Landstar Logistics' intermodal
operations, while the business acquired with Express comprises the majority of
Landstar Express America's operations.
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 operations. Purchased
transportation for the intermodal services operations of Landstar Logistics and
the air freight operations of Landstar Express America is based on a
contractually agreed upon fixed rate. Purchased transportation as a percentage
of revenue for the intermodal operations of Landstar Logistics is normally
higher than that of Landstar's other transportation companies. 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 and brokers
are primarily based on contractually agreed upon percentages of revenue or
contractually agreed upon percentages of gross profit. Commissions to agents
and brokers as a percentage of consolidated revenue will vary directly with the
revenue generated through independent commission sales agents. Both purchased
transportation and commissions to agents and brokers generally will also
increase or decrease as a percentage of the Company's consolidated revenue if
there is a change in the percentage of revenue contributed by the intermodal
operations of Landstar Logistics or through the air freight operations of
Landstar Express America or through company-employed drivers.
Drivers' wages and benefits represent the amount Landstar Poole and Landstar
T.L.C. employee drivers are compensated. Employee drivers are compensated
primarily on a cents per mile driven basis. Drivers' wages and benefits as a
percentage of consolidated revenue generally will vary only if there is a
change in the revenue contribution generated through the independent
contractors or a change in the rate of employee driver pay or benefit
structure.
The Company's intention is to continue its expansion of truckload capacity
provided by independent contractors and to reduce its truckload capacity
provided by company-owned equipment and company-employed drivers. It is also
the Company's intention to favor independent commission sales agent locations
over company-owned and operated locations. Historically, Landstar T.L.C. and
the intermodal operations of Landstar Logistics have principally utilized a
company employee sales structure and to a lesser degree, independent commission
sales agents. During 1996, management completed the process of converting the
majority of company-owned sales locations at Landstar Logistics and Landstar
T.L.C. to independent commission sales agent locations. Accordingly, purchased
transportation and commissions to agents and brokers are anticipated to
increase as a percentage of total consolidated revenue and drivers' wages and
benefits are anticipated to decline as a percentage of total consolidated
revenue over time.
Potential liability associated with accidents in the trucking industry is
severe and occurrences are unpredictable. The industry is also subject to
substantial workers' compensation expense. 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.
The cost of fuel is the largest component of fuel and other operating costs.
Changes in prevailing prices of fuel or increases in fuel taxes can
significantly affect Landstar Poole's or Landstar T.L.C.'s operating results.
Also included in fuel and other operating costs are costs of equipment
maintenance paid to third parties and the operating costs of Landstar Poole and
Landstar T.L.C. terminals. Effective August 1, 1996, Landstar closed all but
one of the Landstar Poole terminals, including those that had functioned as
Landstar Centers. The closings are part of Landstar's strategy to reduce the
fixed cost elements of Landstar Poole.
Employee compensation and benefits account for more than half of the Company's
selling, general and administrative expense. Other significant components of
selling, general and administrative expense are data processing expense,
communications costs and rent expense.
The following table sets forth the percentage relationships of expense items to
revenue for the periods indicated:
Fiscal Year
------------------------
1996 1995 1994
------ ------ ------
Revenue 100.0% 100.0% 100.0%
Costs and expenses:
Purchased transportation 69.0 67.5 66.3
Drivers' wages and benefits 3.2 4.0 3.9
Fuel and other operating costs 5.5 5.6 5.5
Insurance and claims 2.8 3.1 3.6
Commissions to agents and brokers 6.8 6.2 6.3
Selling, general and administrative 7.1 7.7 8.4
Depreciation and amortization 1.9 1.7 1.4
Restructuring costs 0.6
------ ------ ------
Total costs and expenses 96.9 95.8 95.4
------ ------ ------
Operating income 3.1 4.2 4.6
Interest and debt expense, net 0.6 0.7 0.4
------ ------ ------
Income before income taxes 2.5 3.5 4.2
Income taxes 1.0 1.4 1.7
------ ------ ------
Net income 1.5% 2.1% 2.5%
====== ====== ======
FISCAL YEAR ENDED DECEMBER 28, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1995
Revenue for the fiscal year 1996 was $1,283,801,000, an increase of
$79,134,000, or 6.6%, over the 1995 fiscal year. The increase was primarily
attributable to an increase in revenue miles (volume) of 6.5%, which included
the revenue of the businesses acquired during the first quarter of 1995 for the
full fifty-two weeks of 1996, and an increase of less than 1% in revenue per
revenue mile (price). During the 1996 year, revenue generated through
independent contractors, including railroads and air cargo carriers, was 90.4%
of consolidated revenue compared with 88.5% in the 1995 year.
Purchased transportation was 69.0% of revenue in 1996 compared with 67.5% in
1995. Drivers' wages and benefits were 3.2% of revenue in 1996 compared with
4.0% in 1995. Fuel and other operating costs were 5.5% of revenue in 1996
compared with 5.6% in 1995. The increase in purchased transportation and
decrease in drivers' wages and benefits and fuel and other operating costs as a
percentage of revenue was primarily attributable to an increase in the
percentage of revenue generated through independent contractors. The decrease
in fuel and other operating costs was partially offset by an increase in fuel
prices. Insurance and claims were 2.8% of revenue in 1996 compared with 3.1%
in 1995 due to a decrease in third-party premiums and favorable development of
prior year claims. Commissions to agents and brokers were 6.8% of revenue in
1996 compared with 6.2% in 1995 due to an increase in the percentage of revenue
generated through independent commission sales agents which reflected the
conversion of company-owned sales locations to independent commission sales
agent locations. Selling, general and administrative costs were 7.1% of
revenue in 1996 compared with 7.7% of revenue in 1995, primarily due to a lower
provision for customer bad debts, reduced employee sales costs which reflected
the conversion of company-owned sales locations to independent commission sales
agent locations and the effect of increased revenue.
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. During the 1996 fourth quarter, the Company
recorded $7,263,000 in restructuring costs, which included approximately
$4,166,000 for impairment of certain long-lived assets, $939,000 for the early
termination of certain operating leases, $850,000 for employee termination
costs and $1,308,000 of other costs. Long-lived assets, having an aggregate
carrying value of $16,500,000, were reduced to their estimated sales value and
primarily represented revenue equipment to be sold. The Company anticipates to
incur additional pre-tax restructuring costs of approximately $2,200,000 during
the 1997 first half.
Interest and debt expense, net was 0.6% of revenue in 1996 and 0.7% in 1995.
This decrease was primarily attributable to the effect of increased revenue.
The provisions for income taxes for both the 1996 and 1995 fiscal years were
based on an effective income tax rate of approximately 41%, 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 28, 1996, the valuation allowance of $816,000 was
attributable to deferred state income tax benefits, primarily state operating
loss carryforwards at one subsidiary. The valuation allowance and goodwill
were reduced by $190,000 for state operating loss carryforwards utilized in
1996. The valuation allowance was reduced by an additional $265,000 for state
operating loss carryforwards that had expired. The valuation allowance and
goodwill will be further reduced by $788,000 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 $18,925,000, or $1.48 per share, in 1996 compared with
$24,962,000, or $1.95 per share, in the prior year. Excluding restructuring
costs, 1996 net income would have been $23,174,000, or $1.81 per share. If the
acquisitions had taken place at the beginning of 1995, pro forma net income for
1995 would have been $24,352,000, or $1.90 per share.
FISCAL YEAR ENDED DECEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1994
Revenue for the fiscal year 1995 was $1,204,667,000, an increase of
$220,308,000, or 22.4%, over the 1994 fiscal year. Revenue from the acquired
businesses of ITCO, TLC and Express accounted for $198,926,000 of the increase.
The remaining increase of $21,382,000, or 2.2%, was attributable to an increase
in revenue miles of approximately 1% and an increase in revenue per revenue
mile of approximately 1%. During the 1995 year, revenue generated through
independent contractors, including railroads and air cargo carriers, was 88.5%
of consolidated revenue compared with 87.8% in the 1994 year.
Purchased transportation was 67.5% of revenue in 1995 compared with 66.3% in
1994. Drivers' wages and benefits were 4.0% of revenue in 1995 compared with
3.9% in 1994. Fuel and other operating costs were 5.6% of revenue in 1995
compared with 5.5% in 1994. The increase in purchased transportation as a
percentage of revenue was primarily attributable to the purchased
transportation incurred by the intermodal operations of Landstar Logistics
which reflected the higher cost of intermodal purchased transportation. The
increase in drivers' wages and benefits as a percentage of revenue was
primarily attributable to the acquisition of TLC and the increase in Landstar
Poole's driver pay package, partially offset by the increase in the percentage
of revenue generated through independent contractors. The increase in fuel and
other operating costs as a percentage of revenue was primarily attributable to
the acquisition of TLC. Insurance and claims were 3.1% of revenue in 1995
compared with 3.6% in 1994. Excluding the 1995 revenue and insurance and
claims of the intermodal operations of Landstar Logistics, which has a
significantly lower risk of claims exposure due to the nature of its intermodal
operations, insurance and claims as a percentage of revenue were 3.4% in 1995
versus 3.6% in 1994. This percentage decrease was primarily attributable to a
decrease in the severity of accidents and a decrease in third-party premiums as
a percentage of revenue. Commissions to agents and brokers were 6.2% of
revenue in 1995 compared with 6.3% in 1994. The decrease was primarily
attributable to an increase in the percentage of revenue generated through
company store locations and employees, which reflected the sales structure of
the acquired companies. No bonuses were accrued under the Company's management
incentive compensation plan for the 1995 year. As a result, selling, general
and administrative costs were 7.7% of revenue in 1995 compared with 8.4% of
revenue in 1994.
Interest and debt expense, net was 0.7% of revenue in 1995 and 0.4% in 1994.
This increase was primarily attributable to borrowings to finance the
acquisitions.
The provisions for income taxes for the 1995 and 1994 fiscal years were based
on an effective income tax rate of approximately 41%, 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.
Net income was $24,962,000, or $1.95 per share, in 1995 compared with
$24,407,000, or $1.90 per share, in the prior year. If the acquisitions had
taken place at the beginning of both fiscal years, pro forma net income for
1995 would have been $24,352,000, or $1.90 per share, compared to $22,876,000,
or $1.78 per share in 1994.
CAPITAL RESOURCES AND LIQUIDITY
Landstar has a credit facility with a syndicate of banks and Chase Manhattan
Bank, as agent (the "Credit Agreement"). The Credit Agreement provides
$150,000,000 of borrowing capacity, consisting of $100,000,000 of revolving
credit (the "Working Capital Facility") and $50,000,000 of revolving credit
available to finance acquisitions (the "Acquisition Facility"). $50,000,000 of
the total borrowing capacity under the Working Capital Facility may be utilized
in the form of letter of credit guarantees. At December 28, 1996, Landstar had
no borrowings outstanding under the Working Capital Facility, $28,500,000
outstanding under the Acquisition Facility and had commitments for letters of
credit outstanding in the amount of $20,459,000, primarily as collateral for
estimated insurance claims. The Credit Agreement expires on October 7, 2000,
and may be extended to October 7, 2002 upon Landstar's request and bank
approval.
Borrowings under the 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 Chase Manhattan 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 Chase Manhattan 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 certain financial ratios. As of December 28, 1996, the margin
was equal to 1/2 of 1%. The unused portion of the Credit Agreement carries a
commitment fee determined based on the level of certain financial ratios. As
of December 28, 1996, the commitment fee for the unused portion of the Credit
Agreement was 0.200%. At December 28, 1996, the weighted average interest rate
on borrowings outstanding under the Acquisition Facility was 6.09%. Based on
the borrowing rates in the Credit Agreement and the repayment terms, the fair
value of the outstanding borrowings under the Acquisition Facility were
estimated to approximate carrying value.
The Credit Agreement contains a number of covenants that limit, among other
things, the payment of dividends, the incurrence of additional indebtedness,
the incurrence of operating or capital lease obligations and the purchase of
operating property. The 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 Credit Agreement, and Interest
and Fixed Charge Coverages, as therein defined. Under the most restrictive
covenant, Landstar exceeded the required minimum Interest Charge Coverage level
by approximately $2,345,000 at December 28, 1996. The Credit Agreement limits
the payment of dividends in any fiscal year to the lesser of 50% of Excess
Cash Flow, as therein defined, or 25% of Consolidated Net Income, as therein
defined.
The Credit Agreement provides a number of events of default related to a person
or group of persons 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 Credit Agreement are unsecured, however, the
Company and each of LSHI's subsidiaries guarantee LSHI's obligations under the
Credit Agreement.
Shareholders' equity increased to $147,557,000, or 62.0% of total
capitalization, at December 28, 1996, compared with $128,396,000, or 57.8% of
total capitalization, at December 30, 1995, primarily as a result of earnings
for the period. Working capital and the ratio of current assets to current
liabilities were $70,653,000 and 1.54 to 1, respectively, at December 28, 1996,
compared with $51,360,000 and 1.40 to 1, respectively, at December 30, 1995.
Landstar has historically operated with current ratios ranging between 1.0 to 1
and 1.5 to 1. Cash provided by operating activities was $24,994,000 in 1996
compared with $19,963,000 in 1995. The increase in cash provided by operating
activities was primarily attributable to the timing of payments, partially
offset by reduced earnings. During the 1996 fiscal year, Landstar purchased
$12,853,000 of operating property and acquired $20,690,000 of operating
property by entering into capital leases. Landstar plans to acquire
approximately $15,000,000 of operating property during fiscal year 1997 either
by purchase or by lease financing.
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.
Landstar Ranger is subject to the Multi Employer Pension Plan Amendments Act of
1980 ("MEPPA"), which could require Landstar Ranger, in the event of
withdrawal, to fund its proportionate share of the union sponsored plans', in
which it participates, unfunded benefit obligation. However, management
believes that the liability, if any, for withdrawal from any or all of these
plans would 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.
Management believes that cash flow from operations combined with its borrowing
capacity under the 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.
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.
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.
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
December 28, December 30,
1996 1995
------------ ------------
ASSETS
Current assets:
Cash $ 4,187 $ 3,415
Trade accounts receivable, less allowance
of $6,526 and $6,923 176,892 151,009
Other receivables, including advances to independent
contractors, less allowance of $4,390
and $4,205 10,740 13,359
Inventories 1,785 2,292
Prepaid expenses and other current assets 7,319 8,501
-------- --------
Total current assets 200,923 178,576
-------- --------
Operating property, less accumulated depreciation
and amortization of $50,223 and $39,796 105,564 108,052
Goodwill, less accumulated amortization of $7,087
and $5,354 55,126 57,049
Deferred income taxes and other assets 9,188 9,402
-------- --------
Total assets $370,801 $353,079
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 13,488 $ 13,449
Accounts payable 39,901 37,427
Current maturities of long-term debt 23,241 20,668
Estimated insurance claims 25,328 23,654
Other current liabilities 28,312 32,018
-------- --------
Total current liabilities 130,270 127,216
-------- --------
Long-term debt, excluding current maturities 67,155 73,199
Estimated insurance claims 25,819 24,031
Other liabilities 237
Shareholders' equity:
Common stock, $.01 par value, authorized 20,000,000
shares, issued 12,882,874 shares and
12,871,674 shares 129 129
Additional paid-in capital 61,740 61,504
Retained earnings 87,655 68,730
Cost of 94,041 shares of common
stock in treasury (1,967) (1,967)
-------- --------
Total shareholders' equity 147,557 128,396
-------- --------
Total liabilities and shareholders' equity $370,801 $353,079
======== ========
See accompanying notes to consolidated financial statements.
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
Fiscal Year Ended
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
Revenue $ 1,283,801 $ 1,204,667 $ 984,359
Costs and expenses:
Purchased transportation 885,500 813,003 653,076
Drivers' wages and benefits 41,210 47,970 38,287
Fuel and other operating costs 70,207 67,861 53,627
Insurance and claims 36,495 37,816 35,413
Commissions to agents and brokers 87,935 73,974 61,542
Selling, general and administrative 91,267 93,194 83,143
Depreciation and amortization 24,027 20,841 13,509
Restructuring costs 7,263
------------ ----------- ------------
Total costs and expenses 1,243,904 1,154,659 938,597
------------ ----------- ------------
Operating income 39,897 50,008 45,762
Interest and debt expense, net 7,547 7,552 4,134
------------ ----------- ------------
Income before income taxes 32,350 42,456 41,628
Income taxes 13,425 17,494 17,221
------------ ----------- ------------
Net income $ 18,925 $ 24,962 $ 24,407
============ =========== ============
Earnings per share $ 1.48 $ 1.95 $ 1.90
============ =========== ============
Average number of common shares outstanding 12,785,000 12,807,000 12,848,000
============ =========== ============
See accompanying notes to consolidated financial statements.
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal Year Ended
December 28, December 30, December 31,
1996 1995 1994
------------ ------------ ------------
OPERATING ACTIVITIES
Net income $ 18,925 $ 24,962 $ 24,407
Adjustments to reconcile net income to net cash
provided by operating activities:
Impairment of long-lived assets 4,166
Depreciation and amortization of operating property 21,878 18,824 12,612
Amortization of goodwill and non-competition
agreements 2,149 2,017 897
Non-cash interest charges 264 253 366
Provisions for losses on trade and other receivables 4,768 6,232 3,575
Losses (gains) on sales of operating property (2,530) (2,080) 185
Deferred income taxes, net 355 (419) (1,540)
Non-cash charge in lieu of income taxes 190
Changes in operating assets and liabilities,
net of businesses acquired:
Increase in trade and other accounts receivable (28,032) (14,417) (29,237)
Decrease (increase) in other assets 868 (2,635) (2,170)
Increase (decrease) in accounts payable 2,474 (2,928) 5,673
Increase in estimated insurance claims 3,462 7,179 7,875
Increase (decrease) in other liabilities (3,943) (17,025) 13,707
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,994 19,963 36,350
------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of businesses, net of cash acquired (33,932)
Purchases of operating property (12,853) (7,286) (7,491)
Proceeds from sales of operating property 12,517 7,154 2,460
------------ ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (336) (34,064) (5,031)
------------ ------------ ------------
FINANCING ACTIVITIES
Borrowings to finance businesses acquired 45,900
Borrowings under revolving credit facility 16,000 10,000
Increase in cash overdraft 39 4,029 280
Proceeds from exercise of stock options and
related income tax benefit 236
Purchases of common stock (1,727)
Principal payments on borrowings under revolving
credit facility, long-term debt and capital lease
obligations (40,161) (58,441) (28,964)
------------ ----------- -----------
NET CASH USED BY FINANCING ACTIVITIES (23,886) (239) (28,684)
------------ ----------- -----------
Increase (decrease) in cash 772 (14,340) 2,635
Cash at beginning of period 3,415 17,755 15,120
------------ ----------- -----------
Cash at end of period $ 4,187 $ 3,415 $ 17,755
============ =========== ===========
See accompanying notes to consolidated financial statements.
LANDSTAR SYSTEM INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Fiscal Year Ended December 28, 1996,
December 30, 1995 and December 31, 1994
(Dollars in thousands)
Additional Treasury Stock
Common Stock Paid-In Retained at Cost
Shares Amount Capital Earnings Shares Amount Total
----------------- --------- -------- ------ ------- --------
Balance December 25, 1993 12,871,674 $ 129 $61,504 $19,361 24,041 $ (240) $ 80,754
Net income 24,407 24,407
---------- ------ ------- ------- ------ --------- --------
Balance December 31, 1994 12,871,674 129 61,504 43,768 24,041 (240) 105,161
Net income 24,962 24,962
Purchases of common stock 70,000 (1,727) (1,727)
---------- ------ ------- ------- ------ --------- --------
Balance December 30, 1995 12,871,674 129 61,504 68,730 94,041 (1,967) 128,396
Net income 18,925 18,925
Exercise of stock options
and related income tax
benefit 11,200 236 236
---------- ------ ------- ------- ------ --------- --------
Balance December 28, 1996 12,882,874 $ 129 $61,740 $87,655 94,041 $ (1,967) $147,557
========== ====== ======= ======= ====== ========= ========
See accompanying notes to consolidated financial statements.
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. 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, 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 up to $1,000,000 for each individual property, casualty and
general liability claim, $500,000 for each workers' compensation claim and
$250,000 for each cargo claim.
Inventories
Inventories, consisting of fuel, tires and vehicle repair parts, are valued at
the lower of average cost or market.
Tires
Tires and tubes purchased as part of revenue equipment are capitalized as part
of the cost of the equipment. Replacement tires and tubes are charged to
expense when placed in service.
Operating Property
Operating property is recorded at cost. Depreciation is provided on the
straight-line basis over the estimated useful lives of the related assets.
Revenue equipment is being depreciated over a maximum of 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.
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 basis. 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 share amounts are based on the weighted average number of common
shares outstanding.
(2) Restructuring Costs
On December 18, 1996, the Company announced a plan to restructure its Landstar
T.L.C., Inc. ("Landstar T.L.C.") and Landstar Poole, Inc. ("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. includes the merger of Landstar
T.L.C. into Landstar Inway, Inc., 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 plan to restructure Landstar Poole
includes the transfer of the variable cost business component of Landstar
Poole to Landstar Ranger, Inc. ("Landstar Ranger") and the disposal of 175
Landstar Poole company-owned tractors.
During the 1996 fourth quarter, the Company recorded $7,263,000 in
restructuring costs, which included $4,166,000 for the impairment of certain
long-lived assets, $939,000 for the early termination of certain operating
leases, $850,000 for employee termination costs and $1,308,000 of other costs.
Long-lived assets, having an aggregate carrying value of $16,500,000, were
reduced to their estimated sales value and primarily represented revenue
equipment to be sold. After deducting related income tax benefits of
$3,014,000, the restructuring charge reduced net income by $4,249,000, or
$0.33 per share, in 1996. The Company anticipates to complete the
restructuring by the end of fiscal year 1997 and to incur additional pre-tax
restructuring costs of approximately $2,200,000.
(3) Acquisitions
During the first quarter of 1995, Landstar, through different subsidiaries of
Landstar System Holdings, Inc. ("LSHI"), acquired the businesses and net
assets of Intermodal Transport Company, 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., a North Carolina-based air
freight and truck expedited service provider. The aggregate purchase price of
the four acquisitions, including expenses, was $34,076,000, plus the
assumption of $24,162,000 of long-term indebtedness, including current
maturities.
The aggregate purchase price and a portion of the indebtedness
assumed was paid or refinanced with proceeds received from $34,500,000 of
borrowings under the acquisition line of Landstar's revolving credit facility,
$11,400,000 of borrowings from Fleet Bank, N.A. and Mark Twain Bank, and
available cash.
The acquisitions were accounted for under the purchase method and the net
assets acquired and the results of operations of the four acquisitions were
included in Landstar's consolidated financial statements from their respective
dates of acquisition. The aggregate purchase price was allocated to the
assets acquired, including $22,036,000 of operating property, and the
liabilities assumed based on their respective estimated fair values. The
aggregate purchase price exceeded the fair value of the net assets acquired by
$27,415,000 of which $1,200,000 was assigned to non-competition agreements and
$26,215,000 was assigned to goodwill. The non-competition agreements are
being amortized on the straight-line method over the two and three year lives
of the agreements, and goodwill is being amortized on the straight-line method
over periods of twenty and forty years.
The following unaudited pro forma information represents the consolidated
results of operations of Landstar and the four acquired businesses as if the
acquisitions had occurred at the beginning of the periods presented, and gives
effect to increased depreciation of operating property, amortization of
goodwill and non-competition agreements and increased interest expense, at
rates available to Landstar under the acquisition line of its revolving credit
facility (in thousands, except per share amounts):
Fiscal Year
--------------------------
1995 1994
---- ----
Revenue $1,214,267 $1,195,582
Net income $ 24,352 $ 22,876
Earnings per share $ 1.90 $ 1.78
The above pro forma information is not necessarily indicative of the results of
operations which actually would have been obtained during such periods.
(4) Income Taxes
The provisions for income taxes consisted of the following (in thousands):
Fiscal Year
------------------------------
1996 1995 1994
---- ---- ----
Current:
Federal $10,830 $14,838 $16,121
State 2,050 3,075 2,640
------- ------- -------
12,880 17,913 18,761
Deferred:
Federal 869 413 (1,553)
State (514) (832) 13
------ ------- -------
355 (419) (1,540)
Non-cash charge in lieu of income taxes 190
------- ------- -------
Provision for income taxes $13,425 $17,494 $17,221
======= ======= =======
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities consisted of the following (in thousands):
Dec. 28, 1996 Dec. 30, 1995
------------- -------------
Deferred tax assets:
Allowance for doubtful accounts $ 3,750 $ 3,954
Deferred state income tax benefits 812 992
State net operating loss carryforwards 3,235 2,943
Self insured claims 20,294 19,570
Compensated absences 620 630
All other 1,245 837
--------- ---------
29,956 28,926
Valuation allowance (816) (1,271)
--------- ---------
$ 29,140 $ 27,655
========= =========
Deferred tax liabilities:
Operating property $ 20,254 $ 18,482
All other 4,470 4,402
--------- ---------
$ 24,724 $ 22,884
========= =========
At December 28, 1996, the valuation allowance of $816,000 was attributable to
deferred state income tax benefits, primarily state operating loss carry-
forwards at one subsidiary. The valuation allowance and goodwill were reduced
by $190,000 for state operating loss carryforwards utilized in 1996. The
valuation allowance was reduced by an additional $265,000 for state operating
loss carryforwards that had expired. The valuation allowance and goodwill will
be further reduced by $788,000 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
provision for income taxes (in thousands):
Fiscal Year
----------------------------
1996 1995 1994
---- ---- ----
Income taxes at federal income tax rate $11,323 $14,860 $14,570
State income taxes, net of federal income
tax benefit 1,122 1,458 1,724
Amortization of goodwill 439 420 314
Meals and entertainment exclusion 448 647 452
Other, net 93 109 161
------- -------- --------
Provision for income taxes $13,425 $17,494 $17,221
======= ======= =======
Landstar paid income taxes of $15,949,000 in 1996, $19,679,000 in 1995, and
$16,407,000 in 1994.
(5) Operating Property
Operating property is summarized as follows (in thousands):
Dec. 28, 1996 Dec. 30, 1995
------------- -------------
Land $ 2,309 $ 2,947
Leasehold improvements 366 373
Buildings and improvements 10,937 8,387
Revenue equipment 125,124 123,258
Other equipment 17,051 12,883
-------- --------
155,787 147,848
Less accumulated depreciation and amortization 50,223 39,796
-------- --------
$105,564 $108,052
======== ========
Included above is $110,936,000 in 1996 and $93,616,000 in 1995 of operating
property under capital lease, $74,792,000 and $69,114,000, respectively, net
of accumulated amortization. Landstar acquired operating property by entering
into capital leases in the amount of $20,690,000 in 1996, $28,566,000 in 1995
and $24,570,000 in 1994.
(6) 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 6% of their
base salary subject to certain limitations. Landstar contributes an amount
equal to 50% of such contributions, subject to certain limitations. In
addition, one subsidiary, Landstar Ranger, makes contributions in accordance
with negotiated labor contracts (generally based on the number of weeks
worked) to union sponsored multi-employer defined benefit pension plans for
the benefit of approximately 200 union drivers.
Landstar Ranger is subject to the Multi Employer Pension Plan Amendments Act
of 1980 ("MEPPA"), which could require Landstar Ranger, in the event of
withdrawal, to fund its proportionate share of these union sponsored plans'
unfunded benefit obligation. Management believes that the liability, if any,
for withdrawal from any or all of these plans would 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.
The expense for the Company sponsored defined contribution plan and for union
sponsored plans was $1,144,000 and $1,085,000 in 1996, respectively,
$1,185,000 and $937,000 in 1995, respectively, and $1,012,000 and $1,268,000
in 1994, respectively.
(7) Debt
Long-term debt is summarized as follows (in thousands):
Dec. 28, 1996 Dec. 30, 1995
------------- -------------
Capital leases $61,896 $65,367
Acquisition Facility 28,500 28,500
------- -------
90,396 93,867
Less current maturities 23,241 20,668
------- -------
Total long-term debt $67,155 $73,199
======= =======
Landstar has a credit facility with a syndicate of banks and Chase Manhattan
Bank, as agent (the "Credit Agreement"). The Credit Agreement provides
$150,000,000 of borrowing capacity, consisting of $100,000,000 of revolving
credit (the "Working Capital Facility") and $50,000,000 of revolving credit
available to finance acquisitions (the "Acquisition Facility"). $50,000,000 of
the total borrowing capacity under the Working Capital Facility may be
utilized in the form of letter of credit guarantees. At December 28, 1996,
Landstar had commitments for letters of credit outstanding in the amount of
$20,459,000, primarily as collateral for estimated insurance claims. The
Credit Agreement expires on October 7, 2000, and may be extended to October 7,
2002 upon Landstar's request and bank approval.
Borrowings under the 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 Chase Manhattan 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 Chase Manhattan 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 certain financial ratios. As of December 28, 1996, the margin
was equal to 1/2 of 1%. The unused portion of the Credit Agreement carries a
commitment fee determined based on the level of certain financial ratios. As
of December 28, 1996, the commitment fee for the unused portion of the Credit
Agreement was 0.200%. At December 28, 1996, the weighted average interest
rate on borrowings outstanding under the Acquisition Facility was 6.09%.
Based on the borrowing rates in the Credit Agreement and the repayment terms,
the fair value of the outstanding borrowings under the Acquisition Facility
was estimated to approximate carrying value.
The Credit Agreement contains a number of covenants that limit, among other
things, the payment of dividends, the incurrence of additional indebtedness,
the incurrence of operating or capital lease obligations and the purchase of
operating property. The 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 Credit Agreement, and Interest
and Fixed Charge Coverages, as therein defined. Under the most restrictive
covenant, Landstar exceeded the required minimum Interest Charge Coverage
level by approximately $2,345,000 at December 28, 1996. The Credit Agreement
limits the payment of dividends in any fiscal year to the lesser of 50% of
Excess Cash Flow, as therein defined, or 25% of Consolidated Net Income, as
therein defined.
The Credit Agreement provides a number of events of default related to a
person or group of persons 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 Credit Agreement are unsecured, however, the Company and
each of LSHI's subsidiaries guarantee LSHI's obligations under the Credit
Agreement.
The amount outstanding on the Acquisition Facility is payable upon expiration
of the Credit Agreement. There are no other installments of long-term debt,
excluding capital lease obligations, maturing in the next five years.
Landstar paid interest of $7,180,000 in 1996, $7,359,000 in 1995 and
$4,286,000 in 1994.
(8) Leases
The future minimum lease payments under all noncancellable leases at
December 28, 1996, principally for revenue equipment, are shown in the
following table (in thousands):
Capital Operating
Leases Leases
------- ---------
1997 $26,920 $ 2,762
1998 20,889 1,762
1999 12,833 1,266
2000 6,828 540
2001 1,680 282
Thereafter 209
------- ---------
69,150 $ 6,821
=========
Less amount representing interest
(6.0% to 10.7%) 7,254
Present value of minimum -------
lease payments $61,896
=======
Total rent expense, net of sublease income, was $16,778,000 in 1996,
$16,127,000 in 1995 and $14,779,000 in 1994.
(9) Stock Option Plans
The Company maintains two stock option plans. Under the 1993 Stock Option
Plan (the "Plan"), the Compensation Committee of the Board of Directors may
grant options to Company employees for up to 615,000 shares of common stock.
Under the 1994 Directors Stock Option Plan (the "DSOP"), outside members of
the Board of Directors will be granted up to an aggregate of 120,000 options
to purchase common stock. Under the DSOP, each outside Director will be
granted 12,000 options to purchase common stock upon election or re-election
to the Board of Directors.
Options granted become exercisable in five equal annual installments under the
Plan 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 28, 1996, there were
723,800 shares of the Company's stock reserved for issuance upon exercise of
options granted under the plans.
Information regarding the Company's stock option plans is as follows:
Options Outstanding Options Exercisable
--------------------------- --------------------------
Weighted Average Weighted Average
Exercise Price Exercise Price
Shares Per Share Shares Per Share
-------- ----------------- -------- ----------------
Options at December 25, 1993 186,000 $ 18.33
Granted 203,000 $ 25.50
-------
Options at December 31, 1994 389,000 $ 22.07 37,200 $ 18.33
Granted 212,000 $ 30.06
Forfeited (1,500) $ 25.50
-------
Options at December 30, 1995 599,500 $ 24.89 121,100 $ 21.10
Granted 35,000 $ 27.53
Exercised (11,200) $ 18.50
Forfeited (110,400) $ 26.94
--------
Options at December 28, 1996 512,900 $ 24.77 201,000 $ 23.10
========
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 1996 and 1995: expected volatility of 39%, risk free interest
rate of 6.0%, expected lives of 5 years and no dividend yield. The weighted
average grant date fair value of stock options granted was $12.06 and $13.20
per share in 1996 and 1995, respectively.
The following table summarizes stock options outstanding at December 28,1996:
Options Outstanding
-------------------
Range of Exercise Weighted Average Weighted Average
Prices Number Outstanding Remaining Contractual Exercise Price
Per Share Dec. 28, 1996 Life (years) Per Share
----------------- ------------------ --------------------- ----------------
$14.625 - $21.50 143,000 7.0 $ 18.47
$21.50 - $32.25 369,900 8.5 $ 27.20
----------------
$14.625 - $32.25 512,900 8.1 $ 24.77
================
Options Exercisable
-------------------
Range of Exercise Number Weighted Average
Prices Exercisable Exercise Price
Per Share Dec. 28, 1996 Per Share
----------------- ------------------ ----------------
$14.625 - $21.50 84,600 $ 18.47
$21.50 - $32.25 116,400 $ 26.46
----------------
$14.625 - $32.25 201,000 $ 23.10
================
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 Financial Accounting Standards Board Statement No. 123,
Accounting for Stock-based Compensation, the effect on net income and earnings
per share for fiscal years 1996 and 1995 would not have been material.
(10) Shareholders' Equity
The Company has 2,000,000 shares of preferred stock authorized and unissued.
Under the terms of a Shareholder Rights Agreement (the "Agreement"), 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.
(11) Commitments and Contingencies
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.
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 28, 1996 and December 30, 1995, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the fiscal years ended December 28, 1996, December 30, 1995,
and December 31, 1994. 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 generally accepted auditing
standards. 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 28, 1996 and December 30, 1995, and the
results of their operations and their cash flows for the fiscal years ended
December 28, 1996, December 30, 1995 and December 31, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 12, 1997
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
QUARTERLY FINANCIAL DATA
(Dollars in thousands, except per share amounts)
Fourth Third Second First
Quarter Quarter Quarter Quarter
1996 (1) 1996 1996 1996
-------- -------- -------- --------
Revenue $329,017 $330,195 $329,112 $295,477
======== ======== ======== ========
Operating income $ 3,185 $ 15,261 $ 14,118 $ 7,333
-------- -------- -------- --------
Income before income taxes $ 1,547 $ 13,325 $ 12,067 $ 5,411
Income taxes 484 5,631 5,053 2,257
-------- -------- -------- --------
Net income $ 1,063 $ 7,694 $ 7,014 $ 3,154
======== ======== ======== ========
Net income per share $ 0.08 $ 0.60 $ 0.55 $ 0.25
======== ======== ======== ========
Fourth Third Second First
Quarter Quarter Quarter Quarter
1995 1995 1995 1995
-------- -------- -------- --------
Revenue $302,132 $298,681 $308,148 $295,706
======== ======== ======== ========
Operating income $ 10,792 $ 14,166 $ 15,352 $ 9,698
-------- -------- -------- --------
Income before income taxes $ 8,891 $ 12,185 $ 13,210 $ 8,170
Income taxes 3,682 5,009 5,390 3,413
-------- -------- -------- --------
Net income $ 5,209 $ 7,176 $ 7,820 $ 4,757
======== ======== ======== ========
Net income per share $ 0.41 $ 0.56 $ 0.61 $ 0.37
======== ======== ======== ========
(1) Includes pre-tax restructuring costs of $7,263. After deducting related
income tax benefits of $3,014, the restructuring charges reduced net income by
$4,249, or $0.33 per share.
LANDSTAR SYSTEM, INC. AND SUBSIDIARY
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
Fiscal Year
----------------------------------------------------------
1996 1995 1994 1993 1992
Income Statement Data:
Revenue $1,283,801 $1,204,667 $984,359 $ 780,520 $672,450
Costs and expenses:
Purchased transportation 885,500 813,003 653,076 500,368 426,137
Drivers' wages & benefits 41,210 47,970 38,287 37,124 35,354
Fuel and other operating costs 70,207 67,861 53,627 55,376 55,209
Insurance and claims 36,495 37,816 35,413 30,314 21,238
Commissions to agents and brokers 87,935 73,974 61,542 45,965 37,783
Selling, general and administrative 91,267 93,194 83,143 68,390(2) 62,019
Depreciation and amortization 24,027 20,841 13,509 12,759 11,839
Restructuring costs 7,263
---------- --------- ------- --------- --------
Total costs and expenses 1,243,904 1,154,659 938,597 750,296 649,579
---------- --------- ------- --------- --------
Operating income 39,897 50,008 45,762 30,224 22,871
Interest and debt expense, net 7,547 7,552 4,134 5,711 9,701
---------- --------- ------- --------- --------
Income before income taxes and
extraordinary loss 32,350 42,456 41,628 24,513 13,170
Income taxes 13,425 17,494 17,221 10,955 6,820
---------- --------- ------- --------- --------
Income before extraordinary loss 18,925 24,962 24,407 13,558 6,350
Extraordinary loss (1,830)(3)
---------- --------- ------- --------- --------
Net income $ 18,925(1) $ 24,962 $24,407 $ 11,728 $ 6,350
========== ========= ======= ======== ========
Earnings per share:
Income before extraordinary loss $ 1.48(1) $ 1.95 $ 1.90 $ 1.14 (2) $ 0.67
Extraordinary loss (0.15)(3)
========== ========= ======= ======== ========
Net income $ 1.48(1) $ 1.95 $ 1.90 $ 0.99(2),(4)$ 0.67
========== ========= ======= ======== ========
Dec. 28, Dec. 30, Dec. 31, Dec. 25, Dec. 26,
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Balance Sheet Data:
Total assets $ 370,801 $ 353,079 $ 267,084 $ 219,412 $ 181,078
Long-term debt, including
current maturities 90,396 93,867 43,680 48,074 68,307
Warrants 2,899
Shareholders' equity 147,557 128,396 105,161 80,754 29,857
(1) After deducting related income tax benefits of $3,014, the
restructuring charges reduced net income by $4,249, or $0.33
per share.
(2) Included in selling, general and administrative costs in
1993 are one-time charges in the amount of $1,200 for the
termination of consulting and management services agreements
with two parties in interest. After deducting related income
tax benefits of $504, these charges reduced earnings per share
by $.06 per share.
(3) Represents the after-tax loss on the early extinguishment
of the Company's 14% senior subordinated notes.
(4) If the initial public offering and the redemption of the
Company's 14% senior subordinated notes had taken place at the
beginning of 1993, net income per share for 1993 would have
been $1.16.