##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the Fiscal Year Ended December 25, 2004                                                 
|          
|or        
|          
|o          |  | 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 of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|13410 Sutton Park Drive South
    Jacksonville, Florida            |  | 32224(Zip Code)                         
|(Address of principal executive offices)                           |  |                                         

(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, $0.01 Par Value


(Title of Class)


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE




|                                                                                                                  |  |                         |          | 
|----------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -------- | 
|                                                                                                                  |  | Part of 10-K            |         
|Document                                                                                                          |  | Into Which Incorporated |         
|                                                                                                                  |  |                         |         
|Proxy Statement relating to Landstar System, Inc.s Annual
    Meeting of Shareholders to be held on May 12, 2005 |  |                         | Part III | 









---










LANDSTAR SYSTEM, INC.


2004 ANNUAL REPORT ON FORM 10-K


TABLE OF CONTENTS


|                                                           |  |                                                                                                                      |    |      |    | 
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                           |  |                                                                                                                      |    | Page |   
|                                                           |  |                                                                                                                      |    |      |   
|PART I                                                    
|Item 1.                                                    |  | Business                                                                                                             |    |      | 2  | 
|Item 2.                                                    |  | Properties                                                                                                           |    |      | 9  | 
|Item 3.                                                    |  | Legal Proceedings                                                                                                    |    |      | 9  | 
|Item 4.                                                    |  | Submission of Matters to a Vote of Security
    Holders                                                              |    |      | 10 | 
|                                                          
|PART II                                                   
|Item 5.                                                    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |    |      | 10 | 
|Item 6.                                                    |  | Selected Financial Data                                                                                              |    |      | 11 | 
|Item 7.                                                    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |    |      | 12 | 
|Item 7a.                                                   |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |    |      | 26 | 
|Item 8.                                                    |  | Financial Statements and Supplementary
    Data                                                                      |    |      | 28 | 
|Item 9.                                                    |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |    |      | 55 | 
|Item 9a.                                                   |  | Controls and Procedures                                                                                              |    |      | 55 | 
|Item 9b.                                                   |  | Other Information                                                                                                    |    |      | 57 | 
|                                                          
|PART III                                                  
|Item 10.                                                   |  | Directors and Executive Officers of the
    Registrant                                                               |    |      | 57 | 
|Item 11.                                                   |  | Executive Compensation                                                                                               |    |      | 57 | 
|Item 12.                                                   |  | Security Ownership of Certain Beneficial
    Owners and Management                                                   |    |      | 58 | 
|Item 13.                                                   |  | Certain Relationships and Related
    Transactions                                                                   |    |      | 58 | 
|Item 14.                                                   |  | Principal Accounting Fees and Services                                                                               |    |      | 58 | 
|                                                          
|PART IV                                                   
|Item 15.                                                   |  | Exhibits, Financial Statement Schedules                                                                              |    |      | 58 | 
|Signatures                                                 |  |                                                                                                                      | 62 |     
|Form of Key Executive Employment Protection Agreement     
|Amendment to Key Executive Employment Protection Agreement
|Amendment to Key Executive Employment Protection Agreement
|Subsidiaries                                              
|Consent of KPMG LLP                                       
|Powers of Attorney                                        
|Section 302 CEO Certification                             
|Section 302 CFO Certification                             
|Section 906 CEO Certification                             
|Section 906 CFO Certification                             



1



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General




Historical Background












Description of Business




2



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3



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Factors Significant to the Companys Operations






| |              
| | -------------
| | Agent Network



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Management believes the Company has more independent commission
    sales agents than any other domestic truckload carrier.
    Landstars network of over 1,000 independent commission
    sales agent locations provides the Company with regular contact
    with shippers at the local level and the capability to be highly
    responsive to shippers changing needs. The agent network
    also 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. Through its agent network, the Company believes it offers
    smaller shippers a level of service comparable to that typically
    enjoyed only by 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,

4



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##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | The typical Landstar agent maintains a relationship with a
    number of shippers and services these shippers by providing a
    base of operations for the Companys Independent
    Contractors and other third party capacity providers.
    Independent commission sales agents in the carrier segment
    receive a commission generally between 5% and 8% of the revenue
    they generate if the load is hauled by an Independent Contractor
    and a contractually agreed-upon percent of the revenue or the
    gross profit, defined as revenue less the cost of purchased
    transportation, from each load they generate if hauled by a
    third party trucking company. In most cases, the carrier segment
    independent commission sales agents are paid volume-based
    incentives. Multimodal independent commission sales agents are
    typically paid a contractually agreed-upon percentage of the
    gross profit from each load they generate.
|
| | The Companys primary day to day contact with its customers
    is through its agents and not through employees of the Company.
    Nevertheless, it is important to note that each Operating
    Subsidiary contracts directly with customers and generally
    assumes the credit risk and liability for freight losses or
    damages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | The carrier segments independent commission sales agents
    use the Companys Landstar Electronic Administrative
    Dispatch System (LEADS) software program which enables these
    agents to enter available freight, dispatch capacity and process
    most administrative procedures and then communicate that
    information to Landstar and its capacity providers via the
    internet. The multimodal segments independent commission
    sales agents use other Landstar proprietary software to process
    customer shipments and communicate the necessary information to
    third party capacity providers 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 Operating Subsidiaries emphasize programs to support the
    agents operations and to establish pricing parameters. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | During 2004, 427 agents generated revenue for Landstar of at
    least $1 million each, or approximately $1.9 billion
    of Landstars total revenue, and one agent generated
    approximately $200,000,000 of Landstars total revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Although the Company typically enters into non-exclusive
    contractual relationships with its independent commission sales
    agents, management believes that the majority of the agents who
    generate revenue of $1 million or more choose to represent
    Landstar exclusively. Historically, Landstar has experienced
    very limited agent turnover among its larger-volume agents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |         
| | --------
| | Capacity



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company relies exclusively on independent third parties for
    its hauling capacity. These third party capacity providers
    consist of Independent Contractors, unrelated trucking
    companies, air and ocean cargo carriers and railroads.
    Landstars use of capacity provided by its Independent
    Contractors and other third party capacity providers allows it
    to maintain a lower level of capital investment, resulting in
    lower fixed costs. Historically, with the exception of air
    revenue, the margin generated from freight hauled by Independent
    Contractors has been greater than from freight hauled by other
    third party capacity providers.
|
| | Independent Contractors. Management believes the Company
    has the largest fleet of truckload Independent Contractors in
    the United States. This provides marketing, operating, safety,
    recruiting, retention and financial advantages to the Company.
    The Companys 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 only a                                                                                                                                                                      

5



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | tractor and from 73% to 79% where the Independent Contractor
    provides both a tractor and a trailer. The Independent
    Contractor must pay substantially all of 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
    rate, size, origin and destination when planning trips.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | The Landstar Contractors Advantage Purchasing Program
    leverages Landstars purchasing power to provide discounts
    to eligible 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 primarily trailing equipment
    and mobile communication equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Trucks provided to the Company by the Independent Contractors
    were 8,677 at December 25, 2004 compared to 8,573 at
    December 27, 2003. The number of trucks provided by
    Independent Contractors fluctuates daily as a result of truck
    recruiting and truck terminations. Trucks recruited were lower
    in 2004 than in 2003, however, lower truck terminations in 2004
    resulted in a net gain of 104 trucks. Landstars truck
    turnover ratio was approximately 35% in 2004 compared to 45% in
    2003. More than half 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 have historically favorably impacted 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 that a
    reduction in the amount of available freight may cause an
    increase in truck turnover.
|
| | Other Third Party Truck Capacity. The Company maintains a
    database of over 18,000 qualified other third party truck
    capacity providers who provide additional truck hauling capacity
    to the Company. Other third party truck capacity providers are
    paid either a negotiated rate for each load they haul or a
    contractually agreed-upon amount per load. The Company recruits,
    qualifies, establishes contracts with, tracks safety ratings and
    service records of and generally maintains the relationships
    with these third party trucking companies. In addition to
    augmenting the Companys capability during periods of
    extraordinary demand and traffic lane imbalance, the use of
    third party carriers enables the Company to pursue different
    types and quality of freight such as temperature-controlled,
    short-haul traffic and, in certain instances, lower priced
    freight that would generally not be handled by the
    Companys Independent Contractors.                                                                                                      
|
| | The Landstar Savings Plus Program leverages Landstars
    purchasing power to provide discounts to eligible other third
    party trucking companies when they purchase fuel and equipment
    and provides the other third party trucking companies with an
    electronic payment option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Third Party Rail, Air and Ocean Capacity. The Company
    maintains contractual relationships with various railroads and
    air cargo capacity providers. These relationships allow the
    Company to pursue the freight best serviced by these forms of
    transportation capacity. Railroads and air and ocean cargo
    carriers are generally paid a contractually fixed amount per
    load.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| |                              
| | -----------------------------
| | Diversity of Services Offered



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company offers its customers a wide range of transportation
    services through the Operating Subsidiaries, including a fleet
    of diverse trailing equipment and extensive geographic coverage.
    Specialized services offered by the Company include those
    provided by a large fleet of flatbed trailers, multi-axle
    trailers capable of hauling extremely heavy or oversized loads,
    drivers certified to handle ammunition and explosives shipments
    for the U.S. Department of Defense, emergency and expedited
    surface and air cargo services and intermodal capability with
    railroads and, to a lesser extent, steamship lines.

6



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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | The following table illustrates the diversity of the trailing
    equipment available to the Company as of December 25, 2004:

|                                                        |       |  |        |        | 
|------------------------------------------------------- | ----- |  | ------ | ------ | 
|Trailers by Type                                        |       | 
|                                                        |       | 
|Vans                                                    |       |  | 10,204 |       
|Temperature-controlled                                  |       |  | 127    |       
|Flatbeds, including step decks, drop decks and low boys |       |  | 3,904  |       
|                                                        |       |  |       
|                                                        | Total |  |        | 14,235 | 
|                                                        |       |  |       



| |           
| | ----------
| | Technology



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Management believes leadership in the development and
    application of technology is an ongoing part of providing high
    quality service at competitive prices. The Companys focus
    is on developing and implementing software applications which
    are designed to improve its operational and administrative
    efficiency, assist its independent commission sales agents in
    sourcing capacity and assist its third party capacity providers
    in identifying desirable freight. Landstar manages its
    technology programs centrally through its information services
    department.
|
| | The Companys information technology systems used in
    connection with its operations are located in Jacksonville,
    Florida and, to a lesser extent, in Rockford, Illinois. Landstar
    relies, in the regular course of its business, on the proper
    operation of its information technology systems.                                                                                                                                                                                                                                                                                             



| |                   
| | ------------------
| | Corporate Services



| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Management believes that significant advantages result from the
    collective expertise and corporate services afforded by
    Landstars corporate management. The primary services
    provided are:

|                                      |  |                                              
|------------------------------------- |  | ---------------------------------------------
|accounting,
    budgeting and taxes   |  | quality programs                             
|finance                               |  | risk management insurance services           
|human
    resource management         |  | safety                                       
|legal                                 |  | strategic planning                           
|operator
    and equipment compliance |  | technology and management information systems
|purchasing                            |  |                                              



| |            
| | -----------
| | Competition



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Landstar competes primarily in the transportation services
    industry with truckload carriers, intermodal transportation
    service providers, railroads, less-than-truckload carriers,
    third party broker carriers and other non-asset based
    transportation service providers. The transportation services
    industry is extremely competitive and fragmented.                                                                                                                 
|
| | 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.



| |                     
| | --------------------
| | Insurance and Claims



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Potential liability associated with accidents in the trucking
    industry is severe and occurrences are unpredictable.
    Landstars retained liability for individual commercial
    trucking claims depends on when such claims are incurred. For
    commercial trucking claims incurred subsequent to March 30,
    2004, Landstar retains liability up to $5,000,000 per
    occurrence. For commercial trucking claims incurred from
    June 19, 2003 through March 30, 2004, Landstar retains
    liability up to $10,000,000 per occurrence. For commercial
    trucking claims incurred from May 1, 2001 through
    June 18, 2003,

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Landstar retains liability up to $5,000,000 per occurrence. For
    commercial trucking claims incurred prior to May 1, 2001,
    Landstar retains liability up to $1,000,000 per occurrence. 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s
    exposure to liability associated with accidents incurred by
    other third party capacity providers who haul freight on behalf
    of the Company is reduced by various factors including the
    extent to which they maintain their own insurance coverage. A
    material increase in the frequency or severity of accidents,
    cargo or workers compensation claims or the unfavorable
    development of existing claims could be expected to materially
    adversely affect Landstars results of operations.

Dependence on Third Party
Insurance Companies




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company is dependent on a limited number of third party
    insurance companies to provide insurance coverage in excess of
    its self-insured retention amounts. Historically, the Company
    has relied on various third party insurance companies to provide
    insurance coverage for commercial trucking claims in excess of
    specific per occurrence limits. Over the past three years, the
    premiums proposed by the third party insurance companies
    providing coverage for commercial trucking liability insurance
    over the Companys self insured retention amounts have
    varied dramatically. In an attempt to manage the cost of these
    increasing premiums required by the third party insurance
    companies, the Company has historically increased or decreased
    the level of its exposure to commercial trucking claims on a per
    occurrence basis. To the extent that the third party insurance
    companies increase their proposed premiums for coverage of
    commercial trucking claims, the Company may increase its
    exposure on a per occurrence basis. However, to the extent the
    third party insurance companies reduce their premiums proposed
    for coverage of commercial trucking claims, the Company may
    reduce its exposure on a per occurrence basis.

Regulation




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Each of the Operating Subsidiaries is a motor carrier which is
    regulated by the Federal Motor Carrier Safety Administration
    (FMCSA) and by various state agencies. The FMCSA has broad
    regulatory powers, with respect to activities such as motor
    carrier operations, practices, 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 the possibility of more 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 FMCSA. Each of the Companys
    drivers are required to have a commercial drivers license
    and is subject to mandatory drug and alcohol testing. The
    FMCSAs commercial drivers license and drug and
    alcohol testing requirements have not adversely affected the
    Companys ability to source the capacity necessary to meet
    its customers transportation needs.                                                                               

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.

8



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Employees




| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of December 25, 2004, the Company and its subsidiaries
    employed 1,251 individuals. Approximately 31 Landstar Ranger
    drivers (out of a Company total of 8,677) are members of the
    International Brotherhood of Teamsters. The Company considers
    relations with its employees to be good.




Item 2.     Properties









Item 3.     Legal
Proceedings






9



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|               |  |                   |        |  |                   |   |        |      |  |   |        |  |  |   |        | 
|-------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|               |  | 2004 Market Price |        |  | 2003 Market Price |  
|               |  |                   |        |  |                   |  
|Fiscal Period  |  | High              |        |  | Low               |   |        | High |  |   | Low    | 
|               |  |                   |        |  |                   |   |        |      |  |   |        | 
|First Quarter  |  | $                 | 20.870 |  |                   | $ | 17.000 |      |  | $ | 15.425 |  |  | $ | 12.760 | 
|Second Quarter |  |                   | 26.110 |  |                   |   | 20.260 |      |  |   | 16.498 |  |  |   | 13.700 | 
|Third Quarter  |  |                   | 28.590 |  |                   |   | 23.140 |      |  |   | 16.975 |  |  |   | 14.625 | 
|Fourth Quarter |  |                   | 37.495 |  |                   |   | 27.125 |      |  |   | 19.975 |  |  |   | 15.255 | 











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|                                                           |  |                      |           |  |                     |                      |                         |                       |  |  |           | 
|---------------------------------------------------------- |  | -------------------- | --------- |  | ------------------- | -------------------- | ----------------------- | --------------------- |  |  | --------- | 
|                                                           |  |                      |           |  |                     | Number of Securities |                        
|                                                           |  | Number of Securities |           |  |                     |                      | Remaining Available for |                      
|                                                           |  | to be Issued Upon    |           |  | Weighted-average    |                      |                         | Future Issuance Under | 
|                                                           |  | Exercise of          |           |  | Exercise Price of   |                      |                         | Equity Compensation   | 
|Plan Category                                              |  | Outstanding Options  |           |  | Outstanding Options |                      |                         | Plans                 | 
|                                                           |  |                      |           |  |                     |                      |                         |                       | 
|Equity Compensation Plans Approved by Security Holders     |  |                      | 3,115,764 |  |                     | $                    | 12.3061                 |                       |  |  | 5,355,360 | 
|Equity Compensation Plans Not Approved by Security Holders |  |                      | 0         |  |                     |                      | 0                       |                       |  |  | 0         | 






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

LANDSTAR SYSTEM, INC. AND SUBSIDIARY


SELECTED CONSOLIDATED FINANCIAL DATA


(Dollars in thousands, except per share amounts)


|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |           |           |           |   |           |           |           | 
|----------------------------- | ----------------------------------- | ------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | --------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                              |                                     | Fiscal Years             |          
|                              |                                     |                          |          
|Income Statement Data:        |                                     | 2004                     |           |           | 2003      |   |           | 2002      |           |   | 2001      |           |           | 2000 |          
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|Revenue                       |                                     | $                        | 2,019,936 |           |           | $ | 1,596,571 |           |           | $ | 1,506,555 |           |           | $    | 1,392,771 |           |           | $ | 1,418,492 |          
|Investment income             |                                     |                          | 1,346     |           |           |   | 1,220     |           |           |   | 1,950     |           |           |      | 3,567     |           |           |   | 4,317     |          
|Costs and expenses:           |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |           |           |           |   |           |          
|                              | Purchased transportation            |                          |           | 1,510,963 |           |   |           | 1,185,043 |           |   |           | 1,116,009 |           |      |           | 1,030,454 |           |   |           | 1,046,183 |          
|                              | Commissions to agents               |                          |           | 161,011   |           |   |           | 125,997   |           |   |           | 118,864   |           |      |           | 110,513   |           |   |           | 113,721   |          
|                              | Other operating costs               |                          |           | 37,130    |           |   |           | 37,681    |           |   |           | 34,325    |           |      |           | 32,750    |           |   |           | 29,568    |          
|                              | Insurance and claims                |                          |           | 60,339    |           |   |           | 45,690    |           |   |           | 42,188    |           |      |           | 32,930    |           |   |           | 31,935    |          
|                              | Selling, general and administrative |                          |           | 118,461   |           |   |           | 105,849   |           |   |           | 101,918   |           |      |           | 99,762    |           |   |           | 105,786   |          
|                              | Depreciation and amortization       |                          |           | 13,959    |           |   |           | 12,736    |           |   |           | 11,520    |           |      |           | 13,543    |           |   |           | 13,003    |          
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|                              |                                     | Total costs and expenses |           |           | 1,901,863 |   |           |           | 1,512,996 |   |           |           | 1,424,824 |      |           |           | 1,319,952 |   |           |           | 1,340,196 | 
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|Operating income              |                                     |                          | 119,419   |           |           |   | 84,795    |           |           |   | 83,681    |           |           |      | 76,386    |           |           |   | 82,613    |          
|Interest and debt expense     |                                     |                          | 3,025     |           |           |   | 3,240     |           |           |   | 4,292     |           |           |      | 6,802     |           |           |   | 9,127     |          
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|Income before income taxes    |                                     |                          | 116,394   |           |           |   | 81,555    |           |           |   | 79,389    |           |           |      | 69,584    |           |           |   | 73,486    |          
|Income taxes                  |                                     |                          | 44,522    |           |           |   | 30,855    |           |           |   | 30,168    |           |           |      | 26,790    |           |           |   | 28,292    |          
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|Net income                    |                                     | $                        | 71,872    |           |           | $ | 50,700    |           |           | $ | 49,221    |           |           | $    | 42,794    |           |           | $ | 45,194    |          
|                              |                                     |                          |           |           |           |   |           |           |           |   |           |           |           |      |          
|Earnings per common share(1)  |                                     | $                        | 1.19      |           |           | $ | 0.82      |           |           | $ | 0.76      |           |           | $    | 0.64      |           |           | $ | 0.64      |          
|Diluted earnings per share(1) |                                     | $                        | 1.16      |           |           | $ | 0.79      |           |           | $ | 0.73      |           |           | $    | 0.63      |           |           | $ | 0.63      |          






|    |                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All earnings per share amounts have been adjusted to give
    retroactive effect to a two-for-one stock split effected in the
    form of a 100% stock dividend declared December 9, 2004.

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|                                             |  |          |         |  |          |   |         |          |  |   |          |  |  |          |         |  |  |   |         | 
|-------------------------------------------- |  | -------- | ------- |  | -------- | - | ------- | -------- |  | - | -------- |  |  | -------- | ------- |  |  | - | ------- | 
|                                             |  | Dec. 25, |         |  | Dec. 27, |   |         | Dec. 28, |  |   | Dec. 29, |  |  | Dec. 30, |        
|Balance Sheet Data:                          |  | 2004     |         |  | 2003     |   |         | 2002     |  |   | 2001     |  |  | 2000     |        
|                                             |  |          |         |  |          |   |         |          |  |   |          |  |  |          |        
|Total assets                                 |  | $        | 584,512 |  |          | $ | 438,457 |          |  | $ | 400,748  |  |  | $        | 364,651 |  |  | $ | 370,362 | 
|Long-term debt, including current maturities |  |          | 92,090  |  |          |   | 91,456  |          |  |   | 77,360   |  |  |          | 101,874 |  |  |   | 94,643  | 
|Shareholders equity                         |  |          | 212,839 |  |          |   | 142,515 |          |  |   | 149,093  |  |  |          | 117,440 |  |  |   | 107,859 | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Introduction














| |                                                         
| | --------------------------------------------------------
| | Changes in Financial Condition and Results of Operations



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|                                                                       |  |             |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------------------- |  | ----------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                       |  | Fiscal Year |          
|                                                                       |  |             |          
|                                                                       |  | 2004        |           |   | 2003 |   |           | 2002 | 
|                                                                       |  |             |           |   |      |   |           |      | 
|Number of Million Dollar Agents                                        |  |             | 427       |   |      |   | 396       |      |  |   | 384       |  
|                                                                       |  |             |           |   |      |   |           |      | 
|Average revenue generated per Million Dollar Agent                     |  | $           | 4,374,000 |   |      | $ | 3,584,000 |      |  | $ | 3,483,000 |  
|                                                                       |  |             |           |   |      |   |           |      | 
|Percent of consolidated revenue generated by Million Dollar
    Agents |  |             | 92        | % |      |   | 89        | %    |  |   | 89        | %
|                                                                       |  |             |           |   |      |   |           |      | 



|                    |                                                    |                                            |           |           |           |   |           |           |           |   |           |           |           | 
|------------------- | -------------------------------------------------- | ------------------------------------------ | --------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                    |                                                    | Fiscal Year                                |          
|                    |                                                    |                                            |          
|                    |                                                    | 2004                                       |           |           | 2003      |   |           | 2002      |          
|                    |                                                    |                                            |           |           |           |   |           |           |          
|Carrier Segment:    |                                                    |                                            |           |           |           |   |           |           |           |   |           |          
|                    | External revenue generated through (in thousands): |                                            |           |           |           |   |           |           |           |   |           |           |          
|                    |                                                    | Independent Contractors                    |           | $         | 1,191,605 |   |           | $         | 1,052,346 |   |           | $         | 1,038,298 | 
|                    |                                                    | Other third party truck capacity providers |           |           | 263,257   |   |           |           | 174,825   |   |           |           | 139,965   | 
|                    |                                                    |                                            |           |           |           |   |           |           |          
|                    |                                                    | $                                          | 1,454,862 |           |           | $ | 1,227,171 |           |           | $ | 1,178,263 |          
|                    |                                                    |                                            |           |           |           |   |           |           |          
|                    | Number of loads(1)                                 |                                            |           | 1,046,000 |           |   |           | 1,007,000 |           |   |           | 1,012,000 |          
|                    | Revenue per load                                   |                                            | $         | 1,391     |           |   | $         | 1,219     |           |   | $         | 1,164     |          
|                    | Revenue per revenue mile                           |                                            | $         | 1.79      |           |   | $         | 1.72      |           |   | $         | 1.66      |          
|                    | Average length of haul (miles)                     |                                            |           | 779       |           |   |           | 707       |           |   |           | 700       |          
|Multimodal Segment: |                                                    |                                            |           |           |           |   |           |           |           |   |           |          
|                    | External revenue generated through (in thousands): |                                            |           |           |           |   |           |           |           |   |           |           |          
|                    |                                                    | Independent Contractors(2)                 |           | $         | 105,815   |   |           | $         | 53,766    |   |           | $         | 55,816    | 
|                    |                                                    | Other third party truck capacity providers |           |           | 308,106   |   |           |           | 182,333   |   |           |           | 143,317   | 
|                    |                                                    | Rail, Air and Ocean Carriers               |           |           | 121,001   |   |           |           | 105,142   |   |           |           | 101,583   | 
|                    |                                                    |                                            |           |           |           |   |           |           |          
|                    |                                                    | $                                          | 534,922   |           |           | $ | 341,241   |           |           | $ | 300,716   |          
|                    |                                                    |                                            |           |           |           |   |           |           |          
|Number of loads(3)  |                                                    |                                            | 324,000   |           |           |   | 256,000   |           |           |   | 262,000   |          
|Revenue per load(3) |                                                    | $                                          | 1,454     |           |           | $ | 1,332     |           |           | $ | 1,150     |          

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|    |                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Effective with the 2004 second quarter, the Company modified its
    methodology for reporting loads. The application of this new
    methodology to the 2003 and 2002 fiscal year periods resulted in
    an increase of 3,000 and 7,000 loads, respectively. This change
    in load recognition had no impact on reported revenue in any
    period.                                          
|   
|(2) | Includes revenue generated through Carrier Segment Independent
    Contractors.                                                                                                                                                                                                                                                                                                                  
|   
|(3) | Number of loads and revenue per load for the 2004 fiscal year
    exclude the effect of $63,790,000 of revenue derived from
    disaster relief efforts provided primarily under a contract with
    the United States Federal Aviation Administration
    (FAA) as discussed further in the paragraphs that
    follow. (See the section Use of Non-GAAP Financial
    Measures on page 18.)



|                                                     |                        |          |        |        |          |  |        |          |  |  |        |       | 
|---------------------------------------------------- | ---------------------- | -------- | ------ | ------ | -------- |  | ------ | -------- |  |  | ------ | ----- | 
|                                                     |                        | Dec. 25, |        |        | Dec. 27, |  |        | Dec. 28, | 
|                                                     |                        | 2004     |        |        | 2003     |  |        | 2002     | 
|                                                     |                        |          |        |        |          |  |        |          | 
|Independent Contractors                              |                        |          | 7,800  |        |          |  | 7,584  |          |  |  | 7,365  |      
|Other third party truck capacity providers:          |                        |          |        |        |          |  |        |          |  |  |        |      
|                                                     | Approved and active(1) |          |        | 11,077 |          |  |        | 9,296    |  |  |        | 8,610 | 
|                                                     | Other approved         |          |        | 7,144  |          |  |        | 6,240    |  |  |        | 5,310 | 
|                                                     |                        |          |        |        |          |  |        |          | 
|                                                     |                        |          | 18,221 |        |          |  | 15,536 |          |  |  | 13,920 |      
|                                                     |                        |          |        |        |          |  |        |          | 
|Total available truck capacity providers             |                        |          | 26,021 |        |          |  | 23,120 |          |  |  | 21,285 |      
|                                                     |                        |          |        |        |          |  |        |          | 
|Number of trucks provided by Independent Contractors |                        |          | 8,677  |        |          |  | 8,573  |          |  |  | 8,402  |      
|                                                     |                        |          |        |        |          |  |        |          | 






|    |                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Active refers to other third party truck capacity providers who
    moved at least one load in the 180 days immediately
    preceding the fiscal year end.







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|                           |                                     |                          |       |      |      |  |       |      |      |  |       |      |      | 
|-------------------------- | ----------------------------------- | ------------------------ | ----- | ---- | ---- |  | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                           |                                     | Fiscal Year              |      
|                           |                                     |                          |      
|                           |                                     | 2004                     |       |      | 2003 |  |       | 2002 |     
|                           |                                     |                          |       |      |      |  |       |      |     
|Revenue                    |                                     |                          | 100.0 | %    |      |  | 100.0 | %    |      |  | 100.0 | %   
|Investment income          |                                     |                          | 0.1   |      |      |  | 0.1   |      |      |  | 0.1   |     
|Costs and expenses:        |                                     |                          |       |      |      |  |       |      |      |  |       |     
|                           | Purchased transportation            |                          |       | 74.8 |      |  |       | 74.2 |      |  |       | 74.1 |     
|                           | Commissions to agents               |                          |       | 8.0  |      |  |       | 7.9  |      |  |       | 7.9  |     
|                           | Other operating costs               |                          |       | 1.8  |      |  |       | 2.4  |      |  |       | 2.3  |     
|                           | Insurance and claims                |                          |       | 3.0  |      |  |       | 2.9  |      |  |       | 2.8  |     
|                           | Selling, general and administrative |                          |       | 5.9  |      |  |       | 6.6  |      |  |       | 6.7  |     
|                           | Depreciation and amortization       |                          |       | 0.7  |      |  |       | 0.8  |      |  |       | 0.7  |     
|                           |                                     |                          |       |      |      |  |       |      |     
|                           |                                     | Total costs and expenses |       |      | 94.2 |  |       |      | 94.8 |  |       |      | 94.5 | 
|                           |                                     |                          |       |      |      |  |       |      |     
|Operating income           |                                     |                          | 5.9   |      |      |  | 5.3   |      |      |  | 5.6   |     
|Interest and debt expense  |                                     |                          | 0.1   |      |      |  | 0.2   |      |      |  | 0.3   |     
|                           |                                     |                          |       |      |      |  |       |      |     
|Income before income taxes |                                     |                          | 5.8   |      |      |  | 5.1   |      |      |  | 5.3   |     
|Income taxes               |                                     |                          | 2.2   |      |      |  | 1.9   |      |      |  | 2.0   |     
|                           |                                     |                          |       |      |      |  |       |      |     
|Net income                 |                                     |                          | 3.6   | %    |      |  | 3.2   | %    |      |  | 3.3   | %   
|                           |                                     |                          |       |      |      |  |       |      |     



| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Fiscal Year Ended December 25, 2004 Compared to
    Fiscal Year Ended December 27, 2003







16



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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Fiscal Year Ended December 27, 2003 Compared to Fiscal
    Year Ended December 28, 2002



17



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| |                                   
| | ----------------------------------
| | Use of Non-GAAP Financial Measures



18



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##### Table of Contents







Capital Resources and Liquidity








19



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1 2














20



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Contractual Obligations and
Commitments




|                          |  |                        |         |           |        |   |        |       |  |     |        |  |           |         |        |  |  |   |       | 
|------------------------- |  | ---------------------- | ------- | --------- | ------ | - | ------ | ----- |  | --- | ------ |  | --------- | ------- | ------ |  |  | - | ----- | 
|                          |  | Payments Due By Period |        
|                          |  |                        |        
|                          |  |                        |         | Less Than |        |   | 1-3    |       |  | 4-5 |        |  | More Than |        
|Contractual Obligation    |  | Total                  |         |           | 1 Year |   |        | Years |  |     | Years  |  |           | 5 Years |       
|                          |  |                        |         |           |        |   |        |       |  |     |        |  |           |         |       
|Long-term debt            |  | $                      | 63,000  |           |        |   |        |       |  |     |        |  |           | $       | 63,000 |  |  |   |       | 
|Capital lease obligations |  |                        | 32,065  |           |        | $ | 9,858  |       |  | $   | 14,934 |  |           |         | 7,273  |  |  |   |       | 
|Operating leases          |  |                        | 41,141  |           |        |   | 7,711  |       |  |     | 14,633 |  |           |         | 9,647  |  |  | $ | 9,150 | 
|                          |  |                        |         |           |        |   |        |       |  |     |        |  |           |         |       
|                          |  | $                      | 136,206 |           |        | $ | 17,569 |       |  | $   | 29,567 |  |           | $       | 79,920 |  |  | $ | 9,150 | 
|                          |  |                        |         |           |        |   |        |       |  |     |        |  |           |         |       



Off-Balance Sheet
Arrangements




Legal Matters




21



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Critical Accounting Policies and Estimates










22



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##### Table of Contents



Effects of Inflation




Seasonality




Recently Issued Accounting Standards Not Currently
Effective






Forward-Looking Statements




23



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##### Table of Contents



Factors That May Affect Future Results and/or Forward-Looking
Statements


Increased severity or frequency of accidents and other
claims.


Dependence on third party insurance companies.


Dependence on independent commission sales agents.


Dependence on third party capacity providers.


24



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##### Table of Contents



Change in Capacity Mix.


Decreased demand for transportation services.


Substantial industry competition.


Dependence on key personnel.


Disruptions or failures in the Companys computer
systems.


Potential changes in fuel taxes.


25



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Status of independent contractors.




Regulatory and legislative changes.







|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7a. | Quantitative and Qualitative Disclosures about Market
    Risk







26



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27



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Item 8.Financial
Statements and Supplementary Data


LANDSTAR SYSTEM, INC. AND SUBSIDIARY


CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except per share amounts)


|                                                                                              |                                                                                                                         |                            |         |          |          |   |         |          |         | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | -------- | - | ------- | -------- | ------- | 
|                                                                                              |                                                                                                                         | Dec. 25,                   |         |          | Dec. 27, |  
|                                                                                              |                                                                                                                         | 2004                       |         |          | 2003     |  
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|ASSETS                                                                                       
|Current Assets                                                                                |                                                                                                                         |                            |         |          |          |   |         |         
|                                                                                              | Cash and cash equivalents                                                                                               |                            | $       | 61,684   |          |   | $       | 42,640   |        
|                                                                                              | Short-term investments                                                                                                  |                            |         | 21,942   |          |   |         | 30,890   |        
|                                                                                              | Trade accounts receivable, less allowance of $4,021 and $3,410                                                          |                            |         | 338,774  |          |   |         | 219,039  |        
|                                                                                              | Other receivables, including advances to independent
    contractors, less allowance of $4,245 and $4,077               |                            |         | 13,929   |          |   |         | 13,196   |        
|                                                                                              | Deferred income taxes and other current assets                                                                          |                            |         | 13,503   |          |   |         | 14,936   |        
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|                                                                                              |                                                                                                                         | Total current assets       |         |          | 449,832  |   |         |          | 320,701 | 
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|Operating property, less accumulated depreciation and
    amortization of $65,315 and $58,480 |                                                                                                                         |                            | 76,834  |          |          |   | 67,639  |         
|Goodwill                                                                                      |                                                                                                                         |                            | 31,134  |          |          |   | 31,134  |         
|Other assets                                                                                  |                                                                                                                         |                            | 26,712  |          |          |   | 18,983  |         
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|Total assets                                                                                  |                                                                                                                         | $                          | 584,512 |          |          | $ | 438,457 |         
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                         
|Current Liabilities                                                                           |                                                                                                                         |                            |         |          |          |   |         |         
|                                                                                              | Cash overdraft                                                                                                          |                            | $       | 23,547   |          |   | $       | 20,523   |        
|                                                                                              | Accounts payable                                                                                                        |                            |         | 120,197  |          |   |         | 71,713   |        
|                                                                                              | Current maturities of long-term debt                                                                                    |                            |         | 8,797    |          |   |         | 9,434    |        
|                                                                                              | Insurance claims                                                                                                        |                            |         | 32,612   |          |   |         | 26,293   |        
|                                                                                              | Accrued compensation                                                                                                    |                            |         | 14,609   |          |   |         | 6,903    |        
|                                                                                              | Other current liabilities                                                                                               |                            |         | 40,317   |          |   |         | 38,320   |        
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|                                                                                              |                                                                                                                         | Total current liabilities  |         |          | 240,079  |   |         |          | 173,186 | 
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|Long-term debt, excluding current maturities                                                  |                                                                                                                         |                            | 83,293  |          |          |   | 82,022  |         
|Insurance claims                                                                              |                                                                                                                         |                            | 32,430  |          |          |   | 27,282  |         
|Deferred income taxes                                                                         |                                                                                                                         |                            | 15,871  |          |          |   | 13,452  |         
|Shareholders Equity                                                                          |                                                                                                                         |                            |         |          |          |   |         |         
|                                                                                              | Common stock, $0.01 par value, authorized 80,000,000 and
    50,000,000 shares, issued 63,154,190 and 31,816,860 shares |                            |         | 632      |          |   |         | 318      |        
|                                                                                              | Additional paid-in capital                                                                                              |                            |         | 43,845   |          |   |         | 18,382   |        
|                                                                                              | Retained earnings                                                                                                       |                            |         | 295,936  |          |   |         | 224,368  |        
|                                                                                              | Cost of 2,490,930 and 1,809,930 shares of common stock in
    treasury                                                  |                            |         | (127,151 | )        |   |         | (100,150 | )      
|                                                                                              | Accumulated other comprehensive income                                                                                  |                            |         | 47       |          |   |         | 182      |        
|                                                                                              | Notes receivable arising from exercises of stock options                                                                |                            |         | (470     | )        |   |         | (585     | )      
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|                                                                                              |                                                                                                                         | Total shareholders equity |         |          | 212,839  |   |         |          | 142,515 | 
|                                                                                              |                                                                                                                         |                            |         |          |          |  
|Total liabilities and shareholders equity                                                    |                                                                                                                         | $                          | 584,512 |          |          | $ | 438,457 |         
|                                                                                              |                                                                                                                         |                            |         |          |          |  



28



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF INCOME


(Dollars in thousands, except per share amounts)


|                                      |                                     |                          |           |            |           |   |           |            |           |   |           |            |           | 
|------------------------------------- | ----------------------------------- | ------------------------ | --------- | ---------- | --------- | - | --------- | ---------- | --------- | - | --------- | ---------- | --------- | 
|                                      |                                     | Fiscal Years Ended       |          
|                                      |                                     |                          |          
|                                      |                                     | Dec. 25,                 |           |            | Dec. 27,  |   |           | Dec. 28,   |          
|                                      |                                     | 2004                     |           |            | 2003      |   |           | 2002       |          
|                                      |                                     |                          |           |            |           |   |           |            |          
|Revenue                               |                                     | $                        | 2,019,936 |            |           | $ | 1,596,571 |            |           | $ | 1,506,555 |           
|Investment income                     |                                     |                          | 1,346     |            |           |   | 1,220     |            |           |   | 1,950     |           
|Costs and expenses:                   |                                     |                          |           |            |           |   |           |            |           |   |           |           
|                                      | Purchased transportation            |                          |           | 1,510,963  |           |   |           | 1,185,043  |           |   |           | 1,116,009  |          
|                                      | Commissions to agents               |                          |           | 161,011    |           |   |           | 125,997    |           |   |           | 118,864    |          
|                                      | Other operating costs               |                          |           | 37,130     |           |   |           | 37,681     |           |   |           | 34,325     |          
|                                      | Insurance and claims                |                          |           | 60,339     |           |   |           | 45,690     |           |   |           | 42,188     |          
|                                      | Selling, general and administrative |                          |           | 118,461    |           |   |           | 105,849    |           |   |           | 101,918    |          
|                                      | Depreciation and amortization       |                          |           | 13,959     |           |   |           | 12,736     |           |   |           | 11,520     |          
|                                      |                                     |                          |           |            |           |   |           |            |          
|                                      |                                     | Total costs and expenses |           |            | 1,901,863 |   |           |            | 1,512,996 |   |           |            | 1,424,824 | 
|                                      |                                     |                          |           |            |           |   |           |            |          
|Operating income                      |                                     |                          | 119,419   |            |           |   | 84,795    |            |           |   | 83,681    |           
|Interest and debt expense             |                                     |                          | 3,025     |            |           |   | 3,240     |            |           |   | 4,292     |           
|                                      |                                     |                          |           |            |           |   |           |            |          
|Income before income taxes            |                                     |                          | 116,394   |            |           |   | 81,555    |            |           |   | 79,389    |           
|Income taxes                          |                                     |                          | 44,522    |            |           |   | 30,855    |            |           |   | 30,168    |           
|                                      |                                     |                          |           |            |           |   |           |            |          
|Net income                            |                                     | $                        | 71,872    |            |           | $ | 50,700    |            |           | $ | 49,221    |           
|                                      |                                     |                          |           |            |           |   |           |            |          
|Earnings per common share(1)          |                                     | $                        | 1.19      |            |           | $ | 0.82      |            |           | $ | 0.76      |           
|                                      |                                     |                          |           |            |           |   |           |            |          
|Diluted earnings per share(1)         |                                     | $                        | 1.16      |            |           | $ | 0.79      |            |           | $ | 0.73      |           
|                                      |                                     |                          |           |            |           |   |           |            |          
|Average number of shares outstanding: |                                     |                          |           |            |           |   |           |            |           |   |           |           
|                                      | Earnings per common share(1)        |                          |           | 60,154,000 |           |   |           | 61,458,000 |           |   |           | 64,565,000 |          
|                                      |                                     |                          |           |            |           |   |           |            |          
|                                      | Diluted earnings per share(1)       |                          |           | 61,800,000 |           |   |           | 63,840,000 |           |   |           | 67,069,000 |          
|                                      |                                     |                          |           |            |           |   |           |            |          






|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All earnings per share amounts and average number of shares
    outstanding have been adjusted to give retroactive effect to a
    two-for-one stock split effected in the form of a 100% stock
    dividend declared December 9, 2004.



29



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##### Table of Contents



LANDSTAR SYSTEM, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Dollars in thousands)


|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |         |         |         |        |         |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ----------------------------------------------- | ------ | -------- | -------- | ------- | -------- | ------- | ------- | ------- | ------ | ------- | ------- | -
|                                                 |                                                                                       | Fiscal Years Ended                                                                      |                                                
|                                                 |                                                                                       |                                                                                         |                                                
|                                                 |                                                                                       | Dec. 25,                                                                                |                                                 |        | Dec. 27, |          |         | Dec. 28, |        
|                                                 |                                                                                       | 2004                                                                                    |                                                 |        | 2003     |          |         | 2002     |        
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|OPERATING ACTIVITIES                             |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |         |         |         |       
|                                                 | Net income                                                                            |                                                                                         | $                                               | 71,872 |          |          | $       | 50,700   |         |         | $       | 49,221 |        
|                                                 | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                                         |                                                 |        |          |          |         |          |         |         |         |        |        
|                                                 |                                                                                       | Depreciation and amortization of operating property                                     |                                                 |        | 13,959   |          |         |          | 12,736  |         |         |        | 11,520  |        
|                                                 |                                                                                       | Non-cash interest charges                                                               |                                                 |        | 348      |          |         |          | 272     |         |         |        | 273     |        
|                                                 |                                                                                       | Provisions for losses on trade and other accounts receivable                            |                                                 |        | 6,250    |          |         |          | 5,094   |         |         |        | 7,514   |        
|                                                 |                                                                                       | Losses on sales and disposals of operating property                                     |                                                 |        | 215      |          |         |          | 344     |         |         |        | 642     |        
|                                                 |                                                                                       | Director compensation paid in common stock                                              |                                                 |        | 402      |          |         |          | 85      |         |         |        |         |        
|                                                 |                                                                                       | Deferred income taxes, net                                                              |                                                 |        | 3,967    |          |         |          | (2,899  | )       |         |        | 5,513   |        
|                                                 |                                                                                       | Tax benefit on stock option exercises                                                   |                                                 |        | 9,035    |          |         |          | 5,110   |         |         |        | 1,404   |        
|                                                 |                                                                                       | Changes in operating assets and liabilities:                                            |                                                 |        |          |          |         |          |         |         |         |        |         |        
|                                                 |                                                                                       |                                                                                         | Increase in trade and other accounts receivable |        |          | (126,718 | )       |          |         | (34,637 | )       |        |         | (11,221 | )
|                                                 |                                                                                       |                                                                                         | Decrease (increase) in other assets             |        |          | 677      |         |          |         | (3,335  | )       |        |         | 933     |  
|                                                 |                                                                                       |                                                                                         | Increase in accounts payable                    |        |          | 48,484   |         |          |         | 11,416  |         |        |         | 4,484   |  
|                                                 |                                                                                       |                                                                                         | Increase in other liabilities                   |        |          | 9,786    |         |          |         | 4,630   |         |        |         | 7,522   |  
|                                                 |                                                                                       |                                                                                         | Increase in insurance claims                    |        |          | 11,467   |         |          |         | 3,880   |         |        |         | 6,508   |  
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|NET CASH PROVIDED BY OPERATING ACTIVITIES        |                                                                                       |                                                                                         | 49,744                                          |        |          |          | 53,396  |          |         |         | 84,313  |       
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|INVESTING ACTIVITIES                             |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |         |         |         |       
|                                                 |                                                                                       | Net change in other short-term investments                                              |                                                 |        | 8,461    |          |         |          | (27,354 | )       |         |        |         |        
|                                                 |                                                                                       | Maturities of long-term investments                                                     |                                                 |        | 4,006    |          |         |          | 4,219   |         |         |        | 2,500   |        
|                                                 |                                                                                       | Purchases of long-term investments                                                      |                                                 |        | (12,606  | )        |         |          | (4,542  | )       |         |        | (8,889  | )      
|                                                 |                                                                                       | Purchases of operating property                                                         |                                                 |        | (6,377   | )        |         |          | (5,557  | )       |         |        | (4,421  | )      
|                                                 |                                                                                       | Proceeds from sales of operating property                                               |                                                 |        | 971      |          |         |          | 1,612   |         |         |        | 387     |        
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|NET CASH USED BY INVESTING ACTIVITIES            |                                                                                       |                                                                                         | (5,545                                          | )      |          |          | (31,622 | )        |         |         | (10,423 | )     
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|FINANCING ACTIVITIES                             |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |         |         |         |       
|                                                 |                                                                                       | Increase in cash overdraft                                                              |                                                 |        | 3,024    |          |         |          | 3,978   |         |         |        | 3,527   |        
|                                                 |                                                                                       | Proceeds from repayment of notes receivable arising from
    exercises of stock options |                                                 |        | 115      |          |         |          | 605     |         |         |        | 4,867   |        
|                                                 |                                                                                       | Proceeds from exercises of stock options                                                |                                                 |        | 16,036   |          |         |          | 10,584  |         |         |        | 2,467   |        
|                                                 |                                                                                       | Borrowings on revolving credit facility                                                 |                                                 |        | 71,000   |          |         |          | 38,000  |         |         |        |         |        
|                                                 |                                                                                       | Purchases of common stock                                                               |                                                 |        | (27,001  | )        |         |          | (73,844 | )       |         |        | (26,306 | )      
|                                                 |                                                                                       | Principal payments on long-term debt and capital lease
    obligations                  |                                                 |        | (88,329  | )        |         |          | (23,904 | )       |         |        | (40,884 | )      
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|NET CASH USED BY FINANCING ACTIVITIES            |                                                                                       |                                                                                         | (25,155                                         | )      |          |          | (44,581 | )        |         |         | (56,329 | )     
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|Increase (decrease) in cash and cash equivalents |                                                                                       |                                                                                         | 19,044                                          |        |          |          | (22,807 | )        |         |         | 17,561  |       
|Cash and cash equivalents at beginning of period |                                                                                       |                                                                                         | 42,640                                          |        |          |          | 65,447  |          |         |         | 47,886  |       
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        
|Cash and cash equivalents at end of period       |                                                                                       | $                                                                                       | 61,684                                          |        |          | $        | 42,640  |          |         | $       | 65,447  |       
|                                                 |                                                                                       |                                                                                         |                                                 |        |          |          |         |          |        



30



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##### Table of Contents



LANDSTAR SYSTEM, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS
EQUITY


For the Fiscal Years Ended December 25, 2004,


December 27, 2003 and December 28, 2002


(Dollars in thousands)


|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ------------ | ---------- | - | ------- | - | --- | -------- |  | ---------------------- | -------- | - | ----- | ------------- | -------- | ---------- | -------- |  | ---------- | ------ |  | - | -------- | - |  | ----- | ---- | - |  | - | ------ | - |  | - | ------- | -
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          | Notes      |          |  |           
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          | Receivable |          |  |           
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          | Arising    |          |  |           
|                                                                           |  |              |            |   |         |   |     |          |  | Accumulated            |          |   | from  |               |          |           
|                                                                           |  | Common Stock |            |   | Addl   |   |     |          |  | Treasury Stock at Cost |          |   | Other |               |          | Exercises  |          |  |           
|                                                                           |  |              |            |   | Paid-In |   |     | Retained |  |                        |          |   |       | Comprehensive |          |            | of Stock |  |            |       
|                                                                           |  | Shares       |            |   | Amount  |   |     | Capital  |  |                        | Earnings |   |       | Shares        |          |            | Amount   |  |            | Income |  |   | 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                                                                 |  |              |            |   |         |   |     |          |  |                        |          |   |       |               | 49,221   |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 49,221  |  
|Retirement of treasury stock                                               |  |              | (5,241,841 | ) |         |   | (52 | )        |  |                        | (76,389  | ) |       |               | (133,485 | )          |          |  | (5,241,841 | )      |  |   | 209,926  |   |  |       |      |   |  |   |        |   |  |   |        |  
|Purchases of common stock                                                  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  | 554,879    |        |  |   | (26,306  | ) |  |       |      |   |  |   |        |   |  |   | (26,306 | )
|Exercises of stock options and related income tax benefit                  |  |              | 116,160    |   |         |   | 1   |          |  |                        | 3,962    |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   | (92    | ) |  |   | 3,871   |  
|Repayment of notes receivable arising from exercises of stock
    options  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   | 4,867  |   |  |   | 4,867   |  
|Stock split effected in the form of a 100% stock dividend                  |  |              | 8,134,353  |   |         |   | 81  |          |  |                        |          |   |       |               | (81      | )          |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   |        |  
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |     
|Balance December 28, 2002                                                  |  |              | 16,337,506 |   |         |   | 163 |          |  |                        | 2,609    |   |       |               | 173,817  |            |          |  | 554,879    |        |  |   | (26,306  | ) |  |       |      |   |  |   | (1,190 | ) |  |   | 149,093 |  
|Net income                                                                 |  |              |            |   |         |   |     |          |  |                        |          |   |       |               | 50,700   |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 50,700  |  
|Purchases of common stock                                                  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  | 1,255,051  |        |  |   | (73,844  | ) |  |       |      |   |  |   |        |   |  |   | (73,844 | )
|Exercises of stock options and related income tax benefit                  |  |              | 564,021    |   |         |   | 6   |          |  |                        | 15,688   |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 15,694  |  
|Director compensation paid in common stock                                 |  |              | 1,500      |   |         |   |     |          |  |                        | 85       |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 85      |  
|Repayment of notes receivable arising from exercises of stock
    options  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   | 605    |   |  |   | 605     |  
|Unrealized gain on available-for-sale investments, net of income
    taxes |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  | $     | 182  |   |  |   |        |   |  |   | 182     |  
|Stock split effected in the form of a 100% stock dividend                  |  |              | 14,913,833 |   |         |   | 149 |          |  |                        |          |   |       |               | (149     | )          |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   |        |  
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |     
|Balance December 27, 2003                                                  |  |              | 31,816,860 |   |         |   | 318 |          |  |                        | 18,382   |   |       |               | 224,368  |            |          |  | 1,809,930  |        |  |   | (100,150 | ) |  |       | 182  |   |  |   | (585   | ) |  |   | 142,515 |  
|Net income                                                                 |  |              |            |   |         |   |     |          |  |                        |          |   |       |               | 71,872   |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 71,872  |  
|Purchases of common stock                                                  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  | 681,000    |        |  |   | (27,001  | ) |  |       |      |   |  |   |        |   |  |   | (27,001 | )
|Exercises of stock options and related income tax benefit                  |  |              | 996,700    |   |         |   | 10  |          |  |                        | 25,061   |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 25,071  |  
|Director compensation paid in common stock                                 |  |              | 9,000      |   |         |   |     |          |  |                        | 402      |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   | 402     |  
|Repayment of notes receivable arising from exercises of stock
    options  |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |      |   |  |   | 115    |   |  |   | 115     |  
|Unrealized loss on available-for-sale investments, net of income
    taxes |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       | (135 | ) |  |   |        |   |  |   | (135    | )
|Stock split effected in the form of a 100% stock dividend                  |  |              | 30,331,630 |   |         |   | 304 |          |  |                        |          |   |       |               | (304     | )          |          |  |            |        |  |   |          |   |  |       |      |   |  |   |        |   |  |   |        |  
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |     
|Balance December 25, 2004                                                  |  |              | 63,154,190 |   |         | $ | 632 |          |  | $                      | 43,845   |   |       | $             | 295,936  |            |          |  | 2,490,930  |        |  | $ | (127,151 | ) |  | $     | 47   |   |  | $ | (470   | ) |  | $ | 212,839 |  
|                                                                           |  |              |            |   |         |   |     |          |  |                        |          |   |       |               |          |            |          |  |            |        |  |   |          |   |  |       |     



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)     Significant Accounting
Policies


Consolidation




Fiscal Year




Revenue Recognition




Insurance Claim Costs




Tires




Cash and Cash
Equivalents




Investments




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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                   
| | ------------------
| | Operating Property





| |             
| | ------------
| | Income Taxes





| |                                         
| | ----------------------------------------
| | Stock-Based Compensation  Stock Options



33



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                            |                                                                                                                                                         |             |        |        |      |   |        |        |   |   |        |        |  
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                            |                                                                                                                                                         | Fiscal Year |       
|                            |                                                                                                                                                         |             |       
|                            |                                                                                                                                                         | 2004        |        |        | 2003 |   |        | 2002   |  
|                            |                                                                                                                                                         |             |        |        |      |   |        |        |  
|Net income, as reported     |                                                                                                                                                         | $           | 71,872 |        |      | $ | 50,700 |        |   | $ | 49,221 |       
|Deduct:                     |                                                                                                                                                         |             |        |        |      |   |        |        |   |   |        |       
|                            | Total stock-based employee compensation expense determined under
    the fair value based method for all awards, net of related
    income tax benefits |             |        | (3,607 | )    |   |        | (3,522 | ) |   |        | (3,102 | )
|                            |                                                                                                                                                         |             |        |        |      |   |        |        |  
|Pro forma net income        |                                                                                                                                                         | $           | 68,265 |        |      | $ | 47,178 |        |   | $ | 46,119 |       
|                            |                                                                                                                                                         |             |        |        |      |   |        |        |  
|Earnings per common share:  |                                                                                                                                                         |             |        |        |      |   |        |        |   |   |        |       
|                            | As reported                                                                                                                                             |             | $      | 1.19   |      |   | $      | 0.82   |   |   | $      | 0.76   |  
|                            | Pro forma                                                                                                                                               |             | $      | 1.13   |      |   | $      | 0.77   |   |   | $      | 0.71   |  
|Diluted earnings per share: |                                                                                                                                                         |             |        |        |      |   |        |        |   |   |        |       
|                            | As reported                                                                                                                                             |             | $      | 1.16   |      |   | $      | 0.79   |   |   | $      | 0.73   |  
|                            | Pro forma                                                                                                                                               |             | $      | 1.11   |      |   | $      | 0.75   |   |   | $      | 0.70   |  



| |                   
| | ------------------
| | Earnings Per Share





|                                                                             |  |             |        |  |      |  |        |      |  |  |        | 
|---------------------------------------------------------------------------- |  | ----------- | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                                                                             |  | Fiscal Year |       
|                                                                             |  |             |       
|                                                                             |  | 2004        |        |  | 2003 |  |        | 2002 | 
|                                                                             |  |             |        |  |      |  |        |      | 
|Average number of common shares outstanding                                  |  |             | 60,154 |  |      |  | 61,458 |      |  |  | 64,565 | 
|Incremental shares from assumed exercises of stock options                   |  |             | 1,646  |  |      |  | 2,382  |      |  |  | 2,504  | 
|                                                                             |  |             |        |  |      |  |        |      | 
|Average number of common shares and common share equivalents
    outstanding |  |             | 61,800 |  |      |  | 63,840 |      |  |  | 67,069 | 
|                                                                             |  |             |        |  |      |  |        |      | 





| |                                                                 
| | ----------------------------------------------------------------
| | Recently Issued Accounting Standards Not Currently
    Effective



34



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






(2)     Stock Splits










(3)     Litigation Settlement
Agreement




35



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(4)     Comprehensive Income




|                                                                                             |  |             |        |   |      |   |        | 
|-------------------------------------------------------------------------------------------- |  | ----------- | ------ | - | ---- | - | ------ | 
|                                                                                             |  | Fiscal Year |       
|                                                                                             |  |             |       
|                                                                                             |  | 2004        |        |   | 2003 |  
|                                                                                             |  |             |        |   |      |  
|Net income                                                                                   |  | $           | 71,872 |   |      | $ | 50,700 | 
|Unrealized holding gains (losses) on available-for-sale
    investments, net of income taxes |  |             | (135   | ) |      |   | 182    | 
|                                                                                             |  |             |        |   |      |  
|Comprehensive income                                                                         |  | $           | 71,737 |   |      | $ | 50,882 | 
|                                                                                             |  |             |        |   |      |  



(5)     Income Taxes




|             |         |             |        |        |      |   |        |        |   |   |        |        | 
|------------ | ------- | ----------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | 
|             |         | Fiscal Year |       
|             |         |             |       
|             |         | 2004        |        |        | 2003 |   |        | 2002   |  
|             |         |             |        |        |      |   |        |        |  
|Current:     |         |             |        |        |      |   |        |        |   |   |        |       
|             | Federal |             | $      | 37,233 |      |   | $      | 25,217 |   |   | $      | 23,362 | 
|             | State   |             |        | 3,322  |      |   |        | 8,537  |   |   |        | 1,293  | 
|             |         |             |        |        |      |   |        |        |  
|             |         |             | 40,555 |        |      |   | 33,754 |        |   |   | 24,655 |       
|Deferred:    |         |             |        |        |      |   |        |        |   |   |        |       
|             | Federal |             |        | 3,400  |      |   |        | 3,063  |   |   |        | 4,273  | 
|             | State   |             |        | 567    |      |   |        | (5,962 | ) |   |        | 1,240  | 
|             |         |             |        |        |      |   |        |        |  
|             |         |             | 3,967  |        |      |   | (2,899 | )      |   |   | 5,513  |       
|             |         |             |        |        |      |   |        |        |  
|Income taxes |         | $           | 44,522 |        |      | $ | 30,855 |        |   | $ | 30,168 |       
|             |         |             |        |        |      |   |        |        |  

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |                                        |               |        |        |               |   |        |        |  
|------------------------- | -------------------------------------- | ------------- | ------ | ------ | ------------- | - | ------ | ------ | -
|                          |                                        | Dec. 25, 2004 |        |        | Dec. 27, 2003 |  
|                          |                                        |               |        |        |               |  
|Deferred tax assets:      |                                        |               |        |        |               |   |        |       
|                          | Receivable valuations                  |               | $      | 3,538  |               |   | $      | 3,509  |  
|                          | State net operating loss carryforwards |               |        | 1,282  |               |   |        | 1,486  |  
|                          | Self-insured claims                    |               |        | 4,045  |               |   |        | 3,182  |  
|                          | Other                                  |               |        | 4,125  |               |   |        | 5,677  |  
|                          |                                        |               |        |        |               |  
|                          |                                        |               | 12,990 |        |               |   | 13,854 |       
|                          | Valuation allowance                    |               |        | (420   | )             |   |        | (461   | )
|                          |                                        |               |        |        |               |  
|                          |                                        | $             | 12,570 |        |               | $ | 13,393 |       
|                          |                                        |               |        |        |               |  
|Deferred tax liabilities: |                                        |               |        |        |               |   |        |       
|                          | Operating property                     |               | $      | 16,913 |               |   | $      | 14,321 |  
|                          | Goodwill                               |               |        | 3,890  |               |   |        | 3,338  |  
|                          |                                        |               |        |        |               |  
|                          |                                        | $             | 20,803 |        |               | $ | 17,659 |       
|                          |                                        |               |        |        |               |  





|                                                      |  |             |        |  |      |   |        |      |  |   |        |  
|----------------------------------------------------- |  | ----------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | -
|                                                      |  | Fiscal Year |       
|                                                      |  |             |       
|                                                      |  | 2004        |        |  | 2003 |   |        | 2002 | 
|                                                      |  |             |        |  |      |   |        |      | 
|Income taxes at federal income tax rate               |  | $           | 40,738 |  |      | $ | 28,544 |      |  | $ | 27,786 |  
|State income taxes, net of federal income tax benefit |  |             | 2,528  |  |      |   | 1,674  |      |  |   | 1,646  |  
|Meals and entertainment exclusion                     |  |             | 789    |  |      |   | 500    |      |  |   | 786    |  
|Other, net                                            |  |             | 467    |  |      |   | 137    |      |  |   | (50    | )
|                                                      |  |             |        |  |      |   |        |      | 
|Income taxes                                          |  | $           | 44,522 |  |      | $ | 30,855 |      |  | $ | 30,168 |  
|                                                      |  |             |        |  |      |   |        |      | 



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(6)     Operating Property




|                                               |  |               |         |  |               |   |         | 
|---------------------------------------------- |  | ------------- | ------- |  | ------------- | - | ------- | 
|                                               |  | Dec. 25, 2004 |         |  | Dec. 27, 2003 |  
|                                               |  |               |         |  |               |  
|Land                                           |  | $             | 1,999   |  |               | $ | 1,999   | 
|Leasehold improvements                         |  |               | 8,730   |  |               |   | 8,476   | 
|Buildings and improvement                      |  |               | 8,221   |  |               |   | 8,250   | 
|Trailing equipment                             |  |               | 93,739  |  |               |   | 80,355  | 
|Other equipment                                |  |               | 29,460  |  |               |   | 27,039  | 
|                                               |  |               |         |  |               |  
|                                               |  |               | 142,149 |  |               |   | 126,119 | 
|Less accumulated depreciation and amortization |  |               | 65,315  |  |               |   | 58,480  | 
|                                               |  |               |         |  |               |  
|                                               |  | $             | 76,834  |  |               | $ | 67,639  | 
|                                               |  |               |         |  |               |  



(7)     Retirement Plan






(8)     Debt




|                          |  |               |        |  |               |   |        | 
|------------------------- |  | ------------- | ------ |  | ------------- | - | ------ | 
|                          |  | Dec. 25, 2004 |        |  | Dec. 27, 2003 |  
|                          |  |               |        |  |               |  
|Capital leases            |  | $             | 29,090 |  |               | $ | 21,456 | 
|Revolving credit facility |  |               | 63,000 |  |               |   | 70,000 | 
|                          |  |               |        |  |               |  
|                          |  |               | 92,090 |  |               |   | 91,456 | 
|Less current maturities   |  |               | 8,797  |  |               |   | 9,434  | 
|                          |  |               |        |  |               |  
|Total long-term debt      |  | $             | 83,293 |  |               | $ | 82,022 | 
|                          |  |               |        |  |               |  





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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


1 2












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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(9)     Leases




|                                                 |  |         |        |  |           |   |        | 
|------------------------------------------------ |  | ------- | ------ |  | --------- | - | ------ | 
|                                                 |  | Capital |        |  | Operating |  
|                                                 |  | Leases  |        |  | Leases    |  
|                                                 |  |         |        |  |           |  
|2005                                             |  | $       | 9,858  |  |           | $ | 7,711  | 
|2006                                             |  |         | 7,691  |  |           |   | 7,612  | 
|2007                                             |  |         | 7,243  |  |           |   | 7,021  | 
|2008                                             |  |         | 4,103  |  |           |   | 6,453  | 
|2009                                             |  |         | 3,170  |  |           |   | 3,194  | 
|Thereafter                                       |  |         |        |  |           |   | 9,150  | 
|                                                 |  |         |        |  |           |  
|                                                 |  |         | 32,065 |  |           | $ | 41,141 | 
|                                                 |  |         |        |  |           |  
|Less amount representing interest (3.6% to 8.3%) |  |         | 2,975  |  |           |   |        | 
|                                                 |  |         |        |  |           |  
|Present value of minimum lease payments          |  | $       | 29,090 |  |           |   |        | 
|                                                 |  |         |        |  |           |  



(10)      Stock Compensation
Plans








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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |           |                     |           |                  |                     |   |       |        |                  |  |           |  |  |   |      |  | 
|---------------------------- | --------- | ------------------- | --------- | ---------------- | ------------------- | - | ----- | ------ | ---------------- |  | --------- |  |  | - | ---- |  | 
|                             |           | Options Outstanding |           |                  | Options Exercisable |  
|                             |           |                     |           |                  |                     |  
|                             |           |                     |           | Weighted Average |                     |   |       |        | Weighted Average | 
|                             |           |                     |           | Exercise Price   |                     |   |       |        | Exercise Price   | 
|                             |           | Shares              |           |                  | Per Share           |   |       | Shares |                  |  | Per Share | 
|                             |           |                     |           |                  |                     |   |       |        |                  |  |           | 
|Options at December 29, 2001 |           |                     | 4,492,160 |                  |                     | $ | 5.82  |        |                  |  | 1,661,440 |  |  | $ | 4.31 | 
|                             | Granted   |                     |           | 1,656,000        |                     |   | $     | 9.22   |                  |  |           |  |  |   |      |  | 
|                             | Exercised |                     |           | (654,080         | )                   |   | $     | 3.92   |                  |  |           |  |  |   |      |  | 
|                             |           |                     |           |                  |                     |   |       |        |                  |  |           | 
|Options at December 28, 2002 |           |                     | 5,494,080 |                  |                     | $ | 7.07  |        |                  |  | 1,861,752 |  |  | $ | 5.29 | 
|                             | Granted   |                     |           | 985,200          |                     |   | $     | 14.06  |                  |  |           |  |  |   |      |  | 
|                             | Exercised |                     |           | (1,897,556       | )                   |   | $     | 5.58   |                  |  |           |  |  |   |      |  | 
|                             | Forfeited |                     |           | (22,400          | )                   |   | $     | 10.72  |                  |  |           |  |  |   |      |  | 
|                             |           |                     |           |                  |                     |   |       |        |                  |  |           | 
|Options at December 27, 2003 |           |                     | 4,559,324 |                  |                     | $ | 9.18  |        |                  |  | 1,328,204 |  |  | $ | 7.11 | 
|                             | Granted   |                     |           | 660,000          |                     |   | $     | 20.59  |                  |  |           |  |  |   |      |  | 
|                             | Exercised |                     |           | (1,993,400       | )                   |   | $     | 8.04   |                  |  |           |  |  |   |      |  | 
|                             | Forfeited |                     |           | (110,160         | )                   |   | $     | 9.85   |                  |  |           |  |  |   |      |  | 
|                             |           |                     |           |                  |                     |   |       |        |                  |  |           | 
|Options at December 25, 2004 |           |                     | 3,115,764 |                  |                     | $ | 12.31 |        |                  |  | 664,324   |  |  | $ | 8.56 | 
|                             |           |                     |           |                  |                     |   |       |        |                  |  |           | 



|                                   |  |                     |           |  |                       |  |     |                  |  |   |       | 
|---------------------------------- |  | ------------------- | --------- |  | --------------------- |  | --- | ---------------- |  | - | ----- | 
|                                   |  | Options Outstanding |          
|                                   |  |                     |          
|                                   |  | Number              |           |  | Weighted Average      |  |     | Weighted Average | 
|                                   |  | Outstanding         |           |  | Remaining Contractual |  |     | Exercise Price   | 
|Range of Exercise Prices Per Share |  | Dec. 25, 2004       |           |  | Life (years)          |  |     | Per Share        | 
|                                   |  |                     |           |  |                       |  |     |                  | 
|$ 3.99 - $ 6.00                    |  |                     | 258,640   |  |                       |  | 4.2 |                  |  | $ | 4.89  | 
|$ 6.01 - $ 9.00                    |  |                     | 834,240   |  |                       |  | 6.3 |                  |  | $ | 8.16  | 
|$ 9.01 - $13.50                    |  |                     | 860,084   |  |                       |  | 7.5 |                  |  | $ | 10.87 | 
|$13.51 - $20.00                    |  |                     | 1,012,800 |  |                       |  | 8.5 |                  |  | $ | 16.82 | 
|$20.01 - $26.47                    |  |                     | 150,000   |  |                       |  | 9.5 |                  |  | $ | 25.95 | 
|                                   |  |                     |           |  |                       |  |     |                  | 
|                                   |  |                     | 3,115,764 |  |                       |  | 7.3 |                  |  | $ | 12.31 | 
|                                   |  |                     |           |  |                       |  |     |                  | 

|                                   |  |                     |         |  |                  |   |       | 
|---------------------------------- |  | ------------------- | ------- |  | ---------------- | - | ----- | 
|                                   |  | Options Exercisable |        
|                                   |  |                     |        
|                                   |  | Number              |         |  | Weighted Average |  
|                                   |  | Exercisable         |         |  | Exercise Price   |  
|Range of Exercise Prices Per Share |  | Dec. 25, 2004       |         |  | Per Share        |  
|                                   |  |                     |         |  |                  |  
|$ 3.99 - $ 6.00                    |  |                     | 134,000 |  |                  | $ | 3.99  | 
|$ 6.01 - $ 9.00                    |  |                     | 376,000 |  |                  | $ | 7.99  | 
|$ 9.01 - $13.50                    |  |                     | 68,724  |  |                  | $ | 13.01 | 
|$13.51 - $14.62                    |  |                     | 85,600  |  |                  | $ | 14.62 | 
|                                   |  |                     |         |  |                  |  
|                                   |  |                     | 664,324 |  |                  | $ | 8.56  | 
|                                   |  |                     |         |  |                  |  



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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


(11)     Shareholders
Equity












(12)     Segment Information






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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                  |  |         |           |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   |           | 
|--------------------------------- |  | ------- | --------- |  | ---------- | - | ------- | --------- |  | - | ------ |  |  | ----- | ------- | - |  | - | --------- | 
|                                  |  | Carrier |           |  | Multimodal |   |         | Insurance |  |   | Other  |  |  | Total |        
|                                  |  |         |           |  |            |   |         |           |  |   |        |  |  |       |        
|2004                              |  |         |           |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   |           | 
|External revenue                  |  | $       | 1,454,862 |  |            | $ | 534,922 |           |  | $ | 30,152 |  |  |       |         |   |  | $ | 2,019,936 | 
|Internal revenue                  |  |         | 48,673    |  |            |   | 4,967   |           |  |   | 30,538 |  |  |       |         |   |  |   | 84,178    | 
|Investment income                 |  |         |           |  |            |   |         |           |  |   | 1,346  |  |  |       |         |   |  |   | 1,346     | 
|Interest and debt expense         |  |         |           |  |            |   |         |           |  |   |        |  |  | $     | 3,025   |   |  |   | 3,025     | 
|Depreciation and amortization     |  |         | 9,473     |  |            |   | 270     |           |  |   |        |  |  |       | 4,216   |   |  |   | 13,959    | 
|Operating income                  |  |         | 128,400   |  |            |   | 26,211  |           |  |   | 12,456 |  |  |       | (47,648 | ) |  |   | 119,419   | 
|Expenditures on long-lived assets |  |         | 730       |  |            |   | 206     |           |  |   |        |  |  |       | 5,441   |   |  |   | 6,377     | 
|Goodwill                          |  |         | 20,496    |  |            |   | 10,638  |           |  |   |        |  |  |       |         |   |  |   | 31,134    | 
|Capital lease additions           |  |         | 17,963    |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   | 17,963    | 
|Total assets                      |  |         | 317,466   |  |            |   | 136,311 |           |  |   | 91,183 |  |  |       | 39,552  |   |  |   | 584,512   | 
|                                 
|2003                              |  |         |           |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   |           | 
|External revenue                  |  | $       | 1,227,171 |  |            | $ | 341,241 |           |  | $ | 28,159 |  |  |       |         |   |  | $ | 1,596,571 | 
|Internal revenue                  |  |         | 20,852    |  |            |   | 4,300   |           |  |   | 32,442 |  |  |       |         |   |  |   | 57,594    | 
|Investment income                 |  |         |           |  |            |   |         |           |  |   | 1,220  |  |  |       |         |   |  |   | 1,220     | 
|Interest and debt expense         |  |         |           |  |            |   |         |           |  |   |        |  |  | $     | 3,240   |   |  |   | 3,240     | 
|Depreciation and amortization     |  |         | 8,728     |  |            |   | 272     |           |  |   |        |  |  |       | 3,736   |   |  |   | 12,736    | 
|Operating income                  |  |         | 94,303    |  |            |   | 6,403   |           |  |   | 21,227 |  |  |       | (37,138 | ) |  |   | 84,795    | 
|Expenditures on long-lived assets |  |         | 2,652     |  |            |   | 712     |           |  |   |        |  |  |       | 2,193   |   |  |   | 5,557     | 
|Goodwill                          |  |         | 20,496    |  |            |   | 10,638  |           |  |   |        |  |  |       |         |   |  |   | 31,134    | 
|Total assets                      |  |         | 254,606   |  |            |   | 70,607  |           |  |   | 64,363 |  |  |       | 48,881  |   |  |   | 438,457   | 

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                  |  |         |           |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   |           | 
|--------------------------------- |  | ------- | --------- |  | ---------- | - | ------- | --------- |  | - | ------ |  |  | ----- | ------- | - |  | - | --------- | 
|                                  |  | Carrier |           |  | Multimodal |   |         | Insurance |  |   | Other  |  |  | Total |        
|                                  |  |         |           |  |            |   |         |           |  |   |        |  |  |       |        
|                                 
|2002                              |  |         |           |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   |           | 
|External revenue                  |  | $       | 1,178,263 |  |            | $ | 300,716 |           |  | $ | 27,576 |  |  |       |         |   |  | $ | 1,506,555 | 
|Internal revenue                  |  |         | 23,703    |  |            |   | 2,483   |           |  |   | 29,860 |  |  |       |         |   |  |   | 56,046    | 
|Investment income                 |  |         |           |  |            |   |         |           |  |   | 1,950  |  |  |       |         |   |  |   | 1,950     | 
|Interest and debt expense         |  |         |           |  |            |   |         |           |  |   |        |  |  | $     | 4,292   |   |  |   | 4,292     | 
|Depreciation and amortization     |  |         | 7,546     |  |            |   | 126     |           |  |   |        |  |  |       | 3,848   |   |  |   | 11,520    | 
|Operating income                  |  |         | 87,777    |  |            |   | 7,793   |           |  |   | 22,754 |  |  |       | (34,643 | ) |  |   | 83,681    | 
|Expenditures on long-lived assets |  |         | 329       |  |            |   |         |           |  |   |        |  |  |       | 4,092   |   |  |   | 4,421     | 
|Goodwill                          |  |         | 20,496    |  |            |   | 10,638  |           |  |   |        |  |  |       |         |   |  |   | 31,134    | 
|Capital lease additions           |  |         | 16,370    |  |            |   |         |           |  |   |        |  |  |       |         |   |  |   | 16,370    | 
|Total assets                      |  |         | 241,068   |  |            |   | 59,571  |           |  |   | 70,198 |  |  |       | 29,911  |   |  |   | 400,748   | 

(13)     Commitments and
Contingencies






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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |             
| | ------------
| | /s/ KPMG LLP





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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


QUARTERLY FINANCIAL DATA


(Dollars in thousands, except per share amounts)


(Unaudited)


|                                |  |         |         |  |         |   |         |         |  |   |         |  |  |   |         | 
|------------------------------- |  | ------- | ------- |  | ------- | - | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                |  | Fourth  |         |  | Third   |   |         | Second  |  |   | First   | 
|                                |  | Quarter |         |  | Quarter |   |         | Quarter |  |   | Quarter | 
|                                |  | 2004    |         |  | 2004    |   |         | 2004    |  |   | 2004    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Revenue                         |  | $       | 589,724 |  |         | $ | 526,883 |         |  | $ | 482,303 |  |  | $ | 421,026 | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Operating income                |  | $       | 40,596  |  |         | $ | 35,666  |         |  | $ | 29,268  |  |  | $ | 13,889  | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Income before income taxes      |  | $       | 39,784  |  |         | $ | 35,004  |         |  | $ | 28,485  |  |  | $ | 13,121  | 
|Income taxes                    |  |         | 15,218  |  |         |   | 13,390  |         |  |   | 10,895  |  |  |   | 5,019   | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Net income                      |  | $       | 24,566  |  |         | $ | 21,614  |         |  | $ | 17,590  |  |  | $ | 8,102   | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Earnings per common share(1,2)  |  | $       | 0.41    |  |         | $ | 0.36    |         |  | $ | 0.29    |  |  | $ | 0.14    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Diluted earnings per share(1,2) |  | $       | 0.40    |  |         | $ | 0.35    |         |  | $ | 0.29    |  |  | $ | 0.13    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 

|                                |  |         |         |  |         |   |         |         |  |   |         |  |  |   |         | 
|------------------------------- |  | ------- | ------- |  | ------- | - | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                |  | Fourth  |         |  | Third   |   |         | Second  |  |   | First   | 
|                                |  | Quarter |         |  | Quarter |   |         | Quarter |  |   | Quarter | 
|                                |  | 2003    |         |  | 2003(3) |   |         | 2003    |  |   | 2003    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Revenue                         |  | $       | 433,997 |  |         | $ | 406,772 |         |  | $ | 390,084 |  |  | $ | 365,718 | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Operating income                |  | $       | 25,176  |  |         | $ | 19,963  |         |  | $ | 22,566  |  |  | $ | 17,090  | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Income before income taxes      |  | $       | 24,336  |  |         | $ | 19,107  |         |  | $ | 21,792  |  |  | $ | 16,320  | 
|Income taxes                    |  |         | 9,188   |  |         |   | 7,280   |         |  |   | 8,226   |  |  |   | 6,161   | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Net income                      |  | $       | 15,148  |  |         | $ | 11,827  |         |  | $ | 13,566  |  |  | $ | 10,159  | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Earnings per common share(1,2)  |  | $       | 0.25    |  |         | $ | 0.20    |         |  | $ | 0.22    |  |  | $ | 0.16    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 
|Diluted earnings per share(1,2) |  | $       | 0.24    |  |         | $ | 0.19    |         |  | $ | 0.21    |  |  | $ | 0.15    | 
|                                |  |         |         |  |         |   |         |         |  |   |         | 






|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Due to the changes in the number of average common shares and
    common stock equivalents outstanding during the year, the sum of
    earnings per share amounts for each quarter do not necessarily
    add to the earnings per share amounts for the full year.      
|   
|(2) | All earnings per share amounts have been adjusted to give
    retroactive effect to a two-for-one stock split effected in the
    form of a 100% stock dividend declared December 9, 2004.                                                                              
|   
|(3) | Includes a pre-tax charge of $4,150 to defend and settle the
    Gulf Bridge RoRo, Inc. litigation. After deducting related
    income tax benefits of $1,500, the litigation reduced net income
    by $2,650, or $0.04 per common share ($0.04 per
    diluted share).

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












| |             
| | ------------
| | /s/ KPMG LLP





48



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LANDSTAR SYSTEM, INC.


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


PARENT COMPANY ONLY BALANCE SHEET INFORMATION


(Dollars in thousands, except per share amounts)


|                                                              |                                                                                                                 |          |         |          |          |   |         |          |  
|------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------- | ------- | -------- | -------- | - | ------- | -------- | -
|                                                              |                                                                                                                 | Dec. 25, |         |          | Dec. 27, |  
|                                                              |                                                                                                                 | 2004     |         |          | 2003     |  
|                                                              |                                                                                                                 |          |         |          |          |  
|ASSETS                                                       
|Investment in Landstar System Holdings, Inc., net of advances |                                                                                                                 | $        | 212,839 |          |          | $ | 142,515 |         
|                                                              |                                                                                                                 |          |         |          |          |  
|Total assets                                                  |                                                                                                                 | $        | 212,839 |          |          | $ | 142,515 |         
|                                                              |                                                                                                                 |          |         |          |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY                         
|Shareholders equity:                                         |                                                                                                                 |          |         |          |          |   |         |         
|                                                              | Common stock, $.01 par value, authorized 80,000,000 and
    50,000,000 shares, issued 63,154,190 and 31,816,860 |          | $       | 632      |          |   | $       | 318      |  
|                                                              | Additional paid-in capital                                                                                      |          |         | 43,845   |          |   |         | 18,382   |  
|                                                              | Retained earnings                                                                                               |          |         | 295,936  |          |   |         | 224,368  |  
|                                                              | Cost of 2,490,930 and 1,809,930 shares of common stock in
    treasury                                          |          |         | (127,151 | )        |   |         | (100,150 | )
|                                                              | Accumulated other comprehensive income                                                                          |          |         | 47       |          |   |         | 182      |  
|                                                              | Notes receivable arising from exercises of stock options                                                        |          |         | (470     | )        |   |         | (585     | )
|                                                              |                                                                                                                 |          |         |          |          |  
|Total shareholders equity                                    |                                                                                                                 | $        | 212,839 |          |          | $ | 142,515 |         
|                                                              |                                                                                                                 |          |         |          |          |  
|Total liabilities and shareholders equity                    |                                                                                                                 | $        | 212,839 |          |          | $ | 142,515 |         
|                                                              |                                                                                                                 |          |         |          |          |  

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LANDSTAR SYSTEM, INC.


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


PARENT COMPANY ONLY STATEMENT OF INCOME INFORMATION


(Dollars in thousands, except per share amounts)


|                                                                       |                               |                    |        |            |          |   |        |            |  |   |        |            | 
|---------------------------------------------------------------------- | ----------------------------- | ------------------ | ------ | ---------- | -------- | - | ------ | ---------- |  | - | ------ | ---------- | 
|                                                                       |                               | Fiscal Years Ended |       
|                                                                       |                               |                    |       
|                                                                       |                               | Dec. 25,           |        |            | Dec. 27, |   |        | Dec. 28,   | 
|                                                                       |                               | 2004               |        |            | 2003     |   |        | 2002       | 
|                                                                       |                               |                    |        |            |          |   |        |            | 
|Equity in undistributed earnings of Landstar System Holdings,
    Inc. |                               | $                  | 71,968 |            |          | $ | 50,773 |            |  | $ | 49,309 |           
|Income taxes                                                           |                               |                    | 96     |            |          |   | 73     |            |  |   | 88     |           
|                                                                       |                               |                    |        |            |          |   |        |            | 
|Net income                                                             |                               | $                  | 71,872 |            |          | $ | 50,700 |            |  | $ | 49,221 |           
|                                                                       |                               |                    |        |            |          |   |        |            | 
|Earnings per common share(1)                                           |                               | $                  | 1.19   |            |          | $ | 0.82   |            |  | $ | 0.76   |           
|                                                                       |                               |                    |        |            |          |   |        |            | 
|Diluted earnings per share(1)                                          |                               | $                  | 1.16   |            |          | $ | 0.79   |            |  | $ | 0.73   |           
|                                                                       |                               |                    |        |            |          |   |        |            | 
|Average number of shares outstanding:                                  |                               |                    |        |            |          |   |        |            |  |   |        |           
|                                                                       | Earnings per common share(1)  |                    |        | 60,154,000 |          |   |        | 61,458,000 |  |   |        | 64,565,000 | 
|                                                                       |                               |                    |        |            |          |   |        |            | 
|                                                                       | Diluted earnings per share(1) |                    |        | 61,800,000 |          |   |        | 63,840,000 |  |   |        | 67,069,000 | 
|                                                                       |                               |                    |        |            |          |   |        |            | 






|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All earnings per share amounts and average number of shares
    outstanding have been adjusted to give retroactive effect to a
    two-for-one stock split effected in the form of a 100% stock
    dividend declared December 9, 2004.

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LANDSTAR SYSTEM, INC.


SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF
REGISTRANT


PARENT COMPANY ONLY STATEMENT OF CASH FLOWS INFORMATION


(Dollars in thousands)


|                                                                                      |                                                                        |                    |         |         |          |   |         |          |   |   |         |         |  
|------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------ | ------- | ------- | -------- | - | ------- | -------- | - | - | ------- | ------- | -
|                                                                                      |                                                                        | Fiscal Years Ended |        
|                                                                                      |                                                                        |                    |        
|                                                                                      |                                                                        | Dec. 25,           |         |         | Dec. 27, |   |         | Dec. 28, |  
|                                                                                      |                                                                        | 2004               |         |         | 2003     |   |         | 2002     |  
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Operating Activities                                                                  |                                                                        |                    |         |         |          |   |         |          |   |   |         |        
|Net income                                                                            |                                                                        | $                  | 71,872  |         |          | $ | 50,700  |          |   | $ | 49,221  |        
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                        |                    |         |         |          |   |         |          |   |   |         |        
|                                                                                      | Tax benefit on stock option exercises                                  |                    |         | 9,035   |          |   |         | 5,110    |   |   |         | 1,404   |  
|                                                                                      | Equity in undistributed earnings of Landstar System Holdings,
    Inc. |                    |         | (71,968 | )        |   |         | (50,773  | ) |   |         | (49,309 | )
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Net Cash Provided By Operating Activities                                             |                                                                        |                    | 8,939   |         |          |   | 5,037   |          |   |   | 1,316   |        
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Investing Activities                                                                  |                                                                        |                    |         |         |          |   |         |          |   |   |         |        
|Additional investments in and advances from Landstar System
    Holdings, Inc., net   |                                                                        |                    | 1,911   |         |          |   | 57,618  |          |   |   | 17,656  |        
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Net Cash Provided By Investing Activities                                             |                                                                        |                    | 1,911   |         |          |   | 57,618  |          |   |   | 17,656  |        
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Financing Activities                                                                  |                                                                        |                    |         |         |          |   |         |          |   |   |         |        
|Proceeds from repayment of notes arising from exercises of stock
    options          |                                                                        |                    | 115     |         |          |   | 605     |          |   |   | 4,867   |        
|Proceeds from exercises of stock options                                              |                                                                        |                    | 16,036  |         |          |   | 10,584  |          |   |   | 2,467   |        
|Purchases of common stock                                                             |                                                                        |                    | (27,001 | )       |          |   | (73,844 | )        |   |   | (26,306 | )      
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Net Cash Used By Financing Activities                                                 |                                                                        |                    | (10,850 | )       |          |   | (62,655 | )        |   |   | (18,972 | )      
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Change in cash                                                                        |                                                                        |                    | 0       |         |          |   | 0       |          |   |   | 0       |        
|Cash at beginning of period                                                           |                                                                        |                    | 0       |         |          |   | 0       |          |   |   | 0       |        
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  
|Cash at end of period                                                                 |                                                                        | $                  | 0       |         |          | $ | 0       |          |   | $ | 0       |        
|                                                                                      |                                                                        |                    |         |         |          |   |         |          |  

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS


For the Fiscal Year Ended December 25, 2004


(Dollars in thousands)


|                                 |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |       | 
|-------------------------------- | ------------------------------------------- | ------------ | ----- | --------- | ---------- | ---------- | ----- | -------- |  |  | ---------- |  |  | ---------- | ------ | ------ | - | - | ----- | ----- | 
|COL A                            |                                             | COL B        |       |           | COL C      |            |       | COL D    |  |  | COL E      | 
|                                 |                                             |              |       |           |            |            |       |          |  |  |            | 
|                                 |                                             |              |       | Additions |            |            |       |          | 
|                                 |                                             |              |       |           |            |            |       |          | 
|                                 |                                             |              |       |           |            | Charged to |       |          |  |  |           
|                                 |                                             | Balance at   |       |           | Charged to |            |       | Other    |  |  | Deductions |  |  | Balance at |       
|                                 |                                             | Beginning of |       |           | Costs and  |            |       | Accounts |  |  | Describe   |  |  | End of     |       
|                                 |                                             | Period       |       |           | Expenses   |            |       | Describe |  |  | (A)        |  |  | Period     |       
|                                 |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |       
|Description                      |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|Allowance for doubtful accounts: |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|                                 | Deducted from trade receivables             |              | $     | 3,410     |            |            | $     | 2,883    |  |  |            |  |  |            | $      | (2,272 | ) |   | $     | 4,021 | 
|                                 | Deducted from other receivables             |              |       | 4,077     |            |            |       | 3,348    |  |  |            |  |  |            |        | (3,180 | ) |   |       | 4,245 | 
|                                 | Deducted from other non-current receivables |              |       | 244       |            |            |       | 19       |  |  |            |  |  |            |        |        |   |   |       | 263   | 
|                                 |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |       
|                                 |                                             | $            | 7,731 |           |            | $          | 6,250 |          |  |  |            |  |  | $          | (5,452 | )      |   | $ | 8,529 |      
|                                 |                                             |              |       |           |            |            |       |          |  |  |            |  |  |            |       






|    |                               
|--- | ------------------------------
|(A) | Write-offs, net of recoveries.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS


For the Fiscal Year Ended December 27, 2003


(Dollars in thousands)


|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |       | 
|-------------------------------- | ------------------------------------------- | ---------- | ----- | --------- | ---------- | ---------- | ----- | -------- |  |  | ---------- |  |  | ---------- | ------ | ------ | - | - | ----- | ----- | 
|COL A                            |                                             | COL B      |       |           | COL C      |            |       | COL D    |  |  | COL E      | 
|                                 |                                             |            |       |           |            |            |       |          |  |  |            | 
|                                 |                                             |            |       | Additions |            |            |       |          | 
|                                 |                                             |            |       |           |            |            |       |          | 
|                                 |                                             |            |       |           |            | Charged to |       |          |  |  |           
|                                 |                                             | Balance at |       |           | Charged to |            |       | Other    |  |  | Deductions |  |  | Balance at |       
|                                 |                                             | Beginning  |       |           | Costs and  |            |       | Accounts |  |  | Describe   |  |  | End of     |       
|                                 |                                             | of Period  |       |           | Expenses   |            |       | Describe |  |  | (A)        |  |  | Period     |       
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       
|Description                      |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|Allowance for doubtful accounts: |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|                                 | Deducted from trade receivables             |            | $     | 3,953     |            |            | $     | 2,401    |  |  |            |  |  |            | $      | (2,944 | ) |   | $     | 3,410 | 
|                                 | Deducted from other receivables             |            |       | 5,331     |            |            |       | 2,674    |  |  |            |  |  |            |        | (3,928 | ) |   |       | 4,077 | 
|                                 | Deducted from other non-current receivables |            |       | 230       |            |            |       | 19       |  |  |            |  |  |            |        | (5     | ) |   |       | 244   | 
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       
|                                 |                                             | $          | 9,514 |           |            | $          | 5,094 |          |  |  |            |  |  | $          | (6,877 | )      |   | $ | 7,731 |      
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       






|    |                               
|--- | ------------------------------
|(A) | Write-offs, net of recoveries.

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LANDSTAR SYSTEM, INC. AND SUBSIDIARY


SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS


For the Fiscal Year Ended December 28, 2002


(Dollars in thousands)


|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |       | 
|-------------------------------- | ------------------------------------------- | ---------- | ----- | --------- | ---------- | ---------- | ----- | -------- |  |  | ---------- |  |  | ---------- | ------ | ------ | - | - | ----- | ----- | 
|COL A                            |                                             | COL B      |       |           | COL C      |            |       | COL D    |  |  | COL E      | 
|                                 |                                             |            |       |           |            |            |       |          |  |  |            | 
|                                 |                                             |            |       | Additions |            |            |       |          | 
|                                 |                                             |            |       |           |            |            |       |          | 
|                                 |                                             |            |       |           |            | Charged to |       |          |  |  |           
|                                 |                                             | Balance at |       |           | Charged to |            |       | Other    |  |  | Deductions |  |  | Balance at |       
|                                 |                                             | Beginning  |       |           | Costs and  |            |       | Accounts |  |  | Describe   |  |  | End of     |       
|                                 |                                             | of Period  |       |           | Expenses   |            |       | Describe |  |  | (A)        |  |  | Period     |       
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       
|Description                      |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|Allowance for doubtful accounts: |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |        |        |   |   |       |      
|                                 | Deducted from trade receivables             |            | $     | 4,416     |            |            | $     | 3,936    |  |  |            |  |  |            | $      | (4,399 | ) |   | $     | 3,953 | 
|                                 | Deducted from other receivables             |            |       | 4,740     |            |            |       | 3,576    |  |  |            |  |  |            |        | (2,985 | ) |   |       | 5,331 | 
|                                 | Deducted from other non-current receivables |            |       | 228       |            |            |       | 2        |  |  |            |  |  |            |        |        |   |   |       | 230   | 
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       
|                                 |                                             | $          | 9,384 |           |            | $          | 7,514 |          |  |  |            |  |  | $          | (7,384 | )      |   | $ | 9,514 |      
|                                 |                                             |            |       |           |            |            |       |          |  |  |            |  |  |            |       






|    |  |                               
|--- |  | ------------------------------
|(A) |  | Write-offs, net of recoveries.

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9a. | Controls and Procedures

Disclosure Controls and Procedure






Internal Control Over Financial Reporting


(a)         Managements
Report on Internal Control over Financial Reporting










55



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(b)         Attestation Report
of the Registered Public Accounting Firm


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM















.


56



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| |             
| | ------------
| | /s/ KPMG LLP







|    |                                                         
|--- | --------------------------------------------------------
|(c) | Changes in Internal Control Over Financial
    Reporting








|         |                  
|-------- | -----------------
|Item 9b. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



www.landstar.com







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation



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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters










|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

Financial Statements and Supplementary Data


|                                                           |  |      |    | 
|---------------------------------------------------------- |  | ---- | -- | 
|                                                           |  | Page |   
|                                                           |  |      |   
|Consolidated Balance Sheets                                |  |      | 28 | 
|Consolidated Statements of Income                          |  |      | 29 | 
|Consolidated Statements of Cash Flows                      |  |      | 30 | 
|Consolidated Statements of Changes in Shareholders Equity |  |      | 31 | 
|Notes to Consolidated Financial Statements                 |  |      | 32 | 
|Report of Independent Registered Public Accounting Firm    |  |      | 46 | 

58



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Financial Statement Schedules




|         |    |  |             |                                                                                                           |      |  |    | 
|-------- | -- |  | ----------- | --------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|Schedule |    |  |             |                                                                                                           |     
|Number   |    |  | Description |                                                                                                           | Page | 
|         |    |  |             |                                                                                                           |      | 
|         | I  |  |             | Condensed Financial Information of Registrant Parent Company
    Only Balance Sheet Information           |      |  | 49 | 
|         | I  |  |             | Condensed Financial Information of Registrant Parent Company
    Only Statement of Income Information     |      |  | 50 | 
|         | I  |  |             | Condensed Financial Information of Registrant Parent Company
    Only Statement of Cash Flows Information |      |  | 51 | 
|         | II |  |             | Valuation and Qualifying Accounts For the Fiscal Year Ended
    December 25, 2004                         |      |  | 52 | 
|         | II |  |             | Valuation and Qualifying Accounts For the Fiscal Year Ended
    December 27, 2003                         |      |  | 53 | 
|         | II |  |             | Valuation and Qualifying Accounts For the Fiscal Year Ended
    December 28, 2002                         |      |  | 54 | 



Exhibits


|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | (2)  |             |  | 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-K for the quarter ended June 27, 1998
    (Commission File No. 0-21238))                                                                                                                 
|        | (3)  |             |  | Articles of Incorporation and By-Laws:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 3    | .1          |  | Amended and Restated Certificate of Incorporation of the Company
    dated February 9, 1993, Certificate of Designation of
    Junior Participating Preferred Stock dated February 10,
    1993 and Certificate of Amendment to the Amended and Restated
    Certificate of Incorporation of the Company dated May 29,
    2003. (Incorporated by reference to Exhibit 3.1 to the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 28, 2003 (Commission File
    No. 0-21238))
|        | 3    | .2          |  | Certificate of Amendment to the Amended and Restated Certificate
    of Incorporation of the Company, dated July 16, 2004
    (Incorporated by reference to Exhibit 3.1 to the
    Registrants Quarterly Report on form 10-Q for the
    quarter ended June 26, 2004 (Commission File
    No. 0-21238))                                                                                                                                                                                                   
|        | 3    | .3          |  | The Companys Bylaws, as amended and restated on
    February 9, 1993. (Incorporated by reference to
    Exhibit 3 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          |  | Fourth Amended and Restated Credit Agreement, dated July 8,
    2004, among LSHI, Landstar, the lenders named therein and
    JPMorgan Chase Bank as administrative agent (including exhibits
    and schedules thereto). (Incorporated by reference to
    Exhibit 99.1 to the Registrants Form 8-K filed
    on July 12, 2004 (Commission File 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))                                                                                                                                                                                                                                                                                                                  

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##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ---- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |            
|No.     |    |      | Description
|        |    |      |            
|        | 10 | .2+  |             | Form of Indemnification Agreement between the Company and each
    of the directors and certain executive officers of the Company.
    (Incorporated by reference to Exhibit 10.2 to the
    Registrants Annual Report on Form 10-K for the fiscal
    year ended December 27, 2003 (Commission No. 0-21238))                                                                               
|        | 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+  |             | Form of Key Executive Employment Protection Agreement dated
    January 30, 1998 between Landstar System, Inc. and each of
    Henry H. Gerkens, Robert C. LaRose, Gary W. Hartter and Ronald
    G. Stanley (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))
|        | 10 | .6+* |             | Form of Key Executive Employment Protection Agreement dated
    December 15, 2000 between Landstar System, Inc. and James
    B. Gattoni (Commission File No. 0-21238)                                                                                                                                                                                                                       
|        | 10 | .7+  |             | Amendment to Key Executive Employment Protection Agreement,
    dated August 7, 2002, between Landstar System, Inc. and
    Henry H. Gerkens (Incorporated by reference to Exhibit 10.7
    to the Registrants Annual Report on Form 10-K for the
    fiscal year ended December 28, 2002 (Commission File
    No. 0-21238))                                                                
|        | 10 | .8+  |             | Amendment to Key Executive Employment Protection Agreement,
    dated August 7, 2002, between Landstar System, Inc. and
    Robert C. LaRose (Incorporated by reference to Exhibit 10.8
    to the Registrants Annual Report on Form 10-K for the
    fiscal year ended December 28, 2002 (Commission File
    No. 0-21238))                                                                
|        | 10 | .9+  |             | Amendment to Key Executive Employment Protection Agreement,
    dated August 7, 2002, between Landstar System, Inc. and
    Gary W. Hartter (Incorporated by reference to Exhibit 10.9
    to the Registrants Annual Report on Form 10-K for the
    fiscal year ended December 28, 2002 (Commission File
    No. 0-21238))                                                                 
|        | 10 | .10+ |             | 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 | .11+ |             | First Amendment to the Landstar System, Inc. 1994 Directors
    Stock Option Plan (Incorporated by reference to
    Exhibit 10.8 to the Registrants Annual Report on
    Form 10-K for the fiscal year ended December 30, 2000
    (Commission File No. 0-21238))                                                                                                                           
|        | 10 | .12+ |             | Second Amendment to the Landstar System, Inc. 1994 Directors
    Stock Option Plan (Incorporated by reference to
    Exhibit 10.9 to the Registrants Annual Report on
    Form 10-K for the fiscal year ended December 30, 2000
    (Commission File No. 0-21238))                                                                                                                          
|        | 10 | .13+ |             | Landstar System, Inc. 2002 Employee Stock Option Plan
    (Incorporated by reference to Exhibit A to the
    Registrants Definitive Proxy Statement filed on
    March 22, 2002 (Commission File No. 0-21238))                                                                                                                                                                              
|        | 10 | .14+ |             | Landstar System, Inc. Executive Incentive Compensation Plan
    (Incorporated by reference to Exhibit B to the
    Registrants Definitive Proxy Statement filed on
    March 22, 2002 (Commission File No. 0-21238))                                                                                                                                                                        
|        | 10 | .15+ |             | Letter Agreement, dated July 2, 2002 from Jeffrey C. Crowe
    to Henry H. Gerkens. (Incorporated by reference to
    Exhibit 10.17 to the Registrants Annual Report on
    Form 10-K for the fiscal year ended December 28, 2002
    (Commission File No. 0-21238))                                                                                                                        
|        | 10 | .16+ |             | Directors Stock Compensation Plan, dated May 15, 2003
    (Incorporated by reference to Exhibit 10.1 to the
    Registrants Quarterly Report on Form 10-Q for the
    quarter ended June 28, 2003 (Commission File
    No. 0-21238))                                                                                                                                                        

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##### Table of Contents



|        |      |       |             |                                                                                                                                                                                                                                                           
|------- | ---- | ----- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |       |            
|No.     |      |       | Description
|        |      |       |            
|        | 10   | .17+  |             | Letter agreement, dated April 27, 2004, between Landstar
    System, Inc. and Henry H. Gerkens (Incorporated by reference to
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K filed on April 28, 2004 (Commission File
    No. 0-21238)
|        | 10   | .18+  |             | Letter agreement, dated April 27, 2004, between Landstar
    System, Inc. and Jeffrey C. Crowe (Incorporated by reference to
    Exhibit 10.2 to the Registrants Current Report on
    Form 8-K filed on April 28, 2004 (Commission
    No. 0-21238)     
|        | 10   | .19+* |             | Amendment to Key Executive Employment Protection Agreement,
    dated August 7, 2002, between Landstar System, Inc. and
    Ronald G. Stanley (Commission File No. 0-21238)                                                                               
|        | 10   | .20+* |             | Amendment to Key Executive Employment Protection Agreement,
    dated August 7, 2002, between Landstar System, Inc. and
    James B. Gattoni (Commission File No. 0-21238)                                                                                
|        | (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 Registered Public Accounting
    Firm of the Registrant                                                                                                                                                                
|        | (24) |       |             | Power of attorney:                                                                                                                                                                                                                                        
|        | 24   | .1*   |             | Powers of Attorney                                                                                                                                                                                                                                        
|        | (31) |       |             | Certifications pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002:                                                                                                                                                                             
|        | 31   | .1*   |             | Chief Executive Officer certification, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                           
|        | 31   | .2*   |             | Chief Financial Officer certification, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                           
|        | (32) |       |             | Certifications pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002:                                                                                                                                                                             
|        | 32   | .1**  |             | Chief Executive Officer certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                    
|        | 32   | .2**  |             | Chief Financial Officer certification pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                                                                                                    






|  |                                                        
|- | -------------------------------------------------------
|+ | management contract or compensatory plan or arrangement



| |   |                
| | - | ---------------
| | * | Filed herewith.



|   |                    
|-- | -------------------
|** | Furnished herewith.



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##### Table of Contents






SIGNATURES






| |                      
| | ---------------------
| | Landstar System, Inc.



| |     |                     
| | --- | --------------------
| | By: | /s/ Henry H. Gerkens

| |                        
| | -----------------------
| |                        
| | Henry H. Gerkens       
| | President and          
| | Chief Executive Officer



| |     |                     
| | --- | --------------------
| | By: | /s/ Robert C. LaRose

| |                                
| | -------------------------------
| |                                
| | Robert C. LaRose               
| | Executive Vice President, Chief
| | Financial Officer and Secretary





|                                         |  |                                                                                                   |  |                   |  | 
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | ----------------- |  | 
|Signature                                |  | Title                                                                                             |  | Date             
|                                         |  |                                                                                                   |  |                  
|                                        
|*Jeffrey
    C. Crowe                    |  | Chairman of the Board                                                                             |  | February 28, 2005
|                                        
|/s/ Henry H. GerkensHenry
    H. Gerkens |  | Director, President and Chief Executive Officer; Principal
    Executive Officer                  |  | February 28, 2005
|                                        
|/s/ Robert C. LaRoseRobert
    C. LaRose |  | Executive Vice President, Chief Financial Officer and Secretary;
    Principal Accounting Officer |  | February 28, 2005
|                                        
|*David
    G. Bannister                  |  | Director                                                                                          |  | February 28, 2005
|                                        
|*Ronald
    W. Drucker                   |  | Director                                                                                          |  | February 28, 2005
|                                        
|*Merritt
    J. Mott                     |  | Director                                                                                          |  | February 28, 2005
|                                        
|*William
    S. Elston                   |  | Director                                                                                          |  | February 28, 2005

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|                                                                  |  |          |  |                   |  | 
|----------------------------------------------------------------- |  | -------- |  | ----------------- |  | 
|Signature                                                         |  | Title    |  | Date             
|                                                                  |  |          |  |                  
|                                                                 
|*Diana
    M. Murphy                                              |  | Director |  | February 28, 2005
|                                                                 
|By: /s/ Robert C.
    LaRoseRobert
    C. LaRoseAttorney In Fact* |  |          |  |                  

63