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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 March 28, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 0-21238
 
 LANDSTAR SYSTEM, INC.
  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
 (904) 398-9400
 N/A
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
   o þ




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##### 



PART I Financial InformationItem 1.Financial StatementsConsolidated Balance Sheets as of March 28, 2009 and December 27, 2008
    
    Page 3Consolidated Statements of Income for the Thirteen Weeks Ended March 28, 2009 and March 29, 2008
    
    Page 4Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 28, 2009 and March 29, 2008
    
    Page 5Consolidated Statement of Changes in Shareholders Equity for the Thirteen Weeks Ended March 28, 2009
    
    Page 6Notes to Consolidated Financial Statements
    
    Page 7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Page 10Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    Page 18Item 4.Controls and Procedures
    
    Page 18PART II Other InformationItem 1.Legal Proceedings
    
    Page 19Item 1A.Risk Factors
    
    Page 20Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 20Item 6.Exhibits
    
    Page 21Signatures
    
    Page 23EX-31.1EX-31.2EX-32.1EX-32.2
  
 PART I 
 
    2




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March 28,
    
    
    Dec 27,2009
    
    
    2008ASSETSCurrent AssetsCash and cash equivalents
    
    $
    130,378
    
    
    $
    98,904Short-term investments
    
    
    23,860
    
    
    
    23,479Trade accounts receivable, less allowance of $6,926 and $6,230
    
    
    232,206
    
    
    
    315,065Other receivables, including advances to independent contractors, less allowance
of $5,016 and $4,298
    
    
    18,251
    
    
    
    10,083Deferred income taxes and other current assets
    
    
    20,554
    
    
    
    27,871Total current assets
    
    
    425,249
    
    
    
    475,402Operating property, less accumulated depreciation and amortization of $111,600
and $106,635
    
    
    125,803
    
    
    
    124,178Goodwill
    
    
    31,134
    
    
    
    31,134Other assets
    
    
    34,350
    
    
    
    32,816Total assets
    
    $
    616,536
    
    
    $
    663,530LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCash overdraft
    
    $
    23,835
    
    
    $
    32,065Accounts payable
    
    
    88,037
    
    
    
    105,882Current maturities of long-term debt
    
    
    26,274
    
    
    
    24,693Insurance claims
    
    
    24,016
    
    
    
    23,545Accrued income taxes
    
    
    11,921
    
    
    
    12,239Other current liabilities
    
    
    33,246
    
    
    
    38,161Total current liabilities
    
    
    207,329
    
    
    
    236,585Long-term debt, excluding current maturities
    
    
    91,216
    
    
    
    111,752Insurance claims
    
    
    38,217
    
    
    
    38,278Deferred income taxes
    
    
    24,848
    
    
    
    23,779Shareholders EquityCommon stock, $0.01 par value, authorized 160,000,000 shares, issued 66,150,467
and 66,109,547 shares
    
    
    662
    
    
    
    661Additional paid-in capital
    
    
    156,693
    
    
    
    154,533Retained earnings
    
    
    716,157
    
    
    
    704,331Cost of 14,815,905 and 14,424,887 shares of common stock in treasury
    
    
    (617,786
    )
    
    
    (605,828
    )Accumulated other comprehensive loss
    
    
    (800
    )
    
    
    (561
    )Total shareholders equity
    
    
    254,926
    
    
    
    253,136Total liabilities and shareholders equity
    
    $
    616,536
    
    
    $
    663,530
  3




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Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Revenue
    
    $
    469,247
    
    
    $
    608,828Investment income
    
    
    425
    
    
    
    1,096Costs and expenses:Purchased transportation
    
    
    351,324
    
    
    
    465,029Commissions to agents
    
    
    38,324
    
    
    
    46,814Other operating costs
    
    
    7,450
    
    
    
    6,584Insurance and claims
    
    
    9,002
    
    
    
    9,521Selling, general and administrative.
    
    
    34,369
    
    
    
    35,857Depreciation and amortization
    
    
    5,485
    
    
    
    5,130Total costs and expenses
    
    
    445,954
    
    
    
    568,935Operating income
    
    
    23,718
    
    
    
    40,989Interest and debt expense
    
    
    1,163
    
    
    
    2,142Income before income taxes
    
    
    22,555
    
    
    
    38,847Income taxes
    
    
    8,661
    
    
    
    15,104Net income
    
    $
    13,894
    
    
    $
    23,743Earnings per common share
    
    $
    0.27
    
    
    $
    0.45Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.45Average number of shares outstanding:Earnings per common share
    
    
    51,575,000
    
    
    
    52,601,000Diluted earnings per share
    
    
    51,782,000
    
    
    
    53,003,000Dividends paid per common share
    
    $
    0.0400
    
    
    $
    0.0375
  4




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Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    13,894
    
    
    $
    23,743Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of operating property
    
    
    5,485
    
    
    
    5,130Non-cash interest charges
    
    
    55
    
    
    
    43Provisions for losses on trade and other accounts receivable
    
    
    2,743
    
    
    
    1,045Losses on sales/disposals of operating property
    
    
    2
    
    
    
    12Deferred income taxes, net
    
    
    783
    
    
    
    1,684Stock-based compensation
    
    
    1,389
    
    
    
    1,693Changes in operating assets and liabilities:Decrease (increase) in trade and other accounts receivable
    
    
    71,948
    
    
    
    (3,101
    )Decrease in other assets
    
    
    7,278
    
    
    
    10,750Decrease in accounts payable
    
    
    (17,845
    )
    
    
    (6,142
    )Increase (decrease) in other liabilities
    
    
    (5,149
    )
    
    
    1,040Increase (decrease) in insurance claims
    
    
    410
    
    
    
    (1,631
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    80,993
    
    
    
    34,266INVESTING ACTIVITIESNet change in other short-term investments
    
    
    6,505
    
    
    
    (4,217
    )Sales and maturities of investments
    
    
    442
    
    
    
    4,037Purchases of investments
    
    
    (8,828
    )
    
    
    (1,318
    )Purchases of operating property
    
    
    (555
    )
    
    
    (361
    )Proceeds from sales of operating property
    
    
    28
    
    
    
    NET CASH USED BY INVESTING ACTIVITIES
    
    
    (2,408
    )
    
    
    (1,859
    )FINANCING ACTIVITIESIncrease (decrease) in cash overdraft
    
    
    (8,230
    )
    
    
    1,442Dividends paid
    
    
    (2,068
    )
    
    
    (1,972
    )Proceeds from exercises of stock options
    
    
    533
    
    
    
    4,964Excess tax benefit on stock option exercises
    
    
    239
    
    
    
    1,148Purchases of common stock
    
    
    (11,958
    )
    
    
    Principal payments on long-term debt and capital lease obligations
    
    
    (25,540
    )
    
    
    (17,759
    )NET CASH USED BY FINANCING ACTIVITIES
    
    
    (47,024
    )
    
    
    (12,177
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (87
    )Increase in cash and cash equivalents
    
    
    31,474
    
    
    
    20,230Cash and cash equivalents at beginning of period
    
    
    98,904
    
    
    
    60,750Cash and cash equivalents at end of period
    
    $
    130,378
    
    
    $
    80,980
  5




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AccumulatedAdditional
    
    
    
    
    
    
    Treasury Stock
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    at Cost
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Loss
    
    
    TotalBalance December 27, 2008
    
    
    66,109,547
    
    
    $
    661
    
    
    $
    154,533
    
    
    $
    704,331
    
    
    
    14,424,887
    
    
    $
    (605,828
    )
    
    $
    (561
    )
    
    $
    253,136Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,894
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,894Dividends paid ($0.04 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,068
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,068
    )Purchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,018
    
    
    
    (11,958
    )
    
    
    
    
    
    
    (11,958
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,389Exercises of stock options,
including
excess tax benefit
    
    
    40,920
    
    
    
    1
    
    
    
    771
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    772Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87
    )
    
    
    (87
    )Unrealized loss on
available-for-sale investments,
net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    (152
    )Balance March 28, 2009
    
    
    66,150,467
    
    
    $
    662
    
    
    $
    156,693
    
    
    $
    716,157
    
    
    
    14,815,905
    
    
    $
    (617,786
    )
    
    $
    (800
    )
    
    $
    254,926
  6




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(1)
    
    Share-based Payments
  Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Total cost of the Plans during the period
    
    $
    1,389
    
    
    $
    1,693Amount of related income tax benefit recognized
during the period
    
    
    353
    
    
    
    530Net cost of the Plans during the period
    
    $
    1,036
    
    
    $
    1,163
  2009
    
    
    2008Expected volatility
    
    
    38.0
    %
    
    
    33.0
    %Expected dividend yield
    
    
    0.400
    %
    
    
    0.375
    %Risk-free interest rate
    
    
    1.50
    %
    
    
    3.00
    %Expected lives (in years)
    
    
    4.0
    
    
    
    4.1
   Weighted Average
    
    Weighted AverageNumber of
    
    Exercise Price
    
    Remaining Contractual
    
    Aggregate IntrinsicOptions
    
    per Share
    
    Term (years)
    
    Value (000s)Options outstanding at December 27, 2008
    
    
    2,505,644
    
    
    $
    35.47Granted
    
    
    362,000
    
    
    $
    38.24Exercised
    
    
    (40,920
    )
    
    $
    13.03Forfeited
    
    
    (93,000
    )
    
    $
    42.74Options outstanding at March 28, 2009
    
    
    2,733,724
    
    
    $
    35.92
    
    
    
    7.2
    
    
    $
    0Options exercisable at March 28, 2009
    
    
    1,352,424
    
    
    $
    31.20
    
    
    
    5.7
    
    
    $
    3,929
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(2)
    
    Income Taxes
  (3)
    
    Earnings Per Share
   Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Average number of common shares outstanding
    
    
    51,575
    
    
    
    52,601Incremental shares from assumed exercises of stock options
    
    
    207
    
    
    
    402Average number of common shares and common share
equivalents outstanding
    
    
    51,782
    
    
    
    53,003
  (4)
    
    Additional Cash Flow Information
  (5)
    
    Segment Information
  Thirteen Weeks EndedMarch 28, 2009
    
    March 29, 2008Transportation
    
    
    
    
    
    
    
    
    
    TransportationLogistics
    
    Insurance
    
    Total
    
    Logistics
    
    Insurance
    
    TotalExternal revenue
    
    $
    459,934
    
    
    $
    9,313
    
    
    $
    469,247
    
    
    $
    599,600
    
    
    $
    9,228
    
    
    $
    608,828Investment income
    
    
    
    
    
    
    425
    
    
    
    425
    
    
    
    
    
    
    
    1,096
    
    
    
    1,096Internal revenue
    
    
    
    
    
    
    5,831
    
    
    
    5,831
    
    
    
    
    
    
    
    5,852
    
    
    
    5,852Operating income
    
    
    15,106
    
    
    
    8,612
    
    
    
    23,718
    
    
    
    32,386
    
    
    
    8,603
    
    
    
    40,989Goodwill
    
    
    31,134
    
    
    
    
    
    
    
    31,134
    
    
    
    31,134
    
    
    
    
    
    
    
    31,134
 8




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(6)
    
    Comprehensive Income
  Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Net income
    
    $
    13,894
    
    
    $
    23,743Unrealized holding
gains/(losses) on
available-for-sale investments,
net of income taxes
    
    
    (152
    )
    
    
    204Foreign currency translation loss
    
    
    (87
    )Comprehensive income
    
    $
    13,655
    
    
    $
    23,947
   (7)
    
    Commitments and Contingencies
     9




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(8)
    
    Concentrations of Credit Risk in Key Customers
  
   10




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Introduction
    Changes in Financial Condition and Results of Operations
   11




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Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Revenue generated through (in thousands):BCO Independent Contractors
    
    $
    262,065
    
    
    $
    324,804Truck Brokerage Carriers
    
    
    164,243
    
    
    
    228,633Rail intermodal
    
    
    19,318
    
    
    
    33,789Ocean cargo carriers
    
    
    8,851
    
    
    
    8,434Air cargo carriers
    
    
    5,387
    
    
    
    3,589Other (1)
    
    
    9,383
    
    
    
    9,579$
    469,247
    
    
    $
    608,828Number of loads:BCO Independent Contractors
    
    
    170,650
    
    
    
    203,200Truck Brokerage Carriers
    
    
    117,650
    
    
    
    142,030Rail intermodal
    
    
    9,580
    
    
    
    14,980Ocean cargo carriers
    
    
    1,240
    
    
    
    1,250Air cargo carriers
    
    
    3,260
    
    
    
    1,990302,380
    
    
    
    363,450Revenue per load:BCO Independent Contractors
    
    $
    1,536
    
    
    $
    1,598Truck Brokerage Carriers
    
    
    1,396
    
    
    
    1,610Rail intermodal
    
    
    2,016
    
    
    
    2,256Ocean cargo carriers
    
    
    7,138
    
    
    
    6,747Air cargo carriers
    
    
    1,652
    
    
    
    1,804
 
 (1)
    
    Includes premium revenue generated by the insurance segment and warehousing revenue
generated by the transportation logistics segment.  March 28,
    
    
    March 29,2009
    
    
    2008BCO Independent Contractors
    
    
    8,424
    
    
    
    8,277Truck Brokerage Carriers:Approved and active (1)
    
    
    14,877
    
    
    
    15,820Other approved
    
    
    10,682
    
    
    
    9,51525,559
    
    
    
    25,335Total available truck capacity providers
    
    
    33,983
    
    
    
    33,612Number of trucks provided by BCO Independent Contractors
    
    
    9,013
    
    
    
    8,856
 
 (1) Active refers to Truck Brokerage Carriers who moved at least one load in the 180
days immediately preceding the fiscal
quarter end.  12




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Thirteen Weeks EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Revenue
    
    
    100.0
    %
    
    
    100.0
    %Investment income
    
    
    0.1
    
    
    
    0.2Costs and expenses:Purchased transportation
    
    
    74.9
    
    
    
    76.4Commissions to agents
    
    
    8.1
    
    
    
    7.7Other operating costs
    
    
    1.6
    
    
    
    1.1Insurance and claims
    
    
    1.9
    
    
    
    1.6Selling, general and administrative
    
    
    7.3
    
    
    
    5.9Depreciation and amortization
    
    
    1.2
    
    
    
    0.8Total costs and expenses
    
    
    95.0
    
    
    
    93.5Operating income
    
    
    5.1
    
    
    
    6.7Interest and debt expense
    
    
    0.3
    
    
    
    0.3Income before income taxes
    
    
    4.8
    
    
    
    6.4Income taxes
    
    
    1.8
    
    
    
    2.5Net income
    
    
    3.0
    %
    
    
    3.9
    %
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15




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16




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Recognition and Presentation of Other-Than-Temporary Impairments
 17




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18




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Purchases of Equity Securities by the Company
  Total Number of Shares
    
    Maximum Number ofPurchased as Part of
    
    Shares That May YetTotal Number of
    
    Average Price Paid
    
    Publicly Announced
    
    Be Purchased UnderFiscal Period
    
    Shares Purchased
    
    Per Share
    
    Programs
    
    the ProgramsDecember 27, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,430,623Dec. 28, 2008  Jan. 24, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,430,623Jan. 25, 2009  Feb. 21, 2009
    
    
    150,000
    
    
    $
    34.37
    
    
    
    150,000
    
    
    
    2,850,000Feb. 22, 2009  March 28, 2009
    
    
    241,018
    
    
    $
    28.22
    
    
    
    241,018
    
    
    
    2,608,982Total
    
    
    391,018
    
    
    $
    30.58
    
    
    
    391,018
   Dividend Amount
    
    Declaration
    
    Record
    
    Paymentper share
    
    Date
    
    Date
    
    Date$0.04
    
    January 27, 2009
    
    February 6, 2009
    
    February 27, 2009
  20




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Exhibit No.
    
    Description(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.
 *
    
    Filed herewith**
    
    Furnished herewith
 22




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LANDSTAR SYSTEM, INC.Date: May 1, 2009
    /s/ Henry H. GerkensHenry H. GerkensPresident and
Chief Executive OfficerDate: May 1, 2009
    /s/ James B. GattoniJames B. GattoniVice President and Chief
Financial Officer 23