##### Table of Contents



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
 July 1, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
  0-21238
 
 LANDSTAR SYSTEM, INC.
  Delaware
(State or other jurisdiction
of incorporation or organization)
    
    06-1313069
(I.R.S. Employer
Identification No.)
 13410 Sutton Park Drive South, Jacksonville, Florida    32224    (904) 398-9400    N/A
  x o
  x o o
  o x




---



##### 



PART I Financial InformationItem 1.Financial StatementsConsolidated Balance Sheets as of July 1, 2006 and December 31, 2005
    
    Page 3Consolidated Statements of Income for the Twenty Six and Thirteen Weeks Ended July 1, 2006 and June 25, 2005
    
    Page 4Consolidated Statements of Cash Flows for the Twenty Six Weeks Ended July 1, 2006 and June 25, 2005
    
    Page 5Consolidated Statement of Changes in Shareholders Equity for the Twenty Six Weeks Ended July 1, 2006
    
    Page 6Notes to Consolidated Financial Statements
    
    Page 7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Page 11Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    Page 19Item 4.Controls and Procedures
    
    Page 19PART II Other InformationItem 1.Legal Proceedings
    
    Page 20Item 1A.Risk Factors
    
    Page 21Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 22Item 4.Submission of Matters to a Vote of Security Holders
    
    Page 22Item 6.Exhibits
    
    Page 22Signatures
    
    Page 24EX-31.1 SECTION 302 CEO CERTIFICATIONEX-31.2 SECTION 302 CFO CERTIFICATIONEX-32.1 SECTION 906 CEO CERTIFICATIONEX-32.2 SECTION 906 CFO CERTIFICATION
  
 PART I 
 
    2




---



##### Table of Contents



July 1,
    
    
    Dec 31,2006
    
    
    2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    80,815
    
    
    $
    29,398Short-term investments
    
    
    21,699
    
    
    
    20,693Trade accounts receivable, less allowance of $5,484 and $4,655
    
    
    369,300
    
    
    
    534,274Other receivables, including advances to independent contractors,
less allowance of $4,718 and $4,342
    
    
    16,086
    
    
    
    11,384Deferred income taxes and other current assets
    
    
    29,695
    
    
    
    21,106Total current assets
    
    
    517,595
    
    
    
    616,855Operating property, less accumulated depreciation and amortization
of $72,881 and $68,561
    
    
    88,614
    
    
    
    89,131Goodwill
    
    
    31,134
    
    
    
    31,134Other assets
    
    
    32,391
    
    
    
    28,694Total assets
    
    $
    669,734
    
    
    $
    765,814LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCash overdraft
    
    $
    24,812
    
    
    $
    29,829Accounts payable
    
    
    134,284
    
    
    
    164,509Current maturities of long-term debt
    
    
    13,704
    
    
    
    12,122Insurance claims
    
    
    27,459
    
    
    
    27,887Other current liabilities
    
    
    55,268
    
    
    
    65,149Total current liabilities
    
    
    255,527
    
    
    
    299,496Long-term debt, excluding current maturities
    
    
    94,625
    
    
    
    154,851Insurance claims
    
    
    36,417
    
    
    
    37,840Deferred income taxes
    
    
    17,702
    
    
    
    17,938Shareholders EquityCommon stock, $0.01 par value, authorized 160,000,000 shares,
issued 64,666,698 and 64,151,902
    
    
    647
    
    
    
    642Additional paid-in capital
    
    
    97,365
    
    
    
    84,532Retained earnings
    
    
    443,420
    
    
    
    392,549Cost of 6,573,231 and 5,344,883 shares of common stock in treasury
    
    
    (275,864
    )
    
    
    (221,776
    )Accumulated other comprehensive loss
    
    
    (58
    )
    
    
    (211
    )Note receivable arising from exercise of stock options
    
    
    (47
    )
    
    
    (47
    )Total shareholders equity
    
    
    265,463
    
    
    
    255,689Total liabilities and shareholders equity
    
    $
    669,734
    
    
    $
    765,814
  3




---



##### Table of Contents



Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    1,253,280
    
    
    $
    1,041,316
    
    
    $
    643,238
    
    
    $
    539,104Investment income
    
    
    1,252
    
    
    
    1,235
    
    
    
    873
    
    
    
    696Costs and expenses:Purchased transportation
    
    
    944,309
    
    
    
    783,092
    
    
    
    486,059
    
    
    
    405,514Commissions to agents
    
    
    97,521
    
    
    
    82,039
    
    
    
    50,510
    
    
    
    42,913Other operating costs
    
    
    22,288
    
    
    
    16,615
    
    
    
    10,220
    
    
    
    7,917Insurance and claims
    
    
    20,574
    
    
    
    22,904
    
    
    
    9,022
    
    
    
    9,779Selling, general and administrative
    
    
    70,924
    
    
    
    63,851
    
    
    
    35,088
    
    
    
    32,036Depreciation and amortization
    
    
    8,050
    
    
    
    7,928
    
    
    
    3,957
    
    
    
    3,966Total costs and expenses
    
    
    1,163,666
    
    
    
    976,429
    
    
    
    594,856
    
    
    
    502,125Operating income
    
    
    90,866
    
    
    
    66,122
    
    
    
    49,255
    
    
    
    37,675Interest and debt expense
    
    
    3,142
    
    
    
    1,989
    
    
    
    1,292
    
    
    
    1,052Income before income taxes
    
    
    87,724
    
    
    
    64,133
    
    
    
    47,963
    
    
    
    36,623Income taxes
    
    
    33,909
    
    
    
    24,891
    
    
    
    18,498
    
    
    
    14,199Net income
    
    $
    53,815
    
    
    $
    39,242
    
    
    $
    29,465
    
    
    $
    22,424Earnings per common share
    
    $
    0.92
    
    
    $
    0.66
    
    
    $
    0.50
    
    
    $
    0.38Diluted earnings per share
    
    $
    0.90
    
    
    $
    0.64
    
    
    $
    0.50
    
    
    $
    0.37Average number of shares outstanding:Earnings per common share
    
    
    58,700,000
    
    
    
    59,878,000
    
    
    
    58,499,000
    
    
    
    59,402,000Diluted earnings per share
    
    
    59,665,000
    
    
    
    61,137,000
    
    
    
    59,287,000
    
    
    
    60,421,000Dividends paid per common share
    
    $
    0.050
    
    
    
    
    
    
    $
    0.025
  4




---



##### Table of Contents



Twenty Six Weeks EndedJuly 1,
    
    
    June 25,2006
    
    
    2005OPERATING ACTIVITIESNet income
    
    $
    53,815
    
    
    $
    39,242Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of operating property
    
    
    8,050
    
    
    
    7,928Non-cash interest charges
    
    
    87
    
    
    
    87Provisions for losses on trade and other accounts receivable
    
    
    3,287
    
    
    
    2,884(Gains) losses on sales and disposals of operating property
    
    
    112
    
    
    
    (668
    )Director compensation paid in common stock
    
    
    265
    
    
    
    193Deferred income taxes, net
    
    
    (653
    )
    
    
    (2,375
    )Stock-based compensation
    
    
    3,297
    
    
    
    3,028Changes in operating assets and liabilities:Decrease in trade and other accounts receivable
    
    
    156,985
    
    
    
    55,705Increase in other assets
    
    
    (9,245
    )
    
    
    (9,382
    )Decrease in accounts payable
    
    
    (30,225
    )
    
    
    (15,504
    )Decrease in other liabilities
    
    
    (9,336
    )
    
    
    (2,239
    )Increase (decrease) in insurance claims
    
    
    (1,851
    )
    
    
    1,261NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    174,588
    
    
    
    80,160INVESTING ACTIVITIESNet change in other short-term investments
    
    
    (3,306
    )
    
    
    (6,067
    )Sales and maturities of investments
    
    
    17,929
    
    
    
    3,013Purchases of investments
    
    
    (18,094
    )
    
    
    (1,309
    )Purchases of operating property
    
    
    (1,214
    )
    
    
    (1,184
    )Proceeds from sales of operating property
    
    
    1,057
    
    
    
    3,109NET CASH USED BY INVESTING ACTIVITIES
    
    
    (3,628
    )
    
    
    (2,438
    )FINANCING ACTIVITIESIncrease (decrease) in cash overdraft
    
    
    (5,017
    )
    
    
    1,039Proceeds from repayment of notes receivable arising from exercises of stock
options
    
    
    
    
    
    
    275Dividends paid
    
    
    (2,944
    )Proceeds from exercises of stock options
    
    
    5,975
    
    
    
    4,018Excess tax benefit on stock option exercises
    
    
    3,269
    
    
    
    1,233Borrowings on revolving credit facility
    
    
    
    
    
    
    2,000Purchases of common stock
    
    
    (54,694
    )
    
    
    (80,659
    )Principal payments on long-term debt and capital lease obligations
    
    
    (66,132
    )
    
    
    (5,427
    )NET CASH USED BY FINANCING ACTIVITIES
    
    
    (119,543
    )
    
    
    (77,521
    )Increase in cash and cash equivalents
    
    
    51,417
    
    
    
    201Cash and cash equivalents at beginning of period
    
    
    29,398
    
    
    
    61,684Cash and cash equivalents at end of period
    
    $
    80,815
    
    
    $
    61,885
  5




---



##### Table of Contents



NoteReceivableArisingTreasury Stock
    
    
    Accumulated
    
    
    fromCommon Stock
    
    
    Add'l
    
    
    
    
    
    
    at Cost
    
    
    Other
    
    
    ExercisePaid-In
    
    
    Retained
    
    
    
    
    
    
    
    
    
    
    Comprehensive
    
    
    of StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    Income (Loss)
    
    
    Options
    
    
    TotalBalance December 31, 2005
    
    
    64,151,902
    
    
    $
    642
    
    
    $
    84,532
    
    
    $
    392,549
    
    
    
    5,344,883
    
    
    $
    (221,776
    )
    
    $
    (211
    )
    
    $
    (47
    )
    
    $
    255,689Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,815
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,815Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,944
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,944
    )Director compensation paid in
common stock
    
    
    6,000
    
    
    
    
    
    
    
    265
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265Purchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,242,948
    
    
    
    (54,694
    )
    
    
    
    
    
    
    
    
    
    
    (54,694
    )Stock based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,297Exercises of stock options,
including excess tax benefit
    
    
    508,796
    
    
    
    5
    
    
    
    9,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,244Incentive compensation paid in
common stock
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    (14,600
    )
    
    
    606
    
    
    
    
    
    
    
    
    
    
    
    638Change in other comprehensive
income on available-for-sale
investments, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    153Balance July 1, 2006
    
    
    64,666,698
    
    
    $
    647
    
    
    $
    97,365
    
    
    $
    443,420
    
    
    
    6,573,231
    
    
    $
    (275,864
    )
    
    $
    (58
    )
    
    $
    (47
    )
    
    $
    265,463
  6




---



##### Table of Contents



Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Total cost of share-based payment
plans during the period
    
    $
    3,297
    
    
    $
    3,028
    
    
    $
    1,886
    
    
    $
    1,516Amount of related income tax benefit
recognized during the period
    
    
    1,063
    
    
    
    899
    
    
    
    596
    
    
    
    447Net cost of share based payment plans
during the period
    
    $
    2,234
    
    
    $
    2,129
    
    
    $
    1,290
    
    
    $
    1,069
 7




---



##### Table of Contents



Weighted Average
    
    
    Weighted AverageNumber of
    
    
    Exercise Price
    
    
    Remaining Contractual
    
    
    Aggregate IntrinsicOptions
    
    
    per Share
    
    
    Term (years)
    
    
    Value (000s)Options outstanding at December 31, 2005
    
    
    2,794,652
    
    
    $
    19.07Granted
    
    
    630,000
    
    
    $
    43.60Exercised
    
    
    (508,796
    )
    
    $
    11.74Forfeited/expired
    
    
    (17,800
    )
    
    $
    15.03Options outstanding at July 1, 2006
    
    
    2,898,056
    
    
    $
    25.71
    
    
    
    7.5
    
    
    $
    60,700Options exercisable at July 1, 2006
    
    
    1,099,584
    
    
    $
    15.65
    
    
    
    6.0
    
    
    $
    34,095
  8




---



##### Table of Contents



Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Average number
of common shares
outstanding
    
    
    58,700
    
    
    
    59,878
    
    
    
    58,499
    
    
    
    59,402Incremental shares
from assumed
exercises of stock
options
    
    
    965
    
    
    
    1,259
    
    
    
    788
    
    
    
    1,019Average number of
common shares and
common share
equivalents
outstanding
    
    
    59,665
    
    
    
    61,137
    
    
    
    59,287
    
    
    
    60,421
    9




---



##### Table of Contents



Twenty Six Weeks Ended July 1, 2006Carrier
    
    
    Global Logistics
    
    
    Insurance
    
    
    Other
    
    
    TotalExternal revenue
    
    $
    895,933
    
    
    $
    340,467
    
    
    $
    16,880
    
    
    
    
    
    
    $
    1,253,280Investment income
    
    
    
    
    
    
    
    
    
    
    1,252
    
    
    
    
    
    
    
    1,252Internal revenue
    
    
    23,908
    
    
    
    999
    
    
    
    16,411
    
    
    
    
    
    
    
    41,318Operating income
    
    
    88,064
    
    
    
    17,022
    
    
    
    15,089
    
    
    $
    (29,309
    )
    
    
    90,866Goodwill
    
    
    20,496
    
    
    
    10,638
    
    
    
    
    
    
    
    
    
    
    
    31,134Total assets
    
    
    362,475
    
    
    
    144,153
    
    
    
    99,271
    
    
    
    63,835
    
    
    
    669,734
 Twenty Six Weeks Ended June 25, 2005Carrier
    
    
    Global Logistics
    
    
    Insurance
    
    
    Other
    
    
    TotalExternal revenue
    
    $
    783,521
    
    
    $
    242,588
    
    
    $
    15,207
    
    
    
    
    
    
    $
    1,041,316Investment income
    
    
    
    
    
    
    
    
    
    
    1,235
    
    
    
    
    
    
    
    1,235Internal revenue
    
    
    11,640
    
    
    
    888
    
    
    
    17,848
    
    
    
    
    
    
    
    30,376Operating income
    
    
    70,279
    
    
    
    9,142
    
    
    
    11,628
    
    
    $
    (24,927
    )
    
    
    66,122Goodwill
    
    
    20,496
    
    
    
    10,638
    
    
    
    
    
    
    
    
    
    
    
    31,134Total assets
    
    
    329,230
    
    
    
    76,178
    
    
    
    97,352
    
    
    
    40,623
    
    
    
    543,383
 Thirteen Weeks Ended July 1, 2006Carrier
    
    
    Global Logistics
    
    
    Insurance
    
    
    Other
    
    
    TotalExternal revenue
    
    $
    467,620
    
    
    $
    167,042
    
    
    $
    8,576
    
    
    
    
    
    
    $
    643,238Investment income
    
    
    
    
    
    
    
    
    
    
    873
    
    
    
    
    
    
    
    873Internal revenue
    
    
    12,052
    
    
    
    639
    
    
    
    10,472
    
    
    
    
    
    
    
    23,163Operating income
    
    
    47,493
    
    
    
    8,295
    
    
    
    8,413
    
    
    $
    (14,946
    )
    
    
    49,255
 Thirteen Weeks Ended June 25, 2005Carrier
    
    
    Global Logistics
    
    
    Insurance
    
    
    Other
    
    
    TotalExternal revenue
    
    $
    412,478
    
    
    $
    118,892
    
    
    $
    7,734
    
    
    
    
    
    
    $
    539,104Investment income
    
    
    
    
    
    
    
    
    
    
    696
    
    
    
    
    
    
    
    696Internal revenue
    
    
    5,756
    
    
    
    538
    
    
    
    11,258
    
    
    
    
    
    
    
    17,552Operating income
    
    
    39,248
    
    
    
    3,976
    
    
    
    7,536
    
    
    $
    (13,085
    )
    
    
    37,675
   Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    53,815
    
    
    $
    39,242
    
    
    $
    29,465
    
    
    $
    22,424Unrealized holding gains (losses) on available-for-sale investments, net of income taxes
    
    
    153
    
    
    
    (109
    )
    
    
    16
    
    
    
    (31
    )Comprehensive income
    
    $
    53,968
    
    
    $
    39,133
    
    
    $
    29,481
    
    
    $
    22,393
     10




---



##### Table of Contents



Introduction
   11




---



##### Table of Contents



Changes in Financial Condition and Results of Operations
    Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Carrier Segment:External revenue generated through (in thousands):BCO Independent Contractors
    
    $
    640,596
    
    
    $
    599,222
    
    
    $
    336,803
    
    
    $
    316,547Truck Brokerage Carriers
    
    
    255,337
    
    
    
    184,299
    
    
    
    130,817
    
    
    
    95,931$
    895,933
    
    
    $
    783,521
    
    
    $
    467,620
    
    
    $
    412,478Revenue per revenue mile
    
    $
    2.00
    
    
    $
    1.81
    
    
    $
    2.01
    
    
    $
    1.82Revenue per load
    
    $
    1,594
    
    
    $
    1,454
    
    
    $
    1,607
    
    
    $
    1,463Average length of haul (miles)
    
    
    797
    
    
    
    802
    
    
    
    800
    
    
    
    802Number of loads
    
    
    562,000
    
    
    
    539,000
    
    
    
    291,000
    
    
    
    282,000Global Logistics Segment:External revenue generated through (in thousands):BCO Independent Contractors (1)
    
    $
    47,163
    
    
    $
    35,335
    
    
    $
    22,331
    
    
    $
    17,497Truck Brokerage Carriers
    
    
    198,301
    
    
    
    154,665
    
    
    
    97,674
    
    
    
    75,584Rail, air, ocean and bus carriers (2)
    
    
    95,003
    
    
    
    52,588
    
    
    
    47,037
    
    
    
    25,811$
    340,467
    
    
    $
    242,588
    
    
    $
    167,042
    
    
    $
    118,892Revenue per load (3)
    
    $
    1,504
    
    
    $
    1,484
    
    
    $
    1,507
    
    
    $
    1,431Number of loads (3)
    
    
    189,000
    
    
    
    158,000
    
    
    
    97,000
    
    
    
    82,000
 12




---



##### Table of Contents



(1)
    
    Includes revenue from freight hauled by carrier segment BCO Independent Contractors
for global logistics customers.(2)
    
    Included in the 2006 twenty six and thirteen week periods was $19,438,000 and
$8,582,000, respectively, of revenue attributable to buses provided under contract between
Landstar Express America, Inc. and the United States Department of Transportation/Federal
Aviation Administration (the FAA).(3)
    
    Number of loads and revenue per load in the twenty six and thirteen week periods
ended July 1, 2006, exclude the effect of $56,297,000 and $20,848,000, respectively, of
revenue derived from transportation services provided under the FAA contract. Number of
loads and revenue per load in the twenty six and thirteen week periods ended June 25, 2005,
exclude the effect of $8,075,000 and $775,000, respectively, of revenue derived under the
FAA contract. See Use of Non-GAAP Financial Measures.  July 1, 2006
    
    
    June 25, 2005BCO Independent Contractors
    
    
    8,347
    
    
    
    7,840Truck Brokerage Carriers:Approved and active (1)
    
    
    14,034
    
    
    
    12,458Other approved
    
    
    7,977
    
    
    
    7,60522,011
    
    
    
    20,063Total available truck capacity providers
    
    
    30,358
    
    
    
    27,903Number of trucks provided
by BCO Independent Contractors
    
    
    9,047
    
    
    
    8,609
 
 (1)
    
    Active refers to Truck Brokerage Carriers who moved at least one load in the 180
days immediately preceding the fiscal quarter end.     13




---



##### Table of Contents



Twenty Six Weeks Ended
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    June 25,
    
    
    July 1,
    
    
    June 25,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Investment income
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1Costs and expenses:Purchased transportation
    
    
    75.3
    
    
    
    75.2
    
    
    
    75.6
    
    
    
    75.2Commissions to agents
    
    
    7.8
    
    
    
    7.9
    
    
    
    7.8
    
    
    
    8.0Other operating costs
    
    
    1.8
    
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.5Insurance and claims
    
    
    1.6
    
    
    
    2.2
    
    
    
    1.4
    
    
    
    1.8Selling, general and administrative
    
    
    5.7
    
    
    
    6.1
    
    
    
    5.4
    
    
    
    5.9Depreciation and amortization
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.6
    
    
    
    0.7Total costs and expenses
    
    
    92.8
    
    
    
    93.7
    
    
    
    92.4
    
    
    
    93.1Operating income
    
    
    7.3
    
    
    
    6.4
    
    
    
    7.7
    
    
    
    7.0Interest and debt expense
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Income before income taxes
    
    
    7.0
    
    
    
    6.2
    
    
    
    7.5
    
    
    
    6.8Income taxes
    
    
    2.7
    
    
    
    2.4
    
    
    
    2.9
    
    
    
    2.6Net income
    
    
    4.3
    %
    
    
    3.8
    %
    
    
    4.6
    %
    
    
    4.2
    %
   14




---



##### Table of Contents



15




---



##### Table of Contents



16




---



##### Table of Contents



17




---



##### Table of Contents



18




---



##### Table of Contents



19




---



##### Table of Contents



20




---



##### Table of Contents



Purchases of Equity Securities by the Company
 Total number of shares
    
    
    Maximum number ofpurchased as part of
    
    
    shares that may yet beTotal number of
    
    
    Average price paid
    
    
    publicly announced
    
    
    purchased under theFiscal period
    
    shares purchased
    
    
    per share
    
    
    programs
    
    
    programsApril 1, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,275,927Apr. 2, 2006  Apr. 29, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,275,927Apr. 30, 2006  May 27, 2006
    
    
    719,800
    
    
    $
    44.00
    
    
    
    719,800
    
    
    
    1,556,127May 28, 2006  July 1, 2006
    
    
    273,848
    
    
    $
    43.43
    
    
    
    273,848
    
    
    
    1,282,279Total
    
    
    993,648
    
    
    $
    43.84
    
    
    
    993,648
  21




---



##### Table of Contents



22




---



##### Table of Contents



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.
 
 23




---



##### Table of Contents



LANDSTAR SYSTEM, INC.Date: August 4, 2006
    /s/ Henry H. GerkensHenry H. GerkensPresident and
Chief Executive OfficerDate: August 4, 2006
    /s/ Robert C. LaRoseRobert C. LaRoseExecutive Vice President and Chief
Financial Officer 24