-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S1xEbWDvH/+H3LIOByUYXAoHA4ZBSTBac/4BXsvF8VotbxgRXRcgt2/obu02eBXh N05qB5lMlf+lC8usxqVsTQ== 0000853816-97-000011.txt : 19970514 0000853816-97-000011.hdr.sgml : 19970514 ACCESSION NUMBER: 0000853816-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDSTAR SYSTEM INC CENTRAL INDEX KEY: 0000853816 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 061245498 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21238 FILM NUMBER: 97601764 BUSINESS ADDRESS: STREET 1: FIRST SHELTON PL STREET 2: 1000 BRIDGEPORT AVE CITY: SHELTON STATE: CT ZIP: 06484 BUSINESS PHONE: 2039252900 MAIL ADDRESS: STREET 1: FIRST SHELTON PL STREET 2: 1000 BRDGEPORT AVE CITY: SHELTON STATE: CT ZIP: 06484 10-Q 1 LANDSTAR SYSTEM, INC. FORM 10-Q, 3/29/97 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 29, 1997 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________________ to _____________________ Commission File Number: 0-21238 LANDSTAR SYSTEM, INC. (Exact name of registrant as specified in its charter) Delaware 06-1313069 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) First Shelton Place, 1000 Bridgeport Avenue, Shelton, Connecticut (Address of principal executive offices) 06484-0898 (Zip Code) (203) 925-2900 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) The number of shares of the registrant's Common Stock, par value $.01 per share, outstanding as of the close of business on May 8, 1997 was 12,616,833. PART I FINANCIAL INFORMATION Item 1. Financial Statements The interim consolidated financial statements contained herein reflect all adjustments (all of a normal, recurring nature) which, in the opinion of management, are necessary for a fair statement of the financial condition, results of operations, cash flows and changes in shareholders' equity for the periods presented. They have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the thirteen weeks ended March 29, 1997 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 27, 1997. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. Index Item 1 Consolidated Balance Sheets as of March 29, 1997 and December 28, 1996 ................................................ Page 3 Consolidated Statements of Income for the Thirteen Weeks Ended March 29, 1997 and March 30, 1996 .............................. Page 4 Consolidated Statements of Cash Flows for the Thirteen Weeks Ended March 29, 1997 and March 30, 1996 .............................. Page 5 Consolidated Statement of Changes in Shareholders' Equity for the Thirteen Weeks Ended March 29, 1997 ................... Page 6 Notes to Consolidated Financial Statements.............................. Page 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations......................... Page 8 2 LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) (Unaudited)
March 29, December 28, 1997 1996 ------------- ------------ ASSETS Current assets: Cash $ 8,022 $ 4,187 Trade accounts receivable, less allowance of $6,496 157,992 176,892 and $6,526 Other receivables, including advances to independent contractors, less allowance of $4,551 and $4,390 16,057 10,740 Inventories 1,522 1,785 Prepaid expenses and other current assets 8,987 7,319 ---------- ----------- Total current assets 192,580 200,923 ---------- ----------- Operating property, less accumulated depreciation and amortization of $49,422 and $50,223 100,307 105,564 Goodwill, less accumulated amortization of $7,520 and $7,087 54,693 55,126 Deferred income taxes and other assets 8,406 9,188 ---------- ----------- Total assets $ 355,986 $ 370,801 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdraft $ 8,187 $ 13,488 Accounts payable 49,420 39,901 Current maturities of long-term debt 20,568 23,241 Estimated insurance claims 26,477 25,328 Other current liabilities 29,335 28,312 ---------- ----------- Total current liabilities 133,987 130,270 ---------- ----------- Long-term debt, excluding current maturities 48,941 67,155 Estimated insurance claims 26,340 25,819 Shareholders' equity: Common stock, $.01 par value, authorized 20,000,000 shares, issued 12,889,874 shares and 12,882,874 shares 129 129 Additional paid-in capital 61,886 61,740 Retained earnings 90,660 87,655 Cost of 273,041 and 94,041 shares of common stock in treasury (5,957) (1,967) ---------- ----------- Total shareholders' equity 146,718 147,557 ---------- ----------- Total liabilities and shareholders' equity $ 355,986 $ 370,801 ========== =========== See accompanying notes to consolidated financial statements. 3
LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (Unaudited)
Thirteen Weeks Ended ----------------------- March 29, March 30, 1997 1996 ---------- ---------- Revenue $ 305,558 $ 295,477 Costs and expenses: Purchased transportation 215,122 200,213 Drivers' wages and benefits 8,145 11,505 Fuel and other operating costs 13,163 17,778 Insurance and claims 9,331 9,797 Commissions to agents and brokers 22,719 18,767 Selling, general and administrative 24,166 24,070 Depreciation and amortization 5,114 6,014 Restructuring costs 1,179 ---------- ---------- Total costs and expenses 298,939 288,144 ---------- ---------- Operating income 6,619 7,333 Interest and debt expense, net 1,439 1,922 ---------- ---------- Income before income taxes 5,180 5,411 Income taxes 2,175 2,257 ---------- ---------- Net income $ 3,005 $ 3,154 ========== ========== Earnings per share $ 0.24 $ 0.25 ========== ========== Average number of common shares outstanding 12,726,000 12,779,000 ========== ========== See accompanying notes to consolidated financial statements. 4
LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Thirteen Weeks Ended --------------------------- March 29, March 30, 1997 1996 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,005 $ 3,154 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of operating property 4,579 5,479 Amortization of goodwill and non-competition agreements 535 535 Non-cash interest charges 66 66 Provisions for losses on trade and other accounts receivable 622 811 Gains on sales of operating property (762) (1,132) Deferred income taxes, net 76 58 Changes in operating assets and liabilities: Decrease (increase) in trade and other accounts receivable 12,961 (7,519) Decrease (increase) in inventories, prepaid expenses and other assets (867) 182 Increase in accounts payable and other liabilities 10,542 4,681 Increase in estimated insurance claims 1,670 847 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 32,427 7,162 ----------- ----------- INVESTING ACTIVITIES Purchases of operating property (4,289) (2,178) Proceeds from sales of operating property 5,729 3,260 ----------- ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 1,440 1,082 ----------- ----------- FINANCING ACTIVITIES Borrowings under revolving credit facility 7,000 Decrease in cash overdraft (5,301) (4,110) Proceeds from exercise of stock options and related income tax benefit 146 37 Purchases of common stock (3,990) Principal payments on long-term debt and capital lease obligations (20,887) (9,949) ----------- ----------- NET CASH USED BY FINANCING ACTIVITIES (30,032) (7,022) ----------- ----------- Increase in cash 3,835 1,222 Cash at beginning of period 4,187 3,415 ----------- ----------- Cash at end of period $ 8,022 $ 4,637 =========== =========== See accompanying notes to consolidated financial statements. 5
LANDSTAR SYSTEM, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Thirteen Weeks Ended March 29, 1997 (Dollars in thousands) (Unaudited)
Treasury Stock Common Stock Additional at Cost ------------------ Paid-In Retained ---------------- Shares Amount Capital Earnings Shares Amount Total ---------- ------- --------- -------- -------- ------- --------- Balance December 28, 1996 12,882,874 $ 129 $61,740 $87,655 94,041 $(1,967) $147,557 Purchases of common stock 179,000 (3,990) (3,990) Exercise of stock options and related income tax benefit 7,000 146 146 Net income 3,005 3,005 ---------- ------- -------- -------- -------- -------- --------- Balance March 29, 1997 12,889,874 $ 129 $61,886 $90,660 273,041 $(5,957) $146,718 ========== ======= ======== ======== ======== ======== ========= See accompanying notes to consolidated financial statements. 6
LANDSTAR SYSTEM, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The consolidated financial statements include the accounts of Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc., and reflect all adjustments (all of a normal, recurring nature) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of the consolidated financial statements requires the use of management's estimates. Actual results could differ from those estimates. Landstar System, Inc. and its subsidiary are herein referred to as "Landstar". (1) Income Taxes The provisions for income taxes for both the 1997 and 1996 thirteen week periods were based on an estimated combined full year effective income tax rate of approximately 42%, which is higher than the statutory federal income tax rate, primarily as a result of state income taxes, amortization of certain goodwill and the meals and entertainment exclusion. (2) Earnings Per Share Earnings per share amounts were based on the weighted average number of common shares outstanding. (3) Additional Cash Flow Information During the 1997 period, Landstar paid income taxes and interest of $813,000 and $1,719,000, respectively, and did not acquire any property by entering into capital leases. During the 1996 period, Landstar paid income taxes and interest of $1,688,000 and $1,795,000, respectively, and acquired operating property by entering into capital leases in the amount of $8,659,000. (4) Commitments and Contingencies At March 29, 1997, Landstar had commitments for letters of credit outstanding in the amount of $21,469,000, primarily as collateral for estimated insurance claims. Landstar is involved in certain claims and pending litigation arising from the normal conduct of business. Based on the knowledge of the facts and, in certain cases, opinions of outside counsel, management believes that adequate provisions have been made for probable losses with respect to the resolution of all claims and pending litigation and that the ultimate outcome, after provisions thereof, will not have a material adverse effect on the financial condition of Landstar, but could have a material effect on the results of operations in a given quarter or year. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the attached interim consolidated financial statements and notes thereto, and with the Company's audited financial statements and notes thereto for the fiscal year ended December 28, 1996 and Management's Discussion and Analysis of Financial Condition and Results of Operations, included in the Annual Report to Shareholders. RESULTS OF OPERATIONS Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. ("Landstar" or the "Company") provide transportation services to a variety of market niches throughout the United States and to a lesser extent in Canada and between the United States and Canada and Mexico through its operating subsidiaries. The Company provides truckload transportation, intermodal transportation services, expedited air and surface transportation and contract logistics services. The Company provides truckload and expedited surface transportation through independent contractors, and to a lesser extent company-owned equipment driven by company-employed drivers. The Company's intermodal and expedited air transportation services primarily involve arranging for the movement of customer's goods by a combination of rail or air and truck. Both the railroads and air cargo carriers used by the Company in its intermodal and expedited air operations are independent contractors. Contract logistics services include single source alternatives, truck brokerage and other transportation solutions for large customers. The Company markets its transportation services and provides local operating support primarily through a network of independent commission sales agents. A significant portion of the Company's operating costs vary directly with revenue which is attributable to the use of independent contractors and independent commission sales agents. Purchased transportation represents the amount an independent contractor is paid to haul freight and is primarily based on a contractually agreed upon percentage of revenue generated by the haul for truck operations. Purchased transportation for the intermodal and expedited air operations is based on a contractually agreed-upon fixed rate. Purchased transportation as a percentage of revenue for the intermodal operations is normally higher than that of Landstar's other transportation services. Purchased transportation is the largest component of costs and expenses and, on a consolidated basis, increases or decreases in proportion to the revenue generated through independent contractors. Commissions to agents and brokers are primarily based on contractually agreed upon percentages of revenue or contractually agreed upon percentages of gross profit. Commissions to agents and brokers as a percentage of consolidated revenue will vary directly with the revenue generated through independent commission sales agents. Both purchased transportation and commissions to agents and brokers generally will also increase or decrease as a percentage of the Company's consolidated revenue if there is a change in the percentage of revenue contributed by intermodal operations or expedited air operations or through company-employed drivers. Drivers' wages and benefits represent the amount Landstar employee drivers are compensated. Employee drivers are compensated primarily on a cents per 8 mile driven basis. Drivers' wages and benefits as a percentage of consolidated revenue generally will vary only if there is a change in the revenue contribution generated through independent contractors or a change in Landstar's rate of employee driver pay or benefit structure. The Company's intention is to continue its expansion of truckload capacity provided by independent contractors and to reduce its truckload capacity provided by company-owned equipment and company- employed drivers. It is also the Company's intention to favor independent commission sales agent locations over company-owned and operated locations. Historically, the intermodal operations and a portion of the company-owned equipment operations have principally utilized a company employee sales structure and to a lesser degree, independent commission sales agents. During 1996, management completed the process of converting the majority of the company-owned sales locations to independent commission sales agent locations. Accordingly, purchased transportation and commissions to agents and brokers are anticipated to increase as a percentage of total consolidated revenue and drivers' wages and benefits are anticipated to decline as a percentage of total consolidated revenue over time. Potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. The industry is also subject to substantial workers' compensation expense. A material increase in the frequency or severity of accidents or workers' compensation claims or the unfavorable development of existing claims can be expected to adversely affect Landstar's operating income. The cost of fuel, including fuel taxes, is the largest component of fuel and other operating costs. Changes in prevailing prices of fuel or increases in fuel taxes can significantly affect the operating results of the company- owned equipment operations. Also included in fuel and other operating costs are costs of equipment maintenance paid to third parties and the operating costs of Company terminals. Effective August 1, 1996, Landstar closed all but one of its Company terminals, including those that had functioned as Landstar Centers. The closings were part of the Company's strategy to reduce its fixed cost elements. Employee compensation and benefits account for more than half of the Company's selling, general and administrative expense. Other significant components of selling, general and administrative expense are data processing expense, communications costs and rent expense. 9 The following table sets forth the percentage relationships of expense items to revenue for the periods indicated:
Thirteen Weeks Ended ----------------------- March 29, March 30, 1997 1996 ---------- ---------- Revenue 100.0% 100.0% Costs and expenses: Purchased transportation 70.4% 67.8% Drivers' wages and benefits 2.7% 3.9% Fuel and other operating costs 4.3% 6.0% Insurance and claims 3.0% 3.3% Commissions to agents and brokers 7.4% 6.4% Selling, general and administrative 7.9% 8.1% Depreciation and amortization 1.7% 2.0% Restructuring costs 0.4% - ------- ------- Total costs and expenses 97.8% 97.5% ------- ------- Operating income 2.2% 2.5% Interest and debt expense, net 0.5% 0.7% ------- ------- Income before income taxes 1.7% 1.8% Income taxes 0.7% 0.7% ------- ------- Net income 1.0% 1.1% ======= =======
THIRTEEN WEEKS ENDED MARCH 29, 1997 COMPARED TO THIRTEEN WEEKS ENDED MARCH 30, 1996 Revenue for the 1997 thirteen week period was $305,558,000, an increase of $10,081,000, or 3.4%, over the 1996 thirteen week period. The increase was primarily attributable to an increase in revenue per revenue mile (price) of approximately 4%, which reflected improved freight quality. An increase in revenue miles (volume) generated through independent contractors was offset by a decline in revenue miles generated through company-owned equipment, which reflected a planned reduction in company-owned tractors. In the 1997 period, revenue generated through independent contractors, including railroads and air cargo carriers, was 92.9% of total consolidated revenue compared with 88.7% in the 1996 period. Purchased transportation was 70.4% of revenue in 1997 compared with 67.8% in 1996. Drivers' wages and benefits were 2.7% of revenue in 1997 compared with 3.9% in 1996. Fuel and other operating costs were 4.3% of revenue in 1997 compared with 6.0% in 1996. The increase in purchased transportation and decrease in drivers' wages and benefits and fuel and other operating costs as a percentage of revenue was primarily attributable to an increase in the percentage of revenue generated through independent contractors which reflected the reduction in company-owned equipment in accordance with a previously announced restructuring plan. 10 The decrease in fuel and other operating costs as a percentage of revenue was also attributable to reduced terminal and maintenance costs, partially offset by increased trailer costs. Insurance and claims were 3.0% of revenue in 1997 compared with 3.3% in 1996. The favorable variance to prior year was primarily due to lower third party premiums. Commissions to agents and brokers were 7.4% of revenue in 1997 compared with 6.4% in 1996, primarily due to an increased percentage of revenue generated through independent commission sales agents, which reflected the conversion of company-owned sales locations to independent commission sales agent locations. Selling, general and administrative costs were 7.9% of revenue in 1997 compared with 8.1% of revenue in 1996, primarily due to increased revenue, partially offset by an increased provision for bonuses under the Company's management incentive compensation plan. Depreciation and amortization was 1.7% of revenue in 1997 compared with 2.0% in 1996, primarily due to a decrease in the number of company-owned tractors. During the fourth quarter of 1996, the Company announced a plan to restructure its Landstar T.L.C., Inc. ("Landstar T.L.C.") and Landstar Poole, Inc. ("Landstar Poole") operations, in addition to the relocation of its Shelton, Connecticut corporate office headquarters to Jacksonville, Florida in the second quarter of 1997. The Landstar Poole restructuring plan included the transfer of the variable cost business component of Landstar Poole to Landstar Ranger, Inc. and the disposal of 175 company-owned tractors. The Landstar T.L.C. restructuring plan included the merger of Landstar T.L.C. into Landstar Inway, Inc. and the disposal of all the company-owned tractors. During the first quarter of 1997, the Company incurred $1,179,000 of such restructuring costs. The provisions for income taxes for both the 1997 and 1996 thirteen week periods were both based on an estimated full year combined effective income tax rate of approximately 42%, which is higher than the statutory federal income tax rate primarily as a result of state income taxes, amortization of certain goodwill and the meals and entertainment exclusion. Net income was $3,005,000, or $0.24 per share, in the 1997 period, compared with $3,154,000, or $0.25 per share, in the 1996 period. Excluding restructuring costs, 1997 net income would have been $3,689,000, or $0.29 per share. CAPITAL RESOURCES AND LIQUIDITY Shareholders' equity decreased to $146,718,000 at March 29, 1997, compared with $147,557,000 at December 28, 1996, which reflected the repurchase of 179,000 shares of common stock, at an aggregate cost of $3,990,000, partially offset by the net income for the period. However, shareholders' equity increased to 67.9% of total capitalization at March 29, 1997 compared with 62.0% at December 28, 1996, as a result of reduced borrowings on the acquisition line of the senior credit facility and reduced capital lease obligations. Working capital and the ratio of current assets to current liabilities were $58,593,000 and 1.44 to 1, respectively, at March 29, 1997, compared with $70,653,000 and 1.54 to 1, respectively, at December 28, 1996. Landstar has historically operated with a current ratio of approximately 1.5 to 1. Cash provided by operating activities was $32,427,000 in the 1997 thirteen week period compared with $7,162,000 in the 1996 thirteen week period. The increase in cash flow provided by operating 11 activities was primarily attributable to the timing of cash collections and payments. During the 1997 thirteen week period, Landstar purchased $4,289,000 of operating property and did not acquire any operating property by entering into capital leases. Landstar plans to acquire approximately $10,700,000 of operating property during the remainder of fiscal year 1997 either by purchase or lease financing. Management believes that cash flow from operations combined with the Company's borrowing capacity under its revolving credit agreement will be adequate to meet Landstar's debt service requirements, fund continued growth, both internal and through acquisitions, and meet working capital needs. Management does not believe inflation has had a material impact on the results of operations or financial condition of Landstar in the past five years. However, inflation higher than that experienced in the past five years might have an adverse effect on the Company's results of operations. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("FAS") No. 128, "Earnings per Share." This statement, effective for financial statements issued for periods ending after December 15, 1997, replaces the presentation of primary earnings per share, currently required under Accounting Principals Board Opinion 15 "Earnings Per Share" ("APB 15"), with a presentation of basic earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. FAS No. 128 also requires the dual presentation of basic earnings per share and diluted earnings per share on the face of the income statement. Management believes that, upon the adoption of this statement, basic earnings per share will not differ from primary earnings per share calculated in accordance with APB 15 and diluted earnings per share will not be materially different from the basic earnings per share given the current market value of the Company's common stock and the current structure of its stock compensation plans. SEASONALITY Landstar's operations are subject to seasonal trends common to the trucking industry. Results of operations for the quarter ending in March is typically lower than the quarters ending June, September and December due to reduced shipments and higher operating costs in the winter months. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings In response to a breach of contract suit filed in January 1988 by Landstar Gemini in the Circuit Court, County of Genesee, in the state of Michigan against Vicki and Kevin Cresson, individually and doing business as V&C Trucking (the "Defendants"), the Defendants, who are former agents and independent contractors of Landstar Gemini, have asserted breach of contract, tort and state antitrust law counterclaims against Landstar Gemini and other parties, including EnviroSource, Landstar, Landstar Ranger and John B. Bowron, a director and executive officer of the Company. Defendants have claimed approximately $7,500,000 in actual damages (subject to trebling) as well as punitive damages. On October 24, 1996, the court rendered an opinion on the parties' cross- motions for summary judgment. The court granted Landstar Gemini's motion for summary judgment in its entirety and denied Defendants motion for summary judgment in its entirety. The court also granted Landstar Gemini's request for costs and reasonable attorney's fees. Defendants have appealed the judge's decision, which to date, have been denied. Further appeals may ensue at the close of the actions brought by Landstar Gemini which remain pending. The Company, believing that its defenses are and will continue to be deemed good and meritorious, will vigorously contest any such appeal. Although a trial in this matter is now considerably less likely in light of the judges favorable rulings, any such trial would not likely occur before 1998. The Company is routinely a party to litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains insurance which covers liability amounts in excess of retained liabilities from personal injury and property damages claims. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None. 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The exhibits listed on the Exhibit Index are filed as part of this quarterly report on Form 10-Q. (b) Form 8-K No reports on Form 8-K were filed by the Registrant during the thirteen week period ended March 29, 1997. EXHIBIT INDEX Registrant's Commission File No.: 0-21238 Exhibit No. Description - ------------ ----------- (4) Instruments defining the rights of security holders, including indentures: (4.1)* Amendment, dated February 28, 1997, to the Credit Agreement, dated October 7, 1994, among Landstar System Holdings, Inc., Landstar System, Inc., the lenders named therein, and Chase Manhattan Bank, as agent. (11) Statement re: Computation of Per Share Earnings: (11.1)* Statement re: Computation of Per Share Earnings for the Thirteen Weeks ended March 29, 1997 and March 30, 1996. (27) Statement re: Financial Data Schedule: (27 )* Statement re: Financial Data Schedule __________________ * Filed herewith 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LANDSTAR SYSTEM, INC. Date: May 8, 1997 Henry H. Gerkens ---------------------------- Henry H. Gerkens Executive Vice President and Chief Financial Officer; Principal Financial Officer Date: May 8, 1997 Robert C. LaRose ---------------------------- Robert C. LaRose Vice President Finance and Treasurer; Principal Accounting Officer EX-4.1 2 EXHIBIT 4.1 THIRD AMENDMENT THIRD AMENDMENT, dated as of February 28, 1997 (this "Amendment"), to the Amended and Restated Credit Agreement, dated as of October 7, 1994 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among LANDSTAR SYSTEM HOLDINGS, INC., a Delaware corporation (the "Borrower"), LANDSTAR SYSTEM, INC., a Delaware corporation (the "Parent"), the lenders parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Parent, the Lenders and the Agent are parties to the Credit Agreement; and WHEREAS, the Borrower and the Parent have requested that the Lenders agree to amend certain provisions of the Credit Agreement and the Lenders are agreeable to such request upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, and for other valuable consideration the receipt of which is hereby acknowledged, the Borrower, the Parent, the Lenders and the Agent hereby agree as follows: 1. Definitions. All terms defined in the Credit Agreement shall have such defined meanings when used herein unless otherwise defined herein. 2. Amendment of Subsection 1.1. Subsection 1.1 of the Credit Agreement is hereby amended by amending or adding definitions in alphabetical order therein such that the following definitions shall, in their entirety, be as follows: "Insurance Subsidiary": a wholly owned corporate Subsidiary of the Borrower organized under the insurance laws of the Cayman Islands for the purpose of engaging in the business of providing insurance to the Borrower, its Subsidiaries and/or independent contractors doing business with the Borrower and/or any of its Subsidiaries. "Permitted Insurance Company Investments": any investments (i) in Cash Equivalents, (ii) constituting loans and advances to the Borrower or any of its Subsidiaries and (iii) in obligations which, at the time the investment in question is made, are rated one, two or three by the Securities Valuation Office of the National Association of Insurance Commissioners. "Subsidiary Guarantors": the Subsidiaries of the Borrower listed on Schedule 1.1(b) hereto and the Insurance Subsidiary. 3. Amendment to Subsection 6.4. Subsection 6.4 of the Credit Agreement is hereby amended by inserting therein, immediately following the phrase "the same general type as now conducted by it", the following parenthetical clause: "(except that the Insurance Subsidiary shall be permitted to engage in the business of providing insurance to the Borrower, its Subsidiaries and/or independent contractors doing business with the Borrower and/or any of its Subsidiaries)". 4. Amendment of Subsection 7.10. Subsection 7.10 of the Credit Agreement is hereby amended by deleting paragraph (b) in its entirety and substituting in lieu thereof the following new paragraph (b): "(b) investments in Cash Equivalents and investments by the Insurance Subsidiary in Permitted Insurance Company Investments;" 5. Amendment to Subsection 7.16. Subsection 7.16 of the Credit Agreement is hereby amended by inserting therein, immediately following the phrase "subsection 7.10(k)", the following: "; provided, further, that the Insurance Subsidiary shall be permitted to engage in the business of providing insurance to the Borrower, its Subsidiaries and/or independent contractors doing business with the Borrower and/or any of its Subsidiaries provided that, in the case of insurance for independent contractors, the premiums charged by the Insurance Subsidiary in connection therewith are consistent in all material respects with those prevailing in the industry for similar risks (based on the good faith judgment of the Insurance Subsidiary)". 6. Amendment to Subsection 7.17. Subsection 7.17 of the Credit Agreement is hereby amended by inserting therein, immediately following the phrase "equal to $5,000,000", the following: "; provided, further, that the Borrower shall be permitted to form the Insurance Subsidiary". 7. Amendment to Schedule 1.1(b). Schedule 1.1(b) to the Credit Agreement is hereby amended by deleting Schedule 1.1(b) in its entirety and substituting in lieu thereof Schedule 1.1(b) attached hereto. 8. Representations; No Default. On and as of the date hereof, and after giving effect to this Amendment, the Borrower confirms, reaffirms and restates that the representations and warranties set forth in Section 4 of the Credit Agreement are true and correct in all material respects, provided that the references to the Credit Agreement therein shall be deemed to be references to this Amendment and to the Credit Agreement as amended by this Amendment. 9. Conditions to Effectiveness. This Amendment shall become effective on the date on which the Agent shall have received each of the following: (a) counterparts of this Amendment, duly executed and delivered by a duly authorized officer of each of the Borrower, the Parent, each Guarantor which is a party to the Subsidiaries Guarantee and the Required Lenders; (b) a supplement to the Subsidiaries Guarantee, in substantially the form attached to the Subsidiaries Guarantee as Exhibit A thereto, executed and delivered by a duly authorized officer of the Insurance Subsidiary; and (c) an opinion of counsel to the Insurance Subsidiary, in form and substance satisfactory to the Agent, with respect to the documents delivered pursuant to clause (b) above. 10. Limited Effect. Except as expressly amended herein, the Credit Agreement shall continue to be, and shall remain, in full force and effect. This Amendment shall not be deemed to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of the Credit Agreement or to prejudice any other right or rights which the Lenders may now have or may have in the future under or in connection with the Credit Agreement or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 11. Costs and Expenses. The Borrower agrees to pay or reimburse the Agent for all its reasonable and customary out-of-pocket costs and expenses incurred in connection with this Amendment, including, without limitation, the reasonable fees and disbursements of its counsel. 12. Counterparts. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first above written. LANDSTAR SYSTEM HOLDINGS, INC. By: Robert C. LaRose Title: Vice President Finance and Treasurer LANDSTAR SYSTEM, INC. By: Robert C. LaRose Title: Vice President Finance and Treasurer THE CHASE MANHATTAN BANK, as Agent and as a Lender By: Rosemary Bradley Title: Vice President ABN AMRO BANK N.V. By: Nancy W. Lanzoni Title: Group Vice President By: Thomas T. Rogers Title: Assistant Vice President AMSOUTH BANK OF ALABAMA By: John J. Hooker Title: Commercial Banking Officer THE BANK OF NEW YORK By: Ken Sneider Title: Vice President BARNETT BANK OF JACKSONVILLE, N.A. By: Pamela Fitch Title: Vice President CORESTATES BANK, N.A. By: Verna R. Prentice Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: Michael J. Blake Title: Director FLEET BANK, NATIONAL ASSOCIATION By: John V. Raliegh Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH By: Nobru Kubota Title: Deputy General Manager NATIONSBANK N.A. (CAROLINAS) By: Thomas J. Kane Title: Vice President PNC BANK, NATIONAL ASSOCIATION By: Sarah McClintock Title: Vice President FIRST UNION NATIONAL BANK OF NORTH CAROLINA By: Rey Giallongo, Jr. Title: Senior Vice President The undersigned Guarantors do hereby consent and agree to the execution and delivery by the Borrower and the Parent of the foregoing Amendment: LANDSTAR GEMINI, INC. (f.k.a. GEMINI TRANSPORTATION SERVICES, INC.) LANDSTAR EXPEDITED, INC. LANDSTAR GEMINI ACQUISITION LANDSTAR CORPORATE SERVICES, INC. LANDSTAR RANGER, INC. (f.k.a. RANGER TRANSPORTATION,INC.) LANDSTAR LIGON, INC. (f.k.a. LIGON NATIONWIDE, INC.) LANDSTAR POOLE, INC. (f.k.a. POOLE TRUCK LINE, INC.) RISK MANAGEMENT CLAIM SERVICES, INC. LANDSTAR LOGISTICS, INC. (f.k.a. LANDSTAR TRANSPORTATION SERVICE, INC.) LANDSTAR EXPRESS AMERICA, INC. LANDSTAR T.L.C., INC. LANDSTAR INWAY, INC. (f.k.a. INDEPENDENT FREIGHTWAY, INC.) By: Robert C. LaRose Title: Vice President Schedule 1.1(b) Subsidiary Guarantors Landstar Gemini, Inc. (f.k.a. Gemini Transportation Services, Inc.) Landstar Expedited, Inc. Landstar Gemini Acquisition Landstar Corporate Services, Inc. Landstar Ranger, Inc. (f.k.a. Ranger Transportation, Inc.) Landstar Ligon, Inc. (f.k.a. Ligon Nationwide, Inc.) Landstar Poole, Inc. (f.k.a. Poole Truck Line, Inc.) Risk Management Claim Services, Inc. Landstar Logistics, Inc. (f.k.a. Landstar Transportation Service, Inc.) Landstar Express America, Inc. Landstar T.L.C., Inc. Landstar Inway, Inc. (f.k.a. Independent Freightway, Inc.) EX-11.1 3 [DESCRIPTION] CALCULATION OF 1997 EARNINGS PER SHARE EXHIBIT 11.1 LANDSTAR SYSTEM, INC. AND SUBSIDIARY CALCULATION OF EARNINGS PER SHARE (In thousands, except per share amounts) (Unaudited)
Thirteen Thirteen Weeks Ending Weeks Ending March 29, March 30, 1997 1996 ------------ ------------ Earnings available for earnings per share: Net income $ 3,005 $ 3,154 ============ ============ Average number of common shares outstanding 12,726 12,779 ============ ============ Earnings per share $ 0.24 $ 0.25 ============ ============
EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets at March 29, 1997 (Unaudited) and the Consolidated Statements of Income for the thirteen weeks ended March 29, 1997 (Unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 OTHER DEC-27-1997 DEC-29-1996 MAR-29-1997 8,022 0 164,488 6,496 1,522 192,580 149,729 49,422 355,986 133,987 48,941 0 0 129 146,589 355,986 0 305,558 0 236,430 9,331 622 1,439 5,180 2,175 3,005 0 0 0 3,005 0.24 0.24
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