Forward-Looking Statements

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this document that are not based on historical facts are "forward-looking statements." This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-K contain forward-looking statements, such as statements which relate to Landstar's business objectives, plans, strategies and expectations. Terms such as "anticipates," "believes," "estimates," "expects," "plans," "predicts," "may," "should," "could," "will," the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; substantial industry competition; dependence on key personnel; disruptions or failures in our computer systems; changes in fuel taxes; status of independent contractors; a downturn in economic growth or growth in the transportation sector; concentrations of credit risk; and other operational, financial or legal risks or uncertainties detailed in

this and Landstar's other SEC filings from time to time and described in Item 1A of this Form 10-K under the heading "Risk Factors." These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Introduction

Landstar System, Inc. and its subsidiary, Landstar System Holdings, Inc. (together referred to herein as "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, Mexico and other countries through its operating subsidiaries. Landstar's business strategy is to be a non-asset based provider of transportation capacity and logistics services delivering safe, specialized transportation services, utilizing a network of independent commission sales agents, third party capacity providers and employees. Landstar focuses on providing transportation services which emphasize safety, customer service and information coordination among its independent commission sales agents, customers and capacity providers. The Company markets its services primarily through independent commission sales agents and utilizes third party capacity providers exclusively to transport customers' freight. The nature of the Company's business is such that a significant portion of its operating costs varies directly with revenue.

Historically, the Company reported the results of three operating segments: the carrier segment, the global logistics segment and the insurance segment. Beginning in the thirteen-week period ended March 29, 2008, the Company revised the presentation format of its segment disclosure to consolidate the previously reported three segments to two segments: the transportation logistics segment and the insurance segment. This change in segment reporting reflected increased centralization and consolidation of certain administrative and sales functions across all of the Company's operating subsidiaries and the increased similarity of the services provided by the operations of the Company's various operating subsidiaries, primarily with respect to truck brokerage services. As a result of this change in presentation, the revenue and operating results formerly separated into the carrier and global logistics segments, together with corporate overhead, which was previously included as "other" in the segment information, were consolidated into the transportation logistics segment. This change in segment reporting had no impact on the Company's consolidated balance sheets, statements of income, statements of cash flows or statements of changes in shareholders' equity for any periods. This change in reporting also had no impact on reporting with respect to the insurance segment.

The transportation logistics segment markets its services primarily through independent commission sales agents. The transportation logistics segment provides a wide range of transportation and logistics services including truckload transportation, rail intermodal, air cargo and ocean cargo services, the arrangement of multimodal (ground, air, ocean and rail) moves and warehousing to a variety of industries including automotive products, paper, lumber and building products, metals, chemicals, foodstuffs, heavy machinery, retail, electronics, ammunition and explosives and military hardware. In addition, Landstar provides transportation services to other transportation companies including logistics and less-than-truckload service providers. Landstar also provides dedicated contract and logistics solutions, including freight optimization and less-than-truckload freight consolidations, expedited land and air delivery of time-critical freight and the movement of containers via ocean. Each of the independent commission sales agents has the opportunity to market all of the services provided by the transportation logistics segment.

Truckload services primarily are provided for a wide range of general commodities, much of which are over irregular or non-repetitive routes, utilizing dry and specialty vans and unsided trailers, including flatbed, drop deck and specialty trailers. Available truckload services also include short-to-long haul movement of containers by truck and expedited ground and dedicated power-only truck capacity. These services are provided by independent contractors who provide truck capacity to the Company under exclusive lease arrangements (the "BCO Independent Contractors") and other third party truck capacity providers under non-exclusive contractual arrangements ("Truck Brokerage Carriers"). Rail intermodal, air and ocean services are provided by third party railroad carriers and air and ocean cargo carriers. The Company has contracts with all

of the Class 1 domestic railroads and certain Canadian railroads and contracts with domestic and international airlines and ocean lines. Warehousing services are provided by independent contractors who provide warehouse capacity to the Company under non-exclusive contractual arrangements ("Warehouse Capacity Owners"). During the fiscal year ended December 27, 2008, revenue hauled by BCO Independent Contractors, Truck Brokerage Carriers, rail intermodal carriers, air cargo carriers and ocean cargo carriers represented 53%, 38%, 5%, 1%, and 2%, respectively, of the Company's transportation logistics segment revenue. In addition, during the fiscal year ended December 27, 2008, revenue for passenger bus capacity provided for evacuation assistance related to the storms that impacted the Gulf Coast in September 2008 ("Bus Revenue") represented 1% of the Company's transportation logistics segment revenue in 2008.

The insurance segment is comprised of Signature Insurance Company ("Signature"), a wholly owned offshore insurance subsidiary, and Risk Management Claim Services, Inc. The insurance segment provides risk and claims management services to Landstar's operating subsidiaries. In addition, it reinsures certain risks of the Company's BCO Independent Contractors and provides certain property and casualty insurance directly to Landstar's operating subsidiaries. Revenue, representing premiums on reinsurance programs provided to the Company's BCO Independent Contractors, at the insurance segment represented approximately 1% of total revenue for the fiscal year ended December 27, 2008.

Changes in Financial Condition and Results of Operations

Management believes the Company's success principally depends on its ability to generate freight through its network of independent commission sales agents and to efficiently deliver that freight utilizing third party capacity providers. Management believes the most significant factors to the Company's success include increasing revenue, sourcing capacity and controlling costs.

While customer demand, which is subject to overall economic conditions, ultimately drives increases or decreases in revenue, the Company primarily relies on its independent commission sales agents to establish customer relationships and generate revenue opportunities. Management's primary focus with respect to revenue growth is on revenue generated by independent commission sales agents who on an annual basis generate $1 million or more of Landstar revenue ("Million Dollar Agents"). Management believes future revenue growth is primarily dependent on its ability to increase both the revenue generated by Million Dollar Agents and the number of Million Dollar Agents through a combination of recruiting new agents and increasing the revenue opportunities generated by existing independent commission sales agents. Management believes the decrease in number of Million Dollar Agents in 2008 resulted from the severe downturn in the economy in the fourth quarter of 2008 and not necessarily from agent turnover. The number of agents generating Landstar revenue between $750,000 and $1,000,000 in 2008 and 2007 were 91 and 61, respectively. The following table shows the number of Million Dollar Agents, the average revenue generated by these agents, the percent of consolidated revenue generated by these agents during the past three fiscal years and the number of agent locations at each fiscal year end:

                                                                     Fiscal Year
                                                       2008             2007             2006

Number of Million Dollar Agents                             484              495              490

Average revenue generated per Million Dollar
Agent                                               $ 4,907,000      $ 4,571,000      $ 4,700,000

Percent of consolidated revenue generated by
Million Dollar Agents                                        90 %             91 %             92 %

Number of independent commission sales agent
locations at year end                                     1,428            1,397            1,345

Management monitors business activity by tracking the number of loads (volume) and revenue per load by mode of transportation. Revenue per load can be influenced by many factors other than a change in price. Those factors include the average length of haul, freight type, special handling and equipment requirements and delivery time requirements. For shipments involving two or more modes of transportation, revenue is classified by the mode of transportation having the highest cost for the load. The following table summarizes this data by mode of transportation for the past three fiscal years:

                                                             Fiscal Year
                                                2008            2007            2006

 Revenue generated through (in thousands):
 BCO Independent Contractors                 $ 1,388,353     $ 1,377,083     $ 1,351,694
 Truck Brokerage Carriers                        996,269         884,577         871,134
 Rail intermodal                                 136,367         133,878         122,656
 Ocean cargo carriers                             42,153          26,498          17,022
 Air cargo carriers                               14,891          19,692          15,991
 Other(1)                                         65,036          45,549         135,259

                                             $ 2,643,069     $ 2,487,277     $ 2,513,756

 Number of loads:
 BCO Independent Contractors                     820,680         857,200         851,880
 Truck Brokerage Carriers                        571,600         588,660         569,360
 Rail intermodal                                  58,510          62,720          55,650
 Ocean cargo carriers                              5,380           4,620           3,680
 Air cargo carriers                                8,260          11,600           8,790

                                               1,464,430       1,524,800       1,489,360

 Revenue per load:
 BCO Independent Contractors                 $     1,692     $     1,606     $     1,587
 Truck Brokerage Carriers                          1,743           1,503           1,530
 Rail intermodal                                   2,331           2,135           2,204
 Ocean cargo carriers                              7,835           5,735           4,626
 Air cargo carriers                                1,803           1,698           1,819

(1) Includes premium revenue generated by the insurance segment and warehousing revenue generated by the transportation logistics segment. Also, included in the 2008 fiscal year period was $27,638 of Bus Revenue. Included in the 2007 and 2006 fiscal year periods was $8,511 and $100,655 respectively, of revenue derived from transportation services provided in support of disaster relief efforts provided under a contract between Landstar Express America, Inc. and the United States Department of Transportation/Federal Aviation Administration (the "FAA").

Also critical to the Company's success is its ability to secure capacity, particularly truck capacity, at rates that allow the Company to profitably transport customers' freight. The following table summarizes available truck capacity providers as of the end of the three most recent fiscal years:

                                                              Dec. 27,       Dec. 29,       Dec. 30,
                                                                2008           2007           2006

BCO Independent Contractors                                       8,455          8,403          8,516
Truck Brokerage Carriers:
Approved and active(1)                                           16,135         16,053         15,247
Other approved                                                   10,036          9,362          8,574

                                                                 26,171         25,415         23,821

Total available truck capacity providers                         34,626         33,818         32,337

Number of trucks provided by BCO Independent Contractors          9,039          8,993          9,205

(1) Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal year end.

The Company incurs costs that are directly related to the transportation of freight that include purchased transportation and commissions to agents. The Company incurs indirect costs associated with the transportation of freight that include other operating costs and insurance and claims. In addition, the Company incurs selling, general and administrative costs essential to administering its business operations. Management continually monitors all components of the costs incurred by the Company and establishes annual cost budgets which, in general, are used to benchmark costs incurred on a monthly basis.

Purchased transportation represents the amount a transportation capacity provider is paid to haul freight. The amount of purchased transportation paid to a BCO Independent Contractor is primarily based on a contractually agreed-upon percentage of revenue generated by the haul. Purchased transportation paid to a Truck Brokerage Carrier is based on either a negotiated rate for each load hauled or a contractually agreed-upon rate. Purchased transportation paid to rail intermodal, air cargo and ocean cargo carriers is based on contractually agreed-upon fixed rates. Purchased transportation paid to bus capacity providers was based on a contractually agreed-upon rate. Purchased transportation as a percentage of revenue with respect to services provided by Truck Brokerage Carriers, rail intermodal carriers, ocean cargo carriers and bus capacity providers is normally higher than that provided by BCO Independent Contractors and air cargo carriers. 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 BCO Independent Contractors and other third party capacity providers and revenue from the insurance segment. Purchased transportation costs are recognized upon the completion of freight delivery.

Commissions to agents are based on contractually agreed-upon percentages of revenue or gross profit, defined as revenue less the cost of purchased transportation. No commissions to agents were incurred in connection with the 2008 Bus Revenue. Commissions to agents as a percentage of consolidated revenue will vary directly with fluctuations in the percentage of consolidated revenue generated by the various modes of transportation and the insurance segment and with changes in gross profit on services provided by Truck Brokerage Carriers, rail intermodal carriers, air cargo carriers, ocean cargo carriers and bus capacity providers. Commissions to agents are recognized upon the completion of freight delivery.

Rent and maintenance costs for Company-provided trailing equipment, BCO Independent Contractor recruiting costs and bad debts from BCO Independent Contractors and independent commission sales agents are the largest components of other operating costs.

Potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. Landstar's retained liability for individual commercial trucking claims varies depending on when such claims are incurred. For commercial trucking claims incurred prior to June 19, 2003 and 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. The Company also retains liability for each general liability claim up to $1,000,000, $250,000 for each workers' compensation claim and $100,000 for each cargo claim. For cargo claims incurred prior to May 1, 2008, the Company retains cargo liability up to $250,000 per occurrence. The Company's exposure to liability associated with accidents incurred by Truck Brokerage Carriers, rail intermodal carriers, air cargo carriers and ocean cargo carriers who transport 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 claims or workers' compensation claims or the unfavorable development of existing claims could have a material adverse effect on Landstar's results of operations.

Employee compensation and benefits account for over half of the Company's selling, general and administrative costs.

Depreciation and amortization primarily relate to depreciation of trailing equipment and management information services equipment.

The following table sets forth the percentage relationships of income and expense items to revenue for the periods indicated:

                                                          Fiscal Year
                                                 2008        2007        2006

          Revenue                                 100.0 %     100.0 %     100.0 %
          Investment income                         0.1         0.2         0.2
          Costs and expenses:
          Purchased transportation                 76.9        75.8        75.2
          Commissions to agents                     7.7         8.1         8.0
          Other operating costs                     1.0         1.1         1.8
          Insurance and claims                      1.4         2.0         1.6
          Selling, general and administrative       5.2         5.0         5.3
          Depreciation and amortization             0.8         0.8         0.7

          Total costs and expenses                 93.0        92.8        92.6

          Operating income                          7.1         7.4         7.6
          Interest and debt expense                 0.3         0.3         0.3

          Income before income taxes                6.8         7.1         7.3
          Income taxes                              2.6         2.7         2.8

          Net income                                4.2 %       4.4 %       4.5 %

Fiscal Year Ended December 27, 2008 Compared to Fiscal Year Ended December 29, 2007

Revenue for the 2008 fiscal year period was $2,643,069,000, an increase of $155,792,000, or 6.3%, compared to the 2007 fiscal year period. Revenue increased $155,805,000, or 6.4%, at the transportation logistics segment primarily due to a 13% increase in revenue hauled by Truck Brokerage Carriers, increased revenue hauled by ocean cargo carriers and increased revenue from bus capacity provided for evacuation assistance related to the storms that impacted the Gulf Coast in September 2008 ("Bus Revenue"), partially offset by lower revenue hauled by air cargo carriers. The number of loads in the 2008 period hauled by BCO Independent Contractors, Truck Brokerage Carriers, rail intermodal and air cargo carriers, decreased 4%, 3%, 7% and 29% , respectively, compared to the number of loads hauled in the 2007 period. Loads hauled by ocean cargo carriers increased 16% over the 2007 period. Revenue per load for loads hauled by BCO Independent Contractors, Truck Brokerage Carriers and rail intermodal, air cargo and ocean cargo carriers increased 5%, 16%, 9%, 6% and 37%, respectively, over the 2007 period. The increase in revenue per load hauled by Truck Brokerage Carriers and rail intermodal, air cargo and ocean cargo carriers was partly attributable to increased fuel surcharges identified separately in billings to customers in the 2008 period

compared to the 2007 period. Fuel surcharges on truck brokerage revenue identified separately in billings to customers and included as a component of truck brokerage revenue were $134,230,000 and $85,256,000 in the 2008 and 2007 periods, respectively. Fuel surcharges billed to customers on revenue hauled by BCO Independent Contractors are excluded from revenue.

Investment income at the insurance segment was $3,339,000 and $5,347,000 in the 2008 and 2007 fiscal year periods, respectively. The decrease in investment income was primarily due to a decreased rate of return, attributable to a general decrease in interest rates, on investments held by the insurance segment in the 2008 period.

Purchased transportation was 76.9% and 75.8% of revenue in the 2008 and 2007 fiscal year periods, respectively. The increase in purchased transportation as a percentage of revenue was primarily attributable to increased rates of purchased transportation paid to Truck Brokerage Carriers and ocean cargo carriers, partially attributable to the increased cost of fuel in 2008, increased revenue hauled by Truck Brokerage Carriers and ocean cargo carriers, both of which tend to have a higher cost of purchased transportation, and the effect of Bus Revenue, which also had a higher rate of purchased transportation. Commissions to agents were 7.7% of revenue in the 2008 period and 8.1% of revenue in the 2007 period. The decrease in commissions to agents as a percentage of revenue was primarily attributable to decreased gross profit, revenue less the cost of purchased transportation, on revenue hauled by Truck Brokerage Carriers. Other operating costs were 1.0% and 1.1% of revenue in the 2008 and 2007 periods, respectively. The decrease in other operating costs as a percentage of revenue was primarily attributable to the effect of increased revenue hauled by Truck Brokerage Carriers and ocean cargo carriers in the 2008 fiscal year period, neither of which incur significant other operating costs, partially offset by lower gains on the sales of trailing equipment in the 2008 period compared to the 2007 period. Insurance and claims were 1.4% of revenue in the 2008 period, compared with 2.0% of revenue in the 2007 period. The decrease in insurance and claims as a percentage of revenue was primarily due to a $5,000,000 charge for the estimated cost of one severe accident that occurred during the first quarter of 2007, favorable development of prior year claims in 2008 and a lower cost of cargo claims in the 2008 period. Selling, general and administrative costs were 5.2% of revenue in the 2008 period, compared with 5.0% of revenue in the 2007 period. The increase in selling, general and administrative costs as a percentage of revenue was primarily attributable to an increased provision for bonuses under the Company's incentive compensation programs and an increased provision for customer bad debt, partially offset by the effect of increased revenue. Depreciation and amortization was 0.8% of revenue in each of the 2008 and 2007 fiscal year periods.

Interest and debt expense was 0.3% of revenue in each of the 2008 and 2007 fiscal year periods.

The provisions for income taxes for the 2008 and 2007 fiscal year periods were based on estimated full year combined effective income tax rates of approximately 38.2% and 38.4%, respectively, which were higher than the statutory federal income tax rate primarily as a result of state taxes, the meals and entertainment exclusion and non-deductible stock compensation expense.

Net income was $110,930,000, or $2.11 per common share ($2.10 per diluted share), in the 2008 fiscal year period, compared to $109,653,000, or $2.01 per common share ($1.99 per diluted share), in the 2007 fiscal year period.

Fiscal Year Ended December 29, 2007 Compared to Fiscal Year Ended December 30, 2006

Revenue for the 2007 fiscal year period was $2,487,277,000, a decrease of $26,479,000, or 1.1%, compared to the 2006 fiscal year period. Revenue decreased $28,747,000, or 1.2%, at the transportation logistics segment primarily due to a decrease in disaster relief revenue provided under the FAA contract in fiscal year 2007 compared to fiscal year 2006. Revenue for disaster relief services provided under the FAA contract in 2007 and 2006 was $8,511,000 and $100,655,000, respectively, including trailer rental revenue of $2,235,000 and $18,778,000, respectively. Revenue hauled in the 2007 fiscal year period by BCO Independent Contractors, Truck Brokerage Carriers, rail intermodal, ocean cargo and air cargo carriers increased 2%, 2%, 9%, 56%, and 23%, respectively, compared to the 2006 fiscal year period. The number of loads in the 2007 fiscal year period hauled by BCO Independent Contractors, Truck Brokerage Carriers, rail intermodal, ocean

cargo and air cargo carriers increased 1%, 3%, 13%, 26% and 32%, respectively, . . .