Landstar System, Inc. - Company Profile, Information, Business Description, History, Background Information on Landstar System, Inc.

13410 Sutton Park Drive South
Jacksonville, Florida 32224

Company Perspectives:

Landstar Mission Statement: To be the leading non-asset based provider of transportation capacity delivering safe, specialized transportation services to a broad range of customers throughout North America utilizing a network of agents, business capacity owners and employees.

History of Landstar System, Inc.

Landstar System, Inc. is a top U.S. trucking firm. Landstar operates on a "variable cost non-asset based business model," which means rather than having the company buy and maintain its own trucks, Landstar hires owner-operators as subcontractors. The carrier segment of Landstar's business is manned by 7,300 owner-operators, whom the company refers to as "business capacity owners" (BCOs), supplying 8,400 tractors and 14,300 trailers. They are dispatched by 1,000 agents, most of them independent contractors as well. Landstar also contracts with third party truck, rail, and air providers.

Landstar has two other business segments: multimodal and insurance. Landstar Logistics and Landstar Express America make up the multimodal segment, the capacity of which is provided by more than 300 independent contractors. Signature Insurance Company and RMCS form the insurance segment.

Landstar was formed through the acquisition of several trucking firms, some of whose names are reflected in operating companies Landstar Gemini, Landstar Inway, Landstar Ligon, and Landstar Ranger. These and other units are owned through Landstar System, Inc. subsidiary Landstar System Holdings, Inc.

The U.S. military is a major customer. Landstar also specializes in serving the automotive and construction industries, and counts many well-known corporations among its client list.


NEOAX, an industrial services company based in Stamford, Connecticut, acquired IU International Corp. through a hostile takeover in 1988. IU, based in Philadelphia, had acquired several different trucking companies. Major customers included auto makers and the Department of Defense.

NEOAX then sold one of IU's seven trucking companies and closed another. This left five carriers in the Truckload Group, each with its own specialty: Ranger Transportation Inc. of Jacksonville, Florida (just-in-time delivery); Independent Freightway Inc. of Rockford, Illinois (flatbed); Gemini Transport Inc. of Greensburg, Pennsylvania (intermodal containers drayage); Ligon Nationwide Inc. of Madisonsville, Kentucky (heavy hauls); and Poole Truck Lines Inc. of Evergreen, Alaska (high-density short and medium hauls). They had combined sales of $579 million in 1987. Of these, Ranger was unionized. Poole was the only unit that owned its own trucks; the others were manned by owner-operators.

According to the Fairfield County Business Journal, truckers received 75 percent of gross revenues (later upped to more than 80 percent), leaving 7 percent for the independent agents and 18 percent for the company. Landstar offered a buying coop to save its drivers on purchases of fuel, tires, and lodging.

Landstar System Inc. was formed in October 1988 to purchase the IU Truckload Group from NEOAX Inc. in a management buyout. Landstar paid $94 million in cash plus $16 million in stock for the unit. NEOAX retained a 49 percent interest.

The Truckload Group's head, John B. Bowron, became chairman and CEO of the new Landstar System. Jeffrey C. Crowe, formerly head of Independent Freightway, was named president and CEO of Landstar in 1989.

Management Buyout in 1991

EnviroSource Inc., formerly NEOAX, sold its interest in Landstar System to Landstar Holding Corp. in March 1991 for $12 million in cash plus the assumption of more than $70 million in debt. Kelso & Co., a group whose interests ranged from American Standard to International House of Pancakes, was the controlling shareholder of Landstar Holding. Kelso also controlled a dozen other trucking companies. Other investors included 48 senior Landstar System managers. CEO Jeffrey Crowe became board chairman after the deal.

According to Industry Week, Crowe placed a heavy emphasis on safety, and the company tried a number of innovative approaches. For example, in 1990, Landstar began adding reflective tape to the sides of trucks to increase their night-time visibility. This reduced the number of cars driving into the sides of the trucks by 75 percent. Safety was stressed in the corporate culture through regular weekly and monthly meetings, mandatory safety programs for new drivers, and recognition programs. In the mid-1990s, the company became an early user of onboard collision avoidance radar.

Revenues exceeded $620 million in 1990. Landstar bought a number of small to midsized truckload carriers in the early 1990s. Revenues were $672 million in 1992. Landstar's headquarters moved from Stamford to Shelton, Connecticut, during the year.

Public in 1993

Landstar completed an initial public offering (IPO) on NASDAQ in March 1993. The IPO took in $30.3 million before expenses, earmarked to pay down debt. The offering freed Landstar management to focus more on operations and acquisitions, rather than finance. Landstar was focusing on the automotive, steel, chemicals, and refrigerated segments of the trucking business.

Landstar acquired three companies in 1994 and 1995, increasing the range of its transportation offerings. T.L.C. Lines of St. Clair, Missouri, specialized in long hauls, including refrigerated. Two Dublin, California firms were being acquired: Intermodal Transport Co. (ITCO) and LDS Truckline Inc.

Intermodal Transport was renamed Landstar ITCO Inc., and the name was changed again to Landstar Logistics Inc. in 1996. Another subsidiary, Landstar Express America Inc., was formed in 1995 to acquire Express America Freight Systems Inc. of Charlotte, North Carolina. The operations of Landstar T.L.C. were merged with those of Landstar Inway in a 1997 restructuring, and T.L.C.'s company-owned trucks were sold off.

The five original subsidiaries were prefixed with the parent company's name in January 1995. Independent Freightway, Inc., also known as Inway, became Landstar Inway, Inc. Landstar System had three other subsidiaries: Landstar Intermodal, Inc., Landstar Transportation Services, Inc., and Landstar Expedited, Inc.

Landstar invested more than $12 million in upgrading its IT and communications systems during this time. The company used various means to communicate with its drivers, including pagers, cell phones, and satellite links, and operated a network of 750 field stations.

The company was working on computer and marketing systems to help its subsidiaries work together better. Smaller accounts made up 75 percent of Landstar's business; the company created a new subsidiary, Landstar Transportation Services Inc., to offer national accounts convenient access to Landstar's variety of services. Another new subsidiary, Landstar Expedited Inc., was also added.

Driver turnover was between 60 and 70 percent a year in the mid-1990s, a rate far superior to the 100 to 200 percent turnover some truckload carriers reported. With 10,500 drivers, Landstar was the third largest truckload carrier at this point, behind J.B. Hunt Transport Services Inc. and Schneider National, Inc. J.B. Hunt, however, operated mostly in the retail shipping market, not one of Landstar's specialties.

The trucking industry was booming. At the time, Landstar was the third largest truckload firm in the United States. A trend toward outsourcing of transportation helped Landstar throughout the 1990s. The company's mass and breadth of services benefited it as customers trimmed the number of different trucking companies they hired. Landstar earned a record $25 million on revenues of $1.2 billion, also a record, in 1995.

The figures would be even better, reasoned management, if the company could get rid of its lowest performing unit. In 1998, Landstar sold Landstar Poole, which owned its own trucks and classified its drivers as employees, in contrast to the other Landstar operations. Schneider National paid $41 million for Poole.

Relocating to Jacksonville in 1997

Revenues were $1.2 billion in 1997. In June of that year, Landstar's headquarters was relocated to Jacksonville, Florida, where three of its subsidiaries (Landstar Ranger Inc., Landstar Gemini Inc., and Landstar Logistics Inc.) were already based.

The company had 1,000 agents and 8,000 drivers, all of them independent contractors, plus another 1,300 regular employees. Landstar was the only publicly traded trucking company to rely on independent owner-operators. As Crowe told Forbes, "We want to manage assets, not own them."

Landstar used the Internet to communicate with its drivers. It was difficult to obtain Internet access on the road, however, and satellite systems were prohibitively costly. In 2000, Landstar and unveiled a system designed to use the tiny text screens of web-enabled mobile phones.

Same Model, New HQ for 2000 and Beyond

Landstar moved to a new five-story headquarters in Jacksonville, Florida, in late 1999. The 180,900-square-foot building also housed head offices for several subsidiaries. While most of Jacksonville's publicly traded companies were taking a beating, Landstar was poised to ride its business model to future success, reported the Florida Times-Union. At least investors thought so. Although revenues and earnings fell slightly in the weakened economy of 2001, share price rose 31 percent during the year.

Driven by the strength of the BCO business model, Landstar's revenues passed $1.5 billion in 2002 as the rest of the trucking industry struggled in a weak economy. Landstar achieved net income of $50.7 million on sales of $1.6 billion in 2003. The company was consistently finding itself a spot on Forbes magazine's Platinum 40 List of America's Best Big Companies.

Principal Subsidiaries: Landstar System Holdings, Inc.

Principal Divisions: Carrier; Multimodal; Insurance.

Principal Operating Units: Landstar Express America; Landstar Gemini; Landstar Inway; Landstar Ligon; Landstar Logistics; Landstar Ranger; Risk Management Claim Services, Inc.; Signature Insurance Company.

Principal Competitors: J.B. Hunt Transport Services; Schneider National, Inc.; Swift Transportation Co., Inc.; U.S. Xpress Enterprises; Werner Enterprises, Inc.


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