Georgia Jury Slaps Landstar System (LSTR) with $40.2M Penalty from 2007 Incident; Landstar Will Appeal

Landstar System, Inc (Nasdaq: LSTR), together with its subsidiaries (“Landstar” or the “Company”), announced today that on September 23, 2011, a jury sitting in a state court in Cobb County, Georgia, entered a damage award of approximately $40.2 million (such amount, plus pre-judgment interest and a portion of plaintiffs’ attorney fees in an amount not yet determined are collectively referred to herein as the “Damage Award”) against Landstar Ranger, Inc., Landstar System Holdings, Inc. and Landstar System, Inc. The Damage Award arises out of an accident that occurred in February, 2007, involving a truck owner-operator leased to Landstar Ranger, Inc.

Under the terms of the commercial trucking insurance program that Landstar had in place in 2007, Landstar retained liability for up to $5 million with respect to the accident giving rise to the Damage Award. Landstar has third party insurance in place covering all amounts of the Damage Award in excess of such $5 million retention, including all related out-of-pocket expenses, such as the costs of an appeal bond, post-judgment interest and attorney fees.

The Company previously recorded a $5 million charge in respect of this accident in the financial results of the Company for the 2007 first quarter. Accordingly, the Company’s payment of its portion of the Damage Award up to its $5 million retention would not reduce the operating income or net income of the Company for the 2011 third quarter or any other future financial period in which such payment may ultimately be made.

The Company and its insurers intend to appeal the Damage Award.

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