SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER DECEMBER 31, 2000 0-11757
For the year ended
Commission file number
December 31, 2002
0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(EXACT(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS 71-0335111 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 615 J.B. HUNT CORPORATE DRIVE 72745 LOWELL, ARKANSAS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 820-0000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.01 Par Value
Arkansas
71-0335111
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)(I.R.S. EMPLOYER
IDENTIFICATION NO.)615 J.B. Hunt Corporate Drive Lowell, Arkansas
72745
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
Registrant’s telephone number, including area code:
(479) 820-0000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTIONSSECTION 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 THE FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.YES X NO --- ---
YES ý
NO o
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF
REGISTRANT'SREGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K.[ ]oINDICATED BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12b-2).
YES ý
NO o
THE AGGREGATE MARKET VALUE OF
15,215,98627,493,354 SHARES OF THEREGISTRANT'SREGISTRANT’S $.01 PAR VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY 28,20012003 WAS$240,564,739$674,686,907 (BASED UPON$15.81$24.54 PER SHARE BEING THE CLOSING SALE PRICE ON THAT DATE, AS REPORTED BY NASDAQ). IN MAKING THIS CALCULATION, THE ISSUER HAS ASSUMED, WITHOUT ADMITTING FOR ANY PURPOSE, THAT ALL EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT, AND NO OTHER PERSONS, ARE AFFILIATES.THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE
REGISTRANT'SREGISTRANT’S CLASSES OF COMMON STOCK, AS OF FEBRUARY 28,2001: 35,280,616.2003: 39,352,835.DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING OF THE STOCKHOLDERS, TO BE HELD APRIL
26, 200124, 2003, ARE INCORPORATED BY REFERENCE INTO PARTII.III OF THIS FORM 10-K. J.B. HUNT TRANSPORT SERVICES, INC.
Form 10-K
For The Calendar Year Ended December 31, 2002
Table of Contents
2
Exhibits, Financial Statement Schedules and Reports on Form 8-K
3
GENERAL
J.B. Hunt Transport Services, Inc., together with its wholly-owned subsidiaries
("JBHT" or the "Company"(“JBHT”), is a diversified transportation services company operating under the jurisdiction of the U.S. Department of Transportation (DOT) and various state regulatory agencies. JBHT is an Arkansas holding company incorporated on August 10, 1961. JBHT has been a publicly held company since our initial public offering in 1983. Throughitsour subsidiaries and associated companies,JBHT provideswe provide a wide range of logistics and transportation services to a diverse group of customers.The CompanyWe directlymanagesmanage orprovidesprovide tailored, technology-driven solutions to a growing list of Fortune 500 companies. These customers may request specifically targeted transportation service or outsource their entire transportation function toJBHT,us, or an associated company.The CompanyWe also directlytransportstransport full-load containerizable freight throughout the continental United States and portions of Canada and Mexico. Transportation services may utilizeJBHTour equipment and employees, or may employ equipment and services provided by associated or unrelated third parties in the transportation industry.The Company currently operates four distinct operating segments:We had three reportable business segments during calendar year 2002. These segments include full truck-load, dry-vantruck only ("JBT")(JBT), intermodal("JBI"),(JBI) and dedicated contract services("DCS") and(DCS). In addition, we operated a logistics businesssegments.segment from 1992 until mid 2000. Effective July 1, 2000,the Company,JBHT, along with five otherlarge,publicly-held transportation companies, contributeditsour logistics business to a new, commonly owned company,Transplace.com, LLC.Transplace, Inc.JBT SEGMENT
Primary transportation service offerings classified in this segment include full truck-load, dry-van freight which is
typicallypredominantly transported utilizing company-owned revenue equipment. Freight is picked up at the dock or specified location of the shipper and transported directly to the location of the consignee. The load may be transported entirely bycompany-owned and controlledour power equipment or a portion of the movement may be handled by a third-party motor carrier. Typically, the charges for the entire movement are billed to the customer bythe Companyus andthe Company,we, in turn,payspay the third-party for their portion of the transportation services provided. JBT operates utilizing certain Canadian authorities which were initially granted in 1988 and may transport freight to and from all points in the continental United States to Quebec, British Columbia and Ontario.The Company hasWe have authorization to operate directly in all the Canadian provinces, but to datehaswe have served limited points in Canada, primarily through interchange operations with Canadian motor carriers.The CompanyWe operateditsour JBT and JBI segments in combined fashion in periods prior to January 1, 2000. This combined operation was reported as Van/Intermodal("Van"(“Van”) in prior periods. In late 2000, we began utilizing independent contractors on a limited basis in the JBT segment. These independent contractors (I/C’s) provide their own tractors and agree to transport freight in JBHT owned or controlled trailing equipment. At December 31,2000,2002, approximately 680 I/C’s were operating in the JBT segment. JBT gross revenue for calendar year 2002 was $827 million, compared with $829 million in 2001. At December 31, 2002, the JBT segment operatedapproximately 5,8504,924 company owned tractors18,120 trailersand employed8,4627,573 people,6,7895,541 ofwhichwhom were drivers.JBT gross revenue was $834 million in 2000, an increase of 9% over 1999.JBI SEGMENT
Transportation service offerings of
theour JBI segment utilize agreements with various railroads to provide proven intermodal freight solutions toJBIour customers in all major lanes of commerce in the United States, Canada, and Mexico.The Company differentiates itselfWe differentiate ourselves from others throughitsour premium service network, as well as, coordinated door to door service on company-owned and controlled assets.The CompanyWe establisheditsour first intermodal agreement with the Santa Fe Railway in 1989. Through growth of this transportation segment and additions, deletions, and mergers of rail carriers,the Companywe nowhashave agreements with seven North American railcarriers:carriers including: BNSF, Norfolk Southern, CSX, Kansas City Southern, Union Pacific, Canadian National, and Florida East Coast railroads. Typically, freight is picked up at the dock or specified location of the shipper and transported to the rail carrier for loading ontorail cars. Upon completion of the rail routing, the freight is picked up at the railcarrier'scarrier’s ramp and transported to the consignee. These originating and destination drays may be transported entirely bycompany-owned and controlledour power equipment or may be handled by a third-party motor carrier. It isthe Company'sour customary business practice that all charges for the entire movement are billed to the customer bythe Companyus andthe Company,we, in turn,payspay the rail carrier and third-party motor carrier for their portion of the transportation services provided. In 1993, rail operations were expanded to utilize high-cube containers which can be separated from the chassis and double-stacked on rail cars to provide improved productivity. This concept isknowknown ascontainer-on-flatcar (COFC). Thecontainer-on-flatcar. Most of our agreementsthe Company haswithitsrail carriers allow for the majority of JBI business carried under these rail agreements to receive priority space on trains and preferential loading and unloading at rail facilities. JBI gross revenue for calendar year 2002 was $809 million, compared with $740 million in4
2001. At December 31,
2000,2002, the JBI segment operatedapproximately 910917 tractors21,930 containersand employed1,7051,557 people,1,4101,215 ofwhichwhom were drivers.JBI gross revenue was $681 million in 2000, an increase of 5% over 1999. 2DCS SEGMENT
Since 1992,
JBHT haswe have offered dedicated contract carriage as a service option. DCS segment operations specialize in the design, development, and execution of supply chain solutions. Capitalizing on advanced systems and technologies, DCS offers engineered transportation solutions that support private fleet conversion, dedicated fleet creation, and transportation system augmentation. DCS operations typically provide customized services that are governed by long-term contracts and currently include dry van, flatbed, and temperature-controlled operations. Near 100% on-time service is standard with efficient routes executed to design specifications.DCS operations focus on driving out cost and enhancing customer value through leveraging the JBHT
freightnetwork for backhaulinfusion.repositioning freight. Network freight may be used to reposition equipment near outbound domiciles, thereby reducing inefficient empty miles and system cost. DCS also frequently finds synergy in shared resources with the JBT and JBI segments including terminals, drivers, maintenance shops, bulk fuel locations, and trailer pools providing further economies of scale.In theDCS gross revenue for calendar year2000, DCS reported gross revenues of $4792002 was $628 million,a 49% increase over 1999 and a 50% compound annual growth rate since 1998. Increased utilization and productivity drove top-line revenue growth as the number of tractors increased 43% to 3,890compared with $549 million in2000. Total DCS employees were 4,746 at2001. At December 31,2000, 4,0832002, the DCS segment operated 4,812 tractors and employed 5,989 people, 5,273 ofwhichwhom were drivers.LOGISTICS
The CompanyBUSINESS AND ASSOCIATED COMPANYWe formally began offering logistics transportation services in 1992 through a wholly-owned subsidiary, J.B. Hunt Logistics (JBL). JBL services frequently included an arrangement whereby a shipper might outsource a substantial portion of its entire distribution and transportation process to one organization. The JBL segment business included a wide range of comprehensive transportation and management services including experienced professional managers, information and optimization technology, and the actual design or redesign of system solutions. A new
JBLlogistics customer or service arrangement may have required a significant amount of up-front analysis and design time, while alternatives were considered and custom systems and software were developed. Effective July 1, 2000,the Companywe contributed substantially all ofitsour JBL segment business, all related intangible assets and $5 million of cash to a newly-formed, commonly-owned company,Transplace.com, LLC ("TPC"Transplace, Inc. (“TPI”).TPCTPI is an Internet-based global transportation logistics company.
The initial members includeTPI commenced operations in July of 2000 and initially included substantially all of theCompany, along with five other large, publicly-held transportation companies:logistics business of JBHT, Covenant Transport,Inc.; M.S. Carriers,Inc.; Swift Transportation Co.,Inc.;Inc; U.S. Xpress Enterprises, Inc.,; and Werner Enterprises, Inc.The Company presently hasTPI gross revenue for calendar year 2002 approximated $672 million, which revenue is not included in our financial statements for 2002. We initially had an approximate 27%membershipownership interest inTPCTPI. In November of 2002, we agreed to purchase a portion of Werner Enterprises’ (Werner) ownership interest in TPI. Effective January 1, 2003, our interest in TPI increased from 27% to 37% andaccordingly, utilizes the equity method of accounting.Werner’s interest declined from 15% to 5%. The financial results ofTPC since inception,TPI are included on a one-line, non-operating item included ontheour Consolidated Statements of Earnings entitled"equity“Equity in earnings (loss) of associated companies." Equity in earnings from TPC totaled $440,000 in 2000.”ASSOCIATED COMPANY - MEXICO
The Company hasWe have provided transportation services to and from Mexico since 1989. These services frequently involve equipment interchange operations with various Mexican motor carriers.
AIn addition, a joint venture agreement with Transportacion Maritima Mexicana (TMM), one of the largest transportation companies in Mexico, was signed in 1992. The joint venture, Comercializadora Internacional de CargaSt.S.A. deCVC.V. and its subsidiaries,originateoriginated andcompletecompleted northbound and southbound international truck movements between the U.S. and Mexico. The joint venture alsoprovidesprovided Mexican domestic irregular route truck service, refrigerated freight services, Mexican dedicated contract business and short-haul drayage to and from the Mexican maritime ports and rail heads.The Company'sFor the calendar year ended December 31, 2001 and for prior years, our share ofitsthe Mexican joint venture operating resultsarewas included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled"equity“Equity in earnings (loss) of associated companies." Equity in earnings fromDuring theCompany's Mexicanfirst quarter of 2002, we sold our joint venturetotaled $4.3 millioninterest in2000Mexico to TMM. We still provide transportation services to and$3.1 million in 1999. OTHER The Company announcedfrom Mexico by utilizing the services of adecision in late 1999, to separate the operationvariety ofthe Van business into truck (JBT) and intermodal (JBI) segments. In late 2000, a decision was made to supplement Company owned tractors with independent contractors (I/C's). An I/C is a driver who personally owns one or more tractors and agrees to lease that equipment to the Company. These arrangements typically call for the I/C to transport freight offered by the Company utilizing a tractor owned by the I/C, in trailers owned or controlled by the Company. This new program was initiated by the JBT segment in December of 2000. At December 31, 2000, 16 I/C's were leasing tractors to the Company. 3Mexican carriers. 5
MARKETING AND OPERATIONS
JBHT transportsWe transport a wide range of products including automotive parts, department store merchandise, paper and wood products, food and beverages, plastics, chemicals and manufacturing materials and supplies.
The Company'sOur primary customers include many of the"Fortune 500" companies, but no single“Fortune 500” companies. Our largest customer in 2002 was Wal-Mart Stores, Inc., which accounted formore than 12%approximately 18% ofrevenues during 2000.total revenue. A broad geographic dispersion and a good balance in the type of freight transported allowsJBHTus some protection from major seasonal fluctuations. However, consistent with the truckload industry in general, freight is typically stronger during the second half of the year, with peak volume occurring in August through mid November. Revenue and earnings are also affected by bad weather, holidays, fuel prices, driver cost and availability, and railroad service levels.The CompanyWe generally
marketsmarket all ofitsour service offerings through a nationwide marketing network. All transportation services offered are typically billed directly to the customer byJBHTus and all inquiries, claims and other customer contacts are handled bythe Company.us. Certain marketing, sales, engineering and design functions are assigned to each operating segment. However, marketing and pricing strategy,pricingand national account service coordination is managed at the corporate level.PERSONNEL
At December 31,
2000, JBHT2002, we employedapproximately 15,98016,265 people, including12,28012,029 drivers. Historically the truckload transportation industry andthe CompanyJBHT have experienced shortages of qualified drivers. In addition, driver turnover rates for truckload motor carriers frequently exceed 100%. During the past few years a number of changes have occurred within the industry relative to drivers. InSeptember of1996,JBHTwe announceda new compensation program for theand implemented an approximate3,500 over-the-road JBT drivers. This comprehensive package, which was effective in February of 1997, included an average33% increase in wages forthis group of employees. This program was designed to attract and retain a professional and experienced work force capable of delivering a high level of customer service.our over-the-road drivers. As anticipated, this increase in driverwages and benefitscompensation was partially offset by lower driver recruiting and training expense, reduced accident and safety costs and better equipment utilization.The averageWe also experienced a decline in driver turnover rates between 1997 and 1999. During late 2000 and 2001, supply and demand conditions for drivers changed and a number of truck load carriers, including JBHT, implemented lower mileage pay rates for newly hired drivers. Partly as a result of this reduced compensation level for drivers, our driver turnover rate increased during 2000 and has remained at historically high levels inthe JBT segment business was approximately 66% during 2000. Drivers are typically compensated on2001 and 2002. During calendar year 2002, we have once again experienced some difficulty attracting and retaining arate-per-mile basis,desired level of drivers. To date, we continue to hire only experienced drivers and, although recruiting costs have increased significantly, operations have not been disrupted by arate-per-week basis or a combinationshortage offactors. JBHTqualified drivers. At December 31, 2002, we also employed approximately2,9703,100 officepersonnelemployees and730 mechanics at December 31, 2000. No1,137 mechanics. None of our employees are represented by collective bargainingagreements and management believes that its relationship with its employees is excellent.agreements.REVENUE EQUIPMENT
At December 31,
2000, JBHT2002, we owned or leasedapproximately 10,65010,653 company operated tractors,and operated 22,38026,087 trailers and21,93019,672 containers.JBHT believesWe believe that modern, late-model, clean equipment differentiates quality customer service, increases equipment utilization and reduces maintenance costs and downtime.The CompanyWe generallyoperatesoperate with newer revenue equipment in the JBT segment, with the age of tractors and trailers approximatingtwo2.1 years andfour2.2 years, respectively, at December 31,2000. Slightly2002. Somewhat older equipment and tractors designed for local and regional operations are typically utilized in the JBIsegment.and DCS segments. Specially designed high-cube containers which can be separated from the chassis and double-stacked on rail cars are also operated by JBI. The average age of JBI tractors and containers at December 31,20002002 was approximatelythree4.6 years andfive5.2 years, respectively. The JBI segment commenced receiving brand new containers and reconditioned chassis in late 2001. Approximately 6,300 new containers and 6,300 new and reconditioned chassis were placed in service during 2002. The composition of the dedicated contract fleet varies with specific customer service requirements. At December 31, 2002, the average age of DCS segment tractors was 2.8 years. In November of 2002, we committed to purchase approximately 2,100 new tractors, the majority of which will be traded one-for-one for units in the JBI and DCS fleets. These trades will significantly reduce the average age of these tractor fleets. AllJBHTof our revenue equipment is maintained in accordance with a specific maintenance program primarily based on ageandand/or miles traveled.COMPETITION
JBHT isWe are one of the largest publicly held truckload carriers in the United States.
It competesWe compete primarily with other irregular route, truckload common carriers. Less-than-truckload common carriers and private carriers generally provide limited competition for truckload carriers. JBHT anditsour associated companies are one of a few carriers offering nationwide logistics management and dedicated revenue equipment services. Although a number of carriers may provide competition on a regional basis, only a limited number of companies represent competition in all markets. The extensive rail network developed in conjunction with the various railroads also allowsthe Companyus the opportunity to differentiateitsour services in the marketplace.46
REGULATION
The Company'sOur operations as a for-hire carrier are subject to regulation by the U.S. Department of
Transportation'sTransportation’s Federal Motor Carrier Safety Administration (FMCSA) and by various Canadian provinces. Entrycontrolledcontrol barriershave largely beenwere substantially removed as a result of federal deregulation statutes such as the Interstate Commerce Commission Termination Act of 1995 (ICCTA). The FMCSA continues to enforce safety regulations and has proposed new rules which, if approved in their present form, would limitdriver'sdriver’s hours of service. President Bush is considering implementation of provisions of the North America Free Trade Agreement (NAFTA), which may result in increased competition between U.S. and Mexican carriers for truckload services moving between these two countries. TheCompany believes it has responded effectivelyClean Air Act of 1990 established tighter pollution standards for emissions from automobiles and trucks. These new standards were effective on a phased in basis beginning with model year 1994. As part of a 1998 consent decree with the U.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines produced subsequent to October 1, 2002. JBHT and a number of other truckload motor carriers believe themarketplace changes causednew engines have not yet been sufficiently tested for fuel economy and reliability. While we continue to test a limited number of the new EPA compliant engines, we committed in November of 2002 to purchase approximately 2,100 new tractors, the majority of which will be equipped with Mercedes engines, which are not covered byincreased domestic competitionthe EPA’s October 1, 2002 rules.INTERNET WEB SITE
We maintain a web site on the Internet through which additional information about JBHT is available. Our web site address is www.jbhunt.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, press releases, earnings releases and other reports filed pursuant to Section 13 or 15 (d) of the Exchange Act are available, free of charge, on our website as soon as practical after they are filed.
SEC FILINGS
We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (SEC). Our reports and any materials we file with the SEC are available at the Public Reference Room, located at 450 Fifth Street, N.W., Washington, D.C. 20549. Information may be obtained from the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that
it can effectively respond to any foreseeable changescontains information we file with the agency. Our common stock is traded inFMCSA regulations or NAFTA implementation.the over-the-counter market under the symbol “JBHT.”ITEM 2. PROPERTIES
The Company'sOur corporate headquarters are in Lowell, Arkansas. A 150,000-square-foot building was constructed and occupied in September 1990.
The CompanyWe alsoutilizes itsutilize our former corporate building as general offices. In 1999, a new 20,000 square foot building was constructed and occupied near the corporate headquarters. A portion of this leased facility serves as a backup data center andprovideprovides disaster recovery support services. An additional 20,000 square foot building consisting of general office space forCorporateour corporate employees was completed and occupied in 2000. This building is located nextdoorto the data center building and is a leased facility.Principal outside facilities consist primarily of general offices which support operational, safety and maintenance functions. In addition to the principal facilities listed below,
the Company leaseswe lease numerous small offices and trailer parking yards in various locations throughout thecountycountry to support customer trailing equipment pool commitments.7
A summary of
the Company'sour principal facilities follows:
Maintenance Shop Office Space Location Acreage (square feet) (square feet) - ----------------------------------------------------------------------------------------------------------------------Atlanta, Georgia 30 29,800 10,400 Chicago, Illinois 27 50,000 14,000 Dallas, Texas 14 24,000 7,800 Detroit, Michigan 27 44,300 10,800 East Brunswick, New Jersey 20 20,000 7,800 Houston, Texas 13 24,700 7,200 Kansas City, Missouri 10 31,000 6,700 Little Rock, Arkansas 24 29,200 7,200 Louisville, Kentucky 14 40,000 10,000 Lowell, Arkansas (corporate headquarters) 25 -- 150,000 Lowell, Arkansas 40 50,200 14,000 Lowell, Arkansas (office and data center) 2 -- 20,000 Memphis, Tennessee 10 26,700 8,000 Phoenix, Arizona 14 10,000 5,300 San Bernardino, California 8 14,000 4.000 South Gate, California 12 12,000 5,500 Syracuse, New York 13 19,000 8,0005
Location
Acreage
Maintenance Shop
(square feet)
Office Space
(square feet)
Atlanta, Georgia
30
29,800
10,400
Chicago, Illinois
27
50,000
14,000
Dallas, Texas
14
24,000
7,800
East Brunswick, New Jersey
20
20,000
7,800
Houston, Texas
13
24,700
7,200
Kansas City, Missouri
10
31,000
6,700
Little Rock, Arkansas
24
29,200
7,200
Louisville, Kentucky
14
40,000
10,000
Lowell, Arkansas (corporate headquarters)
25
—
150,000
Lowell, Arkansas
40
50,200
14,000
Lowell, Arkansas (office and data center)
2
—
20,000
Lowell, Arkansas (office)
2
—
20,000
Memphis, Tennessee
10
26,700
8,000
Phoenix, Arizona
14
10,000
5,300
San Bernardino, California
8
14,000
4,000
South Boston, VA
3
30,000
3,500
South Gate, California
12
12,000
5,500
Syracuse, New York
13
19,000
8,000
Vancouver, WA
4
20,000
—
ITEM 3. LEGAL PROCEEDINGS
The CompanyJBHT is involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel,
management believeswe believe the resolution of claims and pending litigation will not have a material adverse effect ontheour financial condition or our results ofoperations of the Company.operations.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of
20002002 to a vote of security holders.OUR EXECUTIVE OFFICERS
OF THE COMPANYInformation with respect to
theour executive officersof the Companyis set forth below:
Executive Name Age Position with Company Officer Since - ---- --- --------------------- -------------J.B. Hunt 74 Senior Chairman of the Board; Director 1961 Wayne Garrison 48 Chairman of the Board; Director 1979 Johnelle Hunt 69 Secretary; Director 1972 Kirk Thompson 47 President and Chief Executive Officer; Director 1984 Paul R. Bergant 54 Executive Vice President, Marketing and Chief Marketing Officer 1985 Bob D. Ralston 54 Executive Vice President, Equipment and Properties 1989 Jerry W. Walton 54 Executive Vice President, Finance and Administration and Chief Financial Officer 1991 Craig Harper 43 Executive Vice President, Operations and Chief Operations Officer 1997 Jun-Sheng Li (1) 42 President J.B. Hunt Logistics and Executive Vice President, Integrated Solutions 1998 John N. Roberts III (2) 36 President, Dedicated Contract Services, and Executive Vice President, Enterprise Solutions 1997 Kay J. Palmer (3) 37 Chief Information Officer 1999
Name
Age
Position with JBHT
Executive
Officer Since
J.B. Hunt
76
Senior Chairman of the Board; Director
1961
Wayne Garrison
50
Chairman of the Board; Director
1979
Johnelle D. Hunt
71
Secretary; Director
1972
Kirk Thompson
49
President and Chief Executive Officer; Director
1984
Paul R. Bergant
56
Executive Vice President, Marketing and Chief Marketing Officer
1985
Bob D. Ralston
56
Executive Vice President, Equipment and Properties
1989
Jerry W. Walton
56
Executive Vice President, Finance and Administration and Chief Financial Officer
1991
Craig Harper
45
Executive Vice President, Operations and Chief Operations Officer
1997
John N. Roberts III(1)
38
President, Dedicated Contract Services, and Executive Vice President, Enterprise Solutions
1997
Kay J. Palmer(2)
39
Executive Vice President and Chief Information Officer
1999
(1)
Dr. Li joined the Company in 1994 as Senior Vice President of J.B. Hunt Logistics. In June of 1995, he was named President of J.B. Hunt Logistics and in June of 1998, he was appointed to the additional post of Executive Vice President, Integrated Solutions. In July, 2000, Dr. Li took the position of Chief Executive Officer, President and Chairman of the Board of Transplace.com, LLC, while also remaining an employee of JBHT until December 31, 2000. (2)Mr. Roberts joinedthe CompanyJBHT in 1989 as a management trainee. In December of 1990, he became a Regional Marketing Manager. In February of 1996, he was named Vice President, Marketing Strategy and was appointed President, Dedicated Contract Services, in July of 1997. In June of 1998, he was appointed to the additional position of Executive Vice President of Enterprise Solutions.(3)(2) Ms. Palmer joined
the CompanyJBHT in 1988 as a programming specialist. In June of 1989, she was named Director of Application Services. In June of 1995, she was named Vice President of Applications. She became Senior Vice President of Information Services in August of 1998 and named Executive Vice President and Chief Information Officer in June of 1999.68
ITEM 5. MARKET FOR THE
REGISTRANT'SREGISTRANT’S COMMON STOCK AND RELATED SECURITY HOLDER MATTERSPRICE RANGE OF COMMON STOCK
The Company'sOur common stock is traded in the over-the-counter market under the symbol
"JBHT."“JBHT.” The following table sets forth, for the calendar years indicated, the range of high and low sales prices forthe Company'sour common stock as reported by the National Association of Securities Dealers Automated Quotations National Market System("NASDAQ"(“NASDAQ”).
2000 1999 --------------- -------------- Period High Low High Low ---------------------------------------------------------------------------------------------1st Quarter $16.00 $10.50 $26.25 $18.00 2nd Quarter 17.50 13.13 23.25 14.19 3rd Quarter 16.00 11.50 16.75 11.88 4th Quarter 17.25 10.50 15.00 12.38
2002
2001
Period
High
Low
High
Low
1st Quarter
$
29.39
$
22.07
$
20.50
$
12.88
2nd Quarter
32.37
24.60
20.75
14.63
3rd Quarter
29.83
21.55
25.60
12.15
4th Quarter
30.32
21.25
25.17
11.93
On February 28,
2001,2003, the high and low sales prices forthe Company'sour common stock as reported by the NASDAQ were$16.00$24.91 and$14.50,$24.51, respectively. As of February 28,2001, the Company2003, we had1,5631,378 stockholders of record.DIVIDEND POLICY
On January 21, 2000,
theour Board of Directors declared a quarterly dividend of $.05 per share, paid on February 17, 2000 to shareholders of record on February 3, 2000.The CompanyWe declared and paid cash dividends of $.20 per share in 1999 and 1998. On February 16, 2000,theour Board of Directors announced a decision to discontinueitsour policy of paying quarterly cash dividends. No dividends have been paid since February of 2000.79
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------- (Dollars(Dollars in millions, except per share amounts)
Years Ended December 31 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------Operating revenues $2,160.4 $2,045.1 $1,841.6 $1,554.3 $1,486.7 $1,352.2 $1,207.6 $1,020.9 $912.0 $733.3 Operating income 63.4 74.3 101.5 42.1 60.2 22.8 84.9 78.6 69.1 59.4 Earnings (loss) before cumulative effect of changes in accounting methods 36.1 31.9 46.8 11.4 22.1 (2.2) 40.4 38.2 36.9 29.5 Basic earnings (loss) per share before cumulative effect of changes in ccounting methods 1.02 .90 1.32 .31 .58 (.06) 1.05 1.00 1.03 .85 Cash dividends per share .05 .20 .20 .20 .20 .20 .20 .20 .20 .19 Total assets 1,231.9 1,127.5 1,171.5 1,021.9 1,043.4 1,016.8 993.7 862.4 715.7 520.1 Long-term debt and lease obligations 300.4 267.6 417.0 322.8 332.6 339.9 299.2 303.5 216.3 156.9 Stockholders' equity 428.0 401.4 375.7 338.0 357.3 356.9 377.9 344.0 308.6 215.8 Diluted earnings per share were $1.02, $.89, $1.28, $.31 and $.58, for the years 2000, 1999, 1998, 1997 and 1996, respectively. Percentage of Operating Revenue Years Ended December 31 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Operating revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Operating expenses: Salaries, wages and employee benefits 35.6 34.9 34.9 34.4 32.6 33.8 33.5 36.4 38.2 40.0 Rents and purchased transportation 32.1 33.7 33.7 33.1 29.0 26.8 24.1 18.5 12.2 7.0 Fuel and fuel taxes 11.3 8.3 7.5 9.1 10.8 10.6 10.9 12.4 14.2 16.3 Depreciation 6.2 7.3 7.6 8.4 8.9 10.2 10.2 10.1 10.3 10.1 Operating supplies and expenses 6.1 6.2 5.3 5.9 6.2 7.0 6.7 7.1 7.4 8.0 Insurance and claims 1.8 2.0 1.8 2.4 3.9 3.8 3.1 4.0 4.8 4.7 Operating taxes and licenses 1.5 1.3 1.3 1.6 1.9 2.0 2.2 2.8 2.8 3.0 General and administrative expenses 1.3 1.7 1.4 1.3 1.5 1.7 1.2 - 1.2 1.4 Communication and utilities 1.2 1.0 1.0 1.1 1.2 1.1 1.1 1.0 1.3 1.4 Special charges - - - - - 1.3 - - - - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Total operating expenses 97.1 96.4 94.5 97.3 96.0 98.3 93.0 92.3 92.4 91.9 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Operating income 2.9 3.6 5.5 2.7 4.0 1.7 7.0 7.7 7.6 8.1 Interest expense (1.1) (1.4) (1.6) (1.6) (1.6) (1.8) (1.6) (1.4) (1.2) (1.5) Equity in earnings of associated companies .2 .2 .1 .1 - (.1) - - - - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Earnings before income taxes 2.0 2.4 4.0 1.2 2.4 (.2) 5.4 6.3 6.4 6.6 Income taxes .3 .8 1.5 .5 .9 - 2.1 2.6 2.3 2.6 Cumulative effect of changes in accounting methods - - - - - - - - .2 (.2) ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Net earnings (loss) 1.7% 1.6% 2.5% .7% 1.5% (.2%) 3.3% 3.7% 4.3% 3.8% ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== The following table sets forth certain operating data of the Company. Years Ended December 31 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Total loads 2,696,658 2,769,834 2,243,856 1,802,006 1,605,546 1,361,251 1,187,815 1,081,013 960,031 796,929 Average number of tractors owned/ leased in the fleet during the year 10,055 9,183 8,207 7,629 7,728 7,559 7,094 6,890 6,424 5,286 Tractors owned/leased (at year end) 10,650 9,460 8,906 7,508 7,750 7,706 7,412 6,775 7,004 5,843 Independent contractors (at year end) 16 - - - - - - - - - Trailers/containers (at year end) 44,310 39,465 35,366 30,391 27,773 24,618 22,687 19,089 17,391 12,389 Tractor miles (in thousands) 1,000,127 986,288 922,560 790,018 810,450 772,199 740,626 718,767 733,700 638,9268
Years Ended December 31
2002
2001
2000
1999
1998
Operating revenues
$
2,247.9
$
2,100.3
$
2,160.4
$
2,045.1
$
1,841.6
Operating income
101.0
72.2
63.4
74.3
101.5
Net earnings
51.8
32.9
36.1
31.9
46.8
Diluted earnings per share
1.33
.91
1.02
.89
1.28
Cash dividends per share
—
—-
.05
.20
.20
Total assets
1,318.7
1,260.3
1,231.9
1,127.5
1,171.5
Long-term debt and lease obligations
219.0
353.6
300.4
267.6
417.0
Stockholders’ equity
590.5
458.3
417.8
391.2
365.5
Percentage of Operating Revenue
Years Ended December 31
2002
2001
2000
1999
1998
Operating revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Operating expenses:
Salaries, wages and employee benefits
36.4
37.6
35.6
34.9
34.9
Rents and purchased transportation
31.1
28.8
32.1
33.7
33.7
Fuel and fuel taxes
9.4
10.8
11.3
8.3
7.5
Depreciation and amortization
6.5
6.8
6.2
7.3
7.6
Operating supplies and expenses
5.8
6.9
6.1
6.2
5.3
Insurance and claims
2.5
2.0
1.8
2.0
1.8
Operating taxes and licenses
1.4
1.6
1.5
1.3
1.3
General and administrative expenses, net of gains
1.3
.9
1.3
1.7
1.4
Communication and utilities
1.1
1.2
1.2
1.0
1.0
Total operating expenses
95.5
96.6
97.1
96.4
94.5
Operating income
4.5
3.4
2.9
3.6
5.5
Interest expense
(1.1
)
(1.3
)
(1.1
)
(1.4
)
(1.6
)
Equity in earnings (loss) of associated companies
(.1
)
—
.2
.2
.1
Earnings before income taxes
3.3
2.1
2.0
2.4
4.0
Income taxes
1.0
.5
.3
.8
1.5
Net earnings
2.3
%
1.6
%
1.7
%
1.6
%
2.5
%
The following table sets forth certain operating data.
Years Ended December 31
2002
2001
2000
1999
1998
Total loads
2,847,377
2,565,915
2,697,582
2,769,834
2,243,856
Average number of tractors owned/leased in the fleet during the year
10,712
10,710
10,055
9,183
8,207
Company tractors operated (at year end)
10,653
10,770
10,649
9,460
8,906
Independent contractors (at year end)
679
336
16
—
—
Trailers/containers (at year end)
45,759
44,318
44,330
39,465
35,366
Company tractor miles (in thousands)
981,818
1,022,677
1,000,127
986,288
922,560
10
FORWARD-LOOKING STATEMENTS
This report contains statements that may be considered to be forward-looking or predictions concerning future operations or events. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, subject to risks and should be viewed with caution. These statements are based on our belief or interpretation of information currently available. Shareholders and prospective investors are cautioned that actual results and future events may differ materially from the forward-looking statements as a result of many factors. Among all the factors and events that are not within our control and could have a material impact on future operating results include: general economic and business conditions, competition and competitive rate fluctuations, cost and availability of diesel fuel, ability to attract and retain qualified drivers, a loss of one or more major customers, interference with or termination of our relationships with certain railroads, insurance costs and availability, claims expense, retention of key employees, terrorists attacks or actions, acts of war, adverse weather conditions, new or different environmental or other laws and regulations, increased costs for new revenue equipment or decreases in the value of used equipment and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. The above is not an all-inclusive list. Financial and operating results of JBHT may fluctuate as a result of these and other risk factors or events as described from time to time in our filings with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared.
The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect:
• the amounts reported for assets and liabilities;
• the disclosure of contingent assets and liabilities at the date of the financial statements; and
• the amounts reported for revenues and expenses during the reporting period.
Therefore, the reported amounts of assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from estimates. Any effects on business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
In preparing our financial statements and related disclosures, we must use estimates in determining the economic useful lives of assets, provisions for uncollectible accounts receivable, exposures under self-insurance plans and various other recorded or disclosed amounts. However, we believe that certain accounting policies are of more significance in the financial statement preparation process than others and are discussed below. To the extent that actual outcomes differ from estimates, or additional facts and circumstances cause us to revise estimates, earnings will be affected.
Workers’ Compensation and Accident Costs
We purchase insurance coverage for a portion of our expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims. Most insurance arrangements include a level of self insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs that are completely insured. The amounts of self insurance change from time to time based on certain measurement dates and policy expiration dates. Our current insurance coverage specifies that the self insured limit on the majority of our claims is $1.5 million, which is prefunded with our insurance carrier. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. Our safety and claims personnel work directly with representatives from our insurance companies to continually update the estimated ultimate cost of each claim. At December 31, 2002, we
11
had approximately $15 million of estimated net claims payable. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2002, we had a prepaid insurance asset of approximately $45 million.
Revenue Equipment
We operate a significant number of tractors, trailers and containers in connection with our business. This equipment may be purchased or acquired under capital or operating leases. In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements. Revenue equipment which is purchased is depreciated on the straight-line method over the estimated useful life down to an estimated salvage or trade-in value. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments and amortized on the straight-line method over the lease term or the estimated useful life, whichever is shorter.
We have an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain new equipment acquired since 1999. We have utilized these values in accounting for purchased and leased tractors. If the supplier was unable to perform under the terms of such agreements, it could have a material negative impact on our financial results.
Revenue Recognition
We recognize revenue based on the relative transit time of the freight transported. Accordingly, a portion of the total revenue which will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period.
Segments
We operated three segments during calendar year 2002. Segments included Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). JBT business included full truck-load, dry-van freight which is primarily transported utilizing company-owned or controlled revenue equipment. Freight in the JBT segment is typically transported over roads and highways and no portion of a movement involves railroads. The JBI segment includes freight which is transported by rail over at least a portion of the movement. JBI freight may also include certain repositioning truck loads which are moved by JBI equipment or third-party carriers, in circumstances where the movement directs JBI equipment back toward intermodal operations. DCS segment business usually includes company-owned revenue equipment and employee drivers who are assigned to a specific customer, traffic lane or service. DCS operations most frequently involve formal, written long-term agreements which govern services performed and applicable rates.
Prior to July 1, 2000, the Logistics business segment (JBL) primarily consisted of J.B. Hunt Logistics, a wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services. Such services included experienced professional managers, information and freight optimization technology and the actual design or redesign of freight system solutions. JBL utilized JBT, JBI or DCS owned or controlled assets and employees, third-party carriers, or a combination of these options to meet service requirements. JBL services were typically provided in accordance with written long-term agreements. Effective July 1, 2000, JBL exchanged its ownership in substantially all of its assets for an initial membership interest in TPI. As of January 1, 2003, we increased our interest in TPI from approximately 27% to 37%.
12
RESULTS OF OPERATIONS
2002 Compared With 2001
Operating Segments
For Years Ended December 31
(in millions of dollars)
Gross Revenue
Operating Income
2002
2001
% Change
2002
2001
JBT
$
827.3
$
828.6
—
26.6
$
8.7
JBI
809.1
740.5
9
%
54.6
42.1
DCS
628.3
548.7
15
%
19.7
17.4
JBL
—
—
—
—-
—
Other
—
.6
—
.1
4.0
Subtotal
2,264.7
2,118.4
7
%
$
101.0
72.2
Inter-segment eliminations
(16.8
)
(18.1
)
—
—
—
Total
$
2,247.9
$
2,100.3
7
%
$
101.0
$
72.2
The following discussion and analysis should be read in conjunction with
theour Consolidated Financial Statementsof the Companyand related footnotes appearing in this annual report.SUMMARY OF 2000 FinancialOverview of 2002
Our consolidated net earnings for calendar year 2002 were $51.8 million, or diluted earnings per share of $1.33, compared with 2001 full-year earnings of $32.9 million, or 91 cents per diluted share. We generated $101 million of operating income in 2002, a nearly 40% increase over the $72.2 million of operating income in 2001. Our operating ratio was 95.5% in 2002 and
operating results for96.6% in 2001. Our increase in 2002 net earnings was in spite of an effective income tax rate which rose to 30.8% from 23.5% in 2001 and theyear 2000 were impacted by anumber ofsignificant items. Consolidated operating revenues for 2000 increased 6% over 1999. Excluding the JBL operations, which were contributed to TPC as of July 1, 2000, revenue growth for the remaining segments was approximately 15%diluted shares outstanding increasing by nearly 8%. The increase in shares outstanding reflects a secondary public offering, which closed in June of 2002. Each of our three segments contributed to the improved earnings levels in 2002.JBT segment gross revenue was essentially flat, totaling $827.3 million in 2002 and $828.6 million in 2001. However, 2002 revenues were generated with approximately 3% fewer tractors. In addition, 2002 fuel surcharge revenues were $14.2 million lower than the comparable amount in 2001, which negatively impacted the revenue
associated with higher costs of fuel in the current year accounted forcomparison by approximately4% of revenue growth for these remaining segments. Prior2%. Truck segment operating income rose toJanuary 1, 2000, the JBT and JBI businesses had been operated and reported together as the Van business segment. Accordingly, 2000 was the first full year that certain JBT and JBI identifiable information was available. JBT segment revenue, which consists primarily of full truckload, dry-van freight, increased 9%, to $833.8$26.6 million in2000,2002, from$763.2$8.7 million in1999. Revenue per loaded mile, excluding fuel surcharges, increased 3.4%2001. The improvement in2000. The JBT company owned/leased tractor fleet totaled 5,850 at December 31, 2000. A new initiative to utilize independent contractors, who own their tractors was commenced in late 2000. In addition to its company owned tractors, the JBT segment had2002 operatingarrangements with 16 independent contractors at December 31, 2000. The JBT segment incurred an operating loss of $7.1 million in 2000. Since the JBT and JBI segments were operated in combined fashion during 1999, no comparative operating results were available. A portion of the year 2000 JBT operating loss was due to certain costs incurred to separate the JBT and JBI business units. The JBI segment business, which includes primarily truckload freight transported by rail and certain repositioning truck freight, grew 5%, to $681.1 million in 2000, from $651.6 million in 1999. Intermodalincome reflected higher revenue per loaded mile, reduced empty miles and lower driver pay rates. A significant portion of the higher revenue per loaded mile and reduced empty miles was a result of our continued focus on yield management and improved revenue quality. The reduction in2000, exclusivedriver pay per mile was a result offuel surcharges, was essentially flat compared with 1999. Thechanges in pay scales for newly-hired drivers.JBI
tractor fleet totaled 910 at December 31, 2000. The intermodalsegmentgenerated operating income of $36.7gross revenue grew 9%, to $809.1 million in2000. A comparable amount2002, from $740.5 million in 2001. Revenue growth was due, in part, to continued demand for1999 is not available. DCSour intermodal service offering and conversion of our container fleet to 100% 53-foot units. Operating income in the JBI segmentbusiness primarily includes services provided with company-ownedrose to $54.6 million in 2002 from $42.1 million in 2001. Our JBI operating ratio was 93.3% in 2002 and 94.3% in 2001. Financial results in this segment were enhanced by improved container utilization, improved driver productivity and a focus on revenueequipment and employee drivers assigned to specific customers or traffic lanes. During 2000,quality.DCS segment revenue grew
49%nearly 15%, to$478.6 million, from $320.2$628.3 million in1999. A portion2002, from $548.7 million in 2001. Revenue growth was primarily a result of a 9% increase in the size of the DCSsegment revenue growth was due to transfers of equipment and drivers from the JBT business segment. The DCStractor fleettotaled 3,890 at December 31, 2000. DCSand our focus on improving the quality of individual fleets. While operating incomewas $28.4rose to $19.7 million in2000, compared with $24.12002 from $17.4 million in1999. The lower margin on2001, the segment’s operating ratio was 96.9% in 2002 and 96.8% in 2001. We reduced some costs in the DCS segmentbusiness in 2000 was primarily due to asuch as driver pay and overhead, however, higherproportionate share of corporate supportaccident and claims expenses, as well as new project start up costs,being assigned tomore than offset thebusiness. As previously mentioned, the JBL business was contributed to TPC effective July 1, 2000. JBL generated $230 million of revenue and $8.1 million of operating income between January 1, 2000 and June 30, 2000. The Company's share of TPC's results of operations were reported in a one-line, non-operating item on the consolidated statements of earnings and totaled $440,000 in 2000. No gain or loss was recognized upon formation and contribution of JBL segment assets to TPC. 9RESULTS OF OPERATIONS 2000 COMPARED WITH 1999
Operating Segments For Years Ended December 31 (in millions of dollars) Gross Revenue Operating Income -------------------------------------------- ---------------------- 2000 1999 % Change 2000 1999 ---- ---- -------- ---- ----JBT $833.8 $763.2 9% $(7.1) -- JBI 681.1 651.6 5% 36.7 -- ------- ------- --- ---- ----- Van 1,514.9 1,414.8 7% 29.6 $44.4 DCS 478.6 320.2 49% 28.4 24.1 Logistics 230.0* 387.9 (41%) 8.1* 10.5 Other -- -- -- (2.7) (4.7) ------- ------- --- ---- ----- Subtotal 2,223.5 2,122.9 5% 63.4 74.3 Inter-segment eliminations (63.1) (77.8) -- -- -- ------- ------- --- ---- ----- Total $2,160.4 $2,045.1 6% $63.4 $74.3 ======== ======== === ===== =====*As of December 31, 2000, TPC qualifies as a reportable business segment for financial reporting purposes. However, the logistics segment information shown above excludes TPC from its inception in July 2000. TPC is accounted for on the equity method.improvements.13
The following table sets forth items in
theour Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.
Percentage of Percentage Operating Revenue Change ----------------------- ------------- 2000 1999 2000 vs. 1999 ------ ------ -------------Operating revenues 100.0% 100.0% 5.6% Operating expenses: Salaries, wages and employee benefits 35.6% 34.9% 7.9% Rents and purchased transportation 32.1 33.7 .8 Fuel and fuel taxes 11.3 8.3 43.3 Depreciation 6.2 7.3 (9.8) Operating supplies and expenses 6.1 6.2 4.1 Insurance and claims 1.8 2.0 (3.9) Operating taxes and licenses 1.5 1.3 20.4 General and administrative expenses 1.3 1.7 (17.8) Communication and utilities 1.2 1.0 15.1 ------ ------ ------- Total operating expenses 97.1 96.4 6.4 ------ ------ ------- Operating income 2.9 3.6 (14.6) Interest expense (1.1) (1.4) (9.2) Equity in earnings of associated companies .2 .2 52.1 ------ ------ ------- Earnings before income taxes 2.0 2.4 (13.5) Income taxes .3 .8 (62.9) ------ ------ ------- Net earnings 1.7% 1.6% 13.1% ====== ====== =======10OPERATING EXPENSES
Percentage of
Operating Revenue
Percentage Change
Between Years
2002
2001
2002 vs. 2001
Operating revenues
100.0
%
100.0
%
7.0
%
Operating expenses:
Salaries, wages and employee benefits
36.4
%
37.6
%
3.6
%
Rents and purchased transportation
31.1
28.8
15.5
Fuel and fuel taxes
9.4
10.8
(6.8
)
Depreciation and amortization
6.5
6.8
2.2
Operating supplies and expenses
5.8
6.9
(10.3
)
Insurance and claims
2.5
2.0
32.4
Operating taxes and licenses
1.4
1.6
.6
General and administrative expenses, net of gains
1.3
.9
55.7
Communication and utilities
1.1
1.2
(2.0
)
Total operating expenses
95.5
96.6
5.9
Operating income
4.5
3.4
39.8
Interest expense
(1.1
)
(1.3
)
(8.4
)
Equity in earnings (loss) of associated companies
(.1
)
—
(35.0
)
Earnings before income taxes
3.3
2.1
73.7
Income taxes
1.0
.5
127.2
Net earnings
2.3
%
1.6
%
57.3
%
Consolidated Operating Expenses
Total operating expenses in
20002002 increased6.4%5.9% over1999,2001, whiletotaloperating revenuesincreased 5.6%rose 7.0%.Operating expenses expressed as a percentage ofOur operatingrevenue (operating ratio) were 97.1%ratio improved to 95.5% in2000,2002, compared with96.4%96.6% in1999. These comparisons were impacted by the contribution of the JBL segment business to TPC, effective July 1, 2000.2001. Salaries, wages and employee benefits expense increased7.9% during 20003.6% in 2002, androsedeclined to35.6%36.4% of revenue in2000,2002 from34.9%37.6% in1999. These increases2001. As previously mentioned, a lower mileage pay rate in our JBT segment for newly-hired drivers and the use of additional independent contractors wereprimarily dueprimary contributors to the relationship of this cost category to operating revenues. Partly offsetting a decline in drivers’ wages relative to revenue were increases indrivermaintenance wages, workers’ compensation, health insurance and office employee incentive expenses. We opened some new company managed maintenance facilities and increased our mechanic labor force by about 14% in order to reduce the amount of maintenance that we outsource. We also experienced higher costs in workers’ compensation andhigher costs of medical insurance. The higher level of driver compensation expense in 2000, was dueother fringe benefit programs and paid additional incentive payments tochanges in the mix of driversour office andnot a pay rate change.administrative personnel that resulted from improved 2002 net earnings.Rents and purchased transportation expense increased
.8% and declined slightly as a percentage of revenue, reflecting a substantial decrease in purchased transportation,15.5%, primarily due to thecontributiongrowth of our JBI business segment and theJBL segment business, offset by an increaserelated payments to railroads and drayage carriers and the use of more independent contractors. The 6.8% decline inrent expense for leased revenue equipment as discussed below. Fuelfuel and fuel tax expenseincreased 43.3% and rose to 11.3%was primarily a result ofrevenue in 2000, from 8.3% in 1999. Fuel expense was driven by an approximate 35% higher costfuel costs per gallonand slightly lower fuel miles per gallon. Fuel surcharges, which were initiated in late 1999, recovered approximately 90% of higher fuel costs during 2000. Depreciation expense decreased 9.8% and also declined as a percentage of revenue, primarily due to transactions to sell and leaseback certain trailing equipment in 2000 and 1999. These transactions and a decision to rent, rather than buy, additional trailers decreased depreciation expense and increased rents and purchased transportation expenses in 2000.averaging about 5% less vs. 2001. Operating supplies and expensesincreased 4.1%, but remained approximatelywere down 10.3% in 2002 reflecting thesame percentagereduced amount ofrevenue in 2000outsourced tractor and1999.trailer maintenance work and our focus on reducing travel expenses. The20.4%32.4% increase inoperating taxesinsurance andlicensesclaims costs reflects escalating liability insurance premiums which have been experienced industry wide and our higher accident costs. The significant increase in general and administrative expenses was due primarily to higher driver advertising and recruiting expensewasin 2002 and changes in our gains and losses on revenue equipment dispositions. In 2002, we had a $1.8 million net loss on equipment and facility dispositions, compared with a net gain of $4.8 million in 2001.Our net interest expense declined in 2002, partly due to the
larger sizeapproximate $68 million ofthe tractor fleet andcapital we raised through ahigher state base plate cost per tractorsecondary public offering of common stock which closed in2000. Communication and utility costs were up 15.1%, primarily due to expanded data and telecommunications networks and higher satellite communication expenses. Interest expense declined 9.2% in 2000, primarily due to the reductionJune ofaverage debt balances in 2000 versus 1999, resulting from the sale and leaseback transactions. The equity in earnings of associated companies amounts represent the Company's share of earnings from operations in Mexico and from TPC. Earnings recognized from Mexican operations in 2000 totaled $4.3 million, compared with $3.1 million in 1999. Earnings recognized from TPC were $440,000 in 2000. The effective income tax rates were approximately 15% in 2000 and 35% in 1999. The primary reason for the decrease in the year 20002002. We increased our effective income tax ratewasto 30.8% in 2002, from 23.5% in 2001, primarily to reflect additional taxes associated with our increased earnings.14
Equity in losses of associated companies reflects our share of operating results for TPI and for our Mexican joint venture. Amounts included the
benefitfollowing:
Years Ended December 31
(000)
2002
2001
TPI
$
(1,353
)
$
(1,918
)
Mexican joint venture
—
(165
)
$
(1,353
)
$
(2,083
)
JBHT’s financial exposure is limited to its approximate $8.5 million investment in TPI as we have not made any additional commitments or guaranteed any of TPI’s financial obligations.
The year 2001 financial results of our Mexican joint venture primarily reflect adjustments to the carrying value of the
amortizationinvestment due to the anticipated sale of our interests. During thegainfirst quarter of 2002, we sold our joint venture interest in Mexico for its carrying value, to the majority owner, Transportacion Maritima Mexicana (TMM). We recorded an $18.1 million note receivable from TMM, which, according to the terms of this sale, will be paid in four annual payments of approximately $4.5 million, plus interest at 5% per annum, through June of 2005. The first payment was received as scheduled in June of 2002.2001 Compared With 2000
Operating Segments
For Years Ended December 31
(in millions of dollars)
Gross Revenue
Operating Income
2001
2000
% Change
2001
2000
JBT
$
828.6
$
833.8
(1
)%
$
8.7
$
(7.1
)
JBI
740.5
681.1
9
%
42.1
36.7
DCS
548.7
478.6
15
%
17.4
28.4
JBL
—
230.0
*
—
—
8.1
*
Other
.6
—
—
4.0
(2.7
)
Subtotal
2,118.4
2,223.5
(5
)%
72.2
63.4
Inter-segment eliminations
(18.1
)
(63.1
)
—
—
—
Total
$
2,100.3
$
2,160.4
(3
)%
$
72.2
$
63.4
*As of December 31, 2000, TPI qualified as a reportable business segment for financial reporting purposes. However, the logistics segment (JBL) information for 2001 shown above excludes TPI. TPI is accounted for on the
saleequity method andleaseback transaction, which closeddoes not qualify as a reporting segment inlate 1999. As a result2001.The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related footnotes appearing in this annual report.
Overview of
the above, net earnings for 2000 were $36.1 million, or diluted earnings per share of $1.02, compared with $31.9 million in 1999, or $.89 per diluted share. The average number of shares outstanding remained substantially the same in 2000 and in 1999. SUMMARY OF 1999 The 1999 financial2001Financial and operating results for the year 2001 were impacted by a number of significant
itemsitems. General economic conditions in the transportation industry were soft during the majority of the year and fuel costs varied dramatically, sometimes changing more than 10% from one month to the next. However, overall fuel costs for 2001 were down from the prior year.Van (JBTConsolidated operating revenues for 2001 decreased approximately 3% from 2000. Excluding the JBL operations, which were contributed to TPI as of July 1, 2000, revenue growth for the remaining business segments was approximately 6%. The growth in the remaining segments is attributable to expansion of our operating fleet of tractors from an average of 10,055 in 2000 to 10,710 in 2001, an average increase of 655 tractors or 6.5%. While fuel costs and related fuel surcharge revenues varied significantly during 2001, the net change in fuel surcharge revenue had less than a 1% impact on revenue between 2001 and 2000.JBT segment revenue totaled $828.6 million in 2001, down 1% from 2000. This decline was due in part to the softer economy that created a reduced demand for freight. JBT began focusing on improving the operating ratio through cost management initiatives rather than JBT fleet growth. We had no plans to grow the JBT fleet until such time that a reasonable operating income had been achieved, warranting the additional investment of capital. JBT tractor count,
15
including independent contractors (I/C’s) declined nearly 3% during 2001 and tractor utilization was also down approximately 3%. However, revenue per loaded mile increased 3.9%, excluding fuel surcharges, reflecting freight mix changes and pure rate increases,. The Truck segment generated operating income of $8.7 million in 2001, compared with a loss of $7.1 million in 2000. As a result of a new initiative commenced in late 2000, the number of I/C’s in JBT grew to 337 in 2001, from 16 at the end of 2000. Continued volatility in the earnings power of the Truck unit is likely to prevail until supply and demand factors in the truckload industry improve. Additional improvement is significantly dependent upon increases in the availability of freight.
JBI
combined)segment business was reasonably strong during 2001 and grew 9% to $740.5 million from $681.1 million in 2000. The Intermodal segment held its tractor count essentially flat at 910 during 2001. Unlike the other segments, growth of JBI is not easily tracked by number of tractors, as JBI can utilize outside dray carriers and the other JBHT business units to support load and revenue growth. The increase in revenue can be attributed to a 5% increase in the number of loads from 2000 to 2001, coupled with a 1.7% increase in revenue per loaded mile, excluding fuel surcharges. As a result of revenue growth and utilization of containers, JBI operating income climbed 15% in 2001 to $42.1 million from $36.7 million in 2000.DCS segment revenue grew 15% during 2001, to $548.7 million from $478.6 million in 2000. This growth rate was down significantly from recent years due to: 1) soft economic conditions which made companies more apprehensive about changing or outsourcing their transportation needs, and; 2) our unwillingness to reduce rates to increase market share. The DCS segment tractor fleet grew by 15% during 2001, but revenue growth was limited
to 3%, partly due to rail service delays which occurred during the second and third quartersby idle tractors throughout most of1999. JBT loads increased about 6%, while JBI load count declined approximately 3% during 1999. Tractor count in the Van segment was essentially flat forthe year.JBT revenue per loaded mile, before fuel surcharges, was up approximately 1%, while JBI rates declined about 1%. Van revenue growth increased slightly during the fourth quarterDCS generated $17.4 million of1999 due to fuel surcharges which were initiated as fuel costs began to rise significantly. Operatingoperating income in 2001, compared with $28.4 million in 2000. The lower margin and reduced operating income was primarily a result of idle tractors and a higher proportionate amount of shared trailer pool and corporate support costs being assigned to theVan segment was reduced, in part,business, as a result of improving the tracking of trailer usage and the increased internal transfer price, which is charged byhigher revenue equipment maintenance and tire costs, and significant increases in the cost of fuel. In addition, an initiative to separate theJBT and JBIbusinesses resultedwhen DCS utilizes their assigned trailers. Cost control and close analysis of individual fleet profitability remains a DCS objective.For the year ended December 31, 2001, JBHT’s share of TPI’s results of operations totaled a loss of $1.9 million, compared with earnings of $440,000 for the six month period ended December 31, 2000. TPI’s operating loss in
higher third party dray expense during the latter part of 1999. DCS segment revenue grew 51% to $320.2 million in 1999 from $211.9 million in 1998. This increase in DCS revenue was driven by new customer contracts and projects and fleet additions to existing contracts. The higher level of DCS operating income during 19992001 was primarily due tothe growthstart up expenses. JBHT’s financial exposure is limited to its approximate $6.4 million investment in TPI as we have not made any additional commitments or guaranteed any ofsegment revenue. Margins in the DCS business declined slightly during 1999, partly due to higher fuel costs and higher driver wage expense. The 22% increase in JBL segment revenue during 1999 was consistent with the prior year. This growth reflected new logistics agreements with new customers and growth of business volumes with existing customers. The increase in 1999 JBL operating income was primarily related to higher revenue levels with some lower purchased transportation costs providing for slightly better margins on some business. The operating losses classified as "other" in 1999 and 1998 were primarily a result of corporate administrative expenses which were not allocated to the business segments. 11RESULTS OF OPERATIONS 1999 COMPARED WITH 1998TPI’s financial obligations.
Operating Segments For Years Ended December 31 (in millions of dollars) Gross Revenue Operating Income ------------------------------------------- -------------------- 1999 1998 % Change 1999 1998 ------- ------- -------- ---- -----JBT $763.2 $733.6 4% -- -- JBI 651.6 644.8 1% -- -- ------- ------- -------- ---- ----- Van 1,414.8 1,378.4 3% 44.4 $81.1 DCS 320.2 211.9 51% 24.1 17.0 JBL 387.9 317.3 22% 10.5 7.5 Other -- 8.0 -- (4.7) (4.1) ------- ------- -------- ---- ----- Subtotal 2,122.9 1,915.6 11% 74.3 101.5 Inter-segment eliminations (77.8) (74.0) -- -- -- ------- ------- -------- ---- ----- Total $2,045.1 $1,841.6 11% $74.3 $101.5 ======== ======== ======== ===== ======The following table sets forth items in
theour Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.
Percentage of Percentage Operating Revenue Change ----------------------- ------------- 1999 1998 1999 vs. 1998 ------ ------ -------------Operating revenues 100.0% 100.0% 11.0% Operating expenses: Salaries, wages and employee benefits 34.9% 34.9% 11.0% Rents and purchased transportation 33.7 33.7 11.2 Fuel and fuel taxes 8.3 7.5 23.2 Depreciation 7.3 7.6 6.1 Operating supplies and expenses 6.2 5.3 29.2 Insurance and claims 2.0 1.8 24.1 Operating taxes and licenses 1.3 1.3 12.9 General and administrative expenses 1.7 1.4 33.1 Communication and utilities 1.0 1.0 10.8 ------ ------ ------- Total operating expenses 96.4 94.5 13.3 ------ ------ ------- Operating income 3.6 5.5 (26.8) Interest expense (1.4) (1.6) (1.2) Equity in earnings of associated companies .2 .1 108.6 ------ ------ ------- Earnings before income taxes 2.4 4.0 (34.0) Income taxes .8 1.5 (37.6) ------ ------ ------- Net earnings 1.6% 2.5% (31.9)% ====== ====== =======12OPERATING EXPENSES
Percentage of
Operating Revenue
Percentage Change
Between Years
2001
2000
2001 vs. 2000
Operating revenues
100.0
%
100.0
%
(2.8
)%
Operating expenses:
Salaries, wages and employee benefits
37.6
%
35.6
%
2.7
%
Rents and purchased transportation
28.8
32.1
(13.0
)
Fuel and fuel taxes
10.8
11.3
(6.9
)
Depreciation and amortization
6.8
6.2
6.2
Operating supplies and expenses
6.9
6.1
11.4
Insurance and claims
2.0
1.8
8.7
Operating taxes and licenses
1.6
1.5
—
General and administrative expenses, net of gains
.9
1.3
(32.5
)
Communication and utilities
1.2
1.2
(.7
)
Total operating expenses
96.6
97.1
(3.3
)
Operating income
3.4
2.9
13.9
Interest expense
(1.3
)
(1.1
)
5.0
Equity in earnings (loss) of associated companies
—
.2
—
Earnings before income taxes
2.1
2.0
1.5
Income taxes
.5
.3
59.2
Net earnings
1.6
%
1.7
%
(8.7
)%
16
Consolidated Operating Expenses
Total operating expenses in
1999 increased 13.3% over 1998, while total2001 declined 3.3% from 2000, decreasing in relative proportion to operatingrevenues increased 11.0%. Operatingrevenues. Our operating ratio (operating expenses expressed as a percentage of operating revenues) improved slightly to 96.6% in 2001 from 97.1% in 2000. As previously mentioned, the JBL segment was contributed to TPI effective July 1, 2000. This approximate 10% reduction in consolidated operating revenues(operating ratio) were 96.4%was the primary factor in1999, compared with 94.5% in 1998. Salaries, wages and employee benefits increased 11.0% during 1999 and remained exactly the same percentage of operating revenue for 1999 and 1998. Rentsreduced rents and purchased transportationexpense increased 11.2%expense. The JBI segment relied solely on JBT andalso maintainedthird party carriers for transportation services and accordingly, purchased transportation costs as aconsistent relationship with operating revenues. While fuel costspercent of revenue werebelow prior year levels during the first quarter of 1999, cost per gallon started to rise during March and April. During the third quarter of 1999, fuel prices averaged nearly $.20 per gallonsignificantly higher than thecomparable periodother segments. The decline in1998 and the spread widened to nearly $.30 per gallon by November of 1999. For the year 1999,fuel and fueltaxes increased 23.2% and grew from 7.5% of operating revenue in 1998 to 8.3% in 1999. Depreciationtax expenseincreased 6.1% during 1999, but declined slightly as a percentage of operating revenues. The amount of depreciation expense on revenue equipment increased in relative proportion to the size of the fleet. Depreciation expense in 1999 was reduced, in part, by a sale and immediate leaseback of certain trailing equipment. This transaction closed during the fourth quarter of 1999. Operating supplies and expenses increased 29.2% during 1999 and rose as a percentage of operating revenues. This increasewas primarily due to significantly lower fuel cost per gallon in late 2001. The increase in 2001 operating supplies and expenses reflected higherrevenuetractor and trailing equipment maintenance and tireexpenditures during 1999.costs. Insurance and claims costs reflected higher collision rates in JBT during 2001. The significant decline in general and administrative expenses was due to an approximate $5.5 million gain on the sale of a group of trailers, which closed in March of 2001. Gains on revenue equipment dispositions are included in this expensewhich had declined significantly from 1997classification and totaled a net gain of $4.8 million in 2001, compared with a loss of $267,000 in 2000.Equity in earnings (loss) of associated companies reflects our share of operating results for TPI and for the Mexican joint venture. Equity in earnings amounts included the following:
Year Ended December 31
(000)
2001
2000
TPI
$
(1,918
)
$
440
Mexican joint venture
(165
)
4,337
$
(2,083
)
$
4,777
The year 2001 financial results of our Mexican joint venture primarily reflected adjustments to
1998, increased 24.1% in 1999. Whilethefrequencycarrying value ofvehicle collisions declined slightly during 1999,theseverity, or cost per collision, rose significantly during 1999. Operating taxes and licenses increased 12.9% during 1999, partlyinvestment due to thegrowthanticipated sale of our interests. We had an agreement in principle for a sale to the majority owner of thetractor fleet and increasesjoint venture. This transaction was consummated inlicensing fees charged by certain states. General and administrative expenses increased 33.1%, but remained nearly the same percentage of operating revenue for both years. A portion of this increased expense was for rental and maintenance of computer equipment. Communication and utilities increased 10.8%, reflecting expanded data and telecommunications networks and higher satellite communications costs. Interest expense declined slightly and the effective income tax rate declined to 35% in 1999 from 37% in 1998. These decreases were due, in part, to the sale and leaseback transaction described above. The overall impact of this sale and leaseback transaction increased 1999 earnings per share by approximately $.02. As a result of the above, net earnings for 1999 declined to $31.9 million, or diluted earnings per share of $.89, compared with $46.8 million in 1998, or $1.28 per diluted share. The average number of weighted average shares outstanding (before the effect of dilutive stock options) remained substantially the same for 1999 and 1998. A decrease in weighted average shares assuming dilution resulted from the decreased effect of dilutive stock options caused by a decline in the Company's average price of common stock during 1999.early 2002.LIQUIDITY AND CAPITAL RESOURCES
The Company generatesCash Flow
We generate significant amounts of cash from operating activities. Net cash provided by operating activities was $174 million in 2002, $172 million in 2001 and $125 million in 2000. While 2002 and 2001 reflected a typical level of cash provided by operating activities, 2000
$136 million in 1999 and $181 million in 1998. The decline in cash flow over the past two years partly reflects the Company's decision to acquire new revenue equipment throughwas impacted by a significant prepayment for an operatingleases rather than purchase. Other factors impacting cash flow have been increases in prepaidleaseand insurance costs in 2000; increases in accounts receivable in 1999 and 1998, a trendwhich wasreversedfunded in2000, with the contribution of JBL to TPC and improvements in the receivable aging. Net cashearly 2000. Cash flows used in investing activitieswas $100 million in 2000, $19 million in 1999primarily reflect additions to and$259 million in 1998. The primary usedispositions from our fleet offunds for investing activities was the acquisition of newrevenue equipment.The numberDuring the latter part ofnew tractors purchased totaled approximately 1,900 in20002,200 in 1999, 2,900 in 1998. The amount of investment spendingthrough late 2001, we utilized capital leases to acquire tractors. Tractor additions since October 2001 have been purchased. The majority of our trailing equipmentvaried significantly during the three year period ended December 31, 2000. The total number of trailing pieces of equipment purchased was approximately 3,600 inadditions since October 20002,200 in 1999 and 4,700 in 1998.have been under operating lease programs. Net cashused for investingprovided by financing activities in2000 was reduced by the sale and leaseback2002 reflects our $68 million secondary stock offering, which closed in June ofapproximately $66 million of trailers in September of 2000. Net cash used for investing activities in 1999 was reduced by a sale and immediate leaseback of 13approximately $175 million of trailing equipment. The Company also elected to rent a significant number of trailers during 2000. As mentioned previously, a $5 million cash investment in TPC was also made in 2000. Net financing activities consumed approximately $32 million in 2000 and $113 million in 1999, but generated $83 million in 1998. Proceeds from the sale and leaseback of trailing equipment which approximated $66 million in 2000 and $175 million in 1999 were used to reduce commercial paper note balances and long-term debt. The Company sold $100 million of 7.00% senior notes in September of 1998, which mature in September of 2004. Financing activities also included the purchase of treasury stock, which totaled $7.6 million in 2000 and $5.8 million in 1998. Dividends of approximately $1.8 million were paid in 2000 and $7.1 million were paid in both 1999 and 1998. The Company announced in February of 2000, a decision to discontinue paying dividends. In January of 2001, Moody's Investors Service downgraded the ratings of the Company's senior unsecured debt to Baa3 from Baa2 and its commercial paper to Prime-3 from Prime-2. During 2000, the Company entered into various capital lease agreements to lease revenue equipment with a net book value of approximately $94 million.
SELECTED BALANCE SHEET DATA As of December 31 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------Working capital ratio 1.06 1.09 1.09 Current maturities of long-term debt and lease obligations (millions) $101 $60 $16 Total debt and capitalized lease obligations (millions) $401 $328 $433 Total debt to equity .94 .82 1.15 Total debt as a percentage of total capital .48 .45 .54The Company is authorized to issue up to $150 million in notes under2002. We discontinued a commercial papernoteborrowing programof which $74 million was outstanding at December 31,during 2001 and ceased paying cash dividends in early 2000.SELECTED BALANCE SHEET DATA
As of December 31
2002
2001
2000
Working capital ratio
1.33
1.45
1.04
Current maturities of long-term debt and lease obligations (millions)
$
124
$
38
$
101
Total debt and capitalized lease obligations (millions)
$
343
$
392
$
401
Total debt to equity
.58
.86
.96
Total debt as a percentage of total capital
.37
.46
.49
17
From time to time
theour Board of Directors authorizes the repurchase ofCompanyour common stock. Purchases ofCompanyJBHT stock were:
2000 1999 1998 --------------------------------------------------------------------------------------Number of shares acquired 500,000 -- 225,000 Price range of shares $10.94 - $16.13 -- $17.50 - $28.00At
2002
2001
2000
Number of shares acquired
—
—
500,000
Price range of shares
—
—
$10.94 - $16.13
Liquidity
Our need for capital typically has resulted from the acquisition of revenue equipment required to support our growth and the replacement of older tractors and trailing equipment with new, late model equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We have recently obtained capital through a secondary common stock offering, revolving lines of credit and cash generated from operations. We have also utilized capital and operating leases to acquire revenue equipment.
As mentioned above, we utilized capital leases to acquire tractors from late 2000 through late 2001. We started purchasing tractors and containers in October of 2001 and plan to continue purchasing tractors and containers in the foreseeable future. We have been acquiring dry van trailing equipment since October of 2000, primarily under operating lease programs. We currently expect to spend in the range of $220 million, net of expected proceeds from sale or trade-in allowances, on revenue equipment for the full calendar year of 2003.
We are authorized to borrow up to $150 million under our current revolving lines of credit which expire November 14, 2005. We had no balances outstanding under these lines at December 31,
2000,2002. Under theCompanyterms of our credit and note agreements, we are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios. We were in compliance with all of the financial covenants at December 31, 2002. As of December 31, 2002, we had committed to purchase approximately$90$184 million of revenue and service equipment, net ofexpectedproceeds, from sale or trade-in allowances.Additional capital spending for new revenue equipment is anticipated during 2001, however, funding for such expenditures is expected to come fromWe believe that our current liquid assets, cash generated from operations andexisting borrowing facilities. The Company had approximately $75.6 million of unused borrowing capacity under its committedour revolving lines ofcredit. YEARcredit will provide sufficient funds for our operating and capital requirements for the foreseeable future.Contractual Cash Obligations
As of December 31, 2002
(000)
Amounts Due By Period
Total
One Year
Or Less
One To
Three Years
Four To
Five Years
After
Five Years
Operating Leases
$
283,616
$
74,233
$
110,227
$
80,769
$
18,387
Capital leases
149,886
34,481
115,405
—
—
Senior and subordinated notes payable
202,010
97,010
105,000
—
—
Subtotal
$
635,512
$
205,724
$
330,632
$
80,769
$
18,387
Commitments to acquire revenue equipment
184,000
184,000
—
—
—
Total
$
819,512
$
389,724
$
330,632
$
80,769
$
18,387
18
Financing Commitments
As of December 31, 2002
(000)
Commitments Expiring By Period
Total
One Year
Or Less
One To
Three Years
Four To
Five Years
After
Five Years
Revolving credit arrangements
$
150,000
$
—
$
150,000
—
—-
Standby letters of credit
26,510
26,510
—
—
—
Total
$
176,510
$
26,510
$
150,000
—
—
Risk Factors
In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million. These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to examine. We have voluntarily disclosed these transactions to the IRS and in October of 2002, the IRS began their examination of the specific facts of these transactions. If the IRS challenges our transactions, we intend to vigorously defend them. However, if the IRS successfully challenges these transactions, and is successful in disallowing some or all of the tax benefits that we realized, these actions could have a material adverse effect on our financial condition and operating results.
Our effective income tax rates were 30.8%, 23.5% and 15.0% for the years 2002, 2001 and 2000,
- ---------respectively. We implemented an accountable expense reimbursement plan for a portion of our drivers in February of 2003 (driver per diem). While this plan will generally benefit both JBHT and the majority of our drivers, it results in a higher effective income tax rate. Partly as a result of this change and anticipated higher earnings, we are currently estimating an effective income tax rate of 37% to 39% for calendar year 2003.In 1997, the Equal Employment Opportunity Commission (EEOC) commenced an action against us in Federal District Court alleging that we had violated the Americans With Disabilities Act by refusing to hire as truck drivers certain individuals who were taking certain medications. The
Company didEEOC sought injunctive relief and damages for a group of 540 individuals. The District Court dismissed the EEOC’s complaint on our motion for summary judgment. The EEOC appealed this decision to the Federal Court of Appeals. The Federal Court of Appeals upheld the District Court’s decision in our favor. However, the EEOC may still appeal this case to higher courts. If the higher courts rule against us, we could be subject to a new trial in the District Court.In a separate action filed in Michigan in November 2001, by a group of eight former employees, the plaintiffs alleged that we violated the Elliott-Larsen Civil Rights Act of Michigan. In February 2003, we reached an agreement to settle this complaint. The terms of the settlement are to remain confidential by agreement, however, this contemplated settlement will not
experiencematerially impact our financial statements or results of operations.In October 2002, we were assessed a judgment of approximately $7 million for an accident that occurred in August 2001. We are currently in dispute over the total value of this judgment and plan to file the appropriate appeals. We believe, based on advise from outside counsel, that it is probable that this award will be substantially reduced by the appellate court. However, if we are unsuccessful in our appeal to the appellate court, the ultimate payments to the claimant could have a material effect on our financial statements.
Inflation could have a material impact on our business. A prolonged or unusual period of rising costs could result in fuel, wages, insurance, interest or other costs increasing rapidly and could adversely affect our results of operations if we were unable to increase freight rates accordingly. The impact of inflation has been minimal during the past three years.
Our business is subject to general economic and business factors that are largely out of our control, any one of which could have a material
Year 2000 problemsadverse effect on our results of operations. These factors include significant increases ordisruptionsrapid fluctuations in fuel costs, excess capacity in the trucking industry, surpluses in the market for used equipment, interest rates, fuel taxes, license and registration fees, insurance premiums, self-insurance levels and difficulty attracting and retaining qualified drivers and independent contractors. We are also affected by recessionary economic cycles and downturns in customers’ business cycles.We operate in a highly competitive and fragmented industry. Numerous factors could impair our ability to maintain our current profitability and to compete with
internal systems,other carriers. We compete with many other truckload carriers of varying sizes, some of which have more equipment and greater capital resources that we do. Some of our competitors periodically reduce their freight rates to gain or retain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain rates or maintain our profit margins.19
We depend on third parties in the operation of our business. Our Intermodal business segment utilizes a number of railroads in the performance of transportation services. While the majority of these services are provided pursuant to written agreements with the railroads, the inability to utilize one or more of these railroads could have a material adverse effect on our business or operating results.
If we are unable to retain our key employees, our business, financial condition and results of operations could be harmed. We are highly dependent upon the services of a number of our officers and other key employees. We do not have employment agreements with any of these employees. The loss of any of their services could have a materially adverse effect on our operations or future profitability.
As part of a 1998 consent decree with the U.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines which were produced subsequent to October 1, 2002. We have not yet had sufficient time to test these new engines. We will continue to test a limited number of the new EPA compliant engines. In November of 2002, we committed to purchase approximately 2,100 new tractors, primarily for our JBI and DCS segments, which will be equipped with Mercedes engines. These engines are not covered by the EPA’s October 1, 2002 rules. Except for these 2,100 tractors, which will be utilized primarily for local and regional operations, we expect to limit new tractor purchases until we are able to complete further testing and evaluation of the EPA compliant engines. In addition, these new EPA compliant engines are expected to increase the acquisition and operating costs of these tractors and may negatively impact our future profitability.
Fuel and fuel taxes currently represent our third largest general expense category. During the past three years fuel cost per gallon has
not experienced anyvaried significantly, with prices frequently changing as much as $.10 to $.15 per gallon between consecutive months. We have a fuel surcharge revenue program in place with the majority of our customers, which has historically enabled us to recover the majority of higher fuel costs. Most of these programs automatically adjust weekly depending on the cost of fuel. However, there can be timing differences between a change in our fuel cost and the timing of the fuel surcharges billed to our customers. In addition, we incur additional costs when fuel prices rise which cannot be fully recovered due to our engines being idled during cold weather and empty or out-of-route miles which cannot be billed to customers. In February of 2003, fuel prices averaged approximately 15% higher than December of 2002 and 45% higher than February of 2002. Rapid increases in fuel costs or shortages of fuel could have a materialproblemsadverse effect on our operations ordisruptions with customers or suppliers systems. 14future profitability. As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. RECENT ACCOUNTING PRONOUNCEMENTS
In June
1998,2001, the Financial Accounting Standards Board("FASB")(FASB) issuedStatement of FinancialSFAS No. 143, AccountingStandardsfor Asset Retirement Obligations (SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")143). SFAS133 establishes new accounting and reporting standards for derivative financial instruments and for hedging activities. SFAS 133No. 143 requiresan entityus tomeasure all derivatives at fair value and to recognize them inrecord thebalance sheet as an asset or liability, depending on the entity's rights or obligations under the applicable derivative contract. The recognition of changes infair value of an asset retirement obligation as aderivativeliability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets thataffectresult from theincome statement will depend on the intendedacquisition, construction, development and/or normal use of thederivative. Ifassets. We also record a corresponding asset which is depreciated over thederivative doeslife of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. We were required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS 143 will notqualify ashave ahedging instrument,material effect on our financial statements.In November 2002, the
gain or lossFASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on thederivative willdisclosures to berecognized currentlymade by a guarantor inearnings. Ifits interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for thederivative qualifies for special hedge accounting, the gain or loss on the derivative will either (1) be recognized in income along with an offsetting adjustment to the basisfair value of theitem being hedgedobligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or(2) be deferred in other comprehensive incomemodified after December 31, 2002 andreclassified to earnings in the same period or periods during which the hedged transaction affects earnings. SFAS 133 was amended by Statement of Financial Accounting Standards No. 138 ("SFAS 138") in June 2000 that amended the accounting and reporting standards of SFAS 133 for certain derivative instruments and certain hedging activities. SFAS 138 also amended SFAS 133 for decisions made by the FASB relating to the Derivatives Implementation Group process. The Company has completed its analysis of Statement 133 and doesare notexpect adoption as of January 1, 2001expected to have a material effect onresultsour financial statements. The disclosure requirements are effective for financial statements ofoperations orinterim and annual periods ending after December 15, 2002, and are included in the notes to our consolidated financialposition. FORWARD-LOOKING STATEMENTSstatements.In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123. This
report contains statements that may be considered as forward-looking or predictions concerning future operations. Such statements are made pursuantStatement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to thesafe harbor provisionsfair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of20
Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the
Private Securities Litigation Reform Act of 1995. These statementsdisclosure modifications arebased on management's belief or interpretation of information currently available. Shareholdersrequired for fiscal years ending after December 15, 2002 andprospective investorsarecautioned that actual results and experience may differ materially fromincluded in theforward-looking statements as a result of many factors. Among all the factors and events that are not within the Company's control and could have a material impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions and competitive rate fluctuations and availability of drivers. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. Financial and operating results of the Company may fluctuate as a result of these and other risk factors as detailed from timenotes totime in Company filings with the Securities and Exchange Commission.our consolidated financial statements.Our earnings are affected by changes in short-term interest rates as a result of
itsour issuance of short-termcommercial paper. The Companydebt. We from time to timeutilizesutilize interest rate swaps to mitigate the effects of interest rate changes; none were outstanding at December 31,2000.2002. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more during the next twelve months, there would be no material adverse impact onthe Company'sour results of operations based on variable rate debt outstanding at December 31,2000.2002. At December 31,2000,2002, the fair value ofthe Company'sour fixed rate long-term obligations approximated carrying value.Although
the Company conductswe conduct business in foreign countries, international operations are not material tothe Company'sour consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material tothe Company'sour results of operations for the year ended December 31,2000.2002. Accordingly,the Company iswe are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have onthe Company'sour future costs or on future cash flowsitwe would receive fromitsour foreign investment. To date,the Company haswe have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.15The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
PAGE - -------------------------------------------------------------------------------------------------------------------Consolidated Balance Sheets as of December 31,
20002002 and1999 18200116INDEPENDENT AUDITORS' REPORT21
The Board of Directors
J. B. Hunt Transport Services, Inc.:
We have audited the accompanying consolidated balance sheets of J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31,
20002002 and1999,2001, and the related consolidated statements of earnings,stockholders'stockholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31,2000.2002. These consolidated financial statements are the responsibility of theCompany'sCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31,
20002002 and1999,2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31,2000,2002, in conformity with accounting principles generally accepted in the United States of America.Tulsa, Oklahoma
February 2, 2001 17January 30, 2003
22
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
December 31,
20002002 and1999 (Dollars2001(Dollars in thousands, except per share amounts)
ASSETS 2000 1999 ------------- --------------Current assets: Cash and cash equivalents $ 5,370 12,606 Trade accounts receivable 225,797 238,573 Inventories 7,233 7,825 Prepaid licenses and permits 17,224 17,380 Other current assets 75,347 18,757 ------------- -------------- Total current assets 330,971 295,141 ------------- -------------- Property and equipment, at cost: Revenue and service equipment 1,117,689 1,038,056 Land 19,987 20,949 Structures and improvements 76,159 76,517 Furniture and office equipment 120,622 103,872 ------------- -------------- Total property and equipment 1,334,457 1,239,394 Less accumulated depreciation 489,282 453,509 ------------- -------------- Net property and equipment 845,175 785,885 ------------- -------------- Other assets (note 7) 55,775 46,438 ------------- -------------- $ 1,231,921 1,127,464 ============= ============== 18J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2000 and 1999 (Dollars in thousands, except per share amounts) LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999 -------------- -------------- Current liabilities: Current maturities of long-term debt (note 2) $ 84,400 60,000 Current installments of obligations under capital leases (note 8) 16,489 0 Trade accounts payable 158,585 180,009 Claims accruals 13,260 788 Accrued payroll 29,148 19,462 Other accrued expenses 10,390 10,371 Deferred income taxes (note 4) 13,002 4,185 -------------- -------------- Total current liabilities 325,274 274,815 -------------- -------------- Long-term debt, excluding current maturities (note 2) 222,694 267,639 Obligations under capital leases, excluding current installments (note 8) 77,694 0 Claims accruals 4,974 7,368 Deferred income taxes (note 4) 173,282 176,256 -------------- -------------- Total liabilities 803,918 726,078 -------------- -------------- Stockholders' equity (notes 2 and 3): Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding 0 0 Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 39,009,858 shares 390 390 Additional paid-in capital 107,090 107,172 Retained earnings 385,221 350,928 Accumulated other comprehensive loss (6,502) (5,324) -------------- -------------- 486,199 453,166 Treasury stock, at cost (3,795,400 shares in 2000 and 3,370,872 shares in 1999) (58,196) (51,780) -------------- -------------- Total stockholders' equity 428,003 401,386 Commitments and contingencies (notes 2, 3, 4, 5 and 8) -------------- -------------- $ 1,231,921 1,127,464 ============== ==============
2002
2001
Assets
Current assets:
Cash and cash equivalents
$
80,628
49,245
Trade accounts receivable
237,156
233,246
Inventories
9,515
8,915
Prepaid licenses and permits
20,054
17,507
Other current assets
85,828
75,886
Total current assets
433,181
384,799
Property and equipment, at cost:
Revenue and service equipment
1,096,809
1,067,465
Land
20,469
19,834
Structures and improvements
80,667
78,469
Furniture and office equipment
107,708
98,201
Total property and equipment
1,305,653
1,263,969
Less accumulated depreciation
461,091
432,258
Net property and equipment
844,562
831,711
Other assets (notes 7 and 9)
40,985
43,788
$
1,318,728
1,260,298
23
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2002 and 2001
(Dollars in thousands, except per share amounts)
2002
2001
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt (note 2)
$
97,010
10,000
Current installments of obligations under capital leases (note 8)
27,138
28,426
Trade accounts payable
117,931
163,291
Claims accruals
14,706
18,003
Accrued payroll
46,511
30,251
Other accrued expenses
11,291
12,713
Deferred income taxes (note 4)
10,742
3,150
Total current liabilities
325,329
265,834
Long-term debt, excluding current maturities (note 2)
104,815
212,950
Obligations under capital leases, excluding current installments (note 8)
114,152
140,657
Other long-term liabilities
1,997
5,275
Deferred income taxes (note 4)
181,948
177,265
Total liabilities
728,241
801,981
Stockholders’ equity (notes 2, 3 and 12):
Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding
—
—
Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 41,774,858 and 39,009,858 shares at December 31, 2002 and 2001, respectively
418
390
Additional paid-in capital
184,683
115,319
Retained earnings
459,803
407,987
Accumulated other comprehensive loss
—
(7,037
)
644,904
516,659
Treasury stock, at cost (2,457,280 shares in 2002 and 3,030,828 shares in 2001)
(54,417
)
(58,342
)
Total stockholders’ equity
590,487
458,317
Commitments and contingencies (notes 2, 4, 6 and 8)
$
1,318,728
1,260,298
See accompanying notes to consolidated financial statements.
1924
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31,
2000, 19992002, 2001 and1998 (Dollars2000(Dollars in thousands, except per share amounts)
2000 1999 1998 ------------ ------------ ------------Operating revenues $ 2,160,447 2,045,073 1,841,628 Operating expenses: Salaries, wages and employee benefits (note 5) 769,393 713,378 642,946 Rents and purchased transportation 694,756 689,561 619,902 Fuel and fuel taxes 242,835 169,407 137,561 Depreciation 134,391 148,968 140,355 Operating supplies and expenses 130,947 125,748 97,295 Insurance and claims 38,982 40,555 32,674 Operating taxes and licenses 32,641 27,118 24,029 General and administrative expenses 28,563 34,740 26,091 Communication and utilities 24,528 21,309 19,237 ------------ ------------ ------------ Total operating expenses 2,097,036 1,970,784 1,740,090 ------------ ------------ ------------ Operating income 63,411 74,289 101,538 Interest expense (25,747) (28,346) (28,700) Equity in earnings of associated companies 4,777 3,141 1,506 ------------ ------------ ------------ Earnings before income taxes 42,441 49,084 74,344 Income taxes (note 4) 6,366 17,175 27,507 ------------ ------------ ------------ Net earnings $ 36,075 31,909 46,837 ============ ============ ============ Basic earnings per share $ 1.02 0.90 1.32 ============ ============ ============ Diluted earnings per share $ 1.02 0.89 1.28 ============ ============ ============
2002
2001
2000
Operating revenues
$
2,247,886
2,100,305
2,160,447
Operating expenses:
Salaries, wages and employee benefits (note 5)
818,318
790,210
769,393
Rents and purchased transportation
698,455
604,542
694,756
Fuel and fuel taxes
210,632
226,102
242,835
Depreciation and amortization
145,848
142,755
134,391
Operating supplies and expenses
130,853
145,850
130,947
Insurance and claims
56,132
42,381
38,982
Operating taxes and licenses
32,797
32,616
32,641
General and administrative expenses, net of gains
30,029
19,282
28,563
Communication and utilities
23,859
24,358
24,528
Total operating expenses
2,146,923
2,028,096
2,097,036
Operating income
100,963
72,209
63,411
Interest expense
(24,763
)
(27,044
)
(25,747
)
Equity in earnings (loss) of associated companies
(1,353
)
(2,083
)
4,777
Earnings before income taxes
74,847
43,082
42,441
Income taxes (note 4)
23,031
10,137
6,366
Net earnings
$
51,816
32,945
36,075
Basic earnings per share
$
1.36
0.93
1.02
Diluted earnings per share
$
1.33
0.91
1.02
See accompanying notes to consolidated financial statements.
2025
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of
Stockholders'Stockholders’ Equity and Comprehensive IncomeYears ended December 31,
2000, 19992002, 2001 and1998 (Dollars2000(Dollars in thousands, except per share amounts)
Common Paid-in Stock Capital ----------- -----------Balances at December 31, 1997 390 105,682 Tax benefit of stock options exercised -- 925 Sale of treasury stock to employees -- 382 Forfeiture of restricted stock -- (4) Repurchase of treasury stock -- -- Cash dividends paid ($.20 per share) -- -- Comprehensive income - net earnings -- -- ----------- ----------- Balances at December 31, 1998 390 106,985 Sale of subsidiary stock -- 200 Tax benefit of stock options exercised -- 55 Sale of treasury stock to employees -- (65) Forfeiture of restricted stock to employees -- (3) Cash dividends paid ($.20 per share) -- -- Comprehensive income: Net earnings -- -- Foreign currency translation adjustments -- -- ----------- ----------- Total comprehensive income -- -- =========== =========== Balances at December 31, 1999 390 107,172 Remeasurement of stock options -- 110 Tax benefit of stock options exercised -- 31 Sale of treasury stock to employees -- (223) Repurchase of treasury stock -- -- Cash dividends paid ($0.05 per share) -- -- Comprehensive income: Net earnings -- -- Foreign currency translation adjustments -- -- ----------- ----------- Total comprehensive income -- -- ----------- ----------- Balances at December 31, 2000 390 107,090 =========== =========== 21Accumulated Total Other Stockholders' Comprehensive Retained Comprehensive Treasury Equity Income Earnings Loss Stock (Notes 2 and 3) - ------------ ----------- ------------- ----------- ---------------286,409 (5,621) (48,896) 337,964 -- -- -- 925 -- -- 2,486 2,868 -- -- (18) (22) -- -- (5,814) (5,814) (7,101) -- -- (7,101) $ 46,837 46,837 -- -- 46,837 ============ ----------- ----------- ----------- ----------- 326,145 (5,621) (52,242) 375,657 -- -- -- 200 -- -- -- 55 -- -- 477 412 -- -- (15) (18) (7,126) -- -- (7,126) 31,909 31,909 -- -- 31,909 297 -- 297 -- 297 - ------------ ----------- ----------- ----------- ----------- $ 32,206 -- -- -- -- ============ =========== =========== =========== =========== 350,928 (5,324) (51,780) 401,386 -- -- -- -- 110 -- -- -- -- 31 -- -- -- 1,160 937 -- -- -- (7,576) (7,576) -- (1,782) -- -- (1,782) 36,075 36,075 -- -- 36,075 (1,178) -- (1,178) -- (1,178) - ------------ ----------- ----------- ----------- ----------- $ 34,897 -- -- -- -- ============ ----------- ----------- ----------- ----------- 385,221 (6,502) (58,196) 428,003 =========== =========== =========== ===========
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Other
Comprehensive
Loss
Treasury
Stock
Stockholders’
Equity
(Notes 2 and 3)
Balances at December 31, 1999
$
390
107,172
340,749
(5,324
)
(51,780
)
391,207
Comprehensive income:
Net earnings
—
—
36,075
—
—
36,075
Foreign currency translation adjustments
—
—
—
(1,178
)
—
(1,178
)
Total comprehensive income
—
—
—
—
—
34,897
Remeasurement of stock options
—
110
—
—
—
110
Tax benefit of stock options exercised
—
31
—
—
—
31
Sale of treasury stock to employees
—
(223
)
—
—
1,160
937
Repurchase of treasury stock
—
—
—
—
(7,576
)
(7,576
)
Cash dividends paid ($0.05 per share)
—
—
(1,782
)
—
—
(1,782
)
Balances at December 31, 2000
$
390
107,090
375,042
(6,502
)
(58,196
)
417,824
Comprehensive income:
Net earnings
—
—
32,945
—
—
32,945
Foreign currency translation adjustments
—
—
—
(535
)
—
(535
)
Total comprehensive income
—
—
—
—
—
32,410
Tax benefit of stock options exercised
—
5,361
—
—
—
5,361
Sale of treasury stock to employees
—
2,868
—
—
(146
)
2,722
Balances at December 31, 2001
$
390
115,319
407,987
(7,037
)
(58,342
)
458,317
Comprehensive income:
Net earnings
—
—
51,816
—
—
51,816
Foreign currency translation adjustments
—
—
—
7,037
—
7,037
Total comprehensive income
—
—
—
—
—
58,853
Common stock issued
28
68,066
—
—
—
68,094
Tax benefit of stock options exercised
—
5,822
—
—
—
5,822
Stock option exercises, net of stock repurchased for payroll taxes
—
(4,524
)
—
—
3,925
(599
)
Balances at December 31, 2002
$
418
184,683
459,803
—
(54,417
)
590,487
See accompanying notes to consolidated financial statements.
2226
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31,
2000, 19992002, 2001 and1998 (Dollars2000(Dollars in thousands)
2000 1999 1998 ------------ ----------- -----------Cash flows from operating activities: Net earnings $ 36,075 31,909 46,837 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 134,391 148,968 140,355 (Gain) loss on sale of revenue equipment 267 849 (4,051) Provision for deferred income taxes 5,843 16,146 25,722 Equity in earnings of associated companies (4,777) (3,141) (1,506) Tax benefit of stock options exercised 31 55 925 Remeasurement of options 110 -- -- Forfeiture of restricted stock -- (18) (22) Amortization of discount, net 55 594 (144) Changes in operating assets and liabilities: Trade accounts receivable 12,776 (54,206) (15,169) Other assets (58,057) (26,624) (5,686) Trade accounts payable (21,424) 32,042 9,458 Claims accruals 10,078 (5,141) (24,177) Accrued payroll and other accrued expenses 9,705 (5,760) 8,820 ------------ ----------- ----------- Net cash provided by operating activities 125,073 135,673 181,362 ------------ ----------- ----------- Cash flows from investing activities: Additions to property and equipment (225,672) (224,795) (306,128) Investment in associated company (5,000) -- -- Proceeds from sale of equipment 126,350 214,493 41,231 Decrease (increase) in other assets 4,404 (9,128) 5,858 ------------ ----------- ----------- Net cash used in investing activities (99,918) (19,430) (259,039) ------------ ----------- -----------23J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Years ended December 31, 2000, 1999 and 1998 (Dollars in thousands)
2000 1999 1998 ------------ ----------- -----------Cash flows from financing activities: Net borrowings (repayments) of commercial paper borrowings $ 39,400 (96,350) (1,150) Proceeds from long-term debt -- -- 99,400 Repayments of long-term debt (60,000) (10,000) (5,000) Principal payments under capital lease obligations (3,370) -- -- Proceeds from sale of subsidiary stock -- 200 -- Proceeds from sale of treasury stock 937 412 2,868 Repurchase of treasury stock (7,576) -- (5,814) Dividends paid (1,782) (7,126) (7,101) ------------ ----------- ----------- Net cash provided by (used in) financing activities (32,391) (112,864) 83,203 ------------ ----------- ----------- Net increase (decrease) in cash and cash equivalents (7,236) 3,379 5,526 Cash and cash equivalents at beginning of year 12,606 9,227 3,701 ------------ ----------- ----------- Cash and cash equivalents at end of year $ 5,370 12,606 9,227 ============ =========== =========== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 26,138 28,944 26,387 ============ =========== =========== Income taxes $ 3,654 95 11 ============ =========== =========== Non-cash activities: Capital lease obligations for revenue equipment $ 97,553 -- -- ============ =========== =========== Assets contributed to associated company $ 2,927 -- -- ============ =========== ===========
2002
2001
2000
Cash flows from operating activities:
Net earnings
$
51,816
32,945
36,075
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
145,848
142,755
134,391
(Gain) loss on sale of revenue equipment
1,798
(4,833
)
267
Provision for deferred income taxes
12,275
251
5,843
Equity in (earnings) loss of associated companies
1,353
2,083
(4,777
)
Tax benefit of stock options exercised
5,822
5,361
31
Remeasurement of options
—
—
110
Amortization of discount
125
256
55
Changes in operating assets and liabilities:
Trade accounts receivable
(3,910
)
(7,449
)
12,776
Other assets
(3,667
)
3,353
(58,057
)
Trade accounts payable
(45,360
)
4,706
(21,424
)
Claims accruals
(6,575
)
(11,256
)
10,078
Accrued payroll and other accrued expenses
14,838
3,427
9,705
Net cash provided by operating activities
174,363
171,599
125,073
Cash flows from investing activities:
Additions to property and equipment
(239,341
)
(138,466
)
(225,672
)
Proceeds from sale of equipment
80,005
110,711
126,350
Decrease (increase) in other assets
(2,096
)
3,512
(596
)
Net cash used in investing activities
(161,432
)
(24,243
)
(99,918
)
Cash flows from financing activities:
Net borrowings (repayments) of commercial paper borrowings
$
—
(74,400
)
39,400
Repayments of long-term debt
(21,250
)
(10,000
)
(60,000
)
Principal payments under capital lease obligations
(27,793
)
(21,803
)
(3,370
)
Proceeds from sale of common stock
68,094
—
—
Stock option exercise
3,313
2,722
937
Stock repurchased for payroll taxes
(3,912
)
—
—
Repurchase of treasury stock
—
—
(7,576
)
Dividends paid
—
—
(1,782
)
Net cash provided by (used in) financing activities
18,452
(103,481
)
(32,391
)
Net increase (decrease) in cash and cash equivalents
31,383
43,875
(7,236
)
Cash and cash equivalents at beginning of year
49,245
5,370
12,606
Cash and cash equivalents at end of year
$
80,628
49,245
5,370
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
$
25,063
27,248
26,138
Income taxes
$
22,953
779
3,654
Non-cash activities:
Capital lease obligations for revenue equipment
$
—
96,703
97,553
Assets contributed to associated company
$
—
—
2,927
Sale of joint venture
Non-monetary proceeds
$
1,161
—
—
Note receivable
$
5,876
—
—
See accompanying notes to consolidated financial statements.
2427
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31,
2000, 19992002, 2001 and19982000(1)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESSummary of Significant Accounting Policies(a) Description of Business
J. B. Hunt Transport Services, Inc. (JBHT), together with
itsour wholly-owned subsidiaries,("Company"),is a diversified transportation services company operating under the jurisdiction of the U.S. Department of Transportation and various state regulatory agencies.The Company has four distinct operating segments: Truck; Intermodal; Logistics;(b) Principles of Consolidation and
Dedicated Contract Services. See note 10. (b) PRINCIPLES OF CONSOLIDATION TheCritical Accounting PoliciesJBHT’s consolidated financial statements include
theour financial statementsof the Companyanditsour wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.Our discussion and analysis of financial condition and operations are based on our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and contained within this report. Certain amounts included in or affecting our financial statements and related disclosure must be estimated, requiring us to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Therefore, the reported amount of our assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates.
However, we believe that certain accounting policies are of more significance in our financial statement preparation process than others including determining the economic useful lives of our assets, provisions for uncollectible accounts receivable, exposures under our self-insurance plans and various other recorded or disclosed amounts. To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected.
(c)
CASH AND CASH EQUIVALENTSCash and Cash EquivalentsFor purposes of the statements of cash flows,
the Company considerswe consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.(d)
TIRES IN SERVICE The Company capitalizesTires in ServiceWe capitalize tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service.
(e)
PROPERTY AND EQUIPMENTProperty and EquipmentDepreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of
53 to1015 years for revenue and service equipment, 10 to 40 years for structures and improvements, and 3 to 10 years for furniture and office equipment.Property and equipment under capital leases are stated at the present value of minimum lease
payments;payments and amortized over the straight-line method over the shorter of the lease term or estimated useful life of the asset.28
(f)
REVENUE RECOGNITION The Company recognizesRevenue RecognitionWe recognize revenue based on relative transit time in each reporting period with expenses recognized as incurred.
25 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998(g)
INCOME TAXESIncome TaxesIncome taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(h)
EARNINGS PER SHAREEarnings Per ShareA reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31, ------------------------------------------------------- 2000 1999 1998 --------------- --------------- ----------------Basic earnings per share: Numerator (net earnings) $ 36,075 31,909 46,837 =============== =============== ================ Denominator (weighted average shares outstanding) 35,313 35,628 35,582 =============== =============== ================ Earnings per share $ 1.02 .90 1.32 =============== =============== ================ Diluted earnings per share: Numerator (net earnings) $ 36,075 31,909 46,837 =============== =============== ================ Denominator: Weighted average shares outstanding 35,313 35,628 35,582 Effect of common stock options 104 174 1,019 --------------- --------------- ---------------- 35,417 35,802 36,601 =============== =============== ================ Earnings per share $ 1.02 .89 1.28 =============== =============== ================26 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
Years ended December 31
2002
2001
2000
Basic earnings per share:
Numerator (net earnings)
$
51,816
32,945
36,075
Denominator (weighted average shares outstanding)
37,984
35,602
35,313
Earnings per share
$
1.36
0.93
1.02
Diluted earnings per share:
Numerator (net earnings)
$
51,816
32,945
36,075
Denominator:
Weighted average shares outstanding
37,984
35,602
35,313
Effect of common stock options
1,058
597
104
39,042
36,199
35,417
Earnings per share
$
1.33
0.91
1.02
Options to purchase shares of common stock that were outstanding during each year but were not included in the computation of diluted earnings per share because the
options'options’ exercise price was greater than the average market price of the common shares are shown in the table below.
2000 1999 1998 ------------------- ------------------- -------------------Number of shares under option 5,394,000 4,318,000 162,000 Range of exercise prices $ 14.00 - 37.50 $ 17.38 - 37.50 $ 26.00 - 37.50
2002
2001
2000
Number of shares under option
250,000
410,900
5,394,000
Range of exercise prices
$
28.32 - 37.50
$
18.38 - 37.50
$
14.00 - 37.50
(i)
CREDIT RISKCredit RiskFinancial instruments, which potentially subject
the Companyus to concentrations of credit risk, consist primarily of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due tothe Company'sour large number of customers and the diverse range of industries which they represent. As of December 31,20002002 and1999, the Company2001, we had no significant concentrations of credit risk.29
(j)
FOREIGN CURRENCY TRANSLATIONForeign Currency TranslationLocal currencies are generally considered the functional currencies outside the United States. Assets and liabilities are translated at year-end exchange rates for operations in local currency environments. Income and expense items are translated at average rates of exchange prevailing during the year.
Foreign currency translation adjustments, which reflect foreign currency exchange rate changes applicable to the net assets of the Mexican operations have been recorded as a separate item of accumulated other comprehensive loss in
stockholders'stockholders’ equityfor the years endedas of December 31,1999 and 2000. For the year ended December 31, 1998, Mexico2001. This investment wasconsidered a highly inflationary economy as defined by Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign Currency Translation. Accordingly, the more stable currency of the reporting parent (the Company) was used, and the effect of exchange rates resulting in translation adjustmentssold during 2002.(k) Stock Based Compensation
We have
been recorded as a component of net earnings for the year ended December 31, 1998. As of January 1, 1999, Mexico is no longer considered a highly inflationary economy. (k) STOCK BASED COMPENSATION The Company hasadopted thedisclosure requirementsintrinsic value based method ofSFAS No. 123, Accounting for Stock-Based Compensation and, as permitted under SFAS No. 123, appliesAccounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees and related interpretations in accounting for compensation costs foritsour stock option plans. Accordingly, compensation expense is recognized on the date of grant only if the current market price of the underlying common stock at date of grant exceeds the exercise price.27 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NotesHad we determined compensation cost based on the fair value at the grant date for our stock options under Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), our net earnings would have been reduced to
Consolidated Financial Statementsthe pro forma amounts indicated below.
2002
2001
2000
Net earnings (in thousands)
$
51,816
32,945
36,075
As reported
Total stock-based employee compensation expense determined under fair value based methods for all awards, net of taxes
5,008
3,083
5,352
Pro forma
$
46,808
29,862
30,723
Basic earnings per share
As reported
$
1.36
0.93
1.02
Pro forma
$
1.23
0.84
0.87
Diluted earnings per share
As reported
$
1.33
0.91
1.02
Pro forma
$
1.20
0.82
0.87
Pro forma net earnings reflects only options granted since December 31,
2000, 19991995. Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting periods of 5 to 10 years and1998compensation cost for options granted prior to January 1, 1996 is not considered.(l)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The CompanyImpairment of Long-Lived Assets and Long-Lived Assets to be Disposed OfWe continually
evaluatesevaluate the carrying value ofitsour assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.(m)
USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (n) COMPREHENSIVE INCOMEComprehensive IncomeComprehensive income consists of net earnings and foreign currency translation adjustments and is presented in the consolidated statements of
stockholders'stockholders’ equity.(n) Claims Accruals
Claims payable represent accruals for the self-insured portion of pending accident liability, workers’ compensation, physical damage and cargo damage. These accruals are estimated based on our evaluation of the nature and severity of individual claims and an estimate of future claims development based on our past claims experience.
Our current insurance coverage specifies that the self-insured limit on the majority of our claims is $1.5 million, which is prefunded with our insurance carrier. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment.
(o)
RECLASSIFICATIONS To conformRecently Issued Accounting StandardsIn June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We also record a corresponding asset which is depreciated over the life of the asset. Subsequent to the
2000 presentation, certain accounts for 1999initial measurement of the asset retirement obligation, the obligation will be adjusted at the30
end of each period to reflect the passage of time and
1998changes in the estimated future cash flows underlying the obligation. We were required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS 143 will not havebeen reclassified. The reclassifications had noa material effect onnet earningsour financial statements.In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and
stockholders' equity previously reported.Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on our financial statements. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002 and are included in the notes to our consolidated financial statements.In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.
(2)
LONG-TERM DEBTLong-Term DebtLong-term debt consists of (in thousands):
2000 1999 ------------- -----------Commercial paper $ 74,400 35,000 Senior notes payable, due 11/17/00, interest at 6.25% payable semiannually - 25,000 Senior notes payable, due 12/12/00, interest at 6.00% payable semiannually - 25,000 Senior notes payable, due 9/1/03, interest at 6.25% payable semiannually 98,260 98,260 Senior notes payable, due 9/15/04, interest at 7.00% payable semiannually 95,000 95,000 Senior subordinated notes, interest at 7.80% payable semiannually 40,000 50,000 ------------- ----------- 307,660 328,260 28 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 Less current maturities (84,400) (60,000) Unamortized discount (566) (621) ------------- ----------- $ 222,694 267,639 ============= ===========Under its commercial paper note program, the Company is
2002
2001
Senior notes payable, due September 1, 2003, interest at 6.25% payable semianually
$
87,010
98,260
Senior notes payable, due September 15, 2004, interest at 7.00% payable semiannually
95,000
95,000
Senior subordinated notes, due October 30, 2004, interest at 7.80% payable semiannually
20,000
30,000
202,010
223,260
Less current maturities
(97,010
)
(10,000
)
Unamortized discount
(185
)
(310
)
$
104,815
212,950
We are authorized to issue up to $150 million
in notes.under our current revolving lines of credit. Thesenoteslines of credit are supported by credit agreements,which aggregate $150 million,with a group of banks, whichexpires Decemberexpire November 14,2001. The effective rate on the commercial note program was 7.28% and 5.32% as2005. No balances were outstanding under these lines of credit at December 31,2000 and 1999, respectively.2002. The 7.80% senior subordinated notes are payable in five equal annual installmentsbeginningof $10 million, which commenced October 30, 2000.Under the terms of the credit agreements, the Company had additional unused borrowing capacity of approximately $75.6 million at December 31, 2000.Under the terms of the credit agreements and the note agreements,
the Company iswe are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios.The Company wasWe were in compliance with all of the financial covenants at December 31,2000.2002.31
Current maturities of long-term debt at December 31,
20002002 consist ofcommercial paper due in 2001the 6.25% senior notes and thesecondfourth installment of the 7.80% senior subordinated notes. The aggregate annual maturities of long-term debt for each of thefourtwo years ending December 31 areas follows (in thousands): 2001, $84,400;$97.0 million in 2003 and $105.0 million in 2004. There is no long-term debt due in 2005.(3) Capital Stock
In late May and June of 2002,
$10,000; 2003, $108,260;we closed an offering of approximately 5.9 million shares of common stock. Approximately 2.8 million shares were issued and2004, $105,000. (3) CAPITAL STOCKsold by JBHT and 3.1 million shares were sold by a shareholder. TheCompany maintainsselling price of the stock was $26 per share before underwriter discounts and other expenses.We maintain a Management Incentive Plan
("Plan"(“Plan”) that provides various vehicles to compensate our key employees withCompanyJBHT common stock or common stock equivalents. Under the original Plan,the Company waswe were authorized to award, in aggregate, not more than 5,000,000 shares. During 1998 and again in 2000, the stockholders ofthe CompanyJBHT amended the Plan wherebythe Company iswe are now authorized to award, in aggregate, not more than 8,500,000 shares. At December 31,20002002, there were approximately1,935,0001,076,000 shares available for grant under the Plan.The Company hasWe have utilized three such vehicles to award stock or grant options to purchasethe Company'sJBHT common stock: restricted stock awards, restricted options and nonstatutory stock options.RestrictedAs of December 31, 2002, there are no restricted stock awardsare granted to key employees subject to restrictions regarding transferability and assignment. Shares of Company common stock areor restricted options issuedto the key employees and held by the Company until each employee becomes vested in the award. Vesting of the awards generally occurs over a four-year period of time from the award date. Termination of the employee for any reason other than death, disabilityorcertain cases of retirement causes the unvested portion of the award to be forfeited. 29 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998outstanding.The Plan provides that nonstatutory stock options may be granted to key employees for the purchase of
CompanyJBHT common stock for 100% of the fair market value of the common stock at the grant date. The options generally vest over a ten-year period and are forfeited if the employee terminates for any reason. TheCompanyplan allows the employee to surrender shares of common stock which the employee already owns in full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option. We amended certain vested options related to employees ofitsour logistics segment, extending the exercise period after termination. This resulted in a remeasurement of these options and accordingly $110,000 was charged to compensation expense in 2000.Compensation expense (benefit) under the Plan for restricted stock awards is charged to earnings over the vesting period and amounted to approximately $0, ($5,400), and $20,000 for the years ended December 31, 2000, 1999 and 1998, respectively.A summary of the restricted and nonstatutory options to purchase
CompanyJBHT common stock follows:
WEIGHTED AVERAGE NUMBER NUMBER EXERCISE PRICE OF SHARES OF SHARES PER SHARE EXERCISABLE -------------- ------------------ ----------------Outstanding at December 31, 1997 3,039,925 $ 16.70 274,225 Granted 602,000 18.12 Exercised (176,760) 16.66 Terminated (115,275) 16.81 -------------- Outstanding at December 31, 1998 3,349,890 16.98 323,390 Granted 471,000 14.03 Exercised (26,375) 12.90 Terminated (56,950) 16.09 -------------- Outstanding at December 31, 1999 3,737,565 16.65 551,940 Granted 908,250 12.75 Exercised (98,100) 13.06 Terminated (237,950) 16.15 -------------- Outstanding at December 31, 2000 4,309,765 15.94 831,812 ============== ================== ================
Number
of Shares
Weighted Average
Exercise
Per Share
Number
of Shares
Exercisable
Outstanding at December 31, 1999
3,737,565
$
16.65
551,940
Granted
908,250
12.75
Exercised
(98,100
)
13.06
Terminated
(237,950
)
16.15
Outstanding at December 31, 2000
4,309,765
15.94
831,812
Granted
881,000
14.43
Exercised
(600,051
)
14.78
Terminated
(553,570
)
17.48
Outstanding at December 31, 2001
4,037,144
15.57
488,620
Granted
992,900
25.41
Exercised
(431,794
)
14.51
Terminated
(147,300
)
15.27
Outstanding at December 31, 2002
4,450,950
$
17.88
494,413
32
During 1995,
theour Board of Directors established a nonqualified stock option plan to provide performance based compensation to the Chairman of theBoard.Board (Chairman’s Plan). Theplan allowsChairman’s Plan allowed the Chairman the option to purchase up to 2.5 million shares ofthe Company'sJBHT common stock at a price of $17.63 per share. These options vested after five years. The Chairman's Plan allows the Chairman to surrender shares of common stock which he already owns in full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option. Under the originalplanChairman’s Plan the optionsmustwere to be exercised within one year of vesting and all unexercised optionswill terminate.would have terminated. During 2000,theour stockholdersof the Companyamended theplanChairman’s Plan whereby the exercise period was extendedto be withintwo years from date of vesting.30 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial StatementsOne million options were exercised during the year ended December 31,2000, 19992002 and1998 Had1.5 million options were exercised in 2001. There were no options outstanding for theCompany determined compensation cost based on the fair valueChairman’s Plan atthe grant date for its stock options under SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below.
2000 1999 1998 ------------ ------------ ------------Net earnings (in thousands) As reported $ 36,075 31,909 46,837 Pro forma 30,723 27,391 42,881 Basic earnings per share As reported 1.02 .90 1.32 Pro forma .87 .77 1.21 Diluted earnings per share As reported 1.02 .89 1.28 Pro forma .87 .76 1.17Pro forma net earnings reflects only options granted sinceDecember 31,1995. Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options' vesting periods of 5 to 10 years and compensation cost for options granted prior to January 1, 1996 is not considered.2002.The per share weighted-average fair value of stock options granted during 2002, 2001 and 2000
1999was $14.53, $10.82 and1998 was$9.07,$4.13 and $13.23,respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 2002 - expected dividend yield 0.0%, volatility of 54.9%, risk-free interest rate of 3.2%, and an expected life of 6.7 years; 2001 - expected dividend yield 0.0%, volatility of 59.9%, risk-free interest rate of 4.7%, and an expected life of 6.2 years; 2000 - expected dividend yield 0.0%, volatility of 52.4%, risk-free interest rate of 5.2%, and an expected life of 6.6years; 1999 - expected dividend yield 1.2%, volatility of 51.6%, risk-free interest rate of 6.5%, and an expected life of 7.3 years; 1998 - expected dividend yield .9%, volatility of 65.5%, risk-free interest rate of 4.7%, and an expected life of 7.7years.33
The following table summarizes information about stock options outstanding at December 31,
2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- ------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE REMAINING EXERCISE EXERCISE OF EXERCISE OPTIONS CONTRACTUAL PRICE OPTIONS PRICE PRICES OUTSTANDING LIFE (IN YEARS) PER SHARE EXERCISABLE PER SHARE ---------------- -------------- --------------- ------------- -------------- -------------$ 10.63 - 11.37 114,750 7.7 $ 10.67 250 $ 10.88 11.58 - 15.00 1,830,800 6.9 13.13 404,060 13.43 15.01 - 18.75 4,309,040 2.6 17.36 209,340 16.46 18.76 - 22.50 368,000 5.6 20.13 143,225 19.94 22.51 - 26.25 99,675 5.3 23.64 53,525 23.21 26.26 - 30.00 117,000 8.4 28.76 19,400 28.63 30.01 - 37.50 10,000 8.5 37.50 2,000 37.50 ---------------- -------------- --------------- ------------- -------------- ------------- $ 10.63 - 37.50 6,809,265 4.1 $ 16.56 831,800 $ 16.35 ================ ============== =============== ============= ============== =============31 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 19982002:
Options outstanding
Options exercisable
Range of exercise prices
Options
outstanding
Weighted
average
remaining
contractual
life (in years)
Weighted
average
exercise
price
per share
Options
exercisable
Weighted
average
exercise
price
per share
$
10.01-20.00
3,233,387
5.7
$
15.14
402,800
$
14.71
20.01-30.00
1,207,563
9.2
25.06
87,613
23.15
30.01-40.00
10,000
6.5
37.50
4,000
37.50
$
10.01-40.00
4,450,950
6.7
$
17.88
494,413
$
16.39
(4)
INCOME TAXESIncome TaxesTotal income tax (benefit) expense for the years ended December 31,
2000, 19992002, 2001 and19982000 was allocated as follows (in thousands):
2000 1999 1998 ------------ ----------- ------------Earnings before income taxes $ 6,366 17,175 27,507 Stockholders' equity, for tax benefit of stock options exercised 31 55 925 ------------ ----------- ------------ $ 6,335 17,120 26,582 ============ =========== ============
2002
2001
2000
Earnings before income taxes
$
23,031
10,137
6,366
Stockholders’ equity, for tax benefit of stock options exercised
5,823
5,361
31
$
17,208
4,776
6,335
Refundable income taxes at December 31,
20002002 were $8,538,000 and1999payable income taxes at December 31, 2001 were$3,133,000 and $3,000,000, respectively.$3,659,000. These amounts have been included in other current assets and liabilities on the balancesheet.sheet, respectively.Income tax expense (benefit) attributable to earnings before income taxes consists of (in thousands):
2000 1999 1998 ---------- ---------- ----------Current expense: Federal $ 66 662 1,410 State and local 457 367 375 ---------- ---------- ---------- 523 1,029 1,785 ---------- ---------- ---------- Deferred expense (benefit): Federal 8,032 18,233 21,354 State and local (2,189) (2,087) 4,368 ---------- ---------- ---------- 5,843 16,146 25,722 ---------- ---------- ---------- Total tax expense $ 6,366 17,175 27,507 ========== ========== ==========
2002
2001
2000
Current expense:
Federal
$
10,413
9,661
66
State and local
343
225
457
10,756
9,886
523
Deferred expense (benefit):
Federal
3,892
208
8,032
State and local
8,383
43
(2,189
)
12,275
251
5,843
Total tax expense
$
23,031
10,137
6,366
34
Income tax expense attributable to earnings before income taxes differed from the amounts computed using the statutory federal tax rate of 35% for the following reasons (in thousands):
2000 1999 1998 ----------- ---------- ----------Income tax - statutory rate $ 14,854 17,179 26,020 State tax, net of Federal effect (1,125) (869) 3,050 Sale/leaseback benefit (7,863) (741) - Other, net 500 1,606 (1,563) ----------- ---------- ---------- Total tax expense $ 6,366 17,175 27,507 =========== ========== ==========32 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
2002
2001
2000
Income tax - statutory rate
$
26,196
15,078
14,854
State tax, net of Federal effect
1,295
(174
)
(1,125
)
Sale/leaseback benefit
(8,021
)
(8,021
)
(7,863
)
Mexican joint-venture redemption
—
2,331
—
Change in effective state tax rate, net of federal effect
4,514
—
—
Other, net
(953
)
923
500
Total tax expense
$
23,031
10,137
6,366
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31,
20002002 and19992001 are presented below (in thousands):
2000 1999 --------------- ---------------Deferred tax assets: Claims accruals, principally due to accrual for financial reporting purposes $ 7,232 7,261 Tax credit carryforwards 9,105 7,321 Net operating loss carryforwards 37,830 43,395 Accounts receivable, principally due to allowance for doubtful accounts 3,227 3,999 Other 5,101 4,176 --------------- -------------- Total gross deferred tax assets 62,495 66,152 --------------- -------------- Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and capitalized interest 182,712 181,298 Prepaid permits and insurance, principally due to expensing for income tax purposes 20,222 12,809 Sale and leaseback transaction 36,144 44,007 Other 9,701 8,479 --------------- -------------- Total gross deferred tax liabilities 248,779 246,593 --------------- -------------- Net deferred tax liability $ 186,284 180,441 =============== ==============The Company believes its
2002
2001
Deferred tax assets:
Claims accruals, principally due to accrual for financial reporting purposes
$
3,362
12,419
Tax credit carryforwards
17,037
12,181
Net operating loss carryforwards
9,382
—
Accounts receivable, principally due to allowance for doubtful accounts
1,812
1,635
Other
5,560
1,266
Total gross deferred tax assets
$
37,153
27,501
2002
2001
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation and capitalized interest
$
169,515
162,406
Prepaid permits and insurance, principally due to expensing for income tax purposes
16,514
7,877
Sale and leaseback transaction
20,102
28,123
Mexican joint-venture
—
3,396
Other
23,712
6,114
Total gross deferred tax liabilities
229,843
207,916
Net deferred tax liability
$
192,690
180,415
35
We believe our history of profitability and taxable income, the reversal of deferred tax liabilities, and
itsour utilization of tax planning sufficiently supports the carrying amount of the deferred tax assets. Accordingly,the Company haswe have not recorded a valuation allowance as all deferred tax benefits are more likely than not to be realized.At December 31,
2000, the Company had available net operating loss ("NOL") carryforwards of approximately $104,915,000 expiring from the year 2007 to 2017. Additionally, the Company2002, we had general business tax credit carryforwards of approximately$4,405,000$4,174,000 expiring from the year 2007 to 2009, and alternative minimum tax credit carryforwards with no expiration of approximately$4,700,000. 33 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes$12,863,000.In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million. These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to
Consolidated Financial Statements December 31, 2000, 1999examine. We have voluntarily disclosed these transactions to the IRS and1998in October 2002, the IRS began their examination of the specific facts of these transactions. If the IRS challenges these transactions, we intend to vigorously defend them. However, if the IRS successfully challenges these transactions, and disallows some or all of the tax benefits that have been realized, these actions could have a material adverse effect on our financial condition and operating results.(5)
EMPLOYEE BENEFIT PLANS The Company maintainsEmployee Benefit PlansWe maintain a defined contribution employee retirement plan, which includes a 401(k) option, under which all employees are eligible to participate.
The Company matchesWe match a specified percentage of employee contributions, subject to certain limitations. For the years ended December 31, 2002, 2001 and 2000,1999 and 1998, total CompanyJBHT matching contributions to the planincluding matching 401(k) contributions,were $6,813,000, $7,555,000 and $6,553,000,$7,348,000respectively.(6) Fair Value of Significant Financial Instruments
(a) Cash and
$6,533,000, respectively. (6) FAIR VALUE OF SIGNIFICANT FINANCIAL INSTRUMENTS (a) CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, AND TRADE ACCOUNTS PAYABLECash Equivalents, Accounts Receivable, and Trade Accounts PayableThe carrying amount approximates fair value because of the short maturity of these instruments.
(b)
LONG-TERM DEBT The carrying amount of the commercial paper debt approximates the fair value because of the short maturity of the commercial paper instruments.Long-Term DebtThe fair value of the fixed rate debt is presented as the present value of future cash flows discounted using
the Company'sour current borrowing rate for notes of comparable maturity. The calculation arrives at a theoretical amountthe Companywe would pay a creditworthy third party to assumeitsour fixed rate obligations and not the termination value of these obligations. Consistent with market practices, such termination values may include various prepayment and termination fees thatthe Companywe would contractually be required to pay ifitwe retired the debt early.The estimated fair values of
the Company'sour financial instruments are summarized as follows (in thousands):
AT DECEMBER 31, 2000 AT DECEMBER 31, 1999 --------------------------------- ----------------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE --------------- -------------- ------------- ------------Cash and cash equivalents $ 5,370 5,377 12,606 12,606 Accounts receivable 225,797 225,797 238,573 238,573 Trade accounts payable 150,585 150,585 180,009 180,009 Long-term debt: Commercial paper 74,400 74,400 35,000 35,000 Fixed rate obligations 233,260 234,352 293,260 287,754 =============== ============== ============= ============34 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998
At December 31, 2002
At December 31, 2001
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Cash and cash equivalents
$
80,628
80,628
49,245
49,245
Trade accounts receivable
237,156
237,156
233,246
233,246
Trade accounts payable
117,931
117,931
163,291
163,291
Long-term debt:
Fixed rate obligations
202,010
213,397
223,260
228,331
36
(7)
RELATED PARTY TRANSACTIONS The Company advancesRelated Party TransactionsWe advanced premiums on life insurance policies on the lives of
the Company'sour principal stockholder and his wife. In 2002, we ceased advancing premiums on these policies. All premiums paid bythe Company,JBHT, along with accrued interest thereon, are reimbursable from a trust which is the owner and beneficiary of the policy.The Company hasWe have a guarantee from the stockholder for the amount of premiums paid bythe CompanyJBHT together with interest at the rate of 5% per annumuntilthrough June of 2000. In July of 2000theour Board of Directors approved an adjustment to the interest rate to betheour average borrowing rateof the Company forwhen additional advances were made. The interest rate changed to 7.42% in August 2001 and to 7.39% in July2000 which was 7.15%.2002. The amounts reimbursable tothe CompanyJBHT amount to approximately$8,002,000$10,153,000 and$7,044,000$9,049,000 at December 31,20002002 and1999,2001, respectively, and are included in other assets intheour accompanying consolidated balance sheets. See also note 9 for disclosure of transactions with an associated company.(8)
COMMITMENTS AND CONTINGENCIESCommitments and ContingenciesDuring 1999,
the Companywe entered into a sale and leaseback transaction for a portion ofitsour container fleet. Containers having a net book value of approximately $175,000,000 were sold to third party leasing companies at approximate net book value. A gain on the transaction has been deferred and will be amortized to income in relation to rent expense recognized under the leases. The containers are being leased back under operating leases over terms of four to ten years.The CompanyWe alsoleaseslease terminal facilities, shuttle yards and computer equipment under operating leases having various terms. Under the terms of certain lease agreements,the Company iswe are required to maintain certain covenants including minimum credit ratings.The Company wasWe were in compliance withthis requirementthese requirements at December 31,2000.2002.During 2000,
the Companywe entered into various capital lease agreements to lease revenue equipment. These capital leases are secured by revenue equipment with a net book value at December 31,20002002 of approximately$94,000,000$139,000,000 and contain certain guarantees of residual value at the end of the lease terms with fixed price purchase options.35 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31,
2000 are:2002 are (in thousands):
CAPITAL OPERATING LEASES LEASES ------------ ------------2001 $ 20,239 65,142 2002 20,239 38,414 2003 58,761 22,336 2004 8,310 18,366 2005 - 17,228 Thereafter - 17,949 ------------ ------------ Total minimum lease payments 107,549 179,435 ============ Less amount representing interest (at rates ranging from 8.0% to 8.5%) 13,366 ------------ Present value of net minimum capital lease payments 94,183 Less current installments of obligations under capital leases 16,489 ------------ Obligations under capital leases excluding current installments $ 77,694 ============
Capital
Leases
Operating
Leases
2003
$
34,481
74,233
2004
115,405
56,414
2005
—
53,813
2006
—
44,053
2007
—
36,716
Thereafter
—
18,387
Total minimum lease payments
149,886
283,616
Less amount representing interest (at rates ranging from 4.2% to 8.5%)
8,596
Present value of net minimum capital lease payments
141,290
Less current installments of obligations under capital leases
27,138
Obligations under capital leases excluding current installments
$
114,152
37
At December 31,
20002002 and 2001 gross property and equipmentand accumulated amortizationrecorded under capital leases was$97,553,000$193,953,000 and$3,158,000,$194,256,000, respectively.Total rent expense was $115,084,000 in 2002, $98,783,000 in 2001, and $87,545,000 in 2000,
$39,862,000 in 1999, and $28,692,000 in 1998,respectively.At December 31,
2000, the Company2002, we had committed to purchase approximately$90,000,000$184,000,000 of revenue and service equipment net of expected proceeds from sale or trade-in allowances.We adopted the provisions of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The
CompanyInterpretation requires that we recognize the fair value of guarantee and indemnification arrangements issued or modified by JBHT after December 31, 2002, if these arrangements are within the scope of that Interpretation. In addition, under previously existing generally accepted accounting principles, we continue to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.In 2002, we issued financial standby letters of credit as a guarantee of our performance under certain operating lease commitments and insurance policies. If we default on our commitments under the lease agreements or insurance policies, we are required to perform under these guarantees. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $27 million. As of December 31, 2002, no amounts have been accrued for any estimated losses under the obligations, as it is probable that the suppliers will be able to make all scheduled payments.
We are involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel,
management believeswe believe the resolution of claims and pending litigation will not have a material adverse effect ontheour financial condition or our results ofoperations of the Company. 36 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998operations.(9)
INVESTMENT IN AFFILIATED COMPANYInvestment in Affiliated CompanyIn March 2000,
the Company,we, along with five other motor carriers, announced the intent to contribute all ofitsour non-asset based logistics business into a recently formed joint venture,Transplace.com (TPC)Transplace, Inc. (TPI).TPCTPI is aninternet-basedInternet-based global transportation logistics company.TPCTPI commenced operations effective July 1, 2000.The CompanyWe contributed all ofitsour logistics segment business and all related intangible assets, plus $5.0 million of cash, in exchange for an approximate 27% initial membership interest inTPC. The Company accountsTPI. We account foritsour approximate 27% interest inTPCTPI utilizing the equity method of accounting. No gain or loss was recognized upon formation and contribution of logistics segment assets toTPC. The excess of the Company's share of TPC's net assets over its cost basis is being amortized over 20 years on a straight-line method.TPI. Equity in earnings ofTPCTPI wasnot significanta loss of $1,353,000 in2000. The Company2002. On December 31, 2002, we acquired an additional 10% interest in TPI from one of the initial members.We provided various services to
TPCTPI under a shared service agreement, the terms of which expired on December 31,2000.2002. The services included the following: payroll and benefits; accounting; computer system maintenance; office facilities; and telecommunications. The fees from these services approximated$2,971,000$6,299,000 and $6,483,000 in20002002 and 2001, respectively, and were recorded in the consolidated statement of earnings as reimbursements of salaries, wages and employee benefits and general and administrative expenses.At December 31, 2000, the Company had advanced to TPC in the form of a loan $5,600,000. This amount was repaid in full during January 2001. The CompanyWe earned revenues of
$43,500,000$40,406,000 and $69,696,000 fromTPCTPI in providing transportation servicesin the last six months of 2000.during 2002 and 2001, respectively.At December 31,
2000,2002 and 2001, trade accounts receivableincludes $1,148,000included $2,383,000 and $4,198,000, respectively, due fromTPCTPI for freight and fees related to the shared service agreement.37 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated Financial Statements38
For the years ending December 31,
2000, 19992002 and19982001, we incurred approximately $34,994,000 and $32,649,000, respectively, in purchased transportation expense as a result of TPI providing transportation services.(10)
SEGMENT INFORMATION The Company had fourSegment InformationWe have three reportable business segments,
during 2000. Segments includedTruck (JBT), Intermodal (JBI), and Dedicated Contract Services (DCS)and Logistics.. JBT business includes full truck-load, dry-van freight which is typically transported utilizing company-owned or controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. The JBI segment includes freight which is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations.The JBT and JBI business segments were operated in combined fashion (formally reported as Van/Intermodal in prior periods) and limited identifiable comparative information is available for JBT and JBI prior to January 1, 2000. Accordingly, the Company has provided comparable segment information for the year ended December 31, 2000 based on the prior segmentation, which included JBT and JBI as the former segment, "Van/Intermodal".DCS segment business typically includes company-owned revenue equipment and employee drivers which are assigned to a specific customer, traffic lane or service. DCS operations usually include formal, written long-term agreements or contracts which govern services performed and applicable rates.Prior to July 1, 2000, the Logistics business segment primarily consisted of J. B. Hunt Logistics (JBL) a wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services. Such services included experienced professional managers, information and optimization technology and the actual design or redesign of freight system solutions. JBL utilized JBT, JBI or DCS owned or controlled assets and employees,
orthird-party carriers, or a combination of these options to meet customer service requirements. JBL services typically were provided in accordance with written long-term agreements. As discussed in Note 9,the Companywe exchangeditsour ownership in JBL for an initial membership interest inTPC.TPI. Effective July 1, 2000,the Companywe began accounting foritsour ownership inTPCTPI utilizing the equity method of accounting. As of December 31, 2000,TPC qualifiesTPI qualified as a reportable business segment and, accordingly, the Logistics segment information shown below includes both JBL andTPC.TPI. Information forTPCTPI included in the following tables is theentity'sentity’s results of operations without regard tothe Company'sour ownership interest which is then subtracted in reconciling to the consolidated statement of earnings.38 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 The Company'sOur customers are geographically dispersed across the United States and
includesinclude many of the"Fortune 500"“Fortune 500” companies. One customer accounted for approximately 18%, 16% and 12% of consolidated operating revenues in2000. No single customer exceeded 10% in 19992002, 2001 and1998.2000, respectively. A summary of certain segment information is presented below (in millions):
ASSETS -------------------------------------- 2000 1999 1998 ---------- ---------- ----------Truck $ 871 -- -- Intermodal 128 -- -- ---------- ---------- ---------- Van/Intermodal 999 826 925 Logistics 33 73 43 Dedicated Contract Services 138 95 62 Other (includes corporate and intersegment eliminations) 62 133 141 ---------- ---------- ---------- Total $ 1,232 1,127 1,171 ========== ========== ========== REVENUES -------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Truck $ 834 763 734 Intermodal 681 652 645 ---------- ---------- ---------- Van/Intermodal 1,515 1,415 1,379 Logistics 727 388 317 Dedicated Contract Services 479 320 212 Other -- -- 8 ---------- ---------- ---------- Total segment revenues 2,721 2,123 1,916 Inter-segment eliminations (63) (78) (74) Less revenues of equity method investee (498) -- -- ---------- ---------- ---------- Consolidated statements of earnings amount $ 2,160 2,045 1,842 ========== ========== ==========
Assets
2002
2001
2000
Truck
$
844
892
871
Intermodal
227
172
128
Logistics
—
—
33
Dedicated Contract Services
227
179
138
Other (includes corporate and intersegment eliminations)
21
17
62
Total
$
1,319
1,260
1,232
39
(Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated
Revenues
2002
2001
2000
Truck
$
827
829
834
Intermodal
809
740
681
Logistics
—
—
727
Dedicated Contract Services
628
549
479
Total segment revenues
2,264
2,118
2,721
Inter-segment eliminations
(16
)
(18
)
(63
)
Less revenues of equity method investee
—
—
(498
)
Consolidated statements of earnings amount
$
2,248
2,100
2,160
Operating income
2002
2001
2000
Truck
$
27
9
(7
)
Intermodal
55
42
37
Logistics
—
—
9
Dedicated Contract Services
20
17
28
Other
(1
)
4
(3
)
Total segment operating income
$
101
72
64
Less operating income of equity method investee
—
—
(1
)
Consolidated statements of earnings amount
$
101
72
63
Depreciation expense
2002
2001
2000
Truck
$
69
70
65
Intermodal
19
21
23
Dedicated Contract Services
49
44
36
Other
9
8
10
Total
$
146
143
134
40
(11) Quarterly Financial
Statements December 31, 2000, 1999 and 1998
OPERATING INCOME -------------------------------------- 2000 1999 1998 ---------- ---------- ----------Truck $ (7) -- -- Intermodal 37 -- -- ---------- ---------- ---------- Van/Intermodal 30 44 81 Logistics 9 11 8 Dedicated Contract Services 28 24 17 Other (3) (5) (4) ---------- ---------- ---------- Total segment operating income 64 74 102 Less operating income of equity method investee (1) -- -- ---------- ---------- ---------- Consolidated statements of earnings amount $ 63 74 102 ========== ========== ========== DEPRECIATION EXPENSE -------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Truck $ 65 -- -- Intermodal 23 -- -- ---------- ---------- ---------- Van/Intermodal 88 113 109 Logistics -- 1 1 Dedicated Contract Services 36 26 18 Other 10 9 12 ---------- ---------- ---------- Total $ 134 149 140 ========== ========== ==========40 (Continued)J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDAIRIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (11) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)Information (Unaudited)Operating results by quarter for the years ended December 31,
20002002 and19992001 are as follows (in thousands, except per share data):
QUARTER ------------------------------------------------------ FIRST SECOND THIRD FOURTH ----------- ----------- ----------- -----------2000: Operating revenues $ 533,556 583,500 509,422 533,969 =========== =========== =========== =========== Operating income $ 9,554 20,347 15,817 17,694 =========== =========== =========== =========== Net earnings $ 5,013 11,054 9,123 10,885 =========== =========== =========== =========== Basic earnings per share $ .14 .31 .26 .31 =========== =========== =========== =========== Diluted earnings per share $ .14 .31 .26 .31 =========== =========== =========== =========== 1999: Operating revenues $ 470,244 497,554 523,901 553,374 =========== =========== =========== =========== Operating income $ 24,174 24,240 14,975 14,041 =========== =========== =========== =========== Net earnings $ 10,585 10,785 4,958 5,581 =========== =========== =========== =========== Basic earnings per share $ .30 .30 .14 .16 =========== =========== =========== =========== Diluted earnings per share $ .29 .30 .14 .16 =========== =========== =========== ===========
Quarter
First
Second
Third
Fourth
2002:
Operating revenues
$
510,221
557,328
582,671
597,666
Operating income
$
13,631
28,509
28,026
30,797
Net earnings
$
4,854
15,479
16,756
14,727
Basic earnings per share
$
0.13
0.42
0.43
0.37
Diluted earnings per share
$
0.13
0.40
0.42
0.37
2001:
Operating revenues
$
495,419
521,489
537,156
546,241
Operating income
$
8,367
15,818
11,950
36,074
Net earnings
$
1,645
8,568
4,549
18,183
Basic earnings per share
$
0.05
0.24
0.13
0.51
Diluted earnings per share
$
0.05
0.24
0.12
0.50
41
(Continued)ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K have been filed within the twenty-four months prior to December 31,
20002002 involving a change of accountants or disagreements on accounting and financial disclosure.ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The schedule of directors is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April
26, 200124, 2003 set forth under section entitled"Proposal“Proposal One Election ofDirectors".Directors.”EXECUTIVE OFFICERS
Information with respect to our executive officers
of the Companyis set forth in Item 4 of this Report under the caption"Executive Officers of the Company".“Our Executive Officers.”ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for Items 11 and 12 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held on April
26, 200124, 2003 set forth under sections entitled"Principal“Principal Stockholders of the Company," "Report” “Report of the Compensation Committee," "2001” “2003 Performance-based Compensation,"” and"Compensation“Compensation Committee Interlocks and Insider Participation."”ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for Item 13 is hereby incorporated by reference from Note (7) Related Party Transactions
AND NOTEand Note (9)INVESTMENT IN AFFILIATED COMPANYInvestment in Affiliated Company of the Notes to Consolidated Financial Statements and from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held on April26, 200124, 2003 set forth under the section entitled"Compensation“Compensation Committee Interlocks and Insider Participation." PART IV”ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in alerting them, in a timely manner, to material information required to be disclosed by us in our periodic reports to the Securities and Exchange Commission. In addition, the CEO and CFO determined that there were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of their most recent evaluation.
42
PART IV
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements, Financial Statement Schedules and Exhibits:
(1) Financial Statements
The financial statements filed as part of this filing are listed on the index to Consolidated Financial Statements, Item 8, on page 21.
(3)Exhibits
The response to this portion of Item 14 is submitted as a separate section of this report
("(“ExhibitIndex"Index”). 42on page 47. (b) Reports on Form 8-K
On November 21, 2002, we filed a current report on Form 8-K announcing that we had reached an agreement in principle with Werner Enterprises, Inc. to transfer a portion of Werner Enterprises’ ownership interest in Transplace, Inc. to J.B. Hunt.
On November 25, 2002, we filed a current report on Form 8-K announcing that an agreement had been reached with Freightliner LLC for a comprehensive truck sale and trade package for 2003.
On January 30, 2003, we filed a current report on Form 8-K announcing our financial results for the fourth quarter and year ended December 31, 2002.
43
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
hadhas duly caused thisReportreport to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on the 10th day of March,9, 2001. J.B. HUNT TRANSPORT SERVICES, INC. (Registrant) By: /s/ Kirk Thompson ---------------------------------------------------------- Kirk Thompson President and Chief Executive Officer By: /s/ Jerry W. Walton ---------------------------------------------------------- Jerry W. Walton Executive Vice President, Finance and Administration, Chief Financial Officer By: /s/ Donald G. Cope ---------------------------------------------------------- Donald G. Cope Senior Vice President, Controller, Chief Accounting Officer2003.
J. B. HUNT TRANSPORT SERVICES, INC.
(Registrant)
By:
/s/
Kirk Thompson
Kirk Thompson
President and Chief Executive Officer
By:
/s/
Jerry W. Walton
Jerry W. Walton
Executive Vice President, Finance and Administration,
Chief Financial Officer
By:
/s/
Donald G. Cope
Donald G. Cope
Senior Vice President, Controller,
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Reportreport has been signed below by the following persons on the 10th day of March, 2003 on behalf of the registrant and in the capacitiesand on the datesindicated.
/s//s/
John A. Cooper, Jr.
Member of the Board
March 9, 2001 - ------------------------------ of DirectorsJohn A. Cooper, Jr.
/s/of Directors
/s/
Wayne Garrison
Member of the Board
March 9, 2001 - ------------------------------Wayne Garrison
of Directors (Chairman)
Wayne Garrison /s//s/
Gene George
Member of the Board
March 9, 2001 - ------------------------------Gene George
of Directors
Gene George /s//s/
Thomas L. Hardeman
Member of the Board
March 9, 2001 - ------------------------------ of DirectorsThomas L. Hardeman
/s/of Directors
/s/
J. Bryan Hunt, Jr.
Member of the Board
March 9, 2001 - ------------------------------J. Bryan Hunt, Jr.
of Directors (Vice Chairman)
J. Bryan Hunt, Jr. /s//s/
J.B. Hunt
Member of the Board
March 9, 2001 - ------------------------------J.B. Hunt
of Directors (Senior Chairman)
J.B./s/
Johnelle D. Hunt
/s/ Johnelle HuntMember of the Board
March 9, 2001 - ------------------------------Johnelle D. Hunt
of Directors (Corporate
Johnelle HuntSecretary)/s/ Kirk Thompson/s/
James L. Robo
Member of the Board
March 9, 2001 - ------------------------------James L. Robo
of Directors
/s/
Kirk Thompson
Member of the Board
Kirk Thompson
of Directors (President and
Kirk Thompson
Chief Executive Officer)/s/ John A. White/s/
Leland Tollett
Member of the Board
March 9, 2001 - ------------------------------Leland Tollett
of Directors
/s/
John A. White
Member of the Board
John A. White
of Directors
43EXHIBIT INDEX Exhibit Number Description - -------------------------------------------------------------------------------- 3A The Company's Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the Company's S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028). 3B The Company's Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the Company's S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714). 10A Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the Company's S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714). 10B The Company has an Employee Stock Purchase Plan filed44
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
J.B. Hunt Transport Services, Inc.
I, Kirk Thompson, certify that:
1. I have reviewed this annual report on Form
S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form S-8 on April 16, 1991 (Registration Statement Number 33-40028). The Management Incentive Plan is incorporated herein by reference from Exhibit 4B of Registration Statement 33-40028. The Company amended and restated its Employee Retirement Plan on Form S-8 (Registration Statement Number 33-57127) filed December 30, 1994. The Employee Retirement Plan is incorporated herein by reference from Exhibit 99 of Registration Statement Number 33-57127. The Company amended and restated its Management Incentive Plan on Form S-8 (Registration Statement Number 33-40028) filed July 7, 1995. The Company filed the Chairman's Stock Option Incentive Plan as part of a definitive 14A on March 26, 1996. 21 Subsidiaries10-K of J.B. Hunt Transport Services, Inc.-;2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 10, 2003
/s/ Kirk Thompson
Kirk Thompson
President and Chief Executive Officer
45
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
J.B. Hunt Transport Services, Inc.
, a Georgia corporation - L.A., Inc., an Arkansas corporation -I, Jerry W. Walton, certify that:
1. I have reviewed this annual report on Form 10-K of J.B. Hunt
Corp.,Transport Services, Inc.;2. Based on my knowledge, this annual report does not contain any untrue statement of a
Delaware corporation - J.B. Hunt Logistics, Inc., an Arkansas corporation - Comercializadora Internacional de Cargo S.A. De C.V.,material fact or omit to state aMexican corporation - Hunt Mexicana, S.A. de C.V.,material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a
Mexican corporation - Servicios de Logistica de Mexico, S.A. de C.V.,date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); andc) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a
Mexican corporation - Servicios Administratios de Logistica, S.A. de C.V., a Mexican corporation - Asesoria Administrativa de Logistica, S.A. de C.V., a Mexican corporation. - FIS, Inc., a Nevada corporation 23 Consentsignificant role in the registrant’s internal controls; and6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of
KPMG LLP 44our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 10, 2003
/s/ Jerry W. Walton
Jerry W. Walton
Executive Vice President, Finance and
Administration,
Chief Financial Officer46
EXHIBIT INDEX
Exhibit
NumberDescription
3A
The Company’s Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the Company’s S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028).
3B
The Company’s Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).
10A
Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).
10B
The Company has an Employee Stock Purchase Plan filed on Form S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form D-8 on April 16, 1991 (Registration Number 33-40028). The Management Incentive Plan is Incorporated herein by reference from Exhibit 4B of the Registration Statement 33-40028. The Company amended and restated its Employee Retirement Plan on Form S-8 (Registration Statement Number 33-57127) filed December 30, 1994. The Employee Retirement Plan is incorporated herein by reference from Exhibit 99 of Registration Statement Number 33-57127. The Company amended and restated its Management Plan on Form S-8 (Registration Number 33-40028) filed August 14, 2001. The Company filed the Chairman’s Stock Option Incentive Plan as part of a definitive 14A on March 26, 1996.
21
Subsidiaries of J.B. Hunt Transport Services, Inc.
23
Consent of KPMG LLP
99.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the President and Chief Executive Officer
99.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Executive Vice President of Finance and Administration and Chief Financial Officer
47