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, 19951996 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)(Exact name of registrant as specified in its charter)
ARKANSAS 71-0335111
(STATE OR OTHER JURISDICTION OF(State or other jurisdiction of (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.Employer
incorporation or organization) Identification No.)
615 J.B. HUNT CORPORATE DRIVE 72745
LOWELL, ARKANSAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(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
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTIONS 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_X_ NO ----- -----_____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K (SS229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL
NOT BE CONTAINED, TO THE BEST OF REGISTRANT'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. [ ]
THE AGGREGATE MARKET VALUE OF 17,552,07517,432,816 SHARES OF THE REGISTRANT'S $.01 PAR
VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY 29,
19963,
1997 WAS $320,325,369$250,596,730 (BASED UPON $18.25$14.375 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'S CLASSES OF
COMMON STOCK, AS OF FEBRUARY 29, 1996: 38,010,296.3, 1997: 36,941,274.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE 19951997 ANNUAL
STOCKHOLDERS' MEETING TO BE HELD MAY 9, 1996,APRIL 17, 1997 PART II.
PART I
ITEM 1. BUSINESS
GENERAL
J.B. Hunt Transport Services, Inc., together with its wholly-owned
subsidiaries ("JBH" or the "Company") is a diversified transportation services
and logistics company operating under the jurisdiction of the U.S. Department of
Transportation, formerly the Interstate Commerce Commission ("ICC"), and various
state regulatory agencies. JBH is an Arkansas holding company incorporated on
August 10, 1961. Through its subsidiaries JBH transports primarily full-load
containerizable freight throughout the continental United States and portions of
Canada and Mexico. The Company also provides logistics and transportation-relatedtransportation-
related services which may utilize JBH equipment and employees, or may employ
equipment and services provided by unrelated third parties in the transportation
industry.
JBH has various operating authorities granted by the ICC and state regulatory
agencies. The Company may transport any type of freight (except certain types of
explosives) from any point in the continental United States to any other point
in another state, over any route selected by the Company. The Company also has
certain intrastate authorities, allowing pick-up and delivery within those
states. Federal legislation was enacted effective January 1, 1995 which
preempted each state's right to limit entry into intrastate operations. AJBH
transports a wide range of products are transported including automotive parts, department store
merchandise, paper and paper products, plastics, chemicals and manufacturing
materials and supplies.
JBH was granted certain Canadian authority initially in 1988 and currently
transports freight to and from all points in the continental United States to
Quebec, British Columbia and Ontario. The Company has authorization to operate
directly in all the Canadian provinces, but to date has served additional points
in Canada primarily through interchange operations with Canadian motor carriers.
The Company has provided transportation services to and from Mexico since 1989
through interchange operations with various Mexican motor carriers. A joint
venture agreement with Transportacion Maritima Mexicana, the largest
transportation company in Mexico, was signed in 1992.
In 1990, JBH initiated intermodal operations with the Atchison, Topeka and
Santa Fe Railway Company. In accordance with thisthat agreement, freight maycould be
transported by rail utilizing traditional trailer-on-flatcar (TOFC) or
container-on-flatcar (COFC) medium. Since this initial agreement with Santa Fe
(now Burlington Northern Sante Fe), intermodal operations have been expanded to
include arrangements with ten railroads. A number of these rail routes allow the
utilization of a
newly-designed containerhigh cube containers which can be double-stacked to provide
improved productivity. Substantially all of the freight carried under these rail
arrangements is guaranteedgranted priority space on trains and receives preferential
loading and unloading at rail facilities.
The Company also offers related full truckload transportation services.
Flatbed and special (hazardous) commodities operations were commenced in
1991. A Texas intrastate operation was also acquired in 1991. A growing
number of shippers are interested in logistics and dedicated equipment
services, whereby all transportation requirements can be outsourced and
provided by one management and services company. JBH commenced offering transportation logistics services in 1992 in
response to shippers' interest in outsourcing their total distribution and
transportation processes. JBH Logistics provides a range of comprehensive
transportation and management services including experienced professional
managers, information and optimization technology and the design or redesign
process of system solutions. Dedicated contract services were initiated in
1993, which provide specifically assigned equipment, drivers and management to
companies that want to augment or outsource their private fleet. During 1996,
the Company successfully exited the hazardous commodity and small package
transportation businesses in order to focus on the dry-van, logistics management
and dedicated equipment in 1993. A new operation
was initiated in late 1994 to provide transportation services to the
direct merchandising industry transporting small parcels.operations.
MARKETING AND OPERATIONS
The truckload ("T/L") market has traditionallyhistorically been a lower price, lower
service market when compared to the less-than-truckload ("LTL") segment. The
Company has opted to provide a premium service and charge compensating rates
rather than compete primarily on the basis of price.
The Company's business is well diversified and no one customer accounted for
more than 6%5% of revenues during 19951996 or 1994.1995. Marketing efforts include
significant focus on the diversified group of "Fortune 500" customers. A broad
geographic dispersion and a good balance in the type of industries served allow
JBH some protection from major seasonal fluctuations. However, consistent with
the T/L industry in general, freight is typically stronger in the second half of
the year with peak 2
months being August, September and October. In addition,
demand for services is usually strong at the end of the first two calendar
quarters (i.e., March and June). Revenue is also affected by bad weather and
holidays, since revenue is directly related to available working days of
shippers.
2
The Company markets door-to-door T/L service through its nationwide
marketing network. Services involving intermodal transportation mediums are
billed by JBH and all inquiries, claims and other customer contact are
handled by the Company. In late 1994,Certain marketing and sales functions are assigned to
each of the Company reorganized its dry vanprimary businesses of dry-van, logistics management and intermodal operations into five geographically based regions.dedicated
equipment. However, marketing strategy and national account service
coordination is managed at the corporate level.
PERSONNEL
At December 31, 1995,1996, JBH employed 12,02011,575 people, including 9,0738,345 drivers.
The transportation industry and the Company have experienced shortages of
qualified drivers from time to time. The Company has developed an extensive
program to attract, train and retain drivers. BothIn September 1996, a new
compensation program was announced for the approximate 4,000 over-the-road van
drivers. This comprehensive package, effective February 25, 1997, includes an
average 33 percent increase in wages for this group of employees. The expected
results of this program include a more stable and experienced and non-experienced drivers are trained in all phaseswork force capable
of Company policies and operations, as well as defensive driving, safety
techniques and fuel efficient operationdelivering a high quality of equipment. During 1992, three
distinct driving designations (local, regional or zone and over-the-road)
were identified in order to get drivers home more frequently and provide
specific support for intermodal and regional operations.customer service. Drivers are frequently
designated as local, regional, assigned/dedicated or over-the-road and typically
compensated based uponon the basis of miles driven, a specifiedspecific rate per week or a
combination of both. Additional compensation may be earned based upon fuel
economy and other performance criteria.factors. The Company also employed approximately 1,0301,100 mechanics
as ofat December 31, 1995. In the opinion of
management, the Company's1996. Management believes that its relationship with all of its
employees is excellent.
REVENUE EQUIPMENT
At December 31, 1995,1996, JBH owned 7,7067,750 tractors 7,556and operated 8,954 trailers
and 17,06218,819 specially designed containers. The average age of the tractor and
trailing equipment fleet was slightly more than two and one half years. In late
1992, the Company announced the development of a new multi-purpose container
which can be placed on a chassis for transportation over the road by truck and
also moved by rail or ship. The container and chassis combination may be
transported by rail (TOFC) or the container can be separated from the chassis
and double-stacked (COFC) on the rail for improved productivity. The Company intends to continueIn early 1996,
JBH took delivery of the remaining containers and chassis in its initial
equipment orders. This rapid conversion of the van trailing fleet has helped
support the significant growth of intermodal volume. Specific customer service
requirements are a significant
portionprimary determining factor of its dry van trailerthe dedicated equipment fleet
to these containers.specifications and mix.
A periodic maintenance program is strictly enforced for all revenue equipment
based upon the specific type and use of the equipment. JBH believes that modern,
late-model, clean equipment differentiates quality service in the marketplace. A
professional maintenance program minimizes downtime, increases utilization and
enhances the trade-in value of used equipment.
COMPETITION
JBH is the largest publicly held T/L carrier in the United States. It
competes primarily with other irregular route, T/L common carriers. LTL common
carriers and private carriers generally provide limited competition.competition for T/L
carriers. JBH is 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 allows the Company the opportunity
to differentiate its services in the marketplace.
REGULATION
The Company is a motor common carrier regulated by the United States
Department of Transportation (formerly the ICC). The federal government
generally governs activities such as authority to engage in interstate motor
carrier operations, accounting systems, certain mergers, consolidations,
acquisitions and periodic financial reporting.
3
Motor carrier operations are subject to safety requirements prescribed by the
United States Department of Transportation (DOT) governing interstate operation.
Such matters as weight and dimensions of equipment and commercial driver's
licensing are also subject to federal and state regulations. A federal
requirement that all drivers obtain a commercial driver's license became
effective in April 1992.
The federal Motor Carrier Act of 1980 was the start of a program to increase
competition among motor carriers and limit the level of regulation in the
industry (sometimes referred to as "deregulation"). The Motor Carrier Act of
3
1980 enabled applicants to obtain ICC operating authority more easily and
allowsallowed interstate motor carriers, such as the Company, to change their rates
by a certain percentage per year without ICC approval. The new law also allowed
for the removal of many route and commodity restrictions regarding the
transportation of freight. As a result of the Motor Carrier Act of 1980, the
Company was able to obtain unlimited authority to carry general commodities
throughout the 48 contiguous states. Effective January 1, 1995, the federal
government issued guidelines which allow motor carriers more flexibility in
intrastate operations. Although this reduced level of state regulation may
increase the level of competition in some regions, the Company believes it
will ultimately benefit from this legislation.
ITEM 2. PROPERTIES
The Company's corporate headquarters are in Lowell, Arkansas. A 150,000-square-foot150,000-
square-foot building was constructed and occupied in September 1990. The
building is situated on a 127-acre tract of land.
In addition to the corporate headquarters, the Company owns a separate 61-acre40-
acre tract in Lowell, Arkansas with three separate buildings totaling 21,000
square feet of office space and 90,000 square feet of maintenance and warehouse
space. These buildings serve as the Lowell operations terminal, tractor and
trailer maintenance facilities and additional administrative offices. A new
terminal and maintenance facility is beingwas constructed and occupied in Chicago,
Illinois and will be occupied in midduring 1996.
A summary of the Company's principal facilities follows:
LOCATION
- -------- MAINTENANCE SHOP OFFICE SPACE
VAN DIVISION TERMINALS ACREAGE (SQUARE FEET) (SQUARE FEET)
- ---------------------- ------- ---------------- -------------
Atlanta, Georgia 30 29,800 10,400
Chicago, Illinois 10 5,800 6,400Maintenance 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 9 44,300 10,800
East Brunswick, New Jersey 19 3,000 7,800
Houston, Texas 13 24,700 7,200
Little Rock, Arkansas 24 29,200 7,200
Louisville, Kentucky 14 40,000 10,000
Lowell, Arkansas 40 50,200 14,000
Lowell, Arkansas (trailer
facilities) 14 29,800 3,700
South Gate, California 12 12,000 5,500
FLATBED DIVISION TERMINAL
- -------------------------
Hueytown, Alabama 9 16,000 3,000
In addition to the above facilities, the Company leases several small offices
and/orand trailer parking yards in various locations throughout the country.
4
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred in
the transportation of freight. The Company maintains excess insurance above its
self-insured levels which covers extraordinary liability resulting from such
claims. Adverse results in one or more of these cases would not have a material
adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1995 Annual Stockholders' Meeting was held on May 11, 1995. At that
meeting, the following matters were submitted to a vote of security holders:
1. To elect ten (10) directors and to fix the number of directors for the
ensuing year at ten (10).
FOR AGAINST ABSTAIN
--------- ------- -------
Number of shares voted 34,172,332 0 129,301
Percentage of shares voted 99.62% 0.00% .38%
2. To approve the Amended Management Incentive Plan.
FOR AGAINST ABSTAIN
--------- ------- -------
Number of shares voted 27,549,508 1,534,479 231,055
Percentage of shares voted 93.98% 5.23% .79%
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the next fiscal year.
FOR AGAINST ABSTAIN
--------- ------- -------
Number of shares voted 34,245,829 17,670 38,134
Percentage of shares voted 99.84% .05% .11%
No matters were submitted during the fourth quarter of 19951996 to a vote of
security holders.
5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded in the over-the-counter market under the
symbol "JBHT"."JBHT." The following table sets forth, for the calendar periodsyears
indicated, the range of high and low sales prices for the Company's common stock
as reported by the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ").
CALENDAR YEAR 1994 CALENDAR YEAR 1995
PERIOD HIGH LOW HIGH LOW
- ------ ------ ------ ------ ------
1st Quarter $25.75 $21.75 $20.13 $15.25
2nd Quarter 23.38 17.50 19.50 16.13
3rd Quarter 19.25 15.75 19.50 14.88
4th Quarter 17.25 15.00Calendar Year 1996 Calendar Year 1995
Period High Low High Low
- -------------------------------------------------------------
1st Quarter $22.13 $15.13 $20.13 $15.25
2nd Quarter 22.13 18.75 19.50 16.13
3rd Quarter 21.88 15.06 19.50 14.88
4th Quarter 16.00 13.75 17.13 12.75
On February 29, 1996,3, 1997, the high and low sales prices for the Company's common
stock as reported by the NASDAQ were $18.50$14.375 and $18.25,$14.00, respectively. As of
February 29, 1996,3, 1997, the Company had 2,2751,980 stockholders of record.
DIVIDEND POLICY
On January 24, 1996,23, 1997, the Board of Directors declared a quarterly dividend of
$.05 per share, payable on February 16, 199617, 1997 to shareholders of record on
February 2, 1996.3, 1997. Although it is the present intention of the Board of Directors
to continue quarterly dividends, payment of future dividends will depend upon
the Company's financial condition, results of operations and other factors
deemed relevant by the Board of Directors. The Company declared and paid cash
dividends of $.20 per share in 19951996 and 1994.
61995.
5
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
YEARS ENDED DECEMBERYears Ended December 31 1996 1995 1994 1993 1992 1991 1990 1989
1988 1987
- ----------------------- ---------- ---------- ---------- -------- -------- -------- -------- -------- ------------------------------------------------------------------------------------------------------------------------------
Operating revenues $1,486,748 $1,352,225 $1,207,601 $1,020,921 $911,982 $733,288 $579,831 $509,278
Earnings (loss) before
cumulative effect of changes
in accounting methods 22,115 (2,170) 40,392 38,221 36,933 29,459 30,048 30,615
Earnings (loss) per share before
cumulative effect of changes
in accounting methods .58 (.06) 1.05 1.00 1.03 .85 .85 .87
Cash dividends per share .20 .20 .20 .20 .20 .19 .16 .16
Total assets 1,040,925 1,016,782 993,699 862,442 715,741 520,130 452,734 384,684
Long-term debt 332,571 339,015 299,243 303,499 216,254 156,930 137,597 104,955
Stockholders' equity 357,255 356,939 377,898 343,964 308,626 215,761 191,074 175,518
Years Ended December 31 1988 1987
- ----------------------------------------------------
Operating revenues $392,553 $286,419
Earnings (loss) before
cumulative effect of changes
in accounting methods (2,170) 40,392 38,221 36,933 29,459 30,048 30,615 33,045 22,415
Earnings (loss) per share before
cumulative effect of changes
in accounting methods (.06) 1.05 1.00 1.03 .85 .85 .87 .93 .63
Cash dividends per share .20 .20 .20 .20 .19 .16 .16 .13 .11
Total assets 1,016,782 993,699 862,442 715,741 520,130 452,734 384,684 300,199 250,274
Long-term debt 339,0152 99,243 303,499 216,254 156,930 137,597 104,955 65,358 69,000
Stockholders' equity 356,939 377,898 343,964 308,626 215,761 191,074 175,518 150,126 121,316
Percentage of Operating Revenue
YEARS ENDED DECEMBERYears Ended December 31 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------- ----- ----- ----- ----- ----- ----- ----- ----- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenues 100.0% 100.0 % 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 32.6 33.8 33.5 36.4 38.2 40.0 41.4 42.1 41.4 39.6
Purchased transportation 29.0 26.8 23.9 18.4 12.2 7.0 0.7 0.7 0.6 0.4
Fuel and fuel taxes 10.8 10.6 10.9 12.4 14.2 16.3 17.3 15.7 14.3 15.8
Depreciation 8.4 9.6 9.2 8.2 9.5 9.4 9.7 9.5 9.7 10.3
Operating supplies and
expenses 6.2 7.0 6.9 7.2 7.4 8.0 8.8 8.5 7.8 7.1
Insurance and claims 3.9 3.8 3.1 4.0 4.8 4.7 5.4 4.5 4.3 4.4
General and administrative expenses 1.9 2.4 2.2 1.9 2.0 2.1 2.3 1.7 1.3 1.3
Operating taxes and licenses 1.9 2.0 2.2 2.8 2.8 3.0 3.2 3.5 3.4 3.7
Special charges - 1.3 - - - - - - - -
Communication and utilities 1.2 1.1 1.1 1.0 1.3 1.4 1.4 1.7 2.0 2.4
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses 95.9 98.4 93.0 92.3 92.4 91.9 90.2 87.9 84.8 85.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income 4.1 1.6 7.0 7.7 7.6 8.1 9.8 12.1 15.2 15.0
Interest expense 1.7 1.8 1.6 1.4 1.2 1.5 1.2 1.8 1.7 1.4
Income taxes .9 - 2.1 2.6 2.3 2.6 3.4 4.3 5.1 5.7
Cumulative effect of changes in
accounting methods - - - - 0.2 (0.2) - - - (1.2)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net earnings (loss) (0.2%)1.5% (0.2)% 3.3% 3.7% 4.3% 3.8%3.8 % 5.2% 6.0% 8.4% 9.1%9.1 %
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
76
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis of the Company's operations,
financial condition and financial performance, as well as material contained
elsewhere herein, includes statements that are not historical facts. Such
statements are forward-looking statements based on the Company's expectations
and as such, are subject to uncertainty and risk. For additional
information, the following should be read in conjunction with the Selected
Financial Data and the Company's Consolidated Financial Statements and Notes
to Consolidated Financial Statements which appear elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage
change between years of certain revenue, expense and operating items.
(Dollars in thousands, except tractor data)
1996 Compared To 1995 COMPARED TO1995 Compared To 1994
1994 COMPARED TO 1993
--------------------- ---------------------
INCREASE INCREASE
(DECREASE) (DECREASE)
IN AMOUNTS- ------------------------------------------------------------------------------------------------------
Increase (Decrease) Increase (Decrease)
in Amounts % CHANGE IN AMOUNTSChange in Amounts % CHANGE
---------- -------- ---------- --------Change
- ------------------------------------------------------------------------------------------------------
Average number of tractors
in the fleet 169 2 % 465 7% 204 3%7 %
-------- ---- -------- ---
-------- --
-------- --- -------- --
Operating revenues $134,523 10 % $144,624 12% $186,680 18%12 %
Operating expenses:
Salaries, wages and
employee benefits 27,135 6 52,431 13
33,287 9
Purchased transportation 68,306 19 74,836 26 100,427 53
Fuel and fuel taxes 17,026 12 12,213 9
4,060 3
Depreciation (5,334) (4) 19,603 18 27,452 33
Operating supplies and expenses (2,166) (2) 11,653 14 9428 13
Insurance and claims 7,680 15 12,756 34 (2,473) (6)
General and administrative
expenses (4,480) (14) 6,022 22 7,927 42
Operating taxes and licenses 1,000 4 (594) (2)
(1,889) (7)
Special charges (17,296) (100) 17,296 --
Communication and utilities 3,634 25 1,959 15
2,191 21-------- ---- -------- --- -------- --
Total operating expenses 95,505 7 % 208,175 19% 180,410 19%19 %
-------- ---- -------- --- -------- --
Operating income after
special charges $ 39,018 183% $(63,551) (75%) $ 6,270 8%(75)%
-------- ---- -------- --- -------- --
-------- --- -------- --
Operating income before
special charges $ 21,722 56 % $(46,255) (54%) $ 6,270 8%(54)%
-------- ---- -------- ---
-------- ------ -------- --- -------- --
The following table sets forth certain industry operating data of the Company.
YEARS ENDED DECEMBERYears Ended December 31 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------- --------- --------- --------- ------- ------- ------- ------------------------------------------------------------------------------------------------------------------------------
Total loads 1,605,546 1,361,251 1,187,815 1,081,013 960,031 796,929 596,574 536,448
Average number of tractors in
the fleet during the year 7,728 7,559 7,094 6,890 6,424 5,286 4,413 3,616
Tractors operated (at year end) 7,750 7,706 7,412 6,775 7,004 5,843 4,729 4,096
Trailers/containers (at year end) 27,773 24,618 22,687 19,089 17,391 12,389 10,563 9,339
Tractor miles (in thousands) 810,450 772,199 740,626 718,767 733,700 638,926 551,175 495,377
87
OPERATING REVENUES
Operating revenues increased $134.5 million, or 10%, from 1995 to 1996
and $144.6 million, (12%)or 12%, from 1994 to 1995 and
$186.7 million (18%) from 1993 to 1994. These increases in revenue were
primarily due to expansion of specialized carrier operations and continued
growth of intermodal volume.1995. The increase in revenue
between years includes the following by type of freight:
Increase (Decrease) in Revenue
(millions of dollars)
1995 COMPARED 1994 COMPARED
TO 1994 TO 1993
------------- -------------
Intermodal $ 76.8 $110.5
Dedicated Contract 58.5 41.2
Logistics Management 17.8 48.3
Flatbed 10.0 12.5
Other (including conversion of
dry van truck freight to intermodal) (18.5) (25.8)Type of Freight 1996 Compared To 1995 1995 Compared To 1994
--------------------------------------------------------------------------
Dry-Van* $79.0 $26.0
Logistics Management 75.9 17.8
Dedicated Contract 16.3 58.5
Other** (36.7) 42.3
------ ------
$134.5 $144.6 $186.7
------ ------
------ ------
* Includes intermodal
** Reflects $32.2 million impact from sale of special commodities and
parcel management operations.
The average number of tractors in the fleet increased 7% from 1994 toCompany continued its strategy during 1996 and 1995 and 3% from 1993 to 1994. The strategy of providing
diversified transportation and logistics management services, which utilize
intermodal, professional management expertise and full-servicethird-party revenue
equipment. This growth strategy allowed consolidated revenue to increase at
double-digit rates, while the tractor fleet increased only 2% during 1996 and
7% during 1995. Dry van revenue, which includes intermodal operations,
increased $79 million, or 8%, during 1996 and $26 million, or 3% during 1995.
The relatively new service offerings of logistics management which utilizes third party revenue equipment, results inand dedicated
contract significantly contributed to revenue growth that does not require a comparable increase in the tractor fleet.1996 and 1995. Dry
van truck freight rates, excluding fuel surcharges, decreased approximately 2% during
1996 and declined approximately 1% from 1994 to 1995, but
increased 4% from 1993 to 1994.1995. Intermodal freight
rates declined approximately 1% during 1996 and decreased approximately 3%
from 1994 to 1995 and were essentially flat from 1993 to 1994.1995. These rate decreases negatively impacted revenues and
earnings in 1995.
Revenue growth during 19951996 and 1994 primarily reflects a focus on the
following:
* The Company made a commitment in 1990 to utilize intermodal as an
integral part of dry service. Intermodal operations include
arrangements with ten different railroads across the United States
and portions of Canada and Mexico. Intermodal revenue increased by
19% during 1995 and 37% during 1994.
* The dedicated contract services unit which commenced operations in
1993 continued to contribute to revenue growth. Dedicated revenue
increased approximately 110% in 1995 and more than 300% in 1994
over a partial year of operation in 1993.
* Logistics services, which commenced operations in 1992, also
continued to grow rapidly. Revenue increased 22% in 1995 and in
excess of 150% in 1994.
The Company expects that revenue growth is sustainable in the near term.
Management expects to continue its focus on intermodal, dedicated contract
services, logistics management and other special service offerings related to
truckload freight.
9
1995.
OPERATING EXPENSES
Total operating expenses increased $95.5 million, or 7% from 1995 to
1996. Total operating expenses, including special charges of $17.3 million,
increased $208.2 million, or 19% in 1995. Operating expenses as a percentage
of operating revenuerevenues (operating ratio) were 95.9% in 1996 and 98.4% in 1995 and 93.0% in 1994.1995.
The operating ratio for 1995 was 97.1% excluding special charges. The
following operating expense categories increased or decreased at percentage
rates significantly different than the rate of revenue increase during the
period indicated:
1996 Compared to 1995
---------------------
* Revenue increased 10%.
* The 19% increase in purchased transportation was primarily due to the
growth of logistics and dedicated contract business, which results in
additional payments to railroads and third-party companies for
transportation service.
* Fuel and fuel taxes increased 12%, primarily due to significant increases
in fuel cost per gallon. This cost increase was partly offset by fuel
surcharge revenue billed to customers.
8
* The $5.3 million, or 4%, reduction in depreciation expense was due, in
part, to gains on the sale of the special commodities and parcel
management businesses. Gains of $7.9 million before income taxes were
recognized on the sale of these businesses and other assets and were
offset against depreciation expense. Gains on the sale of revenue
equipment were $7.2 million in 1995. Lower depreciation expense on
certain revenue equipment and on-board tractor communication devices
also reduced 1996 depreciation expense.
* Significantly higher accident rates during the first half of 1996
contributed to the 15% increase in insurance and claims costs. A
decision was announced in July 1996 to limit the speed of over-the-road
tractors to 59 miles per hour. Accident rates declined during late
1996, partly due to lower speeds and additional management focus.
* The significant decline in general and administrative expenses was
primarily due to lower advertising costs.
* Special charges of $17.3 million were recorded in 1995 was 97.1%.
The primary reasons for the increase in operating ratio and the decrease
in operating income from 1994 to 1995 were:
* Special charges were recorded to reduce the
carrying value of idle and under-performing assets primarily related to the Company's decision to
exit the auto hauling business. Theseassets. No special charges
which were recorded during the fourth quarter of 1995, increased operating
expensesin 1996.
* The 25% increase in communication and reduced operating income by $17.3 million.
* Gains on dispositions of revenue equipment, which are offset against
depreciation expense, were $8.1 million in 1995 and $12.3 in 1994.
These lower gains in 1995 increased operating expenses and reduced
operating income by $4.2 million. Management expects gains on future
equipment dispositions to be lowerutilities was primarily due to
a softer used equipment
marketcertain rate reductions and changes of salvage values and useful lives made during 1993
andone-time credits recognized in early 1995.
1995 COMPARED TO 1994
for certain revenue and service equipment. See Note 1(d) of
the Notes to Consolidated Financial Statements.---------------------
* Revenue increased 12%.
* Salaries, wages and employee benefits increased 13% from 1994 to 1995.. This increase was
due in part to a driver pay increase implemented in April 1995 for the
Company's least experienced drivers.
* Fuel and fuel taxesPurchased transportation increased 9% from 1994 to 1995,26%, primarily due to a
decrease in miles per gallonthe growth of
logistics and a slightdedicated contract business and resulting payments to
railroads and third-party transportation companies.
* The 18% increase in cost per gallon.
Insurancedepreciation expense was primarily due to significant
increases in the size of and claimsupgrading the trailing equipment fleet, the
addition of on-board tractor communication devices and lower equipment
gains in 1995. Gains on the disposition of revenue equipment, which are
offset against depreciation expense, increased 34% from 1994 to 1995.were $8.1 million in 1995 and $12.3
million in 1994.
* While the number of accidents did not increase significantly during 1995,
a small number of severe accidents occurred during late 1995 which fell within the Company's self-insured limits.
Purchased transportation expense increased 26% from 1994 to 1995. This
increase reflects payments to railroads and third-party companies for
intermodal and transportation services provided to the Company. Management
believes the increase in intermodal volume has notself-
insured limits contributed to the overallsignificant increase in operating ratioinsurance and
decreaseclaims.
* The significant increase in operating income,general and should
ultimately improve earnings.administrative expenses was due
primarily to higher levels of spending for driver advertising and
recruiting and recognition of certain uncollectible accounts receivable
amounts.
* Special charges of $17.3 million were recorded during the fourth quarter
of 1995 to reduce the carrying value of idle and under-performing assets.
* The 15% increase in communications and utilities was primarily due to
higher satellite usage charges in 1995 related to on-board tractor
communication devices.
* Interest expense increased approximatelyby $5.0 million, during 1995 and
$5.9 million during 1994. These increases were primarily duerelated to higher
levels of debt associated with the acquisition of new containers and
chassis,chassis.
In September 1996, the Company announced a historic compensation package
for its approximate 4,000 over-the-road van drivers. This comprehensive
plan, effective February 25, 1997, includes an average 33 percent increase in
wages for this group of drivers. The expected results of this program
include a more stable and slightly higher interest rates.experienced work force capable of delivering a high
quality of customer service. Funding of this increased level of expense,
estimated to approximate $50.0 million per year, is expected to result from
shifting costs out of driver recruiting and training, safety, and from
improved equipment utilization. Both company-owned driver training centers
were closed in October 1996, as an initial step to generate a portion of the
planned cost savings.
9
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Consolidated Statements
of Cash Flows and the Consolidated Balance Sheets.
The Company generates significant cash from operating activities and has
substantial borrowing capacity to meet its operating, committed and
contemplated cash expenditures.
Net cash provided by operating activities was $143 million in 1996,
$175 million in 1995, and $172 million in 1994 and $122 million in 1993. Net cash provided in 1993 was
reduced by approximately $29 million of accounts receivable at December 31,
1993 related to the sale of revenue equipment which was received in early 1994. Trade accounts payable at
December 31, 1995 includesincluded approximately $24 million due to revenue equipment
suppliers for service equipment received in 1995, which funds were disbursed
in early 1996.
A commitment was made in 1992 to increase levels of capital spending and
convert the majority of the dry van trailing equipment fleet to newly
designed multi-purpose containers and chassis. As of December 31, 1995 more
than 80%With nearly 19,000 of the dry van trailernew
high cube containers in the fleet, had been converted.the Company has taken delivery of all the
units initially ordered.
Net capital expenditures declined to $129 million in 1996, from $155
million in 1995 fromand $219 million in 1994 and
$197 million in 1993.1994. These expendituresexenditures were funded with
proceeds from long-term debt and cash generated from operations.
10
SELECTED BALANCE SHEET DATA
AS OF DECEMBER 31 1995 1994 1993
- ------------------------------------------------------------------------------
- ---------------------------
As of December 31 1996 1995 1994
- -------------------------------------------------------------------------
Working capital ratio 1.03 1.01 1.02 1.76
Current maturities of long-term debt (millions) $ 49.8 $ 30.3 $ 68.1 --
Total debt (millions) 382.3 369.3 367.3 303.5
Total debt to equity 1.07 1.03 .97 .88
Total debt as a percentage of total capital .52 .51 .49 .47
While total debt levels have increased during 1994 and 1995, primarily
due to capital expenditures, the 1993 working capital ratio was unusually
high because no debt was classified as current at December 31, 1993. The
Company's liquidity has essentially remained the same during 1994 and 1995.
The Company is authorized to issue up to $250 million in notes under a
commercial paper note program, of which $145$170 million was outstanding at
December 31, 1995.1996. The Company filed a prospectus supplement with the
Securities and Exchange Commission in June 1995 to issue up to $150 million
of senior or subordinated medium-term notes, of which $50 million of senior
notes were outstanding at December 31, 1995.1996. In addition, the Company had
approximately $166$128 million of uncommitted lines of credit, none of which were
outstanding at December 31, 1995.1996.
As of December 31, 1995,1996, the Company had committed to purchase
approximately $203$69 million of revenue and service equipment (net cost, after
expected proceeds from sale or trade-in allowances of $51$21 million).
In October 19951996 the Board of Directors authorized the repurchase of up
to 1.02.0 million shares of the Company's common stock, from time-to-time in the
open market or through privately negotiated transactions at prevailing market
prices. This was in addition to an authorization in October 19941995 to
repurchase up to .51.0 million shares. During 1996, the Company purchased
1,159,100 shares at market prices ranging from $14.13 per share to $16.63 per
share. During 1995, the Company repurchased 513,742 shares at market prices
ranging from $13.125 per share to $15.625 per share. During 1994, the
Company repurchased 134,500 shares at market prices ranging from $15.125 per
share to $15.75 per share. The Company intends to hold these shares in
treasury for general corporate purposes, which may include employee stock
options and restricted stock awards.
1110
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
PAGE
----- -------------------------------------------------------------------------------
Management's and Independent Auditors' Report 1312
Consolidated Balance Sheets at December 31, 1996 and 1995 and 1994 1413
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 1994 and 19931994 15
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 1994 and 19931994 16
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 1994 and 19931994 17
Notes to Consolidated Financial Statements 18
1211
MANAGEMENT'S REPORT
Management is responsible for the financial statements and other information
contained in its annual report. The financial statements have been prepared in
accordance with appropriate, generally accepted accounting principles, and the
other information presented is consistent with the financial statements. In
preparing these financial statements, it is necessary to make informed judgments
and estimates regarding the expected effects of certain events and transactions
that are currently being reported.
To meet its financial reporting responsibilities, management depends upon
systems of internal controls which are intended to provide reasonable assurance,
in relationship to reasonable cost, that assets are safeguarded, that
transactions are executed in accordance with management's authorization and that
the transactions are properly recorded so as to permit preparation of financial
statements in accordance with generally accepted accounting principles.
Management seeks to provide reasonable assurance that the objectives of internal
accounting control are met by prudent selection of personnel, adoption of
appropriate policies, effective communication to personnel and establishment of
an effective system of authorization.
The Board of Directors performs an oversight role with respect to
management's financial reporting responsibilities. To ensure effective discharge
of its responsibilities, the Board of Directors has established an audit
committee. The majority of the committee members are nonemployees of the Company
and its subsidiaries. The audit committee has met and reviewed accounting
issues, financial reporting and audit matters, including those pertaining to the
effectiveness of the Company's systems of internal control.
The consolidated financial statements have been audited by KPMG Peat Marwick
LLP. As part of their audit of the Company's consolidated financial statements,
our independent accountants considered the Company's system of internal control
structure to the extent they deemed necessary to determine the nature, timing
and extent of their audit tests. These auditing procedures are intended to
provide a reasonable level of assurance that the consolidated financial
statements are fairly stated in all material respects.
Kirk Thompson Jerry W. Walton
President and Chief Executive Officer Executive Vice President,
Finance and Chief Financial Officer
March 15, 1996February 19, 1997
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of J.B. Hunt
Transport Services, Inc. and subsidiaries as of December 31, 19951996 and 1994,1995, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1995.1996. These consolidated financial statements are the responsibility of the
Company'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 generally accepted auditing
standards. 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, 19951996 and 1994,1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995,1996, in conformity with generally
accepted accounting principles.
Little Rock, Arkansas KPMG Peat Marwick LLP
February 9, 1996
137, 1997
12
CONSOLIDATED BALANCE SHEETSJ. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 19951996 and 1994,1995
(Dollars in thousands)
ASSETS 1995 1994
---------- ----------
Current assets:
Cash and cash equivalents $ 4,260 2,142
Accounts receivable 143,002 138,295
Prepaid expenses:
Taxes, licenses and permits 13,280 11,987
Repair parts and supplies 6,447 16,277
Other (note 4) 9,918 4,449
----------- ----------
Total prepaid expenses 29,645 32,713
----------- ----------Assets 1996 1995
------ ---- ----
Current assets:
Cash and cash equivalents $ 3,786 4,260
Accounts receivable 151,357 143,002
Refundable income taxes (note 4) 8,426 5,981
Inventories 6,772 6,447
Prepaid expenses 20,766 17,217
Deferred income taxes (note 4) 11,000 10,171 8,083
----------- ----------
Total current assets 187,078 181,233
----------- ----------
Property and equipment, at cost:
Revenue and service equipment 1,050,986 966,878
Land 17,313 12,268
Structures and improvements 50,962 44,799
Furniture and office equipment 65,547 65,290
----------- ----------
Total property and equipment 1,184,808 1,089,235
Less accumulated depreciation 375,798 299,539
----------- ----------
Net property and equipment 809,010 789,696
----------- ----------
Other assets (note 7) 20,694 22,770
----------- ----------
$ 1,016,782 993,699
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 2) $ 30,310 68,075
Trade accounts payable 90,127 48,847
Claims accruals 38,014 34,248
Accrued payroll 11,083 9,626
Other accrued expenses 15,065 17,125
----------- ----------
Total current liabilities 184,599 177,921
----------- ----------
Long-term debt (notes 2 and 9) 339,015 299,243
Claims accruals 13,500 16,750
Deferred income taxes (note 4) 122,729 121,887
----------- ----------
Total liabilities 659,843 615,801
----------- ----------
Stockholders' equity (notes 2 and 3):
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 39,009,858 shares 390 390
Additional paid-in capital 105,577 104,723
Retained earnings 267,823 277,718
Foreign currency translation adjustment (6,739) -
----------- ----------
367,051 382,831
Less common stock in treasury at cost
(820,703 shares in 1995 and 504,732 shares in 1994 10,112 4,933
----------- ----------
Total stockholders' equity 356,939 377,898
----------- ----------
Commitments and contingencies (notes 2, 3, 5, 8 and 9)
$ 1,016,782 993,699
----------- ----------
-----------
----------
---------
Total current assets 202,107 187,078
---------- ---------
Property and equipment, at cost:
Revenue and service equipment 1,069,285 1,050,986
Land 19,354 17,313
Structures and improvements 56,884 50,962
Furniture and office equipment 72,722 65,547
---------- ---------
Total property and equipment 1,218,245 1,184,808
Less accumulated depreciation 404,992 375,798
---------- ---------
Net property and equipment 813,253 809,010
---------- ---------
Other assets (note 7) 25,565 20,694
---------- ---------
$1,040,925 1,016,782
---------- ---------
---------- ---------
(Continued)
13
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1996 and 1995
(Dollars in thousands)
Liabilities and Stockholders' Equity 1996 1995
------------------------------------ ---- ----
Current liabilities:
Current maturities of long-term debt
(note 2) $ 49,750 30,310
Trade accounts payable 83,846 90,127
Claims accruals 33,693 38,014
Accrued payroll 12,852 11,083
Other accrued expenses 15,999 15,065
---------- ---------
Total current liabilities 196,140 184,599
---------- ---------
Long-term debt (note 2) 332,571 339,015
Claims accruals 12,800 13,500
Deferred income taxes (note 4) 142,159 122,729
---------- ---------
Total liabilities 683,670 659,843
---------- ---------
Stockholders' equity (notes 2 and 3):
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
39,009,858 shares 390 390
Additional paid-in capital 105,897 105,577
Retained earnings 282,364 267,823
Foreign currency translation adjustment (5,621) (6,739)
---------- ---------
383,030 367,051
Less common stock in treasury at cost
(1,814,084 shares in 1996 and 820,703
shares in 1995) 25,775 10,112
---------- ---------
Total stockholders' equity 357,255 356,939
Commitments and contingencies (notes 2, 3,
5 and 8)
---------- ---------
$1,040,925 1,016,782
---------- ---------
---------- ---------
See accompanying notes to consolidated financial statements.
14
CONSOLIDATED STATEMENTS OF OPERATIONSJ. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 1994 and 19931994
(Dollars in thousands, except per share amounts)
1996 1995 1994
1995
------------ ---------- ------------------- ---------
Operating revenues $$1,486,748 1,352,225 1,207,601 1,020,921
Operating expenses:
Salaries, wages and employee benefits (note 5) 484,702 457,567 405,136
371,849
Purchased transportation 431,295 362,989 288,153 187,726
Fuel and fuel taxes (note 9)160,265 143,239 131,026
126,966
Depreciation 124,931 130,265 110,662 83,210
Operating supplies and expenses 92,426 94,592 82,939 73,511
Insurance and claims 58,387 50,707 37,951 40,424
General and administrative expenses 28,501 32,981 26,959 19,032
Operating taxes and licenses 27,422 26,422 27,016 28,905
Special charges (note 10)9) - 17,296 - -
Communication and utilities 18,456 14,822 12,863
10,672
------------ ---------- ------------------- ---------
Total operating expenses 1,426,385 1,330,880 1,122,705
942,295
------------ ---------- ------------------- ---------
Operating income 60,363 21,345 84,896
78,626
Interest expense 24,694 24,790 19,748
13,800
------------ ---------- ------------------- ---------
Earnings (loss) before income taxes 35,669 (3,445) 65,148 64,826
Income taxes (note 4) 13,554 (1,275) 24,756
26,605
------------ ---------- ------------------- ---------
Net earnings (loss) (note 1(d)) $ 22,115 (2,170) 40,392
38,221
------------ ---------- --------- ---------
---------- --------- ---------
Earnings (loss) per share $ .58 .(06) 1.05
1.00
---- ---- ----
---- ---- -------------- --------- ---------
---------- --------- ---------
See accompanying notes to consolidated financial statements.
15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYJ. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 1994 and 19931994
(Dollars in thousands, except per share amounts)
FOREIGN TOTAL
ADDITIONAL RETAINED CURRENCY STOCKHOLDERS'
COMMON PAID-IN EARNINGS TRANSLATION TREASURY EQUITY
STOCK CAPITAL (NOTEForeign Total
Additional Retained currency stockholders'
Common paid-in earnings translation Treasury equity
stock capital (note 2) ADJUSTMENT STOCK (NOTEadjustment stock (note 3)
----------- ------- --------------- ---------- ----- -------- -------
Balances at December 31, 19921993 $ 390 99,521 214,503 - (5,788) 308,626
Tax benefit of stock options exercised - 890 - - - 890
Sale of treasury stock to employees - 1,951 - - 1,927 3,878
Cash dividends paid ($.20 per share) - - (7,651) - - (7,651)
Net earnings - - 38,221 - - 38,221
------ ------- ------- ------ ------ -------
Balances at December 31, 1993 390 102,362 245,073 - (3,861) 343,964
Tax benefit of stock options exercised - 735 - - - 735
Sale of treasury stock to employees - 1,626 - - 1,008 2,634
Repurchase of treasury stock - - - - (2,080) (2,080)
Cash dividends paid ($.20 per share) - - (7,747) - - (7,747)
Net earnings - - 40,392 - - 40,392
------ ------- ------- ------ ------------- -------
Balances at December 31, 1994 390 104,723 277,718 - (4,933) 377,898
Tax benefit of stock options exercised - 301 - - - 301
Sale of treasury stock to employees - 553 - - 1,878 2,431
Repurchase of treasury stock - - - - (7,057) (7,057)
Cash dividends paid ($.20 per share) - - (7,725) - - (7,725)
Foreign currency translation adjustment - - - (6,739) - (6,739)
Net loss - - (2,170) - - (2,170)
------ ------- ------- ------ ------------- -------
Balances at December 31, 1995 $ 390 105,577 267,823 (6,739) (10,112) 356,939
Tax benefit of stock options exercised - 325 - - - 325
Sale of treasury stock to employees - (5) - - 2,114 2,109
Repurchase of treasury stock - - - - (17,777) (17,777)
Cash dividends paid ($.20 per share) - - (7,574) - - (7,574)
Foreign currency translation adjustment - - - 1,118 - 1,118
Net earnings - - 22,115 - - 22,115
------ ------- ------- ------ ------- -------
Balances at December 31, 1996 $ 390 105,897 282,364 (5,621) (25,775) 357,255
------ ------- ------- ------ ------- -------
------ ------- ------- ------ ------- -------
See accompanying notes to consolidated financial statements.
16
16
CONSOLIDATED STATEMENTS OF CASH FLOWSJ. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 1994 and 19931994
(Dollars in thousands)
1996 1995 1994
1993
- -------------------------------------------------------------------------------------- ---- ----
Cash flows from operating activities:
Net earnings (loss) $ 22,115 (2,170) 40,392 38,221
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation 124,931 130,265 110,662 83,210
Provision for noncurrent deferred income taxes 19,430 842 14,598 17,396
Tax benefit of stock options exercised 325 301 735
890
Special charges - 17,296 - -
Amortization of discount, net 296 22 287 307
Changes in assets and liabilities:
Accounts receivable (8,355) (4,707) (1,011)
(31,375)
Prepaid expensesOther current assets (6,319) (4,637) (9,503) 1,092
Deferred income taxes (829) (2,088) (3,490) 5,271
Trade accounts payable (6,281) 41,280 11,269
5,583
Claims accruals (5,021) 516 3,874 (2,114)
Other accrued expenses 2,703 (1,603) 3,763
3,253
------------------ -------- --------
Net cash provided by operating activities 142,995 175,317 171,576
121,734
------------------ -------- --------
Cash flows from investing activities:
Additions to property and equipment (192,434) (206,570) (282,581) (285,687)
Proceeds from sale of equipment 63,260 51,350 63,862 88,651
Increase in other assets (3,753) (7,613) (10,444)
(6,306)
------------------ -------- --------
Net cash used in investing activities (132,927) (162,833) (229,163)
(203,342)
------------------ -------- --------
Cash flows from financing activities:
Net borrowings (repayments) on short-term
obligations 24,440 (37,765) 75,848 (1,075)
Proceeds from long-term debt - 49,750 - 99,680
Repayments of long-term debt (11,740) (10,000) (12,316) (11,667)
Proceeds from sale of treasury stock 2,109 2,431 2,634 3,878
Repurchase of treasury stock (17,777) (7,057) (2,080)
-
Dividends paid (7,574) (7,725) (7,747)
(7,651)
------------------ -------- --------
Net cash provided by (used in)
financing activities (10,542) (10,366) 56,339
83,165
------------------ -------- --------
Net increase (decrease) in cash and temporary
investmentscash equivalents (474) 2,118 (1,248)
1,557
Cash and temporary investmentscash equivalents at beginning of year 4,260 2,142 3,390
1,833
------------------ -------- --------
Cash and temporary investmentscash equivalents at end of year $ 3,786 4,260 2,142
3,390
---------- -------- --------
---------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 25,258 25,019 20,366
12,014
Income taxes (2,602) 3,431 13,606
3,743
---------- -------- --------
---------- -------- --------
See accompanying notes to consolidated financial statements.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJ. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 1994 and 19931994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J. B. Hunt Transport Services, Inc., together with its
wholly-owned subsidiaries ("Company"), is a diversified
transportation services and logistics company operating under the
jurisdiction of the U.S. Department of Transportation and various
state regulatory agencies.
(a) 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.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three
months or less to be cash equivalents.
(d) TIRES IN SERVICE
The Company capitalizes 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.
(d)(e) PROPERTY AND EQUIPMENT
Depreciation of property and equipment is calculated on the straight-linestraight-
line method over the estimated useful lives of 5 - 10 years for
revenue and service equipment, 10 to 40 years for structures and
improvements, and 3 to 10 years for furniture and office equipment.
Gains on dispositions of revenue and other equipment, which are
offset against depreciation expense, were $8,088,000,approximately $7,949,000,
$7,181,000 and $12,251,000 and $20,092,000 for the years ended December 31, 1996,
1995 and 1994, and 1993, respectively.
On April 1, 1993, the Company changed the estimated salvage value for
some of its revenue and service equipment. The effect upon 1993 net earnings
was an increase of approximately $2,639,000 ($.07 per share).
(e)(f) REVENUE RECOGNITION
The Company recognizes revenue based on relative transit time in each
reporting period with expenses recognized as incurred.
(f)(Continued)
18
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(g) INCOME TAXES
Income 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. 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.
(g)(h) EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average
number of shares outstanding during each year (38,520,323(37,913,331 in 1996;
38,520,323 in 1995; and 38,559,528 in 1994; and 38,276,109 in 1993)1994). Shares issuable under
employee stock options are excluded from the weighted average number of
shares as their dilutive effect is less than 3%.
(h)(i) CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables.
Concentrations of credit risk with respect to trade receivables are
limited due to the Company's large number of customers and the diverse
range of industries which they represent. As of December 31, 1995,1996, the
Company had no significant concentrations of credit risk.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(i)(j) DERIVATIVES
The differential paid or received on interest rate swap agreements is
accrued as interest rates change and is charged or credited to interest
expense over the life of the agreements. Any gains or losses realized
upon the termination of an interest rate swap agreement are deferred
and amortized over the remaining life of the original term as a charge
or credit to interest expense.
The differential paid or received on fuel swap agreements is accrued as
fuel prices change and is charged or credited to fuel expense on a
monthly basis.
(j)(k) FOREIGN CURRENCY TRANSLATION
Local 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. Cumulative translation adjustments, which
reflect foreign currency exchange rate changes applicable to Mexican
operations, are recorded as a component of stockholders' equity and
reduced stockholders' equity by approximately $5,621,000 and $6,739,000
at December 31, 1995.
(k)1996 and 1995, respectively.
(Continued)
19
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) MANAGEMENT INCENTIVE PLAN
Prior to January 1, 1996, the Company accounted for its management
incentive plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations. As such, compensation expense
would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. On January 1,
1996, the Company adopted the provisions of Statement of Financial
Accounting Standard ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of
grant or alternatively to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net earnings and pro forma
earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
(m) SPECIAL CHARGES
The Company continually reevaluates the carrying value of its assets for
events or changes in circumstances which indicate that the carrying
value may not be recoverable. As part of this reevaluation, the
Company estimates the future cash flows expected to result from the use
of the asset and its eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized
through a charge to earnings.
(l) RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified to conform to 1995
presentation. These reclassifications have no effect on prior years' net
earnings.
(2) LONG-TERM DEBT
- --------------------------------------------------------------------------------------
Long-term debt consists of (in thousands): 1995 1994
-------- -------
Commercial paper $145,310 183,075
Senior notes payable, interest at 6.25% payable semiannually 100,000 100,000
Senior notes payable, interest at 7.75% payable semiannually 5,000 10,000
Senior notes payable, interest at 7.84% payable semiannually 20,000 25,000
Senior subordinated notes, interest at 7.80% payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25% payable semiannually 25,000 -
Senior notes payable, interest at 6.00% payable semiannually 25,000 -
-------- -------
370,310 368,075
Less: current maturities (30,310) (68,075)
Unamortized discount (985) (757)
-------- -------
$339,015 299,243
-------- -------
--------Long-term debt consists of (in thousands):
December 31,
---------------------
1996 1995
---- ----
Commercial paper $ 169,750 145,310
Senior notes payable, interest at 6.25%
payable semiannually 98,260 100,000
Senior notes payable, interest at 7.75%
payable semiannually - 5,000
Senior notes payable, interest at 7.84%
payable semiannually 15,000 20,000
Senior subordinated notes, interest at
7.80% payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25%
payable semiannually 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
--------- -------
383,010 370,310
Less: current maturities (49,750) (30,310)
Unamortized discount (689) (985)
--------- -------
$ 332,571 339,015
--------- -------
--------- -------
(Continued)
20
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under its commercial paper note program, the Company is authorized to issue
up to $250 million in notes. These notes are supported by two credit
agreements, which aggregate $250 million, with a group of banks, of which
$125 million expires March 28, 199627, 1997 and $125 million expires March 31,
1999. The effective rate on the commercial note program was 6.11%6.18% and
5.90%6.11% for the years ended December 31, 1996 and 1995, and 1994, respectively.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 6.25% senior notes (face amount $100,000,000) are payable at maturity on September 1, 2003; the
7.75% senior notes are payable in annual installments of $5,000,000 on
October 31; the 7.84% senior notes are payable in annual installments of
$5,000,000 on March 31; the 7.80% senior subordinated notes are payable in
five equal annual installments beginning October 30, 2000; the 6.25% senior
notes (face amount $25,000,000) are payable at maturity on November 17, 2000; and the 6.00% senior
notes are payable at maturity on December 12, 2000.
Under the terms of the credit agreements and the note agreements, the Company
is required to maintain certain financial covenants including leverage
tests, minimum tangible net worth levels and other financial ratios.
During January 1996, the Company and its creditors amended certain terms of
these agreements in consideration of the special charges described in note
10. As a result of these amendments, the Company is in compliance with all
financial covenants.
The Company has approximately $166$128 million of uncommitted lines of credit,
none of which were outstanding at December 31, 1995.1996. These lines are with
various domestic and international banks and are due on demand. Interest
on borrowings is generally tied to the banks' prevailing base rates or
other alternative market rates. No commitment or facility fees are paid on
these lines of credit and the obligations are typically evidenced by
unsecured demand notes.
Current maturities of long-term debt at December 31, 19951996 consist of
outstanding commercial paper associated with the revolving credit agreement
which expires March 28, 199627, 1997 and two installmentsone installment of the senior notes. The
aggregate annual maturities of long-term debt for each of the five years
ending December 31 are as follows (in thousands): 1996, $30,310; 1997, $5,000;$49,750; 1998,
$5,000; 1999, $130,000; 2000, $60,000; and 2000, $60,000.2001, $10,000.
(3) CAPITAL STOCK
The Company maintains a Management Incentive Plan ("Plan") that provides
various vehicles to compensate key employees with Company common stock.
Under the Plan, the Company is authorized to award, in aggregate, not more
than 5,000,000 shares. At December 31, 19951996 there were approximately
474,000221,000 shares available for granting under the Plan. The Company has
utilized three such vehicles to award stock or grant options to purchase
the Company's common stock: restricted stock awards, restricted options
and nonstatutory stock options.
Restricted stock awards are granted to key employees subject to restrictions
regarding transferability and assignment. Shares of Company common stock
are issued to 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, disability or certain cases
of retirement causes the unvested portion of the award to be forfeited.
(Continued)
21
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Key employees have been granted restricted options to purchase stock. The
option price is 50% of the fair market value of the stock at the date of
grant. Vesting of the award generally occurs over a four year period
beginning on the grant date. Failure to exercise a vested option within
210 days after vesting or termination of the employee for any reason other
than death or disability will cause unexercised and nonvested options to be
forfeited.
The Plan provides that nonstatutory stock options may be granted to key
employees for the purchase of Company common stock for 100% of the fair
market value at the grant date. The options generally vest over a ten year
period and are forfeited if the employee terminates for any reason.
Compensation expense under the Plan is charged to earnings over the vesting
period and amounted to approximately $628,000, $1,100,000 $1,600,000 and $1,600,000
for the years ended December 31, 1996, 1995 and 1994, and 1993, respectively.
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the restricted and nonstatutory options to purchase Company
common stock follows:
NUMBER
NUMBER OPTION PRICE OF SHARES
OF SHARES PER SHARE EXERCISABLE
---------- -------------Number
Number Option price of shares
of shares per share exercisable
--------- ----------- -----------
Outstanding at December 31, 1992 $1,332,095 6.00 - 24.63 369,706
Granted 148,500 18.25 - 23.50
Exercised (219,809) 6.00 - 20.25
Terminated (71,430) 6.00 - 20.25
----------
Outstanding at December 31, 1993 1,189,356 $ 6.00 - 24.63 369,663
Granted 391,750 17.00 - 23.00
Exercised (194,270) 6.00 - 19.50
Terminated (52,375) 11.58 - 18.25
----------
Outstanding at December 31, 1994 1,334,461 6.00 - 24.63 399,536
Granted 1,626,000 13.38 - 19.25
Exercised (116,980) 6.00 - 15.93
Terminated (117,750) 10.83 - 23.00
----------
Outstanding at December 31, 1995 2,725,731 9.33 - 24.63 415,606
Granted 493,000 14.00 - 21.25
Exercised (192,956) 9.33 - 18.75
Terminated (284,850) 11.58 - 23.00
----------
Outstanding at December 31, 1996 $2,740,925 11.58 - 24.63 294,950
---------- ------------- -------
---------- ------------- -------
---------- -------
During 1995, the Board of Directors established a nonqualified stock option
plan to provide performance based compensation to the Chairman of the
Board. The plan must be approved by the shareholders of the Company at the
annual meeting in May of 1996. The plan allows the Chairman the option to purchase up to 2.5
million shares of the Company's common stock at a price of $17.63 per
share. These options are exercisable after five years, except for special
circumstances in which the options vest earlier. The options must be
exercised within one year of vesting and all unexercised options will
terminate.
(Continued)
22
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net
earnings (loss) would have been reduced to the pro forma amounts indicated
below.
1996 1995
---- ----
Net earnings (loss) As reported $ 22,115 (2,170)
Pro forma 19,180 (2,820)
Earnings (loss) per share As reported $ .58 (.06)
Pro Forma .51 (.07)
Pro forma net earnings (loss) reflects only options granted in 1996 and 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
(loss) 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, 1995 is not considered.
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $7.88 and $6.35, respectively, on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions: 1996 - expected dividend yield 1.4%, risk-free interest rate
of 6.2%, and an expected life of 5.6 years; 1995 - expected dividend yield
1.4%, risk-free interest rate of 5.6%, and an expected life of 5.6 years.
On January 24, 1996,23, 1997, the Company's Board of Directors declared a cash
dividend of $.05 per share payable on February 16, 199617, 1997 to shareholders of
record on February 2, 1996.3, 1997.
(4) INCOME TAXES
Total income tax expense (benefit) for the years ended December 31, 1996,
1995 1994 and 19931994 was allocated as follows (in thousands):
1995 1994 1993
-------- ------ ------
Earnings (loss) before income taxes $ (1,275) 24,756 26,605
Stockholders' equity, for tax
benefit of stock options exercised (301) (735) (890)
-------- ------ ------
$ (1,576) 24,009 25,715
-------- ------ ------
--------1996 1995 1994
---- ---- ----
Earnings (loss) before income tax $ 13,554 (1,275) 24,756
Stockholders' equity, for tax benefit
of stock options exercised (325) (301) (735)
--------- ------ ------
$ 13,229 (1,576) 24,021
--------- ------ ------
--------- ------ ------
(Continued)
23
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense (benefit) attributable to earnings (loss) before
income taxes consists of (in thousands):
1995 1994 1993
------- ------ ------
Current expense (benefit):
Federal $(1,193) 12,897 2,596
State and local 1,164 751 1,344
------- ------ ------
(29) 13,648 3,940
------- ------ ------
Deferred expense (benefit):
Federal (591) 9,929 20,238
State and local (655) 1,179 2,427
------- ------ ------
(1,246) 11,108 22,665
------- ------ ------
Total tax expense (benefit) $(1,275)1996 1995 1994
-------- ------- ------
Current expense (benefit):
Federal $(5,830) (1,193) 12,897
State and local 783 1,164 751
------- ------ ------
(5,047) (29) 13,648
------- ------ ------
Deferred expense (benefit):
Federal 20,366 (591) 9,929
State and local (1,765) (655) 1,179
------- ------ ------
18,601 (1,246) 11,108
------- ------ ------
Total tax expense (benefit) $13,554 (1,275) 24,756 26,605
------- ------ ------
------- ------ ------
The following is a reconciliation between the effective income tax rate
and the applicable statutory Federal income tax rate for each of the three
fiscal years in the period ended December 31, 1995:
1996:
1996 1995 1994 1993
-------- ------ ------
Income tax - statutory rate (35.00)% 35.00% 35.00%
State tax, net of Federal benefit 9.60 1.93 3.78
Tax credits (9.65) (0.92) (2.71)
Other, net (1.95) 1.99 4.98
------ ------- -----
Income tax - statutory rate 35.00% (35.00) 35.00
State tax, net of Federal benefit (1.79) 9.60 1.93
Tax credits (0.87) (9.65) (0.92)
Other, net 3.92 (1.95) 1.99
----- ------ -----
Effective income tax rate 38.00% (37.00) 38.00
----- -----
Effective income tax rate (37.00)% 38.00% 41.05% ------ -----
----- ------ ----- -----
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred income tax expense (benefit)
attributable to earnings (loss) before income taxes are as follows (in
thousands):
1995 1994 1993
-------- ------ ------
Deferred tax expense (benefit)
(exclusive of the effects of other
components listed below) $(1,246) 12,788 22,665
Adjustments to deferred tax assets
and liabilities for negotiated
income tax settlements - (1,680) -
------- ------ ------
$(1,246)1996 1995 1994
------- ------- ------
Deferred tax expense (benefit) (exclusive
of the effects of other components
listed below) $18,601 (1,246) 12,788
Adjustments to deferred tax assets and
liabilities for negotiated income tax
settlements - - (1,680)
------- ------ ------
$18,601 (1,246) 11,108 22,665
------- ------ ------
------- ------ ------
(Continued)
24
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 19951996 and 19941995 are presented below (in thousands):
1995 1994
--------- -------
Deferred tax assets:
Claims accruals, principally due to accrual for
financial reporting purposes $(17,834) (17,809)
Tax credit carryforwards (17,896) (21,215)
Accounts receivable, principally due to
allowance for doubtful accounts (4,353) (3,769)
Special charges, principally due to write-off
for financial reporting purposes (5,670) -
Other (4,673) (3,100)
-------- -------
Total gross deferred tax assets (50,426) (45,893)
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and capitalized
interest 153,176 147,653
Prepaid permits and insurance, principally due
to write-offs for income tax purposes 5,653 5,373
Other 4,155 6,671
-------- -------
Total gross deferred tax liabilities 162,984 159,697
-------- -------
Net deferred tax liability $112,558 113,8041996 1995
--------- --------
Deferred tax assets:
Claims accruals, principally due to accrual
for financial reporting purposes $(16,288) (17,834)
Tax credit carryforwards (9,193) (17,896)
Accounts receivable, principally due to
allowance for doubtful accounts (5,410) (4,353)
Special charges, principally due to write-off
for financial reporting purposes - (5,670)
Other (4,489) (4,673)
-------- -------
Total gross deferred tax assets (35,380) (50,426)
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and
capitalized interest 153,303 153,176
Prepaid permits and insurance, principally
due to write-offs for income tax purposes 6,709 5,653
Other 6,527 4,155
-------- -------
Total gross deferred tax liabilities 166,539 162,984
-------- -------
Net deferred tax liability $131,159 112,558
-------- -------
-------- -------
The Company believes its history of profitability and taxable income,
its taxes paid within the three year carryback period and its utilization of
tax planning sufficiently supports the value of the deferred tax assets.
Accordingly, the Company has not recorded a valuation allowance on its books
as all deferred tax assets are more than likely to be recovered.
The Company had general business tax credit carryforwards of
approximately $3 million$2,621,000 expiring from the year 2007 to 2009, and alternative
minimum tax credit carryforwards with no expiration of approximately
$15
million$6,572,000 at December 31, 1995.
Included in other prepaid expenses are refundable income taxes of
$5,981,000 and $386,000 at December 31, 1995 and 1994, respectively.
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1996.
(5) EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution employee retirement plan,
which includes a 401(k) option, under which employees are eligible to
participate after they complete one year of service. Company contributions
to the plan each year are made at the discretionary amount determined by the
Company's Board of Directors. For the years ended December 31, 1996, 1995
1994 and 1993,1994, total Company contributions to the plan, including matching 401(k)
contributions, were $3,400,000,$3,450,000, $3,394,000 and $1,950,000, and $1,900,000, respectively.
(Continued)
25
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND TEMPORARY INVESTMENTS, ACCOUNTS RECEIVABLE, AND TRADE ACCOUNTS
PAYABLE
The carrying amount approximates fair value because of the short maturity
of these instruments.
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.
The fair value of the fixed rate debt is presented as the present value
of future cash flows discounted using the Company's current borrowing
rate for notes of comparable maturity. The calculation arrives at a
theoretical amount the Company would pay a creditworthy third party to
assume its 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 that the Company
would contractually be required to pay if it retired the debt early.
INTEREST RATE SWAP AGREEMENTS
(NOTE 9)
The fair values of interest rate swap agreements are obtained from dealer
quotes. These values represent the estimated amount the Company would
pay to terminate such agreements, taking into consideration current
interest rates and the creditworthiness of the counterparties.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
AT DECEMBERAt December 31, 1996 At December 31, 1995
AT DECEMBER 31, 1994---------------------- ---------------------
---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
--------Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- -------------- ----------
Cash and temporary investments $ 3,786 3,786 4,260 4,260
2,142 2,142
Accounts receivable 151,357 151,357 143,002 143,002 138,295 138,295
Trade accounts payable 83,846 83,846 90,127 90,127 48,847 48,847
Long-term debt:
Commercial paper 169,750 169,750 145,310 145,310 182,595 182,595
Fixed rate obligations 212,571 208,966 224,015 229,940 184,723 166,807
Interest rate swap agreements - - - (140)
- (1,964)-------- ------- ------- -------
-------- ------- ------- -------
(Continued)
26
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) RELATED PARTY TRANSACTIONS
The Company advances premiums on life insurance policies on the lives of
the Company's principal stockholder and his wife. The Company has advanced
$3,877,635 on these policies which, along with related accrued interest
thereon of approximately $590,000, is included in other assets at December
31, 1995. All premiums paid by
the Company, along with accrued interest thereon, are reimbursable from
a trust which is the owner and beneficiary of the policy. The Company
has a guarantee from the stockholder securing any
deficiency in cash surrender value iffor the policies are terminated before cash
surrender value exceeds actual premium advanced. Atamount of premiums paid by
the Company together with interest at the rate of 5% per annum. The
amounts reimbursable to the Company amount to approximately $4,630,000
and $4,468,000 at December 31, 1996 and 1995, respectively. These
amounts are included in other assets in the cash surrender value of such polices was approximately $2,315,000.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSaccompanying balance sheets.
(8) COMMITMENTS AND CONTINGENCIES
The Company has committed to purchase approximately $203$69 million of revenue
and service equipment (net cost, after expected proceeds from sale or
trade-in allowances of $51$21 million).
The Company 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
believes the resolution of claims and pending litigation will not have a
material adverse effect on the financial condition of the Company.
(9) DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements are used to reduce the potential impact of
changes in interest rates on the Company's debt portfolio. At December 31,
1995, an interest rate swap agreement with an aggregate notional amount of
$20 million was outstanding. The estimated fair value of the swap at December
31, 1995 was a liability of approximately $140,000. This value was determined
from a dealer quotation and represents the estimated amount the Company would
pay to terminate the agreement.
The Company uses fuel swap agreements to hedge anticipated purchases of
diesel fuel. Under these agreements, the Company receives or makes payments
on the differential between a contractual index price and the actual average
index during such period.
(10) QUARTERLY FINANCIAL INFORMATION
During the fourth quarter of 1995, the Company recorded special charges of
approximately $17,296,000 to reduce the carrying value of idle and under-performingunder-
performing assets, primarily property and equipment and inventories
associated with the auto hauling operations. The effect of these charges
reduced net earnings for the fourth quarter and for the year by
approximately $10,896,000 ($.29 per share).
Operating results (unaudited) by quarter for the years ended December 31,
19951996 and 19941995 are as follows (in thousands, except per share data):
QUARTER
-----------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
--------Quarter
-------------------------------------------------------
First Second Third Fourth Total
----- ------ ------ ------ -----
1996:
Operating revenues $ 354,014 372,573 378,739 381,422 1,486,748
---------- ------- ------- ------- ---------
---------- ------- ------- ------ ---------
Operating income $ 10,432 17,436 17,433 15,062 60,363
---------- ------- ------- ------ ---------
---------- ------- ------- ------ ---------
Net earnings $ 2,803 6,866 7,082 5,364 22,115
---------- ------- ------- ------ ---------
---------- ------- ------- ------ ---------
Earnings per share $ .07 .18 .19 .14 .58
---------- ------- ------- ------ ---------
---------- ------- ------- ------ ---------
(Continued)
27
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Quarter
-------------------------------------------------------
First Second Third Fourth Total
----- ------ ------ ------ -----
1995:
Operating revenues $309,424$ 309,424 329,219 355,114 358,468 1,352,225
------------------ ------- ------- ------- ---------
---------- ------- ------- ------- ---------
Operating income $ 13,738 3,214 9,716 (5,323) 21,345
------------------ ------- ------- ------- ---------
---------- ------- ------- ------- ---------
Net earnings (loss) $ 4,890 (2,139) 1,840 (6,761) (2,170)
------------------ ------- ------- ------- ---------
---------- ------- ------- ------- ---------
Earnings (loss) per share $ .13 (.06) .05 (.18) (.06)
------------------ ------- ------- ------- ---------
1994:
Operating revenues $264,663 297,735 313,911 331,292 1,207,601
-------- ------- ------- ------- ---------
Operating income $ 13,019 23,185 25,026 23,666 84,896
-------- ------- ------- ------- ---------
Net earnings $ 5,726 11,575 12,260 10,831 40,392
-------- ------- ------- ------- ---------
Earnings per share $ .15 .30 .32 .28 1.05
------------------ ------- ------- ------- ---------
2428
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, 19951996 involving a change of accountants or disagreements
on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for Items 10, 11 and 12 is hereby incorporated
by reference from the Notice and Proxy Statement For Annual Stockholders'
Meeting of April 17, 1997 set forth under sections entitled "Proposal One
Election of Directors," "Board Committees," "Executive Officers," "Voting
Securities and Security Ownership of Management and Principal Stockholders,"
"Executive Compensation and Other Information," "1996and "1997 Performance Based
Compensation,"
"Proposal Two Proposal to Approve the Chairman's Stock Option Incentive Plan"
and "Proposal Three Ratification of Appointment of Auditors.Compensation."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for Item 13 is hereby incorporated by reference
from Note (7) Related Party Transactions of the Notes to Consolidated
Financial Statements and from the Notice and Proxy Statement For Annual
Stockholders' Meeting set forth underin Note (4) to the section entitled "Certain
Transactions."Summary Compensation Table.
PART IV
ITEM 14. EXHIBITS
The following documents are filed as part of this report:
(a) Exhibits
The response to this portion of Item 14 is submitted as a separate section
of this report ("Exhibit Index").
2529
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant had duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lowell, Arkansas, on the 15th19th day of March, 1996.February, 1997.
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 Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ John A. Cooper, Jr. Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors
John A. Cooper, Jr.
/s/ Fred K. Darragh, Jr. Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors
Fred K. Darragh, Jr.
/s/ Wayne Garrison Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors (Chairman)
Wayne Garrison
/s/ Gene George Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors
Gene George
/s/ Thomas L. Hardeman Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors
Thomas L. Hardeman
/s/ J. Bryan Hunt, Jr. Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors (Vice Chairman)
J. Bryan Hunt, Jr.
/s/ J.B. Hunt Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors (Senior Chairman)
J.B. Hunt
/s/ Johnelle Hunt Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors (Corporate
Johnelle Hunt Secretary)
/s/ Lloyd E. Peterson Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors
Lloyd E. Peterson
/s/ Kirk Thompson Member of the Board March 15, 1996February 19, 1997
- ---------------------------- of Directors (President and
Kirk Thompson Chief Executive Officer)
2630
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTIONExhibit
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 Bylaws as amended (incorporated by reference from
Exhibit 3B of the Company's S-1 Registration Statement filed November
22, 1983; Registration Number 2-86684).
3C 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 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.
21 Subsidiaries of J.B. Hunt Transport Services, Inc.
- J.B. Hunt Transport, Inc., a Georgia corporation
- L.A., Inc., an Arkansas corporation
- J.B. Hunt Corp., a Delaware corporation
- J.B. Hunt Special Commodities, Inc., an Arkansas corporation
- J.B. Hunt Logistics, Inc., an Arkansas corporation
- Comercializadora Internacional de Cargo S.A. Dede C.V., a Mexican
corporation
- Hunt Mexicana, S.A. de C.V., a Mexican corporation
- Servicios de Logistica de Mexico, S.A. de C.V., 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.
- Queen City Express, Inc., a North Carolina corporation
- Lake City Express, Inc., an Arkansas Corporation
- FIS, Inc., a Nevada corporation
23 Consent of KPMG Peat Marwick LLP
27 A Financial Data Schedule for the year ended December 31, 1995.
27
1996.
31