FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ----- THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934- -----
COMMISSION FILE NUMBER 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS 71-0335111
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
615 J.B. HUNT CORPORATE DRIVE, LOWELL, ARKANSAS 72745
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, AND ZIP CODE)
(501) 820-0000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D)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
/ /--- ---
THE NUMBER OF SHARES OF THE COMPANY'S $.01 PAR VALUE COMMON STOCK
OUTSTANDING ON JUNESEPTEMBER 30, 2000 WAS 35,152,588.35,165,323.
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim condensed consolidated financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of financial condition, results of operations and
cash flows for the periods presented. They have been prepared in accordance with
Rule 10-01 of Regulation S-X and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Operating results for the three month and sixnine month
periods ended JuneSeptember 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000.
The interim condensed consolidated financial statements have been
reviewed by KPMG LLP, independent public accountants.
These interim condensed consolidated financial statements should be read in
conjunction with the Company's latest annual report and Form 10-K for the year
ended December 31, 1999.
INDEX
Condensed Consolidated Statements of Earnings for the Three
and SixNine Months Ended JuneSeptember 30, 2000 and 1999............................. Page 3
Condensed Consolidated Balance Sheets as of
JuneSeptember 30, 2000 and December 31,1999......................................31, 1999...................................... Page 4
Condensed Consolidated Statements of Cash Flows for the
SixNine Months Ended JuneSeptember 30, 2000 and 1999................................. Page 5
Notes to Condensed Consolidated Financial Statements
as of JuneSeptember 30, 2000.....................................................2000...................................................... Page 6
Review Report of KPMG LLP......................................................LLP.............................................................. Page 1110
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition................................................Condition....................................................... Page 1211
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk.....................Risk............................. Page 1918
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGSCondensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIXNINE MONTHS ENDED
JUNESEPTEMBER 30 JUNESEPTEMBER 30
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating revenues $ 583,500509,422 $ 497,554523,901 $ 1,117,0561,626,478 $ 967,7981,491,699
Operating expenses
Salaries, wages and employee benefits 194,273 176,175 380,158 348,863190,995 181,206 571,153 530,068
Rents and purchased transportation 215,497 161,283 404,229 305,632140,997 179,958 545,226 485,591
Fuel and fuel taxes 58,168 39,211 114,874 75,92061,282 44,305 176,156 120,226
Depreciation 33,320 38,524 64,668 76,43434,244 38,129 98,911 114,563
Operating supplies and expenses 31,491 30,693 61,338 58,24335,505 34,922 96,844 93,165
Insurance and claims 9,682 8,214 19,216 17,9959,459 11,410 28,676 29,405
Operating taxes and licenses 8,329 7,064 15,993 13,5668,390 6,694 24,383 20,259
General and administrative expenses 6,108 7,042 12,031 12,0696,178 7,268 21,245 22,084
Communication and utilities 5,924 5,109 11,612 10,6626,555 5,233 18,167 15,895
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 562,792 473,315 1,084,119 919,384493,605 509,125 1,580,761 1,431,256
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 20,708 24,239 32,937 48,41415,817 14,776 45,717 60,443
Interest expense 6,890 7,255 12,854 14,7606,813 7,166 19,666 21,926
Equity in earnings of associated companies 548 198 3,584 2,945
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 13,818 16,984 20,083 33,6549,552 7,808 29,635 41,462
Income taxes 2,764 6,199 4,016 12,284429 2,850 4,445 15,134
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 11,0549,123 $ 10,7854,958 $ 16,06725,190 $ 21,370
================================================================================================================================26,328
=================================================================================================================
Average basic shares outstanding 35,31535,161 35,635 35,359 35,625
35,459 35,620
=================================================================================================================================================================================================================================================
Basic earnings per share $ 0.31 0.300.26 0.14 $ 0.450.71 $ 0.60
================================================================================================================================0.74
=================================================================================================================
Average diluted shares outstanding 35,505 35,847 35,548 36,226
================================================================================================================================35,280 35,692 35,478 35,957
=================================================================================================================
Diluted earnings per share $ 0.31 0.300.26 0.14 $ 0.450.71 $ 0.59
================================================================================================================================0.73
=================================================================================================================
See accompanying notes to condensed consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- --------------------------------------------------------------------------------------------------------
JUNE------------------------------------------------------------------------------------------------
SEPTEMBER 30, 2000 DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,9309,147 $ 12,606
Accounts receivable 253,546225,335 238,573
Prepaid expenses 57,77855,855 43,962
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total current assets 317,254290,337 295,141
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Property and equipment 1,282,9361,281,682 1,239,394
Less accumulated depreciation 457,116475,176 453,509
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net property and equipment 825,820806,506 785,885
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Investments and other assets 53,19757,485 46,438
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$ 1,196,2711,154,328 $ 1,127,464
========================================================================================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 60,00064,109 $ 60,000
Trade accounts payable 160,535137,428 180,009
Claims accruals 3,4334,687 788
Accrued payroll 32,71831,128 19,462
Other accrued expenses 11,89911,625 10,371
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 268,585248,977 270,630
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 331,938300,174 267,639
Claims accruals 5,6475,436 7,368
Deferred income taxes 182,840182,781 180,441
Stockholders' equity 407,261416,960 401,386
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$ 1,196,2711,154,328 $ 1,127,464
========================================================================================================================================================================================================
See accompanying notes to condensed consolidated financial statements.
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- -------------------------------------------------------------------------------------------------------------
SIX--------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED JUNESEPTEMBER 30
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 16,06725,190 $ 21,37026,328
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 64,668 76,43498,911 114,563
Provision for noncurrent deferred income taxes 2,399 9,7562,341 11,766
Equity in earnings of associated companies (3,584) (2,945)
Tax benefit of stock options exercised 8 697 55
Forefeiture of restricted stock 0 (18)
Amortization of discount, net (1) 430135 461
Changes in assets and liabilities:
Trade accounts receivable (14,973) (13,863)13,238 (40,938)
Prepaid expenses (20,656) 7,788(11,893) (7,027)
Trade accounts payable (19,474) (25,858)(42,581) 35,333
Claims accruals (924) (7,825)1,967 (3,807)
Accrued payroll and other accrued expenses 14,784 7,74012,920 655
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 41,898 76,02396,651 134,426
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (146,269) (68,840)(235,186) (133,626)
Proceeds from sale of equipment 41,666 4,724115,654 18,922
Investment in associated company (5,000) 0
Increase in investments and other assets 902 (9,695)(3,080) (24,316)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (103,701) (73,811)(127,612) (139,020)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under commercial paper program 64,299 (50)17,309 7,950
Net paymentsborrowings (payments) of long-term debt 019,200 (5,000)
Repurchase of treasury stock (7,576) 0
Proceeds from sale of treasury stock 186 422351 580
Dividends paid (1,782) (3,563)(5,346)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 55,127 (8,191)27,502 (1,816)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6,676) (5,979)(3,459) (6,410)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,606 9,227
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,9309,147 $ 3,248
=============================================================================================================2,817
========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 12,74421,012 $ 15,03123,742
Income taxes 426 300
=============================================================================================================639 295
Contribution of assets to associated company 2,927 0
========================================================================================================
See accompanying notes to condensed consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) The interim condensed consolidated financial statements at JuneSeptember 30, 2000
and for the three and sixnine months ended JuneSeptember 30, 2000 and 1999 are
unaudited and include all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of
financial position and operating results. The unaudited condensed consolidated
financial statements have been prepared in accordance with Rule 10-01 of
Regulation S-X and, therefore, do not contain all information and footnotes
normally contained in annual financial statements. Accordingly, they should be
read in conjunction with the financial statements and notes thereto appearing in
the annual report on Form 10-K of the Company for the year ended December 31,
1999.
2) The results of operations for the three and sixnine months ended JuneSeptember 30,
2000 are not necessarily indicative of those to be expected for the calendar
year ending December 31, 2000.
3) LONG-TERM DEBT
Long-term debt consists of (in thousands):
6/9/30/2000 12/31/1999
--------- ----------
Commercial paper $ 99,30048,200 $ 35,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/2000 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually, due 12/12/2000 25,000 25,000
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/2003 98,260 98,260
Senior notes payable, interest at 7.00%
payable semiannually, due 9/15/2004 95,000 95,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Capitalized lease obligations 23,309 --
-------- --------
392,560364,769 328,260
Less current maturities (60,000)(64,109) (60,000)
Unamortized discount (622)(486) (621)
-------- --------
$331,938$300,174 $267,639
======== ========
Under its commercial paper note program, the Company is authorized to
issue up to $240 million in notes. These notes are supported by two credit
agreements, which aggregate $240 million, with a group of banks, of which $120
million expires March 6, 2001 and $120 million expires March 20, 2002.
The 7.80% senior subordinated notes were issued on October 30, 1992 and
are payable in five equal annual installments beginning October 30, 2000.
6
4) CAPITAL STOCK
The Company maintains a Management Incentive Plan that provides various
vehicles to compensate key employees with Company common stock. A summary of the
restricted and non-statutory options to purchase Company common stock follows:
Weighted average Number of
Number of exercise price shares
Shares Per Share Exercisableshares per share exercisable
--------- --------------------------------- -----------
Outstanding at December 31, 1999 3,737,565 $16.65 551,940
=======
Granted 627,000 12.98746,000 13.06
Exercised 13.68(28,550) 13.02
Terminated (13,700) 16.43
(118,650)(134,950) 16.14
--------- ------
Outstanding at JuneSeptember 30, 2000 4,232,215 $16.13 880,600
==========4,320,065 $16.07 915,350
========= ====== =======
The Company announced in February of 2000, a decision to discontinue a
policy of paying dividends and an intent to use those funds to repurchase up to
500,000 shares of its common stock. These shares were repurchased during the
first six months of 2000.
5) EARNINGS PER SHARE
A reconciliation of the numerator and denominator of basic and diluted
earnings per share is shown below:
(in thousands, except per share data)
--------------------------------------------------------------------------------------------------------
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
--------------------- ---------------------------------------------- -----------------------
2000 1999 2000 1999
------- ------- ------- ----------- ---- ---- ----
Numerator (net earnings) $11,054 $10,785 $16,067 $21,370$ 9,123 $ 4,958 $25,190 $26,328
Denominator - Basic earnings per share
Weighted average shares outstanding 35,31535,161 35,635 35,359 35,625 35,459 35,620
======= ======= ======= =======
Basic earnings per share $ .31.26 $ .30.14 $ .45.71 $ .60.74
======= ======= ======= =======
Denominator - Diluted earnings per share
Weighted average share outstanding 35,31535,161 35,635 35,359 35,625 35,459 35,620
Effect of common stock options 190 222 89 606119 57 119 332
------- ------- ------- -------
Weighted average shares assuming dilution 35,505 35,847 35,548 36,22635,280 35,692 35,478 35,957
======= ======= ======= =======
Diluted earnings per share $ .31.26 $ .30.14 $ .45.71 $ .59.73
======= ======= ======= =======
Options which were outstanding to purchase shares of common stock
during the periods indicated above, but were excluded from the computation of
diluted earnings per share because the option price was greater than the average
market price of the common shares were:
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
-------------------------------- --------------------------------------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
Number of shares under option 1,951,915 682,525 2,663,915 387,6752,852,965 4,754,115 2,840,465 623,675
Range of exercise price $15.69-$14.19-$37.50 $18.00-$15.00-$37.50 $14.33-$14.25-$37.50 $20.38-$18.75-$37.50
7
6) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings and foreign currency
translation adjustments. During the three and sixnine months ended JuneSeptember 30,
2000 and 1999, comprehensive income was equal to:to (in thousands):
7
Three Months Ended SixNine Months Ended
JuneSeptember 30 JuneSeptember 30
------------------------ ---------------------- --------------------
2000 1999 2000 1999
------- ------- ------- -------
--------- --------- --------- ---------
Net earnings $11,054 $10,785 $16,067 $21,370$9,123 $4,958 $25,190 $26,328
Foreign currency
translation (loss) gain (1,891) 79 (1,028) (56)
------- ------- ------- -------412 430 (616) 374
--------- --------- --------- ---------
Comprehensive income $ 9,163 $10,864 $15,039 $21,314
======= ======= ======= =======$9,535 $5,388 $24,574 $26,702
========= ========= ========= =========
7) INCOME TAXES
The effective income tax rates were approximately 4% for the three
and six months ended JuneSeptember 30, 2000 and 199915% for the nine months ended September 30,
2000, compared with 36.5% for both comparable periods in 1999. The primary
reasons for the decrease in the current year's effective income tax rates were
based on estimated annual combinedtwo sale and lease back transactions and a change in the expected effective rates ofrate
for the full year 2000 from 20% and 36.5%, respectively.during the second quarter to 15% during the
third quarter.
8) BUSINESS SEGMENTS
The Company had four reportable business segments during the first sixnine
months of 2000:2000. Segments included Truck (JBT), Intermodal (JBI), Dedicated
Contract Services (DCS) and Logistics (JBL). JBT business includes full
truck-load, dry-van freight which is typically transported utilizing
company-owned or controlled revenue equipment. This freight is typically
transported over roads and highways and does not move by rail. The JBI segment
includes freight which is transported by rail over at least some portion of the
movement and also includes certain repositioning truck freight moved by JBI
equipment or third-party carriers, when such highway movement is intended to
direct JBI equipment back toward intermodal operations. The JBT and JBI business
segments were operated in combined fashion (formally reported as Van/Intermodal
in prior periods) and limited identifiable comparative information is available
for JBT and JBI prior to January 1, 2000. Accordingly, the Company has provided
comparable segment information for the three and sixnine months ended JuneSeptember 30,
2000 based on the prior segmentation, which included JBT and JBI as the former
segment, "Van/Intermodal."
DCS segment business typically includes company-owned revenue equipment
and employee drivers which are assigned to a specific customer, traffic lane or
service. DCS operations usually include formal, written long-term agreements or
contracts which govern services performed and applicable rates.
The JBL business segment includesprior to July 1, 2000, included a wide range
of comprehensive transportation and freight management services. Such services
which may includeincluded experienced professional managers, information and optimization
technology and the actual design or redesign of freight system solutions. JBL
may utilizeutilized JBT, JBI or DCS owned or controlled assets and employees, or
third-party carriers, or a combination to meet the customer'scustomer service requirements.
JBL services also typically arewere provided in accordance with written long-term
agreements. See note 9.
Intersegment revenues consist of services provided by one or more segments to
another segment. A summary of certain segment information is presented below (in
millions):
8
Assets
--------------------
As of June 30
--------------------
2000 1999
------ ------
JBT $ 799 --
JBI 98 --
------ ------
Van/Intermodal 897 900
DCS 119 76
JBL 80 56
Other (includes corporate) 100 137
------ ------
Total $1,196 $1,169
====== ======
REVENUES
-------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
----------------- ------------------
2000 1999 2000 1999
---- ---- ------ ------
JBT $204 194 407 375
JBI 166 159 317 314
---- ---- ------ ------
Van/Intermodal 370 353 724 689
DCS 118 77 216 147
JBL 121 88 228 169
Other (includes corporate) -- -- -- --
---- ---- ------ ------
Subtotal 609 518 1,168 1,005
Inter-segment eliminations (25) (20) (51) (37)
---- ---- ------ ------
Total $584 $498 $1,117 $ 968
==== ==== ====== ======
Operating Income (Loss)
---------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
JBT $(3.3) -- $(3.5) --
JBI 9.5 -- 17.2 --
------ ------ ------ ------
Van/Intermodal 6.2 16.5 13.7 31.8
DCS 9.7 6.7 13.7 11.3
JBL 5.1 .9 6.8 3.7
Other (includes corporate) (.3) .1 (1.3) 1.6
------ ------ ------ ------
Total $20.7 $24.2 $32.9 $48.4
====== ====== ====== ======
Net Depreciation Expense
---------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
JBT $16.8 -- $32.8 --
JBI 5.9 -- 11.8 --
------ ------ ------ ------
Van/Intermodal 22.7 28.8 44.6 57.3
DCS 8.8 6.5 16.7 12.7
JBL .2 .3 .5 .6
Other (includes corporate) 1.6 2.9 2.9 5.8
------ ------ ------ ------
Total $33.3 $38.5 $64.7 $76.4
====== ====== ====== =====
9
9) OTHER
On March 14,Effective July 1, 2000, the Company, along with five other motor
carriers, announced the intent to contributecontributed all of its non-asset based logistics business into a recently formednew
joint venture, Transplace.com. Transplace.com, which is jointly owned by sixThis contribution included all of the largest
publicly-held truckload transportation companies and its Chief
Executive Officer, Jun-Sheng Li, commenced operations effective July 1,
2000. The Company will contribute all of itsCompany's
JBL segment business and all related intangible assets, plus $5.0 million of
cash, in exchange for an approximate 27% initial membership interest in
Transplace.com. As a result of this transaction, effective July 1, 2000, the
Company will no longerdid not report the JBL segment revenue, expenses and operating income as
components of its consolidated statements of earnings. TheEffective July 1, 2000,
the Company will account forbegan reporting its approximate 27% interest in Transplace.com
utilizing the equity method of accounting. No gain or loss will bewas recognized upon
formation and contribution of JBL segment assets to Transplace.com. The
Company's share of Transplace.com's results of operations will appear asand its share of
Mexican joint venture operating results were reported on a one-line,
non-operating item on the condensed consolidated statements of earnings subsequent to Junefor the
three and nine months ended September 30, 2000.
10)2000 and 1999. A summary of certain
segment information is presented below (in millions):
8
Assets
--------------------
As of September 30
--------------------
2000 1999
------- -------
JBT $ 816 $ --
JBI 108 --
------- -------
Van/Intermodal 924 913
DCS 128 88
JBL 15 63
Other (includes corporate and
intersegment eliminations) 87 177
------- -------
Total $1,154 $1,241
======= =======
Revenues
----------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
JBT $209 $191 $ 615 $ 566
JBI 178 167 495 482
------- ------- ------- -------
Van/Intermodal 387 358 1,110 1,048
DCS 128 83 344 230
JBL 1 104 230 272
------- ------- ------- -------
Subtotal 516 545 1,684 1,550
Inter-segment eliminations (7) (21) (58) (58)
------- ------- ------- -------
Total $509 $524 $1,626 $1,492
======= ======= ======= =======
Operating Income (Loss)
----------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
JBT $(2.0) $ -- $(5.4) $ --
JBI 10.4 -- 27.5 --
------- ------- ------- -------
Van/Intermodal 8.4 6.8 22.1 38.5
DCS 8.0 4.5 21.7 15.7
JBL .2 3.2 7.2 6.9
Other (includes corporate) (.8) .3 (5.3) (.7)
------- ------- ------- -------
Total $15.8 $14.8 $45.7 $60.4
======= ======= ======= =======
Net Depreciation Expense
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
JBT $16.8 $ -- $49.6 $ --
JBI 5.9 -- 17.7 --
------- ------- ------- -------
Van/Intermodal 22.7 29.3 67.3 86.6
DCS 9.6 6.8 26.3 19.6
JBL -- .3 .5 .9
Other (includes corporate) 1.9 1.7 4.8 7.5
------- ------- ------- -------
Total $34.2 $38.1 $98.9 $114.6
======= ======= ======= =======
9) RECLASSIFICATIONS
Certain amounts for 1999 have been reclassified to conform to the 2000
classifications.
109
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of JuneSeptember 30, 2000, and the
related condensed consolidated statements of earnings for the three and six
month periodsnine
months ended JuneSeptember 30, 2000 and 1999, and the condensed consolidated
statements of cash flows for the six month periodsnine months ended JuneSeptember 30, 2000 and 1999.
These condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
auditing standards generally accepted auditing standards,in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted accounting principles.in the
United States of America.
We have previously audited, in accordance with auditing standards generally
accepted auditing
standards,in the United States of America, the consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of December 31, 1999, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 4, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1999, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ KPMG LLP
-----------------------------------
Tulsa, Oklahoma
July 17,October 13, 2000
1110
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the attached
interim condensed consolidated financial statements and notes thereto, and with
the Company's audited consolidated financial statements and notes thereto for
the calendar year ended December 31, 1999 and Management's Discussion and
Analysis of Results of Operations and Financial Condition included in the 1999
Annual Report to Shareholders.
RESULTS OF OPERATIONS
COMPARISON OF SECONDTHIRD QUARTER 2000 TO SECONDTHIRD QUARTER 1999
SUMMARY
Consolidated operating revenues for the secondthird quarter of 2000 increased
17%, to $584were $509
million, from $498compared with $524 million induring the comparable periodthird quarter of 1999. The Company had four reportablelower
revenue reflected the previously announced contribution of all the Company's JBL
segment logistics business segmentsto the jointly owned logistics company,
Transplace.com. Adjusted for this contributed logistics business, which was
effective July 1, 2000, the revenue growth for the secondthird quarter of 2000:
Truck (JBT)2000 was
approximately 21%. While the Company's results of operations includes
approximately 27% of Transplace.com's net results of operations, all JBL segment
revenue will be excluded from the Company's financial statements subsequent to
June 30, 2000.
JBT segment revenue, which consists primarily of full truckload, dry-van
freight, increased 9%, Intermodal (JBI), Dedicated Contract Services (DCS) and Logistics
(JBL).to $209 million, during the third quarter of 2000. Prior
to January 1, 2000, the JBT and JBI units had been operated and reported
together as the Van/Intermodal segment. Accordingly, the only identifiable
comparative segment information for JBT and JBI is revenue prior to January 1, 2000.2000, is
revenue. The JBT segment consists primarily of full truckload, dry-van freight
which is typically transported over roads and highways by company-owned or
controlled revenue equipment. JBT segment revenue grew approximately 5%, to $204
million, during the second quarter of 2000, compared with $194 million in the
same period of 1999.tractor fleet totaled 5,770 at September 30, 2000. Revenue
growth in this segment was reduced by the transfer of some revenue equipment to
the DCS segment during the current quarter. Revenue per loaded mile in the JBT
segment, exclusive of fuel surcharges, rose 3.9%3.3% in the current quarter,
compared with the secondthird quarter of 1999.
JBI segment business, which includes primarily truckload freight
which is
transported by rail over any portion of the movement. This segment also includes
certainand some repositioning truck freight, moved by JBI or third-party equipment when
such highway or other movement is intendedgrew 7% to direct equipment back into
intermodal operations. JBI segment revenue increased approximately 5%$178
million, during the currentthird quarter to $166 million, from $159 million in 1999.of 2000. The JBI tractor fleet totaled 846 at
September 30, 2000. Intermodal rates,revenue per loaded mile, exclusive of fuel
surcharges, increased approximately .7% in the secondcurrent quarter, of 2000 were essentially
flat when compared with
the same period in 1999.third quarter of 1999
DCS segment operations typically includebusiness primarily includes services provided with company-owned
revenue equipment and employee drivers which are assigned to specific customers or traffic
lanes. DCS operations usually involve written,
long-term agreements or contracts. During the secondthird quarter of 2000, DCS revenue increased 53%grew 54%, to $118$128 million,
from $77$83 million, in the comparable period of 1999. A portion of the DCS segment
revenue 12
growth was due to transfers of equipment and drivers from the JBT
business segment. The DCS tractor fleet totaled 3,793 units at September 30,
2000. Margins in the DCS segment declined slightly in 2000, due, in part, to
higher fuel costs and increased computer system and corporate support expenses.
The JBL segment includes a wide range of comprehensive transportation and
management services. These services may include experienced professional
managers, information and optimization technology and the actual design or
redesign of transportation system solutions. JBL may utilize JBT, JBI, or DCS
owned or controlled assets and employees or third-party equipment and employees,
or a combination to meet customers' service requirements. JBL services also
typically involve long-term, written agreements. JBL revenue grew 38% during the secondthird quarter of 2000,
partly due to $121 million, from $88 million in 1999. Operating
income was $5.1 million in the second quarterrecovery of 2000, compared with $.9 million
in 1999. This increase in operating income was due, in part, to increased
revenue and lower purchased transportation expenses.
On March 14, 2000, the Company announced the intent to contributefuel costs through fuel surcharge revenues.
11
As previously mentioned, all of
its non-asset based logisticsJBL segment business into a recently formed joint venture,
Transplace.com. The entire JBL business segment was contributed to
Transplace.com effective July 1, 2000. As a resultThe small amount of this transaction, the
Company will no longer reportrevenue and operating
income reported in the JBL segment revenue, expensesfor the third quarter of 2000 was primarily
due to differences between accruals and operating
income as componentsestimates versus final amounts,
determined during the current quarter. During the third quarter of its consolidated statements2000, the
Company recognized approximately $340,000 and $208,000 of earnings. The Company
will account for its approximate 27% interestequity in earnings of
associated companies from Transplace.com utilizingand it's Mexican operations,
respectively. Approximately $198,000 of equity in earnings was recognized during
the equity methodthird quarter of accounting. No gain or loss will be recognized upon formation
and contribution of JBL segment assets to Transplace.com. The Company's share of
Transplace.com results of operations will appear as a one-line non-operating
item on the consolidated statements of earnings subsequent to June 30, 2000.1999 from Mexican operations.
Summary of Operating Segments Results
For Three Months Ended JuneSeptember 30
(dollars in millions)
Gross Revenue Operating Income
------------------------------- ----------------------
2000 1999 % Change 2000 1999
---- --------- ----- -------- ---- ---------- ------
JBT $204 194 5% $(3.3)$209 $191 9 % $(2.0) --
JBI 166 159 5% 9.5178 167 6 % 10.4 --
----- ----- ----- ----- ----------- ------
Van/Intermodal 370 353 5% 6.2 $16.5387 358 8 % 8.4 $6.8
DCS 118 77 53% 9.7 6.7128 83 54 % 8.0 4.5
JBL 121 88 38% 5.1 .91 104 -- .2 3.2
Other -- -- -- (.3) .1(.8) .3
----- ----- ----- ----- ----------- ------
Subtotal 609 518 18% 20.7 24.2516 545 (5)% 15.8 14.8
Inter-segment eliminations (25) (20)(7) (21) -- -- --
----- ----- ----- ----- ----------- ------
Total $584 $498 17% $20.7 $24.2$509 $524 (3)% $15.8 $14.8
===== ===== ===== ===== =========== ======
13
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the percentage
increase or decrease of those items as compared with the prior period.
Three Months Ended JuneSeptember 30
-----------------------------------------------------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
---------------------------- ------------------------------------- -----------------
2000 1999 2000 vs.VS. 1999
------------- ------------ -------------------------- -------- -----------------
Operating revenues 100.0% 100.0% 17.3%(2.8)%
Operating expenses
Salaries, wages and employee benefits 33.3% 35.4% 10.3%37.5% 34.6% 5.4 %
Rents and purchased transportation 36.9% 32.4% 33.6%27.7% 34.3% (21.7)%
Fuel and fuel taxes 10.0% 7.9% 48.3%12.0% 8.4% 38.3 %
Depreciation 5.7% 7.7% (13.5%)6.7% 7.3% (10.2)%
Operating supplies and expenses 5.4% 6.2% 2.6%7.0% 6.7% 1.7 %
Insurance and claims 1.7% 1.7% 17.9%1.9% 2.2% (17.1)%
Operating taxes and licenses 1.4% 1.4% 17.9%1.6% 1.3% 25.3 %
General and administrative expenses 1.0%1.2% 1.4% (13.3%)(15.0)%
Communication and utilities 1.3% 1.0% 1.0% 16.0%
---------------------------- ------------------25.3 %
-------------------- ---------
Total operating expenses 96.5% 95.1% 18.9%
---------------------------- ------------------96.9% 97.2% (3.0)%
-------------------- ---------
Operating income 3.5% 4.9% (14.6%)3.1% 2.8% 7.0 %
Interest expense 1.2% 1.5% (5.0%)
---------------------------- ------------------1.3% 1.3% (4.9)%
Equity in earnings of associated companies 0.1% 0.0% 176.8 %
-------------------- ---------
Earnings before income taxes 2.4% 3.4% (18.6%)1.9% 1.5% 22.3 %
Income taxes 0.5% 1.2% (55.4%)
---------------------------- ------------------0.1% .5% (84.9)%
Net earnings 1.9% 2.2% 2.5%
============================ ==================1.8% 1.0% 84.0 %
-------------------- ---------
12
Total operating expenses for the secondthird quarter of 2000 increased 18.9%
overdecreased 3.0%
from the comparable period of 1999. As previously discussed, operating
revenues increased 17.3%decreased 2.8% during the current quarter. Totalsame period. These comparisons were
impacted by the contribution of the JBL segment business to Transplace.com,
effective July 1, 2000. The Company's operating expenses expressed
as a percentage of operating revenues (operating ratio) were 96.5% forratio improved slightly to
96.9% during the secondthird quarter of 2000, compared with 95.1%97.2% in 1999.
Salaries, wages and employee benefits increased 10.3%5.4% during the current
quarter but declinedand rose to 33.3% of revenue from 35.4%37.5% of revenue in 2000, from 34.6% in 1999. These
increases were primarily due to increases in driver compensation and medical
insurance costs. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline inas a percentage of revenue was primarily due topartly a result
of the growthcontribution of the non-asset based Logistics (JBL) revenue.JBL segment business to an
associated company during the current quarter. The higher level of driver
compensation in 2000 was due to changes in the mix of drivers and not a pay
rate change. Rents and purchased transportation expense increased 33.6%declined 21.7% and increaseddecreased
as a percentage of revenue. This increasedecrease was partly due to the growthcontribution
of the JBL business, additional use of
third-party dray companiessegment business. This decline in purchased transportation expense
was partly offset by increases in drayage and higher revenue equipment rental expense. A
transactionrents.
Transactions to sell and leaseback or rent certain trailing equipment, which
closed in latethe fourth quarter of 1999 and the third quarter of 2000, resulted
in higher revenue equipment rent and lower depreciation expense. Fuel and
fuel taxes expense rose 48.3%38.3% during the current quarter, driven by a 35%30%
higher cost per gallon and slightly lower fuel miles per gallon. Fuel
surcharges, which were initiated in late 1999, recovered the majority of thisthe
increased fuel cost relative to the secondthird quarter of 1999.
14
Depreciation expense declined 13.5%10.2% during the secondthird quarter of 2000,
primarily due to the sale and leaseback transaction previously discussed.
Operating supplies and expenses increased 2.6%, but declined as a percentage of
revenue. The small increasewhich closed in the dollar amount of this expense was for
spending on tractor and trailing equipment maintenance and tires. The decline in
percentage of revenue was primarily due to growth of the non-asset based JBL
segment revenue.late 1999.
Insurance and claims expense remained at 1.7% of revenue in
2000 and 1999, but increased 17.9%declined 17.1%, primarily due to higherlower liability
and accident costs. The nearly 18%25.3% increase in operating taxes and license expense
was due to the larger size of the tractor fleet and a higher state base plate
cost per tractor in 2000. The 13.3%15.0% decrease in general and administrative costs
was primarilypartly due to certain support service charges which were charged to
Transplace.com and lower professional fees and bad debt expenses.expenses, partly offset
by higher driver recruiting and increased computer rental expense. Communication
and utilities expense increased 16.0%utility costs were up 25.3%, primarily due to expanded data and
telecommunication networks and higher satellite communication costs.expenses. Interest
expense declined slightly in 2000,4.9%, primarily due to reduced debt levels associated with the
sale and leaseback transaction.transactions. The effective income tax rates were
approximately 4% in the third quarter of 2000 and 36.5% in the comparable period
of 1999. The primary reasons for the decrease in the current quarter's effective
income tax rate were two sale and lease back transactions and a change in the
expected effective rate for the full year 2000 from 20% during the second
quarter to 15% during the third quarter.
As a result of the above, net earnings for the third quarter of 2000
increased to $9.1 million, or diluted earnings per share of $.26, compared with
$5.0 million, or $.14 per diluted share, in 1999.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
SUMMARY
Consolidated operating revenues for the nine months ended September 30,
2000 increased 9.0%, to $1.626 billion, from $1.492 billion in 1999. This
increase in revenue was 15%, adjusted for the contributed JBL business. Revenue
in the JBT segment increased approximately 9%, to $615 million in 2000, from
$566 million in 1999. Revenue growth in this segment was reduced by the transfer
of some revenue equipment to the DCS segment during the period. Revenue per
loaded mile in the JBT segment, exclusive of fuel surcharges, rose 3.7% during
the first nine months of 2000, compared with the same period in 1999.
13
JBI segment business grew approximately 3%, to $495 million during the
first nine months of 2000, from $482 million in the comparable period of 1999.
Intermodal revenue per loaded mile during the first nine months of 2000,
exclusive of fuel surcharges, were essentially flat when compared with the same
period in 1999.
DCS segment revenue grew approximately 50% during the first nine months
of 2000, to $344 million, from $230 million in 1999. A portion of this segment
revenue growth was due to transfers of equipment and drivers from the JBT
business segment. Operating income was $21.7 million during the first nine
months of 2000, compared with $15.7 million in 1999. This increase was due
primarily to higher segment revenue.
As previously mentioned, all JBL segment business was contributed to
Transplace.com effective July 1, 2000. Substantially all of the $230 million of
JBL revenue reported for the first nine months of 2000 was generated between
January 1, 2000 and June 30, 2000. While the Company's results of operations
includes approximately 27% of Transplace.com's net results of operations, all
JBL revenue will be excluded from the Company's financial statements subsequent
to June 30, 2000.
Summary of Operating Segments Results
For Nine Months Ended September 30
(dollars in millions)
Gross Revenue Operating Income
------------------------------- --------------------
2000 1999 % Change 2000 1999
------ ------ -------- ----- -----
JBT $ 615 $ 566 9 % $(5.4) --
JBI 495 482 3 % 27.5 --
------ ------ ---- ----- -----
Van/Intermodal 1,110 1,048 6 % 22.1 $38.5
DCS 344 230 50 % 21.7 15.7
JBL 230 272 (15)% 7.2 6.9
Other -- -- -- (5.3) (.7)
------ ----- ----- ----- -----
Subtotal 1,684 1,550 9 % 45.7 60.4
Inter-segment eliminations (58) (58) -- -- --
------ ------ ----- ----- -----
Total $1,626 $1,492 9 % $45.7 $60.4
====== ====== ===== ===== =====
14
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the percentage
increase or decrease of those items as compared with the prior period.
Nine Months Ended September 30
----------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------- -----------------
2000 1999 2000 VS. 1999
---- ---- -------------
Operating revenues 100.0% 100.0% 9.0 %
Operating expenses
Salaries, wages and employee benefits 35.1% 35.5% 7.8 %
Rents and purchased transportation 33.5% 32.5% 12.2 %
Fuel and fuel taxes 10.8% 8.1% 46.5 %
Depreciation 6.1% 7.7% (13.7)%
Operating supplies and expenses 6.0% 6.2% 3.9 %
Insurance and claims 1.8% 2.0% (2.5)%
Operating taxes and licenses 1.5% 1.3% 20.4 %
General and administrative expenses 1.3% 1.5% (3.8)%
Communication and utilities 1.1% 1.1% 14.3 %
-------------------- ---------
Total operating expenses 97.2% 95.9% 10.4 %
-------------------- ---------
Operating income 2.8% 4.1% (24.4)%
Interest expense 1.2% 1.5% (10.3)%
Equity in earnings of associated companies 0.2% 0.2% 21.7 %
-------------------- ---------
Earnings before income taxes 1.8% 2.8% (28.5)%
Income taxes 0.3% 1.0% (70.6)%
-------------------- ---------
Net earnings 1.5% 1.8% (4.3)%
-------------------- ---------
Total operating expenses for the nine month period ended September 30,
2000 increased 10.4% over the comparable period of 1999. As previously
discussed, operating revenues increased 9.0% during this same period. These
comparisons were impacted by the contribution of the JBL segment business to
Transplace.com, effective July 1, 2000. The Company's operating ratio
increased to 97.2% during the first nine months of 2000, compared with 95.9%
in 1999. Salaries, wages and employee benefits increased 7.8% during the
first nine months of 2000, but declined slightly as a percentage of revenue.
The increase in the dollar amount of this expense category was partly due to
increases in driver compensation and higher costs of medical insurance. The
slight decline in percentage of revenue was primarily due to growth of the
non-asset based JBL business during the first six months of 2000 and growth
of the JBI business. The higher level of driver compensation in 2000 was due
to changes in the mix of drivers and not a pay rate change. Rents and
purchased transportation expense increased 12.2% and increased as a
percentage of revenue. This increase was due primarily to the additional use
of third-party dray carriers and higher revenue equipment rental expense. A
transaction to sell and leaseback certain trailing equipment, which closed in
late 1999, increased equipment rent and decreased depreciation expense. Fuel
and fuel tax expense increased 46.5% and increased as a percentage of
revenue, driven by a 39% higher cost per gallon and slightly lower fuel miles
per gallon. Fuel surcharges, which were initiated in late 1999, recovered
approximately 77% of higher fuel costs during the nine months ended September
30, 2000.
15
Depreciation expense declined 13.7% and also declined as a percentage of
revenue, primarily due to the sale and leaseback transactions previously
discussed. Operating supplies and expenses and insurance and claims costs
remained relatively consistent in proportion to revenue during 2000 and 1999.
The 20.4% increase in operating taxes and licenses expense was due to the larger
size of the tractor fleet and a higher state base plate cost per tractor in
2000. Communication and utility costs were up 14.3%, primarily due to expanded
data and telecommunication networks and higher satellite communication expenses.
Interest expense declined 10.3% in 2000, primarily due to reduced debt levels
associated with the sale and leaseback transactions. The effective income tax
rates were approximately 15% in 2000 and 36.5% in 1999. These were the effective
rates expected for the full year 2000 and 1999, respectively. The primary reason
for the decrease in the effective income tax rate was the sale and leaseback
transaction, which closed in late 1999.
As a result of the above, net earnings for the second quarter ofnine months ended
September 30, 2000 increased to $11.1were $25.2 million, or diluted earnings per share of $.31,$.71,
compared with $10.8$26.3 million, or $.30 per diluted share, in 1999.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999
SUMMARY
Consolidated operating revenues for the six months ended June 30, 2000
increased 15.4%, to $1.117 billion, from $967.8 million in 1999. Revenue in the
JBT segment increased approximately 9% in 2000, to $407 million, compared with
$375 million in 1999. Revenue growth of JBT was reduced by the transfer of some
revenue equipment to the DCS segment. As previously mentioned, the JBT and JBI
had been operated and reported together as the Van/Intermodal segment prior to
January 1, 2000. Accordingly, the only identifiable comparative 1999 segment
information for JBT and JBI is revenue. Revenue per mile in the JBT segment,
exclusive of fuel surcharges, rose approximately 4% during the first six months
of 2000, compared with the same period in 1999.
The JBI segment revenue increased approximately 1% during 2000, to $317
million, from $314 million in 1999. Intermodal rates in 2000 were essentially
flat when compared with the same period in 1999.
DCS segment revenue grew 47% during the first six months of 2000, to $216
million, from $147 million in 1999. A portion of this segment revenue growth was
due to transfers of equipment and drivers from the JBT business segment.
Operating income
15
was $13.7 million during the first six months of 2000, compared with $11.3
million in 1999. This decline in margin was due primarily to significantly
higher fuel costs and increased computer system and corporate support expenses.
JBL segment revenue increased 35% during the first six months of 2000,
to $228 million, from $169 million in 1999. Operating income was $6.8 million
in 2000, compared with $3.7 million in 1999. This increase in operating income
was due to higher revenue levels and relatively lower purchased transportation
expense.
On March 14, 2000, the Company announced the intent to contribute all
of its non-asset based logistics business into a recently formed joint
venture, Transplace.com. The entire JBL business segment was contributed to
Transplace.com effective July 1, 2000. As a result of this transaction, the
Company will no longer report the JBL segment revenue, expenses and operating
income as components of its consolidated statements of earnings. The Company
will account for its approximate 27% interest in Transplace.com utilizing the
equity method of accounting. No gain or loss will be recognized upon formation
and contribution of JBL segment assets to Transplace.com. The Company's share
of Transplace.com results of operations will appear as a one-line
non-operating item on the consolidated statements of earnings subsequent to
June 30, 2000.
Summary of Operating Segments Results
For Six Months Ended June 30
(dollars in millions)
Gross Revenue Operating Income
------------------------------- ---------------------
2000 1999 % CHANGE 2000 1999
------ ------ -------- ----- -----
JBT $ 407 375 9% $(3.5) -
JBI 317 314 1% 17.2 -
------ ------ --- ----- -----
Van/Intermodal 724 689 5% 13.7 $31.8
DCS 216 147 47% 13.7 11.3
JBL 228 169 35% 6.8 3.7
Other - - - (1.3) 1.6
------ ------ --- ----- -----
Subtotal 1,168 1,005 16% 32.9 48.4
Inter-segment eliminations (51) (37) - - -
------ ------ --- ----- -----
Total $1,117 $ 968 15% $32.9 $48.4
====== ====== === ===== =====
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the
percentage increase or decrease of those items as compared with the prior
period.
16
Six Months Ended June 30
-----------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------------------ ----------------------
2000 1999 2000 vs. 1999
---------------- ------------- ---------------
Operating revenues 100.0% 100.0% 15.4%
Operating expenses
Salaries, wages and employee benefits 34.0% 36.0% 9.0%
Rents and purchased transportation 36.2% 31.6% 32.3%
Fuel and fuel taxes 10.3% 7.8% 51.3%
Depreciation 5.8% 7.9% (15.4%)
Operating supplies and expenses 5.5% 6.0% 5.3%
Insurance and claims 1.7% 1.9% 6.8%
Operating taxes and licenses 1.4% 1.4% 17.9%
General and administrative expenses 1.1% 1.2% (3.0%)
Communication and utilities 1.0% 1.1% 8.9%
------------------------------ ---------------
Total operating expenses 97.1% 95.0% 17.9%
------------------------------ ---------------
Operating income 2.9% 5.0% (31.6%)
Interest expense 1.1% 1.5% (12.9%)
------------------------------ ---------------
Earnings before income taxes 1.8% 3.5% (40.3%)
Income taxes 0.4% 1.3% (67.3%)
------------------------------ ---------------
Net earnings 1.4% 2.2% (24.8%)
============================== ===============
Total operating expenses for the six months ended June 30, 2000
increased 17.9% over the comparable period of 1999. As previously discussed,
operating revenues increased 15.4% during the same period. Total operating
expenses expressed as a percentage of operating revenues (operating ratio)
were 97.1% for 2000, compared with 95.0% in 1999. Salaries, wages and employee
benefits increased 9% during the first six months of 2000, but declined to
34.0% of revenue from 36.0% of revenue in 1999. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline in percentage of revenue was primarily due to growth of
the non-asset based JBL segment business. Rents and purchased transportation
expense increased 32.3% and increased as a percentage of revenue. This
increase was due to the growth of JBL business, additional use of third-party
dray carriers and higher revenue equipment rental expense. A transaction to
sell and leaseback certain trailing equipment, which closed in late 1999,
increased equipment rent and decreased depreciation expense. Fuel and fuel
taxes rose 51.3% during 2000, driven by a 44% higher cost per gallon and
slightly lower fuel miles per gallon. Fuel surcharges, which were initiated in
late 1999, recovered approximately 60% of the higher fuel costs during the
first quarter of 2000 and the majority of this increased fuel cost during the
second quarter of 2000 relative to the same periods in 1999.
Depreciation expense declined 15.4% during 2000, primarily due to the
sale and leaseback transaction previously discussed. Operating supplies and
expenses increased
17
5.3%, but declined as a percentage of revenue. The increase in the dollar
amount of this expense was primarily due to spending on tractor and trailing
equipment. The decline in percentage of revenue was primarily due to growth of
the non-asset based JBL segment revenue. Insurance and claims expense
increased 6.8%, but declined slightly as a percentage of revenue. The
increased cost was primarily due to higher liability and accident costs. The
nearly 18% increase in operating taxes and license expense was due to the
larger size of the tractor fleet and a higher state base plate cost per
tractor in 2000. Communication and utilities expense increased 8.9%, primarily
due to expanded data and telecommunication networks and higher satellite
communication costs. Interest expense declined 12.9% in 2000, primarily due to
reduced debt levels associated with the sale and leaseback transaction. The
effective income tax rates were 20% in 2000 and 36.5% in 1999. These were the
effective rates expected for the full year 2000 and 1999, respectively. The
primary reason for the decrease in the effective income tax rate was the sale
and leaseback transaction, which closed in late 1999.
As a result of the above, net earnings for the six months ended June
30, 2000 declined to $16.1 million, or diluted earnings per share of $.45,
compared with $21.4 million, or $.59$.73 per diluted share, in 1999.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Condensed Consolidated
Statements of Cash Flows and the Condensed Consolidated Balance Sheets.
Net cash provided by operating activities was $41.9$96.7 million for the first
sixnine months of 2000, compared with $76.0$134.4 million provided during the same
period of 1999. This decrease in net cash provided was primarily due to funds
used for accounts receivable, prepaid expenses and trade accounts payable, partly offset by cash
generated from accounts receivable, claims accruals and accrued payroll and
other accrued expenses. In addition, net earnings, depreciation expense and depreciation were downthe
provision for noncurrent deferred income taxes all declined in 2000. As
previously discussed, the lower depreciation expense was due to the sale and
leaseback of certain trailing equipment. Net cash used in investing activities
was $103.7$127.6 million in 2000, updown from $73.8$139.0 million in 1999. Purchases of new revenueAdditions to
property and equipment were up significantly during 2000. New tractor purchases
totaled approximately 1,7201,860 during the sixfirst nine months ended June 30,of 2000, compared with
about 6001,120 in 1999. This increase in capital spending for tractors was partly offset
by reduced purchases of trailing equipment.equipment and the conversion of approximately
$66 million of trailing equipment from owned to leased in September of 2000. The
Company has beenalso commenced tractor leasing or
rentingprograms in July of 2000 and anticipates
leasing a significant portionnumber of its trailing equipment fleet and plans to
commence leasing some tractorsnew tractor acquisitions during the third quarterremainder of
2000.year 2000 and in 2001. Financing activities generated $55.1$27.5 million during the
first halfnine months of 2000, compared with a use of $8.2$1.8 million in 1999.
Financing activities included net borrowings of $64.3$36.5 million, $7.6 million used
to repurchase treasury stock and $1.8 million paid out in dividends. The Company
announced in February of 2000, an intent to cease the payment of dividends and
to utilize those funds to purchase additional treasury stock. 18The purchase of
additional treasury stock was completed during the first six months of 2000.
16
SELECTED BALANCE SHEET DATA
As of
-------------------------------------------------------------
June---------------------------------------------------------------------
September 30, 2000 December 31, 1999 JuneSeptember 30, 1999
------------------------------- ----------------- -------------------------------
Working capital ratio 1.181.17 1.09 1.271.11
Current maturities of long-
term debt (millions) $ 6064 $ 60 $ 1119
Total debt (millions) $ 392364 $ 328 $ 429437
Total debt to equity .96.87 .82 1.091.10
Total debt as a percentage
of total capital .49.47 .45 .52
The Company's total debt levels increased approximately $64$36 million from
December 31, 1999 to JuneSeptember 30, 2000. As of JuneSeptember 30, 2000, the Company
had commitmentsintentions to acquire or lease approximately $196$405 million of revenue and
service equipment net of expected proceeds from sale or trade-in allowances. As
previously discussed, the Company has been leasing significant portions of its
tractor and trailing equipment since July of 2000. Funding for such expendituresfuture
acquisitions of revenue equipment is expected to come from cash generated from
operations, existing borrowing facilities and leases of certain equipment commencing
during the third quarter of 2000.rental or leasing arrangements.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, as amended, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement requires the
recognition of all derivatives in the statement of financial position as either
assets or liabilities and their measurement at fair value. Statement No. 133 is
effective for fiscal years beginning after June 15, 2000. The Company has not
determined what impact, if any,completed its analysis of Statement No. 133, willbut does not expect adoption on
January 1, 2001 to have a material effect on its financialresults of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q may contain statements that may constitute
"forward-looking statements.
In March 2000," Such statements are made pursuant to the FASB issued Interpretation No. 44, ACCOUNTING FOR
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION: AN INTERPRETATION OF APB
OPINION NO. 25. Among other issues, Interpretation No. 44 clarifiessafe
harbor provisions of the applicationPrivate Securities Litigation Reform Act of Accounting Principles Board Opinion No. 25 (APB No. 25)
regarding (a)1995.
Shareholders and prospective investors are cautioned that actual results and
experience may differ materially from the definition of employee for purposes of applying APB No. 25,
(b) the criteria for determining whether a plan qualifiesforward-looking statements as a noncompensatory
plan, (c)result
of many factors, possibly including changes in general economic conditions, fuel
prices, driver availability and other items as described in periodic Company
filings with the accounting consequence of various modifications toSEC, including the terms of
a previously fixed stock option or award, and (d)annual report filed on Form 10-K for the
accounting for an
exchange of stock options in a business combination. The provisions of
Interpretation No. 44 affecting the Company are to be applied on a prospective
basis effective July 1, 2000.year ended December 31, 1999.
YEAR 2000
As of the date of this filing, the Company had not experienced any
material Year 2000 problems or disruptions with internal systems, nor had any
material problems or disruptions been experienced with customers or suppliers.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short-term interest
rates as a result of its issuance of short-term commercial paper. The Company
from time to time utilizes interest rate swaps to mitigate the effects of
interest rate changes.changes; none were outstanding at September 30, 2000. Risk can be
estimated by measuring the impact of a near-term adverse movement of 10% in
short-term market interest rates. If short-term market interest rates average
10% more in 2000 than in 1999,during the next twelve months, there would be no material adverse
impact on the Company's results of operations.operations based on variable rate debt
outstanding at September 30, 2000. At JuneSeptember 30, 2000, the fair value of the
Company's fixed rate long-term obligations approximated carrying value.
Although the Company conducts business in foreign countries,
international operations are not material to the Company's consolidated
financial position, results of operations or cash flows. Additionally, foreign
currency transaction gains and losses were not material to the Company's results
of operations for the three and sixnine months ended JuneSeptember 30, 2000.
Accordingly, the Company is not currently subject to material foreign currency
exchange rate risks from the effects that exchange rate movements of foreign
currencies would have on the Company's future costs or on future cash flows it
would receive from its foreign investment. To date, the Company has not entered
into any foreign currency forward exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None applicable.
ITEM 5. OTHER INFORMATION
On March 14, 2000, a news release was issued announcing that six of
the nation's largest truckload transportation companies: Covenant
Transport, Inc.; J.B. Hunt Transport Services, Inc.; M.S. Carriers,
Inc.; Swift Transportation Co., Inc.; U.S. Xpress Enterprises, Inc.
and Werner Enterprises, Inc., intended to merge their logistics
business units into a jointly owned, Internet-based global
transportation logistics company, Transplace.com.
On July 13, 2000, Transplace.com announced that its operations
commenced as scheduled on July 1, 2000.
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Form 8-K on July 17, 2000, relating to Items
2, 5 and 7 of that Form and announcing that effective June 30,
2000 the Company completed the conversion of its non-asset based
logistics business into Transplace.com. In addition, a copy of a
Transplace.com news release was filed as an exhibit to the Form
8-K.
The Company has not determined whether this transaction requires
the filing of historical financial statements or proforma
financial information.
21ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None applicable.
ITEM 5. OTHER INFORMATION
On November 1, 2000, Moody's Investors Service announced that it
had placed the Company's Baa2 Senior unsecured and Prime-2
short-term ratings under review for possible downgrade.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. HUNT TRANSPORT SERVICES, INC.
DATE: August 11,November 13, 2000 BY: /s/ Kirk Thompson
---------------------- ------------------------------------------------------------- --------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: August 11,November 13, 2000 BY: /s/ Jerry W. Walton
---------------------- ------------------------------------------------------------- --------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
DATE: August 11,November 13, 2000 BY: /s/ Donald G. Cope
---------------------- ------------------------------------------------------------- --------------------------------
Donald G. Cope
Vice President, Controller
and Chief Accounting Officer
2219