FORM 10-QSECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
(MARK ONE) _X_FORM 10-Q
(Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the Quarter Ended June 30, 2001 OR o 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
ORor 15(d)OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange Act of 1934FOR THE QUARTER ENDED MARCH 31,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 ý No o
The number of shares of the Company's $.01 par value common stock outstanding on June 30, 2001
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) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO THE FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS. YES X NO ------- ------- THE NUMBER OF SHARES OF THE COMPANY'S $.01 PAR VALUE COMMON STOCK OUTSTANDING ON MARCH 31, 2001 WAS 35,286,216.was 35,337,765.PART 1
FINANCIAL INFORMATION
ITEMItem 1.
FINANCIAL STATEMENTSFinancial 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 monthperiodand six month periods endedMarch 31,June 30, 2001 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2001.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, 2000.
INDEXIndex
2J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in
(in thousands, except per share data)
(unaudited)
- ---------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31 - ---------------------------------------------------------------------------------------------------- 2001 2000 - ----------------------------------------------------------------------------------------------------Operating revenues $ 495,419 $ 533,556 Operating expenses Salaries, wages and employee benefits 196,685 185,885 Rents and purchased transportation 131,789 188,732 Fuel and fuel taxes 62,279 56,706 Depreciation and amortization 35,513 32,012 Operating supplies and expenses 34,262 29,847 Insurance and claims 12,218 9,534 Operating taxes and licenses 8,072 7,665 General and administrative expenses, net of gains (372) 7,933 Communication and utilities 6,606 5,688 - ---------------------------------------------------------------------------------------------------- Total operating expenses 487,052 524,002 - ---------------------------------------------------------------------------------------------------- Operating income 8,367 9,554 Interest expense (6,264) (5,963) Equity in earnings of associated companies 166 2,675 - ---------------------------------------------------------------------------------------------------- Earnings before income taxes 2,269 6,266 Income taxes 624 1,253 - ---------------------------------------------------------------------------------------------------- Net earnings $ 1,645 $ 5,013 ==================================================================================================== Average basic shares outstanding 35,273 35,604 ==================================================================================================== Basic earnings per share $ 0.05 $ 0.14 ==================================================================================================== Average diluted shares outstanding 35,792 35,622 ==================================================================================================== Diluted earnings per share $ 0.05 $ 0.14 ====================================================================================================
Three Months Ended
June 30Six Months Ended
June 302001 2000 2001 2000 Operating revenues $ 521,489 $ 583,500 $ 1,016,909 $ 1,117,056 Operating expenses Salaries, wages and employee benefits 197,008 194,273 393,693 380,158 Rents and purchased transportation 144,933 215,497 276,723 404,229 Fuel and fuel taxes 58,835 58,168 121,114 114,874 Depreciation and amortization 35,337 33,148 70,850 65,160 Operating supplies and expenses 35,904 31,491 70,166 61,338 Insurance and claims 12,249 9,682 24,467 19,216 Operating taxes and licenses 8,321 8,329 16,393 15,994 General and administrative expenses, net of gains 6,611 6,641 6,239 14,575 Communication and utilities 6,473 5,924 13,079 11,612 Total operating expenses 505,671 563,153 992,724 1,087,156 Operating income 15,818 20,347 24,185 29,900 Interest expense (5,917 ) (6,890 ) (12,182 ) (12,853 ) Equity in earnings of associated companies (155 ) 361 12 3,036 Earnings before income taxes 9,746 13,818 12,015 20,083 Income taxes 1,178 2,764 1,802 4,017 Net earnings $ 8,568 $ 11,054 $ 10,213 $ 16,066 Average basic shares outstanding 35,312 35,315 35,292 35,459 Basic earnings per share $ 0.24 $ 0.31 $ 0.29 $ 0.45 Average diluted shares outstanding 35,811 35,505 35,734 35,548 Diluted earnings per share $ 0.24 $ 0.31 $ 0.29 $ 0.45 See accompanying notes to condensed consolidated financial statements.
3J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (inCondensed Consolidated Balance Sheets
(in thousands)(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------ MARCH 31, 2001 DECEMBER 31, 2000 - ------------------------------------------------------------------------------------------------------------------------------ASSETS Current assets: Cash and cash equivalents $ 19,224 $ 5,370 Accounts receivable 216,715 225,797 Prepaid expenses and other 85,859 99,804 - ------------------------------------------------------------------------------------------------------------------------------ Total current assets 321,798 330,971 - ------------------------------------------------------------------------------------------------------------------------------ Property and equipment 1,251,264 1,334,457 Less accumulated depreciation 435,010 489,282 - ------------------------------------------------------------------------------------------------------------------------------ Net property and equipment 816,254 845,175 - ------------------------------------------------------------------------------------------------------------------------------ Other assets 71,793 55,775 - ------------------------------------------------------------------------------------------------------------------------------ $ 1,209,845 $ 1,231,921 ============================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 62,000 $ 84,400 Current installments of obligations under capital leases 20,756 16,489 Trade accounts payable 135,906 158,585 Claims accruals 15,030 13,260 Accrued payroll 29,629 29,148 Other accrued expenses 6,642 10,390 Deferred income taxes 13,002 13,002 - ------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 282,965 325,274 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt 222,855 222,694 Obligations under capital leases, excluding current installments 95,340 77,694 Claims accruals 5,138 4,974 Deferred income taxes 173,301 173,282 Stockholders' equity 430,246 428,003 - ------------------------------------------------------------------------------------------------------------------------------ $ 1,209,845 $ 1,231,921 ==============================================================================================================================
June 30, 2001
(unaudited)December 31, 2000 ASSETS Current assets: Cash and cash equivalents $ 22,490 $ 5,370 Accounts receivable 229,007 225,797 Prepaid expenses and other 73,293 99,804 Total current assets 324,790 330,971 Property and equipment 1,251,467 1,334,457 Less accumulated depreciation 440,884 489,282 Net property and equipment 810,583 845,175 Other assets 63,907 55,775 $ 1,199,280 $ 1,231,921 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 10,000 $ 84,400 Current installments of obligations under capital leases 26,377 16,489 Trade accounts payable 128,219 158,585 Claims accruals 14,809 13,260 Accrued payroll 32,450 29,148 Other accrued expenses 11,932 10,390 Deferred income taxes 13,002 13,002 Total current liabilities 236,789 325,274 Long-term debt 222,886 222,694 Obligations under capital leases, excluding current installments 118,527 77,694 Claims accruals 5,214 4,974 Deferred income taxes 173,663 173,282 Stockholders' equity 442,201 428,003 $ 1,199,280 $ 1,231,921 See accompanying notes to condensed consolidated financial statements.
4J.B. Hunt Transport Services, Inc.
Condensed Consolidated Statements of Cash Flows
(in
(in thousands)
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31 - ----------------------------------------------------------------------------------------------------------------------------- 2001 2000 - -----------------------------------------------------------------------------------------------------------------------------Cash flows from operating activities: Net earnings $ 1,645 $ 5,013 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 35,513 32,012 Gain on sale of revenue equipment (5,337) (665) Provision for noncurrent deferred income taxes 20 633 Tax benefit (expense) of stock options exercised 80 (1) Amortization of discount, net 160 (11) Changes in operating assets and liabilities: Trade accounts receivable 9,081 33 Other assets 10,248 (40,616) Trade accounts payable (22,678) (11,085) Claims accruals 1,769 309 Accrued payroll and other accrued expenses (3,102) 6,326 - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 27,399 (8,052) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Additions to property and equipment (13,411) (89,733) Proceeds from sale of equipment 38,583 23,106 Decrease (increase) in other assets (12,792) 2,061 - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 12,380 (64,566) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under commercial paper program and revolving credit agreements (22,400) 68,800 Principal payments under capital lease obligations (4,513) -- Repurchase of treasury stock -- (3,126) Proceeds from sale of treasury stock 988 8 Dividends paid -- (1,782) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (25,925) 63,900 - ----------------------------------------------------------------------------------------------------------------------------- Net change in cash and cash equivalents 13,854 (8,718) - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 5,370 12,606 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 19,224 $ 3,888 ============================================================================================================================= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 8,371 $ 7,450 Income taxes 186 50 Non-cash activities: Capital lease obligations for revenue equipment $ 26,426 $ -- =============================================================================================================================
Six Months Ended June 30 2001 2000 Cash flows from operating activities: Net earnings $ 10,213 $ 16,066 Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:Depreciation and amortization 70,850 65,160 Gain on sale of revenue equipment (4,918 ) (492 ) Provision for noncurrent deferred income taxes 381 2,399 Tax benefit of stock options exercised 256 8 Amortization of discount, net 192 (1 ) Changes in operating assets and liabilities: Trade accounts receivable (3,210 ) (14,973 ) Other assets 18,379 (20,656 ) Trade accounts payable (30,366 ) (19,474 ) Claims accruals 1,789 (924 ) Accrued payroll and other accrued expenses 4,844 14,785 Net cash provided by operating activities 68,410 41,898 Cash flows from investing activities: Additions to property and equipment (27,723 ) (146,269 ) Proceeds from sale of equipment 57,166 41,666 Increase in other assets 2,467 902 Net cash provided by (used in) investing activities 31,910 (103,701 ) Cash flows from financing activities: Net borrowings (repayments) under commercial paper program and revolving credit agreements (74,400 ) 64,299 Principal payments under capital lease obligations (10,063 ) 0 Repurchase of treasury stock 0 (7,576 ) Proceeds from sale of treasury stock 1,263 186 Dividends paid 0 (1,782 ) Net cash provided by (used in) financing activities (83,200 ) 55,127 Net change in cash and cash equivalents 17,120 (6,676 ) Cash and cash equivalents at beginning of period 5,370 12,606 Cash and cash equivalents at end of period $ 22,490 $ 5,930 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 12,255 $ 12,744 Income taxes 531 426 Non-cash activities: Capital lease obligations for revenue equipment $ 61,007 $ -- See accompanying notes to condensed consolidated financial statements.
5J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(Unaudited)1) The interim condensed consolidated financial statements at
March 31,June 30, 2001 and for the three and six months endedMarch 31,June 30, 2001 and 2000 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 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, 2000.2) The results of operations for the
three-month periodthree and six month periods endedMarch 31,June 30, 2001 are not necessarily indicative of those to be expected for the calendar year ending December 31, 2001.3)
LONG-TERM DEBTLong-Term Debt
Long-term debt consists of (in thousands):
3/31/2001 12/31/2000 --------- ----------Senior revolving credit $52,000 -- Commercial paper -- $74,400 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 40,000 40,000 -------- -------- 285,260 307,660 Less current maturities (62,000) (84,400) Unamortized discount (405) (566) -------- -------- $222,855 $222,694 ======== ========
6/30/2001 12/31/2000 Commercial paper — $ 74,400 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 40,000 40,000 233,260 307,660 Less current maturities (10,000 ) (84,400 ) Unamortized discount (374 ) (566 ) $ 222,886 $ 222,694 The Company is authorized to borrow up to $150 million under its current revolving lines of credit. These
loanslines of credit are supported by a credit agreement with a number of banks, which expires December 14, 2001.6No balances were outstanding under these lines of credit at June 30, 2001.4)
CAPITAL STOCKCapital StockThe 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 Exercisable ------- ---------- -----------Outstanding at December 31, 2000 4,309,765 $15.94 831,812 ======== Granted 31,000 16.98 Exercised (70,754) 13.70 Terminated (409,000) 17.52 ---------- ------ Outstanding at March 31, 2001 3,861,011 $15.82 739,208 ========== ====== ========
Number of
sharesWeighted average
exercise price
per shareNumber of
shares
exercisableOutstanding at December 31, 2000 4,309,765 $ 15.94 831,812 Granted 95,000 17.06 Exercised (197,197 ) 14.13 Terminated (478,900 ) 17.56 Outstanding at June 30, 2001 3,728,668 $ 15.86 894,674 The Company announced in February of 2000, a decision to discontinue 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 SHAREEarnings Per Share
A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below:
Three Months Ended March 31 (in thousands, except per share data) ------------------------------------- 2001 2000 ---- ----Numerator (net earnings) $1,645 $5,013 Denominator - Basic earnings per share Weighted average shares outstanding 35,273 35,604 ====== ====== Basic earnings per share $ .05 $ .14 ====== ====== Denominator - Diluted earnings per share Weighted average share outstanding 35,273 35,604 Effect of common stock options 519 18 ------ ------ Weighted average shares assuming dilution 35,792 35,622 ====== ====== Diluted earnings per share $ .05 $ .14 ====== ======
(in thousands, except per share data) Three Months Ended
June 30Six Months Ended
June 302001 2000 2001 2000 Numerator (net earnings) $ 8,568 $ 11,054 $ 10,213 $ 16,066 Denominator - Basic earnings per share Weighted average shares outstanding 35,312 35,315 35,292 35,459 Basic earnings per share $ 0.24 $ 0.31 $ 0 .29 $ 0.45 Denominator – Diluted earnings per share Weighted average shares outstanding 35,312 35,315 35,292 35,459 Effect of common stock options 499 190 442 89 Weighted average shares assuming dilution 35,811 35,505 35,734 35,548 Diluted earnings per share $ 0.24 $ 0.31 $ 0 .29 $ 0.45 Options which were outstanding to purchase shares of common stock during the
first quarter of 2001 and 2000,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 March 31 --------------------------- 2001 2000 ---- ----Number of shares under option 4,040,275 5,963,740 Range of exercise price $17.50-$37.50 $12.88-$37.50
Three Months Ended
June 30Six Months Ended
June 302001 2000 2001 2000 Number of shares under option 476,100 1,951,915 4,005,100 2,663,915 Range of exercise price $ 18.17 - $37.50 $ 15.69 - $37.50 $ 17.63 - $37.50 $ 14.33 - $37.50 6)
COMPREHENSIVE INCOME 7Comprehensive Income Comprehensive income consists of net earnings and foreign currency translation adjustments. During the three and six months endedMarch 31,June 30, 2001 and 2000, comprehensive income was equal to: (in thousands):
Three Months Ended March 31 --------------------------- 2001 2000 ------ -------Net earnings $1,645 $5,013 Foreign currency translation gain (loss) (470) 863 ------- ------- Comprehensive income $1,175 $5,876 ====== ======
Three Months Ended
June 30Six Months Ended
June 302001 2000 2001 2000 Net earnings $ 8,568 $ 11,054 $ 10,213 $ 16,066 Foreign currency translation gain (loss) 2,935 (1,891 ) 2,465 (1,028 ) Comprehensive income $ 11,503 $ 9,163 $ 12,678 $ 15,038 7)
INCOME TAXESIncome Taxes
The effective income tax rates for the three and six months endedMarch 31,June 30, 2001 and 2000 were based on estimated annual combined effective rates of27.5%15% and 20%, respectively.8)
BUSINESS SEGMENTSBusiness Segments
The Company had three reportable business segments during the firstquartersix months of 2001. Segments included Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). 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. 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.In addition, the Company operated a logistics business segment during the first six months of 2000. Effective July 1, 2000, substantially all of the logistics business and related assets were contributed to a newly-formed, commonly-owned company, Transplace.com (TPC). The Company presently has an approximate 27% interest in TPC and the financial results of TPC are included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled
"equity“equity in earnings of associated companies."” A summary of certain segment information is presented below ( in millions):8
Assets As of June 30 2001 2000 JBT $ 896 $ 799 JBI 138 98 DCS 160 119 JBL — 80 Other (includes corporate and intersegment eliminations) 3 100 Total $ 1,197 $ 1,196
Revenues Three Months
Ended June 30Six Months
Ended June 302001 2000 2001 2000 JBT $ 211 204 $ 416 407 JBI 180 166 348 317 DCS 135 118 262 216 JBL — 121 — 228 Subtotal 526 609 1,026 1,168 Inter-segment eliminations (5 ) (25 ) (9 ) (51 ) Total $ 521 $ 584 $ 1,017 $ 1,117
Operating Income (Loss) Three Months
Ended June 30Six Months
Ended June 302001 2000 2001 2000 JBT $ 2.9 $ (3.3 ) $ (.4 ) $ (3.5 ) JBI 10.1 9.5 17.4 17.2 DCS 4.9 9.7 9.2 13.7 JBL — 5.1 — 6.8 Other (includes corporate) (2.1 ) (.7 ) (2.0 ) (4.3 ) Total $ 15.8 $ 20.3 $ 24.2 $ 29.9
Net Depreciation Expense Three Months
Ended June 30Six Months
Ended June 302001 2000 2001 2000 JBT $ 17.5 $ 16.7 $ 35.2 $ 33.5 JBI 5.4 5.7 11.2 11.7 DCS 10.5 8.9 20.6 16.6 JBL — .2 — .5 Other (includes corporate) 1.9 1.6 3.8 2.9 Total $ 35.3 $ 33.1 $ 70.8 $ 65.2
Assets ---------------------------- As of March 31 ---------------------------- 2001 2000 -------- -------JBT $878 $830 JBI 124 78 DCS 148 104 JBL -- 69 Other (includes corporate) 60 112 -------- ------- Total $1,210 $1,193 ======== ======
Revenues ------------------------------------------- For The Three Months Ended March 31 ------------------------------------------- 2001 2000 -------- ---------JBT $204 $203 JBI 168 151 DCS 128 98 JBL -- 107 -------- --------- Subtotal 500 559 Inter-segment eliminations (5) (25) -------- --------- Total $495 $534 ======== =========
Operating Income (Loss) ------------------------------------------- For The Three Months Ended March 31 ------------------------------------------- 2001 2000 -------- -------JBT ($3.2) ($0.2) JBI 7.3 7.7 DCS 4.3 4.0 JBL -- 1.7 Other -- (3.6) -------- -------- Total $8.4 $9.6 ======== ========
Depreciation and Amortization Expense For The Three Months Ended March 31 ------------------------------------- 2001 2000 ------- -------JBT $18 $17 JBI 6 6 DCS 10 8 JBL -- -- Other 2 1 -------- -------- Total $36 $32 ======== ========9)
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESDerivative Instruments and Hedging Activities
On January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133,"Accounting“Accounting for Derivative Instruments and HedgingActivities"Activities” (Statement 133), amended by Statement 138. Statement 138 amended the accounting and reporting standards of Statement 133 for certain derivative instruments and hedging activities. Statement 138 also amends Statement 133 for decisions made by the FASB relating to the Derivatives Implementation Group (DIG) process. The FASB DIG is addressing Statement 133 implementation issues the ultimate resolution of which may impact the application of Statement 133.9Under Statement 133, entities are required to record all derivative instruments
inon the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately.Adoption of Statement 133, as of January
1,2, 2001, did not have an effect on results of operations or financial position of the Company, because the Company does not have any free standing derivatives or embedded derivatives that would be required to be separated from the host contract and accounted for under SFAS 133.10)
GAIN ON SALE OF EQUIPMENT In March of 2001, the Company sold approximately 2,800 trailers and recognized a gain of approximately $5.5 million. It is the Company's intent to replace these trailers with an operating lease of 2,800 new trailers. 11) RECLASSIFICATIONSReclassifications
Certain amounts for 2000 have been reclassified to conform to the 2001 classifications.10INDEPENDENT
ACCOUNTANTS'ACCOUNTANTS’ REVIEW REPORTThe 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
March 31,June 30, 2001, and the related condensed consolidated statements of earnings and cash flows for thethree-monththree and six month periods endedMarch 31,June 30, 2001 and 2000. These condensed consolidated financial statements are the responsibility of theCompany'sCompany’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 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 in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2000, and the related consolidated statements of earnings,
stockholders'stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 2, 2001, 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, 2000, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived./s//s/ KPMG LLP
Tulsa, Oklahoma
April
July 16, 200111The following discussion should be read in conjunction with the attached interim condensed consolidated financial statements and notes thereto, and with the
Company'sCompany’s audited consolidated financial statements and notes thereto for the calendar year ended December 31, 2000 andManagement'sManagement’s Discussion and Analysis of Results of Operations and Financial Condition included in the 2000 Annual Report to Shareholders.This report contains statements that may be considered as forward-looking or predictions concerning future operations. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on
management'smanagement’s belief or interpretation of information currently available. Shareholders and prospective investors are cautioned that actual results and experience may differ materially from the forward-looking statements as a result of many factors. Among all the factors and events that are not within theCompany'sCompany’s control and could have a material impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions and competitive rate fluctuations and availability of drivers. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. Financial and operating results of the Company may fluctuate as a result of these and other risk factors as detailed from time to time in Company filings with the Securities and Exchange Commission.RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTERComparison of Second Quarter 2001
TO FIRST QUARTERto Second Quarter 2000SUMMARY
Consolidated operating revenue for the
firstsecond quarter of 2001 was$495$521 million, compared with$534$584 million during thefirstsecond quarter of 2000. The lower revenue reflects the contribution of all theCompany'sCompany’s non-asset based logistics business to a jointly owned logistics company, Transplace.com (TPC). TheCompany'sCompany’s revenue growth for thefirstsecond quarter of 2001 was approximately16%8%, excluding the former logistics segment. While theCompany'sCompany’s results of operations includes approximately 27% ofTPC'sTPC’s net results of operations, all logistics revenue is excluded from theCompany'sCompany’s financial statements subsequent to June 30, 2000.JBT segment revenue grew
1%3% during thefirstsecond quarter of 2001, to$204$211 million, compared with$203$204 million in 2000. The JBT tractor fleet was206239 units larger atMarch 31,June 30, 2001, compared withMarch 31,June 30, 2000. This increase included131223 independent contractor tractors which the Company began utilizing in late 2000. Revenue per loaded mile in the JBT segment, excluding fuel surcharges, rose1.9%1.7% in the current quarter, compared with thefirstsecond quarter of 2000. The JBT segmentincurred angenerated operatinglossincome of$3.2$2.9 million during thefirstsecond quarter of 2001, compared with a loss of$.2$3.3 million in 2000. Theoperating loss in thecurrent quarterwas reduced by a $4.1 million gain onresults represent thesalefirst quarter oftrailers, which closed in March of 2001. The significant JBTpositive operatingloss in 2001 was primarily due to reduced freight demand associated withincome since theslowing U.S. economy, additional empty miles run and higher maintenance and safety costs.Company began reporting the Truck segment separately from Intermodal.Revenue in the JBI segment rose
11%8% to$168$180 million in 2001, compared with$151$166 million in 2000. Revenue per mile, excluding fuel surcharges,declined .6%increased 0.6% in 2001 compared with thefirstsecond quarter of 2000. Operating income in the JBI segmentdeclinedwas $10.1 million in 2001 compared with $9.5 million in 2000.DCS segment revenue increased 14% to
$7.3$135 million in 2001 from$7.7 million in 2000. The decline in operating income was partly due to higher equipment costs. 12DCS segment revenue increased 30% to $128 million in 2001 from $98$118 million in 2000. Operating incomewas $4.3declined to $4.9 million in 2001compared with $4.0from $9.7 million in 2000.Current quarterThe decrease in operating incomeincluded a $1.3 million gain onduring thesale of certain trailers. The decline in 2001 operating income, excluding this gain,current quarter was partly due toreduced freight demand associated with the slowing U.S. economylower revenue per tractor and higher accident and equipment costs.
Summary of Operating Segments Results For Three Months Ended March 31 (dollars in millions) Gross Revenue Operating Income ----------------------------------- ------------------ 2001 2000 % Change 2001 2000 ---- ---- -------- ---- ----JBT $204 $203 1% ($3.2) ($0.2) JBI 168 151 11% 7.3 7.7 DCS 128 98 30% 4.3 4.0 JBL -- 107 -- -- 1.7 Other -- -- -- -- (3.6) ----- ----- ----- ---- ----- Subtotal 500 559 (11%) 8.4 9.6 Inter-segment eliminations (5) (25) -- -- -- ----- ----- ------ ---- ---- Total $495 $534 (7%) $8.4 $9.6 ==== ==== ==== ==== ====Summary of Operating Segments Results
For Three Months Ended June 30
(dollars in millions)
Gross Revenue Operating Income (loss) 2001 2000 % Change 2001 2000 JBT $ 211 $ 204 3 % $ 2.9 $ (3.3 ) JBI 180 166 8 % 10.1 9.5 DCS 135 118 14 % 4.9 9.7 JBL — 121 — -- 5.1 Other — — — (2.1 ) (.3 ) Subtotal 526 609 (14 %) 15.8 20.7 Inter-segment eliminations (5 ) (25 ) — — — Total $ 521 $ 584 (11 %) $ 15.8 $ 20.7 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 March 31 --------------------------------------------- Percentage of Percentage Change Operating Revenues Between Quarters --------------------- -------------------- 2001 2000 2001 VS. 2000 ---------- ---------- --------------------Operating revenues 100.0% 100.0% (7.1%) Operating expenses Salaries, wages and employee benefits 39.7% 34.8% 5.8% Rents and purchased transportation 26.6% 35.4% (30.2%) Fuel and fuel taxes 12.6% 10.6% 9.8% Depreciation and amortization 7.2% 6.0% 10.9% Operating supplies and expenses 6.9% 5.6% 14.8% Insurance and claims 2.5% 1.8% 28.2% Operating taxes and licenses 1.6% 1.4% 5.3% General and administrative expenses, net of gains (0.1%) 1.5% (104.7%) Communication and utilities 1.3% 1.1% 16.1% ------------------------ -------------- Total operating expenses 98.3% 98.2% (7.1%) ------------------------ -------------- Operating income 1.7% 1.8% (12.4%) Interest expense (1.3%) (1.1%) 5.0% Equity in earnings of associated companies 0.0% 0.5% (93.8%) ------------------------ -------------- Earnings before income taxes 0.4% 1.2% (63.8%) Income taxes 0.1% 0.3% (50.2%) ------------------------ -------------- Net earnings 0.3% 0.9% (67.2%) ======================== --------------13
Three Months Ended June 30 Percentage of Percentage Change Operating Revenues Between Quarters 2001 2000 2001 vs. 2000 Operating revenues 100.0 % 100.0 % (10.6 %) Operating expenses Salaries, wages and employee benefits 37.8 % 33.3 % 1.4 % Rents and purchased transportation 27.8 % 36.9 % (32.7 %) Fuel and fuel taxes 11.3 % 10.0 % 1.1 % Depreciation and amortization 6.8 % 5.7 % 6.6 % Operating supplies and expenses 6.9 % 5.4 % 14.0 % Insurance and claims 2.3 % 1.7 % 26.5 % Operating taxes and licenses 1.6 % 1.4 % (0.1 %) General and administrative expenses, net of gains 1.3 % 1.1 % (0.5 %) Communication and utilities 1.2 % 1.0 % 9.3 % Total operating expenses 97.0 % 96.5 % (10.2 %) Operating income 3.0 % 3.5 % (22.3 %) Interest expense (1.1 %) (1.2 %) (14.1 %) Equity in earnings of associated companies 0.0 % 0.0 % — Earnings before income taxes 1.9 % 2.4 % (29.5 %) Income taxes 0.2 % 0.5 % (57.4 %) Net earnings 1.6 % 1.9 % (22.5 %) Total operating expenses for the
firstsecond quarter of 2001 decreased7.1%10.2% from the comparable period of 2000. This decrease was significantly impacted by the contribution of the logistics business to TPC, effective July 1, 2000. TheCompany'sCompany’s operating ratio was98.3%97.0% for thefirstsecond quarter of 2001 and98.2%96.5% in the comparable quarter of 2000. Salaries, wages and employee benefits increased5.8%1.4% during the current quarter due, in part, to higherworkers'workers’ compensation and other fringe benefit expenses. The contribution of the logistics business to TPC also significantly decreased 2001 revenue, resulting in an increase of this cost category as a percentage of revenue. Rents and purchased transportation decreased30.2%32.7% and declined significantly as a percentage of revenue. This decrease was primarily due to the contribution of the logistics business to TPC which resulted in a significant decrease of purchased transportation expense. Fuel and fuel taxes increased9.8%,1.1% during the current quarter, primarily due to anapproximate 9%increase in tractor miles anda 1% increase inhigher fuelcost per gallon. Fuel cost per gallon declined about 10% duringcosts. While fuel prices were up only slightly from the first quarter of 2001,relativefuel cost per gallon was still above the comparable period of 2000. The Company has been able tothe fourth quarterrecover substantially all of2000.its increased fuel costs through revenue surcharges.Depreciation and amortization expense increased
10.9%6.6% during the current quarter due primarily toan 8%a 7% increase in the tractor fleet. The Company commenced a tractor leasing program in July of 2000 and has acquired the majority of its new tractors since that time utilizing capital leases. Gains and losses on dispositions of revenue equipment are included in general and administrative expense. Operating supplies and expenses increased14.8%14.0%, primarily due to an increase in tractor miles and higher trailer maintenance costs. Insurance and claims costs rose 26.5%, primarily due to higher accident and collision expenses. Communication and utilities expenses were up 9.3%, primarily due to expanded data and telecommunication networks and increased satellite communication expenses. The effective income tax rates were approximately 12% in 2001 and 20% in 2000. The decrease in the 2001 effective income tax rate was due, in part, to a lower projected rate for the full year 2001.As a result of the above, net earnings for the three months ended June 30, 2001 were $8.6 million, or diluted earnings per share of $0.24, compared with $11.1 million, or $0.31 per diluted share, in 2000.
Comparison of Six Months Ended June 30, 2001 to Six Months Ended June 30, 2000
SUMMARY
Consolidated operating revenue for the six months ended June 30, 2001 was $1.017 billion, compared with $1.117 billion during the first six months of 2000. The lower revenue reflects the contribution of all the Company’s non-asset based logistics business to a jointly owned logistics company, Transplace.com (TPC). The Company’s revenue growth for 2001 was approximately 9%, excluding the former logistics segment. While the Company’s results of operations includes approximate 27% of TPC’s net results of operations, all logistics revenue is excluded from the Company’s financial statements subsequent to June 30, 2000.
JBT segment revenue grew 2% during the six months of 2001, to $416 million, compared with $407 million in 2000. The average JBT tractor fleet increased 4% in 2001, including independent contractors, which the Company began utilizing in late 2000. Revenue per loaded mile in the Truck segment, excluding fuel surcharges, rose 1.7% during the first half of 2001, compared with 2000. The JBT segment incurred an operating loss of $.4 million in 2001, compared with a loss of $3.5 million in 2000. The 2001 operating loss was reduced by a $4.1 million gain on the sale of trailers, which closed in March.
Revenue in the JBI segment rose 10% to $348 million in 2001, from $317 million in 2000. Loads in the Intermodal segment grew about 7% for the first half of 2001. Revenue per mile, excluding fuel surcharges, was essentially the same in both 2001 and 2000. Operating income in the JBI segment was $17.4 million for the first half of 2001, up from $17.2 million in 2000.
DCS segment revenue was $262 million for the first half of 2001, up 21% from $216 million in 2000. Operating income in 2001 totaled $9.2 million, compared with $13.7 million in 2000. Current year operating income included a $1.3 million gain on the sale of certain trailers, which closed in March. The decline in 2001 operating income was partly due to reduced freight demand associated with the slowing U.S. economy and higher accident and equipment costs.
Summary of Operating Segments Results
For Six Months Ended June 30
(dollars in millions)
Gross Revenue Operating Income (loss) 2001 2000 % Change 2001 2000 JBT $ 416 $ 407 2 % $ (.4 ) $ (3.5 ) JBI 348 317 10 % 17.4 17.2 DCS 262 216 21 % 9.2 13.7 JBL — 228 — — 6.8 Other — — — (2.0 ) (4.3 ) Subtotal 1,026 1,168 12 % 24.2 29.9 Inter-segment eliminations (9 ) (51 ) — — — Total $ 1,017 $ 1,117 (9 %) $ 24.2 $ 29.9 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.
Six Months Ended June 30 Percentage of
Operating RevenuesPercentage Change
Between Periods2001 2000 2001 vs. 2000 Operating revenues 100.0 % 100.0 % (9.0 %) Operating expenses Salaries, wages and employee benefits 38.7 % 34.0 % 3.6 % Rents and purchased transportation 27.2 % 36.2 % (31.5 %) Fuel and fuel taxes 11.9 % 10.3 % 5.4 % Depreciation and amortization 7.0 % 5.8 % 8.7 % Operating supplies and expenses 6.9 % 5.5 % 14.4 % Insurance and claims 2.4 % 1.7 % 27.3 % Operating taxes and licenses 1.6 % 1.4 % 2.5 % General and administrative expenses, net of gains 0.6 % 1.3 % (57.2 %) Communication and utilities 1.3 % 1.0 % 12.6 % Total operating expenses 97.6 % 97.3 % (8.7 %) Operating income 2.4 % 2.7 % (19.1 %) Interest expense (1.2 %) (1.2 %) (5.2 %) Equity in earnings of associated companies 0.0 % 0.3 % — Earnings before income taxes 1.2 % 1.8 % (40.2 %) Income taxes 0.2 % 0.4 % (55.1 %) Net earnings 1.0 % 1.4 % (36.4 %) Total operating expenses for the first six months of 2001 decreased 8.7% from the comparable period of 2000. This decrease was significantly impacted by the contribution of the logistics business to TPC, effective July 1, 2000. The Company’s operating ratio was 97.6% for the first half of 2001 and 97.3% in the comparable period of 2000. Salaries, wages and employee benefits increased 3.6% during the current year due, in part, to higher workers’ compensation and other fringe benefit expenses. The contribution of the logistics business to TPC also significantly decreased 2001 revenue, resulting in an increase of this cost category as a percentage of revenue. Rents and purchased transportation decreased 31.5% and declined significantly as a percentage of revenue. This decrease was primarily due to the contribution of the logistics business to TPC, which resulted in a significant decrease of purchased transportation expense. Fuel and fuel taxes increased 5.4%, primarily due to an increase in tractor miles and a slight percentage increase in fuel cost per gallon.
Depreciation and amortization expense increased 8.7% during the current year, due primarily to a 7% increase in the tractor fleet. The Company commenced a tractor leasing program in July of 2000 and has acquired the majority of its new tractors since that time utilizing capital leases. Gains and losses on dispositions of revenue equipment are included in general and administrative expense. Operating supplies and expenses increased 14.4%, primarily due to the
9%6% increase in tractor miles and higher tractor maintenance costs. A portion of the higher tractor repair costsiswas due to more work being outsourced to outside vendors and was partly offset by lower mechanic wage expense. Insurance and claims costs rose28.2%27.3%, primarily due to higher accident and collision expenses. General and administrative expenses declinednearly 105%57.2%, partly due to an approximate $5.5 million gain on the sale of a group of trailers which was closed during March of 2001. This expense category was also reduced in 2001 by charges to TPC for computer system and support work and other administrative services. Communication and utilities expenses were up16.1%12.6%, primarily due to expanded data and telecommunication networks and increased satellite communication expenses. The effective income tax rates wereapproximately 27.5%15% in 2001 and 20% in 2000, which were the rates expected for the full year 2001 and 2000, respectively.As a result of the above, net earnings for the
threesix months endedMarch 31,June 30, 2001 were$1.6$10.2 million, or diluted earnings per share of$.05,$0.29, compared with$5.0$16.1 million, or$.14$0.45 per diluted share, in 2000.LIQUIDITY AND CAPITAL RESOURCESLiquidity 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
$27.4$68.4 million for thefirst quarter ofsix months ended June 30, 2001, compared witha use of $8.1$41.9 million during thefirst quartercomparable period of 2000. This increase in cash provided was partly due tohigher levels ofan improvement in accountspayable in 2001receivable aging and funds paid out during the first quarter of 2000 for prepaid lease charges. Net cash provided by investing activities was$12.4$31.9 million in 2001, compared with$64.6$103.7 million used in 2000. This change was primarily a result of reduced purchases of trailing equipment and the sale of trailing equipment in March of 2001. The Company commenced tractor leasing programs in July of 2000. The majority of new tractor acquisitions since mid 2000 have been under capital lease arrangements. The majority of new trailing equipment additions since late 2000 have been under operating lease arrangements. Due, in part, to the leasing arrangements described above, the Company reducedfunding requirements for revenue equipment, treasury stocktotal debt and capitalized lease obligations during thepaymentfirst half ofdividends, net cash used in financing activities was $25.9 million in 2001, compared with $63.9 million provided by financing activities in 2000. 14SELECTED BALANCE SHEET DATA2001.
As of ------------------------------------------------------------ March 31, 2001 December 31, 2000 March 31, 2000 -------------- ----------------- --------------Working capital ratio 1.14 1.02 1.18 Current maturities of long-term debt and obligations under capital leases (millions) $ 83 $ 101 $ 60 Total debt and obligations under capital leases (millions) $ 401 $ 401 $ 396 Total debt to equity .93 .94 .99 Total debt as a percentage of total capital .48 .48 .50Selected Balance Sheet Data
As of June 30, 2001 December 31, 2000 June 30, 2000 Working capital ratio 1.37 1.02 1.18 Current maturities of long-term debt and obligations under capital leases (millions) $ 36 $ 101 $ 60 Total debt and obligations under capital leases (millions) $ 378 $ 401 $ 392 Total debt to equity .85 .94 .96 Total debt as a percentage of total capital .46 .48 .49 The
Company'sCompany’s total debt level, including capitalized lease obligations,remained atdeclined approximately$401$23 million from December 31, 2000 toMarch 31,June 30, 2001 and wasup $5down about $14 million fromMarch 31,2000. As ofMarch 31,June 30, 2001, the Company had intentions to acquire or lease approximately$60$180 million of revenue and service equipment during the next twelve month period. Funding for future acquisitions of revenue equipment is expected to come from cash generated from operations, existing borrowing facilities and rental or leasing arrangements. The Company discontinued its commercial paper program in early 2001. The Company is authorized to borrow up to $150 million under its current revolving lines of credit. Theseloanslines of credit are supported by a credit agreement with a number of banks, which expires December 14, 2001. The Company plans to renew these lines of credit during the fourth quarter of 2001.Prospective Accounting Pronouncements
In July 2001, the FASB issued Statement No. 141, “Business Combinations,” and Statement No. 142, “Goodwill and Other Intangible Assets.” Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.”
The Company is required to adopt the provisions of Statement 141 immediately, except with regard to business combinations initiated prior to July 1, 2001, which it expects to account for using the pooling-of-interests method, and Statement 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that is acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142.
Statement 141 will require, upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. And finally, any unamortized negative goodwill and negative equity-method goodwill existing at the date Statement 142 is adopted must be written off as the cumulative effect of a change in accounting principle. As of the date of adoption, the Company expects to have unamortized negative goodwill in the amount of approximately $31.7 million, which will be subject to the transition provisions of Statements 141 and 142.
Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company’s financial statements at the date of this report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
Company'sCompany’s earnings are affected by changes in short-term interest rates as a result of its use of short-term revolving lines of credit. The Company from time to time utilizes interest rate swaps to mitigate the effects of interest rate changes; none were outstanding atMarch 31,June 30, 2001. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more during the next twelve months, there would be no material adverse impact on theCompany'sCompany’s results of operations based on variable rate debt outstanding atMarch 31,June 30, 2001. AtMarch 31,June 30, 2001, the fair value of theCompany'sCompany’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'sCompany’s consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material to theCompany'sCompany’s results of operations for the three and six months endedMarch 31,June 30, 2001. 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 theCompany'sCompany’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 fluctuation in foreign currency exchange rates.15PART II
OTHER INFORMATIONITEM 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 The annual meeting of stockholders of J.B. Hunt Transport Services, Inc. was held on April 26, 2001. Proxies for the meeting were solicited pursuant
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 Regulation 14A of the Securities Exchange Act of 1934. At the meeting, stockholders voted on the following resolutions with the vote tabulations so indicated:
VOTES ------------------------------------------- FOR AGAINST ABSTAINED ------------------------------------------1. To elect three Class III Directors foratermVote ofthree years each. 31,811,268 0 453,751 2. To ratify the appointment of KPMG LLP as the Company's principal independent public accountants for the next fiscal year. 31,635,358 619,041 10,620Security HoldersNone applicable. Item 5. Other information None applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 15 – Awareness letter related to Independent Accountants’ Review Report. There was no solicitation in opposition to management's nominees for Directors as listed in the proxy statement and each nominee was elected by greater than ninety-two percent of the shares entitled to vote. No additional business or other matters came before the meeting or any adjournment thereof. ITEM 5. OTHER INFORMATION On April 27, 2001, Standard and Poor's Corporation announced that it had lowered its ratings for J.B. Hunt Transport Services, Inc. The corporate credit rating was lowered to BBB from BBB+; senior unsecured debt was lowered to BBB from BBB+ and subordinated debt was lowered to BBB- from BBB. The commercial paper rating of A-2 was affirmed, with a stable outlook. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 15 -- Awareness letter related to Independent Accountants' Review Report (b) Reports on Form 8-K The Company filed a Form 8-K on May 7, 2001, relating to Items 7 and 9 of that Form and announcing that the Company had prepared a slide presentation and intended to utilize it in meetings with investors, stockholders and analysts. A copy of the slide presentation was filed as an exhibit to the Form 8-K. 16SIGNATURES
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: May 14, 2001 BY: /s/ Kirk Thompson ------------------------ --------------------------------------- Kirk Thompson President and Chief Executive Officer DATE: May 14, 2001 BY: /s/ Jerry W. Walton ------------------------ --------------------------------------- Jerry W. Walton Executive Vice President, Finance and Chief Financial Officer DATE: MAY 14, 2001 BY: /s/ Donald G. Cope ------------------------ --------------------------------------- Donald G. Cope Senior Vice President, Controller and Chief Accounting Officer 17
J.B. HUNT TRANSPORT SERVICES, INC. DATE: August 9, 2001 BY: /s/ Kirk Thompson Kirk Thompson
President and
Chief Executive OfficerDATE: August 9, 2001 BY: /s/ Jerry W. Walton Jerry W. Walton
Executive Vice President, Finance
and Chief Financial OfficerDATE: August 9, 2001 BY: /s/ Donald G. Cope Donald G. Cope
Senior Vice President, Controller
and Chief Accounting Officer