FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
(Mark One)
/X/(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996FOR THE QUARTER ENDED MARCH 31, 1997
OR
/ /[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file numberCOMMISSION FILE NUMBER 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in its charter)(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS 71-0335111
(State or other jurisdiction(STATE OR OTHER JURISDICTION (I.R.S. Employer
of incorporation or organization) Identification No.EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
615 J.B. HUNT CORPORATE DRIVE, LOWELL, ARKANSAS 72745
(Address of principal executive offices, and Zip Code)(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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) has filed all reports
required to be filed by SectionHAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT
OF 1934 during the precedingDURING THE PRECEDING 12 months (or for such shorter period that the
registrant was required to file such reports)MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), andAND (2) has been subject to
the filing requirements for at least the pastHAS BEEN SUBJECT TO
THE FILING REQUIREMENTS FOR AT LEAST THE PAST 90 days.
YesDAYS.
YES X No
--- ---
The number of shares of the Company'sNO
----- -----
THE NUMBER OF SHARES OF THE COMPANY'S $.01 par value common stock outstanding
on September 30, 1996 was 37,996,906PAR VALUE COMMON STOCK OUTSTANDING
ON MARCH 31, 1997 WAS 36,456,276
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim 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 and nine month periodsperiod ended September 30, 1996March 31, 1997 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996.1997.
The interim consolidated financial statements have been reviewed by KPMG
Peat Marwick LLP, independent public accountants.
These interim 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, 1995.1996.
INDEX
-----
Consolidated Statements of Earnings for the Three
and Nine Months Ended September 30, 1996March 31, 1997 and 1995....................................1996............................ Page 3
Consolidated Balance Sheets as of
September 30, 1996March 31, 1997 and December 31, 1995.............................31,1996............................. Page 4
Consolidated Statements of Cash Flows for the
NineThree Months Ended September 30, 1996March 31, 1997 and 1995........................1996...................... Page 5
Notes to Consolidated Financial Statements
as of September 30, 1996.............................................March 31, 1997............................................ Page 6
Review Report of KPMG Peat Marwick LLP.................................LLP............................ Page 8
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition..............................................Condition......................................... Page 9
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
- ------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
- ------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------
Operating revenues $378,739 $355,114 $1,105,326 $993,757
Operating expenses
Salaries, wages and employee benefits 124,914 119,082 363,536 339,686
Purchased transportation 115,258 101,451 312,086 262,265
Fuel and fuel taxes 38,043 35,818 120,292 105,956
Depreciation 28,147 30,974 92,158 96,751
Operating supplies and expenses 22,957 24,875 69,460 72,192
Insurance and claims 14,021 14,074 45,191 36,589
General and administrative expenses 6,645 7,893 22,459 19,390
Operating taxes and licenses 6,738 6,535 21,020 23,794
Communication and utilities 4,583 4,696 13,823 10,466
- ------------------------------------------------------------------------------------------
Total operating expenses 361,306 345,398 1,060,025 967,089
- ------------------------------------------------------------------------------------------
Operating income 17,433 9,716 45,301 26,668
Interest expense 6,010 6,135 18,283 18,720
Other non-operating expense -- 660 -- 660
- ------------------------------------------------------------------------------------------
Earnings before income taxes 11,423 2,921 27,018 7,288
Income taxes 4,341 1,081 10,267 2,697
- ------------------------------------------------------------------------------------------
Net earnings $ 7,082 $ 1,840 $ 16,751 $ 4,591
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Common shares outstanding 38,095 38,669 38,077 38,598
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Earnings per share $ 0.19 $ 0.05 $ 0.44 $ 0.12
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
Operating revenues $ 365,401 $ 354,014
Operating expenses
Salaries, wages and employee benefits 121,444 116,436
Purchased transportation 116,780 97,971
Fuel and fuel taxes 38,057 40,134
Depreciation 33,250 34,144
Operating supplies and expenses 22,146 22,598
Insurance and claims 10,113 13,165
General and administrative expenses 6,042 7,463
Operating taxes and licenses 6,078 7,162
Communication and utilities 4,171 4,509
- ---------------------------------------------------------------------------
Total operating expenses 358,081 343,582
- ---------------------------------------------------------------------------
Operating income 7,320 10,432
Interest expense 6,404 5,911
- ---------------------------------------------------------------------------
Earnings before income taxes 916 4,521
Income taxes 348 1,718
- ---------------------------------------------------------------------------
Net earnings $ 568 $ 2,803
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Common shares outstanding 36,750 38,074
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Earnings per share $ 0.02 $ 0.07
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- ----------------------------------------------------------------------------
September 30,------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1997 1996
December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,93812,114 $ 4,2603,786
Accounts receivable 171,007 143,002162,288 151,357
Prepaid expenses 14,884 29,64524,327 35,964
Deferred income taxes 10,171 10,17111,000 11,000
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Total current assets 199,000 187,078209,729 202,107
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Property and equipment 1,223,443 1,184,8081,201,622 1,218,245
Less accumulated depreciation 400,346 375,798415,322 404,992
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Net property and equipment 823,097 809,010786,300 813,253
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Other assets 26,851 20,69422,490 25,565
- ----------------------------------------------------------------------------
$ 1,048,948 $ 1,016,782------------------------------------------------------------------------------
$1,018,519 $1,040,925
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 64,55067,950 $ 30,31049,750
Trade accounts payable 79,442 86,46672,447 83,846
Claims accruals 32,931 38,01431,101 33,693
Accrued payroll 15,797 12,852
Other accrued expenses 30,184 25,986
Other current liabilities 4,254 3,8237,374 15,999
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 211,361 184,599194,669 196,140
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 332,510 339,015322,467 332,571
Claims accruals 13,500 13,50012,800 12,800
Deferred income taxes 125,466 122,729142,358 142,159
Stockholders' equity 366,111 356,939346,225 357,255
- ----------------------------------------------------------------------------
$ 1,048,948 $ 1,016,782------------------------------------------------------------------------------
$1,018,519 $1,040,925
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- --------------------------------------------------------------------------------------------
Nine Months Ended September 30
- --------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 16,751 $ 4,591
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, net of gain on disposition of equipment 92,158 96,751
Deferred income taxes 2,737 (3,477)
Tax benefit of stock options exercised 381 316
Changes in assets and liabilities:
Accounts receivable (28,005) (18,306)
Prepaid expenses 14,761 8,631
Trade accounts payable (7,024) 27,865
Claims accruals (5,083) 6,113
Accrued expenses and other current liabilities 4,629 (3,042)
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 91,305 119,442
- --------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (146,927) (145,400)
Proceeds from sale of equipment 40,682 38,612
Increase in other assets (4,759) (8,464)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (111,004) (115,252)
- --------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings of long-term obligations 27,735 1,562
Proceeds from sale of treasury stock 2,137 2,263
Repurchase of treasury stock (5,806) --
Dividends paid (5,689) (5,789)
- --------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 18,377 (1,964)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,322) 2,226
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 4,260 2,142
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,938 $ 4,368
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 18,364 $ 19,056
Income Taxes 974 3,050
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 568 $ 2,803
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 33,250 34,144
Deferred income taxes 199 (3,148)
Tax benefit (expense) of stock options exercised (27) 162
Changes in assets and liabilities:
Accounts receivable (10,931) (19,999)
Prepaid expenses 11,637 7,452
Trade accounts payable (11,399) 1,535
Claims accruals (2,592) (4,360)
Accrued payroll and other accrued expenses (5,680) 3,032
- ------------------------------------------------------------------------------
Net cash provided by operating activities 15,025 21,621
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (32,687) (50,601)
Proceeds from sale of equipment 26,390 15,177
Decrease in other assets 3,809 555
- ------------------------------------------------------------------------------
Net cash used in investing activities (2,488) (34,869)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (5,000) --
Net borrowings under commercial paper program 13,096 13,317
Proceeds from sale of treasury stock 34 550
Repurchase of treasury stock (10,479) (2,998)
Dividends paid (1,860) (1,881)
- ------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (4,209) 8,988
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 8,328 (4,260)
- ------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 3,786 4,260
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,114 $ 0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 6,551 $ 5,255
Income Taxes 196 (1,114)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) LONG-TERM DEBT
Long-term debt consists of (in thousands):
9/30/963/31/97 12/31/9596
-------- --------
Commercial paper $179,550 $145,310$182,950 $169,750
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/03 98,260 100,000
Senior notes payable, interest at 7.75%
payable semiannually 5,000 5,00098,260
Senior notes payable, interest at 7.84%
payable semiannually 10,000 15,000 20,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/00 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
-------- --------
397,810 370,310391,210 383,010
Less current maturities (64,550) (30,310)(67,950) (49,750)
Unamortized discount (750) (985)(793) (689)
-------- --------
$332,510 $339,015$322,467 $332,571
-------- --------
-------- --------
The Company is authorized to issue up to $250$240 million in notes under its
commercial paper note program. These notes are supported by two credit
agreements with a group of banks. One agreement for $125$120 million expires March
27, 199719, 1998 and $125$120 million expires March 31, 1999.20, 2002.
The 6.25% senior notes were issued on September 1, 1993 and are due on
September 1, 2003.
The 7.75% senior notes were issued on October 1, 1991 and are payable in
five equal annual installments beginning October 31, 1992.
The 7.84% senior notes were issued on March 31, 1992 and are payable in
five equal annual installments beginningon March 31, 1995.31.
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
The 6.25% senior notes were issued on November 17, 1995 and are payable at
maturity on November 17, 2000.
The 6.00% senior notes were issued on December 12, 1995 and are payable at
maturity on December 12, 2000.
2)6
(2) 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:
Number of
Number of Option price shares
shares per share exercisable
------ --------- ------------ -----------
Outstanding at December 31, 1995 2,725,731 $ 9.33 - 24.63 415,606
-------1996 2,740,925 $11.58-24.63 294,950
-------
Granted 2,792,500 17.63 - 21.255,000 14.25
Exercised (191,456) 9.67 - 18.75(3,000) 11.58
Terminated (270,350) 11.58 - 23.00(32,750) 12.83-23.00
--------- -------------------------- -------
Outstanding at September 30, 1996 5,056,425 $ 9.33 - 24.63 322,850March 31, 1997 2,710,175 $11.58-24.63 313,150
--------- -------------------------- -------
--------- -------------------------- -------
On OctoberApril 17, 1996,1997, the Company's Board of Directors declared a regular
quarterly cash dividend of $.05 per share payable on November 22, 1996May 19, 1997 to
stockholders of record on May 2, 1997.
(3) NEW ACCOUNTING STATEMENT
The Financial Accounting Standards Board issued Statement No. 128, Earnings
per Share, in February of 1997, which the Company is required to adopt as of
November 4, 1996.December 31, 1997. At that time the method of computing earnings per share will
change and all prior periods which are presented will be restated to conform
with Statement 128. Under the new requirements "basic earnings per share" will
replace the current term of "primary earnings per share" and "diluted earnings
per share" will replace the current term of "fully diluted earnings per share".
The Company expects basic earnings per share for the quarters ended March 31,
1997 and March 31, 1996 to be unchanged when compared to primary earnings per
share for those same periods.
7
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the condensed consolidated balance sheet of J.B. Hunt Transport
Services, Inc. and subsidiaries as of September 30, 1996,March 31, 1997, and the related condensed
consolidated statements of earnings and cash flows for the three-month and nine-month periods
ended September 30,March 31, 1997 and 1996, and 1995, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review 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 generally accepted
auditing standards, 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 generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of J.B. Hunt Transport Services, Inc.
and subsidiaries as of December 31, 1995,1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 9, 1996,7, 1997, 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, 1995,1996, is fairly presented, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG Peat Marwick LLP
--------------------------------------
Little Rock, Arkansas
OctoberApril 11, 19961997
8
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 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, 1995.1996.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage change between the third quarter of 1996 and the comparable period in 1995relationship of certain revenue, expense anditems
to operating items.revenues for the periods indicated:
Three Months Ended
September 30,March 31
---------------------
1997 1996
vs. 1995
(In thousands except tractor data)
Increase
(decrease) %
in amounts change
---------------- ------
Operating revenues $23,625 7%
- ---------------------------------------------------------------
Average number of tractors in the fleet (50) (1%)
- ---------------------------------------------------------------100.0% 100.0%
Operating expenses:expenses
Salaries, wages and employee benefits $ 5,832 5%33.2 32.9
Purchased transportation 13,807 14%
- ---------------------------------------------------------------32.0 27.7
Fuel and fuel taxes 2,225 6%10.4 11.3
Depreciation (2,827) (9%)
- ---------------------------------------------------------------9.1 9.7
Operating supplies and expenses (1,918) (8%)6.1 6.4
Insurance and claims (53) 0%
- ---------------------------------------------------------------2.8 3.7
General and administrative expenses (1,248) (16%)1.6 2.1
Operating taxes and licenses 203 31.7 2.0
Communication and utilities (113) (2%)
- ---------------------------------------------------------------1.1 1.3
----- -----
Total operating expenses 15,908 5%
- ---------------------------------------------------------------98.0 97.1
----- -----
Operating income $ 7,717 79%
- ---------------------------------------------------------------
- ---------------------------------------------------------------2.0 2.9
Interest expense 1.7 1.6
----- -----
Earnings before income taxes 0.3 1.3
Income taxes 0.1 0.5
----- -----
Net earnings 0.2% 0.8%
----- -----
----- -----
The following discussion relates to the table set forth above and the
attached interim consolidated financial statements for the quarterquarters ended
September 30, 1996March 31, 1997 and 1995.1996.
OPERATING REVENUES
Operating revenues for the thirdfirst quarter of 1997 increased approximately
$11 million, or 3 percent, to $365 million, from $354 million in the first
quarter of 1996. This comparison of revenue was negatively affected by
approximately $17.8 million of revenue generated during the first quarter of
1996 increasedby the special commodities and parcel management businesses which were
disposed of later in 1996. This comparison was also negatively impacted by
approximately $24$8.8 million or 7 percent,due to $378.7 million from $355.1 million infewer workdays during the thirdfirst quarter of
1997.
9
1995.
The average number of total tractors in the fleet decreased during the
current quarter by 1 percent from 1996. In addition, approximately 150
tractors were without drivers during the same period.first quarter of 1997. Failing to
fill those tractors negatively impacted revenue, utilization and operating
income during the first quarter. Load volume in the van division increased 8
percent, but was partly offset by a decrease in length of haul. Truck only
freight rates increased .2 percent from 1996, while intermodal rates were
down .8 percent. The change in revenue between quarters includes the
following by type of freight:
Change in Revenue
ThirdFirst Quarter 19961997 vs. ThirdFirst Quarter 19951996
(millions of dollars)
Intermodal $ 16
Logistics management 27$ 26
Van/intermodal 7
Dedicated contract 2
Other, net (21)5
Businesses disposed of and fewer workdays (27)
----
$ 2411
----
----
Intermodal loads increased 13 percent during the third quarter of 1996.
Operating revenues increased 5 percent in the van division, approximately 100
percent91% in logistics management, and 53 percent in
Van/intermodal and 16% in dedicated contract. The
decrease in other above reflects the sale of the special commodities and
parcel management businesses. Van division truck only rates were
approximately 1.4 percent lower during the third quarter of 1996, while
intermodal rates were unchanged.
OPERATING EXPENSES
Total operating expenses forexpressed as a percentage of operating revenues
increased from 97.1% in the thirdfirst quarter of 1996 increased
approximately $16to 98.0% in the first quarter
of 1997. Operating income declined to $7.3 million, or 52.0 percent over the comparable period of revenue
in 1997 from $10.4 million, or 2.9 percent of revenue in 1996. Operating income increased by $7.7 million to $17.4 million from $9.7
million. The significant increase in
1996operating expenses and decline in operating income from an
unusually low third quarter of 1995, was due primarily to higher tractor
utilization and reduced operating expenses. In addition, a pretax gainnumber of
approximately $3 million was recognized during the current quarter, from the
sale of the special commodities business. Gains on the disposition of
revenue equipment, which had been significant in some prior reporting
periods, were approximately $1.2 million in the third quarter of 1996
(excluding the special commodities gain), compared with $3.6 million in 1995.
Gains are classified as a reduction of depreciation expense in the
Consolidated Statements of Earnings.factors. Salaries, wages and employee benefits increased 5 percentas a percentage of
revenue from 32.9% in 1996 to 33.2%. This percentage had declined in recent
periods, primarily due to the growth of intermodal and logistics business
wherein third parties may transport freight rather than Company tractors and
drivers. A new compensation package for van over-the-road drivers, announced in
September of 1996, was effective February 25, 1997. This new package increased
salaries, wages and employee benefits by approximately $4.5 million during the
thirdfirst quarter of 1996, due, in part,1997. This compensation change is expected to $1.7increase
salaries, wages and employee benefits by $45 million paid to drivers in
connection with a new safe driving bonus program.$50 million annually.
Funding of this increased cost is planned to come from the reduction of driver
turnover and lower associated costs of advertising, recruiting, driver training
schools, and accidents. Increased tractor utilization is also expected to help
offset the higher wage and benefit costs.
Purchased transportation expense increased 14 percent, reflectingas a percentage of revenue
from 27.7% in 1996 to 32.0% in 1997. This increase is consistent with trends
in recent periods and reflects the increase in payments to railroads and
third-party companies that furnishedthird-parties for intermodal and truck transportation services provided to the
Company. Fuel and fuel taxtaxes reflects an increase of approximately 7 cents
per gallon, offset by significantly higher fuel miles per gallon and
10
the impact of additional freight moved by railroads and third-party
transportation companies.
The decline of insurance and claims expense increased 6from 3.7 percent during the third quarter of 1996. This increasein 1996 to
2.8 percent in 1997 was primarily due to an 11
percent increasea substantial reduction in accident
frequency. The total cost per gallon partially offsetof insurance and claims in the first quarter of
1997 decreased approximately $3 million from 1996. This decrease relates to
a higher number of experienced drivers in the fleet attracted by a nearly 5 percent
increase in miles per gallon. The higher fuel cost was also partially
recovered through additional fuel surcharge revenue billed to customers.
Rapid changes in fuel costs can significantly impact earnings.
10
The 9 percent decline in depreciation expense was primarily due to the gain on sale of the special commodities business described above. The 8
percent decline in operating suppliesnew
compensation package. General and administrative expenses wasdecreased
approximately $1.4 million due, in part, to lower
tractordecreased driver school and
trailing equipment maintenanceadvertising costs. InsuranceInterest expense increased due to slightly higher debt
levels and claims costs
were flat when comparing the third quarter of 1996 to the same period in
1995. However, 1996 insurance and claims expense was down nearly $4 million
from the second quarter of 1996 to the third quarter of 1996. The Company
announced a decision in June, 1996 to limit the speed of its tractors to 59
miles per hour in order to improve safety. General and administrative
expenses declined 16 percent, due, in part, to lower driver advertising and
recruiting cost.higher interest rates on commercial paper.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be read
in conjunction with information presented in the Consolidated Statements of Cash
Flows and the Consolidated Balance Sheets.
Net cash provided by operating activities was approximately $91$15 million for
the nine months ended September 30, 1996first quarter of 1997 compared with $119$21.6 million in 1995.1996. This decrease in
net cash provided was primarily due to an increase inlower earnings, a reduced rate of
accounts receivable growth and certaina reduction of accounts payable and accrued
expenses related to timing of vendor and other cash payments madedisbursements. Net cash
used in investing activities was $2.5 million in 1997 compared to $34.9 million
in 1996. With the van trailing equipment fleet substantially converted to
containers and chassis, the level of net additions to property and equipment was
down by nearly $30 million. Net cash used in financing activities was $4.2
million in 1997 compared with net cash provided of $9.0 million in 1996. This
change was primarily due to the purchase of treasury stock during the first
quarter of 1996 for claims settlements and payables for revenue equipment purchases.1997.
SELECTED BALANCE SHEET DATA
As of
-----------------------------------------------------------
September 30, 1996---------------------------------------------------
March 31, 1997 December 31, 1995 September 30, 1995
------------------1996 March 31, 1996
-------------- ----------------- --------------------------------
Working capital ratio .941.08 1.03 1.01 .91
Current maturities of long-
term debt (millions) $ 65 $ 30 $ 75$68 $50 $43
Total debt (millions) $ 397 $ 369 $369$390 $382 $383
Total debt to equity 1.13 1.07 1.08 1.03 .99
Total debt as a percentage
of total capital .53 .52 .51 .50.52
Net additionsDuring the first quarter of 1997, the Company renewed its commercial paper
note program and reduced the total amount of authorized borrowing from $250
million to property$240 million. The notes are supported by two credit agreements with
a group of banks. One agreement for $120 million expires March 19, 1998 and
equipment during the nine months ended
September 30, 1996 totaled $106$120 million compared with $107 million in 1995.expires March 20, 2002.
11
While total debt levels have increased slightly during the past year,
the Company's liquidity has not changed significantly. The Company generates
significant cash from operating activities and has borrowing capacity to meet
its committed and contemplated cash expenditures.
FORWARD-LOOKING STATEMENTS
This report contains statements that may be considered as
forward-looking or predictions concerning future operations. Such statements
are based on management's belief or interpretation of information currently
available. These statements and assumptions involve certain risks and
uncertainties and management can give no assurance that such expectations
will be realized. Among all the factors and events that are not within the
Company's control and could have a material impact on future operating
results are general economic conditions, cost and availability of diesel
fuel, adverse weather conditions and competitive rate fluctuations. In
October, 1996 Standard and Poor's lowered its ratingsaddition, the ultimate net cost of the new driver compensation package will
be dependent on the mix of experienced drivers attracted to the Company and
on future accident, cargo and worker's compensation claims, as follows:
* corporate credit to BBB+ from A-
* senior unsecured to BBB+ from A-
* subordinated debt to BBB from BBB+
11well as other
factors.
12
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.The annual meeting of stockholders of J. B. Hunt Transport Services,
Inc. was held on April 17, 1997. Proxies for the meeting were solicited
pursuant 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 nine (9) directors and to
fix the number of directors for
the ensuing year at nine (9). 33,855,423 0 323,799
2. To ratify the appointment of
KPMG Peat Marwick LLP as the
Company's independent public
accountants for the next fiscal year. 34,157,116 12,452 9,654
3. To transact such other business as
may properly come before the
meeting or any adjournments thereof. 30,560,028 2,683,497 935,697
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-nine 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 August 8, 1996 the Company announced an agreement to combine J.B.
Hunt's special commodities business into Trism Secured. Trism acquired the
business and certain other assets in exchange for cash and stock options.
On October 17, 1996 the Company announced that its Board of
Directors had authorized the repurchase of up to 2.0 million shares of
outstanding common stock. This action was in addition to previous
authorizations in 1994 and 1995.None applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
1213
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: November 11, 1996MAY 9, 1997 BY: /s/ Kirk Thompson
------------------------- ------------------------------------------------------ ------------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: November 11, 1996May 9, 1997 BY: /s/ Jerry W. Walton
------------------------- ------------------------------------------------------ ------------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
1314