FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended JuneSeptember 30, 1997
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
Commission file numberFile Number 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Its Charter)
ARKANSAS 71-0335111
(State or other jurisdictionOther Jurisdiction (I.R.S. Employer
of incorporationIncorporation or organization) Identification No.)
Organization)
615 J.B. HUNT CORPORATE DRIVE, LOWELL, ARKANSAS 72745
(Address of principal executive offices,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.
YesYES X No
--- ---
The number of shares of the Company's $.01 par value common stock outstanding on
JuneSeptember 30, 1997 was 36,456,278.36,385,196.
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 sixnine month periods ended JuneSeptember 30, 1997
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 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, 1996.
INDEX
-----
Consolidated Statements of Earnings for the Three and SixNine Months
Ended JuneSeptember 30, 1997 and 1996 . . . . . . . . . . . . . . . . Page1996.....................................Page 3
Consolidated Balance Sheets as of JuneSeptember 30, 1997 and
December 31,1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page31,1996......................................................Page 4
Consolidated Statements of Cash Flows for the SixNine Months
Ended JuneSeptember 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . Page1996.....................................Page 5
Notes to Consolidated Financial Statements as of
JuneSeptember 30, 1997 . . . . . Page1997....................................................Page 6
Review Report of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . PageLLP..................................Page 8
ITEM 2.
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Management's Discussion and Analysis of Results of Operations
and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . PageCondition...............................................Page 9
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
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THREE MONTHS ENDED SIXNINE MONTHS ENDED
JUNESEPTEMBER 30 JUNESEPTEMBER 30
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1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating revenues $ 385,198388,460 $ 372,573378,740 $ 750,5991,139,059 $ 726,5871,105,326
Operating expenses
Salaries, wages and employee benefits 133,288 122,186 254,732 238,622135,394 124,914 390,126 363,536
Purchased transportation 124,182 98,857 240,962 196,828131,700 115,258 372,661 312,086
Fuel and fuel taxes 36,039 42,115 74,096 82,24932,968 38,043 107,064 120,292
Depreciation 33,228 29,867 66,478 64,01131,709 28,147 98,187 92,158
Operating supplies and expenses 23,679 23,905 45,825 46,50323,237 22,956 69,063 69,458
Insurance and claims 9,842 18,005 19,955 31,1709,780 14,119 29,893 45,660
General and administrative expenses 5,322 8,351 11,364 15,8144,447 6,549 15,653 21,992
Operating taxes and licenses 6,349 7,120 12,427 14,2826,137 6,738 18,564 21,020
Communication and utilities 4,015 4,731 8,186 9,2404,050 4,583 12,236 13,823
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 375,944 355,137 734,025 698,719379,422 361,307 1,113,447 1,060,025
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 9,254 17,436 16,574 27,8689,038 17,433 25,612 45,301
Interest expense 6,246 6,362 12,650 12,2735,938 6,010 18,588 18,283
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 3,008 11,074 3,924 15,5953,100 11,423 7,024 27,018
Income taxes 1,143 4,208 1,491 5,9261,178 4,341 2,669 10,267
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,8651,922 $ 6,8667,082 $ 2,4334,355 $ 9,66916,751
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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Common shares outstanding 36,456 38,061 36,603 38,06836,387 38,095 36,530 38,077
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings per share $ 0.05 $ 0.180.19 $ 0.070.12 $ 0.250.44
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See accompanying notes to consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
JUNE- -------------------------------------------------------------------------------
SEPTEMBER 30, 1997 DECEMBER 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,33513,002 $ 3,786
Accounts receivable 150,398 151,357154,295 153,871
Prepaid expenses 18,92919,264 35,964
Deferred income taxes 11,000 11,000
- -------------------------------------------------------------------------------------------------------------------------------------------------------
Total current assets 185,662 202,107197,561 204,621
- -------------------------------------------------------------------------------------------------------------------------------------------------------
Property and equipment 1,213,2381,163,258 1,218,245
Less accumulated depreciation 423,667409,509 404,992
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Net property and equipment 789,571753,749 813,253
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Other assets 21,94826,997 25,565
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$ 997,181 $1,040,925978,307 $1,043,439
- -------------------------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 13,3005,000 $ 49,750
Trade accounts payable 96,483 83,846102,589 92,078
Claims accruals 30,817 33,69331,076 33,692
Accrued payroll 17,267 12,85218,176 13,988
Other accrued expenses 14,733 15,99911,140 9,146
- -------------------------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 172,600 196,140167,981 198,654
- -------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 322,770309,585 332,571
Claims accruals 12,800 12,800
Deferred income taxes 142,740143,209 142,159
Stockholders' equity 346,271344,732 357,255
- -------------------------------------------------------------------------------------------------------------------------------------------------------
$ 997,181 $1,040,925978,307 $1,043,439
- -------------------------------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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SIX MONTHS ENDED JUNE 30
- ------------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 2,433 $ 9,669
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, net of gain on disposition of equipment 66,478 64,011
Deferred income taxes 581 (1,233)
Tax benefit (expense) of stock options exercised (36) 386
Changes in assets and liabilities:
Accounts receivable 959 (24,741)
Prepaid expenses 17,035 10,269
Trade accounts payable 12,637 520
Claims accruals (2,876) (3,139)
Accrued payroll and other accrued expenses 3,149 1,361
- ------------------------------------------------------------------------------------
Net cash provided by operating activities 100,360 57,103
- ------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (79,113) (95,786)
Proceeds from sale of equipment 36,317 21,807
Increase in other assets 4,364 (2,791)
- ------------------------------------------------------------------------------------
Net cash used in investing activities (38,432) (76,770)
- ------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (5,000) --
Net borrowings under commercial paper program (41,251) 26,902
Proceeds from sale of treasury stock 34 2,066
Repurchase of treasury stock (10,479) (3,778)
Dividends paid (3,683) (3,783)
- ------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (60,379) 21,407
- ------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,549 1,740
- ------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 3,786 4,260
- ------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,335 $ 6,000
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Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 12,755 $ 12,418
Income taxes (6,754) 789
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NINE MONTHS ENDED SEPTEMBER 30
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 4,355 $ 16,751
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, net of gain on disposition
of equipment 98,187 92,158
Deferred income taxes 1,050 2,737
Tax benefit (expense) of stock options
exercised (33) 381
Changes in assets and liabilities:
Accounts receivable (424) (28,802)
Prepaid expenses 16,700 14,761
Trade accounts payable 10,511 (8,892)
Claims accruals (2,616) (5,083)
Accrued payroll and other accrued expenses 4,606 7,295
- -----------------------------------------------------------------------------
Net cash provided by operating activities 132,336 91,306
- -----------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (147,655) (146,927)
Proceeds from sale of equipment 108,972 40,682
Increase in other assets (1,014) (4,759)
- -----------------------------------------------------------------------------
Net cash used in investing activities (39,697) (111,004)
- -----------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (5,000) --
Net borrowings (repayments) under
commercial paper program (62,736) 27,735
Proceeds from sale of treasury stock 296 2,137
Repurchase of treasury stock (10,481) (5,806)
Dividends paid (5,502) (5,689)
- -----------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (83,423) 18,377
- -----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 9,216 (1,321)
- -----------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 3,786 4,260
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 13,002 $ 2,939
- -----------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 18,421 $ 18,364
Income taxes (6,895) 974
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
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):
6/9/30/97 12/31/96
-------- --------
Commercial paper $128,300$106,800 $169,750
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/03 98,260 98,260
Senior notes payable, interest at 7.84%
payable semiannually 10,000 15,000
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
-------- --------
336,560315,060 383,010
Less current maturities (13,300)(5,000) (49,750)
Unamortized discount (490)(475) (689)
-------- --------
$322,770$309,585 $332,571
-------- --------
-------- --------
The Company is authorized to issue up to $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 $120 million expires March
19, 1998 and $120 million expires March 20, 2002.
The 6.25% senior notes were issued on September 1, 1993 and are due on
September 1, 2003.
The 7.84% senior notes were issued on March 31, 1992 and are payable in
five equal annual installments beginning March 31, 1995.
The 7.80% senior subordinated notes were issued on October 30, 1992 and are
payable in five equal annual installments beginning October 30, 2000.
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.
6
2)(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
sharesoptions per share exercisable
------ --------- ------------ -----------
Outstanding at December 31, 1996 2,740,925 $ 11.58-24.63$11.58-24.63 294,950
-------
-------
Granted 143,000 13.88-15.00466,000 13.88-17.38
Exercised (3,000) 11.58(18,400) 11.58-15.63
Terminated (32,750) 12.83-23.00(334,650) 12.83-23.50
--------- -------------------------
Outstanding at JuneSeptember 30, 1997 2,848,175 $ 11.58-24.63 443,9752,853,875 $11.58-24.63 388,975
--------- ------------------------- -------
--------- ------------------------- -------
On July 17,October 16, 1997, the Company's Board of Directors declared a regular
quarterly cash dividend of $.05 per share payable on August 19,November 21, 1997 to
stockholders of record on August 1,November 3, 1997.
3)(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
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 three and sixnine month
periods ended JuneSeptember 30, 1997 and JuneSeptember 30, 1996 to be unchanged when
compared to primary earnings per share for those same periods.
(4) RECLASSIFICATIONS
Certain amounts for 1996 have been reclassified to conform to the 1997
classifications.
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 JuneSeptember 30, 1997, and the related
condensed consolidated statements of earnings and cash flows for the three-month
and six-monthnine-month periods ended JuneSeptember 30, 1997 and 1996, 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, 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 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, 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
July 15,October 14, 1997
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, 1996.
RESULTS OF OPERATIONS
COMPARISON OF SECONDTHIRD QUARTER 1997 TO SECONDTHIRD QUARTER 1996
The following table sets forth items in the Consolidated Statements of
Earnings as a percentage of operating revenues and the percentage increase or
decrease of those items as compared with the prior period.
Three Months Ended JuneSeptember 30
Percentage of Percentage
Operating Revenues Change
------------------ -------------
1997 1996 1997 vs. 1996
------ ------ -------------
Operating revenues 100.0% 100.0% 3.4%2.6%
Operating expenses
Salaries, wages and employee benefits 34.6% 32.8% 9.1%34.9% 33.0% 8.4%
Purchased transportation 32.2% 26.5% 25.6%33.9% 30.4% 14.3%
Fuel and fuel taxes 9.4% 11.3% (14.4%8.5% 10.0% (13.3%)
Depreciation 8.6% 8.0% 11.3%8.2% 7.4% 12.7%
Operating supplies and expenses 6.0% 6.1% 6.4% (0.9%)1.2%
Insurance and claims 2.6% 4.8% (45.3%2.5% 3.7% (30.7%)
General and administrative expenses 1.4% 2.3% (36.3%1.1% 1.7% (32.1%)
Operating taxes and licenses 1.7% 1.9% (10.8%1.6% 1.8% (8.9%)
Communication and utilities 1.0% 1.3% (15.1%1.2% (11.6%)
------ ------------------------
Total operating expenses 97.6% 95.3% 5.9%
------ ------97.7% 95.4% 5.0%
------------------
Operating income 2.4% 4.7% (46.9%2.3% 4.6% (48.2%)
Interest expense 1.5% 1.6% 1.7% (1.8%(1.2%)
------ ------------------------
Earnings before income taxes 0.8% 3.0% (72.8%(72.9%)
Income taxes 0.3% 1.2% (72.8%1.1% (72.9%)
------ ------------------------
Net earnings 0.5% 1.8% (72.8%1.9% (72.9%)
------ ------
------ ------------------------
------------------
9
Operating revenues for the secondthird quarter of 1997 increased $12.6$9.7 million,
or 32.6 percent, to $385.2$388.5 million from $372.6$378.7 million in the secondthird quarter of
1996. TheThis revenue comparison was affected by the fact that $12.3$25.0 million of
revenue was generated during the secondthird quarter of 1996 by the special
commodities and parcel managementflatbed businesses which were sold later in 1996.1996 and 1997,
respectively. Revenue increased 27 percent in dry van operations, which
includes intermodal; 21intermodal, and 24 percent in logistics and dedicated and 79 percent in logistics. Dry van load count grew by 7
percentoperations
during the current quarter.third quarter of 1997. Truck only dry van rates, excluding fuel
surcharges, increased 1.22.3 percent, while intermodal rates declined .7 percent.2.2
percent during the third quarter of 1997. The continued growthincreased level of logistics
and dedicated equipment and logistics operationsrevenue was primarily due to additional customer contracts
which were signed during the periodcurrent quarter and increased levels of business
under existing contracts.
Significant numbers of shippers
continue to request transportation services whereby equipment is assigned or
dedicated to a particular operation or where all transportation needs are
managed by one party (i.e. logistics). Typically these services are provided in
accordance with longer term contracts or other written agreements.
Total operating expenses for the secondthird quarter of 1997 increased to 97.65
percent over the comparable period of 1996. Total operating expenses
expressed as a percentage of operating revenue from 95.3revenues (operating ratio) were 97.7
percent for the third quarter of 1997 compared with 95.4 percent in 1996. The secondA
number of significant changes in operating expenses during the current
quarter of
1997 was the first full quarter of thewere related to an approximate thirty-three percent pay increase awarded tofor
certain over-the-road van drivers which was effective on February 28, 1997. This
pay increase announced
in September of 1996, increased wages by approximately thirty percentwas the primary reason for certain over-the-road drivers and reduced net earnings in the current quarter by
$8.1 million, or 22 cents per share. This increase in operating costs was
partly offset by lower accident, cargo claims, driver trainingsalaries, wages and
driver
recruiting expenses. The new compensation package has been successful in
attracting and retaining experienced, professional drivers. It has taken longer
than anticipated to increase the driver work force to the levels desired.
Therefore, tractor utilization declined 4 percent during the current quarter
from a strong second quarter of 1996.employee benefits. The increase in purchased transportation expense was
consistent with trends in recent periods and reflects payments to railroads
and other third-parties for transportation services provided to the Company.
Fuel and fuel taxes reflect approximately 6 centstax expense declined, primarily due to lower fuel cost per
gallon and significantly higher fuel miles per gallon. The increase in depreciation expense was
primarily due to a gain recognized on the disposition of the parcel managementspecial
commodities business during the secondthird quarter of 1996. Gains on asset
dispositiondispositions reduce depreciation expense and totaled $3.3 million in 1996
compared with a small net loss of less than $.1$.6 million during the
current
quarter.third quarter of 1997 compared with $4.3 million in 1996.
The significant decrease in insurance and claims reflectsexpense was a result of
fewer vehicle collisions during the declinethird quarter of 1997. The new driver
compensation package has been successful in accidents associated with moreattracting and retaining
experienced, drivers andprofessional drivers. In addition, the elimination ofCompany is no longer
hiring newly trained student drivers. Accident costs were also unusually high during the second
quarter of 1996. The Company announced a decisionA related reduction in June of 1996 to limit the
speed of its tractors to 59 miles per hour. The lower level of general and
administrative expenseexpenses was primarily due to reduced driver training and
recruiting costs. Reduced insurance related costs and lower driver
recruiting expenses were two of the primary sources for funding the new
driver compensation package. Operating taxes and licenses decreased, partly
due to a
decreasethe sale of revenue equipment which had operated in the size of the tractor fleet.special
commodities and flatbed businesses. Lower communication and utilities
expense was due, in part, to lower communication rates in effect during the
current quarter.
10
As a result of the above, net earnings declined to $1.9 million, or 5
cents per share, in the third quarter of 1997 compared with $6.9$7.1 million, or
1819 cents per share, in 1996. The average number of shares outstanding during
the secondthird quarter of 1997 declined to 36.536.4 million from 38.1 million in 1996.
The primary reason for this decrease was the Company's acquisition of
treasury stock by the Company.shares.
10
COMPARISON OF SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 1997 TO SIXNINE MONTHS ENDED
JUNESEPTEMBER 30, 1996
The following table sets forth items in the 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.
SixNine Months Ended JuneSeptember 30
Percentage of Percentage
Operating Revenues Change
------------------ -------------
1997 1996 1997 vs. 1996
------ ------ -------------
Operating revenues 100.0% 100.0% 3.3%3.1%
Operating expenses
Salaries, wages and employee benefits 33.9% 32.8% 6.8%34.3% 32.9% 7.3%
Purchased transportation 32.1% 27.1% 22.4%32.7% 28.2% 19.4%
Fuel and fuel taxes 9.9% 11.3% (9.9%9.4% 10.9% (11.0%)
Depreciation 8.8% 8.8% 3.9%8.6% 8.3% 6.5%
Operating supplies and expenses 6.1% 6.4% (1.5%6.3% (0.6%)
Insurance and claims 2.7% 4.3% (36.0%2.6% 4.1% (34.5%)
General and administrative expenses 1.5% 2.2% (28.1%1.4% 2.0% (28.8%)
Operating taxes and licenses 1.7% 2.0% (13.0%1.6% 1.9% (11.7%)
Communication and utilities 1.1% 1.3% (11.4%(11.5%)
------ ------------------------
Total operating expenses 97.8% 96.2% 5.1%
------ ------95.9% 5.0%
------------------
Operating income 2.2% 3.8% (40.5%4.1% (43.5%)
Interest expense 1.6% 1.7% 1.7%
3.1%
------ ------------------------
Earnings before income taxes 0.5% 2.1% (74.8%0.6% 2.4% (74.0%)
Income taxes 0.2% 0.8% (74.8%0.9% (74.0%)
------ ------------------------
Net earnings 0.3% 1.3% (74.8%0.4% 1.5% (74.0%)
------ ------
------ ------
11
------------------
------------------
Operating revenues for the sixnine months ended JuneSeptember 30, 1997 increased
$24.0$33.7 million, or 33.1 percent, to $750.6$1,139 million from $726.6$1,105 million in 1996.
TheThis revenue comparison was affected by the fact that $30.1$94.8 million of
revenue was generated during the first sixnine months of 1996 by the special
commodities and parcel management businesses which were sold later in 1996.1996 and the
flatbed business which was sold in 1997. Revenue increased 24 percent in dry
van operations, which includes intermodal; 19intermodal, and forty percent in logistics and
dedicated and 85 percent in logistics. Dry van load count grew by 8 percent
during the first six months of 1997.operations. Truck only dry van rates, excluding fuel surcharge,
increased .71.2 percent, while intermodal rates declined by .7 percent.1.1 percent, during
the nine month period ended September 30, 1997. The significant increase in
logistics and dedicated revenue was a result of new customer contracts which
were signed during the period and increased levels of business under existing
contracts.
11
Total operating expenses for the sixnine months ended JuneSeptember 30, 1997
increased to5 percent from the comparable period of 1996. Total operating
expenses expressed as a percentage of operating revenues (operating ratio)
were 97.8 percent of operating revenue from 96.2in 1997 and 95.9 percent in 1996. TheThis increase in
operating expenses was due, in part, to the driver pay increase which was
effective on February 28, 1997. This pay increase reduced net earnings by $11.1
million, or 30 cents per share, for the first six months of 1997. This increase
in operating expenses was partly offset by lower accident, cargo claims, driver
training and driver recruiting costs. Tractor utilization declined 3 percent
during the first six months of 1997 from a relatively strong 1996. The significant increase in purchased
transportation expense reflects payments to railroads and other third-party
companies for transportation services. The decrease in fuel and fuel taxes
reflects slightly higherwas due to lower fuel cost per gallon more than offset by significantlyand higher fuel miles per gallon. The
increase in depreciation expense was primarily due to gaingains on the
disposition of the special commodities and parcel management business in
1996. Gains on the disposition of assets which was $.1 million in 1997 and $3.4 million in 1996. Gain on
disposition isare accounted for as a reduction of
depreciation expense. Gains totaled $.7 million for the nine months ended
September 30, 1997 and $7.7 million for the comparable period of 1996.
The significant decreasedecline in insurance and claims reflects lower accident
ratesexpense was primarily due
to fewer vehicle collisions during 1997. The Company has been successful in
1997 associated with a higher level ofattracting and retaining experienced drivers and has eliminated the use of
newly trained student drivers. In addition, a decision was made in late 1996
to limit tractor speed to 59 miles per hour. In addition, the level of
accidents and related costs was unusually high during the first six months of
1996. The decrease in general and
administrative expensesexpense was primarily due to lower driver training and
recruiting costs. Operating taxes and licenses expense reflected slightly lowera smaller
total tractor fleet size.size, primarily due to sales of the special commodities
and flatbed businesses. Communication and utilities declined, partly due to
lower communication rates in 1997.
As a result of the above, net earnings for the sixnine months ended
JuneSeptember 30, 1997 were $2.4declined to $4.4 million, or 712 cents per share, compared
with $9.7$16.8 million, or 2544 cents per share, in 1996. The average number of
shares outstanding during the first sixnine months of 1997 declined to 36.636.5
million from 38.1 million in 1996. The primary reason for thisThis decrease was primarily due to the
Company's acquisition of treasury stock by the
Company.
12
shares.
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 $100$132 million
for the sixnine months ended JuneSeptember 30, 1997 compared with $57$91 million in
1996. This increase in net cash provided was primarily due to improved
accounts receivable aging, a reduction of prepaid expenses and an increase in
accounts payable related to timing of vendor and other cash disbursements.
Net cash used in investing activities was approximately $38$40 million in 1997
compared with $77$111 million in 1996. This decrease was due primarily to fewer
net additions to the trailing fleet during 1997.1997 and increased proceeds from
the sale of equipment. The increase in cash provided by operating activities
in 1997 and reduced level of cash invested allowed the Company to reduce debt
by $46$68 million during the first sixnine months of 1997. In addition,
approximately $10.5 million was invested in purchases of treasury stock
during 1997 compared with $3.8$5.8 million in 1996.
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SELECTED BALANCE SHEET DATA
As of
-----------------------------------------------
June 30, 1997 December 31, 1996 June 30, 1996
------------- ----------------- -------------
Working capital ratio 1.08 1.03 .95
Current maturities of long-
term debt (millions) $ 13 $ 50 $ 62
Total debt (millions) $336 $382 $396
Total debt to equity .97 1.07 1.10
Total debt as a percentage
of total capital .49
As of
---------------------------------------------------------
September 30, 1997 December 31, 1996 September 30, 1996
------------------ ----------------- ------------------
Working capital ratio 1.18 1.03 .94
Current maturities of long-
term debt (millions) $ 5 $ 50 $ 65
Total debt (millions) $ 315 $ 382 $ 397
Total debt to equity .91 1.07 1.08
Total debt as a percentage
of total capital .48 .52 .52
During the first sixnine months of 1997 the Company renewed its commercial
paper note program and reduced the total amount of authorized borrowing from
$250 million to $240 million. The Company generates significant cash from
operating activities and has borrowing capacity to meet its committed and
contemplated cash requirements.
FORWARD-LOOKING STATEMENTS
This report may contain 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
addition, 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 well as other
factors.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None applicable.
ITEM 5. OTHER INFORMATION
On July 30, 1997 the Company announced that it had completed the sale
of its flatbed division to existing management personnel for $40
million in net cash proceeds. The cash was initially used to reduce
debt. This sale was part of the Company's continuing intention to
focus the majority of its resources on three types of operations; dry
van truckload/intermodal, dedicated equipment and complete logistics
services.None applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. HUNT TRANSPORT SERVICES, INC.
DATE: August 8,November 5, 1997 BY: /s/ Kirk Thompson
-------------------- ------------------------------------------------- --------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: August 8,November 5, 1997 BY: /s/ Jerry W. Walton
-------------------- ------------------------------------------------- --------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
15