FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
X/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ---------- THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ---------- THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS 71-0335111
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
615 J.B. HUNT CORPORATE DRIVE, LOWELL, ARKANSAS 72745
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, AND ZIP CODE)
(501) 820-0000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) 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 SEPTEMBER 30, 1999MARCH 31, 2000 WAS 35,636,738.35,419,588.
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim condensed consolidated financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of financial condition, results of operations
and cash flows for the periods presented. They have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Operating results for the three and nine month
periodsperiod ended September 30, 1999March 31, 2000 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1999.2000.
The interim condensed consolidated financial statements have been
reviewed by KPMG LLP, independent public accountants.
These interim condensed consolidated financial statements should be
read in conjunction with the Company's latest annual report and Form 10-K for
the year ended December 31, 1998.
1999.
INDEX
-----
Condensed Consolidated Statements of Earnings for the Three
and Nine Months Ended September 30, 1999March 31, 2000 and 1998 .............................................Page1999............................... Page 3
Condensed Consolidated Balance Sheets as of
September 30, 1999March 31, 2000 and December 31,1998 .............................................................Page31, 1999............................... Page 4
Condensed Consolidated Statements of Cash Flows for the
NineThree Months Ended September 30, 1999March 31, 2000 and 1998 .......................................................Page1999......................... Page 5
Notes to Condensed Consolidated Financial Statements
as of September 30, 1999 ............................................................................PageMarch 31, 2000............................................... Page 6
Review Report of KPMG LLP ..................................................................................Page 9LLP.............................................. Page 10
ITEM 2.Management's2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition.............................................................................Page 10Condition............................................ Page 11
ITEM 3.Quantitative3.
Quantitative and Qualitative Disclosures About Market Risk...........................................Page 17Risk............. Page 15
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30---------------------------------------------------------------------------------------------------
Three Months Ended
March 31
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000 1999
1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating revenues $ 523,901533,556 $ 473,388 $ 1,491,699 $ 1,347,839470,244
Operating expenses
Salaries, wages and employee benefits 181,206 165,722 530,068 470,561
Purchased185,885 172,688
Rents and purchased transportation 179,957 161,354 485,591 453,746188,732 144,350
Fuel and fuel taxes 44,305 34,537 120,226 101,89556,706 36,710
Depreciation 38,129 35,655 114,563 101,13331,347 37,910
Operating supplies and expenses 34,922 24,508 93,165 69,84929,847 27,550
Insurance and claims 11,410 8,803 29,405 23,4089,534 9,781
Operating taxes and licenses 6,694 5,891 20,260 17,9017,665 6,502
General and administrative expenses 7,070 7,298 19,138 17,5685,923 5,026
Communication and utilities 5,233 5,195 15,895 14,0835,688 5,553
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 508,926 448,963 1,428,311 1,270,144521,327 446,070
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating income 14,975 24,425 63,388 77,69512,229 24,174
Interest expense 7,167 7,207 21,926 21,0125,963 7,504
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 7,808 17,218 41,462 56,6836,266 16,670
Income taxes 2,850 6,371 15,134 20,7281,253 6,084
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 4,9585,013 $ 10,847 $ 26,328 $ 35,955
======================================================================================================================10,586
===================================================================================================
Average basic shares outstanding 35,635 35,597 35,625 35,574
======================================================================================================================35,604 35,615
===================================================================================================
Basic earnings per share $ 0.14 $ 0.30
$ 0.74 $ 1.01
=========================================================================================================================================================================================================================
Average diluted shares outstanding 35,692 36,702 35,957 36,775
======================================================================================================================35,622 36,555
===================================================================================================
Diluted earnings per share $ 0.14 0.30 $ 0.73 $ 0.98
======================================================================================================================0.29
===================================================================================================
See accompanying notes to condensed consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30,-----------------------------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,8173,888 $ 9,22712,606
Accounts receivable 225,305 184,367238,540 238,573
Prepaid expenses 37,429 30,402
Deferred income taxes 1,275 1,27572,441 43,962
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total current assets 266,826 225,271314,869 295,141
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Property and equipment 1,494,360 1,418,0331,273,067 1,239,394
Less accumulated depreciation 568,819 492,633451,902 453,509
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net property and equipment 925,541 925,400821,165 785,885
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Other assets 48,444 20,80857,376 46,438
- -----------------------------------------------------------------------------------------------------------------
$ 1,240,8111,193,410 $ 1,171,479
=======================================================================================================================
1,127,464
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 19,30060,000 $ 16,35060,000
Trade accounts payable 183,300 147,967168,924 180,009
Claims accruals 1,828 6,1311,982 788
Accrued payroll 24,093 23,68425,873 19,462
Other accrued expenses 12,155 11,90910,286 10,371
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 240,676 206,041267,065 270,630
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 417,506 417,045336,428 267,639
Claims accruals 7,662 7,1666,483 7,368
Deferred income taxes 177,336 165,570181,074 180,441
Stockholders' equity 397,631 375,657402,360 401,386
- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$ 1,240,8111,193,410 $ 1,171,479
=======================================================================================================================1,127,464
=================================================================================================================
See accompanying notes to condensed consolidated financial statements.
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- ----------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30--------------------------------------------------------------------------------------------------------------
Three Months Ended March 31
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2000 1999
1998
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 26,3285,013 $ 35,95510,586
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 114,563 101,13331,347 37,910
Provision for noncurrent deferred income taxes 11,766 8,781633 4,803
Tax benefit (expense) of stock options exercised 55 919
Termination(1) 63
Forefeiture of restricted stock -- (18) (23)
Amortization of discount, net 461 (498)(11) 316
Changes in assets and liabilities:
Trade accounts receivable (40,938) (23,638)
Prepaid expenses (7,027) 3,99633 (5,999)
Other assets (40,616) 3,539
Trade accounts payable 35,333 (1,975)(11,085) (30,833)
Claims accruals (3,807) (19,292)309 (2,657)
Accrued payroll and other accrued expenses 655 26,4776,326 9,872
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 137,371 131,835(8,052) 27,582
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (133,626) (253,980)(89,733) (30,783)
Proceeds from sale of equipment 18,922 35,30523,106 599
Decrease (increase) in other assets (27,261) 3,5142,061 (6,876)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (141,965) (215,161)(64,566) (37,060)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under commercial paper program 7,950 (1,900)
Proceeds from68,800 10,550
Net payments of long-term debt -- 100,000
Repayments of long-term debt (5,000) (5,000)
Repurchase of treasury stock (3,126) -- (5,814)
Proceeds from sale of treasury and common stock 580 2,7928 374
Dividends paid (5,346) (5,320)(1,782) (1,781)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used in) by financing activities (1,816) 84,75863,900 4,143
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)decrease in cash and cash equivalents (6,410) 1,432(8,718) (5,335)
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,606 9,227
3,701
- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,8173,888 $ 5,133
==========================================================================================================3,892
==============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 23,7427,450 $ 20,3129,042
Income taxes 295 (1,193)
==========================================================================================================50 45
==============================================================================================================
See accompanying notes to condensed consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1)J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) The interim condensed consolidated financial statements at March 31,
2000 and for the three months ended March 31, 2000 and 1999 are unaudited and
include all adjustments, consisting only of normal recurring accruals, which
the Company considers necessary for a fair presentation of financial position
and operating results. The unaudited consolidated financial statements have
been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore,
do not contain all information and footnotes normally contained in annual
financial statements. Accordingly, they should be read in conjunction with the
financial statements and notes thereto appearing in the annual report on Form
10-K of the Company for the year ended December 31, 1999.
2) The results of operations for the three-month period ended March 31,
2000 are not necessarily indicative of those to be expected for the calendar
year ending December 31, 2000.
3) LONG-TERM DEBT
Long-term debt consists of (in thousands):
9/30/99
3/31/2000 12/31/98
------- --------1999
--------- ----------
Commercial paper $ 139,300 $ 131,350
Senior notes payable, interest at 7.84%
payable semiannually -- 5,000$103,800 $35,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/2000 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually, due 12/12/2000 25,000 25,000
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/2003 98,260 98,260
Senior notes payable, interest at 7.00%
payable semiannually, due 9/15/2004 100,000 100,00095,000 95,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
------- ------
437,560 434,610--------- ----------
397,060 328,260
Less current maturities (19,300) (16,350)(60,000) (60,000)
Unamortized discount (754) (1,215)(632) (621)
--------- ---------
$ 417,506 $ 417,045----------
$336,428 $267,639
========= ===================
Under its commercial paper note program, the Company is authorized to
issue up to $240 million in notes. These notes are supported by two credit
agreements, which aggregate $240 million, with a group of banks, of which $120
million expires March 7, 20006, 2001 and $120 million expires March 20, 2002.
The 7.80% senior subordinated notes were issued on October 30, 1992
and are payable in five equal annual installments beginning October 30, 2000.
6
2)4) CAPITAL STOCK
The Company maintains a Management Incentive Plan that provides
various vehicles to compensate key employees with Company common stock. A
summary of the restricted and non-statutory options to purchase Company common
stock follows:
Weighted average Number of
Number of exercise price shares
shares per share exercisable
------ --------- -----------
Outstanding at December 31, 1998 3,349,890 $16.98 323,3901999 3,737,565 $16.65 551,940
=======
Granted 57,000 21.53560,000 12.83
Exercised (24,125) 12.77(600) 14.31
Terminated (31,200) 13.99(43,350) 20.56
---------- ------ ------------
Outstanding at September 30, 1999 3,351,565 $17.12 554,190
=========March 31, 2000 4,253,615 $16.11 539,040
========== ====== =======
On October 14, 1999, the Company's BoardThe Company announced in February of Directors declared2000, a regular quarterly cash dividenddecision to discontinue
a policy of $.05 per share payable on November 22, 1999paying dividends and an intent to stockholdersuse those funds to repurchase up
to 500,000 shares of record on November 2, 1999.
3)its common stock.
5) EARNINGS 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)
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------- ---------------------------------------------------------
2000 1999 1998 1999 1998
---- ----
---- ----
Numerator (net earnings) $4,958 $10,847 $26,328 $35,955$5,013 $10,586
Denominator - Basic earnings per share
Weighted average shares outstanding 35,635 35,597 35,625 35,57435,604 35,615
====== ====== ====== =============
Basic earnings per share $ .14 $ .30
$ .74 $ 1.01
====== ====== ====== =============
Denominator - Diluted earnings per share
Weighted average share outstanding 35,635 35,597 35,625 35,57435,604 35,615
Effect of common stock options 57 1,105 332 1,20118 940
------ ------ ------ -------------
Weighted average shares assuming dilution 35,692 36,702 35,957 36,77535,622 36,555
====== ====== ====== =============
Diluted earnings per share $ .14 $ .30 $ .73 $ .98.29
====== ====== ====== =============
Options which were outstanding to purchase shares of common stock
during the periods indicated above,first quarter of 2000 and 1999, 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 Nine Months Ended
September 30 September 30
---------------------------------- ------------------------------March 31
------------------------------------
2000 1999 1998 1999 1998
---- ----
---- ----
Number of shares under option 4,754,115 162,000 623,675 144,5005,963,740 238,500
Range of exercise price $15.00-$12.88-$37.50 $26.00-$37.50 $18.75-$37.50 $28.13-$23.00-$37.50
7
4)6) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings and foreign currency
translation adjustments. During the three and nine month periodsmonths ended September 30,March 31, 2000 and
1999, comprehensive income was equal toto: (in thousands):
Three Months Ended Nine Months Ended
September 30,March 31
---------------------------
2000 1999
September 30, 1999
------------------ ------------------------ -------
Net earnings $4,958 $26,328$5,013 $10,586
Foreign currency
translation gain 430 374(loss) 863 (135)
------ -------
Comprehensive income $5,388 $26,702$5,876 $10,451
====== =======
During 1998,7) INCOME TAXES
The effective income tax rates for the three months ended March 31,
2000 and 1999 were based on estimated annual combined effective rates of 20%
and 36.5%, respectively.
8) BUSINESS SEGMENTS
As of January 1, 2000, the Company has four reportable business
segments: Truck (JBT), Intermodal (JBI), Dedicated Contract Services (DCS) and
Logistics (JBL). JBT services include 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
is not moved at any time by railroad. The JBI segment includes freight which
is transported by rail over any portion of the movement and also includes
certain repositioning truck freight moved by JBI equipment or third-party
carriers, when such highway movement is intended to direct JBI equipment back
toward intermodal operations. The JBT and JBI segments were operated in
combined fashion (formally reported as Van/Intermodal in prior periods) and
limited identifiable comparative information is available for JBT and JBI
prior to January 1, 2000. Accordingly, the Company has provided comparable
segment information for the quarter ended March 31, 2000 based on the prior
segmentation, which included JBI and JBT as the former segment,
"Van/Intermodal." DCS 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 agreements or contracts which
govern services performed and applicable rates. The JBL segment includes a
wide range of comprehensive incometransportation and net earnings weremanagement services which may
include experienced professional managers, information and optimization
technology and the same.
5) SEGMENTSactual design or redesign of system solutions. JBL may
utilize JBT, JBI or DCS owned or controlled assets and employees, or
third-party equipment and employees, or a combination to meet the customer's
service requirements. JBL services also typically are in accordance with
written long-term agreements. Intersegment revenues consist of services
provided by one or more segments to another segment. A summary of certain
segment information is presented below (in millions):
8
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
REVENUESAssets
-------------------------------------
As of March 31
-------------------------------------
2000 1999
1998 1999 1998
-------- ---- ---- ---- -----------------------------------------
JBT $ 830 --
JBI 78 --
------ ------
Van/Intermodal 908 899
DCS 104 70
JBL 69 49
Other (includes corporate) 112 150
------ ------
Total $1,193 $1,168
====== ======
Revenues
----------------------------------------------
For the Three Months Ended March 31
----------------------------------------------
2000 1999
----------------------------------------------
JBT $ 203 182
JBI 151 155
----- -----
Van/Intermodal $358.0 $352.9 $1,047.3 $1,014.9
Logistics 103.7 84.0 272.2 229.5
Dedicated Contract Services 82.8 55.7 230.0 148.2354 337
DCS 98 70
JBL 107 80
Other -- --
-- 8.0
------ ------ ------ ----------- -----
Subtotal 544.5 492.6 1,549.5 1,400.6559 487
Inter-segment eliminations (20.6) (19.2) (57.8) (52.8)
--------- -------- --------- ---------(25) (17)
----- -----
Total $523.9 $473.4 $1,491.7 $1,347.8
========= ======= ========= =========$ 534 $ 470
===== =====
Operating Income (Loss)
-----------------------------------
For the Three Months NineEnded March 31
-----------------------------------
2000 1999
-----------------------------------
JBT (0.2) --
JBI 7.7 --
----- -----
Van/Intermodal 7.5 15.3
DCS 4.0 4.6
JBL 1.7 2.8
Other (1.0) 1.5
----- -----
Total $12.2 $24.2
===== =====
Net Depreciation Expense
-----------------------------------
For the Three Months Ended September 30 Ended September 30
------------------ ------------------
OPERATING INCOMEMarch 31
-----------------------------------
2000 1999
1998 1999 1998
---------------- ---- ---- ---- ---------------------------------------
JBT $16 --
JBI 6 --
--- ---
Van/Intermodal $6.8 $18.7 $38.5 $59.2
Logistics 3.2 1.3 6.9 5.1
Dedicated Contract Services 4.5 4.9 15.7 13.122 28
DCS 8 6
JBL -- --
Other .5 (.5) 2.3 .3
-------- ------- ------- -------1 4
--- ---
Total $15.0 $24.4 $63.4 $77.7
======== ======= ======= =======
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
NET DEPRECIATION EXPENSE 1999 1998 1999 1998
------------------------ ---- ---- ---- ----
Van/Intermodal $31.0 $30.8 $94.1 $88.5
Logistics .3 .2 .9 .5
Dedicated Contract Services 6.8 4.7 19.6 12.3
------- ------ ------ -------
Total $38.1 $35.7 $114.6 $101.3
======= ====== ====== =======$31 $38
=== ===
89
6) PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998,9) OTHER
On March 14, 2000, the FASB issued Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement requiresCompany, along with five other motor carriers,
announced the recognition of all derivatives in the statement of financial position as either
assets or liabilities and their measurement at fair value. Statement No. 133,
as amended, is effective for fiscal years beginning after June 15, 2000.intent to merge its non-asset based logistics business
into a commonly owned Internet-based global transportation logistics
company, Transplace.com. The Company has not determined what impact, if any, Statement No. 133will invest $5 million in cash
and will have on
its financial statements.
7)a 28% equity stake in Transplace.com.
10) RECLASSIFICATIONS
Certain amounts for 19981999 have been reclassified to conform to the 19992000
classifications.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of September 30, 1999,March 31, 2000, and the
related condensed consolidated statements of earnings for the
three-month and nine-month periods ended September 30, 1999 and 1998, and the
condensed consolidated statements of cash flows for the
nine-monththree-month periods ended September 30, 1999March 31, 2000 and 1998.1999. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with 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, 1998,1999, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 5, 1999,4, 2000, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1998,1999, is fairly presented, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ KPMG LLP
------------
Little Rock, Arkansas
OctoberTulsa, Oklahoma
April 14, 1999
92000
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
attached interim condensed consolidated financial statements and notes
thereto, and with the Company's audited consolidated financial statements and
notes thereto for the calendar year ended December 31, 1998.1999 and Management's
Discussion and Analysis of Results of Operations and Financial Condition
included in the 1999 Annual Report to Shareholders.
RESULTS OF OPERATIONS
COMPARISON OF THIRDFIRST QUARTER 2000 TO FIRST QUARTER 1999
TO THIRD QUARTER 1998
SUMMARY
OperatingConsolidated operating revenues for the thirdfirst quarter of 19992000 increased
11%13%, to $523.9$534 million, from $473.4$470 million in the comparable period of 1998. Revenue
in1999. As
of January 1, 2000, the Van segment grew 1%Company has four reportable business segments: Truck
(JBT), with truck revenue up 2% and intermodal up 1%. As
announced in September, 1999 rail service delays reduced intermodal volume
during the current quarter. Logistics segment (JBHL) revenues increased 23%
during the third quarter of 1999, whileIntermodal (JBI), Dedicated Contract Services (DCS) and Logistics
(JBL). The first quarter of 2000 marks the first period of separately
reporting segment (DCS)results of the truck and intermodal business units. In prior
periods, the two units had been operated and reported together as the
Van/Intermodal segment. Accordingly, the only identifiable comparative segment
information for JBT and JBI is revenue prior to January 1, 2000.
The JBT segment consists primarily of full truckload, dry-van freight
which is typically transported utilizing company-owned or controlled revenue
equipment. This freight is transported over roads and highways and is not
transported over any portion of the movement by railroad. JBT segment revenue
grew 49%. Average tractor count12%, to $203 million during the first quarter of 2000, compared with $182
million in the Van fleet decreased 2%same period of 1999. Revenue per mile in the truck segment,
exclusive of fuel surcharges, rose 3.7% in the current quarter compared with
the first quarter of 1999.
JBI segment business includes primarily truckload freight which is
transported by rail over any portion of the movement. This segment also
includes certain repositioning truck freight moved by JBI or third-party
equipment when such highway or other movement is intended to direct JBI
equipment back into intermodal operations. JBI segment revenue declined
approximately 3% during the current quarter, whileto $151 million, from $155
million in 1999. Intermodal rates in 2000 were essentially flat when compared
with the same period in 1999.
DCS fleet increased 41%. A portion of
thesegment operations typically include services provided with
company-owned revenue equipment and employee drivers which are assigned to
specific customers or traffic lanes. DCS fleet increase was due to the transfer of tractors from Van. Van
truck only revenue per mile was up approximately 2%, before fuel surcharges,
duringoperations usually involve written,
long-term agreements or contracts. During the current quarter while intermodalDCS revenue
per mile, before fuel
surcharges, declined about 2%.
Operating income in the Van segment declined during the third quarter
of 1999increased 40%, to $6.8$98 million, from $18.7$70 million in the thirdcomparable period of
1999. Operating income was $4.0 million during the first
11
quarter of 1998.
This decrease2000, compared with $4.6 million in the first quarter of 1999. The
decline in 2000 DCS operating income was due, in part, to significantly higher
fuel costs which
were not totally offset by fuel surcharges, and dueincreased computer system and corporate support expenses.
The JBL segment includes a wide range of comprehensive transportation
and management services. These services may include experienced professional
managers, information and optimization technology and the actual design or
redesign of transportation system solutions. JBL may utilize JBT, JBI, or DCS
owned or controlled assets and employees or third-party equipment and
employees, or a combination to increased maintenance
expense on older tractors. In addition, maintenance costs on the trailing
fleet, and insurance and claims costs reduced Van operating incomemeet customers' service requirements. JBL
services also typically involve long-term, written agreements. JBL revenue
grew 34% during the current quarter. The increasequarter to $107 million, from $80 million in JBHL1999.
Operating income was $1.7 million in 2000, compared with $2.8 million in 1999.
This decline in operating income was due primarily due to lower purchased transportation expenseincreased computer
system and improved margins on certain
projects. The decline in DCS operating income was primarily due tocorporate support charges and higher fuel costs and increased insurance and claimsbad debt expense.
Summary of Operating Segments Results
For Three Months Ended September 30March 31
(dollars in millions)
Gross Revenue Operating Income
----------------------------------- --------------------------------------------------- ---------------------
2000 1999 1998 % CHANGEChange 2000 1999
1998
---- --------- ----- -------- --------- ----
Van /Intermodal $358.0 $352.9 1% $6.8 $18.7
Logistics 103.7 84.0 23% 3.2 1.3
Dedicated Contract Services 82.8 55.7 49% 4.5 4.9JBT $203 $182 12% $(0.2) --
JBI 151 155 (3%) 7.7 --
----- ----- -------- ----- -----
Van/Intermodal 354 337 5% 7.5 $15.3
DCS 98 70 40% 4.0 4.6
JBL 107 80 34% 1.7 2.8
Other -- -- -- .5 (0.5)
------ ------ ---- ---- ------(1.0) 1.5
----- ----- -------- ----- -----
Subtotal 544.5 492.6 11% 15.0 24.4559 487 15% 12.2 24.2
Inter-segment eliminations (20.6) (19.2)(25) (17) -- -- --
------- ------- --------- ----- -------- ----- -----
Total $523.9 $473.4 11% $15.0 $24.4
======= ======= ====$534 $470 13% $12.2 $24.2
===== ===== =====
10
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 September 30
------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------- -----------------
1999 1998 1999 vs. 1998
------ ------ -----------------
Operating revenues 100.0% 100.0% 10.7%
Operating expenses
Salaries, wages and employee benefits 34.6% 35.0% 9.3%
Purchased transportation 34.3% 34.1% 11.5%
Fuel and fuel taxes 8.5% 7.3% 28.3%
Depreciation 7.3% 7.5% 6.9%
Operating supplies and expenses 6.7% 5.2% 42.5%
Insurance and claims 2.2% 1.9% 29.6%
Operating taxes and licenses 1.3% 1.2% 13.6%
General and administrative expenses 1.3% 1.5% (3.1%)
Communication and utilities 1.0% 1.1% .7%
------------------- -----------------
Total operating expenses 97.1% 94.8% 13.4%
------------------- -----------------
Operating income 2.9% 5.2% (38.7%)
Interest expense 1.4% 1.6% (0.6%)
------------------- -----------------
Earnings before income taxes 1.5% 3.6% (54.7%)
Income taxes .5% 1.3% (55.3%)
------------------- -----------------
Net earnings 1.0% 2.3% (54.3%)
=================== =================
Total operating expenses for the third quarter of 1999 increased
approximately 13%, while operating revenues increased about 11%, compared
with the same period of 1998. Total operating expenses expressed as a
percentage of operating revenues (operating ratio) were 97.1% for the third
quarter of 1999, compared with 94.8% in 1998. Salaries, wages and employee
benefits increased approximately 9%, primarily due to higher office salary
and wage costs and higher health insurance and other benefit expenses.
Purchased transportation expense increased 11.5%, but remained nearly the
same percentage of revenue. This was due primarily to increases in JBHL
business which results in increased revenue and a corresponding increase in
purchased transportation expense. The significant increase in fuel and fuel
taxes expense was due, in part, to approximately 18% higher fuel cost per
gallon and slightly lower miles per gallon. This increased fuel expense was
only partly offset by additional fuel surcharge revenue during the current
quarter.
Depreciation expense increased about 7%, reflecting the approximate 7%
increase in the combined tractor fleet. Gains or losses on the disposition of
assets are also reflected in net depreciation expense. A net loss of $274,000
was incurred on asset dispositions during the current quarter, compared with
a net gain of $3,000 in 1998. Operating supplies and expenses increased 42.5%
during 1999, reflecting significantly higher levels of spending for tractor
and trailing equipment maintenance and tires. These higher maintenance costs
were due, in part, to an approximate 30% increase in the average age of the
Van tractor fleet.
11
While the frequency of vehicle collisions declined slightly during the
third quarter of 1999, the severity, or cost per collision, was up significantly
and resulted in nearly 30% higher insurance and claims expense. Operating taxes
and licenses expense increased 13.6%, partly due to the growth of the tractor
fleet and increases in licensing fees charged by certain states. General and
administrative expenses declined slightly, partly due to lower bad debt expense
in the current quarter. Communication and utilities expense increased slightly,
but remained nearly the same percentage of revenue. No significant changes in
the telecommunications network or rates were experienced during the current
quarter. The effective income tax rate was 36.5% in 1999 and 37.0% in 1998.
As a result of the above, net earnings for the third quarter of 1999 were
$5.0 million, or earnings per diluted share of $.14, compared with $10.8 million
or $.30 per diluted share in 1998.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
SUMMARY
Operating revenues for the nine month period ended September 30, 1999
increased 11%, to $1,491.7 million from $1,347.8 million in 1998. For the nine
month period Van segment revenue was up 3%, JBHL grew 19% and DCS revenue
increased 55%. The increase in Van revenue included 5% growth of truck and 2% in
intermodal. The Van tractor fleet declined about 2% during the nine month period
of 1999. Overall truck revenue per mile, before fuel surcharges, increased about
1%, while intermodal revenue per mile, excluding fuel surcharges, declined 1.5%.
The increase in JBHL revenue was a result of new accounts and growth with
existing customers. The significant increase in DCS revenue was driven by a 41%
increase in the tractor fleet, a portion of which was transferred from Van, new
contract arrangements and growth with existing customers. Other revenue in 1998
was generated by a small subsidiary, Lake City Express, which was sold in June
of 1998.
Operating income in the Van segment declined during the nine month period
ended September 30, 1999 to $38.5 million, from $59.2 million in 1998. This
decline was due, in part, to higher costs for office salaries and wages, tractor
and trailing equipment maintenance and tire costs, and increased fuel costs, not
totally offset by fuel surcharge revenue. JBHL operating income increased during
1999, primarily due to higher revenue volume and slightly lower purchased
transportation expense. The increase in DCS operating income was primarily due
to revenue growth. Overall margins in the DCS segment declined in 1999, partly
due to higher fuel costs and increased maintenance expense.
12
Operating Segments
For Nine Months Ended September 30
(dollars in millions)
Gross Revenue Operating Income
--------------------------------- --------------------
1999 1998 % CHANGE 1999 1998
-------- -------- -------- ---- ----
Van /Intermodal $1,047.3 $1,014.9 3% $38.5 $59.2
Logistics 272.2 229.5 19% 6.9 5.1
Dedicated Contract Services 230.0 148.2 55% 15.7 13.1
Other -- 8.0 -- 2.3 .3
-------- -------- ----- ----- -----
Subtotal 1,549.5 1,400.6 11% 63.4 77.7
Inter-segment eliminations (57.8) (52.8) -- -- --
-------- -------- ----- ----- -----
Total $1,491.7 $1,347.8 11% $63.4 $77.7
======== ======== ===== ===== =====
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.
12
NineThree Months Ended September 30
----------------------------------------March 31
------------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------------------------------------ -----------------------
2000 1999 2000 vs. 1999
---------------- ------------- -----------------
1999 1998 1999 vs. 1998
------ ------ -----------------
Operating revenues 100.0% 100.0% 10.7%13.5%
Operating expenses
Salaries, wages and employee benefits 35.5% 34.9% 12.6%
Purchased34.8% 36.7% 7.6%
Rents and purchased transportation 32.6% 33.7% 7.0%35.4% 30.7% 30.7%
Fuel and fuel taxes 10.6% 7.8% 54.5%
Depreciation 5.9% 8.1% 7.6% 18.0%
Depreciation 7.7% 7.5% 13.3%(17.3%)
Operating supplies and expenses 6.2% 5.2% 33.4%5.6% 5.9% 8.3%
Insurance and claims 2.0% 1.7% 25.6%1.8% 2.1% (2.5%)
Operating taxes and licenses 1.4% 1.3% 13.2%1.4% 17.9%
General and administrative expenses 1.3% 1.3% 8.9%1.1% 1.1% 17.8%
Communication and utilities 1.1% 1.0% 12.9%
------ ------ ------1.2% 2.4%
-------------------------------
Total operating expenses 95.8% 94.2% 12.5%
------ ------ ------97.7% 94.9% 16.9%
-------------------------------
Operating income 4.2% 5.8% (18.4%2.3% 5.1% (49.4%)
Interest expense 1.4%1.1% 1.6% 4.3%
------ ------ ------(20.5%)
-------------------------------
Earnings before income taxes 2.8% 4.2% (26.9%1.2% 3.5% (62.4%)
Income taxes 1.0% 1.5% (27.0%0.3% 1.2% (79.4%)
------ ------ -------------------------------------
Net earnings 1.8% 2.7% (26.8%0.9% 2.3% (52.6%)
====== ====== =====================================
Total operating expenses for the nine months ended September 30, 1999first quarter of 2000 increased 12.5%, while16.9%
over the comparable period of 1999. As previously discussed, operating
revenues increased 10.7%, compared with13.5% during the same period of 1998.current quarter. Total operating expenses
expressed as a percentage of operating revenues (operating ratio) were 95.8%97.7%
for the nine months ended
September 30, 1999,first quarter of 2000, compared with 94.2%94.9% in 1998.1999. Salaries, wages
and employee benefits increased 12.6%,7.6% during the current quarter, but declined
to 34.8% of revenue from 36.7% of revenue in 1999. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline in percentage of revenue was primarily due to higher driver compensation, office
salariesthe
growth of Logistics (JBL) revenue. Rents and wage costs, and higher health insurance and other benefit expenses.
Purchasedpurchased transportation expense
increased 7%
13
over 1998 levels, but declined as a percentage of revenue, primarily due to
slower growth of intermodal volume and the 1998 sale of Lake City Express, which
compensated its drivers as independent contractors. Fuel and fuel taxes
increased 18%30.7% and increased as a percentage of revenue,revenue. This increase was
due to additional truck
volume, approximately 4% higher fuel cost per gallon and slightly lower fuel
miles per gallon.
Depreciation expense increased 13.3%, reflecting the growth of the
tractorJBL business, additional use of third-party dray
companies and higher revenue equipment rental expense. A transaction to sell
and leaseback certain trailing equipment, fleets. The increasewhich closed in late 1999, increased
equipment rent and decreased depreciation expense. Fuel and fuel taxes expense
rose 54.5% during the current quarter, driven by a 54% higher cost per gallon.
Fuel surcharges, which were initiated in late 1999, recovered approximately
60% of the higher fuel costs during the first quarter. However, the Company
estimates that the net negative impact of higher fuel charges on net earnings
for the first quarter was also$6.1 million, or $.17 per share.
13
Depreciation expense declined 17.3% during 2000, primarily due to differences in gain or loss on asset dispositions. A net loss of $747,000 was
recognized on asset dispositions during the
nine months ended September 30,
1999, which increased depreciation expense, compared with a gain of $2.1
million, which reduced depreciation in 1998.sale and leaseback transaction previously discussed. Operating supplies and
expenses increased 33.4% during 1999, primarily8.3%, partly due to higherincreased spending levels for tractor and
trailing equipment maintenance and tires. These higher maintenance costs
were partly due to an approximate 28%maintenance. The nearly 18% increase in the average age of the Van
tractor fleet and a $2 million cost to repair a group of leased trailers that
were returned to the lessor in 1999.
While the frequency of vehicle collisions declined slightly during the
nine months ended September 30, 1999, the severity, or cost per collision, was
up significantly and resulted in 25.6% higher insurance and claims expense.
Operatingoperating taxes and
licenses increased 13.2%, partlylicense expense was due to the growthlarger size of the tractor fleet and increasesa higher
state base plate cost per tractor in licensing fees charged by certain states. General2000. The significant increase in general
and administrative expenses increasedcosts was primarily a result of higher levels of spending
for computer equipment rental and maintenance, offset, in relative proportion to revenue and
remained the same percentage of operating revenue. Communication and utilities
increased nearly 13%, partlypart, by reduced bad
debt expense. Interest expense decreased 20.5% in 2000. This decrease was
primarily due to expanded datareduced debt levels associated with the sale and telecommunications
networks and higher satellite communications costs.leaseback
transaction. The effective income tax rate wasrates were 20% in 2000 and 36.5% in
1999. These were the effective rates expected for the full year 2000 and 1999,
respectively. The Company estimates the sale and 36.6% in 1998.leaseback transaction
increased diluted earnings per share by $.03 during the first quarter of 2000.
This amount includes the impact of the lower effective income tax rate.
As a result of the above, net earnings for the nine months ended
September 30, 1999 were $26.3first quarter of 2000
decreased to $5.0 million, or diluted earnings per share of $.73,$.14, compared
with $36.0$10.6 million, or $.98$.29 per diluted share, in 1998.1999.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Condensed Consolidated
Statements of Cash Flows and the Condensed Consolidated Balance Sheets.
Net cash provided byused in operating activities was $137.4$8.1 million for the nine
monthsthree
month period ended September 30, 1999,March 31, 2000, compared with $131.8$27.6 million provided for
the first quarter of 1999. This decrease in 1998. Netnet cash provided was generated during 1999 primarily
fromdue to the reduced level of net earnings, lower depreciation deferred
income taxesexpense and increases in trade accounts payable. Net cash was used
primarily to fund ana
$40.6 million increase in accounts receivable, forother assets. As previously mentioned, the lower
depreciation expense was due to the sale and leaseback of certain trailing
equipment. The increase in other assets was due to prepaid expenseslease charges which
were also related to the sale and to pay claims.leaseback transaction. Net cash used in
investing activities was $142$64.6 million in 1999,2000, up from $37.1 million in 1999.
Purchases of new revenue equipment were up significantly during the first
quarter of 2000. New tractor purchases totaled approximately 1,030 during
2000, compared with $215about 220 in 1999. This increase in capital spending for
tractors was partly offset by reduced purchases of trailing equipment.
Financing activities generated $63.9 million during the current quarter,
compared with $4.1 million in 1998. This decline in investment spending was
primarily due to fewer additions and trades of new tractors and trailing
equipment in the current year. The Company had1999. Financing activities included net
borrowings of approximately
$3$68.8 million, in 1999, compared with $93$3.1 million in 1998,to repurchase treasury stock and
$1.8 million paid out $5.3 millionin dividends. The Company announced in February of 2000
an intent to cease the payment of dividends in 1999 and in 1998.to utilize those funds to
purchase additional treasury stock.
14
SELECTED BALANCE SHEET DATA
AS OF
---------------------------------------------------------------
September 30, 1999As of
----------------------------------------------------------------
March 31, 2000 December 31, 1998 September 30, 1998
------------------1999 March 31, 1999
-------------- ----------------- --------------------------------
Working capital ratio 1.111.18 1.09 1.081.18
Current maturities of long-
term debt (millions) $ 19.360 $ 16.460 $ 15.622
Total debt (millions) $ 436.8 $433.4396 $ 432.9328 $ 439
Total debt to equity 1.10 1.15 1.18.99 .82 1.14
Total debt as a percentage
of total capital .52 .54 .54.50 .45 .53
The Company's total debt levellevels increased approximately $3$68 million to
$436.8 million at September 30, 1999 from $433.4 million at
December 31, 1998.
Total debt increased approximately $4 million from September1999 to March 31, 2000. As of 1998 to
September of 1999. However, total debt to equity and debt as a percentage of
total capital both declined in 1999. In August of 1999,March 31, 2000, the Company announced a
five year exclusive commitmenthad
commitments to purchase approximately $1 billion$234 million of new
tractorsrevenue and service
equipment net of expected proceeds from Freightliner Corporation, a member of the Daimler Chrysler Group.
Deliveries of the new tractors commenced in September of 1999. Approximately 800
of the new Freightliners aresale or trade-in allowances. Funding
for such expenditures is expected to be delivered duringcome from cash generated from operations
and existing borrowing facilities.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998, the remainderFASB issued Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement requires the
recognition of calendar year 1999all derivatives in the statement of financial position as
either assets or liabilities and preliminary estimates aretheir measurement at fair value. Statement
No. 133 is effective for approximately 3,000 to be
delivered in calendar yearfiscal years beginning after June 15, 2000. The
Company generates significant levels of
cash from operating activities and has borrowing capacity to meetnot determined what impact, if any, Statement No. 133 will have on
its committed
and contemplated cash requirements.financial statements.
YEAR 2000
The Company utilizes and is significantly dependent upon a wide varietyAs of complex information technologies (IT) to conduct daily business operations.
Company IT systems are used by shippers to request freight services and track
order status, and bythe date of this filing, the Company to process and manage orders, communicate with
drivers, bill customers, authorize the purchase of fuel and other maintenance
services, general accounting, payroll and a number of other functions. The
Company recognized the importance of thehad not experienced any
material Year 2000 (Y2K) issue and developed an
action plan in 1996. The plan included systematic reviews of all internal
hardware, software and functions to either verify that the system is Y2K
compliantproblems or modify/replace the software or system as required.
STATE OF READINESS
The Company has focused significant resources during 1998 and 1999 on Y2K
with the goal of no material business or system disruption related to dates on
or after January 1, 2000. The Company established July 1, 1999 as a completion
date for all modifications, installations and testing of mission critical
internal computer and IT applications. The Company has modified or otherwise
corrected all mission critical internal Y2K issues and problems that have been
identified. Although some limited reviews and testing will continue through 1999
and early 2000, the Company believes that all internal IT systems, which have a
material impact on daily operations, have been modified and tested to eliminate
or minimize the Y2K problem.
15
In addition to the issues and risks associateddisruptions with internal IT systems, the
Company has relationships and is dependent upon a number of third parties such
as customers, suppliers and utility service providers. Daily business operations
include the electronic data interchange of information (EDI)nor had any
material problems or disruptions been experienced with customers and
providers of transportation services such as railroads and motor freight
carriers. Other third party providers of critical services such as voice and
data communications, natural gas, water, electricity and diesel fuel are also an
integral part of daily business operations. If significant numbers or certain
critical customers or suppliers experience failures in their computer systems or
equipment due to Y2K non-compliance it could affect the Company's normal
business activities. While some of these risks are not controllable by the
Company, a number of actions and procedures have been implemented to assess
and/or reduce this risk. Formal communications have been initiated with certain
significant customers and suppliers. Depending upon the circumstances, formal
certifications of Y2K compliance have been requested and received. The Company
has no knowledge of any primary or critical customer or supplier with potential
Y2K issues that might have a material adverse effect on the Company's
operations.
COSTS
Since 1996, the Company has spent approximately $1.7 million on Y2K
compliance. Estimated future expense to complete any remaining tests or
compliance work is $.1 million for an estimated total cost of $1.8 million.
These costs are being charged to operations as incurred. These costs exclude
certain new system acquisitions, development and implementation costs that
relate to on-going business activity, normal system upgrades and enhancements.
RISKS AND CONTINGENCY PLANS
The Company has no knowledge of any internal or external Y2K issues that
could materially affect business operations. However, there can be no assurance
that all internal IT issues have been identified or that no customers, suppliers
or utility service providers will experience Y2K disruptions. Accordingly, the
Company has developed a Y2K Business Continuity Plan which was completed on June
30, 1999. The purpose of the Plan is to identify the business critical processes
and functions, and to outline actions which will be taken to minimize the impact
of any Y2K related disruptions that might occur.
The Plan provides for the establishment of a Y2K Command Center which
will be activated on December 15, 1999. The Plan identifies certain critical
internal IT related systems as well as key external services such as
telecommunications, fuel distribution and utility services to terminals. The
Company is unable to determine or quantify the potential impact of the most
likely worst case scenario due to the number of variables and uncertainties.
Even short-term disruption of telecommunications service, for example, could
have a material adverse impact on the Company's business.
16
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. 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 rates and severity of future accidents, cargo
damage and worker's compensation claims, as well as other factors. In addition,
the Year 2000 issue is extremely complex and compliance failures on the part of
customers and/or suppliers that are outside the control of the Company could
have a material negative impact on future operating results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short-term interest
rates as a result of its issuance of short-term commercial paper. However, due
to its selective utilization of interest rate swaps, at certain times, the effects of interest
rate changes can beare mitigated. Risk can be estimated by measuring the impact of a
near-term adverse movement of 10% in short-term market interest rates. If
short-term market interest rates average 10% more in 19992000 than in 1998,1999, there
would be no material adverse impact on the Company's results of operations. At
September 30, 1999, the Company had no outstanding interest
rate swap agreements. The Company has no material future earnings or cash flow
exposures from changes in interest rates related to its long-term obligations as
all of the Company's long-term debt obligations have fixed rates. At September
30, 1999,March 31, 2000, the fair value of the Company's fixed rate long-term
obligations approximated carrying value.
Although the Company conducts business in foreign countries,
international operations are not material to the Company's consolidated
financial position, results of operations or cash flows. Additionally, foreign
currency transaction gains and losses were not material to the Company's
results of operations for the three and nine months ended September 30, 1999.March 31, 2000. Accordingly,
the Company is not currently subject to material foreign currency exchange
rate risks from the effects that exchange rate movements of foreign currencies
would have on the Company's future costs or on future cash flows it would
receive from its foreign investment. To date, the Company has not entered into
any foreign currency forward exchange contracts or other derivative financial
instruments to hedge the effects of adverse fluctuationsfluctuation in foreign currency
exchange rates.
1715
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 20, 2000. 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 three Class II Directors
for a term of three years each. 31,917,489 0 1,777,428
2. To amend the Company's
Management Incentive Plan by
authorizing additional shares
in the Plan. 24,582,537 5,862,777 459,477
3. To amend and extend the
Chairman's Stock Option
Incentive Plan. 28,614,049 1,798,582 492,160
4. To ratify the appointment of
KPMG LLP as the Company's
principal independent public
accountants for the next
fiscal year. 32,651,829 25,011 18,077
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
None applicable.On March 14, 2000, a news release was issued announcing that six of
the nation's largest truckload transportation companies: Covenant
Transport, Inc.; J.B. Hunt Transport Services, Inc.; M.S. Carriers,
Inc.; Swift Transportation Co., Inc.; U.S. Xpress Enterprises, Inc.
and Werner Enterprises, Inc., intended to merge their logistics
business units into a commonly owned, Internet-based global
transportation logistics company, Transplace.com. The combined
logistics businesses had total revenues of approximately $650 million
in 1999.
16
The Company will invest $5 million of cash and merge all or
substantially all of its JBL segment business into the new entity.
The Company will have a 28% equity stake in Transplace.com. The six
companies also intend to develop programs for the cooperative
purchasing of products, supplies and services and the achievement of
other synergies.
The consummation of the transaction is dependent upon receiving
approval of various regulators, but could be effective as early as
July 1, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. HUNT TRANSPORT SERVICES, INC.
DATE: NovemberMay 10, 19992000 BY: /s/ Kirk Thompson
------------------------- --------------------------------------------------------------------- -------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: NovemberMay 10, 19992000 BY: /s/ Jerry W. Walton
------------------------- --------------------------------------------------------------------- -------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Administration
and Chief Financial Officer
DATE: NovemberMay 10, 19992000 BY: /s/ Donald G. Cope
------------------------- ------------------------------------------------------------------------- -------------------------------
Donald G. Cope
Vice President, Controller
and Chief Accounting Officer
1917