FORM 10-Q
Washington, D.C. 20549
(Mark One) | ||
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Quarter Ended March 31, 2002
OR
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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) |
|
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615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745
(Address of principal executive offices, and Zip Code)
(501)(479) 820-0000
(Registrant'sRegistrant’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 ý No o
The number of shares of the Company'sregistrant’s $.01 par value common stock outstanding on September 30, 2001March 31, 2002 was 35,971,080.36,365,045.
J.B. HUNT TRANSPORT SERVICES, INC.
Form 10-Q
For The Quarter Ended March 31, 2002
Index
Financial Information |
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Consolidated |
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Condensed Consolidated Statements of |
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Exhibits | |||
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PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements
The interim condensed consolidated financial statements contained herein reflect all adjustments which, in the opinion of management, are necessary for a fair statement of financial condition, results of operations and cash flows for the periods presented. They have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three month and nine month periods ended September 30, 2001 are not necessarily indicative of December 31, 2001.
The interim condensed consolidated financial statements have been reviewed by KPMG LLP, independent public accountants.
These interim condensed consolidated financial statements should be read in conjunction with the Company's latest annual report and Form 10-K for the year ended December 31, 2000.
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 |
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| September 30 |
| September 30 |
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| Three Months Ended |
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| 2001 |
| 2000 |
| 2001 |
| 2000 |
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| March 31 |
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| 2002 |
| 2001 |
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Operating revenues |
| $ | 537,156 |
| $ | 509,422 |
| $ | 1,554,065 |
| $ | 1,626,478 |
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| $ | 510,221 |
| $ | 495,419 |
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Operating expenses |
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Salaries, wages and employee benefits |
| 200,647 |
| 190,995 |
| 594,341 |
| 571,153 |
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| 195,695 |
| 196,685 |
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Rents and purchased transportation |
| 159,839 |
| 140,997 |
| 436,561 |
| 545,226 |
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| 156,055 |
| 131,789 |
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Fuel and fuel taxes |
| 56,677 |
| 61,282 |
| 177,790 |
| 176,156 |
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| 46,980 |
| 62,279 |
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Depreciation and amortization |
| 35,717 |
| 33,903 |
| 106,567 |
| 99,063 |
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| 35,984 |
| 35,513 |
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Operating supplies and expenses |
| 38,671 |
| 35,505 |
| 108,838 |
| 96,844 |
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| 31,846 |
| 34,262 |
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Insurance and claims |
| 12,878 |
| 9,459 |
| 37,345 |
| 28,676 |
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| 10,959 |
| 12,218 |
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Operating taxes and licenses |
| 8,660 |
| 8,390 |
| 25,053 |
| 24,383 |
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| 7,988 |
| 8,072 |
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General and administrative expenses, net of gains |
| 7,093 |
| 6,519 |
| 13,332 |
| 21,093 |
|
| 4,812 |
| (372 | ) | ||||||
Communication and utilities |
| 5,024 |
| 6,555 |
| 18,103 |
| 18,167 |
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| 6,271 |
| 6,606 |
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Total operating expenses |
| 525,206 |
| 493,605 |
| 1,517,930 |
| 1,580,761 |
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| 496,590 |
| 487,052 |
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Operating income |
| 11,950 |
| 15,817 |
| 36,135 |
| 45,717 |
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| 13,631 |
| 8,367 |
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Interest expense |
| (5,827 | ) | (6,813 | ) | (18,008 | ) | (19,666 | ) |
| (6,836 | ) | (6,264 | ) | ||||||
Equity in earnings (loss) of associated companies |
| (771 | ) | 548 |
| (759 | ) | 3,584 |
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| (450 | ) | 166 |
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Earnings before income taxes |
| 5,352 |
| 9,552 |
| 17,368 |
| 29,635 |
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| 6,345 |
| 2,269 |
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Income taxes |
| 803 |
| 429 |
| 2,605 |
| 4,445 |
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| 1,491 |
| 624 |
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Net earnings |
| $ | 4,549 |
| $ | 9,123 |
| $ | 14,763 |
| $ | 25,190 |
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| $ | 4,854 |
| $ | 1,645 |
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Average basic shares outstanding |
| 35,839 |
| 35,161 |
| 35,477 |
| 35,359 |
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| 36,264 |
| 35,273 |
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Basic earnings per share |
| $ | 0.13 |
| $ | 0.26 |
| $ | 0.42 |
| $ | 0.71 |
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| $ | 0.13 |
| $ | 0.05 |
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Average diluted shares outstanding |
| 36,846 |
| 35,280 |
| 36,133 |
| 35,478 |
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| 37,269 |
| 35,657 |
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Diluted earnings per share |
| $ | 0.12 |
| $ | 0.26 |
| $ | 0.41 |
| $ | 0.71 |
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| $ | 0.13 |
| $ | 0.05 |
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See accompanying notes to condensed consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands)
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| September 30, 2001 |
| December 31, 2000 |
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| (unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 63,163 |
| $ | 5,370 |
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Accounts receivable |
| 247,206 |
| 225,797 |
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Prepaid expenses and other |
| 61,375 |
| 99,804 |
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Total current assets |
| 371,744 |
| 330,971 |
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Property and equipment |
| 1,253,719 |
| 1,334,457 |
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Less accumulated depreciation |
| 443,869 |
| 489,282 |
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Net property and equipment |
| 809,850 |
| 845,175 |
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Other assets |
| 56,448 |
| 55,775 |
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| $ | 1,238,042 |
| $ | 1,231,921 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current maturities of long-term debt |
| $ | 10,000 |
| $ | 84,400 |
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Current installments of obligations under capital leases |
| 31,414 |
| 16,489 |
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Trade accounts payable |
| 141,503 |
| 158,585 |
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Claims accruals |
| 16,226 |
| 13,260 |
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Accrued payroll |
| 31,237 |
| 29,148 |
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Other accrued expenses |
| 9,723 |
| 10,390 |
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Deferred income taxes |
| 11,255 |
| 13,002 |
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Total current liabilities |
| 251,358 |
| 325,274 |
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Long-term debt |
| 222,918 |
| 222,694 |
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Obligations under capital leases, excluding current installments |
| 136,327 |
| 77,694 |
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Claims accruals |
| 5,434 |
| 4,974 |
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Deferred income taxes |
| 171,865 |
| 173,282 |
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Stockholders' equity |
| 450,140 |
| 428,003 |
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| $ | 1,238,042 |
| $ | 1,231,921 |
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| March 31, 2002 |
| December 31, 2001 |
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ASSETS |
| (unaudited) |
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Current assets: |
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Cash and cash equivalents |
| $ | 12,404 |
| $ | 49,245 |
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Accounts receivable |
| 226,232 |
| 233,246 |
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Prepaid expenses and other |
| 90,912 |
| 102,308 |
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Total current assets |
| 329,548 |
| 384,799 |
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Property and equipment |
| 1,257,465 |
| 1,263,969 |
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Less accumulated depreciation |
| 419,861 |
| 432,258 |
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Net property and equipment |
| 837,604 |
| 831,711 |
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Other assets |
| 53,403 |
| 43,788 |
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| $ | 1,220,555 |
| $ | 1,260,298 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current maturities of long-term debt |
| $ | 33,000 |
| $ | 10,000 |
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Current installments of obligations under capital leases |
| 28,884 |
| 28,426 |
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Trade accounts payable |
| 111,684 |
| 163,291 |
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Claims accruals |
| 12,050 |
| 18,003 |
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Accrued payroll |
| 32,864 |
| 30,251 |
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Other accrued expenses |
| 6,488 |
| 12,713 |
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Deferred income taxes |
| 3,672 |
| 3,150 |
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Total current liabilities |
| 228,642 |
| 265,834 |
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Long-term debt, excluding current maturities |
| 212,981 |
| 212,950 |
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Obligations under capital leases, excluding current installments |
| 133,476 |
| 140,657 |
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Claims accruals |
| 5,389 |
| 5,275 |
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Deferred income taxes |
| 167,574 |
| 177,265 |
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Stockholders' equity |
| 472,493 |
| 458,317 |
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| $ | 1,220,555 |
| $ | 1,260,298 |
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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 |
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| 2001 |
| 2000 |
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| Three Months Ended March 31 |
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| 2002 |
| 2001 |
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Cash flows from operating activities: |
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Net earnings |
| $ | 14,763 |
| $ | 25,190 |
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| $ | 4,854 |
| $ | 1,645 |
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Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | �� |
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Depreciation and amortization |
| 106,567 |
| 99,063 |
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| 35,984 |
| 35,513 |
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Gain on sale of revenue equipment |
| (4,967 | ) | (152 | ) | |||||||||
(Gain) loss on sale of revenue equipment |
| 205 |
| (5,337 | ) | |||||||||
Deferred income taxes |
| (3,164 | ) | 2,341 |
|
| (9,169 | ) | 20 |
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Equity in earnings (loss) of associated companies |
| 759 |
| (3,584 | ) | |||||||||
Equity in loss (earnings) of associated companies |
| 450 |
| (166 | ) | |||||||||
Tax benefit of stock options exercised |
| 2,289 |
| 7 |
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| 4,584 |
| 80 |
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Amortization of discount, net |
| 224 |
| 135 |
|
| 31 |
| 160 |
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Changes in operating assets and liabilities: |
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Trade accounts receivable |
| (21,409 | ) | 13,238 |
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| 7,014 |
| 9,081 |
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Other assets |
| 38,429 |
| (11,893 | ) |
| 20,819 |
| 10,248 |
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Trade accounts payable |
| (17,082 | ) | (42,581 | ) |
| (51,607 | ) | (22,678 | ) | ||||
Claims accruals |
| 3,426 |
| 1,967 |
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| (5,839 | ) | 1,769 |
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Accrued payroll and other accrued expenses |
| 1,422 |
| 12,920 |
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| (3,612 | ) | (3,102 | ) | ||||
Net cash provided by operating activities |
| 121,257 |
| 96,651 |
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| 3,714 |
| 27,233 |
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Cash flows from investing activities: |
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Additions to property and equipment |
| (53,604 | ) | (206,179 | ) |
| (89,688 | ) | (13,411 | ) | ||||
Proceeds from sale of equipment |
| 78,143 |
| 115,654 |
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| 48,767 |
| 38,583 |
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Investment in associated company |
| -- |
| (5,000 | ) | |||||||||
Increase (decrease) in other assets |
| 1,033 |
| (8,080 | ) | |||||||||
Decrease in other assets |
| (13,612 | ) | (12,626 | ) | |||||||||
Net cash provided by (used in) investing activities |
| 25,572 |
| (103,605 | ) |
| (54,533 | ) | 12,546 |
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Cash flows from financing activities: |
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Net borrowings (repayments) under commercial paper program and revolving credit agreements |
| (74,400 | ) | 13,200 |
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| — |
| (74,400 | ) | ||||
Net borrowings (repayments) of long-term debt |
| 23,000 |
| 52,000 |
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Principal payments under capital lease obligations |
| (17,257 | ) | (698 | ) |
| (6,723 | ) | (4,513 | ) | ||||
Repurchase of treasury stock |
| -- |
| (7,576 | ) | |||||||||
Proceeds from sale of treasury stock |
| 2,621 |
| 351 |
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Dividends paid |
| -- |
| (1,782 | ) | |||||||||
Issuance (acquisition) of treasury stock |
| (2,299 | ) | 988 |
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Net cash provided by (used in) financing activities |
| (89,036 | ) | 3,495 |
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| 13,978 |
| (25,925 | ) | ||||
Net change in cash and cash equivalents |
| 57,793 |
| (3,459 | ) |
| (36,841 | ) | 13,854 |
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Cash and cash equivalents at beginning of period |
| 5,370 |
| 12,606 |
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| 49,245 |
| 5,370 |
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Cash and cash equivalents at end of period |
| $ | 63,163 |
| $ | 9,147 |
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| $ | 12,404 |
| $ | 19,224 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest |
| $ | 20,456 |
| $ | 21,012 |
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| $ | 9,405 |
| $ | 8,371 |
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Income taxes |
| 2,636 |
| 639 |
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| 14,320 |
| 186 |
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Non-cash activities: |
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Contribution of assets to associated company |
| -- |
| 2,927 |
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Capital lease obligations for revenue equipment |
| $ | 91,038 |
| $ | 24,007 |
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| $ | — |
| $ | 26,426 |
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See accompanying notes to condensed consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
(Unaudited)
1) 1. Basis of PresentationThe interim
Our condensed consolidated financial statements at September 30,included in this Form 10-Q have been prepared without audit (except that the balance sheet information as of December 31, 2001 has been derived from consolidated financial statements which were audited) in accordance with the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United Sates of America have been condensed or omitted, we believe that the disclosures are adequate to make the information presented not misleading. You should read the accompanying condensed consolidated financial statements in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the three and nine monthsyear ended September 30, 2001 and 2000 are unaudited and includeDecember 31, 2001.
We believe that all adjustments, consisting only of normal recurring accruals, which the Company considersadjustments, necessary for a fair presentation of financial position and operating results. The unaudited consolidated financial statementsthe results of the interim periods presented have been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore, do not contain all information and footnotes normally contained in annual financial statements. Accordingly, they should be read in conjunction with the financial statements and notes thereto appearing in the annual report on Form 10-K of the Company for the year ended December 31, 2000.
2) made. The results of operations for the three and nine monthinterim periods ended September 30, 2001presented in this report are not necessarily indicative of thosethe results to be expected for the full calendar year ending December 31, 2001.2002.
3) 2.Long-Term Debt
Long-term debt consists of (in thousands):
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| 9/30/2001 |
| 12/31/2000 |
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| 3/31/2002 |
| 12/31/2001 |
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Commercial paper |
| -- |
| $ | 74,400 |
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Revolving credit line |
| $ | 23,000 |
| — |
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Senior notes payable, interest at 6.25% payable semiannually, due 9/1/2003 |
| $ | 98,260 |
| 98,260 |
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| 98,260 |
| 98,260 |
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Senior notes payable, interest at 7.00% payable semiannually, due 9/15/2004 |
| 95,000 |
| 95,000 |
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| 95,000 |
| 95,000 |
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Senior subordinated notes, interest at 7.80% payable semiannually |
| 40,000 |
| 40,000 |
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| 30,000 |
| 30,000 |
| ||||
|
| 233,260 |
| 307,660 |
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| 246,260 |
| 223,260 |
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Less current maturities |
| (10,000 | ) | (84,400 | ) |
| (33,000 | ) | (10,000 | ) | ||||
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Unamortized discount |
| (342 | ) | (566 | ) |
| (279 | ) | (310 | ) | ||||
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| $ | 222,918 |
| $ | 222,694 |
|
| $ | 212,981 |
| $ | 212,950 |
|
The 7.80% senior subordinated notes are payable in five equal installments beginning October 30, 2000. The Company is authorizedWe have a revolving line of credit with a number of banks. This agreement allows us to borrow up to $150$165 million under its current revolving lines of credit. These lines of credit are supported by a creditto meet short term cash requirements. This agreement with a number of banks, which expires December 14, 2001. No balances wereon November 13, 2002. As noted above, we had $23 million outstanding under these lineson this line of credit at September 30, 2001.March 31, 2002.
6
4)3. Capital Stock
The Company maintainsWe have a Managementstock option plan (Management Incentive PlanPlan) that provides various vehiclesfor the awarding of our common stock and stock options to compensate key employees with Company common stock.employees. A summary of the restricted and non-statutory options to purchase Companyour common stock follows:
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| Weighted average |
| Number of |
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| Weighted average |
| Number of |
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| Number of |
| exercise price |
| shares |
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| Number of |
| exercise price |
| shares |
| ||
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| shares |
| per share |
| exercisable |
|
| shares |
| per share |
| exercisable |
| ||
Outstanding at December 31, 2000 |
| 4,309,765 |
| $ | 15.94 |
| 831,812 |
| ||||||||
Outstanding at December 31, 2001 |
| 4,037,144 |
| $ | 15.57 |
| 488,620 |
| ||||||||
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Granted |
| 132,000 |
| 17.45 |
|
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| 292,500 |
| 23.09 |
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Exercised |
| (593,201 | ) | 14.81 |
|
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|
| (171,471 | ) | 14.30 |
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Terminated |
| (499,870 | ) | 17.61 |
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| (17,300 | ) | 16.38 |
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Outstanding at September 30, 2001 |
| 3,348,694 |
| $ | 15.95 |
| 498,070 |
| ||||||||
Outstanding at March 31, 2002 |
| 4,140,873 |
| $ | 16.15 |
| 344,949 |
|
We revised our Management Incentive Plan in January of 2002. The Company announcedamendments included changes in Februaryvesting provisions and changes in the process of 2000, a decisiongranting options to discontinue paying dividends and an intent to use those funds to repurchase up to 500,000 shares of its common stock. These shares were repurchased during the first six months of 2000.certain employees.
5)4. Earnings Per Share
AWe compute basic earnings per share by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of options or other contracts to issue common stock options exercised or converted their holdings into common stock. Outstanding stock options represent the only dilutive effects on weighted average shares. The chart below presents a reconciliation of the numerator and denominator ofbetween basic and diluted weighted average shares outstanding and the related earnings per share. All amounts in the chart, except per share is shown below:amounts, are expressed in thousands.
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| (in thousands, except per share data) |
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| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30 |
| September 30 |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
Numerator (net earnings) |
| $ | 4,549 |
| $ | 9,123 |
| $ | 14,763 |
| $ | 25,190 |
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator - Basic earnings per share |
|
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding |
| 35,839 |
| 35,161 |
| 35,477 |
| 35,359 |
| ||||
Basic earnings per share |
| $ | 0.13 |
| $ | 0.26 |
| $ | 0 .42 |
| $ | 0.71 |
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator – Diluted earnings per share |
|
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding |
| 35,839 |
| 35,161 |
| 35,477 |
| 35,359 |
| ||||
Effect of common stock options |
| 1,007 |
| 119 |
| 656 |
| 119 |
| ||||
Weighted average shares assuming dilution |
| 36,846 |
| 35,280 |
| 36,133 |
| 35,478 |
| ||||
Diluted earnings per share |
| $ | 0.12 |
| $ | 0.26 |
| $ | 0 .41 |
| $ | 0.71 |
|
|
| Three Months Ended March 31 |
| ||||
|
| 2002 |
| 2001 |
| ||
Net earnings |
| $ | 4,854 |
| $ | 1,645 |
|
Basic weighted average shares outstanding |
| 36,264 |
| 35,273 |
| ||
Dilutive effect of stock options |
| 1,005 |
| 384 |
| ||
Diluted weighted average shares outstanding |
| 37,269 |
| 35,657 |
| ||
Basic earnings per share |
| $ | 0.13 |
| $ | 0.05 |
|
Diluted earnings per share |
| $ | 0.13 |
| $ | 0.05 |
|
Options which were outstandingWe had some options to purchase shares of common stock which were outstanding during the periods indicated above,shown, 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:shares. A summary of those options follows:
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30 |
| September 30 |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
Number of shares under option |
| 134,750 |
| 2,852,965 |
| 329,250 |
| 2,840,465 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Range of exercise price |
| $ | 22.75 - $37.50 |
| $ | 14.19 - $37.50 |
| $ | 19.13 - $37.50 |
| $ | 14.25 - $37.50 |
|
|
| Three Months Ended March 31 |
| ||
|
| 2002 |
| 2001 |
|
Number of shares under option |
| 70,250 |
| 4,040,275 |
|
|
|
|
|
|
|
Range of exercise price |
| $26.00 - $37.50 |
| $17.50 - $37.50 |
|
7
6)5. Comprehensive Income
Comprehensive income consists of net earnings and foreign currency translation adjustments. During the three and six months ended September 30,March 31, 2002 and 2001, and 2000, comprehensive income was equal to: (in thousands):
|
| Three Months Ended |
| Nine Months Ended |
| |||||||||||||||
|
| September 30 |
| September 30 |
|
| Three Months Ended March 31 |
| ||||||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
|
| 2002 |
| 2001 |
| ||||||
Net earnings |
| $ | 4,549 |
| $ | 9,123 |
| $ | 14,763 |
| $ | 25,190 |
|
| $ | 4,854 |
| $ | 1,645 |
|
Foreign currency translation gain (loss) |
| -- |
| 412 |
| 2,465 |
| (616 | ) |
| 7,037 |
| (470 | ) | ||||||
Comprehensive income |
| $ | 4,549 |
| $ | 9,535 |
| $ | 17,228 |
| $ | 24,574 |
|
| $ | 11,891 |
| $ | 1,175 |
|
7)6. Income Taxes
The effective income tax rates were approximately 15% for the three months ended March 31, 2002 and nine months ended September 30, 2001, compared with 4% for the three months and 15% for the nine months ended September 30, 2000. These rates were based on the estimated annual combined effective rates for each calendar year.of 23.5% and 27.5% respectively.
8)7. Business Segments
The Company hadWe operated three reportabledistinct business segments during the first nine monthsquarter of 2001. Segments included2002. These segments included: Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). JBT business includes full truck-load, dry-van freight whichThe operation of each of these businesses is typically transported utilizing company-owned or controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. The JBI segment includes freight which is transported by rail over at least some portiondescribed in footnote (10) of our annual report (Form 10-K) for the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations. DCS segment business typically includes company-owned revenue equipment and employee drivers which are assigned to a specific customer, traffic lane or service. DCS operations usually include formal, written long-term agreements or contracts which govern services performed and applicable rates.
In addition, the Company operated a logistics business segment during the first six months of 2000. Effective July 1, 2000, substantially all of the logistics business and related assets were contributed to a newly-formed, commonly-owned company, Transplace (TPC). The Company presently has an approximate 27% interest in TPC and the financial results of TPC are included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled “equity in earnings (loss) of associated companies.”year ended December 31, 2001. A summary of certain segment information is presented below ((in millions):
|
| Assets |
| ||||
|
| As of March 31 |
| ||||
|
| 2002 |
| 2001 |
| ||
JBT |
| $ | 860 |
| $ | 878 |
|
JBI |
| 185 |
| 124 |
| ||
DCS |
| 188 |
| 148 |
| ||
Other (includes corporate) |
| (12 | ) | 60 |
| ||
Total |
| $ | 1,221 |
| $ | 1,210 |
|
|
|
|
|
|
| ||
|
| Revenues |
| ||||
|
| For The Three Months Ended March 31 |
| ||||
|
| 2002 |
| 2001 |
| ||
JBT |
| $ | 188 |
| $ | 204 |
|
JBI |
| 185 |
| 168 |
| ||
DCS |
| 143 |
| 128 |
| ||
Subtotal |
| 516 |
| 500 |
| ||
Inter-segment eliminations |
| (6 | ) | (5 | ) | ||
Total |
| $ | 510 |
| $ | 495 |
|
|
|
|
|
|
|
8
|
| Operating Income (Loss) |
| ||||
|
| For The Three Months Ended March 31 |
| ||||
|
| 2002 |
| 2001 |
| ||
JBT |
| ($2.2 | ) | ($3.2 | ) | ||
JBI |
| 10.5 |
| 7.3 |
| ||
DCS |
| 5.3 |
| 4.3 |
| ||
Other (includes corporate) |
| — |
| — |
| ||
Total |
| $ | 13.6 |
| $ | 8.4 |
|
|
|
|
|
|
| ||
|
| Depreciation and Amortization Expense |
| ||||
|
| For The Three Months Ended March 31 |
| ||||
|
| 2002 |
| 2001 |
| ||
JBT |
| $ | 18 |
| $ | 18 |
|
JBI |
| 5 |
| 6 |
| ||
DCS |
| 11 |
| 10 |
| ||
Other (includes corporate) |
| 2 |
| 2 |
| ||
Total |
| $ | 36 |
| $ | 36 |
|
8.Reclassifications
We have reclassified certain amounts from our 2001 financial statements so they will be consistent with the way we have classified amounts in millions):2002.
9
|
| Assets |
| ||||
|
| As of September 30 |
| ||||
|
| 2001 |
| 2000 |
| ||
JBT |
| $ | 914 |
| $ | 816 |
|
JBI |
| 160 |
| 108 |
| ||
DCS |
| 167 |
| 128 |
| ||
Other (includes corporate and intersegment eliminations) |
| (3 | ) | 102 |
| ||
Total |
| $ | 1,238 |
| $ | 1,154 |
|
|
| Revenues |
| ||||||||||
|
| Three Months |
| Nine Months |
| ||||||||
|
| Ended September 30 |
| Ended September 30 |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
JBT |
| $ | 210 |
| $ | 208 |
| $ | 625 |
| $ | 615 |
|
JBI |
| 194 |
| 178 |
| 542 |
| 495 |
| ||||
DCS |
| 138 |
| 128 |
| 400 |
| 344 |
| ||||
JBL |
| -- |
| 1 |
| -- |
| 230 |
| ||||
Subtotal |
| 542 |
| 515 |
| 1,567 |
| 1,684 |
| ||||
Inter-segment eliminations |
| (5 | ) | (6 | ) | (13 | ) | (58 | ) | ||||
Total |
| $ | 537 |
| $ | 509 |
| $ | 1,554 |
| $ | 1,626 |
|
|
| Operating Income (Loss) |
| ||||||||||
|
| Three Months |
| Nine Months |
| ||||||||
|
| Ended September 30 |
| Ended September 30 |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
JBT |
| $ | 4.8 |
| ($1.9 | ) | $ | 4.4 |
| ($5.4 | ) | ||
JBI |
| 11.4 |
| 10.3 |
| 28.8 |
| 27.5 |
| ||||
DCS |
| 1.7 |
| 8.0 |
| 10.9 |
| 21.7 |
| ||||
JBL |
| -- |
| .2 |
| -- |
| 7.2 |
| ||||
Other (includes corporate) |
| (5.9 | ) | (.8 | ) | (8.0 | ) | (5.3 | ) | ||||
Total |
| $ | 12.0 |
| $ | 15.8 |
| $ | 36.1 |
| $ | 45.7 |
|
|
| Net Depreciation Expense |
| ||||||||||
|
| Three Months |
| Nine Months |
| ||||||||
|
| Ended September 30 |
| Ended September 30 |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 |
| 2000 |
| ||||
JBT |
| $ | 17.3 |
| $ | 16.8 |
| $ | 52.5 |
| $ | 50.3 |
|
JBI |
| 5.2 |
| 5.8 |
| 16.4 |
| 17.5 |
| ||||
DCS |
| 11.3 |
| 9.6 |
| 31.9 |
| 26.2 |
| ||||
JBL |
| -- |
| (.1 | ) | -- |
| .4 |
| ||||
Other (includes corporate) |
| 2.0 |
| 1.8 |
| 5.8 |
| 4.7 |
| ||||
Total |
| $ | 35.8 |
| $ | 33.9 |
| $ | 106.6 |
| $ | 99.1 |
|
9) Derivative Instruments and Hedging Activities
On January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133), amended by Statement 138. Statement 138 amended the accounting and reporting standards of Statement 133 for certain derivative instruments and hedging activities. Statement 138 also amends Statement 133 for decisions made by the FASB relating to the Derivatives Implementation Group (DIG) process. The FASB DIG is addressing Statement 133 implementation issues the ultimate resolution of which may impact the application of Statement 133.
Under Statement 133, entities are required to record all derivative instruments on the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately.
Adoption of Statement 133, as of January 1, 2001, did not have an effect on results of operations or financial position of the Company, because the Company does not have any free standing derivatives or embedded derivatives that would be required to be separated from the host contract and accounted for under SFAS 133.
10) Reclassifications
Certain amounts for 2000 have been reclassified to conform to the 2001 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, 2001,March 31, 2002, and the related condensed consolidated statements of earnings for the three and nine months ended September 30, 2001 and 2000, and the condensed consolidated statements of cash flows for the nine monthsthree-month periods ended September 30, 2001March 31, 2002 and 2000.2001. These condensed consolidated financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2000,2001, 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 2, 2001,1, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2000,2001, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Our report dated February 1, 2002, contains an explanatory paragraph that refers to a restatement of retained earnings to reflect an increase in insurance claims payable.
& #160; /s/ KPMG LLP
/s/ KPMG LLP |
Tulsa, Oklahoma
OctoberApril 15, 20012002
10
ITEM 2.2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussionYou should be read in conjunction withrefer to the attached interim condensed consolidated financial statements and related notes thereto, and with the Company’s audited consolidated financial statements and notes theretoalso to our annual report (Form 10-K) for the calendar year ended December 31, 20002001 as you read the following discussion. We may make statements in this report and Management’s Discussionin documents we incorporate by reference that reflect our current expectation regarding future results of operations, performance and Analysis of Results of Operations and Financial Condition included in the 2000 Annual Report to Shareholders.
This report contains statements that may be considered as forward-looking or predictions concerning future operations. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.achievements. These “forward-looking” statements are based on management’sour belief or interpretation of information currently available. ShareholdersYou should realize there are many risks and prospective investors are cautioneduncertainties that could cause actual results and experience mayto differ materially from the forward-looking statements as a result of many factors.those described. Among all the factors and events that are not within the Company’sour control and could have a materialsignificant impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions, and competitive rate fluctuations and availability of drivers. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. FinancialOur future financial and operating results of the Company may fluctuate as a result of these and other risk factors as detaileddescribed from time to time in Companyour filings with the Securities and Exchange Commission.
General
We are one of the largest full-load transportation companies in North America. We operate three distinct, but complementary, business segments and provide a wide range of general and specifically tailored freight and logistics services to our customers. We generate revenues primarily from the actual movement of freight from shippers to consignees and from serving as the logistics provider by offering or arranging for others to provide the transportation service. We account for our business on a calendar year basis with our full year ending on December 31 and our quarterly reporting ending on March 31, June 30 and September 30.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared.
The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect:
•the amounts reported for assets and liabilities;
•the disclosure of contingent assets and liabilities at the date of the financial statements; and
•the amounts reported for revenues and expenses during the reporting period.
Therefore, the reported amounts of assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from estimates. Any effects on business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
In preparing financial statements and related disclosures, we must use estimates in determining the economic useful lives of assets, provisions for uncollectible accounts receivable, exposures under self-insurance plans and various other recorded or disclosed amounts. However, we believe that certain accounting policies are of more significance in the financial statement preparation process than others and are discussed below. To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise estimates, earnings will be affected.
11
We purchase insurance coverage for a portion of expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims. Most insurance arrangements include a level of self insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs that are completely insured. The amounts of self insurance change from time to time based on certain measurement dates and policy expiration dates. Our current insurance coverage specifies that the first $5,000 of any claim is self insured and the self insured limit on certain claims is $1.5 million effective January 1, 2002, which is prefunded with our insurance carrier. We are substantially self insured for loss of and damage to our owned and leased revenue equipment. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated ultimate cost of each claim. At March 31, 2002, we had approximately $17 million of estimated net claims payable. In addition, we are required to pay certain advanced deposits and monthly premiums. At March 31, 2002, we had a prepaid insurance asset of approximately $31 million.
We operate a significant number of tractors, trailers and containers in connection with our business. This equipment may be purchased or acquired under capital or operating leases. In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements. Revenue equipment which is purchased is depreciated on the straight-line method over the estimated useful life down to an estimated salvage or trade-in value. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments and amortized on the straight-line method over the lease term or the estimated useful life, which ever is shorter.
We have an arrangement with our primary tractor supplier for fixed residual or trade-in values for certain new equipment acquired since 1999. We have utilized these values in accounting for purchased and leased tractors. If the supplier is unable to perform under the terms of such agreements, it could have a material negative impact on our financial results.
We recognize revenue based on the relative transit time of the freight transported. Accordingly, a portion of the total revenue which will be billed to our customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period.
We operated three segments during the first quarter of 2002. These segments included: Truck (JBT, Intermodal (JBI) and Dedicated Contract Services (DCS). The operation of each of these businesses is described in footnote 10 of our annual report (Form 10-K) for the year ended December 31, 2001.
12
Comparison of Third Quarter 2001 to Third Quarter 2000
SUMMARY
Consolidated operating revenues for the third quarter of 2001 were $537 million, compared with $509 million during the third quarter of 2000. The Company contributed all of its non-asset based logistics business to a jointly owned logistics company, Transplace (TPC), effective July 1, 2000. While the Company’s results of operations include approximately 27% of TPC’s net results of operations, all logistics revenue has been excluded from the Company’s financial statements subsequent to June 30, 2000.
JBT segment revenue grew 1% during the third quarter of 2001, to $210 million, compared with $208 million in 2000. The JBT tractor fleet was 36 units larger at September 30, 2001, compared with September 30, 2000. This increase included independent contractor tractors which the Company began utilizing in late 2000. Revenue per loaded mile in the JBT segment, excluding fuel surcharges, rose 3.4% in the current quarter, compared with the third quarter of 2000. The JBT segment generated operating income of $4.8 million during the third quarter of 2001, compared with a loss of $1.9 million in 2000. The current quarter results represent the second quarter of positive operating income since the Company began reporting the Truck segment separately from Intermodal. The improvement in JBT operating income during the current quarter was partly due to higher revenue per mile, strong September load volume and cost reduction initiatives, such as reduced empty miles per load.
Revenue in the JBI segment rose 9% to $194 million in 2001, compared with $178 million in 2000. Revenue per mile, excluding fuel surcharges, increased 1.1% in 2001, compared with the third quarter of 2000. Operating income in the JBI segment was $11.4 million in 2001, compared with $10.3 million in 2000.
DCS segment revenue increased 8% to $138 million in 2001 from $128 million in 2000. Operating income declined to $1.7 million in 2001 from $8.0 million in 2000. The decrease in operating income during the current quarter was primarily due to lower revenue per tractor, associated with the weak economy, and higher accident, equipment and personnel costs.
Summary of Operating Segments Results
For The Three Months Ended September 30March 31
(dollars in millions)
|
| Gross Revenue |
| Operating Income (loss) |
|
| Operating Revenue |
| Operating Income (loss) |
| ||||||||||||||||||||||
|
| 2001 |
| 2000 |
| % Change |
| 2001 |
| 2000 |
|
| 2002 |
| 2001 |
| % Change |
| 2002 |
| 2001 |
| ||||||||||
JBT |
| $ | 210 |
| $ | 208 |
| 1 | % | $ | 4.8 |
| ($1.9 | ) | $ | 188 | $ | 204 | (8 | %) | $ | (2.2 | ) | $ | (3.2 | ) | ||||||
JBI |
| 194 |
| 178 |
| 9 | % | 11.4 |
| 10.3 |
|
| 185 |
| 168 |
| 10 | % | 10.5 |
| 7.3 |
| ||||||||||
DCS |
| 138 |
| 128 |
| 8 | % | 1.7 |
| 8.0 |
|
| 143 |
| 128 |
| 12 | % | 5.3 |
| 4.3 |
| ||||||||||
JBL |
| -- |
| 1 |
| -- |
| -- |
| .2 |
| |||||||||||||||||||||
Other |
| -- |
| -- |
| -- |
| (5.9 | ) | (.8 | ) | |||||||||||||||||||||
Subtotal |
| 542 |
| 515 |
| 5 | % | 12.0 |
| 15.8 |
|
| 516 |
| 500 |
| 3 | % | 13.6 |
| 8.4 |
| ||||||||||
Inter-segment eliminations |
| (5 | ) | (6 | ) | -- |
| -- |
| -- |
|
| (6 | ) | (5 | ) | — |
| — |
| — |
| ||||||||||
Total |
| $ | 537 |
| $ | 509 |
| 5 | % | $ | 12.0 |
| $ | 15.8 |
|
| $ | 510 |
| $ | 495 |
| 3 | % | $ | 13.6 |
| $ | 8.4 |
|
Our total consolidated operating revenue for the first quarter of 2002 was $510 million, up 3% over the $495 million in the first quarter of 2001. The current quarter’s revenue was reduced by $18.4 million of fuel surcharge revenue due to lower fuel prices. Excluding this reduction in fuel surcharges, total revenue increased 7%.
JBT segment revenue declined 8%, to $188 million for the first quarter of 2002, compared with $204 million in 2001. If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the decline in JBT revenue would have been 4%. This 4% decrease in revenue was primarily a result of an approximate 7% decline in miles per tractor, partly offset by an approximate 3% increase in revenue per loaded mile, exclusive of fuel surcharges. The lower miles per tractor (productivity) was primarily due to relatively soft freight levels during January and the first half of February. While JBT generated an operating loss of $2.2 million for the first quarter of 2002, the comparable loss in 2001 was $3.2 million, which included a $4.1 million gain on the sale of a group of older trailers. This improvement in results was in spite of relatively soft freight levels in 2002. The improved financial results in 2002 were partly due to the higher revenue per loaded mile, reduced empty miles and slightly lower driver pay costs. The higher revenue per mile and reduced empty miles were a result of our focus on yield management, an initiative which began last year.
JBI segment revenue increased 10%, to $185 million during the first quarter of 2002, compared with $168 million in 2001. If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the increase in JBI revenue would have been 14%. The increase in revenue was primarily due to an approximate 6% increase in load volume and a separate 6% increase in revenue per load. The higher revenue per load was a result of changes in freight mix which generated a longer average length of haul. Revenue was also enhanced by an approximate 1.4% increase in revenue per loaded mile. Operating income of the JBI segment was $10.5 million in the first quarter of 2002, compared with $7.3 million in 2001. This increase was primarily due to higher revenue levels and reduced dray cost per load. In addition, operating income benefited from the higher revenue per loaded mile and lower equipment ownership and maintenance expenses.
13
The DCS segment increased revenue 12% during the current quarter, to $143 million, from $128 million in the comparable period of 2001. If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the increase in DCS revenue would have been 15%. This increase in DCS segment revenue was driven by an approximate 13% increase in the average size of the tractor fleet. DCS was also able to improve the utilization of segment assets which increased revenue per tractor in the first quarter of 2002. Operating income rose to $5.3 million in the first quarter of 2002 from $4.3 million in 2001. The 2001 results included a $1.3 million gain on the sale of some older trailers. The improvement in 2002 operating income was partly due to the better utilization of tractors in service and efforts to reduce costs, including driver wages. The improved operating income in 2002 was also in spite of approximately 200 tractors parked during the current quarter.
The following table sets forth items in theour 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 |
| Three Months Ended March 31 | ||||||||||||||
|
| Percentage of |
| Percentage Change |
|
| Percentage of |
| Percentage Change |
| ||||||||
|
| Operating Revenues |
| Between Quarters |
|
| Operating Revenues |
| Between Quarters |
| ||||||||
|
| 2001 |
| 2000 |
| 2001 vs. 2000 |
|
| 2002 |
| 2001 |
| 2002 vs. 2001 |
| ||||
Operating revenues |
| 100.0 | % | 100.0 | % | 5.4 | % |
| 100.0 | % | 100.0 | % | 3.0 | % | ||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Salaries, wages and employee benefits |
| 37.4 | % | 37.5 | % | 5.1 | % |
| 38.4 | % | 39.7 | % | (0.5 | %) | ||||
Rents and purchased transportation |
| 29.8 | % | 27.7 | % | 13.4 | % |
| 30.6 |
| 26.6 |
| 18.4 |
| ||||
Fuel and fuel taxes |
| 10.6 | % | 12.0 | % | (7.5 | %) |
| 9.2 |
| 12.6 |
| (24.6 | ) | ||||
Depreciation and amortization |
| 6.6 | % | 6.6 | % | 5.4 | % |
| 7.1 |
| 7.2 |
| 1.3 |
| ||||
Operating supplies and expenses |
| 7.2 | % | 7.0 | % | 8.9 | % |
| 6.2 |
| 6.9 |
| (7.1 | ) | ||||
Insurance and claims |
| 2.4 | % | 1.9 | % | 36.1 | % |
| 2.1 |
| 2.5 |
| (10.3 | ) | ||||
Operating taxes and licenses |
| 1.6 | % | 1.6 | % | 3.2 | % |
| 1.6 |
| 1.6 |
| (1.0 | ) | ||||
General and administrative expenses, net of gains |
| 1.3 | % | 1.3 | % | 8.8 | % |
| 0.9 |
| (0.1 | ) |
|
| ||||
Communication and utilities |
| 0.9 | % | 1.3 | % | (23.4 | %) |
| 1.2 |
| 1.3 |
| (5.1 | ) | ||||
Total operating expenses |
| 97.8 | % | 96.9 | % | 6.4 | % |
| 97.3 |
| 98.3 |
| 2.0 |
| ||||
Operating income |
| 2.2 | % | 3.1 | % | (24.4 | %) |
| 2.7 |
| 1.7 |
| 62.9 |
| ||||
Interest expense |
| (1.1 | %) | (1.3 | %) | (14.5 | %) |
| (1.3 | ) | (1.3 | ) | 9.1 |
| ||||
Equity in earnings (loss) of associated companies |
| (0.1 | %) | 0.1 | % | -- |
|
| (0.1 | ) | 0.0 |
| — |
| ||||
Earnings before income taxes |
| 1.0 | % | 1.9 | % | (44.0 | %) |
| 1.3 |
| 0.4 |
| 179.6 |
| ||||
Income taxes |
| 0.2 | % | 0.1 | % | 87.2 | % |
| 0.3 |
| 0.1 |
| 138.9 |
| ||||
Net earnings |
| 0.8 | % | 1.8 | % | (50.1 | %) |
| 1.0 | % | 0.3 | % | 195.1 | % |
Total operating expenses forduring the thirdfirst quarter of 20012002 increased 6.4% from2.0% over the comparable period of 2000. The Company’s operating ratio was 97.8% for the third quarter of 2001 and 96.9% in the comparable quarter of 2000. Salaries, wages and employee benefits expenses increased 5.1% during the current quarter, in relative proportion to the rate of revenue growth.2001. Rents and purchased transportation increased 13.4% and rose as a percentage of revenue, partly18.4%, primarily due to the use of independent contractors, trailer rental charges, the growth of intermodalsignificant increase in JBI business andwhich resulted in larger payments to railroads. In addition, payments to Transplace, Inc. (TPI) increased in 2002 as more freight was outsourced to TPC. Fuelour related logistics partner. The 24.6% decrease in fuel and fuel taxes declined 7.5%was due to significantly lower fuel cost per gallon in 2002. As previously mentioned, this lower fuel cost resulted in corresponding decreases in fuel surcharge revenue. The 7.1% decline in operating supplies and decreased as a percentage of revenue,expenses was primarily due to lower diesel fuel prices in 2001. While fuel prices were somewhat lower during the third quarterequipment maintenance costs at outside vendor repair locations. We are moving more of 2001, cost per gallon was still well above levels of the past few years. The Company has fuelour maintenance and revenue adjustment arrangements in place with most of its customers. These programs allow the Companyequipment repair work to recover substantially all of itsour own facilities. Insurance and claims costs declined 10.3%, primarily due to reduced accident frequency. Interest expense increased fuel costs9.1%, partly due to higher interest rates and also results in lower fuel surcharges when fuel expense declines.slightly higher debt levels.
Depreciation and amortization expense increased 5.4%, but remained the same percentage
14
Equity in earnings of revenue in 2001 and 2000. This increase in spending was primarily due to an approximate 5% growthassociated companies reflects our share of the consolidated tractor fleet. The Company commenced a tractor leasing programoperating results for Transplace, Inc. (TPI) and for our Mexican joint venture. Equity in July of 2000 and has acquiredearnings (loss) amounts include the majority of its new tractors through September 30, 2001 utilizing capital leases. Operating supplies and expenses rose 8.9%, reflecting increased spending for tires and maintenance of revenue equipment. Insurance and claims expense was up 36.1% during the current quarter due, in part, to increases in accident frequency and severity. The 8.8% increase in general and administrative expenses was partly a result of higher bad debt costs in the third quarter of 2001. The 23.4% decline in communications and utilities expense was primarily due to certain vendor credits and lower communication rates in effect during the current quarter. The effective income tax rates were approximately 15% in 2001 and 4% in 2000. The effective income tax rate in the third quarter of 2000 was reduced by two sale and leaseback transactions and a change in the expected tax rate for the full year 2000.following:
|
| Three Months Ended March 31 |
| ||||
|
| (000) |
| ||||
|
| 2002 |
| 2001 |
| ||
TPI |
| $ | (450 | ) | $ | (273 | ) |
Mexican joint venture |
| — |
| 439 |
| ||
Total |
| $ | (450 | ) | $ | 166 |
|
As a resultwe had previously announced, we signed an agreement during the fourth quarter of the above, net earnings for the three months ended September 30, 2001 were $4.5 million, or earnings per diluted share of $0.12, compared with $9.1 million, or earnings per diluted share of $0.26, in 2000.
Comparison of Nine Months Ended September 30, 2001 to Nine Months Ended September 30, 2000
SUMMARY
Consolidated operating revenue forsell our joint venture interest in Mexico to the nine months ended September 30, 2001majority owner. This sale was $1.554 billion, compared with $1.626 billionclosed during the first nine monthsquarter of 2000. Operating revenue reflects2002 under the contributionexpected terms and conditions. In accordance with the terms of all the Company’s non-asset based logistics business to the jointly owned logistics company, Transplace (TPC).sale, we recorded a $18.1 million dollar note receivable. The Company’s revenue growth for 2001 was approximately 11%note carries an interest rate of 5%, excluding the former logistics segment. While the Company’s results of operations include approximately 27% of TPC’s net results of operations, all logistics revenue has been excluded from the Company’s financial statements subsequent torequires annual principle payments and matures on June 30, 2000.2005. We do not expect any future significant impact on earnings related to this sale.
For the current nine months, JBT segment revenue grew 2% to $625 million, compared with $615 million in 2000. The JBT tractor fleet averaged 5% larger in 2001, including independent contractors, which the Company began utilizing in late 2000. Revenue per loaded mile in the Truck segment, excluding fuel surcharges, rose 2.5% during the first nine months of 2001, compared with 2000. The JBT segment generated operating income of $4.4 million in 2001, compared with a loss of $5.4 million in 2000. The improvement in JBT operating income during 2001 was partly due to a $4.1 million gain on the sale of trailers, which closed in March. In addition, the increase in revenue per mile (excluding fuel surcharges) and focus on operating efficiencies, such as reducing empty miles per load, enhanced operating income.
Revenue in the JBI segment rose 9% to $542 million in 2001, from $495 million in 2000. Loads in the Intermodal segment grew about 5% for the first nine months of 2001. Revenue per mile, excluding fuel surcharges increased .4% in 2001 over 2000. Operating income in the JBI segment was $28.8 million for the first nine months of 2001, up from $27.5 million in 2000.
DCS segment revenue was $400 million during the first nine months of 2001, up 16% from $344 million in 2000. Operating income in 2001 totaled $10.9 million, compared with $21.7 million in 2000. Current year operating income included a $1.3 million gain on the sale of certain trailers, which closed in March. The decline in 2001 operating income was primarily due to reduced freight demand associated with the slowing U.S. economy, and higher accident, equipment and personnel costs.
Summary of Operating Segments Results
For Nine Months Ended September 30
(dollars in millions)
|
| Gross Revenue |
| Operating Income (loss) |
| ||||||||||
|
| 2001 |
| 2000 |
| % Change |
| 2001 |
| 2000 |
| ||||
JBT | $ | 625 | $ | 615 | 2 | % | $ | 4.4 | ($5.4 | ) | |||||
JBI |
| 542 |
| 495 |
| 9 | % | 28.8 |
| 27.5 |
| ||||
DCS | 400 | 344 | 16 | % | 10.9 | 21.7 | |||||||||
JBL |
| -- |
| 230 |
| -- |
| -- |
| 7.2 |
| ||||
Other |
| -- |
| -- |
| -- |
| (8.0 | ) | (5.3 | ) | ||||
Subtotal |
| 1,567 |
| 1,684 |
| (7 | %) | 36.1 |
| 45.7 |
| ||||
Inter-segment eliminations |
| (13 | ) | (58 | ) | -- |
| -- |
| -- |
| ||||
Total |
| $ | 1,554 |
| $ | 1,626 |
| (4% | ) | $ | 36.1 |
| $ | 45.7 |
|
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.
|
| Nine Months Ended September 30 |
| ||||||
|
| Percentage of |
| Percentage Change |
| ||||
|
| Operating Revenues |
| Between Periods |
| ||||
|
| 2001 |
| 2000 |
| 2001 vs. 2000 |
| ||
Operating revenues |
| 100.0 | % | 100.0 | % | (4.5 | %) | ||
Operating expenses |
|
|
|
|
|
|
| ||
Salaries, wages and employee benefits |
| 38.2 | % | 35.1 | % | 4.1 | % | ||
Rents and purchased transportation |
| 28.1 | % | 33.5 | % | (19.9 | %) | ||
Fuel and fuel taxes |
| 11.4 | % | 10.8 | % | 0.9 | % | ||
Depreciation and amortization |
| 6.9 | % | 6.1 | % | 7.6 | % | ||
Operating supplies and expenses |
| 7.0 | % | 6.0 | % | 12.4 | % | ||
Insurance and claims |
| 2.4 | % | 1.8 | % | 30.2 | % | ||
Operating taxes and licenses |
| 1.6 | % | 1.5 | % | 2.7 | % | ||
General and administrative expenses, net of gains |
| 0.9 | % | 1.3 | % | (36.8 | %) | ||
Communication and utilities |
| 1.2 | % | 1.1 | % | (0.4 | %) | ||
Total operating expenses |
| 97.7 | % | 97.2 | % | (4.0 | %) | ||
Operating income |
| 2.3 | % | 2.8 | % | (21.0 | %) | ||
Interest expense |
| (1.2 | %) | (1.2 | %) | (8.4 | %) | ||
Equity in earnings (loss) of associated companies |
| 0.0 | % | 0.2 | % | -- |
| ||
Earnings before income taxes |
| 1.1 | % | 1.8 | % | (41.4 | %) | ||
Income taxes |
| 0.2 | % | 0.3 | % | (41.4 | %) | ||
Net earnings |
| 0.9 | % | 1.5 | % | (41.4 | %) | ||
Total operating expenses for the first nine months of 2001 decreased 4.0% from the comparable period of 2000. This decrease was impacted by the contribution of the logistics business to TPC, effective July 1, 2000. The Company’s operating ratio was 97.7% for the first nine months of 2001 and 97.2% in the comparable period of 2000. Salaries, wages and employee benefits increased 4.1% during the current year due, in part, to higher workers’ compensation expenses. The contribution of the logistics business to TPC also significantly decreased 2001 revenue, resulting in an increase of this cost category as a percentage of revenue. Rents and purchased transportation decreased 19.9% and declined significantly as a percentage of revenue, primarily due to the contribution of the logistics business to TPC. Fuel and fuel taxes increased .9%, primarily due to an increase in tractor miles, partly offset by a slight decrease in fuel cost per gallon during 2001.
Depreciation and amortization expense increased 7.6% during the current year, due primarily to an approximate 5% increase in the Company owned tractor fleet. The Company commenced a tractor leasing program in July of 2000 and has acquired the majority of its new tractors since that time utilizing capital leases. Operating supplies and expenses increased 12.4%, primarily due to a 4% increase in tractor miles and higher tractor and trailing equipment maintenance and tire costs. A portion of the higher tractor repair costs was due to more work being outsourced to outside vendors and was partly offset by lower mechanic wage expense. Insurance and claims costs rose 30.2%, primarily due to higher accident and collision expenses. General and administrative expenses declined 36.8%, partly due to an approximate $5.5 million gain on the sale of a group of trailers which closed during March of 2001. This expense category was also reduced in 2001 by charges to TPC for computer system and support work and other administrative services. The effective income tax rates were 15% in 2001 and 2000, which were the rates expected for the full year 2001 and 2000, respectively.
As a result of the above, net earnings for the nine months ended September 30, 2001 were $14.8 million, or earnings per diluted share of $0.41, compared with $25.2 million, or $0.71 per diluted share, in 2000.
Liquidity and Capital Resources
This discussionCash Flow
We typically generate significant amounts 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.
cash from operating activities. Net cash provided by operating activities was $121.3 million for the nine months ended September 30, 2001, compared with $96.7totaled $3.7 million during the comparablefirst quarter of 2002, compared with $27.2 million in the same period of 2000.2001. This increasedecrease in cash provided was partly dueprimarily a result of high levels of funding for accounts payable. Payments totaling approximately $37.4 million were made during the first quarter of 2002 in connection with our insurance coverage. Net cash used in investing activities was $54.5 million in 2002, compared with $12.5 million of net cash provided in 2001. The primary reasons for this category netting to a significant decline in other current assets inpositive cash provided amount during the first quarter of 2001 was the sale of some older trailers and a significant amount of fundsdecision we made to utilize capital and operating leases to acquire new tractors. During the current quarter we have been, once again, purchasing new tractors and containers, which results in additional cash used for accounts payable in 2000. The decrease in other current assets reflects the amortization in 2001 of an insurance premium which was paid in December of 2000.investing activities. Net cash provided from financing activities totaled $14.0 million in 2002, while it netted to a use of $25.6$25.9 million was generated from investing activities in 2001, compared with $103.6 million used in 2000.2001. This change was primarily a result of reduced financing activity in 2001, related to fewer purchases of trailing equipment and the sale of certain trailing equipment in March of 2001. The majority of new trailing equipment additions since late 2000 have been under operating lease arrangements. Current plans are to continue utilizing operating leases for future trailing equipment acquisitions.revenue equipment.
15
Selected Balance Sheet Data
|
|
|
| As of |
|
|
|
| As of |
| ||||||||||
|
| September 30, 2001 |
| December 31, 2000 |
| September 30, 2000 |
|
| March 31, 2002 |
| December 31, 2001 |
| March 31, 2001 |
| ||||||
Working capital ratio |
| 1.48 |
| 1.02 |
| 1.17 |
|
| 1.44 |
| 1.45 |
| 1.14 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current maturities of long-term debt and current installations of obligations under capital leases (millions) |
| $ | 41 |
| $ | 101 |
| $ | 64 |
|
| $ | 62 |
| $ | 38 |
| $ | 83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total debt and obligations under capital leases (millions) |
| $ | 401 |
| $ | 401 |
| $ | 364 |
|
| $ | 408 |
| $ | 392 |
| $ | 401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total debt to equity |
| .89 |
| .94 |
| .87 |
|
| .86 |
| .86 |
| .93 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total debt as a percentage of total capital |
| .47 |
| .48 |
| .47 |
|
| .46 |
| .46 |
| .48 |
|
The Company’s total debt level, including capitalized lease obligations, was $401 million at September 30, 2001, approximatelyOur need for capital typically has resulted from the same level as of December 31, 2000. However, cash and cash equivalents totaled $63 million at September 30, 2001, compared with $5 million at December 31, 2000. As of September 30, 2001, the Company had intentions to acquire or lease approximately $140 million of revenue and service equipment during the next twelve month period. Funding for future acquisitionsacquisition of revenue equipment is expected to come fromsupport growth and the replacement of older tractors and trailing equipment with new, late model equipment. We are frequently able to accelerate or postpone some equipment replacements depending on market conditions. In the past we have obtained capital through public stock offerings, debt financing, revolving lines of credit and cash generated from operations, existing borrowing facilitiesoperations. We have also utilized capital and rentaloperating leases to acquire revenue equipment.
Net capital expenditures approximated $28 million during calendar year 2001 and $42 million during the first quarter of 2002. We made a decision to start purchasing new tractors and containers rather than utilizing capital leases effective in October of 2001, which resulted in higher levels of capital spending. We currently expect to spend in the range of $150 million, net of expected proceeds from sale or leasing arrangements. The Company discontinued its commercial paper program in early 2001. The Company istrade-in allowances, on revenue equipment for the full calendar year of 2002.
We are authorized to borrow up to $150$165 million under itsour current revolving lines of credit. These linesline of credit are supported by a credit agreement with a number of banks, which expires December 14, 2001. The Company plans to renew these linesand had $23 million outstanding on this line at March 31, 2002. We believe that our liquid assets, cash generated from operations and revolving line of credit duringwill provide sufficient funds for our operating and capital requirements for the fourth quarter of 2001.foreseeable future. In the event that our need for capital would change, we may also consider other alternatives for longer-run additional capital.
|
| Contractual Cash Obligations |
|
| ||||||||||||||
|
| As of March 31, 2002 |
|
| ||||||||||||||
|
| (000) |
|
| ||||||||||||||
|
| Amounts Due by Period |
|
| ||||||||||||||
|
|
|
| Less Than |
| One To |
| Four To |
| After |
| |||||||
|
| Total |
| One Year |
| Three Years |
| Five Years |
| Five Years |
| |||||||
Operating leases | $ | 289,453 | $ | 67,965 | $ | 95,250 | $ | 86,431 | $ | 39,807 | ||||||||
Capital leases |
| 69,894 |
| 38,514 |
| 31,380 |
| — |
| — |
| |||||||
Senior and subordinated notes payable |
| 246,260 |
| 10,000 |
| 236,260 |
| — |
| — |
| |||||||
Subtotal |
| $ | 605,607 |
| 116,479 |
| $ | 362,890 |
| $ | 86,431 |
| $ | 39,807 |
| |||
Commitments to acquire revenue equipment |
| 85,000 |
| 85,000 |
| — |
| — |
| — |
| |||||||
Total |
| $ | 690,607 |
| $ | 201,479 |
| $ | 362,890 |
| $ | 86,431 |
| $ | 39,807 |
| ||
16
|
| Financing Commitments |
| ||||||||||
|
| As of March 31, 2002 |
| ||||||||||
|
| (000) |
| ||||||||||
|
| Commitments Expiring By Period |
| ||||||||||
|
|
|
| Less Than |
| One To |
| Four To |
| After |
| ||
|
| Total |
| One Year |
| Three Years |
| Five Years |
| Five Years |
| ||
Revolving credit arrangements |
| $ | 165,000 |
| $ | 165,000 |
| — |
| — |
| — |
|
Standby letters of credit |
| 26,760 |
| 26,760 |
| — |
| — |
| — |
| ||
Total |
| $ | 191,760 |
| $ | 191,760 |
| — |
| — |
| — |
|
ProspectiveRecent Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (Statement 141), Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (Statement 142), and Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (Statement 143). In October, 2001 the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (Statement 144).
Statement 141 requiresrequired that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 142 will requirerequired that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. The Company isWe were required to adopt the provisions of Statement 141 immediately, and Statement 142 effective January 1, 2002. Goodwill acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Statement 143 is effective for fiscal years beginning after June 15, 2002. The Company is currently assessing the impact of Statement 143 on its financial condition and results of operations. Statement 144 retainsretained the requirement to report separately discontinued operations and extendsextended that reporting to a component of an entity that either has been disposed of or is classified as held for sale. Statement 144 iswas effective for fiscal years beginning after December 15, 2001, and for interim periods within those fiscal years.
The Company hasWe have adopted Statements 141, 142, and 144 effective January 1, 2002. We have no goodwill or intangible assets as of September 30, 2001March 31, 2002, and accordingly, does not believe the adoption of these Statements 141 and 142 willhad no impact the Company’son our financial statements.
Under the provisions of Statement 142 impairment of the Company’s equity method of investment will continue to be assessed under the provisions of APB 18. The Company has no negative goodwill as contemplated under Statements 141 and 142 related to its equity method investments.
Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Statement 143 is effective for fiscal years beginning after June 15, 2002. Statement 144 retains the requirement to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. Statement 144 is effective for fiscal years beginning after December 15, 2001, and for interim periods within those fiscal years. The Company is We are currently assessing the impact of StatementsStatement 143 and 144 on itsour financial condition and results of operations.
17
ITEM 3.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’sOur earnings are affected by changes in short-term interest rates as a result of itsour use of short-term revolving lines of credit. The CompanyWe from time to time utilizesutilize interest rate swaps to mitigate the effects of interest rate changes; none were outstanding at September 30, 2001.March 31, 2002. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more during the next twelve months, there would be no material adverse impact on the Company’sour results of operations based on variable rate debt outstanding at September 30, 2001.March 31, 2002. At September 30, 2001,March 31, 2002, the fair value of the Company’sour fixed rate long-term obligations approximated carrying value.
Although the Company conductswe conduct business in foreign countries, international operations are not material to the Company’sour consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material to the Company’sour results of operations for the three and nine months ended September 30, 2001.March 31, 2002. Accordingly, the Company iswe are 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’sour future costs or on future cash flows itwe would receive from its foreign investment. To date, the Company haswe have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuation in foreign currency exchange rates.
OTHER INFORMATION
Item 1. Legal Proceedings
None applicable.
Item 2. Changes in Securities
None applicable.
Item 3. Defaults Upon Senior Securities
None applicable.
Item 4.4. Submission of Matters to a Vote of Security Holders
None applicable.Our annual meeting of stockholders was held on April 25, 2002. 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 four Class I Directors for a term of three years each. |
| 33,092,699 |
| 0 |
| 104,997 |
|
|
|
|
|
|
|
|
|
|
2. | To ratify the appointment of KPMG LLP as our principal independent public accountants for the next fiscal year. |
| 32,750,897 |
| 439,580 |
| 7,219 |
|
There was no solicitation in opposition to our 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 5.5.Other information
None applicable.
Item 6.6. Exhibits and Reports on Form 8-K
(a)Exhibits
Exhibit 10 — Amended and Restated Management Incentive Plan filed as Exhibit Form S-8 on May 9, 2002, which is herein incorporated by reference.
Exhibit 15 –— Awareness letter related to Independent Accountants’ Review Report.
18
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| J.B. HUNT TRANSPORT SERVICES, INC. | |||
|
|
|
| ||
DATE: | May 10, 2002 |
| BY: | /s/ Kirk Thompson | |
|
| ||||
|
|
|
| ||
|
|
| Kirk Thompson | ||
|
|
| President and | ||
|
|
| Chief Executive Officer | ||
|
|
|
| ||
| |||||
DATE: |
|
| BY: | /s/ Jerry W. Walton | |
|
|
| Jerry W. Walton | ||
|
|
| Executive Vice President, Finance | ||
|
|
| and Chief Financial Officer | ||
|
|
|
| ||
| |||||
DATE: |
|
| BY: | /s/ Donald G. Cope | |
|
|
| Donald G. Cope | ||
|
|
| Senior Vice President, Controller | ||
|
|
| and Chief Accounting Officer | ||
19