UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

 

FORM 10-K/A

AMENDMENT NO. 2 TO ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

Commission file number 0-11757


For the year ended

 

Commission file number

December 31, 2002

0-11757

 

J.B. HUNT TRANSPORT SERVICES, INC.

(Exact name of registrant as specified in its charter)EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

Arkansas

 

71-0335111

(State or other jurisdiction of

Incorporation or organization)STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)

 

(I.R.S. Employer

Identification No.EMPLOYER
IDENTIFICATION NO.)

 

 

 

615 J.B. Hunt Corporate Drive Lowell, Arkansas

 

72745

Lowell, Arkansas(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 

(Zip Code)ZIP CODE)

(Address of principal executive offices)

 

 

Registrant’s telephone number, including area code:

(479) 820-0000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 Par Value

 

(479) 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   ý

 

NO    o



 

Explanatory NoteINDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K.     o

 

        This Amendment No. 2 to the Annual Report on Form 10-K for the year ended December 31, 2001 is being filed primarily: (i) to correct mathematical errors in the table of Operating Segment information contained in Item 7, Management’s Discussion and Analysis of Operations and Financial Condition, comparing the years ended 2001 with 2000; (ii) to correct mathematical errors in the table of Contractual Cash Obligations contained in the Liquidity section of Item 7; and (iii) to correct certain other errors related to the rounding of statistical data contained in the discussion portions of Item 7. These corrections had no impact on and do not reflect changes in the consolidated balance sheets, statements of earnings, stockholders’ equity and cash flows as of and for the years ended December 31, 2001, 2000 and 1999.INDICATED BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12b-2).

YES   ý

NO    o

THE AGGREGATE MARKET VALUE OF 27,493,354 SHARES OF THE REGISTRANT’S $.01 PAR VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY 28, 2003 WAS $674,686,907 (BASED UPON $24.54 PER SHARE BEING THE CLOSING SALE PRICE ON THAT DATE, AS REPORTED BY NASDAQ). IN MAKING THIS CALCULATION, THE ISSUER HAS ASSUMED, WITHOUT ADMITTING FOR ANY PURPOSE, THAT ALL EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT, AND NO OTHER PERSONS, ARE AFFILIATES.

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK, AS OF FEBRUARY 28, 2003:   39,352,835.

 

DOCUMENTS INCORPORATED BY REFERENCE

CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING OF THE STOCKHOLDERS, TO BE HELD APRIL 24, 2003, ARE INCORPORATED BY REFERENCE INTO PART III OF THIS FORM 10-K.



J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-K

For The Calendar Year Ended December 31, 2002

Table of Contents

PART I

Item 1.

Business

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Submission of Matters to a Vote of Security Holders

PART II

Item 5.

Market for Registrant’s Common Stock and Related Security Holder Matters

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Item 7a.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Disagreements on Accounting and Financial Disclosure

PART III

Item 10.

Directors and Executive Officers of Registrant

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management

2



Item 13.

Certain Relationships and Related Transactions

Item 14.

Controls and Procedures

Item 15.

Exhibits, Financial Statement Schedules and Reports on Form 8-K

Signatures

3



PART I

 

ITEM 1.   BUSINESS

 

GENERAL

 

J.B. Hunt Transport Services, Inc., together with its wholly-owned subsidiaries (“JBHT” or the “Company”), is a diversified transportation services company operating under the jurisdiction of the U.S. Department of Transportation (DOT) and various state regulatory agencies.  JBHT is an Arkansas holding company incorporated on August 10, 1961.  JBHT has been a publicly held company since our initial public offering in 1983.  Through itsour subsidiaries and associated companies, JBHT provideswe provide a wide range of logistics and transportation services to a diverse group of customers.  The CompanyWe directly managesmanage or providesprovide tailored, technology-driven solutions to a growing list of Fortune 500 companies.  These customers may request specifically targeted transportation service or outsource their entire transportation function to JBHT,us, or an associated company.  The CompanyWe also directly transportstransport full-load containerizable freight throughout the continental United States and portions of Canada and Mexico.  Transportation services may utilize JBHTour equipment and employees, or may employ equipment and services provided by associated or unrelated third parties in the transportation industry.  The CompanyWe had three reportable business segments during calendar year 2001.2002.  These segments includedinclude full truck-load, dry-van truck only (JBT), intermodal (JBI) and dedicated contract services (DCS).  In addition, JBHTwe operated a logistics business segment from 1992 until mid 2000.  Effective July 1, 2000, the Company,JBHT, along with fourfive other large publicly-held transportation companies, contributed itsour logistics business to a new, commonly owned company, Transplace, Inc.

 

JBT SEGMENT

 

Primary transportation service offerings classified in this segment include full truck-load, dry-van freight which is predominantly transported utilizing company-owned revenue equipment.  Freight is picked up at the dock or specified location of the shipper and transported directly to the location of the consignee.  The load may be transported entirely by company-owned and controlledour power equipment or a portion of the movement may be handled by a third-party motor carrier. Typically, the charges for the entire movement are billed to the customer by the Companyus and the Company,we, in turn, payspay the third-party for their portion of the transportation services provided.  JBT operates utilizing certain Canadian authorities which were initially granted in 1988 and may transport freight to and from all points in the continental United States to Quebec, British Columbia and Ontario.  The Company hasWe have authorization to operate directly in all the Canadian provinces, but to date haswe have served limited points in Canada, primarily through interchange operations with Canadian motor carriers.  The CompanyWe operated itsour JBT and JBI segments in combined fashion in periods prior to January 1, 2000.  This combined operation was reported as Van/Intermodal (“Van”) in prior periods.  In late 2000, the  Companywe began utilizing independent contractors on a limited basis in the JBT segment.  These independent contractors (I/C’s) provide their own their tractors and agree to transport freight in CompanyJBHT owned or controlled trailing equipment.  At December 31, 2001,2002, approximately 340680 I/C’s were operating in the JBT segment.  JBT gross revenue for calendar year 20012002 was $829$827 million, compared with $834$829 million in 2000.2001.  At December 31, 2001,2002, the JBT segment operated approximately 5,3804,924 company owned tractors and employed 8,2707,573 people, 6,3735,541 of whom were drivers.

 

JBI SEGMENT

 

Transportation service offerings of theour JBI segment utilize agreements with various railroads to provide proven intermodal freight solutions to JBIour customers in all major lanes of commerce in the United States, Canada, and Mexico.  The Company differentiates itselfWe differentiate ourselves from others through itsour premium service network, as well as, coordinated door to door service on company-owned and controlled assets.  The CompanyWe established itsour first intermodal agreement with the Santa Fe Railway in 1989.  Through growth of this transportation segment and additions, deletions, and mergers of rail carriers, the Companywe now hashave agreements with seven North American rail carriers including:  BNSF, Norfolk Southern, CSX, Kansas City Southern, Union Pacific, Canadian National, and Florida East Coast railroads.  Typically, freight is picked up at the dock or specified location of the shipper and transported to the rail carrier for loading on to rail cars.  Upon completion of the rail routing, the freight is picked up at the rail carrier’s ramp and transported to the consignee.  These originating and destination drays may be transported entirely by company-owned and controlledour power equipment or may be handled by a third-party motor carrier.  It is the Company’sour customary business practice that all charges for the entire movement are billed to the customer by the Companyus and the Company,we, in turn, payspay the rail carrier and third-party motor carrier for their portion of the transportation services provided.  In 1993, rail operations were expanded to utilize high-cube containers which can be separated from the chassis and double-stacked on rail cars to provide improved productivity.  This concept is known as container-on-flatcar (COFC).  Thecontainer-on-flatcar.  Most of our agreements the Company has with its rail carriers allow for the majority of JBI business carried under these rail agreements to receive priority space on trains and preferential loading and

2



unloading at rail facilities.  JBI gross revenue for calendar year 20012002 was $740$809 million, compared with $681$740 million in  2000.

4



2001.  At December 31, 2001,2002, the JBI segment operated approximately 910917 tractors and employed 1,6081,557 people, 1,2881,215 of whom were drivers.

 

DCS SEGMENT

 

Since 1992, JBHT haswe have offered dedicated contract carriage as a service option.  DCS segment operations specialize in the design, development, and execution of supply chain solutions.  Capitalizing on advanced systems and technologies, DCS offers engineered transportation solutions that support private fleet conversion, dedicated fleet creation, and transportation system augmentation.  DCS operations typically provide customized services that are governed by long-term contracts and currently include dry van, flatbed, and temperature-controlled operations.  Near 100% on-time service is standard with efficient routes executed to design specifications.

 

DCS operations focus on driving out cost and enhancing customer value through leveraging the JBHT network for backhaul repositioning freight.  Network freight may be used to reposition equipment near outbound domiciles,  thereby reducing inefficient empty miles and system cost.  DCS also frequently finds synergy in shared resources with the JBT and JBI segments including terminals, drivers, maintenance shops, bulk fuel locations, and trailer pools providing further economies of scale.  DCS gross revenue for calendar year 20012002 was $549$628 million, compared with $479$549 million in 2000.2001.  At December 31, 2001,2002, the DCS segment operated approximately 4,4804,812 tractors and employed 5,3835,989 people, 4,6335,273 of whom were drivers.

 

LOGISTICS BUSINESS AND ASSOCIATED COMPANY

 

        The CompanyWe formally began offering logistics transportation services in 1992 through a wholly-owned subsidiary, J.B. Hunt Logistics (JBL).  JBL services frequently included an arrangement whereby a shipper might outsource a substantial portion of its entire distribution and transportation process to one organization.  The JBL segment business included a wide range of comprehensive transportation and management services including experienced professional managers, information and optimization technology, and the actual design or redesign of system solutions.  A new logistics customer or service arrangement may have required a significant amount of up-front analysis and design time, while alternatives were considered and custom systems and software were developed.  Effective July 1, 2000, the Companywe contributed substantially all of itsour JBL segment business, all related intangible assets and $5 million of cash to a newly-formed, commonly-owned company, Transplace, Inc. (“TPC”TPI”).

 

        TPCTPI is an Internet-based global transportation logistics company.  TPCTPI commenced operations in July of 2000 and initially included substantially all of the logistics business of the Company,JBHT, Covenant Transport, Inc.; Swift Transportation Co., Inc; U.S. Xpress Enterprises, Inc.,; and Werner Enterprises, Inc.  TPCTPI gross revenue for calendar year 20012002 approximated $702$672 million, which revenue is not included in the Company’sour financial statements for 2001.  The Company presently has2002.  We initially had an approximate 27% ownership interest in TPCTPI.  In November of 2002, we agreed to purchase a portion of Werner Enterprises’ (Werner) ownership interest in TPI.  Effective January 1, 2003, our interest in TPI increased from 27% to 37% and accordingly, utilizes the equity method of accounting.Werner’s interest declined from 15% to 5%.  The financial results of TPCTPI are included on a one-line, non-operating item included on theour Consolidated Statements of Earnings entitled “equity“Equity in earnings (loss) of associated companies.”

 

ASSOCIATED COMPANY - MEXICO

 

        The Company hasWe have provided transportation services to and from Mexico since 1989.  These services frequently involve equipment interchange operations with various Mexican motor carriers.  AIn addition, a joint venture agreement with Transportacion Maritima Mexicana (TMM), one of the largest transportation companies in Mexico, was signed in 1992.  The joint venture, Comercializadora Internacional de Carga St.S.A. de CVC.V. and its subsidiaries, originateoriginated and completecompleted northbound and southbound international truck movements between the U.S. and Mexico.  The joint venture also providesprovided Mexican domestic irregular route truck service, refrigerated freight services, Mexican dedicated contract business and short-haul drayage to and from the Mexican maritime ports and rail heads.  For the calendar year ended December 31, 2001 and for prior years, the Company’sour share of itsthe Mexican joint venture operating results werewas included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled “equity“Equity in earnings (loss) of associated companies.  The Company anticipatesDuring the first quarter of 2002, we sold our joint venture interest in Mexico to TMM.  We still provide transportation services to and from Mexico by utilizing the services of a salevariety of its interest, which is expected to be consummated in early 2002.Mexican carriers.

 

35



 

MARKETING AND OPERATIONS

 

        JBHT transportsWe transport a wide range of products including automotive parts, department store merchandise, paper and wood products, food and beverages, plastics, chemicals and manufacturing materials and supplies.  The Company’sOur primary customers include many of the “Fortune 500” companies.  The Company'sOur largest customer in 20012002 was Wal-Mart Stores, Inc., which accounted for approximately 16%18% of total revenue.  A broad geographic dispersion and a good balance in the type of freight transported allows JBHTus some protection from major seasonal fluctuations.  However, consistent with the truckload industry in general, freight is typically stronger during the second half of the year, with peak volume occurring in August through mid November.  Revenue and earnings are also affected by bad weather, holidays, fuel prices, driver cost and availability, and railroad service levels.

 

        The CompanyWe generally marketsmarket all of itsour service offerings through a nationwide marketing network.  All transportation services offered are typically billed directly to the customer by JBHTus and all inquiries, claims and other customer contacts are handled by the Company.us.  Certain marketing, sales, engineering and design functions are assigned to each operating segment.  However, marketing and pricing strategy, and national account service coordination is managed at the corporate level.

 

PERSONNEL

 

At December 31, 2001, JBHT2002, we employed approximately 16,38016,265 people, including 12,29412,029 drivers.  Historically the truckload transportation industry and the CompanyJBHT have experienced shortages of qualified drivers.  In addition, driver turnover rates for truckload motor carriers frequently exceed 100%.  During the past few years a number of changes have occurred within the industry relative to drivers.  In September of 1996, JBHTwe announced a new compensation program for theand implemented an approximate 3,500 over-the-road JBT drivers at that time.  This comprehensive package, which was effective in February of 1997, included an average 33% increase in wages for this group of employees.  This program was designed to attract and retain a professional and experienced work force capable of delivering a high level of customer service.our over-the-road drivers.  As anticipated, this increase in driver wages and benefitscompensation was partially offset by lower driver recruiting and training expense, reduced accident and safety costs and better equipment utilization.  Primarily due to the over-the-road (OTR) driver pay changeWe also experienced a decline in 1997, average driver turnover rates declined from approximately 85% in 1996 to the 45% to 50% range duringbetween 1997 throughand 1999.  During late 2000 and 2001, supply and demand conditions for drivers changed and a number of truck load carriers, including the Company,JBHT, implemented lower mileage pay rates for newly hired drivers.  Partly as a result of this reduced compensation level for drivers, the Company’sour driver turnover rate was approximately 70% inincreased during 2000 and over 100%has remained at historically high levels in 2001.2001 and 2002.  During calendar year 2002, we have once again experienced some difficulty attracting and retaining a desired level of drivers.  To date, we continue to hire only experienced drivers and, although recruiting costs have increased significantly, operations have not been disrupted by a shortage of qualified drivers.  At December 31, 2001 JBHT2002, we also employed approximately 3,0903,100 office employees and 1,0001,137 mechanics.  NoNone of our employees are represented by collective bargaining agreements.

 

REVENUE EQUIPMENT

 

At December 31, 2001, JBHT2002, we owned or leased approximately 10,77010,653 company operated tractors, 25,58026,087 trailers and 18,74019,672 containers.  JBHT believesWe believe that modern, late-model, clean equipment differentiates quality customer service, increases equipment utilization and reduces maintenance costs and downtime.  The CompanyWe generally operatesoperate with newer revenue equipment in the JBT segment, with the age of tractors and trailers approximating 1.52.1 years and 22.2 years, respectively, at December 31, 2001.  Slightly2002.  Somewhat older equipment and tractors designed for local and regional operations are typically utilized in the JBI and DCS segments.  Specially designed high-cube containers which can be separated from the chassis and double-stacked on rail cars are also operated by JBI.  The average age of JBI tractors and containers at December 31, 20012002 was approximately 3.54.6 years and 6.55.2 years, respectively.  The JBI segment commenced receiving brand new containers and reconditioned chassis in late 20012001.  Approximately 6,300 new containers and plans to receive approximately 6,0006,300 new containersand reconditioned chassis were placed in service during 2002.  The composition of the dedicated contract fleet varies with specific customer service requirements.  At December 31, 2002, the average age of DCS segment tractors was 2.8 years.  In November of 2002, we committed to purchase approximately 2,100 new tractors, the majority of which will be traded one-for-one for units in the JBI and DCS fleets.  These trades will significantly reduce the average age of these tractor fleets.  All JBHTof our revenue equipment is maintained in accordance with a specific maintenance program primarily based on age and/or miles traveled.

 

COMPETITION

 

        JBHT isWe are one of the largest publicly held truckload carriers in the United States. It competesWe compete primarily with other irregular route, truckload common carriers. Less-than-truckload common carriers and private carriers generally provide limited competition for truckload carriers.  JBHT and itsour associated companies are one of a few carriers offering nationwide logistics management and dedicated revenue equipment services. Although a number of carriers may provide competition on a regional basis, only a limited number of companies represent competition in all markets. The extensive rail network developed in conjunction with the various railroads also allows the Companyus the opportunity to differentiate itsour services in the marketplace.

 

46



 

REGULATION

 

        The Company’sOur operations as a for-hire carrier are subject to regulation by the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) and by various Canadian provinces.  Entry controlledcontrol barriers were substantially removed as a result of federal deregulation statutes such as the Interstate Commerce Commission Termination Act of 1995 (ICCTA).   The FMCSA continues to enforce safety regulations and has proposed new rules which, if approved in their present form, would limit driver’s hours of service.  President Bush is considering implementation of provisions of the North America Free Trade Agreement (NAFTA), which may result in increased competition between U.S. and Mexican carriers for truckload services moving between these two countries.  The Clean Air Act of 1990 established tighter pollution standards for emissions from automobiles and trucks.  These new standards were effective on a phased in basis beginning with model year 1994.  UnderAs part of a 1998 consent decree with the current rules, additional standards are effective inU.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines produced subsequent to October 1, 2002.  JBHT and a number of 2002.  The impact of theseother truckload motor carriers believe the new rules on the Company hasengines have not yet been determined.sufficiently tested for fuel economy and reliability.  While we continue to test a limited number of the new EPA compliant engines, we committed in November of 2002 to purchase approximately 2,100 new tractors, the majority of which will be equipped with Mercedes engines, which are not covered by the EPA’s October 1, 2002 rules.

INTERNET WEB SITE

We maintain a web site on the Internet through which additional information about JBHT is available.  Our web site address is www.jbhunt.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, press releases, earnings releases and other reports filed pursuant to Section 13 or 15 (d) of the Exchange Act are available, free of charge, on our website as soon as practical after they are filed.

SEC FILINGS

We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (SEC).  Our reports and any materials we file with the SEC are available at the Public Reference Room, located at 450 Fifth Street, N.W., Washington, D.C.  20549.  Information may be obtained from the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The Company believes it has responded effectively toSEC also maintains a web site at www.sec.gov that contains information we file with the marketplace changes caused by increased domestic competition and that it can effectively respond to any foreseeable changesagency.  Our common stock is traded in FMCSA regulations or NAFTA implementation.the over-the-counter market under the symbol “JBHT.”

 

ITEM 2.   PROPERTIES

 

        The Company’sOur corporate headquarters are in Lowell, Arkansas. A 150,000-square-foot building was constructed and occupied in September 1990.  The CompanyWe also utilizes itsutilize our former corporate building as general offices.  In 1999, a new 20,000 square foot building was constructed and occupied near the corporate headquarters.  A portion of this leased facility serves as a backup data center and provides disaster recovery support services. An additional 20,000 square foot building consisting of general office space for Corporateour corporate employees was completed and occupied in 2000. This building is located next to the data center building and is a leased facility.

 

Principal outside facilities consist primarily of general offices which support operational, safety and maintenance functions.  In addition to the principal facilities listed below, the Company leaseswe lease numerous small offices and trailer parking yards in various locations throughout the countycountry to support customer trailing equipment pool commitments.

 

7



A summary of the Company’sour principal facilities follows:

 

 

 

 

Maintenance Shop

 

Office Space

Location

 

Acreage

 

(square feet)

 

(square feet)

Atlanta, Georgia

 

30

 

29,800

 

10,400

Chicago, Illinois

 

27

 

50,000

 

14,000

Dallas, Texas

 

14

 

24,000

 

7,800

Detroit, Michigan

 

27

 

44,300

 

10,800

East Brunswick, New Jersey

 

20

 

20,000

 

7,800

Houston, Texas

 

13

 

24,700

 

7,200

Kansas City, Missouri

 

10

 

31,000

 

6,700

Little Rock, Arkansas

 

24

 

29,200

 

7,200

Louisville, Kentucky

 

14

 

40,000

 

10,000

Lowell, Arkansas (corporate headquarters)

 

25

 

 

150,000

Lowell, Arkansas

 

40

 

50,200

 

14,000

Lowell, Arkansas (office and data center)

 

2

 

 

20,000

Lowell, Arkansas (office)

 

2

 

 

20,000

Memphis, Tennessee

 

10

 

26,700

 

8,000

Phoenix, Arizona

 

14

 

10,000

 

5,300

San Bernardino, California

 

8

 

14,000

 

4.000

South Gate, California

 

12

 

12,000

 

5,500

Syracuse, New York

 

13

 

19,000

 

8,000

Location

 

Acreage

 

Maintenance Shop
(square feet)

 

Office Space
(square feet)

 

Atlanta, Georgia

 

30

 

29,800

 

10,400

 

Chicago, Illinois

 

27

 

50,000

 

14,000

 

Dallas, Texas

 

14

 

24,000

 

7,800

 

East Brunswick, New Jersey

 

20

 

20,000

 

7,800

 

Houston, Texas

 

13

 

24,700

 

7,200

 

Kansas City, Missouri

 

10

 

31,000

 

6,700

 

Little Rock, Arkansas

 

24

 

29,200

 

7,200

 

Louisville, Kentucky

 

14

 

40,000

 

10,000

 

Lowell, Arkansas (corporate headquarters)

 

25

 

 

150,000

 

Lowell, Arkansas

 

40

 

50,200

 

14,000

 

Lowell, Arkansas (office and data center)

 

2

 

 

20,000

 

Lowell, Arkansas (office)

 

2

 

 

20,000

 

Memphis, Tennessee

 

10

 

26,700

 

8,000

 

Phoenix, Arizona

 

14

 

10,000

 

5,300

 

San Bernardino, California

 

8

 

14,000

 

4,000

 

South Boston, VA

 

3

 

30,000

 

3,500

 

South Gate, California

 

12

 

12,000

 

5,500

 

Syracuse, New York

 

13

 

19,000

 

8,000

 

Vancouver, WA

 

4

 

20,000

 

 

 

ITEM 3.   LEGAL PROCEEDINGS

 

        The CompanyJBHT is involved in certain claims and pending litigation arising from the normal conduct of business.  Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, management believeswe believe the resolution of claims and pending litigation will not have a material adverse effect on theour financial condition or our results of operations of the Company.operations.

5



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

No matters were submitted during the fourth quarter of 20012002 to a vote of security holders.

 

OUR EXECUTIVE OFFICERS OF THE COMPANY

 

Information with respect to theour executive officers of the Company is set forth below:

 

 

 

 

 

 

Executive

Name

 

Age

 

Position with Company

 

Officer  Since

 

Age

 

Position with JBHT

 

Executive
Officer Since

 

J.B. Hunt

 

75

 

Senior Chairman of the Board; Director

 

1961

 

76

 

Senior Chairman of the Board; Director

 

1961

 

Wayne Garrison

 

49

 

Chairman of the Board; Director

 

1979

 

50

 

Chairman of the Board; Director

 

1979

 

Johnelle Hunt

 

70

 

Secretary; Director

 

1972

Johnelle D. Hunt

 

71

 

Secretary; Director

 

1972

 

Kirk Thompson

 

48

 

President and Chief Executive Officer; Director

 

1984

 

49

 

President and Chief Executive Officer; Director

 

1984

 

Paul R. Bergant

 

55

 

Executive Vice President, Marketing and Chief Marketing Officer

 

1985

 

56

 

Executive Vice President, Marketing and Chief Marketing Officer

 

1985

 

Bob D. Ralston

 

55

 

Executive Vice President, Equipment and Properties

 

1989

 

56

 

Executive Vice President, Equipment and Properties

 

1989

 

Jerry W. Walton

 

55

 

Executive Vice President, Finance and Administration and Chief Financial Officer

 

1991

 

56

 

Executive Vice President, Finance and Administration and Chief Financial Officer

 

1991

 

Craig Harper

 

44

 

Executive Vice President, Operations and Chief Operations Officer

 

1997

 

45

 

Executive Vice President, Operations and Chief Operations Officer

 

1997

 

John N. Roberts III (1)

 

37

 

President, Dedicated Contract Services, and Executive Vice President,  Enterprise Solutions

 

1997

Kay J. Palmer (2)

 

38

 

Chief Information Officer

 

1999

 

 

 

 

 

 

John N. Roberts III(1)

 

38

 

President, Dedicated Contract Services, and Executive Vice President,  Enterprise Solutions

 

1997

 

Kay J. Palmer(2)

 

39

 

Executive Vice President and Chief Information Officer

 

1999

 


(1)             Mr. Roberts joined the CompanyJBHT in 1989 as a management trainee.  In December of 1990, he became a Regional Marketing Manager.  In February of 1996, he was named Vice President, Marketing Strategy and was appointed President, Dedicated Contract Services, in July of 1997.  In June of 1998, he was appointed to the additional position of Executive Vice President of Enterprise Solutions.

 

(2)             Ms. Palmer joined the CompanyJBHT in 1988 as a programming specialist.  In June of 1989, she was named Director of Application Services.  In June of 1995, she was named Vice President of Applications.  She became Senior Vice President of Information Services in August of 1998 and named Executive Vice President and Chief Information Officer in June of 1999.

 

68



 

PART II

 

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

 

PRICE RANGE OF COMMON STOCK

 

        The Company’sOur common stock is traded in the over-the-counter market under the symbol “JBHT.”  The following table sets forth, for the calendar years indicated, the range of high and low sales prices for the Company’sour common stock as reported by the National Association of Securities Dealers Automated Quotations National Market System (“NASDAQ”).

 

 

2001

 

2000

 

 

2002

 

2001

 

Period

 

High

 

Low

 

High

 

Low

 

 

High

 

Low

 

High

 

Low

 

1st Quarter

 

$20.50

 

$12.88

 

$16.00

 

$10.50

 

 

$

29.39

 

$

22.07

 

$

20.50

 

$

12.88

 

2nd Quarter

 

20.75

 

14.63

 

17.50

 

13.13

 

 

32.37

 

24.60

 

20.75

 

14.63

 

3rd Quarter

 

25.60

 

12.15

 

16.00

 

11.50

 

 

29.83

 

21.55

 

25.60

 

12.15

 

4th Quarter

 

25.17

 

11.93

 

17.25

 

10.50

 

 

30.32

 

21.25

 

25.17

 

11.93

 

 

On February 28, 2002,2003, the high and low sales prices for the Company’sour common stock as reported by the NASDAQ were $25.24$24.91 and $23.40,$24.51, respectively. As of February 28, 2002, the Company2003, we had 1,4401,378 stockholders of record.

 

DIVIDEND POLICY

 

On January 21,  2000, theour Board of Directors declared a quarterly dividend of $.05 per share,  paid on February 17, 2000 to shareholders of record on February 3, 2000. The CompanyWe declared and paid cash dividends of $.20 per share in 1999 and 1998.  On February 16, 2000, theour Board of Directors announced a decision to discontinue itsour policy of paying quarterly cash dividends.  No dividends have been paid since February of 2000.

79



 

ITEM 6.   SELECTED FINANCIAL DATA

(Dollars in millions, except per share amounts)

 

Years Ended December 31

 

2001

 

2000

 

1999

 

1998

 

1997

 

Operating revenues

 

$

2,100.3

 

$

2,160.4

 

$

2,045.1

 

$

1,841.6

 

$

1,554.3

 

Operating income

 

72.2

 

63.4

 

74.3

 

101.5

 

53.1

(2)

Net earnings

 

32.9

 

36.1

 

31.9

 

46.8

 

18.2

(2)

Diluted earnings per share

 

.91

 

1.02

 

.89

 

1.28

 

.50

(2)

Cash dividends per share

 

 

.05

 

.20

 

.20

 

.20

 

Total assets

 

1,260.3

 

1,231.9

 

1,127.5

 

1,171.5

 

1,021.9

 

Long-term debt and lease obligations

 

353.6

 

300.4

 

267.6

 

417.0

 

322.8

 

Stockholders’ equity

 

458.3

 

417.8

(1)

391.2

(1)

365.5

(1)

327.8

(2)


(1) As a result of a change in method of accounting for insurance reserves, retained earnings was restated as of December 31, 1996. See Note 12 of the Notes to Consolidated Financial Statements.

 

(2)  The impact of the change in accounting for insurance reserves as discussed in Note 12 of the Notes to Consolidated Financial Statements would have resulted in an increase to net earnings of approximately $6.8 million in fiscal 1997.  Accordingly, operating income, net earnings and diluted earnings per share have been restated by approximately $11.0 million, $6.8 million and 19 cents, respectively.

Years Ended December 31

 

2002

 

2001

 

2000

 

1999

 

1998

 

Operating revenues

 

$

2,247.9

 

$

2,100.3

 

$

2,160.4

 

$

2,045.1

 

$

1,841.6

 

Operating income

 

101.0

 

72.2

 

63.4

 

74.3

 

101.5

 

Net earnings

 

51.8

 

32.9

 

36.1

 

31.9

 

46.8

 

Diluted earnings per share

 

1.33

 

.91

 

1.02

 

.89

 

1.28

 

Cash dividends per share

 

 

—-

 

.05

 

.20

 

.20

 

Total assets

 

1,318.7

 

1,260.3

 

1,231.9

 

1,127.5

 

1,171.5

 

Long-term debt and lease obligations

 

219.0

 

353.6

 

300.4

 

267.6

 

417.0

 

Stockholders’ equity

 

590.5

 

458.3

 

417.8

 

391.2

 

365.5

 

 

Percentage of Operating Revenue

 

Years Ended December 31

 

2001

 

2000

 

1999

 

1998

 

1997

 

 

Operating revenues

 

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

37.6

 

35.6

 

34.9

 

34.9

 

33.8

 

(2)

Rents and purchased transportation

 

28.8

 

32.1

 

33.7

 

33.7

 

33.1

 

 

Fuel and fuel taxes

 

10.8

 

11.3

 

8.3

 

7.5

 

9.1

 

 

Operating supplies and expenses

 

6.9

 

6.1

 

6.2

 

5.3

 

5.9

 

 

Depreciation and amortization

 

6.8

 

6.2

 

7.3

 

7.6

 

8.4

 

 

Insurance and claims

 

2.0

 

1.8

 

2.0

 

1.8

 

2.3

 

(2)

Operating taxes and licenses

 

1.6

 

1.5

 

1.3

 

1.3

 

1.6

 

 

Communication and utilities

 

1.2

 

1.2

 

1.0

 

1.0

 

1.1

 

 

General and administrative expenses, net of gains

 

.9

 

1.3

 

1.7

 

1.4

 

1.3

 

 

Total operating expenses

 

96.6

 

97.1

 

96.4

 

94.5

 

96.6

 

(2)

Operating income

 

3.4

 

2.9

 

3.6

 

5.5

 

3.4

 

(2)

Interest expense

 

(1.3

)

(1.1

)

(1.4

)

(1.6

)

(1.6

)

 

Equity in earnings (loss) of associated companies

 

 

.2

 

.2

 

.1

 

.1

 

 

Earnings before income taxes

 

2.1

 

2.0

 

2.4

 

4.0

 

1.9

 

(2)

Income taxes

 

.5

 

.3

 

.8

 

1.5

 

.7

 

(2)

Net earnings

 

1.6

%

1.7

%

1.6

%

2.5

%

1.2

%

(2)

Years Ended December 31

 

2002

 

2001

 

2000

 

1999

 

1998

 

Operating revenues

 

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

36.4

 

37.6

 

35.6

 

34.9

 

34.9

 

Rents and purchased transportation

 

31.1

 

28.8

 

32.1

 

33.7

 

33.7

 

Fuel and fuel taxes

 

9.4

 

10.8

 

11.3

 

8.3

 

7.5

 

Depreciation and amortization

 

6.5

 

6.8

 

6.2

 

7.3

 

7.6

 

Operating supplies and expenses

 

5.8

 

6.9

 

6.1

 

6.2

 

5.3

 

Insurance and claims

 

2.5

 

2.0

 

1.8

 

2.0

 

1.8

 

Operating taxes and licenses

 

1.4

 

1.6

 

1.5

 

1.3

 

1.3

 

General and administrative expenses, net of gains

 

1.3

 

.9

 

1.3

 

1.7

 

1.4

 

Communication and utilities

 

1.1

 

1.2

 

1.2

 

1.0

 

1.0

 

Total operating expenses

 

95.5

 

96.6

 

97.1

 

96.4

 

94.5

 

Operating income

 

4.5

 

3.4

 

2.9

 

3.6

 

5.5

 

Interest expense

 

(1.1

)

(1.3

)

(1.1

)

(1.4

)

(1.6

)

Equity in earnings (loss) of associated companies

 

(.1

)

 

.2

 

.2

 

.1

 

Earnings before income taxes

 

3.3

 

2.1

 

2.0

 

2.4

 

4.0

 

Income taxes

 

1.0

 

.5

 

.3

 

.8

 

1.5

 

Net earnings

 

2.3

%

1.6

%

1.7

%

1.6

%

2.5

%

 

The following table sets forth certain operating data of the Company.data.

 

Years Ended December 31

 

2001

 

2000

 

1999

 

1998

 

1997

 

 

2002

 

2001

 

2000

 

1999

 

1998

 

Total loads

 

2,565,915

 

2,697,582

 

2,769,834

 

2,243,856

 

1,802,006

 

 

2,847,377

 

2,565,915

 

2,697,582

 

2,769,834

 

2,243,856

 

Average number of tractors owned/leased in the fleet during the year

 

10,710

 

10,055

 

9,183

 

8,207

 

7,629

 

 

10,712

 

10,710

 

10,055

 

9,183

 

8,207

 

Tractors owned/leased (at year end)

 

10,770

 

10,649

 

9,460

 

8,906

 

7,508

 

Company tractors operated (at year end)

 

10,653

 

10,770

 

10,649

 

9,460

 

8,906

 

Independent contractors (at year end)

 

337

 

16

 

 

 

 

 

679

 

336

 

16

 

 

 

Trailers/containers (at year end)

 

44,318

 

44,330

 

39,465

 

35,366

 

30,391

 

 

45,759

 

44,318

 

44,330

 

39,465

 

35,366

 

Company tractor miles (in thousands)

 

1,022,677

 

1,000,127

 

986,288

 

922,560

 

790,018

 

 

981,818

 

1,022,677

 

1,000,127

 

986,288

 

922,560

 

 

810



 

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

FORWARD-LOOKING STATEMENTS

 

This report contains statements that may be considered to be forward-looking or predictions concerning future operations or events.  Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are inherently uncertain, subject to risks and should be viewed with caution.  These statements are based on management’sour belief or interpretation of information currently available.  Shareholders and prospective investors are cautioned that actual results and future events may differ materially from the forward-looking statements as a result of many factors.  Among all the factors and events that are not within the Company’sour control and could have a material impact on future operating results include:  general economic and business conditions, competition and competitive rate fluctuations, cost and availability of diesel fuel, ability to attract and retain qualified drivers, a loss of one or more major customers, interference with or termination of our relationships with certain railroads, insurance costs and availability, claims expense, retention of key employees, terrorists attacks or actions, acts of war, cost and availability of diesel fuel, adverse weather conditions, competitive rate fluctuations, availability of drivers,new or different environmental or other laws and regulations, increased costs for new revenue equipment resale or trade valuesdecreases in the value of used equipment and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values.  Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings.  The above is not an all-inclusive list.  Financial and operating results of the CompanyJBHT may fluctuate as a result of these and other risk factors or events as described from time to time in Companyour filings with the Securities and Exchange Commission.  The Company assumesWe assume no obligation to update any forward-looking statement to the extent it becomeswe become aware that it will not be achieved for any reason.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Certain amounts included in or affecting the Company’sour 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 our financial statements in conformity with generally accepted accounting principles requires managementus 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.  Management evaluatesWe 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 our financial statements and related disclosures, managementwe 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, management believeswe 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 estimates, or additional facts and circumstances cause managementus to revise estimates, earnings will be affected.

 

Workers’ Compensation and Accident Costs

 

        The Company purchasesWe purchase insurance coverage for a portion of our 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 the Company’sour 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.  The Company’sOur current insurance coverage specifies that the first $5,000 of any claim is self insured and that the self insured limit on certainthe majority of our claims was up to $2 million in 2001 and decreased tois $1.5 million, effective January 1, 2002, which is prefunded with itsour insurance carrier.  The Company isWe are substantially self insuredself-insured for loss of and damage to itsour owned and leased revenue equipment.  CompanyOur safety and claims personnel work directly with representatives from theour insurance companies to continually update the estimated ultimate cost of each claim.  At December 31, 2001, the Company 2002, we

11



had approximately $14$15 million of estimated net claims payable.  In addition, the Company iswe are required to pay certain advanced deposits and monthly premiums.  At December 31, 2001, the Company2002, we had a prepaid insurance asset of approximately $38$45 million.

9



        During the fourth quarter of 2001, the Company modified its method of estimating and recording its ultimate cost related to auto liability and workers’ compensation claims, which will result in a more accurate estimate of the Company’s ultimate loss from claims.  The Company began applying loss development factors to its accident and workers’ compensation claims history.  This new method results in a more accurate estimate of the Company’s ultimate loss from claims than its prior method.  This new method resulted in a restatement of the following balances at December 31, 1998:  a $10.2 million decrease in retained earnings, a $16.3 million increase in claims payable and a $6.1 million increase in deferred tax assets.  These adjustments had no material impact on year 2000 and 1999 consolidated earnings.

 

Revenue Equipment

 

        The Company operatesWe operate a significant number of tractors, trailers and containers in connection with itsour business.  This equipment may be purchased or acquired under capital or operating leases.  In addition, we may rent revenue equipment may be rented 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 everwhichever is shorter.

 

        The Company hasWe have an agreement with itsour primary tractor supplier for guaranteed residual or trade-in values for certain new equipment acquired since 1999.  The Company hasWe have utilized these values in accounting for purchased and leased tractors.  If the supplier was unable to perform under the terms of such agreements, it could have a material negative impact on the Company’sour financial results.

 

Revenue Recognition

 

        The Company recognizesWe recognize revenue based on the relative transit time of the freight transported.  Accordingly, a portion of the total revenue which will be billed to the 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.

 

Segments

 

        The CompanyWe operated three segments during the calendar year 2001.2002.  Segments included Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS).  JBT business included full truck-load, dry-van freight which is primarily transported utilizing company-owned or controlled revenue equipment.  Freight in the JBT segment is typically transported over roads and highways and no portion of a movement involves railroads.  The JBI segment includes freight which is transported by rail over at least a portion of the movement.  JBI freight may also include certain repositioning truck loads which are moved by JBI equipment or third-party carriers, in circumstances where the movement directs JBI equipment back toward intermodal operations.  DCS segment business usually includes company-owned revenue equipment and employee drivers who are assigned to a specific customer, traffic lane or service.  DCS operations most frequently involve formal, written long-term agreements which govern services performed and applicable rates.

 

Prior to July 1, 2000, the Logistics business segment (JBL) primarily consisted of J.B. Hunt Logistics, a wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services.  Such services included experienced professional managers, information and freight optimization technology and the actual design or redesign of freight system solutions.  JBL utilized JBT, JBI or DCS owned or controlled assets and employees, or third-party carriers, or a combination of these options to meet service requirements.  JBL services were typically provided in accordance with written long-term agreements.  Effective July 1, 2000, JBL exchanged its ownership in substantially all of its assets for an initial membership interest in TPC.

TPI.  As of January 1, 2003, we increased our interest in TPI from approximately 27% to 37%.

 

1012



 

RESULTS OF OPERATIONS

2002 Compared With 2001

Operating Segments

For Years Ended December 31

(in millions of dollars)

 

 

Gross Revenue

 

Operating Income

 

 

 

2002

 

2001

 

% Change

 

2002

 

2001

 

JBT

 

$

827.3

 

$

828.6

 

 

26.6

 

$

8.7

 

JBI

 

809.1

 

740.5

 

9

%

54.6

 

42.1

 

DCS

 

628.3

 

548.7

 

15

%

19.7

 

17.4

 

JBL

 

 

 

 

—-

 

 

Other

 

 

.6

 

 

.1

 

4.0

 

Subtotal

 

2,264.7

 

2,118.4

 

7

%

$

101.0

 

72.2

 

Inter-segment eliminations

 

(16.8

)

(18.1

)

 

 

 

Total

 

$

2,247.9

 

$

2,100.3

 

7

%

$

101.0

 

$

72.2

 

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related footnotes appearing in this annual report.

Overview of 2002

Our consolidated net earnings for calendar year 2002 were $51.8 million, or diluted earnings per share of $1.33, compared with 2001 full-year earnings of $32.9 million, or 91 cents per diluted share.  We generated $101 million of operating income in 2002, a nearly 40% increase over the $72.2 million of operating income in 2001.  Our operating ratio was 95.5% in 2002 and 96.6% in 2001.  Our increase in 2002 net earnings was in spite of an effective income tax rate which rose to 30.8% from 23.5% in 2001 and the number of diluted shares outstanding increasing by nearly 8%.  The increase in shares outstanding reflects a secondary public offering, which closed in June of 2002.   Each of our three segments contributed to the improved earnings levels in 2002.

JBT segment gross revenue was essentially flat, totaling $827.3 million in 2002 and $828.6 million in 2001.  However, 2002 revenues were generated with approximately 3% fewer tractors.  In addition, 2002 fuel surcharge revenues were $14.2 million lower than the comparable amount in 2001, which negatively impacted the revenue comparison by approximately 2%.  Truck segment operating income rose to $26.6 million in 2002, from $8.7 million in 2001.  The improvement in 2002 operating income reflected higher revenue per loaded mile, reduced empty miles and lower driver pay rates.  A significant portion of the higher revenue per loaded mile and reduced empty miles was a result of our continued focus on yield management and improved revenue quality.  The reduction in driver pay per mile was a result of changes in pay scales for newly-hired drivers.

JBI segment gross revenue grew 9%, to $809.1 million in 2002, from $740.5 million in 2001.  Revenue growth was due, in part, to continued demand for our intermodal service offering and conversion of our container fleet to 100% 53-foot units.  Operating income in the JBI segment rose to $54.6 million in 2002 from $42.1 million in 2001.  Our JBI operating ratio was 93.3% in 2002 and 94.3% in 2001.  Financial results in this segment were enhanced by improved container utilization, improved driver productivity and a focus on revenue quality.

DCS segment revenue grew nearly 15%, to $628.3 million in 2002, from $548.7 million in 2001.  Revenue growth was primarily a result of a 9% increase in the size of the DCS tractor fleet and our focus on improving the quality of individual fleets.  While operating income rose to $19.7 million in 2002 from $17.4 million in 2001, the segment’s operating ratio was 96.9% in 2002 and 96.8% in 2001.  We reduced some costs in the DCS segment such as driver pay and overhead, however, higher accident and claims expenses, as well as new project start up costs, more than offset the improvements.

13



The following table sets forth items in our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.

 

 

Percentage of
Operating Revenue

 

Percentage Change
Between Years

 

 

 

2002

 

2001

 

2002 vs. 2001

 

 

 

 

 

 

 

 

 

Operating revenues

 

100.0

%

100.0

%

7.0

%

Operating expenses:

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

36.4

%

37.6

%

3.6

%

Rents and purchased transportation

 

31.1

 

28.8

 

15.5

 

Fuel and fuel taxes

 

9.4

 

10.8

 

(6.8

)

Depreciation and amortization

 

6.5

 

6.8

 

2.2

 

Operating supplies and expenses

 

5.8

 

6.9

 

(10.3

)

Insurance and claims

 

2.5

 

2.0

 

32.4

 

Operating taxes and licenses

 

1.4

 

1.6

 

.6

 

General and administrative expenses, net of gains

 

1.3

 

.9

 

55.7

 

Communication and utilities

 

1.1

 

1.2

 

(2.0

)

Total operating expenses

 

95.5

 

96.6

 

5.9

 

Operating income

 

4.5

 

3.4

 

39.8

 

Interest expense

 

(1.1

)

(1.3

)

(8.4

)

Equity in earnings (loss) of associated companies

 

(.1

)

 

(35.0

)

Earnings before income taxes

 

3.3

 

2.1

 

73.7

 

Income taxes

 

1.0

 

.5

 

127.2

 

Net earnings

 

2.3

%

1.6

%

57.3

%

Consolidated Operating Expenses

Total operating expenses in 2002 increased 5.9% over 2001, while operating revenues rose 7.0%.  Our operating ratio improved to 95.5% in 2002, compared with 96.6% in 2001.  Salaries, wages and employee benefits expense increased 3.6% in 2002, and declined to 36.4% of revenue in 2002 from 37.6% in 2001.  As previously mentioned, a lower mileage pay rate in our JBT segment for newly-hired drivers and the use of additional independent contractors were primary contributors to the relationship of this cost category to operating revenues.  Partly offsetting a decline in drivers’ wages relative to revenue were increases in maintenance wages, workers’ compensation, health insurance and office employee incentive expenses.  We opened some new company managed maintenance facilities and increased our mechanic labor force by about 14% in order to reduce the amount of maintenance that we outsource.  We also experienced higher costs in workers’ compensation and other fringe benefit programs and paid additional incentive payments to our office and administrative personnel that resulted from improved 2002 net earnings.

Rents and purchased transportation expense increased 15.5%, primarily due to the growth of our JBI business segment and the related payments to railroads and drayage carriers and the use of more independent contractors.  The 6.8% decline in fuel and fuel tax expense was primarily a result of fuel costs per gallon averaging about 5% less vs. 2001.  Operating supplies and expenses were down 10.3% in 2002 reflecting the reduced amount of outsourced tractor and trailer maintenance work and our focus on reducing travel expenses.  The 32.4% increase in insurance and claims costs reflects escalating liability insurance premiums which have been experienced industry wide and our higher accident costs.  The significant increase in general and administrative expenses was due primarily to higher driver advertising and recruiting expense in 2002 and changes in our gains and losses on revenue equipment dispositions.  In 2002, we had a $1.8 million net loss on equipment and facility dispositions, compared with a net gain of $4.8 million in 2001.

Our net interest expense declined in 2002, partly due to the approximate $68 million of capital we raised through a secondary public offering of common stock which closed in June of 2002.  We increased our effective income tax rate to 30.8% in 2002, from 23.5% in 2001, primarily to reflect additional taxes associated with our increased earnings.

14



Equity in losses of associated companies reflects our share of operating results for TPI and for our Mexican joint venture.  Amounts included the following:

 

 

Years Ended December 31
(000)

 

 

 

2002

 

2001

 

TPI

 

$

(1,353

)

$

(1,918

)

 

 

 

 

 

 

Mexican joint venture

 

 

(165

)

 

 

 

 

 

 

 

 

$

(1,353

)

$

(2,083

)

JBHT’s financial exposure is limited to its approximate $8.5 million investment in TPI as we have not made any additional commitments or guaranteed any of TPI’s financial obligations.

The year 2001 financial results of our Mexican joint venture primarily reflect adjustments to the carrying value of the investment due to the anticipated sale of our interests.  During the first quarter of 2002, we sold our joint venture interest in Mexico for its carrying value, to the majority owner, Transportacion Maritima Mexicana (TMM).  We recorded an $18.1 million note receivable from TMM, which, according to the terms of this sale, will be paid in four annual payments of approximately $4.5 million, plus interest at 5% per annum, through June of 2005.  The first payment was received as scheduled in June of 2002.

2001 Compared With 2000

 

Operating Segments

For Years Ended December 31

(in millions of dollars)

 

 

Gross Revenue

 

Operating Income

 

 

Gross Revenue

 

Operating Income

 

 

2001

 

2000

 

% Change

 

2001

 

2000

 

 

2001

 

2000

 

% Change

 

2001

 

2000

 

JBT

 

$

828.6

 

$

833.8

 

(1

)%

$

 8.7

 

$

(7.1

)

 

$

828.6

 

$

833.8

 

(1

)%

$

8.7

 

$

(7.1

)

JBI

 

740.5

 

681.1

 

9

%

42.1

 

36.7

 

 

740.5

 

681.1

 

9

%

42.1

 

36.7

 

DCS

 

548.7

 

478.6

 

15

%

17.4

 

28.4

 

 

548.7

 

478.6

 

15

%

17.4

 

28.4

 

JBL

 

 

230.0

*

 

—-

 

8.1

*

 

 

230.0

*

 

 

8.1

*

Other

 

.6

 

 

 

4.0

 

(2.7

)

 

.6

 

 

 

4.0

 

(2.7

)

Subtotal

 

2,118.4

 

2,223.5

 

(5

)%

72.2

 

63.4

 

 

2,118.4

 

2,223.5

 

(5

)%

72.2

 

63.4

 

Inter-segment eliminations

 

(18.1

)

(63.1

)

 

 

 

 

(18.1

)

(63.1

)

 

 

 

Total

 

$

2,100.3

 

$

2,160.4

 

(3

)%

$

 72.2

 

$

63.4

 

 

$

2,100.3

 

$

2,160.4

 

(3

)%

$

72.2

 

$

63.4

 

 


*As of December 31, 2000, TPCTPI qualified as a reportable business segment for financial reporting purposes. However, the logistics segment (JBL) information for 2001 shown above excludes TPC from its inception in July 2000.  TPCTPI.  TPI is accounted for on the equity method and does not qualify as a reporting segment in 2001.

 

The following discussion and analysis should be read in conjunction with theour Consolidated Financial Statements of the Company and related footnotes appearing in this annual report.

 

Overview of 2001

 

Financial and operating results for the year 2001 were impacted by a number of significant items.  General economic conditions in the transportation industry were soft during the majority of the year and fuel costs varied dramatically, sometimes changing more than 10% from one month to the next.  However, overall fuel costs for 2001 were down from the prior year.  Consolidated operating revenues for 2001 decreased approximately 3% from 2000.  Excluding the JBL operations, which were contributed to TPCTPI as of July 1, 2000, revenue growth for the remaining business segments was approximately 6%.  The growth in the remaining segments is attributable to expansion of the Company’sour operating fleet of tractors from an average of 10,055 in 2000 to 10,710 in 2001, an average increase of 655 tractors or 6.5%.  While fuel costs and related fuel surcharge revenues varied significantly during 2001, the net change in fuel surcharge revenue had less than a 1% impact on revenue between 2001 and 2000.

 

JBT segment revenue totaled $828.6 million in 2001, down 1% from 2000.  This decline was due in part to the softer economy that created a reduced demand for freight.  The CompanyJBT began focusing on improving the operating ratio through cost management initiatives rather than JBT fleet growth.  The Company hasWe had no plans to grow the JBT fleet until such time that a reasonable operating income hashad been achieved, warranting the additional investment of capital.  JBT tractor count,

15



including independent contractors (I/C’s) declined nearly 3% during 2001 and tractor utilization was also down approximately 3%.  However, revenue per loaded mile increased 3.2%3.9%, excluding fuel surcharges, reflecting freight mix changes and pure rate increases,.  The Truck segment generated operating income of $8.7 million in 2001, compared with a loss of $7.1 million in 2000.  As a result of a new initiative commenced in late 2000, the number of I/C’s in JBT grew to 337 in 2001, from 16 at the end of 2000.  Continued volatility in the earnings power of the Truck unit is likely to prevail until supply and demand factors in the truckload industry improve.  Additional improvement is significantly dependent upon increases in the availability of freight.

 

JBI segment business was reasonably strong during 2001 and grew 9% to $740.5 million from $681.1 million in 2000.  The Intermodal segment held its tractor count essentially flat at 910 during 2001. Unlike the other segments, growth of JBI is not easily tracked by number of tractors, as JBI can utilize outside dray carriers and the other JBHT business units to support load and revenue growth.  The increase in revenue can be attributed to a 5% increase in the number of loads from 2000 to 2001, coupled with a 1.7% increase in revenue per loaded mile, excluding fuel surcharges.  As a result of revenue growth and utilization of containers, JBI operating income climbed 13%15% in 2001 to $42.1 million from $36.7 million in 2000.

 

11



DCS segment revenue grew 15% during 2001, to $548.7 million from $478.6 million in 2000.  This growth rate was down significantly from recent years due to:  1) soft economic conditions which made companies more apprehensive about changing or outsourcing their transportation needs, and;  2) the Company’sour unwillingness to reduce rates to increase market share.  The DCS segment tractor fleet grew by 15% during 2001, but revenue growth was limited by idle tractors throughout most of the year.  DCS generated $17.4 million of operating income in 2001, compared with $28.4 million in 2000.  The lower margin and reduced operating income was primarily a result of idle tractors and a higher proportionate amount of shared trailer pool and corporate support costs being assigned to the business, as a result of improving the tracking of trailer usage and the increased internal transfer price, which is charged by JBT and JBI when DCS utilizes their assigned trailers.  Cost control and close analysis of individual fleet profitability remains a DCS objective.  As in the case of Truck, DCS has no fleet growth planned for 2002.

 

For the year ended December 31, 2001, the Company’sJBHT’s share of TPC’sTPI’s results of operations totaled a loss of $1.9 million, compared with earnings of $440,000 for the six month period ended December 31, 2000.  TPC’sTPI’s operating loss in 2001 was primarily due to start up expenses.  JBHT’s financial exposure is limited to its approximate $6.4 million investment in TPCTPI as the Company haswe have not made any additional commitments or guaranteed any of TPC’sTPI’s financial obligations.

 

The following table sets forth items in theour Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.

 

 

Percentage of Operating Revenue

 

Percentage Change Between Years

 

 

Percentage of
Operating Revenue

 

Percentage Change
Between Years

 

 

2001

 

2000

 

2001 vs. 2000

 

 

2001

 

2000

 

2001 vs. 2000

 

Operating revenues

 

100.0

%

100.0

%

(2.8

)%

 

100.0

%

100.0

%

(2.8

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

37.6

%

35.6

%

2.7

%

 

37.6

%

35.6

%

2.7

%

Rents and purchased transportation

 

28.8

 

32.1

 

(13.0

)

 

28.8

 

32.1

 

(13.0

)

Fuel and fuel taxes

 

10.8

 

11.3

 

(6.9

)

 

10.8

 

11.3

 

(6.9

)

Depreciation and amortization

 

6.8

 

6.2

 

6.2

 

Operating supplies and expenses

 

6.9

 

6.1

 

11.4

 

 

6.9

 

6.1

 

11.4

 

Depreciation and amortization

 

6.8

 

6.2

 

6.2

 

Insurance and claims

 

2.0

 

1.8

 

8.7

 

 

2.0

 

1.8

 

8.7

 

Operating taxes and licenses

 

1.6

 

1.5

 

 

 

1.6

 

1.5

 

 

General and administrative expenses, net of gains

 

.9

 

1.3

 

(32.5

)

Communication and utilities

 

1.2

 

1.2

 

(.7

)

 

1.2

 

1.2

 

(.7

)

General and administrative expenses, net of gains

 

.9

 

1.3

 

(32.5

)

Total operating expenses

 

96.6

 

97.1

 

(3.3

)

 

96.6

 

97.1

 

(3.3

)

Operating income

 

3.4

 

2.9

 

13.9

 

 

3.4

 

2.9

 

13.9

 

Interest expense

 

(1.3

)

(1.1

)

5.0

 

 

(1.3

)

(1.1

)

5.0

 

Equity in earnings of associated companies

 

 

.2

 

 

Equity in earnings (loss) of associated companies

 

 

.2

 

 

Earnings before income taxes

 

2.1

 

2.0

 

1.5

 

 

2.1

 

2.0

 

1.5

 

Income taxes

 

.5

 

.3

 

59.2

 

 

.5

 

.3

 

59.2

 

Net earnings

 

1.6

%

1.7

%

(8.7

)%

 

1.6

%

1.7

%

(8.7

)%

16



 

Consolidated Operating Expenses

 

Total operating expenses in 2001 declined 3.3% from 2000, decreasing in relative proportion to operating revenues.  The Company’sOur operating ratio (operating expenses expressed as a percentage of operating revenues) improved slightly to 96.6% in 2001 from 97.1% in 2000.  As previously mentioned, the JBL segment was contributed to TPCTPI effective July 1, 2000.  This approximate 10% reduction in consolidated operating revenues was the primary factor in reduced rents and purchased transportation expense.  The JBI segment relied solely on JBT and third party carriers for transportation services and accordingly, purchased transportation costs as a percent of revenue were significantly higher than the other segments.  The decline in fuel and fuel tax expense was primarily due to significantly lower fuel cost per gallon in late 2001.  The increase in 2001 operating supplies and expenses reflected higher tractor and trailing equipment maintenance and tire costs.  Insurance and claims costs reflected higher collision rates in JBT during 2001.  The significant decline in general and administrative expenses was due to an approximate $5.5 million gain on the sale of a group of trailers, which closed in March of 2001.  Gains on revenue equipment dispositions are included in this expense classification and totaled a net gain of $4.8 million in 2001, compared with a loss of $267,000 in 2000.

 

12



Equity in earnings (loss) of associated companies reflects the Company’sour share of operating results for TPCTPI and for the Mexican joint venture.  Equity in earnings amounts included the following:

 

Year Ended December 31

 

Year Ended December 31
(000)

 

(000)

 

2001

 

2000

 

TPI

 

$

(1,918

)

$

440

 

2001

 

2000

 

 

 

 

 

TPC

$

(1,918

)

$

440

Mexican joint venture

(165

)

4,337

 

(165

)

4,337

 

$

(2,083

)

$

4,777

 

 

 

 

 

 

$

(2,083

$

4,777

 

 

The year 2001 financial results of the Company’sour Mexican joint venture primarily reflectreflected adjustments to the carrying value of the investment due to the anticipated sale of the Company’sour interests.  The Company hasWe had an agreement in principle for a sale to the majority owner of the joint venture.  This transaction is expected to bewas consummated in early 2002.  If the transaction closes under the current terms and conditions, no material impact on earnings is anticipated.

 

        2000 Compared With 1999

Operating Segments

For Years Ended December 31

(in millions of dollars)

 

 

Gross Revenue

 

Operating Income

 

 

 

2000

 

1999

 

% Change

 

2000

 

1999

 

JBT

 

$

833.8

 

$

763.2

 

9

%

$

(7.1

)

 

JBI

 

681.1

 

651.6

 

5

%

36.7

 

 

Van

 

1,514.9

 

1,414.8

 

7

%

29.6

 

$

44.4

 

 

 

 

 

 

 

 

 

 

 

 

 

DCS

 

478.6

 

320.2

 

49

%

28.4

 

24.1

 

Logistics (JBL)

 

230.0*

 

387.9

 

(41

)%

8.1*

 

10.5

 

Other

 

 

 

 

(2.7

)

(4.7

)

Subtotal

 

2,223.5

 

2,122.9

 

5

%

63.4

 

74.3

 

Inter-segment eliminations

 

(63.1

)

(77.8

)

 

 

 

Total

 

$

2,160.4

 

$

2,045.1

 

6

%

$

63.4

 

$

74.3

 


*As of December 31, 2000, TPC qualified as a reportable business segment for financial reporting purposes. However, the logistics segment information shown above excludes TPC from its inception in July 2000.  TPC is accounted for on the equity method.

Overview of 2000

        Financial and operating results for the year 2000 were impacted by a number of significant items.  Consolidated operating revenues for 2000 increased 6% over 1999.  Excluding the JBL operations, which were contributed to TPC as of July 1, 2000, revenue growth for the remaining segments was approximately 15%.  The increase in fuel surcharge revenue associated with higher costs of fuel in the current year accounted for approximately 4% of revenue growth for these remaining segments.  Prior to January 1, 2000, the JBT and JBI businesses had been operated and reported together as the Van business segment.  Accordingly, 2000 was the first full year that certain JBT and JBI identifiable information was available.

        JBT segment revenue increased 9%, to $833.8 million in 2000, from $763.2 million, in 1999.  Revenue per loaded mile, excluding fuel surcharges, increased 3.2% in 2000.  The JBT company owned/leased tractor fleet totaled 5,850 at December 31, 2000.  A new initiative to utilize independent contractors, who own their tractors was commenced in late 2000.  The JBT segment had operating arrangements with 16 independent contractors at December 31, 2000.  The JBT segment incurred an operating loss of $7.1 million in 2000.  Since the JBT and JBI segments were operated in combined fashion during 1999, no comparative operating results were available.  A portion of the year 2000 JBT operating loss was due to certain costs incurred to separate the JBT and JBI business units.

13



        The JBI segment business grew 5%, to $681.1 million in 2000, from $651.6 million in 1999.  Intermodal revenue per loaded mile in 2000, exclusive of fuel surcharges, was essentially flat compared with 1999.  The increase in revenue was primarily due to a 5% increase in revenue per load over 1999 and the JBI tractor fleet totaled 908 at December 31, 2000.  The intermodal segment generated operating income of $36.7 million in 2000.  A comparable amount for 1999 is not available.

        During 2000, DCS segment revenue grew 49%, to $478.6 million, from $320.2 million in 1999.  A portion of the DCS segment revenue growth was due to transfers of equipment and drivers from the JBT business segment.  The DCS tractor fleet increased 43% to total 3,890 at December 31, 2000.  DCS operating income was $28.4 million in 2000, compared with $24.1 million in 1999.  The lower margin on the DCS segment business in 2000 was primarily due to a higher proportionate share of corporate support costs being assigned to the business.

        The JBL business was contributed to TPC effective July 1, 2000.  JBL generated $230 million of revenue and $8.1 million of operating income between January 1, 2000 and June 30, 2000.  The Company’s share of TPC’s results of operations was reported on a one-line, non-operating item on the Consolidated Statements of Earnings and totaled $440,000 in 2000.  No gain or loss was recognized upon formation and contribution of JBL segment assets to TPC.

        The following table sets forth items in the Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.

 

 

Percentage of

 

Percentage Change

 

 

Operating Revenue

 

Between Years

 

 

2000

 

1999

 

2000 vs. 1999

Operating revenues

 

100.0

%

100.0

%

5.6

%

Operating expenses:

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

35.6

%

34.9

%

7.9

%

Rents and purchased transportation

 

32.1

 

33.7

 

.8

 

Fuel and fuel taxes

 

11.3

 

8.3

 

43.3

 

Operating supplies and expenses

 

6.1

 

6.2

 

4.1

 

Depreciation and amortization

 

6.2

 

7.3

 

(9.8

)

Insurance and claims

 

1.8

 

2.0

 

(3.9

)

Operating taxes and licenses

 

1.5

 

1.3

 

20.4

 

Communication and utilities

 

1.2

 

1.0

 

15.1

 

General and administrative expenses

 

1.3

 

1.7

 

(17.8

)

Total operating expenses

 

97.1

 

96.4

 

6.4

 

Operating income

 

2.9

 

3.6

 

(14.6

)

Interest expense

 

(1.1

)

(1.4

)

(9.2

)

Equity in earnings of associated companies

 

.2

 

.2

 

52.1

 

Earnings before income taxes

 

2.0

 

2.4

 

(13.5

)

Income taxes

 

.3

 

.8

 

(62.9

)

Net earnings

 

1.7

%

1.6

%

13.1

%

 

 

 

 

 

 

 

 

        Consolidated Operating Expenses

        Total operating expenses in 2000 increased 6.4% over 1999, in relative proportion to the increase in operating revenues.  The Company’s operating ratio (operating expenses expressed as a percentage of operating revenues) increased to 97.1% in 2000 from 96.4% in 1999.  As previously mentioned the JBL segment was contributed to TPC effective July 1, 2000.  This change reduced the rate of revenue growth and was the primary factor in the reduction of rents and purchased transportation expense as a percent of revenue in 2000.  The significant increase in fuel and fuel tax expense was driven by an approximate 35% higher cost per gallon and slightly lower fuel miles per gallon in 2000.  Fuel surcharges, which were initiated in late 1999, recovered approximately 90% of higher fuel costs during 2000.  The more than 20% increase in operating taxes and licenses expense was due to the 13% increase of the tractor fleet and higher state base plate license cost per tractor in 2000.  The decline in general and administrative expenses was primarily a result of unusually high bad debt expense in 1999 and system support charges paid by TPC in 2000.  Those payments to the Company from TPC reduced general and administrative expenses.  Gain and loss on equipment dispositions are also included in this classification and totaled a loss of $267,000 and $849,000 in 2000 and 1999, respectively.  The lower year 2000 interest expense reflected the reduction of average debt balances, partly due to the use of the proceeds from sale and leaseback transactions to pay outstanding debt balances.

14



        Equity in earnings of associated companies reflects the Company’s share of operating results for TPC and for the Mexican joint venture.  Equity in earnings amounts include the following:

 

Year Ended December 31

 

 

(000)

 

 

2000

 

1999

 

TPC

$

440

 

 

Mexican joint venture

4,337

 

3,141

 

 

$

4,777

 

$

3,141

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flow

 

        The Company generatesWe generate significant amounts of cash from operating activities.  Net cash provided by operating activities increased towas $174 million in 2002, $172 million in 2001 compared toand $125 million in 2000.  While 2002 and 2001 reflected a typical level of cash provided by operating activities, 2000 and $136 million in 1999.  The increase from 2000 to 2001 was mainly due to increases in prepaid lease expense related toimpacted by a significant upfront paymentprepayment for an operating lease which was funded in lateearly 2000.  The decrease in cash provided by operations in 2000 versus 1999 is due to the items mentioned above and the Company’s decision to acquire revenue equipment through capital and operating leases rather than purchase.

        Net cashCash flows used in investing activities was $24 million in 2001, $100 million in 2000primarily reflect additions to and $19 million in 1999.  The primary usedispositions from our fleet of funds for investing activities was the acquisition of new revenue equipment.  During the latter part of 2000 through late 2001, we utilized capital leases to acquire tractors.  Tractor additions since October 2001 have been purchased.  The majority of our trailing equipment additions since October 2000 have been under operating lease programs.  Net invested cash was reduced in 2001, primarily due to the utilization of operating and capital leases.  Net invested cash in 1999 was reducedprovided by proceeds from a sale and leaseback of approximately $175 million of trailing equipment.

        Cash used in financing activities was $103in 2002 reflects our $68 million secondary stock offering, which closed in 2001, $32 million in 2000 and $113 million in 1999.  The increase in 2001 is due primarily to net repaymentsJune of commercial paper.  The decrease in 2000 when compared to 1999 is due to the use of proceeds received from the sale leaseback transaction in 1999 to reduce the outstanding2002.  We discontinued a commercial paper balance at December 31, 1999.

borrowing program during 2001 and ceased paying cash dividends in early 2000.

 

SELECTED BALANCE SHEET DATA

 

As of December 31

 

2001

 

2000

 

1999

 

 

2002

 

2001

 

2000

 

Working capital ratio

 

1.45

 

1.04

 

1.09

 

 

1.33

 

1.45

 

1.04

 

Current maturities of long-term debt and lease obligations (millions)

 

$

38

 

$

101

 

$

60

 

 

$

124

 

$

38

 

$

101

 

Total debt and capitalized lease obligations (millions)

 

$

392

 

$

401

 

$

328

 

 

$

343

 

$

392

 

$

401

 

Total debt to equity

 

.86

 

.96

 

.84

 

 

.58

 

.86

 

.96

 

Total debt as a percentage of total capital

 

.46

 

.49

 

.46

 

 

.37

 

.46

 

.49

 

 

 

 

 

 

 

 

 

17



 

From time to time theour Board of Directors authorizes the repurchase of Companyour common stock.  Purchases of CompanyJBHT stock were:

 

 

2001

 

2000

 

1999

 

2002

 

2001

 

2000

 

Number of shares acquired

 

 

500,000

 

 

 

 

500,000

 

Price range of shares

 

 

$10.94 - $16.13

 

 

 

 

$10.94 - $16.13

 

 

Liquidity

 

15



Liquidity

        The Company’s  continuedOur need for capital typically has resulted from the acquisition of revenue equipment required to support our growth is primarily contingent upon it’s abilityand the replacement of older tractors and trailing equipment with new, late model equipment.  We are frequently able to provide  funds in order to obtain revenue equipment.  Various financing arrangements, including purchases,accelerate or postpone a portion of equipment replacements depending on market conditions.  We have recently obtained capital leasesthrough a secondary common stock offering, revolving lines of credit and cash generated from operations.  We have also utilized capital and operating leases areto acquire revenue equipment.

As mentioned above, we utilized capital leases to acquire tractors from time to time to fund revenue equipment additions.  A tractor capital lease program was initiatedlate 2000 through late 2001.  We started purchasing tractors and containers in July of 2000 and the majority of tractor acquisitions through September 2001 were under this program.  Tractor additions since October of 2001 and plan to continue purchasing tractors and containers in the foreseeable future.  We have been purchased with excess cash flow.   The majority ofacquiring dry van trailing equipment additions since October of 2000, have beenprimarily under operating lease programs.  EffectiveWe currently expect to spend in Novemberthe range of 2001,$220 million, net of expected proceeds from sale or trade-in allowances, on revenue equipment for the JBI business unit began to take deliveryfull calendar year of the first of 6,000 new containers.  The Company expects to purchase these containers and the majority of tractor acquisitions during 2002 using funds provided from operations and short-term debt.2003.

 

We are authorized to borrow up to $150 million under our current revolving lines of credit which expire November 14, 2005.   We had no balances outstanding under these lines at December 31, 2002.  Under the terms of its various financingour credit and leasingnote agreements, the Company iswe are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios.  The Company wasWe were in compliance with all of the financial covenants at December 31, 2001.  One operating lease arrangement requires the Company to maintain an investment grade credit rating for the Company’s Senior unsecured debt.  The Company currently is rated BBB by Standard & Poors and Baa3 by Moody’s.  A credit rating downgrade to BB+ by Standard & Poors or to Ba1 by Moody’s, while not expected by the Company, could result in an adjustment to the rental payments under the obligation.  Management estimates that such a credit downgrade could result in a $1.9 million annual increase in the associated rental payments.

Contractual Cash Obligations

2002.  As of December 31, 2001

(000)

 

 

Amounts Due By Period

 

 

 

 

 

Less Than

 

One To

 

Four To

 

After

 

 

 

Total

 

One Year

 

Three Years

 

Five Years

 

Five Years

 

Operating Leases

 

$

321,212

 

$

70,078

 

$

106,447

 

$

92,940

 

$

51,747

 

Capital leases

 

188,381

 

38,514

 

149,867

 

 

 

Senior and subordinated

 

 

 

 

 

 

 

 

 

 

 

notes payable

 

223,260

 

10,000

 

213,260

 

 

 

Subtotal

 

$

732,853

 

$

118,592

 

$

469,574

 

$

92,940

 

$

51,747

 

Commitments to acquire

 

 

 

 

 

 

 

 

 

 

 

revenue equipment

 

128,000

 

128,000

 

 

 

 

Total

 

$

860,853

 

$

246,592

 

$

469,574

 

$

92,940

 

$

51,747

 

Financing Commitments

As of December 31, 2001

(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

 

 

 

 

        In January of 2001, Moody’s Investors Service downgraded the ratings of the Company’s senior unsecured debt to Baa3 from Baa2 and its commercial paper to Prime-3 from Prime-2.  The Company is authorized to borrow up to $165 million under its current short-term revolving line of credit, which matures November 13, 2002.  There was no balance

16



outstanding on the revolving line of credit at December 31, 2001.  At December 31, 2001, the Company2002, we had committed to purchase approximately $128$184 million of revenue and service equipment, net of proceeds, from sale or trade-in allowances.  Additional capital spending for new revenue equipment is anticipated during 2002.  However, funding for such expenditures is expected to come fromWe believe that our current liquid assets, cash generated from operations and existing borrowing facilities.  The Company had approximately $165 millionour revolving lines of unused borrowing capacity atcredit will provide sufficient funds for our operating and capital requirements for the foreseeable future.

Contractual Cash Obligations

As of December 31, 2002

(000)

 

 

Amounts Due By Period

 

 

 

Total

 

One Year
Or Less

 

One To
Three Years

 

Four To
Five Years

 

After
Five Years

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Leases

 

$

283,616

 

$

74,233

 

$

110,227

 

$

80,769

 

$

18,387

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital leases

 

149,886

 

34,481

 

115,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior and subordinated notes payable

 

202,010

 

97,010

 

105,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

$

635,512

 

$

205,724

 

$

330,632

 

$

80,769

 

$

18,387

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments to acquire revenue equipment

 

184,000

 

184,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

819,512

 

$

389,724

 

$

330,632

 

$

80,769

 

$

18,387

 

18



Financing Commitments

As of December 31, 2002

(000)

 

 

Commitments Expiring By Period

 

 

 

Total

 

One Year
Or Less

 

One To
Three Years

 

Four To
Five Years

 

After
Five Years

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit arrangements

 

$

150,000

 

$

 

$

150,000

 

 

—-

 

Standby letters of credit

 

26,510

 

26,510

 

 

 

 

Total

 

$

176,510

 

$

26,510

 

$

150,000

 

 

 

Risk Factors

In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million.  These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to examine.  We have voluntarily disclosed these transactions to the IRS and in October of 2002, the IRS began their examination of the specific facts of these transactions.  If the IRS challenges our transactions, we intend to vigorously defend them.  However, if the IRS successfully challenges these transactions, and is successful in disallowing some or all of the tax benefits that we realized, these actions could have a material adverse effect on our financial condition and operating results.

Our effective income tax rates were 30.8%, 23.5% and 15.0% for the years 2002, 2001 under itsand 2000, respectively.  We implemented an accountable expense reimbursement plan for a portion of our drivers in February of 2003 (driver per diem).  While this plan will generally benefit both JBHT and the majority of our drivers, it results in a higher effective income tax rate.  Partly as a result of this change and anticipated higher earnings, we are currently estimating an effective income tax rate of 37% to 39% for calendar year 2003.

In 1997, the Equal Employment Opportunity Commission (EEOC) commenced an action against us in Federal District Court alleging that we had violated the Americans With Disabilities Act by refusing to hire as truck drivers certain individuals who were taking certain medications.  The EEOC sought injunctive relief and damages for a group of 540 individuals.  The District Court dismissed the EEOC’s complaint on our motion for summary judgment.  The EEOC appealed this decision to the Federal Court of Appeals.  The Federal Court of Appeals upheld the District Court’s decision in our favor.  However, the EEOC may still appeal this case to higher courts.  If the higher courts rule against us, we could be subject to a new trial in the District Court.

In a separate action filed in Michigan in November 2001, by a group of eight former employees, the plaintiffs alleged that we violated the Elliott-Larsen Civil Rights Act of Michigan.  In February 2003, we reached an agreement to settle this complaint.  The terms of the settlement are to remain confidential by agreement, however, this contemplated settlement will not materially impact our financial statements or results of operations.

In October 2002, we were assessed a judgment of approximately $7 million for an accident that occurred in August 2001.  We are currently in dispute over the total value of this judgment and plan to file the appropriate appeals.  We believe, based on advise from outside counsel, that it is probable that this award will be substantially reduced by the appellate court.  However, if we are unsuccessful in our appeal to the appellate court, the ultimate payments to the claimant could have a material effect on our financial statements.

Inflation could have a material impact on our business.  A prolonged or unusual period of rising costs could result in fuel, wages, insurance, interest or other costs increasing rapidly and could adversely affect our results of operations if we were unable to increase freight rates accordingly.  The impact of inflation has been minimal during the past three years.

Our business is subject to general economic and business factors that are largely out of our control, any one of which could have a material adverse effect on our results of operations.  These factors include significant increases or rapid fluctuations in fuel costs, excess capacity in the trucking industry, surpluses in the market for used equipment, interest rates, fuel taxes, license and registration fees, insurance premiums, self-insurance levels and difficulty attracting and retaining qualified drivers and independent contractors.  We are also affected by recessionary economic cycles and downturns in customers’ business cycles.

We operate in a highly competitive and fragmented industry.  Numerous factors could impair our ability to maintain our current profitability and to compete with other carriers.  We compete with many other truckload carriers of varying sizes, some of which have more equipment and greater capital resources that we do.  Some of our competitors periodically reduce their freight rates to gain or retain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain rates or maintain our profit margins.

19



We depend on third parties in the operation of our business.  Our Intermodal business segment utilizes a number of railroads in the performance of transportation services.  While the majority of these services are provided pursuant to written agreements with the railroads, the inability to utilize one or more of these railroads could have a material adverse effect on our business or operating results.

If we are unable to retain our key employees, our business, financial condition and results of operations could be harmed.  We are highly dependent upon the services of a number of our officers and other key employees.  We do not have employment agreements with any of these employees.  The loss of any of their services could have a materially adverse effect on our operations or future profitability.

As part of a 1998 consent decree with the U.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines which were produced subsequent to October 1, 2002.  We have not yet had sufficient time to test these new engines.  We will continue to test a limited number of the new EPA compliant engines.  In November of 2002, we committed revolving lineto purchase approximately 2,100 new tractors, primarily for our JBI and DCS segments, which will be equipped with Mercedes engines.  These engines are not covered by the EPA’s October 1, 2002 rules.  Except for these 2,100 tractors, which will be utilized primarily for local and regional operations, we expect to limit new tractor purchases until we are able to complete further testing and evaluation of credit.the EPA compliant engines.  In addition, these new EPA compliant engines are expected to increase the acquisition and operating costs of these tractors and may negatively impact our future profitability.

Fuel and fuel taxes currently represent our third largest general expense category.  During the past three years fuel cost per gallon has varied significantly, with prices frequently changing as much as $.10 to $.15 per gallon between consecutive months.  We have a fuel surcharge revenue program in place with the majority of our customers, which has historically enabled us to recover the majority of higher fuel costs.  Most of these programs automatically adjust weekly depending on the cost of fuel.  However, there can be timing differences between a change in our fuel cost and the timing of the fuel surcharges billed to our customers.  In addition, we incur additional costs when fuel prices rise which cannot be fully recovered due to our engines being idled during cold weather and empty or out-of-route miles which cannot be billed to customers.  In February of 2003, fuel prices averaged approximately 15% higher than December of 2002 and 45% higher than February of 2002.  Rapid increases in fuel costs or shortages of fuel could have a material adverse effect on our operations or future profitability.  As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In JulyJune 2001, the Financial Accounting Standards Board (FASB) issued StatementSFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143).  SFAS No. 143 requires us to record the fair value of Financialan asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.  We also record a corresponding asset which is depreciated over the life of the asset.  Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation.  We were required to adopt SFAS No. 143 on January 1, 2003.   The adoption of SFAS 143 will not have a material effect on our financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting Standardsand Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 141 “Business Combinations” (FAS 141)5, 57 and Statement107 and a rescission of Financial Accounting StandardsFASB Interpretation No. 142 “Goodwill and Other Intangible Assets” (FAS 142)34FAS 141 requires all business combinations initiated after June 30, 2001This Interpretation elaborates on the disclosures to be accounted for using the purchase method. Under FAS 142, goodwillmade by a guarantor in its interim and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assetsannual financial statements about its obligations under guarantees issued.   The Interpretation also clarifies that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of FAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Companya guarantor is required to adopt FAS 142 effective January 1, 2002. .recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken.  The Company has no negative goodwill as contemplated under Statements 141initial recognition and 142 relatedmeasurement provisions of the Interpretation are applicable to its equity method investments.  The adoption of this new accounting pronouncement isguarantees issued or modified after December 31, 2002 and are not expected to have a material impacteffect on our financial statements.  The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002, and are included in the Company’snotes to our consolidated financial position or results of operations.statements.

 

In July 2001,December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123.  This Statement amends FASB Statement No. 123,  Accounting for Stock-Based Compensation, to provide alternative methods of Financial Accounting Standards No. 143, “Accountingtransition for Asset Retirement Obligations”.  Statement 143 requires entitiesa voluntary change to record the fair value method of a liabilityaccounting for an asset retirement obligationstock-based employee compensation.  In addition, this Statement amends the disclosure requirements of

20



Statement No. 123 to require prominent disclosures in the period in which it is incurredboth annual and a corresponding increase in the carrying amountinterim financial statements.  Certain of the related long-lived asset. Statement 143 is effectivedisclosure modifications are required for fiscal years beginning after June 15, 2002.  The Company is currently assessing the impact of Statements 143 on its consolidated financial condition and results of operations.

        In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (FAS 144), which supersedes both Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (FAS 121) and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” (Opinion 30), for the disposal of a segment of a business (as previously defined in that Opinion). FAS 144 retains the fundamental provisions in FAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with FAS 121. For example, FAS 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. FAS 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike FAS 121, an impairment assessment under FAS 144 will never result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under FAS No. 142, “Goodwill and Other Intangible Assets.”

        The Company is required to adopt FAS 144 no later than its first fiscal year beginningending after December 15, 2001. Management does not expect2002 and are included in the adoption of FAS 144 for long-lived assets held for usenotes to have a material impact on the Company’sour consolidated financial statements because the impairment assessment under FAS 144 is largely unchanged from FAS 121. The provisions of this statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities and therefore, will depend on future actions initiated by management. As a result, management cannot determine the potential effects that adoption of FAS 144 will have on the Company’s financial statements with respect to future disposal decisions.statements.

 

ITEM 7a.   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 issuance of short-term debt. The CompanyWe from time to time utilizesutilize interest rate swaps to mitigate the effects of interest rate changes;  none were

17



outstanding at December 31, 2001.2002.  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 December 31, 2001.2002.  At December 31, 2001,2002, 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 year ended December 31, 2001.2002.  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 itsour 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 fluctuations in foreign currency exchange rates.

 

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors.  Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges.  We cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases.  As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

18



 

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

PAGEIndependent Auditors’ Report

 

Independent Auditors’ Report

20

Consolidated Balance Sheets as of December 31, 20012002 and 2000

212001

 

Consolidated Statements of Earnings for years ended December 31, 2002, 2001, 2000, and 1999

232000

 

Consolidated Statements of Stockholders’ Equity and Comprehensive Income for years ended December 31, 2002, 2001, 2000, and 1999

242000

 

Consolidated Statements of Cash Flows for years ended December 31, 2002, 2001, 2000, and 1999

252000

 

Notes to Consolidated Financial Statements

27

 

1921



 

Independent Auditors’ Report

 

The Board of Directors

J. B. Hunt Transport Services, Inc.:

We have audited the accompanying consolidated balance sheets of J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 20012002 and 2000,2001, and the related consolidated statements of earnings, stockholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2001.2002.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 20012002 and 2000,2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001,2002, in conformity with accounting principles generally accepted in the United States of America.

 

As more fully described in Note 12, retained earnings at December 31, 1998,  has been restated to reflect an increase in insurance claims payable.

 

Tulsa, Oklahoma

February 1, 2002

20



J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2001 and 2000

(Dollars in thousands, except per share amounts)

 

 

2001

 

2000
(As restated, see Note 12)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

 49,245

 

5,370

 

Trade accounts receivable

 

233,246

 

225,797

 

Inventories

 

8,915

 

7,233

 

Prepaid licenses and permits

 

17,507

 

17,224

 

Other current assets

 

75,886

 

75,347

 

 

 

 

 

 

 

Total current assets

 

384,799

 

330,971

 

 

 

 

 

 

 

Property and equipment, at cost:

 

 

 

 

 

Revenue and service equipment

 

1,067,465

 

1,117,689

 

Land

 

19,834

 

19,987

 

Structures and improvements

 

78,469

 

76,159

 

Furniture and office equipment

 

98,201

 

120,622

 

Total property and equipment

 

1,263,969

 

1,334,457

 

Less accumulated depreciation

 

432,258

 

489,282

 

Net property and equipment

 

831,711

 

845,175

 

Other assets (note 9)

 

43,788

 

55,775

 

 

 

 

 

 

 

 

 

$

 1,260,298

 

1,231,921

 

(continued)

21



J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2001 and 2000

(Dollars in thousands, except per share amounts)

 

 

 

 

2000

 

 

 

 

 

(As restated,

 

 

 

2001

 

see Note 12)

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt (note 2)

 

$

10,000

 

84,400

 

Current installments of obligations under capital leases (note 8)

 

28,426

 

16,489

 

Trade accounts payable

 

163,291

 

158,585

 

Claims accruals

 

18,003

 

13,260

 

Accrued payroll

 

30,251

 

29,148

 

Other accrued expenses

 

12,713

 

10,389

 

Deferred income taxes (note 4)

 

3,150

 

6,882

 

 

 

 

 

 

 

Total current liabilities

 

265,834

 

319,153

 

 

 

 

 

 

 

Long-term debt, excluding current maturities (note 2)

 

212,950

 

222,694

 

Obligations under capital leases, excluding current installments (note 8)

 

140,657

 

77,694

 

Claims accruals

 

5,275

 

21,274

 

Deferred income taxes (note 4)

 

177,265

 

173,282

 

 

 

 

 

 

 

Total liabilities

 

801,981

 

814,097

 

 

 

 

 

 

 

Stockholders’ equity (notes 2, 3 and 12):

 

 

 

 

 

Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding

 

 

 

Common stock, par value $.01 per share. Authorized 100,000,000  shares; issued 39,009,858 shares

 

390

 

390

 

Additional paid-in capital

 

115,319

 

107,090

 

Retained earnings

 

407,987

 

375,042

 

Accumulated other comprehensive loss

 

(7,037

)

(6,502

)

 

 

516,659

 

476,020

 

 

 

 

 

 

 

Treasury stock, at cost (3,031,000 shares in 2001 and 3,795,400 shares in 2000)

 

(58,342

)

(58,196

)

 

 

 

 

 

 

Total stockholders’ equity

 

458,317

 

417,824

 

 

 

 

 

 

 

Commitments and contingencies (notes 2, 4, 5, 6 and 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,260,298

 

1,231,921

 

See accompanying notes to consolidated financial statements.January 30, 2003

 

22



J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Earnings

Years ended December 31, 2001, 2000 and 1999

(Dollars in thousands, except per share amounts)

 

 

2001

 

2000

 

1999

 

Operating revenues

 

$

2,100,305

 

2,160,447

 

2,045,073

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Salaries, wages and employee benefits (note 5)

 

790,210

 

769,393

 

713,378

 

Rents and purchased transportation

 

604,542

 

694,756

 

689,561

 

Fuel and fuel taxes

 

226,102

 

242,835

 

169,407

 

Operating supplies and expenses

 

145,850

 

130,947

 

125,748

 

Depreciation and amortization

 

142,755

 

134,391

 

148,968

 

Insurance and claims

 

42,381

 

38,982

 

40,555

 

Operating taxes and licenses

 

32,616

 

32,641

 

27,118

 

Communication and utilities

 

24,358

 

24,528

 

21,309

 

General and administrative expenses, net of gains

 

19,282

 

28,563

 

34,740

 

Total operating expenses

 

2,028,096

 

2,097,036

 

1,970,784

 

Operating income

 

72,209

 

63,411

 

74,289

 

Interest expense

 

(27,044

)

(25,747

)

(28,346

)

Equity in earnings (loss) of associated companies

 

(2,083

)

4,777

 

3,141

 

Earnings before income taxes

 

43,082

 

42,441

 

49,084

 

Income taxes (note 4)

 

10,137

 

6,366

 

17,175

 

Net earnings

 

$

32,945

 

36,075

 

31,909

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.93

 

1.02

 

0.90

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.91

 

1.02

 

0.89

 

See accompanying notes to consolidated financial statements.

23



J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

Years ended December 31, 2001, 2000 and 1999

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Total

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Stockholders’

 

 

 

Common

 

Paid-in

 

Comprehensive

 

Retained

 

Comprehensive

 

Treasury

 

Equity

 

 

 

Stock

 

Capital

 

Income

 

Earnings

 

Loss

 

Stock

 

(Notes 2 and 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 1998 (As restated — Note 12)

 

$

390

 

106,985

 

 

 

315,966

 

(5,621

)

(52,242

)

365,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of subsidiary stock

 

 

200

 

 

 

 

 

 

200

 

Tax benefit of stock options exercised

 

 

55

 

 

 

 

 

 

55

 

Sale of treasury stock to employees

 

 

(65

)

 

 

 

 

477

 

412

 

Forfeiture of restricted stock to employees

 

 

(3

)

 

 

 

 

(15

)

(18

)

Cash dividends paid ($.20 per share)

 

 

 

 

 

(7,126

)

 

 

(7,126

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

31,909

 

31,909

 

 

 

31,909

 

Foreign currency translation adjustments

 

 

 

297

 

 

297

 

 

297

 

Total comprehensive income

 

 

 

$

32,206

 

 

 

 

 

Balances at December 31, 1999 (As restated — Note 12)

 

390

 

107,172

 

 

 

340,749

 

(5,324

)

(51,780

)

391,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remeasurement of stock options

 

 

110

 

 

 

 

 

110

 

Tax benefit of stock options exercised

 

 

31

 

 

 

 

 

31

 

Sale of treasury stock to employees

 

 

(223

)

 

 

 

1,160

 

937

 

Repurchase of treasury stock

 

 

 

 

 

 

(7,576

)

(7,576

)

Cash dividends paid ($0.05 per share)

 

 

 

 

(1,782

)

 

 

(1,782

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

36,075

 

36,075

 

 

 

36,075

 

Foreign currency translation adjustments

 

 

 

(1,178

)

 

(1,178

)

 

(1,178

)

Total comprehensive income

 

 

 

$

34,897

 

 

 

 

 

Balances at December 31, 2000 (As restated — Note 12)

 

$

390

 

107,090

 

 

 

375,042

 

(6,502

)

(58,196

)

417,824

 

Tax benefit of stock options exercised

 

 

5,361

 

 

 

 

 

 

5,361

 

Sale of treasury stock to employees

 

 

2,868

 

 

 

 

 

(146

)

2,722

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

32,945

 

32,945

 

 

 

32,945

 

Foreign currency translation adjustments

 

 

 

(535

)

 

(535

)

 

(535

)

Total comprehensive income

 

 

 

$

32,410

 

 

 

 

 

Balances at December 31, 2001

 

$

390

 

115,319

 

 

 

407,987

 

(7,037

)

(58,342

)

458,317

 

See accompanying notes to consolidated financial statements.

24



 

J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash FlowsBalance Sheets

Years ended

December 31, 2001, 20002002 and 19992001

(Dollars in thousands)thousands, except per share amounts)

 

 

 

2001

 

2000

 

1999

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net earnings

 

$

32,945

 

36,075

 

31,909

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

142,755

 

134,391

 

148,968

 

(Gain) loss on sale of revenue equipment

 

(4,833

)

267

 

849

 

Provision for deferred income taxes

 

251

 

5,843

 

16,146

 

Equity in (earnings) loss of associated companies

 

2,083

 

(4,777

)

(3,141

)

Tax benefit of stock options exercised

 

5,361

 

31

 

55

 

Remeasurement of options

 

 

110

 

 

Forfeiture of restricted stock

 

 

 

(18

)

Amortization of discount

 

256

 

55

 

594

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Trade accounts receivable

 

(7,449

)

12,776

 

(54,206

)

Other assets

 

3,353

 

(58,057

)

(26,624

)

Trade accounts payable

 

4,706

 

(21,424

)

32,042

 

Claims accruals

 

(11,256

)

10,078

 

(5,141

)

Accrued payroll and other accrued expenses

 

3,427

 

9,705

 

(5,760

)

Net cash provided by operating

 

 

 

 

 

 

 

activities

 

171,599

 

125,073

 

135,673

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

(138,466

)

(225,672

)

(224,795

)

Investment in associated company

 

 

(5,000

)

 

Proceeds from sale of equipment

 

110,711

 

126,350

 

214,493

 

Decrease (increase) in other assets

 

3,512

 

4,404

 

(9,128

)

Net cash used in investing activities

 

(24,243

)

(99,918

)

(19,430

)

 

 

2002

 

2001

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

80,628

 

49,245

 

Trade accounts receivable

 

237,156

 

233,246

 

Inventories

 

9,515

 

8,915

 

Prepaid licenses and permits

 

20,054

 

17,507

 

Other current assets

 

85,828

 

75,886

 

Total current assets

 

433,181

 

384,799

 

 

 

 

 

 

 

Property and equipment, at cost:

 

 

 

 

 

Revenue and service equipment

 

1,096,809

 

1,067,465

 

Land

 

20,469

 

19,834

 

Structures and improvements

 

80,667

 

78,469

 

Furniture and office equipment

 

107,708

 

98,201

 

 

 

 

 

 

 

Total property and equipment

 

1,305,653

 

1,263,969

 

Less accumulated depreciation

 

461,091

 

432,258

 

Net property and equipment

 

844,562

 

831,711

 

Other assets (notes 7 and 9)

 

40,985

 

43,788

 

 

 

$

1,318,728

 

1,260,298

 

 

(continued)

2523



 

J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows, ContinuedBalance Sheets

Years ended

December 31, 2001, 20002002 and 19992001

(Dollars in thousands)thousands, except per share amounts)

 

 

 

2001

 

2000

 

1999

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Net borrowings (repayments) of commercial paper borrowings

 

$

(74,400

)

39,400

 

(96,350

)

Repayments of long-term debt

 

(10,000

)

(60,000

)

(10,000

)

Principal payments under capital lease obligations

 

(21,803

)

(3,370

)

 

Proceeds from sale of subsidiary stock

 

 

 

200

 

Proceeds from sale of treasury stock

 

2,722

 

937

 

412

 

Repurchase of treasury stock

 

 

(7,576

)

 

Dividends paid

 

 

(1,782

)

(7,126

)

Net cash used in financing activities

 

(103,481

)

(32,391

)

(112,864

)

Net increase (decrease) in cash and cash equivalents

 

43,875

 

(7,236

)

3,379

 

Cash and cash equivalents at beginning of year

 

5,370

 

12,606

 

9,227

 

Cash and cash equivalents at end of year

 

$

49,245

 

5,370

 

12,606

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

Interest

 

$

27,248

 

26,138

 

28,944

 

Income taxes

 

$

779

 

3,654

 

95

 

 

 

 

 

 

 

 

 

Non-cash activities:

 

 

 

 

 

 

 

Capital lease obligations for revenue equipment

 

$

96,703

 

97,553

 

 

Assets contributed to associated company

 

$

 

2,927

 

 

 

 

2002

 

2001

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt (note 2)

 

$

97,010

 

10,000

 

Current installments of obligations under capital leases (note 8)

 

27,138

 

28,426

 

Trade accounts payable

 

117,931

 

163,291

 

Claims accruals

 

14,706

 

18,003

 

Accrued payroll

 

46,511

 

30,251

 

Other accrued expenses

 

11,291

 

12,713

 

Deferred income taxes (note 4)

 

10,742

 

3,150

 

 

 

 

 

 

 

Total current liabilities

 

325,329

 

265,834

 

 

 

 

 

 

 

Long-term debt, excluding current maturities (note 2)

 

104,815

 

212,950

 

Obligations under capital leases, excluding current installments (note 8)

 

114,152

 

140,657

 

Other long-term liabilities

 

1,997

 

5,275

 

Deferred income taxes (note 4)

 

181,948

 

177,265

 

 

 

 

 

 

 

Total liabilities

 

728,241

 

801,981

 

 

 

 

 

 

 

Stockholders’ equity (notes 2, 3 and 12):

 

 

 

 

 

Preferred stock, par value $100.  Authorized 10,000,000 shares; none outstanding

 

 

 

Common stock, par value $.01 per share.  Authorized 100,000,000 shares; issued 41,774,858 and 39,009,858 shares at December 31, 2002 and 2001, respectively

 

418

 

390

 

Additional paid-in capital

 

184,683

 

115,319

 

Retained earnings

 

459,803

 

407,987

 

Accumulated other comprehensive loss

 

 

(7,037

)

 

 

644,904

 

516,659

 

Treasury stock, at cost (2,457,280 shares in 2002 and 3,030,828 shares in 2001)

 

(54,417

)

(58,342

)

Total stockholders’ equity

 

590,487

 

458,317

 

Commitments and contingencies (notes 2, 4, 6 and 8)

 

 

 

 

 

 

 

$

1,318,728

 

1,260,298

 

 

See accompanying notes to consolidated financial statements.

 

2624



 

J.B.J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Earnings

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)

 

 

2002

 

2001

 

2000

 

Operating revenues

 

$

2,247,886

 

2,100,305

 

2,160,447

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits (note 5)

 

818,318

 

790,210

 

769,393

 

Rents and purchased transportation

 

698,455

 

604,542

 

694,756

 

Fuel and fuel taxes

 

210,632

 

226,102

 

242,835

 

Depreciation and amortization

 

145,848

 

142,755

 

134,391

 

Operating supplies and expenses

 

130,853

 

145,850

 

130,947

 

Insurance and claims

 

56,132

 

42,381

 

38,982

 

Operating taxes and licenses

 

32,797

 

32,616

 

32,641

 

General and administrative expenses, net of gains

 

30,029

 

19,282

 

28,563

 

Communication and utilities

 

23,859

 

24,358

 

24,528

 

Total operating expenses

 

2,146,923

 

2,028,096

 

2,097,036

 

Operating income

 

100,963

 

72,209

 

63,411

 

Interest expense

 

(24,763

)

(27,044

)

(25,747

)

Equity in earnings (loss) of associated companies

 

(1,353

)

(2,083

)

4,777

 

Earnings before income taxes

 

74,847

 

43,082

 

42,441

 

Income taxes (note 4)

 

23,031

 

10,137

 

6,366

 

Net earnings

 

$

51,816

 

32,945

 

36,075

 

Basic earnings per share

 

$

1.36

 

0.93

 

1.02

 

Diluted earnings per share

 

$

1.33

 

0.91

 

1.02

 

See accompanying notes to consolidated financial statements.

25



J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands, except per share amounts)

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Other
Comprehensive
Loss

 

Treasury
Stock

 

Stockholders’
Equity
(Notes 2 and 3)

 

Balances at December 31, 1999

 

$

390

 

107,172

 

340,749

 

(5,324

)

(51,780

)

391,207

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

36,075

 

 

 

36,075

 

Foreign currency translation adjustments

 

 

 

 

(1,178

)

 

(1,178

)

Total comprehensive income

 

 

 

 

 

 

34,897

 

Remeasurement of stock options

 

 

110

 

 

 

 

110

 

Tax benefit of stock options exercised

 

 

31

 

 

 

 

31

 

Sale of treasury stock to employees

 

 

(223

)

 

 

1,160

 

937

 

Repurchase of treasury stock

 

 

 

 

 

(7,576

)

(7,576

)

Cash dividends paid ($0.05 per share)

 

 

 

(1,782

)

 

 

(1,782

)

Balances at December 31, 2000

 

$

390

 

107,090

 

375,042

 

(6,502

)

(58,196

)

417,824

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

32,945

 

 

 

32,945

 

Foreign currency translation adjustments

 

 

 

 

(535

)

 

(535

)

Total comprehensive income

 

 

 

 

 

 

32,410

 

Tax benefit of stock options exercised

 

 

5,361

 

 

 

 

5,361

 

Sale of treasury stock to employees

 

 

2,868

 

 

 

(146

)

2,722

 

Balances at December 31, 2001

 

$

390

 

115,319

 

407,987

 

(7,037

)

(58,342

)

458,317

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

51,816

 

 

 

51,816

 

Foreign currency translation adjustments

 

 

 

 

7,037

 

 

7,037

 

Total comprehensive income

 

 

 

 

 

 

58,853

 

Common stock issued

 

28

 

68,066

 

 

 

 

68,094

 

Tax benefit of stock options exercised

 

 

5,822

 

 

 

 

5,822

 

Stock option exercises, net of stock repurchased for payroll taxes

 

 

(4,524

)

 

 

3,925

 

(599

)

Balances at December 31, 2002

 

$

418

 

184,683

 

459,803

 

 

(54,417

)

590,487

 

See accompanying notes to consolidated financial statements.

26



J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands)

 

 

2002

 

2001

 

2000

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net earnings

 

$

51,816

 

32,945

 

36,075

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

145,848

 

142,755

 

134,391

 

(Gain) loss on sale of revenue equipment

 

1,798

 

(4,833

)

267

 

Provision for deferred income taxes

 

12,275

 

251

 

5,843

 

Equity in (earnings) loss of associated companies

 

1,353

 

2,083

 

(4,777

)

Tax benefit of stock options exercised

 

5,822

 

5,361

 

31

 

Remeasurement of options

 

 

 

110

 

Amortization of discount

 

125

 

256

 

55

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Trade accounts receivable

 

(3,910

)

(7,449

)

12,776

 

Other assets

 

(3,667

)

3,353

 

(58,057

)

Trade accounts payable

 

(45,360

)

4,706

 

(21,424

)

Claims accruals

 

(6,575

)

(11,256

)

10,078

 

Accrued payroll and other accrued expenses

 

14,838

 

3,427

 

9,705

 

Net cash provided by operating activities

 

174,363

 

171,599

 

125,073

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

(239,341

)

(138,466

)

(225,672

)

Proceeds from sale of equipment

 

80,005

 

110,711

 

126,350

 

Decrease (increase) in other assets

 

(2,096

)

3,512

 

(596

)

Net cash used in investing activities

 

(161,432

)

(24,243

)

(99,918

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Net borrowings (repayments) of commercial paper borrowings

 

$

 

(74,400

)

39,400

 

Repayments of long-term debt

 

(21,250

)

(10,000

)

(60,000

)

Principal payments under capital lease obligations

 

(27,793

)

(21,803

)

(3,370

)

Proceeds from sale of common stock

 

68,094

 

 

 

Stock option exercise

 

3,313

 

2,722

 

937

 

Stock repurchased for payroll taxes

 

(3,912

)

 

 

Repurchase of treasury stock

 

 

 

(7,576

)

Dividends paid

 

 

 

(1,782

)

Net cash provided by (used in) financing activities

 

18,452

 

(103,481

)

(32,391

)

Net increase (decrease) in cash and cash equivalents

 

31,383

 

43,875

 

(7,236

)

Cash and cash equivalents at beginning of year

 

49,245

 

5,370

 

12,606

 

Cash and cash equivalents at end of year

 

$

80,628

 

49,245

 

5,370

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

Interest

 

$

25,063

 

27,248

 

26,138

 

Income taxes

 

$

22,953

 

779

 

3,654

 

Non-cash activities:

 

 

 

 

 

 

 

Capital lease obligations for revenue equipment

 

$

 

96,703

 

97,553

 

Assets contributed to associated company

 

$

 

 

2,927

 

Sale of joint venture

 

 

 

 

 

 

 

Non-monetary proceeds

 

$

1,161

 

 

 

Note receivable

 

$

5,876

 

 

 

See accompanying notes to consolidated financial statements.

27



J. B. HUNT TRANSPORT SERVICES, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2002, 2001 2000 and 19992000

(1)       Summary of Significant Accounting Policies

(a)Description of Business

J. B. Hunt Transport Services, Inc. (JBHT), together with itsour wholly-owned subsidiaries, (“Company”), is a diversified transportation services company operating under the jurisdiction of the U.S. Department of Transportation and various state regulatory agencies.

 

As of December 31, 2001 the Company has three distinct operating segments: Truck; Intermodal; and Dedicated Contract Services.  For years prior, the Company had four operating segments:  Truck; Intermodal; Dedicated Contract Services; and Logistics.  See note 10.

(b)Principles of Consolidation and Critical Accounting Policies

The

JBHT’s consolidated financial statements include theour financial statements of the Company and itsour wholly-owned subsidiaries.  All significant intercompany balances and transactions have been elimi­natedeliminated in consolidation.

Our discussion and analysis of financial condition and operations are based on our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and contained within this report.  Certain amounts included in or affecting our financial statements and related disclosure must be estimated, requiring us to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared.  Therefore, the reported amount of our 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 we consider reasonable in the particular circumstances.  Nevertheless, actual results may differ significantly from our estimates.

 

However, we believe that certain accounting policies are of more significance in our financial statement preparation process than others including determining the economic useful lives of our assets, provisions for uncollectible accounts receivable, exposures under our self-insurance plans and various other recorded or disclosed amounts.  To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected.

(continued)

27



 

(c)Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considerswe consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

(d)Tires in Service

The Company capitalizes

We capitalize tires placed in service on new revenue equipment as a part of the equipment cost.  Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service.

(e)Property and Equipment

Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of 53 to 1015 years for revenue and service equipment, 10 to 40 years for structures and improvements, and 3 to 10 years for furniture and office equipment.

 

Property and equipment under capital leases are stated at the present value of minimum lease payments;payments and amortized over the straight-line method over the shorter of the lease term or estimated useful life of the asset.

28



(f)Revenue Recognition

The Company recognizes

We recognize revenue based on relative transit time in each reporting period with expenses recognized as incurred.

(g)Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(continued)

28



 

(h)Earnings Per Share

A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below (in thousands, except per share amounts):

 

 

Years ended December 31

 

 

 

2001

 

2000

 

1999

 

Basic earnings per share:

 

 

 

 

 

 

 

Numerator (net earnings)

 

$

32,945

 

36,075

 

31,909

 

 

 

 

 

 

 

 

 

Denominator (weighted average shares outstanding)

 

35,602

 

35,313

 

35,313

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

.93

 

1.02

 

.90

 

Diluted earnings per share:

 

 

 

 

 

 

 

Numerator (net earnings)

 

$

32,945

 

36,075

 

31,909

 

Denominator:

 

 

 

 

 

 

 

Weighted average shares outstanding

 

35,602

 

35,313

 

35,628

 

Effect of common stock options

 

597

 

104

 

174

 

 

 

 

 

 

 

 

 

 

 

36,199

 

35,417

 

35,802

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

.91

 

1.02

 

.89

 

 

 

Years ended December 31

 

 

 

2002

 

2001

 

2000

 

Basic earnings per share:

 

 

 

 

 

 

 

Numerator (net earnings)

 

$

51,816

 

32,945

 

36,075

 

Denominator (weighted average shares outstanding)

 

37,984

 

35,602

 

35,313

 

Earnings per share

 

$

1.36

 

0.93

 

1.02

 

Diluted earnings per share:

 

 

 

 

 

 

 

Numerator (net earnings)

 

$

51,816

 

32,945

 

36,075

 

Denominator:

 

 

 

 

 

 

 

Weighted average shares outstanding

 

37,984

 

35,602

 

35,313

 

Effect of common stock options

 

1,058

 

597

 

104

 

 

 

39,042

 

36,199

 

35,417

 

Earnings per share

 

$

1.33

 

0.91

 

1.02

 

 

Options to purchase shares of common stock that were outstanding during each year but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares are shown in the table below.

 

 

 

2001

 

2000

 

1999

 

Number of shares under option

 

410,900

 

5,394,000

 

4,318,000

 

Range of exercise prices

 

$

18.38 — 37.50

 

$

14.00 — 37.50

 

$

17.38 — 37.50

 

(continued)

29



 

 

2002

 

2001

 

2000

 

Number of shares under option

 

250,000

 

410,900

 

5,394,000

 

 

 

 

 

 

 

 

 

Range of exercise prices

 

$

28.32 - 37.50

 

$

18.38 - 37.50

 

$

14.00 - 37.50

 

 

(i)Credit Risk

Financial instruments, which potentially subject the Companyus to concentrations of credit risk, consist primarily of trade receivables.  Concentrations of credit risk with respect to trade receivables are limited due to the Company’sour large number of customers and the diverse range of industries which they represent.  As of December 31, 2002 and 2001, and 2000, the Companywe had no significant concentrations of credit risk.

29



(j)Foreign Currency Translation

Local currencies are generally considered the functional currencies outside the United States.  Assets and liabilities are translated at year-end exchange rates for operations in local currency environments.  Income and expense items are translated at average rates of exchange prevailing during the year.

 

Foreign currency translation adjustments, which reflect foreign currency exchange rate changes applicable to the net assets of the Mexican operations have been recorded as a separate item of accumulated other comprehensive loss in stockholders’ equity for the years endedas of December 31, 2001 and 2000.2001.  This investment was sold during 2002.

(k)Stock Based Compensation

The Company has

We have adopted the disclosure requirementsintrinsic value based method of SFAS No. 123, Accounting for Stock-Based Compensation and, as permitted under SFAS No. 123, applies Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees and related interpretations in accounting for compensation costs for itsour stock option plans.  Accordingly, compensation expense is recognized on the date of grant only if the current market price of the underlying common stock at date of grant exceeds the exercise price.

Had we determined compensation cost based on the fair value at the grant date for our stock options under Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), our net earnings would have been reduced to the pro forma amounts indicated below.

 

 

2002

 

2001

 

2000

 

Net earnings (in thousands)

 

$

51,816

 

32,945

 

36,075

 

As reported

 

 

 

 

 

 

 

Total stock-based employee compensation expense determined under fair value based methods for all awards, net of taxes

 

5,008

 

3,083

 

5,352

 

Pro forma

 

$

46,808

 

29,862

 

30,723

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

As reported

 

$

1.36

 

0.93

 

1.02

 

Pro forma

 

$

1.23

 

0.84

 

0.87

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

 

 

 

 

 

As reported

 

$

1.33

 

0.91

 

1.02

 

Pro forma

 

$

1.20

 

0.82

 

0.87

 

Pro forma net earnings reflects only options granted since December 31, 1995.  Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting periods of 5 to 10 years and compensation cost for options granted prior to January 1, 1996 is not considered.

(l)Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed ofOf

The Company

We continually evaluatesevaluate the carrying value of itsour assets for events or changes in circumstances which indicate that the carrying value may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(continued)

30



 

(m)Comprehensive Income

Comprehensive income consists of net earnings and foreign currency translation adjustments and is presented in the consolidated statements of stockholders’ equity.

(n)Claims Accruals

Claims payable represent accruals for the uninsuredself-insured portion of pending accident liability, workers’ compensation, physical damage and cargo damage.  These accruals are estimated based on management’sour evaluation of the nature and severity of individual claims and an estimate of future claims development based on the Company’sour past claims experience.  Claims payable were restated as of December 31, 1998 (See Note 12).

 

The Company’s 2001Our current insurance coverage specifies that the first $5,000 of any claim is self insured and that the self insuredself-insured limit on certainthe majority of our claims was $1is $1.5 million, which is prefunded with itsour insurance carrier.  The Company isWe are substantially self insuredself-insured for loss of and damage to itsour owned and leased revenue equipment.

(o)                                 Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143).  SFAS No. 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.  We also record a corresponding asset which is depreciated over the life of the asset.  Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the

30



end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation.  We were required to adopt SFAS No. 143 on January 1, 2003.  The adoption of SFAS 143 will not have a material effect on our financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34.  This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued.  The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken.  The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on our financial statements.  The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002 and are included in the notes to our consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123.  This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements.  Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.

 

(2)       Long-Term Debt

Long-term debt consists of (in thousands):

 

 

 

2001

 

2000

 

Commercial paper

 

$

 

74,400

 

Senior notes payable, due 9/1/03, interest at 6.25% payable semiannually

 

98,260

 

98,260

 

Senior notes payable, due 9/15/04, interest at 7.00% payable semiannually

 

95,000

 

95,000

 

Senior subordinated notes, interest at 7.80% payable semiannually

 

30,000

 

40,000

 

 

 

 

 

 

 

 

 

223,260

 

307,660

 

 

 

 

 

 

 

Less current maturities

 

(10,000

)

(84,400

)

 

 

 

 

 

 

 

 

 

 

 

 

Unamortized discount

 

(310

)

(566

)

 

 

 

 

 

 

 

 

$

212,950

 

222,694

 

 

 

2002

 

2001

 

Senior notes payable, due September 1, 2003, interest at 6.25% payable semianually

 

$

87,010

 

98,260

 

 

 

 

 

 

 

Senior notes payable, due September 15, 2004, interest at 7.00% payable semiannually

 

95,000

 

95,000

 

 

 

 

 

 

 

Senior subordinated notes, due October 30, 2004, interest at 7.80% payable semiannually

 

20,000

 

30,000

 

 

 

202,010

 

223,260

 

Less current maturities

 

(97,010

)

(10,000

)

Unamortized discount

 

(185

)

(310

)

 

 

$

104,815

 

212,950

 

 

(continued)

31



The Company isWe are authorized to issue up to $165$150 million under itsour current revolving linelines of credit.  This lineThese lines of credit isare supported by a credit agreement,agreements, with a group of banks, which expiresexpire November 13, 2002.14, 2005.  No balances were outstanding under this linethese lines of credit at December 31, 2001.2002.  The 7.80% senior subordinated notes are payable in five equal annual installments the first of $10 million, which was due oncommenced October 30, 2000.

 

Under the terms of the credit agreements and the note agreements, the Company iswe are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios.  The Company wasWe were in compliance with all of the financial covenants at December 31, 2001.2002.

31



 

Current maturities of long-term debt at December 31, 20012002 consist of the third6.25% senior notes and the fourth installment of the 7.80% senior subordinated notes.  The aggregate annual maturities of long-term debt for each of the fourtwo years ending December 31 are as follows (in thousands):  2002, $10,000;$97.0 million in 2003 $108,260; 2004, $105,000; and 2005, $0.$105.0 million in 2004.  There is no long-term debt due in 2005.

(3)       Capital Stock

In late May and June of 2002, we closed an offering of approximately 5.9 million shares of common stock.  Approximately 2.8 million shares were issued and sold by JBHT and 3.1 million shares were sold by a shareholder.  The Company maintainsselling price of the stock was $26 per share before underwriter discounts and other expenses.

We maintain a Management Incentive Plan (“Plan”) that provides various vehicles to compensate our key employees with CompanyJBHT common stock or common stock equivalents.  Under the original Plan, the Company waswe were authorized to award, in aggregate, not more than 5,000,000 shares.  During 1998 and again in 2000, the stockholders of the CompanyJBHT amended the Plan whereby the Company iswe are now authorized to award, in aggregate, not more than 8,500,000 shares.  At December 31, 20012002, there were approximately 1,573,0001,076,000 shares available for grant under the Plan.  The Company hasWe have utilized three such vehicles to award stock or grant options to purchase the Company’sJBHT common stock: restricted stock awards, restricted options and nonstatutory stock options.

Restricted  As of December 31, 2002, there are no restricted stock awards are granted to key employees subject to restrictions regarding transferability and assignment.  Shares of Company common stock areor restricted options issued to the key employees and held by the Company until each employee becomes vested in the award.  Vesting of the awards generally occurs over a four-year period of time from the award date.  Termination of the employee for any reason other than death, disability or certain cases of retirement causes the unvested portion of the award to be forfeited.outstanding.

 

The Plan provides that nonstatutory stock options may be granted to key employees for the purchase of CompanyJBHT common stock for 100% of the fair market value of the common stock at the grant date.  The options generally vest over a ten-year period and are forfeited if the employee

(continued)

32



terminates for any reason.  The Companyplan allows the employee to surrender shares of common stock which the employee already owns in full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option.  We amended certain vested options related to employees of itsour logistics segment, extending the exercise period after termination.  This resulted in a remeasurement of these options and accordingly $110,000 was charged to compensation expense in 2000.

 

Compensation expense (benefit) under the Plan for restricted stock awards is charged to earnings over the vesting period and amounted to approximately ($5,400) for the year ended December 31, 1999.  There have been no restricted stock awards in 2001 and 2000.

A summary of the restricted and nonstatutory options to purchase CompanyJBHT common stock follows:

 

 

Number of Shares

 

Weighted Average Exercise Price Per Share

 

Number of Shares Exercisable

 

Outstanding at December 31, 1998

 

3,349,890

 

$

 16.98

 

323,390

 

Granted

 

471,000

 

14.03

 

 

 

Exercised

 

(26,375

)

12.90

 

 

 

Terminated

 

(56,950

)

16.09

 

 

 

 

 

 

 

 

 

 

 

Number
of Shares

 

Weighted Average
Exercise
Per Share

 

Number
of Shares
Exercisable

 

Outstanding at December 31, 1999

 

3,737,565

 

16.65

 

551,940

 

 

3,737,565

 

$

16.65

 

551,940

 

Granted

 

908,250

 

12.75

 

 

 

 

908,250

 

12.75

 

 

 

Exercised

 

(98,100

)

13.06

 

 

 

 

(98,100

)

13.06

 

 

 

Terminated

 

(237,950

)

16.15

 

 

 

 

(237,950

)

16.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2000

 

4,309,765

 

15.94

 

831,812

 

 

4,309,765

 

15.94

 

831,812

 

Granted

 

881,000

 

14.43

 

 

 

 

881,000

 

14.43

 

 

 

Exercised

 

(600,051

)

14.78

 

 

 

 

(600,051

)

14.78

 

 

 

Terminated

 

(553,570

)

17.48

 

 

 

 

(553,570

)

17.48

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2001

 

4,037,144

 

15.57

 

488,620

 

 

4,037,144

 

15.57

 

488,620

 

Granted

 

992,900

 

25.41

 

 

 

Exercised

 

(431,794

)

14.51

 

 

 

Terminated

 

(147,300

)

15.27

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2002

 

4,450,950

 

$

17.88

 

494,413

 

 

32



 

During 1995, theour Board of Directors established a nonqualified stock option plan to provide performance based compensation to the Chairman of the Board (Chairman’s Plan).  The Chairman’s Plan allowsallowed the Chairman the option to purchase up to 2.5 million shares of the Company’sJBHT common stock at a price of $17.63 per share.  These options vested after five years.  The Chairman's Plan allows the Chairman to surrender shares of common stock which he already owns in full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option.  Under the original Chairman’s Plan the options mustwere to be exercised within one year of vesting and all unexercised options will terminate.would have terminated.  During 2000, theour stockholders of the Company amended

(continued)

33



the Chairman’s Plan whereby the exercise period was extended to be within two years from date of vesting of which 1.5vesting.  One million sharesoptions were exercised during the year ended December 31, 2002 and 1.5 million options were exercised in 2001.  The number ofThere were no options outstanding for the Chairman’s Plan was 1 million at December 31, 2001.

Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company’s net earnings would have been reduced to the pro forma amounts indicated below.

 

 

 

 

2001

 

2000

 

1999

 

Net earnings (in thousands)

 

As reported

 

$

32,945

 

36,075

 

31,909

 

 

 

Pro forma

 

29,862

 

30,723

 

27,391

 

Basic earnings per share

 

As reported

 

.93

 

1.02

 

.90

 

 

 

Pro forma

 

.84

 

.87

 

.77

 

Diluted earnings per share

 

As reported

 

.91

 

1.02

 

.89

 

 

 

Pro forma

 

.82

 

.87

 

.76

 

Pro forma net earnings reflects only options granted since December 31, 1995.  Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting periods of 5 to 10 years and compensation cost for options granted prior to January 1, 1996 is not considered.2002.

 

The per share weighted-average fair value of stock options granted during 2002, 2001 and 2000 was $14.53, $10.82 and 1999 was $10.82, $9.07, and $4.13, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: 2002 - expected dividend yield 0.0%, volatility of 54.9%, risk-free interest rate of 3.2%, and an expected life of 6.7 years; 2001 - expected dividend yield 0.0%, volatility of 59.9%, risk-free interest rate of 4.7%, and an expected life of 6.2 years; 2000 - expected dividend yield 0.0%, volatility of 52.4%, risk-free interest rate of 5.2%, and an expected life of 6.6 years; 1999 — expected dividend yield 1.2%, volatility of 51.6%, risk-free interest rate of 6.5%, and an expected life of 7.3 years.

 

(continued)

3433



 

The following table summarizes information about stock options outstanding at December 31, 2001:2002:

 

 

 

 

Options outstanding

 

Options exercisable

 

 

 

 

 

 

Weighted

 

Weighted

 

 

 

Weighted

 

 

 

 

 

 

average

 

average

 

 

 

average

 

 

Range

 

 

 

remaining

 

exercise

 

 

 

exercise

 

 

of exercise

 

Options

 

contractual

 

price

 

Options

 

price

 

 

prices

 

outstanding

 

life (in years)

 

per share

 

exercisable

 

per share

 

 

$

10.01-20.00

 

4,758,294

 

5.3

 

$

15.54

 

1,398,870

 

$

16.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20.01-30.00

 

267,950

 

5.9

 

23.07

 

86,750

 

22.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.01-40.00

 

10,000

 

7.5

 

37.50

 

3,000

 

37.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

10.01-40.00

 

5,036,244

 

5.3

 

$

15.98

 

1,488,620

 

$

17.13

 

(continued)

35



 

 

Options outstanding

 

Options exercisable

 

Range of exercise prices

 

Options
outstanding

 

Weighted
average
remaining
contractual
life (in years)

 

Weighted
average
exercise
price
per share

 

Options
exercisable

 

Weighted
average
exercise
price
per share

 

$

10.01-20.00

 

3,233,387

 

5.7

 

$

15.14

 

402,800

 

$

14.71

 

20.01-30.00

 

1,207,563

 

9.2

 

25.06

 

87,613

 

23.15

 

30.01-40.00

 

10,000

 

6.5

 

37.50

 

4,000

 

37.50

 

$

10.01-40.00

 

4,450,950

 

6.7

 

$

17.88

 

494,413

 

$

16.39

 

 

(4)       Income Taxes

Total income tax (income)(benefit) expense for the years ended December 31, 2002, 2001 2000 and 19992000 was allocated as follows (in thousands):

 

 

2002

 

2001

 

2000

 

 

2001

 

2000

 

1999

 

 

 

 

 

 

 

 

Earnings before income taxes

 

$

10,137

 

6,366

 

17,175

 

 

$

23,031

 

10,137

 

6,366

 

Stockholders’ equity, for tax benefit of stock options exercised

 

5,361

 

31

 

55

 

 

5,823

 

5,361

 

31

 

 

$

4,776

 

6,335

 

17,120

 

 

$

17,208

 

4,776

 

6,335

 

 

(Payable) refundableRefundable income taxes at December 31, 2002 were $8,538,000 and payable income taxes at December 31, 2001 and 2000 were $(3,989,000) and $3,133,000, respectively.$3,659,000.  These amounts have been included in other current liabilitiesassets and assetsliabilities on the balance sheet, respectively.

 

Income tax expense (benefit) attributable to earnings before income taxes consists of (in thousands):

 

 

2001

 

2000

 

1999

 

 

2002

 

2001

 

2000

 

Current expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

9,661

 

66

 

662

 

 

$

10,413

 

9,661

 

66

 

State and local

 

225

 

457

 

367

 

 

343

 

225

 

457

 

 

9,886

 

523

 

1,029

 

 

10,756

 

9,886

 

523

 

Deferred expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

208

 

8,032

 

18,233

 

 

3,892

 

208

 

8,032

 

State and local

 

43

 

(2,189

)

(2,087

)

 

8,383

 

43

 

(2,189

)

 

251

 

5,843

 

16,146

 

 

12,275

 

251

 

5,843

 

Total tax expense

 

$

10,137

 

6,366

 

17,175

 

 

$

23,031

 

10,137

 

6,366

 

 

34



 

Income tax expense attributable to earnings before income taxes differed from the amounts computed using the statutory federal tax rate of 35% for the following reasons (in thousands):

 

(continued)

36



 

2001

 

2000

 

1999

 

 

2002

 

2001

 

2000

 

Income tax — statutory rate

 

$

15,078

 

14,854

 

17,179

 

Income tax - statutory rate

 

$

26,196

 

15,078

 

14,854

 

State tax, net of Federal effect

 

(174

)

(1,125

)

(869

)

 

1,295

 

(174

)

(1,125

)

Sale/leaseback benefit

 

(8,021

)

(7,863

)

(741

)

 

(8,021

)

(8,021

)

(7,863

)

Mexican joint-venture redemption

 

2,331

 

 

 

 

 

2,331

 

 

Change in effective state tax rate, net of federal effect

 

4,514

 

 

 

Other, net

 

923

 

500

 

1,606

 

 

(953

)

923

 

500

 

Total tax expense

 

$

10,137

 

6,366

 

17,175

 

 

$

23,031

 

10,137

 

6,366

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 20012002 and 20002001 are presented below (in thousands):

 

 

2001

 

2000

 

 

2002

 

2001

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

Claims accruals, principally due to accrual for financial reporting purposes

 

$

12,419

 

13,352

 

 

$

3,362

 

12,419

 

Tax credit carryforwards

 

12,181

 

9,105

 

 

17,037

 

12,181

 

Net operating loss carryforwards

 

 

37,830

 

 

9,382

 

 

Accounts receivable, principally due to allowance for doubtful accounts

 

1,635

 

3,227

 

 

1,812

 

1,635

 

Other

 

1,266

 

5,101

 

 

5,560

 

1,266

 

 

 

 

 

 

Total gross deferred tax assets

 

27,501

 

68,615

 

 

$

37,153

 

27,501

 

 

 

2002

 

2001

 

Deferred tax liabilities:

 

 

 

 

 

Plant and equipment, principally due to differences in depreciation and capitalized interest

 

$

169,515

 

162,406

 

Prepaid permits and insurance, principally due to expensing for income tax purposes

 

16,514

 

7,877

 

Sale and leaseback transaction

 

20,102

 

28,123

 

Mexican joint-venture

 

 

3,396

 

Other

 

23,712

 

6,114

 

Total gross deferred tax liabilities

 

229,843

 

207,916

 

Net deferred tax liability

 

$

192,690

 

180,415

 

 

 

 

2001

 

2000

 

Deferred tax liabilities:

 

 

 

 

 

Plant and equipment, principally due to differences in depreciation and capitalized interest

 

$

162,406

 

182,712

 

Prepaid permits and insurance, principally due to expensing for income tax purposes

 

7,877

 

20,222

 

Sale and leaseback transaction

 

28,123

 

36,144

 

Mexican joint-venture

 

3,396

 

 

Other

 

6,114

 

9,701

 

Total gross deferred tax liabilities

 

207,916

 

248,779

 

Net deferred tax liability

 

$

180,415

 

180,164

 

(continued)

3735



 

The Company believes itsWe believe our history of profitability and taxable income, the reversal of deferred tax liabilities, and itsour utilization of tax planning sufficiently supports the carrying amount of the deferred tax assets.  Accordingly, the Company haswe have not recorded a valuation allowance as all deferred tax benefits are more likely than not to be realized.

 

At December 31, 2001, the Company2002, we had general business tax credit carryforwards of approximately $3,827,000$4,174,000 expiring from the year 2007 to 2009, and alternative minimum tax credit carryforwards with no expiration of approximately $8,354,000.$12,863,000.

In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million.  These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to examine.  We have voluntarily disclosed these transactions to the IRS and in October 2002, the IRS began their examination of the specific facts of these transactions. If the IRS challenges these transactions, we intend to vigorously defend them.  However, if the IRS successfully challenges these transactions, and disallows some or all of the tax benefits that have been realized, these actions could have a material adverse effect on our financial condition and operating results.

(5)       Employee Benefit Plans

The Company maintains

We maintain a defined contribution employee retirement plan, which includes a 401(k) option, under which all employees are eligible to participate.  The Company matchesWe match a specified percentage of employee contributions, subject to certain limitations.  For the years ended December 31, 2002, 2001 and 2000, and 1999, total CompanyJBHT matching contributions to the plan including matching 401(k) contributions, were $6,813,000, $7,555,000 $6,553,000 and $7,348,000,$6,553,000, respectively.

(6)       Fair Value of Significant Financial Instruments

(a)Cash and Cash Equivalents, Accounts Receivable, and Trade Accounts Payable

The carrying amount approximates fair value because of the short maturity of these instruments.

(b)Long-Term Debt

The fair value of the fixed rate debt is presented as the present value of future cash flows discounted using the Company’sour current borrowing rate for notes of comparable maturity.  The calculation arrives at a theoretical amount the Companywe would pay a creditworthy third party to assume itsour fixed rate obligations and not the termination value of these obligations. Consistent with market practices, such termination values may include various prepayment and termination fees that the Companywe would contractually be required to pay if itwe retired the debt early.

 

The estimated fair values of the Company’sour financial instruments are summarized as follows (in thousands):

 

 

 

At December 31, 2002

 

At December 31, 2001

 

 

 

Carrying
amount

 

Estimated
fair value

 

Carrying
amount

 

Estimated
fair value

 

Cash and cash equivalents

 

$

80,628

 

80,628

 

49,245

 

49,245

 

Trade accounts receivable

 

237,156

 

237,156

 

233,246

 

233,246

 

Trade accounts payable

 

117,931

 

117,931

 

163,291

 

163,291

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Fixed rate obligations

 

202,010

 

213,397

 

223,260

 

228,331

 

(continued)

3836



 

 

 

At December 31, 2001

 

At December 31, 2000

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

 

amount

 

fair value

 

amount

 

fair value

 

Cash and cash equivalents

 

$

49,245

 

49,245

 

5,370

 

5,370

 

Accounts receivable

 

231,389

 

231,389

 

225,797

 

225,797

 

Trade accounts payable

 

163,291

 

163,291

 

158,585

 

158,585

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

74,400

 

74,400

 

Fixed rate obligations

 

223,260

 

228,331

 

233,260

 

234,352

 

(7)       Related Party Transactions

The Company advances

We advanced premiums on life insurance policies on the lives of the Company’sour principal stockholder and his wife.  In 2002, we ceased advancing premiums on these policies.  All premiums paid by the Company,JBHT, along with accrued interest thereon, are reimbursable from a trust which is the owner and beneficiary of the policy.  The Company hasWe have a guarantee from the stockholder for the amount of premiums paid by the CompanyJBHT together with interest at the rate of 5% per annum untilthrough June of 2000.  In July of 2000 theour Board of Directors approved an adjustment to the interest rate to be theour average borrowing rate of the Company when additional advances were made.  The interest rate changed to 7.42% in August 2001.2001 and to 7.39% in July 2002.  The amounts reimbursable to the CompanyJBHT amount to approximately $9,049,000$10,153,000 and $8,002,000$9,049,000 at December 31, 20012002 and 2000,2001, respectively, and are included in other assets in theour accompanying consolidated balance sheets.  See also note 9 for disclosure of transactions with an associated company.

(8)       Commitments and Contingencies

During 1999, the Companywe entered into a sale and leaseback transaction for a portion of itsour container fleet.  Containers having a net book value of approximately $175,000,000 were sold to third party leasing companies at approximate net book value.  A gain on the transaction has been deferred and will be amortized to income in relation to rent expense recognized under the leases.  The containers are being leased back under operating leases over terms of four to ten years.  The CompanyWe also leases trailing equipment,lease terminal facilities, shuttle yards and computer equipment under operating leases having various terms.  Under the terms of certain lease agreements, the Company iswe are required to maintain certain covenants including minimum credit ratings.  The Company wasWe were in compliance with this requirementthese requirements at December 31, 2001.2002.

 

During 2001 the Company2000, we entered into various capital lease agreements to lease revenue equipment.  These capital leases are secured by revenue equipment with a net book value at December 31, 20012002 of approximately $168,000,000$139,000,000 and contain certain guarantees of residual value at the end of the lease terms with fixed price purchase options.

 

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2001 are:2002 are (in thousands):

 

 

 

Capital
Leases

 

Operating
Leases

 

 

 

 

 

 

 

2003

 

$

34,481

 

74,233

 

2004

 

115,405

 

56,414

 

2005

 

 

53,813

 

2006

 

 

44,053

 

2007

 

 

36,716

 

Thereafter

 

 

18,387

 

Total minimum lease payments

 

149,886

 

283,616

 

Less amount representing interest (at rates ranging from 4.2% to 8.5%)

 

8,596

 

 

 

 

 

 

 

 

 

Present value of net minimum capital lease payments

 

141,290

 

 

 

Less current installments of obligations under capital leases

 

27,138

 

 

 

 

 

 

 

 

 

Obligations under capital leases excluding current installments

 

$

114,152

 

 

 

(continued)

3937



 

 

Capital

 

Operating

 

 

Leases

 

Leases

2002

 

$

38,514

 

70,078

2003

 

90,269

 

55,191

2004

 

59,598

 

51,256

2005

 

 

49,982

2006

 

 

42,958

Thereafter

 

 

51,747

 

 

 

 

 

Total minimum lease payments

 

188,381

 

321,212

Less amount representing interest (at rates ranging from 4.2% to 8.5%)

 

19,298

 

 

 

 

 

 

 

Present value of net minimum capital lease payments

 

169,083

 

 

 

 

 

 

 

Less current installments of obligations under capital leases

 

28,426

 

 

 

 

 

 

 

Obligations under capital leases excluding current installments

 

$

140,657

 

321,212

 

At December 31, 20012002 and 20002001 gross property and equipment recorded under capital leases was $193,953,000 and $194,256,000, and $97,553,000, respectively.

Total rent expense was $115,084,000 in 2002, $98,783,000 in 2001, and $87,545,000 in 2000, and $39,862,000 in 1999, respectively.

At December 31, 2001, the Company2002, we had committed to purchase approximately $128,000,000$184,000,000 of revenue and service equipment net of expected proceeds from sale or trade-in allowances.

We adopted the provisions of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  The CompanyInterpretation requires that we recognize the fair value of guarantee and indemnification arrangements issued or modified by JBHT after December 31, 2002, if these arrangements are within the scope of that Interpretation.  In addition, under previously existing generally accepted accounting principles, we continue to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.

In 2002, we issued financial standby letters of credit as a guarantee of our performance under certain operating lease commitments and insurance policies.  If we default on our commitments under the lease agreements or insurance policies, we are required to perform under these guarantees.  The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $27 million.  As of December 31, 2002, no amounts have been accrued for any estimated losses under the obligations, as it is probable that the suppliers will be able to make all scheduled payments.

We are involved in certain claims and pending litigation arising from the normal conduct of business.  Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, management believeswe believe the resolution of claims and pending litigation will not have a material adverse effect on theour financial condition or our results of operations of the Company.operations.

(9)       Investment in Affiliated Company

In March 2000, the Company,we, along with fourfive other motor carriers, announced the intent to contribute all of itsour non-asset based logistics business into a recently formed joint venture, Transplace, Inc. (TPC)(TPI)TPCTPI is an internet-basedInternet-based global transportation logistics company.  TPCTPI commenced operations effective July 1, 2000.  The CompanyWe contributed all of itsour logistics segment business and all related intangible assets, plus $5.0 million of cash, in exchange for an approximate 27% initial membership interest in TPC.  The Company accountsTPI.  We account for itsour approximate 27% interest in TPCTPI utilizing the equity method of accounting.  No gain or loss was recognized

(continued)

40



upon formation and contribution of logistics segment assets to TPC.  The excess of the Company’s share of TPC’s net assets over its cost basis is being amortized over 20 years on a straight-line method.TPI.  Equity in earnings of TPCTPI was a loss of $1,919,000$1,353,000 in 2001.2002.  On December 31, 2002, we acquired an additional 10% interest in TPI from one of the initial members.

 

The CompanyWe provided various services to TPCTPI under a shared service agreement, the terms of which expired on December 31, 2001.2002.  The services included the following:  payroll and benefits; accounting; computer system maintenance; office facilities; and telecommunications.  The fees from these services approximated $6,299,000 and $6,483,000 in 2002 and $2,971,000 in 2001, and 2000, respectively, and were recorded in the consolidated statement of earnings as reimbursements of salaries, wages and employee benefits and general and administrative expenses.

 

The CompanyWe earned revenues of $40,406,000 and $69,696,000 and $43,500,000 from TPCTPI in providing transportation services during 20012002 and in the last six months of 2000,2001, respectively.

 

At December 31, 20012002 and 2000,2001, trade accounts receivable included $4,198,000$2,383,000 and $1,148,000,$4,198,000, respectively, due from TPCTPI for freight and fees related to the shared service agreement.

 

38



For the yearyears ending December 31, 2002 and 2001, the Company hadwe incurred approximately $34,994,000 and $32,649,000, respectively, in purchased transportation expense as a result of TPCTPI providing transportation services.

(10)       Segment Information

The Company had

We have three reportable business segments, during 2001, Truck (JBT), Intermodal (JBI), and Dedicated Contract Services (DCS).  For years prior, the Company had four reportable business segments, JBT, JBI, DCS and Logistics.  JBT business includes full truck-load, dry-van freight which is typically transported utilizing company-owned or controlled revenue equipment.  This freight is typically transported over roads and highways and does not move by rail.  The JBI segment includes freight which is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations.  The JBT and JBI business 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 year ended December 31, 2001 based on the prior segmentation, which included JBT and JBI as the former segment, “Van/Intermodal”.

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.

(continued)

41



 

Prior to July 1, 2000, the Logistics business segment primarily consisted of J. B. Hunt Logistics (JBL) a wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services.  Such services included experienced professional managers, information and optimization technology and the actual design or redesign of freight system solutions.  JBL utilized JBT, JBI or DCS owned or controlled assets and employees, or third-party carriers, or a combination of these options to meet customer service requirements.  JBL services typically were provided in accordance with written long-term agreements.  As discussed in Note 9, the Companywe exchanged itsour ownership in JBL for an initial membership interest in TPC.TPI.  Effective July 1, 2000, the Companywe began accounting for itsour ownership in TPCTPI utilizing the equity method of accounting.  As of December 31, 2000, TPC qualifiesTPI qualified as a reportable business segment and, accordingly, the Logistics segment information shown below includes both JBL and TPC.TPI.  Information for TPCTPI included in the following tables is the entity’s results of operations without regard to the Company’sour ownership interest which is then subtracted in reconciling to the consolidated statement of earnings.

 

The Company’sOur customers are geographically dispersed across the United States and include many of the “Fortune 500” companies.  One customer exceeded 10%accounted for approximately 18%, 16% and 12% of consolidated operating revenues in 2002, 2001 and 2000.  No single customer exceeded 10% in 1999.2000, respectively.  A summary of certain segment information is presented below (in millions):

 

 

Assets

 

 

Assets

 

 

2001

 

2000

 

1999

 

 

2002

 

2001

 

2000

 

Truck

 

$

892

 

871

 

 

 

$

844

 

892

 

871

 

Intermodal

 

172

 

128

 

 

 

227

 

172

 

128

 

Van/Intermodal

 

1,064

 

999

 

826

 

Logistics

 

 

33

 

73

 

 

 

 

33

 

Dedicated Contract Services

 

179

 

138

 

95

 

 

227

 

179

 

138

 

Other (includes corporate and intersegment eliminations)

 

17

 

62

 

133

 

 

21

 

17

 

62

 

 

 

 

 

 

 

 

Total

 

$

1,260

 

1,232

 

1,127

 

 

$

1,319

 

1,260

 

1,232

 

 

 

 

Revenues

 

 

 

2001

 

2000

 

1999

 

Truck

 

$

829

 

834

 

763

 

Intermodal

 

740

 

681

 

652

 

Van/Intermodal

 

1,569

 

1,515

 

1,415

 

Logistics

 

 

727

 

388

 

Dedicated Contract Services

 

549

 

479

 

320

 

 

 

 

 

 

 

 

 

Total segment revenues

 

2,118

 

2,721

 

2,123

 

 

 

 

 

 

 

 

 

Inter-segment eliminations

 

(18

)

(63

)

(78

)

Less revenues of equity method investee

 

 

(498

)

 

 

 

 

 

 

 

 

 

Consolidated statements of earnings amount

 

$

2,100

 

2,160

 

2,045

 

(continued)

4239



 

 

Operating income

 

 

Revenues

 

 

2001

 

2000

 

1999

 

 

2002

 

2001

 

2000

 

Truck

 

$

9

 

(7

)

 

 

$

827

 

829

 

834

 

Intermodal

 

42

 

37

 

 

 

809

 

740

 

681

 

Van/Intermodal

 

51

 

30

 

44

 

Logistics

 

 

9

 

11

 

 

 

 

727

 

Dedicated Contract Services

 

17

 

28

 

24

 

 

628

 

549

 

479

 

Other

 

4

 

(3

)

(5

)

 

 

 

 

 

 

 

Total segment operating income

 

$

72

 

64

 

74

 

 

 

 

 

 

 

 

Less operating income of equity method investee

 

 

(1

)

 

 

 

 

 

 

 

 

Total segment revenues

 

2,264

 

2,118

 

2,721

 

Inter-segment eliminations

 

(16

)

(18

)

(63

)

Less revenues of equity method investee

 

 

 

(498

)

Consolidated statements of earnings amount

 

$

72

 

63

 

74

 

 

$

2,248

 

2,100

 

2,160

 

 

 

Operating income

 

 

 

2002

 

2001

 

2000

 

Truck

 

$

27

 

9

 

(7

)

Intermodal

 

55

 

42

 

37

 

Logistics

 

 

 

9

 

Dedicated Contract Services

 

20

 

17

 

28

 

Other

 

(1

)

4

 

(3

)

Total segment operating income

 

$

101

 

72

 

64

 

Less operating income of equity method investee

 

 

 

(1

)

Consolidated statements of earnings amount

 

$

101

 

72

 

63

 

 

 

Depreciation expense

 

 

2002

 

2001

 

2000

 

Truck

 

$

69

 

70

 

65

 

Intermodal

 

19

 

21

 

23

 

Dedicated Contract Services

 

49

 

44

 

36

 

Other

 

9

 

8

 

10

 

Total

 

$

146

 

143

 

134

 

 

 

 

Depreciation expense

 

 

 

2001

 

2000

 

1999

 

Truck

 

$

 70

 

65

 

 

Intermodal

 

21

 

23

 

 

Van/Intermodal

 

91

 

88

 

113

 

Logistics

 

 

 

1

 

Dedicated Contract Services

 

44

 

36

 

26

 

Other

 

8

 

10

 

9

 

 

 

 

 

 

 

 

 

Total

 

$

 143

 

134

 

149

 

(continued)

4340



 

(11)       Quarterly Financial Information (Unaudited)

Operating results by quarter for the years ended December 31, 20012002 and 20002001 are as follows (in thousands, except per share data):

 

 

Quarter

 

 

 

First

 

Second

 

Third

 

Fourth

 

2001:

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

495,419

 

521,489

 

537,156

 

546,241

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

8,367

 

15,318

 

11,950

 

36,574

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

1,645

 

8,568

 

4,549

 

18,183

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

.05

 

.24

 

.13

 

.51

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

.05

 

.24

 

.12

 

.50

 

 

 

 

 

 

 

 

 

 

 

2000:

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

533,556

 

583,500

 

509,422

 

533,969

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

9,554

 

20,347

 

15,817

 

17,694

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

5,013

 

11,054

 

9,123

 

10,885

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

.14

 

.31

 

.26

 

.31

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

.14

 

.31

 

.26

 

.31

 

 

 

Quarter

 

 

 

First

 

Second

 

Third

 

Fourth

 

2002:

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

510,221

 

557,328

 

582,671

 

597,666

 

Operating income

 

$

13,631

 

28,509

 

28,026

 

30,797

 

Net earnings

 

$

4,854

 

15,479

 

16,756

 

14,727

 

Basic earnings per share

 

$

0.13

 

0.42

 

0.43

 

0.37

 

Diluted earnings per share

 

$

0.13

 

0.40

 

0.42

 

0.37

 

 

 

 

 

 

 

 

 

 

 

2001:

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

495,419

 

521,489

 

537,156

 

546,241

 

Operating income

 

$

8,367

 

15,818

 

11,950

 

36,074

 

Net earnings

 

$

1,645

 

8,568

 

4,549

 

18,183

 

Basic earnings per share

 

$

0.05

 

0.24

 

0.13

 

0.51

 

Diluted earnings per share

 

$

0.05

 

0.24

 

0.12

 

0.50

 

 

(12)     Restatement of Beginning Retained Earnings

In 2001, the Company modified its method of estimating and accruing its ultimate cost related to accident workers’ compensation, cargo and physical damage claims in accordance with accounting principles generally accepted in the United States of America.  The Company began applying loss development factors to its accident and workers’ compensation claims history.  This new method results in a more accurate estimate of the Company’s ultimate loss from claims than its prior method.

This new method resulted in a restatement of the following balances at December 31, 1998: a decrease in retained earnings of $10.2 million, an increase in claims payable of $16.3 million, and an increase in deferred tax assets of $6.1 million.  This restatement had no material impact on the 2000 and 1999 consolidated statements of income.  Accordingly, the Company’s consolidated balance sheet at December 31, 2000 has been restated to reflect the same adjustments to retained earnings, claims payable and deferred tax assets.

(continued)

4441



 

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

No reports on Form 8-K have been filed within the twenty-four months prior to December 31, 20012002 involving a change of accountants or disagreements on accounting and financial disclosure.

 

PART III

 

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

 

DIRECTORS

 

The schedule of directors is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 25, 200224, 2003 set forth under section entitled “Proposal One Election of Directors”.Directors.”

 

EXECUTIVE OFFICERS

 

Information with respect to our executive officers of the Company is set forth in Item 4 of this Report under the caption “Executive Officers of the Company”.“Our Executive Officers.”

 

ITEM 11.   EXECUTIVE COMPENSATION

 

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The information required for Items 11 and 12 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 200224, 2003 set forth under sections entitled “Principal Stockholders of the Company,” “Report of the Compensation Committee,” “2002“2003 Performance-based Compensation,” and “Compensation Committee Interlocks and Insider Participation.”

 

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

The information required for Item 13 is hereby incorporated by reference from Note (7) Related Party Transactions and Note (9) Investment in Affiliated Company of the Notes to Consolidated Financial Statements and from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held on April 25, 200224, 2003 set forth under the section entitled “Compensation Committee Interlocks and Insider Participation.”

 

ITEM 14.   CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in alerting them, in a timely manner, to material information required to be disclosed by us in our periodic reports to the Securities and Exchange Commission.  In addition, the CEO and CFO determined that there were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of their most recent evaluation.

42



PART IV

 

ITEM 14.15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

 

The following documents are filed as part of this report:

 

(a)   Financial Statements, Financial Statement Schedules and Exhibits:

(1)           Financial Statements

The financial statements filed as part of this filing are listed on the index to Consolidated Financial Statements, Item 8, on page 21.

(3)           Exhibits

The response to this portion of Item 14 is submitted as a separate section of this report (“Exhibit Index”). on page 47.

 

(b)   Reports on Form 8-K

 

On November 21, 2002, we filed a current report on Form 8-K announcing that we had reached an agreement in principle with Werner Enterprises, Inc. to transfer a portion of Werner Enterprises’ ownership interest in Transplace, Inc. to J.B. Hunt.

45

On November 25, 2002, we filed a current report on Form 8-K announcing that an agreement had been reached with Freightliner LLC for a comprehensive truck sale and trade package for 2003.

On January 30, 2003, we filed a current report on Form 8-K announcing our financial results for the fourth quarter and year ended December 31, 2002.

43



 

SIGNATURES

 

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendmentreport to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on the 28th10th day of May, 2002.March, 2003.

 

 

 

J.B.J. B. HUNT TRANSPORT SERVICES, INC.

 

 

(Registrant)

 

 

 

 

 

By:

/s/

Kirk Thompson

 

 

 

 

Kirk Thompson

 

 

 

President and Chief Executive Officer

 

 

 

 

By:

/s/

Jerry W. Walton

 

 

 

 

Jerry W. Walton

 

 

 

Executive Vice President, Finance and

Administration,

Chief Financial Officer

 

 

 

 

By:

/s/

Donald G. Cope

 

 

 

 

Donald G. Cope

 

 

 

Senior Vice President, Controller,

Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the 10th day of March, 2003 on behalf of the registrant and in the capacities indicated.

/s/

John A. Cooper, Jr.

Member of the Board

John A. Cooper, Jr.

of Directors

/s/

Wayne Garrison

Member of the Board

Wayne Garrison

of Directors (Chairman)

/s/

Gene George

Member of the Board

Gene George

of Directors

/s/

Thomas L. Hardeman

Member of the Board

Thomas L. Hardeman

of Directors

/s/

J. Bryan Hunt, Jr.

Member of the Board

J. Bryan Hunt, Jr.

of Directors (Vice Chairman)

/s/

J.B. Hunt

Member of the Board

J.B. Hunt

of Directors (Senior Chairman)

/s/

Johnelle D. Hunt

Member of the Board

Johnelle D. Hunt

of Directors (Corporate Secretary)

/s/

James L. Robo

Member of the Board

James L. Robo

of Directors

/s/

Kirk Thompson

Member of the Board

Kirk Thompson

of Directors (President and
Chief Executive Officer)

/s/

Leland Tollett

Member of the Board

Leland Tollett

of Directors

/s/

John A. White

Member of the Board

John A. White

of Directors

44



CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

J.B. Hunt Transport Services, Inc.

I, Kirk Thompson, certify that:

1.               I have reviewed this annual report on Form 10-K of J.B. Hunt Transport Services, Inc.;

2.               Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.               Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;

a)              designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)             evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)              presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.               The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  March 10, 2003

/s/ Kirk Thompson

Kirk Thompson

President and Chief Executive Officer

45



CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

J.B. Hunt Transport Services, Inc.

I, Jerry W. Walton, certify that:

1.               I have reviewed this annual report on Form 10-K of J.B. Hunt Transport Services, Inc.;

2.               Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.               Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;

a)              designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)             evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)              presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.               The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  March 10, 2003

/s/ Jerry W. Walton

Jerry W. Walton

Executive Vice President, Finance and
Administration,
Chief Financial Officer

 

46



EXHIBIT INDEX

Exhibit
Number

Description

3A

The Company’s Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the Company’s S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028).

3B

The Company’s Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).

10A

Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).

10B

The Company has an Employee Stock Purchase Plan filed on Form S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form D-8 on April 16, 1991 (Registration Number 33-40028).  The Management Incentive Plan is Incorporated herein by reference from Exhibit 4B of the Registration Statement 33-40028. The Company amended and restated its Employee Retirement Plan on Form S-8 (Registration Statement Number 33-57127) filed December 30, 1994.  The Employee Retirement Plan is incorporated herein by reference from Exhibit 99 of Registration Statement Number 33-57127.  The Company amended and restated its Management Plan on Form S-8 (Registration Number 33-40028) filed August 14, 2001.  The Company filed the Chairman’s Stock Option Incentive Plan as part of a definitive 14A on March 26, 1996.

21

Subsidiaries of J.B. Hunt Transport Services, Inc.

23

Consent of KPMG LLP

99.1

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the President and Chief Executive Officer

99.2

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Executive Vice President of Finance and Administration and Chief Financial Officer

47