FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |||
For the Quarter Ended September 30, | ||||
OR | ||||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
Commission file number 0-11757
J.B. HUNT TRANSPORT SERVICES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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 the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ý No o
The number of shares of the registrant’s $.01 par value common stock outstanding on September 30,
J.B. HUNT TRANSPORT SERVICES, INC.
Form 10-Q For The Quarter Ended September 30, Table of Contents
2 J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Statements of Earnings (in thousands, except per share data) (unaudited)
See accompanying notes to condensed consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Balance Sheets (in thousands)
See accompanying notes to condensed consolidated financial statements.
4
J.B. Hunt Transport Services, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
See accompanying notes to condensed consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
Notes to Condensed Consolidated Financial Statements(Unaudited)
1. Basis of Presentation Our condensed consolidated financial statements included in this Form 10-Q have been prepared without audit (except that the balance sheet information as of December 31,
We believe that all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods presented in this report are not necessarily indicative of the results to be expected for the full calendar year ending December 31,
2. Stock-based Compensation We have adopted the intrinsic
Had we determined compensation cost based on the fair value at the grant date for our stock options under Statement of Financial Accounting Standard No. 123, Accounting for Stock-based Compensation (SFAS No. 123), our net earnings would have been reduced to the pro forma amounts indicated below. All amounts in the chart, except per share amounts, are in thousands.
6
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.
3.
Long-term debt consists of (in thousands):
7
We have a stock option plan (Management Incentive Plan) that provides for the awarding of our common stock and stock options to key employees. A summary of the
We announced on
We compute basic earnings per share by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of options
We had
8
Comprehensive income consists of net earnings and foreign currency translation adjustments. During
the three and nine months ended September 30,
The effective income tax
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.
We operated three distinct business segments during the nine months ended September 30,
9
10
REPORT OF INDEPENDENT
The Board of Directors J.B. Hunt Transport Services, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of September 30,
We conducted our review in accordance with standards
Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with
11
ITEM You should refer to the attached interim condensed consolidated financial statements and related notes and also to our annual report (Form 10-K) for the year ended December 31,
GENERAL We are one of the largest full-load transportation companies in North America. We operate three distinct, but complementary, business segments and provide a wide range of general and specifically tailored freight and logistics services to our customers. We generate revenues primarily from the actual movement of freight from shippers to consignees and from serving as a logistics provider by offering, or arranging for others to provide the transportation service. We account for our business on a calendar year basis with our full year ending on December 31 and our quarterly reporting periods ending on March 31, June 30 and September 30.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States
accompanying notes. Therefore, the reported amounts of assets,
Workers’ Compensation and Accident CostsWe purchase insurance coverage for a portion of expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims. Most insurance arrangements include a level of 12 change from time to time based on certain measurement dates and policy expiration dates. Our claims accrual policy for all
Revenue EquipmentWe operate a significant number of tractors, trailers and containers in connection with our business. This equipment may be purchased or acquired under capital or operating
We have an
Revenue RecognitionWe recognize revenue based on the relative transit time of the freight transported. Accordingly, a portion of the total revenue which will be billed to
|
|
| Operating Revenue |
| Operating Income |
| |||||||||||||||||||||||||
|
| Operating Revenue |
| Operating Income |
|
| 2004 |
| 2003 |
| % Change |
| 2004 |
| 2003 |
| ||||||||||||||
|
| 2003 |
| 2002 |
| % Change |
| 2003 |
| 2002 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
JBT | $ | 214 | $ | 215 | 0 | % | $ | 17.9 | $ | 10.1 |
| $ | 238 |
| $ | 214 |
| 11 | % | $ | 30.6 |
| $ | 17.9 |
| |||||
JBI |
| 241 |
| 207 |
| 16 |
| 25.1 |
| 13.2 |
|
| 284 |
| 241 |
| 18 |
| 33.0 |
| 25.1 |
| ||||||||
DCS |
| 170 |
| 164 |
| 4 |
| 14.6 |
| 4.1 |
|
| 201 |
| 170 |
| 18 |
| 18.9 |
| 14.6 |
| ||||||||
Other |
| — |
| — |
| — |
| — |
| .6 |
|
| — |
| — |
| — |
| 0.2 |
| — |
| ||||||||
Subtotal |
| 625 |
| 586 |
| 7 | % | 57.6 |
| 28.0 |
|
| 723 |
| 625 |
| 16 | % | 82.7 |
| 57.6 |
| ||||||||
Inter-segment eliminations |
| (3 | ) | (3 | ) | — |
| — |
| — |
|
| (4 | ) | (3 | ) | — |
| — |
| — |
| ||||||||
Total |
| $ | 622 |
| $ | 583 |
| 7 | % | $ | 57.6 |
| $ | 28.0 |
|
| $ | 719 |
| $ | 622 |
| 16 | % | $ | 82.7 |
| $ | 57.6 |
|
Our total consolidated operating revenue for the third quarter of 20032004 was $622$719 million, an increase of approximately 7%16% over the $583$622 million in the third quarter of 2002.2003. Fuel surcharge revenue hashad an impact on this comparison. The amount of fuel surcharge revenue billed in the current quarter was $8.6$23.2 million more than the amount billed induring the third quarter of 2002.2003. Excluding fuel surcharges, total operating revenue during the current quarter increased 5%12% over the comparable period of 2002.2003.
JBT segment revenue totaled $214$238 million for the third quarter of 2003, essentially equal to2004, an increase of 11% over the $215$214 million in the third quarter of 2002.2003. If the amount of fuel surcharge revenue was excluded from both the 20032004 and 20022003 periods, segment revenue would have decreased approximately 2% in 2003.increased 8%. This 2% decline8% increase in revenue was primarily a result of an approximate 5%9.3% increase in revenue per loaded mile, exclusive of fuel surcharges, partly offset by a 1% decrease in the size of the tractor fleet and 5% lower miles per tractor. The average number of total tractors operated in the JBT fleet declined by 24 during the third quarter of 2003, compared with the third quarter of 2002. The percentage of empty miles increased to 10.2% in 2003, from 9.0% in 2002, although some of our customers paid us for running certain empty miles at their request.fleet. The increase in revenue per loaded mile, excluding fuel surcharges, also significantly contributed to the improvement in operating income of the JBT segment. The higher revenue per mile was primarily a result of our yield management initiatives launched in late 2001.activities and rate increases. In addition, we implemented an accountable expense reimbursement plan (driver per diem plan)significantly lower accident and workers’ compensation costs in February of 2003. This new plan benefits most of our eligible drivers and also favorably impacted our net earnings during2004 contributed to the third quarter of 2003.improvement in segment operating income. JBT operating income for the third quarter of 20032004 was $17.9$30.6 million, compared with $10.1$17.9 million in 2002.2003. The operating ratio of the JBT segment was 87.1% in 2004 and 91.6% in 2003 and 95.3% in 2002.2003.
JBI segment revenue increased 16%18%, to $241$284 million during the third quarter of 2003,2004, compared with $207$241 million in 2002.2003. If the amount of fuel surcharge revenue was excluded from both the 20032004 and 20022003 periods, the increase in JBI revenue would have been 15%14%. TheThis increase in revenue was primarily due to an approximate 13%7% increase in load volume and a 2% increase in revenue per load. The higher revenue per load resulted from changes in freight mix which generated longer average length of haul and an approximate 0.6%4.6% increase in revenue per loaded mile, excluding fuel surcharges. Operating revenue per load in 2004 increased about 5.1% over the comparable period of 2003. Operating income of the JBI segment was $25.1rose to $33.0 million in the third quarter of 2003,2004, compared with $13.2$25.1 million in 2002.2003. The operating ratio of the JBI segment was 88.4% in 2004 and 89.6% in 2003 and 93.6% in 2002.2003. In addition to higher revenue per load, 2003volumes and rate increases, 2004 operating income was enhanced by lower maintenance costs and improved utilization of revenue equipment.lower equipment ownership costs, partly offset by higher purchased transportation costs.
DCS segment revenue rose 4%grew 18%, to $201 million in 2004, from $170 million in 2003, from $164 million in 2002.2003. If fuel surcharge
14
revenue was excluded from both of the 20032004 and 20022003 periods, the increase in DCS revenue would have been 2%15%. This increase in DCS segment revenue was driven by an 8%a 6% increase in net revenue per
14
tractor, excluding fuel surcharge, partly offset bysurcharges and a 6% decrease10% increase in the average size of the tractor fleet. Operating income of our DCS segment climbed to $18.9 million in 2004, from $14.6 million in 2003, from $4.1 million in 2002.2003. The DCS operating ratio was 90.6% in 2004 and 91.4% in 2003 and 97.5% in 2002.2003. Improvements in operating income were driven by better tractor utilization, improved productivity and pricing, reduced workers’ compensation expenses and lower start-up costs associated with new business, partly offset by higher accident and revenue equipment rental costs.
The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.
|
| Three Months Ended September 30 |
| ||||
|
| Percentage of |
| Percentage Change |
| ||
|
| 2004 |
| 2003 |
| 2004 vs. 2003 |
|
|
|
|
|
|
|
|
|
Operating revenues |
| 100.0% |
| 100.0% |
| 15.6% |
|
Operating expenses |
|
|
|
|
|
|
|
Salaries, wages and employee benefits |
| 29.9% |
| 31.8% |
| 8.7% |
|
Rents and purchased transportation |
| 32.9 |
| 33.1 |
| 14.9 |
|
Fuel and fuel taxes |
| 10.4 |
| 8.9 |
| 35.1 |
|
Depreciation and amortization |
| 5.2 |
| 6.1 |
| (1.9) |
|
Operating supplies and expenses |
| 4.5 |
| 5.0 |
| 5.0 |
|
Insurance and claims |
| 2.1 |
| 2.2 |
| 7.2 |
|
Operating taxes and licenses |
| 1.3 |
| 1.3 |
| 10.6 |
|
General and administrative expenses, net of gains |
| 1.4 |
| 1.3 |
| 23.8 |
|
Communication and utilities |
| 0.8 |
| 1.0 |
| 0.4 |
|
Total operating expenses |
| 88.5 |
| 90.7 |
| 12.7 |
|
Operating income |
| 11.5 |
| 9.3 |
| 43.6 |
|
Interest expense |
| (0.2) |
| (0.8) |
| (64.9) |
|
Equity in loss of associated companies |
| (0.1) |
| — |
| — |
|
Earnings before income taxes |
| 11.2 |
| 8.5 |
| 51.5 |
|
Income taxes |
| 4.5 |
| 3.2 |
| 59.4 |
|
Net earnings |
| 6.7% |
| 5.3% |
| 46.6% |
|
Total operating expenses during the third quarter of 2004 increased 12.7% over the comparable period of 2003. The total cost of salaries, wages and employee benefits increased 8.7% in 2004. However, this expense controlscategory declined to 29.9% of operating revenues in 2004, from 31.8% in 2003. While we experienced some increases in certain salary, wage and benefit costs during the current quarter, the primary reasons for this expense category decline as a percentage of revenue were higher revenue per loaded mile, continued growth of Intermodal volume and growth of our independent contractor (IC) fleet. We implemented a new driver pay scale in September 2004. The ultimate cost of this pay increase is expected to be approximately $.02 per mile. A rate increase intended to fund the higher driver compensation levels was proposed to our customers, effective October 1, 2004. Based upon rate increases, which have been agreed upon and implemented to date, we are confident most, if not all, of this driver pay increase will be recovered by the end of 2004. Rents and purchased transportation costs rose 14.9% in 2004, primarily due to additional funds paid to railroads and drayage companies, related to JBI business growth, and to the continued expansion of our IC fleet.
The 35.1% increase in fuel and fuel taxes was primarily a result of fuel prices averaging about 30% higher in 2004 and an approximate 2% lower miles per gallon. The higher fuel costs in 2004 were
15
substantially recovered through additional fuel surcharges billed to our customers. While rapid changes in fuel cost per gallon may result in certain timing differences of fuel costs and fuel surcharges between accounting periods, we have been able to recover the majority of our higher 2004 fuel cost per gallon. The net impact of increased fuel costs, offset by higher fuel surcharge revenue, decreased earnings per share by about $.01 during the current quarter. The 7.2% increase in insurance and claims expense reflects two serious accidents during the current quarter.
The 10.6% increase in operating taxes and licenses reflects a slight increase in the size of the tractor fleet and higher state licensing fees. The significant increase in general and administrative expenses was substantially due to driver advertising and recruiting costs, higher bad debt expense and additional spending on professional fees. Net gains or losses on asset dispositions are included in the general and administrative expense category. We generated a net $400,000 gain during the current quarter, compared with a net $127,000 loss in 2003. Net interest expense declined significantly in 2004 due to lower debt levels. We increased our effective income tax rate to 40.5% in 2004, from 38.5% in 2003, primarily due to our higher level of earnings and the suspension during the fourth quarter of 2003, of recording certain non-cash tax benefits associated with the sale and leaseback transactions.
The equity in loss of associated company item on our consolidated statement of earnings reflects our share of the operating results for Transplace, Inc. (TPI).
Comparison of Nine Months Ended September 30, 2004 to Nine Months Ended September 30, 2003
Summary of Operating Segments Results
For The Nine Months Ended September 30
(dollars in millions)
|
| Operating Revenue |
| Operating Income |
| ||||||||||
|
| 2004 |
| 2003 |
| % Change |
| 2004 |
| 2003 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
JBT |
| $ | 680 |
| $ | 621 |
| 10 | % | $ | 74.4 |
| $ | 31.6 |
|
JBI |
| 789 |
| 682 |
| 16 |
| 93.9 |
| 65.8 |
| ||||
DCS |
| 558 |
| 501 |
| 11 |
| 51.0 |
| 30.5 |
| ||||
Other |
| — |
| — |
| — |
| 0.8 |
| — |
| ||||
Subtotal |
| 2,027 |
| 1,804 |
| 12 | % | 220.1 |
| 127.9 |
| ||||
Inter-segment eliminations |
| (12 | ) | (11 | ) | — |
| — |
| — |
| ||||
Total |
| $ | 2,015 |
| $ | 1,793 |
| 12 | % | $ | 220.1 |
| $ | 127.9 |
|
Our total consolidated operating revenue for the nine months ended September 30, 2004 was $2,015 million, an increase of approximately 12% over the $1,793 million in the comparable period of 2003. Fuel surcharge revenue had an impact on this comparison. The amount of fuel surcharge revenue billed during the nine month period ended September 30, 2004, was $37.9 million more than the amount billed during the comparable period in 2003. Excluding fuel surcharges, total operating revenue during the nine months ended September 30, 2004 increased 11% over 2003.
JBT segment revenue totaled $680 million for the nine months ended September 30, 2004, an increase of 10% over the $621 million in the comparable period of 2003. If the amount of fuel surcharge revenue was excluded from both the 2004 and 2003 periods, segment revenue would have increased 8%. This 8% increase in revenue was primarily a result of an approximate 7.8% increase in revenue per loaded mile, exclusive of fuel surcharges and a 2% increase in company tractor utilization, partly offset by a 3% decrease in the size of the tractor fleet. The increase in revenue per loaded mile, excluding fuel surcharges, also
16
significantly contributed to the improvement in operating income of the JBT segment. The higher revenue per mile was primarily a result of our yield management activities and rate increases. In addition, significantly lower accident, workers’ compensation, equipment ownership and bad debt costs in 2004 contributed to the improvement in segment operating income. JBT operating income for the nine months ended September 30, 2004 was $74.4 million, compared with $31.6 million in 2003. The operating ratio of the JBT segment was 89.1% in 2004 and 94.9% in 2003.
JBI segment revenue increased 16%, to $789 million during the nine months ended September 30, 2004, compared with $682 million in 2003. If the amount of fuel surcharge revenue was excluded from both the 2004 and 2003 periods, the increase in JBI revenue would have been 14%. This increase in revenue was primarily due to an approximate 11% increase in load volume and a 1.9% increase in revenue per loaded mile, excluding fuel surcharges. Operating revenue per load in 2004 increased about 2.9% over the comparable period of 2003. Operating income of the JBI segment rose to $93.9 million in the nine months ended September 30, 2004, compared with $65.8 million in 2003. The operating ratio of the JBI segment was 88.1% in 2004 and 90.3% in 2003. In addition to higher volumes and rate increases, 2004 operating income was enhanced by lower maintenance and equipment ownerships costs.
DCS segment revenue grew 11%, to $558 million in 2004, from $501 million in 2003. If fuel surcharge revenue was excluded from both the 2004 and 2003 periods, the increase in DCS revenue would have been 10%. This increase in DCS segment revenue was driven by a 6% increase in net revenue per tractor, excluding fuel surcharges and a 3% increase in the size of the average tractor fleet. Operating income of our DCS segment climbed to $51.0 million in 2004, from $30.5 million in 2003. The DCS operating ratio was 90.9% in 2004 and 93.9% in 2003. Improvements in operating income were driven by better tractor utilization, improved productivity and pricing, reduced workers’ compensation and maintenance expenses, and lower start-up costs associated with new business.
The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.
|
| Nine Months Ended September 30 |
| ||||||||||||
|
| Three Months Ended September 30 |
|
| Percentage of |
| Percentage Change |
| |||||||
|
| Percentage of |
| Percentage Change |
|
| 2004 |
| 2003 |
| 2004 vs. 2003 |
| |||
|
| 2003 |
| 2002 |
| 2003 vs. 2002 |
|
|
|
|
|
|
|
| |
Operating revenues |
| 100.0 | % | 100.0 | % | 6.7 | % |
| 100.0% |
| 100.0% |
| 12.4% |
| |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Salaries, wages and employee benefits |
| 31.8 | % | 36.7 | % | (7.5 | )% |
| 30.4% |
| 32.6% |
| 4.8% |
| |
Rents and purchased transportation |
| 33.1 |
| 31.2 |
| 13.3 |
|
| 32.8 |
| 32.6 |
| 13.4 |
| |
Fuel and fuel taxes |
| 8.9 |
| 9.4 |
| 0.6 |
|
| 10.2 |
| 9.7 |
| 17.3 |
| |
Depreciation and amortization |
| 6.1 |
| 6.2 |
| 4.8 |
|
| 5.5 |
| 6.3 |
| (1.6) |
| |
Operating supplies and expenses |
| 5.0 |
| 5.6 |
| (3.9 | ) |
| 4.6 |
| 5.1 |
| 1.8 |
| |
Insurance and claims |
| 2.2 |
| 2.3 |
| 4.0 |
|
| 2.2 |
| 2.7 |
| (11.8) |
| |
Operating taxes and licenses |
| 1.3 |
| 1.5 |
| (5.6 | ) |
| 1.3 |
| 1.4 |
| 7.9 |
| |
General and administrative expenses, net of gains |
| 1.3 |
| 1.3 |
| 7.5 |
|
| 1.2 |
| 1.5 |
| (4.8) |
| |
Communication and utilities |
| 1.0 |
| 1.0 |
| (2.5 | ) |
| 0.9 |
| 1.0 |
| (2.4) |
| |
Total operating expenses |
| 90.7 |
| 95.2 |
| 1.7 |
|
| 89.1 |
| 92.9 |
| 7.8 |
| |
Operating income |
| 9.3 |
| 4.8 |
| 105.4 |
|
| 10.9 |
| 7.1 |
| 72.1 |
| |
Interest expense |
| (0.8 | ) | (1.0 | ) | (19.8 | ) |
| (0.3) |
| (0.8) |
| (63.9) |
| |
Equity in loss of associated companies |
| — |
| — |
| (84.0 | ) |
| (0.1) |
| — |
| 238.3 |
| |
Earnings before income taxes |
| 8.5 |
| 3.8 |
| 137.7 |
|
| 10.5 |
| 6.3 |
| 89.6 |
| |
Income taxes |
| 3.2 |
| 0.9 |
| 266.1 |
|
| 4.2 |
| 2.4 |
| 99.4 |
| |
Net earnings |
| 5.3 | % | 2.9 | % | 94.9 | % |
| 6.3% |
| 3.9% |
| 83.4% |
|
17
Total operating expenses during the third quarter of 2003nine month period ended September 30, 2004 increased 1.7%7.8% over the comparable period of 2002. Salaries,2003. The total cost of salaries, wages and employee benefits increased 4.8% in 2004. However, this expense category declined 7.5% in 2003 and decreased to 31.8%30.4% of operating revenues in 20032004, from 36.7%32.6% in 2002. A portion of this decline2003. While we experienced some increases in salaries and wages was a result of our implementation of an accountable expense reimbursement plan (driver per diem plan) for certain drivers during the first quarter of 2003. This plan reduces certain costs which are classified in the salary, wages and employee benefitsbenefit costs during the nine months ended September 30, 2004, the primary reasons for this expense category but is partly offset bydecline as a percentage of revenue were higher effective income tax rates. Lower workers’ compensation expenserevenue per loaded mile, continued growth of Intermodal volume and a reduction in the numbergrowth of mechanics employed during 2003 also impacted this comparison.our IC fleet. Rents and purchased transportation costs rose 13.3%13.4% in 2003,2004, primarily relateddue to additional funds paid to railroads and drayage companies, related to our JBI business growth, and to the continued expansion of our independent contractorIC fleet.
The 0.6%17.3% increase in fuel and fuel taxes was due toprimarily a result of fuel prices averaging about 15% higher in 2004 and an approximate 2% decline in miles per gallon. The higher fuel costs and slightly lower miles per gallon in 2003, substantially offset by lower miles driven by company-operated tractors. During the third quarter of 2003, our fuel cost per gallon averaged approximately 8% higher than the comparable period of 2002. These higher fuel costs2004 were substantially offset byrecovered through additional fuel surcharges billed to customers which are included in operating revenues. After a 38% riseour customers. While rapid changes in fuel cost per gallon may result in certain timing differences of fuel costs and fuel surcharges between accounting periods, we have been able to recover the majority of our higher 2004 fuel cost per gallon. The net impact of increased fuel costs, offset by higher fuel surcharge revenue, decreased earnings per share by about $.02 during the first quarter ofnine months ended September 30, 2004.
15
2003,The 7.9% increase in operating taxes and licenses reflects a slight increase in the lower ratesize of fuel cost increase during the secondtractor fleet and third quarters of 2003 allowed fuel surcharge revenues to substantially recover first quarter losses. Operating supplies and expenses declined 3.9%, partly due to the reduced amount of outsourced tractor and trailing equipment maintenance work.higher state licensing fees. The 4.0% rise in insurance and claims costs reflects escalating liability insurance premiums, which have been experienced throughout the industry and slightly higher accident costs, partly off set by lower cargo claims expense. The 7.5% increase4.8% decline in general and administrative expensesexpense was primarily a result of higherpartly due to significantly lower bad debt expense in 2004, partly offset by higher driver advertising and increased driver recruiting costs. Ourexpenses. In addition, net gains and losses on asset dispositions are included in the general and administrative expense category. We generated a net $149,000 gain during the nine months ended September 30, 2004, compared with a net $1.2 million loss in 2003. Net interest expense declined significantly in 2003, partly2004 due to the approximate $68 million of capital we raised through a secondary public offering of common stock in mid 2002.lower debt levels. We increased our effective income tax rate to 40.5% in 2004, from 38.5% in 2003, from 25.0% in 2002, primarily due to our higher level of earnings, the newsuspension during the fourth quarter of 2003, of recording certain non-cash tax benefits associated with the sale and leaseback transactions, and the driver per diem plan and our increased level of earnings.plan.
The equity in loss of associated company item on our consolidated statement of earnings reflects our share of the operating results for Transplace, Inc. (TPI). Effective January 1, 2003, we increased our interest in TPI to approximately 37% from 27%.
Comparison of Nine Months Ended September 30, 2003 to Nine Months Ended September 30, 2002
Summary of Operating Segments Results
For The Nine Months Ended September 30
(dollars in millions)
|
| Operating Revenue |
| Operating Income |
| ||||||||||
|
| 2003 |
| 2002 |
| % Change |
| 2003 |
| 2002 |
| ||||
JBT | $ | 621 | $ | 614 | 1 | % | $ | 31.6 | $ | 18.8 | |||||
JBI |
| 682 |
| 591 |
| 15 |
| 65.8 |
| 35.0 |
| ||||
DCS |
| 501 |
| 458 |
| 9 |
| 30.5 |
| 16.2 |
| ||||
Other |
| — |
| — |
| — |
| — |
| 0.2 |
| ||||
Subtotal |
| 1,804 |
| 1,663 |
| 8 | % | 127.9 |
| 70.2 |
| ||||
Inter-segment eliminations |
| (11 | ) | (13 | ) | (14 | ) | — |
| — |
| ||||
Total |
| $ | 1,793 |
| $ | 1,650 |
| 9 | % | $ | 127.9 |
| $ | 70.2 |
|
Our total consolidated operating revenue for the first nine months of 2003 was $1.793 billion, up 9% over the $1.650 billion for the first nine months of 2002. Fuel surcharge revenue has an impact on this comparison. The amount of fuel surcharge revenue billed for the nine months ended September 30, 2003 was $44.2 million more that the comparable period in 2002. If the amount of fuel surcharge revenue was excluded from both of the 2003 and 2002 periods, revenue growth would have been 6 %.
JBT segment revenue increased 1%, to $621 million for the first nine months of 2003, compared with $614 million in 2002. If the amount of fuel surcharge revenue was excluded from both the 2003 and 2002 periods, JBT revenue would have declined 2%. This 2% decrease in revenue was primarily a result of an approximate 5% increase in revenue per loaded mile, excluding fuel surcharges, offset by a 3% decrease in the size of the average tractor fleet, 2% lower tractor miles and an increase in empty miles. Part of the decline in miles per tractor was due to relatively soft freight levels during the first quarter and April. The increase in revenue per loaded mile, excluding fuel surcharges, contributed to the improvement in operating income of the JBT segment. Operating income for the first nine months of 2003 was $31.6 million, compared with $18.8 million in 2002. The operating ratio of the JBT segment was 94.9% for the first nine months of 2003 and 96.9% for the first nine months of 2002. In addition, the driver per diem plan, which was implemented in February of 2003, contributed to the improvement in operating income.
16
JBI segment revenue increased 15%, to $682 million during the first nine months of 2003, compared with $591 million in 2002. The increase in segment revenue would have been 13% if fuel surcharge revenue was excluded from both periods. The increase in revenue was primarily due to an approximate 10% increase in load volume and a 2% increase in revenue per load. The higher revenue per load resulted from changes in freight mix which generated a longer average length of haul and an approximate 0.8% increase in revenue per loaded mile, exclusive of fuel surcharges. Operating income in the JBI segment totaled $65.8 million in 2003, compared with $35.0 million in 2002. This increase was primarily due to higher revenue levels, lower maintenance costs and improved utilization of revenue equipment. The JBI operating ratio was 90.3% for the first nine months of 2003 and 94.1% for the comparable period of 2002.
Revenue rose 9% in the DCS segment to $501 million during the first nine months of 2003, compared with $458 million in 2002. This increase in DCS segment revenue would have been 7% if fuel surcharge revenue was excluded from both periods. This increase in DCS revenue was driven by a 6% increase in net revenue per tractor, excluding fuel surcharge and a 1% increase in the size of the average tractor fleet. Operating income rose to $30.5 million in 2003, from $16.2 million in 2002. The DCS segment operating ratio for the first nine months of 2003 was 93.9%, compared to 96.5% for the first nine months of 2002. This improvement in 2003 operating income was primarily due to better utilization of tractors in service, rate increases and efforts to reduce costs, including driver wages.
The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.
|
| Nine months Ended September 30 |
| ||||
|
| Percentage of |
| Percentage Change |
| ||
|
| 2003 |
| 2002 |
| 2003 vs. 2002 |
|
Operating revenues |
| 100.0 | % | 100.0 | % | 8.6 | % |
Operating expenses |
|
|
|
|
|
|
|
Salaries, wages and employee benefits |
| 32.6 | % | 37.1 | % | (4.6 | )% |
Rents and purchased transportation |
| 32.6 |
| 30.7 |
| 15.1 |
|
Fuel and fuel taxes |
| 9.7 |
| 9.3 |
| 14.4 |
|
Depreciation and amortization |
| 6.3 |
| 6.6 |
| 4.3 |
|
Operating supplies and expenses |
| 5.1 |
| 5.9 |
| (6.8 | ) |
Insurance and claims |
| 2.7 |
| 2.3 |
| 29.0 |
|
Operating taxes and licenses |
| 1.4 |
| 1.5 |
| (1.7 | ) |
General and administrative expenses, net of gains |
| 1.5 |
| 1.2 |
| 28.5 |
|
Communication and utilities |
| 1.0 |
| 1.1 |
| (2.2 | ) |
Total operating expenses |
| 92.9 |
| 95.7 |
| 5.4 |
|
Operating income |
| 7.1 |
| 4.3 |
| 82.3 |
|
Interest expense |
| (0.8 | ) | (1.2 | ) | (21.6 | ) |
Equity in loss of associated companies |
| — |
| (0.1 | ) | (57.9 | ) |
Earnings before income taxes |
| 6.3 |
| 3.0 |
| 126.8 |
|
Income taxes |
| 2.4 |
| 0.8 |
| 249.2 |
|
Net earnings |
| 3.9 | % | 2.2 | % | 86.0 | % |
Total operating expenses for the first nine months of 2003 were up 5.4% over the comparable period of 2002. Salaries, wages and employee benefits expense declined 4.6% in 2003, and decreased to 32.6% of operating revenues in 2003, from 37.1% in 2002. A portion of this decline in salaries and wages was a result of our driver per diem plan, which was implemented in February of 2003. Rents and purchased
17
transportation expense increased 15.1%, primarily due to the increase in JBI business, which resulted in larger payments to railroads and drayage companies. In addition, payments to independent contractors increase as we grow this fleet. The 14.4% increase in fuel and fuel taxes was due to significantly higher fuel cost per gallon in 2003, partly offset by lower miles run by company-operated tractors. Our fuel cost per gallon during the first nine months of 2003 averaged 16.6% more than the comparable period of 2002. The 6.8% decline in operating supplies and expenses was partly due to the reduced amount of outsourced tractor and trailing equipment maintenance work. We are moving more of our maintenance and revenue equipment repair work to our own shops. The 29.0% rise in insurance and claims cost reflects escalating liability insurance premiums, which have been experienced throughout the industry and higher accident costs. The significant increase in general and administrative expenses was primarily a result of higher bad debt expense and increased driver recruiting costs. Net interest expense declined 21.6%, partly due to the approximate $68.0 million of capital we raised through a secondary public offering of common stock in mid 2002.
The equity in loss of associated company line item on our consolidated statement of earnings reflects our share of the operating results for Transplace, Inc. (TPI). Effective January 1, 2003, we increased our interest in TPI to approximately 37% from 27%.TPI.
Liquidity and Capital Resources
Cash Flow
We typically generate significant amounts of cash from operating activities. Net cash provided by operating activities totaled $251$290.2 million during the first nine months of 2003,month period ended September 30, 2004, compared with $123$251.1 million for the same period of 2002. Operating2003.
The significant increase in 2004 net cash provided by operating activities, which significantly increased cash in 2003, relative to 2002, included2003, resulted from substantially higher net earnings, deferred income taxes, tax benefits recognized from stock option transactions and prepaidsome timing differences in accrued payroll and other accrued expenses. Cash was consumed by increasesAn increase in trade accounts receivable and a decreasedecline in trade accounts payable. payable in 2004, relative to 2003, partly offset the increase in net cash provided.
Net cash used in 2004 investing activities was $110$182.6 million, compared with $109.7 million in 2003, compared with $122 million 2002.2003. This change was primarily a result of increased capital spending for revenue equipment. Net cash of approximately $129 $127.1
18
million was used in financing activities during the first nine months of 2003,2004, compared with $36$128.9 million provided from financing activities in 2002. Net cash provided from financing activities in 2002 reflected approximately $68.02003. Cash was used during the current period to reduce debt and to repurchase all of our tractors remaining on capital lease arrangements. In addition, $4.8 million of proceeds from the salewas used to pay dividends. We re-initiated payment of a secondary stock offering, which closed during the second quarter.quarterly dividend in May of 2004.
Selected Balance Sheet Data
|
| As of |
| |||||||
|
| September 30, 2003 |
| December 31, 2002 |
| September 30, 2002 |
| |||
Working capital ratio |
| 1.04 |
| 1.33 |
| 1.32 |
| |||
|
|
|
|
|
|
|
| |||
Current maturities of long-term debt and |
| $ | 195 |
| $ | 124 |
| $ | 127 |
|
|
|
|
|
|
|
|
| |||
Total debt and obligations under |
| $ | 205 |
| $ | 343 |
| $ | 361 |
|
|
|
|
|
|
|
|
| |||
Total debt to equity |
| .30 |
| .58 |
| .63 |
| |||
|
|
|
|
|
|
|
| |||
Total debt as a ratio to total capital |
| .23 |
| .37 |
| .39 |
|
|
| As of |
| ||||||||
|
| September 30, 2004 |
| December 31, 2003 |
| September 30, 2003 |
| ||||
Working capital ratio |
| 1.34 |
| .99 |
| 1.04 |
| ||||
|
|
|
|
|
|
|
| ||||
Current maturities of long-term debt and |
| $ | 50 |
| $ | 172 |
| $ | 195 |
| |
|
|
|
|
|
|
|
| ||||
Total debt and obligations under |
| $ | 50 |
| $ | 172 |
| $ | 205 |
| |
|
|
|
|
|
|
|
| ||||
Total debt to equity |
| .06 |
| .24 |
| .30 |
| ||||
|
|
|
|
|
|
|
| ||||
Total debt as a ratio to total capital |
| .06 |
| .20 |
| .23 |
| ||||
Our current working capital ratio andreflects the fact that all of our debt is current maturities of long-term debt and current installments of obligations under capital leases amounts shown in the above table as of September 30, 2003 were impacted by a reclassification. As2004. We currently plan to pay off all of December 31, 2002, we had plannedour remaining debt obligations as they mature later this year. We expect these funds to extend certain capital leases with initial terms coming due within the next year. Partly due to favorable interest rates and cash flows, we elected to purchase some of this equipment as these initial lease terms came due. While we have retained an option to extend certain capital leases, this change of intent resulted in the reclassification of approximately $82 million of capitalized lease debtbe generated from long-term to current. This reclassification had no effect on total debt
18
or earnings. We began purchasing this equipment in July of 2003.operating activities.
Our need for capital typically has resulted from the acquisition of revenue equipment to support growth and the replacement of older tractors and trailing equipment with new, late model equipment. We are frequently able to accelerate or postpone some equipment replacements depending on market conditions. In the past we have obtained capital through public stock offerings, debt financing, revolving lines of credit and cash generated from operations. We have also utilized capital and operating leases, from time to time, to acquire revenue equipment. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments. We have an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain equipment on capitalized leases. We have utilized these values in accounting for these capitalized leases. To date, none of our operating leases contain any guaranteed residual value clauses.
Net capital expenditures were $140$194.5 million during the first nine months of 20032004 compared with $123$110.7 million for the same period of 2002.2003. We are currently anticipate spending in the range of $220committed to spend approximately $87 million to purchase revenue equipment and construct new facilities, net of $29 million expected proceeds from saleequipment sales or trade-in allowances, on revenue equipment for the full calendar year of 2003.allowances.
We retired approximately $87paid $95 million ofto retire senior notes payable, as scheduled, onin September 1, 2003, utilizing funds on hand.2004. We are authorized to borrow up to $150 million under our current revolving line of credit and had no balances$40 million outstanding on this line at September 30, 2003.2004. This line of credit expires on November 14, 2005. We believe that our liquid assets, cash generated from our secondary stock offering described above, cash generated from operations and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future.
|
| Contractual Cash Obligations |
| |||||||||||||
|
| Total |
| One Year |
| One To |
| Four To |
| After |
| |||||
Operating leases | $ | 234 | $ | 71 | $ | 99 | $ | 59 | $ | 5 | ||||||
Capital leases |
| 91 |
| 91 |
| — |
| — |
| — |
| |||||
Senior and subordinated notes payable |
| 115 |
| 105 |
| 10 |
| — |
| — |
| |||||
Subtotal |
| $ | 440 |
| 267 |
| $ | 109 |
| $ | 59 |
| $ | 5 |
| |
Commitments to acquire revenue equipment |
| 296 |
| 50 |
| 246 |
| — |
| — |
| |||||
Total |
| $ | 736 |
| $ | 317 |
| $ | 355 |
| $ | 59 |
| $ | 5 |
|
19
|
| Financing Commitments Expiring By Period |
| |||||||||||
|
| Total |
| One Year |
| One To |
| Four To |
| After |
| |||
Revolving credit arrangements |
| $ | 150 |
| — |
| $ | 150 |
| — |
| — |
| |
Standby letters of credit |
| 29 |
| 29 |
| — |
| — |
| — |
| |||
Total |
| $ | 179 |
| $ | 29 |
| $ | 150 |
| — |
| — |
|
|
| Contractual Cash Obligations |
| |||||||||||||
|
| As of September 30, 2004 |
| |||||||||||||
|
| Amounts Due by Period |
| |||||||||||||
|
| (dollars in millions) |
| |||||||||||||
|
|
|
| One Year |
| One To |
| Four To |
| After |
| |||||
|
| Total |
| Or Less |
| Three Years |
| Five Years |
| Five Years |
| |||||
Operating leases |
| $ | 181 |
| $ | 72 |
| $ | 82 |
| $ | 23 |
| $ | 4 |
|
Revolving credit facility |
| 40 |
| 40 |
| — |
| —- |
| — |
| |||||
Senior and subordinated notes payable |
| 10 |
| 10 |
| — |
| — |
| — |
| |||||
Subtotal |
|
| 231 |
| 122 |
|
| 82 |
|
| 23 |
|
| 4 |
| |
Commitments to acquire revenue equipment, net of $29 million of expected proceeds from sales or trade-in allowances |
| 73 |
| 73 |
| — |
| — |
| — |
| |||||
Facilities |
| 14 |
| 14 |
| — |
| — |
| — |
| |||||
Total |
| $ | 318 |
| $ | 209 |
| $ | 82 |
| $ | 23 |
| $ | 4 |
|
|
| Financing Commitments Expiring By Period |
| |||||||||||
|
| As of September 30, 2004 |
| |||||||||||
|
| (dollars in millions) |
| |||||||||||
|
|
|
| One Year |
| One To |
| Four To |
| After |
| |||
|
| Total |
| Or Less |
| Three Years |
| Five Years |
| Five Years |
| |||
|
|
|
|
|
|
|
|
|
|
|
| |||
Revolving credit arrangements |
| $ | 150 |
| — |
| $ | 150 |
| — |
| — |
| |
Standby letters of credit |
| 20 |
| 20 |
| — |
| — |
| — |
| |||
Total |
| $ | 170 |
| $ | 20 |
| $ | 150 |
| — |
| — |
|
Risk Factors
You should refer to Item 7 of our annual report (Form 10-K) for the year ended December 31, 2002,2003, under the caption “Risk Factors” for additional informationspecific details on the following factors and events that are not within our control and could affect our financial results.
•Our effective income tax rates for the threebusiness is subject to general economic and nine months ended September 30, 2003business factors that are largely out of our control, any of which could have a materially adverse effect on our results of operations.
•We operate in a highly competitive and 2002, were 38.5%fragmented industry. Numerous factors could impair our ability to maintain our current profitability and 25.0%, respectively. to compete with other carriers.
•We implemented an accountable expense reimbursement plan (driver per diem plan) forderive a significant portion of our driversrevenue from a few major customers, the loss of one or more of which could have a materially adverse effect on our business.
•We depend on third parties in February of 2003. While this plan will benefit both the majorityoperation of our business.
•The truckload industry is currently experiencing a shortage of qualified drivers and independent contractors. We have increased a number of our driver pay rates in order to attract and retain additional drivers. If we are unable to attract and retain an adequate supply of drivers, we could
20
be required to pay significantly higher levels of compensation, limit our growth during certain time periods or allow trucks to sit idle.
•Ongoing insurance and claims expenses could significantly reduce our earnings.
•Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.
•We operate in a highly regulated industry, and increased direct and indirect costs of compliance with, or liability for violation of, existing or future regulations could have a materially adverse effect on our business.
•As previously reported, we had a $13.6 million note receivable from Transportacion Maritima Mexicana (TMM) related to the sale of our share of a Mexican joint venture. During the current quarter, we exchanged our TMM note for marketable securities, which we subsequently sold for cash in the open market. These transactions had no net impact on our net earnings, it results in a higher effective incomeearnings. At September 30, 2004, our remaining receivable balance from TMM is approximately $1.8 million.
•The IRS has proposed to disallow the tax rate. Partly as a result of this plan and anticipated higher earnings, we are currently estimating an effective income tax rate of 38.5% for calendar year 2003.benefits associated with certain sale- and-leaseback transactions.
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 thatThis transaction was examined by the Internal Revenue Service (IRS) has recently indicated it intends to examine.IRS in an audit of our 1998 and 1999 income tax returns. We have voluntarily disclosedreceived an IRS Notice of Proposed Assessment, which disallows the tax benefits associated with these transactions, toand as a result, we have filed an appeal in the matter. We have been notified by the IRS Appeals Division that they intend to have the examining agent request more information from us and develop certain technical arguments we raised in Octoberdefending our position. The examining agent has not yet contacted us and no specific timeframe has been given for the completion of 2002,this additional information request. If a resolution of the matter cannot be reached in the appeals process, the IRS began their examinationwill forward a 90-day letter, also known as a Notice of Deficiency. A resolution of the specific facts of these transactions. As of September 30, 2003, no adverse findings have been asserted bydispute could occur at any point in the IRS.administrative process or could extend through a trial and court appeals. If the IRS challenges our transactions, we intend to vigorously defend them. As of September 30, 2003,are unsuccessful in defending this transaction, we had recognized approximately $31 million of income tax benefits from these transactions. The annual tax benefits recognized from these transactions can be computed from the table contained in Footnote (4), Income Taxes, of our Form 10-K for the years 2002could owe additional taxes and 2001, and by summing the amounts labeled as “sale/leaseback benefit” for the years 1999 through 2002. As of September 30, 2003, weinterest. We estimate our maximum potentialearnings exposure to be approximately $36.5$34 million, includingwhich represents the tax benefits realized through December 31, 2002, plus estimated accrued interest in the eventthrough September 30, 2004. This exposure would result if the IRS successfully challenges allsucceeded in disallowing 100% of the tax benefits realized to date.from this transaction.
•As we had previously announced, we signedreported, the Burlington Northern Santa Fe (BNSF) railroad and J.B. Hunt are currently engaged in an arbitration process to clarify certain financial and operating terms in our Joint Service Agreement (JSA). BNSF provides a significant amount of rail transportation services to our Intermodal business segment. The JSA is an agreement during the fourth quarterbetween BNSF and us, which was signed in 1996, and defines a number of 2001financial and operating arrangements relative to sell our joint venture interest in MexicoIntermodal business. According to the majority owner. This sale closed duringJSA, any amounts due us or payable to BNSF, determined through the first quarterarbitration process, could be retroactive to July 7, 2004. At this time, we are unable to reasonably predict the outcome of 2002. In accordance withthis arbitration process and, as such, no gain or loss contingency can be determined or recorded. Normal commercial business activity between the terms of the sale, we recordedparties, including load tendering, load tracing, billing and payments continues on a note receivable for $18.1 million. The original note carried an interest rate of 5%, four required annual principal payments and would have matured on June 30, 2005. The majority owner, GROUPO TMM, S.A. (formerly Transportacion Maritima Mexicana S.A. de C.V.) (TMM) announced that it was experiencing liquidity issues and in May 2003 missed payment on its outstanding bonds. Consequently, TMM requested to defer a scheduled principal and interest payment on our note receivable. On October 14, 2003, we agreed to defer a principal payment that was due on June 30, 2003. This payment is now due when TMM receives cash for certain operations-related transactions, or no later than June 30, 2006. The interest payment that was due on June 30, 2003 was deferred until October 31, 2003. All other terms and conditions remain in place. We have approximately $13.5 million (net) in principal and interest receivable on our balance sheet. We believe TMM’s refinancing plan will provide sufficient liquidity to meet its renegotiated obligation to us. If TMM cannot complete the refinancing or generates insufficient cash to meet its obligations, including ours, our note receivable may become uncollectible.timely basis.
2021
Impact•As previously discussed, the United States Court of Recently Issued Accounting Pronouncements
InAppeals for the District of Columbia issued a decision in July 2004, rejecting the new hours-of-service (HOS) rules, which were newly effective in January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51. This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. On October 9, 2003, the FASB staff issued FASB Staff Position (FSP) Financial Interpretation No. 46-6, which deferred the effective date for applying the provisions until March 31, 2004. The adoptionnew HOS rules had been announced by the Federal Motor Carrier Safety Administration (FMSCA) in April 2004 and were effective in January 2004. The Court’s rejection was based on concerns regarding driver’s health, as well as other issues such as driving time, rest periods and monitoring compliance. On September 30, 2004, the current HOS rules were extended for one year or the time at which the FMCSA develops a set of Interpretation No. 46 is not expected to have a material effect on our financial statements.new rules.
ITEM 3.3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings are affected by changes in short-term interest rates as a result of our use of short-term revolving lines of credit. From time to time we utilize interest rate swaps to mitigate the effects of interest rate changes; none were outstanding at September 30, 2003.2004. 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 our results of operations based on variable rate debt outstanding at September 30, 2003.2004. At September 30, 2003,2004, the fair value of our fixed rate long-term obligations approximated carrying value.
Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the three and nine months ended September 30, 2003.2004. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from its foreign investment. To date, we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuation in foreign currency exchange rates.
ITEM 4.4. CONTROLS AND PROCEDURES
Within 90 days prior to filing
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our internal controls and disclosure controls. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures arewere effective as of September 30, 2004, in alerting them on a timely basis to material information required to be disclosed by us in our periodic reports to the Securities and Exchange Commission.
Since our most recent review of internal controls systems and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect these controls.
2122
OTHER INFORMATION
Item 1. | Legal Proceedings | |||||
| None applicable. | |||||
|
| |||||
Item 2. | Changes in Securities | |||||
| None applicable. | |||||
|
| |||||
Item 3. | Defaults Upon Senior Securities | |||||
| None applicable. | |||||
|
| |||||
Item 4. | Submission of Matters to a Vote of Security Holders | |||||
| None applicable. | |||||
|
| |||||
Other | ||||||
|
| |||||
|
| |||||
Exhibits and Reports on Form 8-K | ||||||
| Exhibits | |||||
15 | Awareness letter related to Independent Accountants’ Review Report | |||||
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||
|
| |||||
b) | Reports on Form 8-K | |||||
On October |
2223
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the city of Lowell, Arkansas, on the 31st29th day of October, 2003.
2004.
| 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 | |||||
2324
INDEX TO EXHIBITS
J.B Hunt Transport Services, Inc.
Exhibit | Exhibit | |||
|
|
| ||
| 15 |
| Awareness letter related to Independent Accountants’ Review Report | |
|
|
|
| |
| 31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
|
|
| |
| 31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
|
|
|
| |
| 32 |
| Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
2425