FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARKANSAS 71-0335111
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
615 J.B. HUNT CORPORATE DRIVE, LOWELL, ARKANSAS 72745
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, AND ZIP CODE)
(501) 820-0000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT
THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
THE FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.
YES X NO
----- -----
THE NUMBER OF SHARES OF THE COMPANY'S $.01 PAR VALUE COMMON STOCK
OUTSTANDING ON MARCH 31, 2000 WAS 35,419,588.
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim condensed consolidated financial statements contained
herein reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of financial condition, results of operations
and cash flows for the periods presented. They have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Operating results for the three month
period ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 2000.
The interim condensed consolidated financial statements have been
reviewed by KPMG LLP, independent public accountants.
These interim condensed consolidated financial statements should be
read in conjunction with the Company's latest annual report and Form 10-K for
the year ended December 31, 1999.
INDEX
-----
Condensed Consolidated Statements of Earnings for the Three
Months Ended March 31, 2000 and 1999............................... Page 3
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999............................... Page 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999......................... Page 5
Notes to Condensed Consolidated Financial Statements
as of March 31, 2000............................................... Page 6
Review Report of KPMG LLP.............................................. Page 10
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................ Page 11
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk............. Page 15
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
- ---------------------------------------------------------------------------------------------------
Three Months Ended
March 31
- ---------------------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------------------
Operating revenues $ 533,556 $ 470,244
Operating expenses
Salaries, wages and employee benefits 185,885 172,688
Rents and purchased transportation 188,732 144,350
Fuel and fuel taxes 56,706 36,710
Depreciation 31,347 37,910
Operating supplies and expenses 29,847 27,550
Insurance and claims 9,534 9,781
Operating taxes and licenses 7,665 6,502
General and administrative expenses 5,923 5,026
Communication and utilities 5,688 5,553
- ---------------------------------------------------------------------------------------------------
Total operating expenses 521,327 446,070
- ---------------------------------------------------------------------------------------------------
Operating income 12,229 24,174
Interest expense 5,963 7,504
- ---------------------------------------------------------------------------------------------------
Earnings before income taxes 6,266 16,670
Income taxes 1,253 6,084
- ---------------------------------------------------------------------------------------------------
Net earnings $ 5,013 $ 10,586
===================================================================================================
Average basic shares outstanding 35,604 35,615
===================================================================================================
Basic earnings per share $ 0.14 $ 0.30
===================================================================================================
Average diluted shares outstanding 35,622 36,555
===================================================================================================
Diluted earnings per share $ 0.14 $ 0.29
===================================================================================================
See accompanying notes to condensed consolidated financial statements.
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- -----------------------------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
- -----------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,888 $ 12,606
Accounts receivable 238,540 238,573
Prepaid expenses 72,441 43,962
- -----------------------------------------------------------------------------------------------------------------
Total current assets 314,869 295,141
- -----------------------------------------------------------------------------------------------------------------
Property and equipment 1,273,067 1,239,394
Less accumulated depreciation 451,902 453,509
- -----------------------------------------------------------------------------------------------------------------
Net property and equipment 821,165 785,885
- -----------------------------------------------------------------------------------------------------------------
Other assets 57,376 46,438
- -----------------------------------------------------------------------------------------------------------------
$ 1,193,410 $ 1,127,464
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 60,000 $ 60,000
Trade accounts payable 168,924 180,009
Claims accruals 1,982 788
Accrued payroll 25,873 19,462
Other accrued expenses 10,286 10,371
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 267,065 270,630
- -----------------------------------------------------------------------------------------------------------------
Long-term debt 336,428 267,639
Claims accruals 6,483 7,368
Deferred income taxes 181,074 180,441
Stockholders' equity 402,360 401,386
- -----------------------------------------------------------------------------------------------------------------
$ 1,193,410 $ 1,127,464
=================================================================================================================
See accompanying notes to condensed consolidated financial statements.
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended March 31
- --------------------------------------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 5,013 $ 10,586
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 31,347 37,910
Provision for noncurrent deferred income taxes 633 4,803
Tax benefit (expense) of stock options exercised (1) 63
Forefeiture of restricted stock -- (18)
Amortization of discount, net (11) 316
Changes in assets and liabilities:
Trade accounts receivable 33 (5,999)
Other assets (40,616) 3,539
Trade accounts payable (11,085) (30,833)
Claims accruals 309 (2,657)
Accrued payroll and other accrued expenses 6,326 9,872
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (8,052) 27,582
- --------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (89,733) (30,783)
Proceeds from sale of equipment 23,106 599
Decrease (increase) in other assets 2,061 (6,876)
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (64,566) (37,060)
- --------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under commercial paper program 68,800 10,550
Net payments of long-term debt -- (5,000)
Repurchase of treasury stock (3,126) --
Proceeds from sale of treasury stock 8 374
Dividends paid (1,782) (1,781)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 63,900 4,143
- --------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (8,718) (5,335)
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,606 9,227
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,888 $ 3,892
==============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,450 $ 9,042
Income taxes 50 45
==============================================================================================================
See accompanying notes to condensed consolidated financial statements.
5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) The interim condensed consolidated financial statements at March 31,
2000 and for the three months ended March 31, 2000 and 1999 are unaudited and
include all adjustments, consisting only of normal recurring accruals, which
the Company considers necessary for a fair presentation of financial position
and operating results. The unaudited consolidated financial statements have
been prepared in accordance with Rule 10-01 of Regulation S-X and, therefore,
do not contain all information and footnotes normally contained in annual
financial statements. Accordingly, they should be read in conjunction with the
financial statements and notes thereto appearing in the annual report on Form
10-K of the Company for the year ended December 31, 1999.
2) The results of operations for the three-month period ended March 31,
2000 are not necessarily indicative of those to be expected for the calendar
year ending December 31, 2000.
3) LONG-TERM DEBT
Long-term debt consists of (in thousands):
3/31/2000 12/31/1999
--------- ----------
Commercial paper $103,800 $35,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/2000 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually, due 12/12/2000 25,000 25,000
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/2003 98,260 98,260
Senior notes payable, interest at 7.00%
payable semiannually, due 9/15/2004 95,000 95,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
--------- ----------
397,060 328,260
Less current maturities (60,000) (60,000)
Unamortized discount (632) (621)
--------- ----------
$336,428 $267,639
========= ==========
Under its commercial paper note program, the Company is authorized to
issue up to $240 million in notes. These notes are supported by two credit
agreements, which aggregate $240 million, with a group of banks, of which $120
million expires March 6, 2001 and $120 million expires March 20, 2002.
The 7.80% senior subordinated notes were issued on October 30, 1992
and are payable in five equal annual installments beginning October 30, 2000.
6
4) CAPITAL STOCK
The Company maintains a Management Incentive Plan that provides
various vehicles to compensate key employees with Company common stock. A
summary of the restricted and non-statutory options to purchase Company common
stock follows:
Weighted average Number of
Number of exercise price shares
shares per share exercisable
------ --------- -----------
Outstanding at December 31, 1999 3,737,565 $16.65 551,940
=======
Granted 560,000 12.83
Exercised (600) 14.31
Terminated (43,350) 20.56
---------- ------ -------
Outstanding at March 31, 2000 4,253,615 $16.11 539,040
========== ====== =======
The Company announced in February of 2000, a decision to discontinue
a policy of paying dividends and an intent to use those funds to repurchase up
to 500,000 shares of its common stock.
5) EARNINGS PER SHARE
A reconciliation of the numerator and denominator of basic and
diluted earnings per share is shown below:
Three Months Ended March 31
(in thousands, except per share data)
--------------------------------------
2000 1999
---- ----
Numerator (net earnings) $5,013 $10,586
Denominator - Basic earnings per share
Weighted average shares outstanding 35,604 35,615
====== =======
Basic earnings per share $ .14 $ .30
====== =======
Denominator - Diluted earnings per share
Weighted average share outstanding 35,604 35,615
Effect of common stock options 18 940
------ -------
Weighted average shares assuming dilution 35,622 36,555
====== =======
Diluted earnings per share $ .14 $ .29
====== =======
Options which were outstanding to purchase shares of common stock
during the first quarter of 2000 and 1999, but were excluded from the
computation of diluted earnings per share because the option price was greater
than the average market price of the common shares were:
Three Months Ended March 31
------------------------------------
2000 1999
---- ----
Number of shares under option 5,963,740 238,500
Range of exercise price $12.88-$37.50 $23.00-$37.50
7
6) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings and foreign currency
translation adjustments. During the three months ended March 31, 2000 and
1999, comprehensive income was equal to: (in thousands):
Three Months Ended March 31
---------------------------
2000 1999
------ -------
Net earnings $5,013 $10,586
Foreign currency
translation gain (loss) 863 (135)
------ -------
Comprehensive income $5,876 $10,451
====== =======
7) INCOME TAXES
The effective income tax rates for the three months ended March 31,
2000 and 1999 were based on estimated annual combined effective rates of 20%
and 36.5%, respectively.
8) BUSINESS SEGMENTS
As of January 1, 2000, the Company has four reportable business
segments: Truck (JBT), Intermodal (JBI), Dedicated Contract Services (DCS) and
Logistics (JBL). JBT services include full truck-load, dry-van freight which
is typically transported utilizing company-owned or controlled revenue
equipment. This freight is typically transported over roads and highways and
is not moved at any time by railroad. The JBI segment includes freight which
is transported by rail over any portion of the movement and also includes
certain repositioning truck freight moved by JBI equipment or third-party
carriers, when such highway movement is intended to direct JBI equipment back
toward intermodal operations. The JBT and JBI segments were operated in
combined fashion (formally reported as Van/Intermodal in prior periods) and
limited identifiable comparative information is available for JBT and JBI
prior to January 1, 2000. Accordingly, the Company has provided comparable
segment information for the quarter ended March 31, 2000 based on the prior
segmentation, which included JBI and JBT as the former segment,
"Van/Intermodal." DCS typically includes company-owned revenue equipment and
employee drivers which are assigned to a specific customer, traffic lane or
service. DCS operations usually include formal agreements or contracts which
govern services performed and applicable rates. The JBL segment includes a
wide range of comprehensive transportation and management services which may
include experienced professional managers, information and optimization
technology and the actual design or redesign of system solutions. JBL may
utilize JBT, JBI or DCS owned or controlled assets and employees, or
third-party equipment and employees, or a combination to meet the customer's
service requirements. JBL services also typically are in accordance with
written long-term agreements. Intersegment revenues consist of services
provided by one or more segments to another segment. A summary of certain
segment information is presented below (in millions):
8
Assets
-------------------------------------
As of March 31
-------------------------------------
2000 1999
-------------------------------------
JBT $ 830 --
JBI 78 --
------ ------
Van/Intermodal 908 899
DCS 104 70
JBL 69 49
Other (includes corporate) 112 150
------ ------
Total $1,193 $1,168
====== ======
Revenues
----------------------------------------------
For the Three Months Ended March 31
----------------------------------------------
2000 1999
----------------------------------------------
JBT $ 203 182
JBI 151 155
----- -----
Van/Intermodal 354 337
DCS 98 70
JBL 107 80
Other -- --
----- -----
Subtotal 559 487
Inter-segment eliminations (25) (17)
----- -----
Total $ 534 $ 470
===== =====
Operating Income (Loss)
-----------------------------------
For the Three Months Ended March 31
-----------------------------------
2000 1999
-----------------------------------
JBT (0.2) --
JBI 7.7 --
----- -----
Van/Intermodal 7.5 15.3
DCS 4.0 4.6
JBL 1.7 2.8
Other (1.0) 1.5
----- -----
Total $12.2 $24.2
===== =====
Net Depreciation Expense
-----------------------------------
For the Three Months Ended March 31
-----------------------------------
2000 1999
-----------------------------------
JBT $16 --
JBI 6 --
--- ---
Van/Intermodal 22 28
DCS 8 6
JBL -- --
Other 1 4
--- ---
Total $31 $38
=== ===
9
9) OTHER
On March 14, 2000, the Company, along with five other motor carriers,
announced the intent to merge its non-asset based logistics business
into a commonly owned Internet-based global transportation logistics
company, Transplace.com. The Company will invest $5 million in cash
and will have a 28% equity stake in Transplace.com.
10) RECLASSIFICATIONS
Certain amounts for 1999 have been reclassified to conform to the 2000
classifications.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of March 31, 2000, and the
related condensed consolidated statements of earnings and cash flows for the
three-month periods ended March 31, 2000 and 1999. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of J.B. Hunt Transport Services,
Inc. and subsidiaries as of December 31, 1999, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 4, 2000, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1999, is fairly presented, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ KPMG LLP
------------
Tulsa, Oklahoma
April 14, 2000
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
attached interim condensed consolidated financial statements and notes
thereto, and with the Company's audited consolidated financial statements and
notes thereto for the calendar year ended December 31, 1999 and Management's
Discussion and Analysis of Results of Operations and Financial Condition
included in the 1999 Annual Report to Shareholders.
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 2000 TO FIRST QUARTER 1999
SUMMARY
Consolidated operating revenues for the first quarter of 2000 increased
13%, to $534 million, from $470 million in the comparable period of 1999. As
of January 1, 2000, the Company has four reportable business segments: Truck
(JBT), Intermodal (JBI), Dedicated Contract Services (DCS) and Logistics
(JBL). The first quarter of 2000 marks the first period of separately
reporting segment results of the truck and intermodal business units. In prior
periods, the two units had been operated and reported together as the
Van/Intermodal segment. Accordingly, the only identifiable comparative segment
information for JBT and JBI is revenue prior to January 1, 2000.
The JBT segment consists primarily of full truckload, dry-van freight
which is typically transported utilizing company-owned or controlled revenue
equipment. This freight is transported over roads and highways and is not
transported over any portion of the movement by railroad. JBT segment revenue
grew 12%, to $203 million during the first quarter of 2000, compared with $182
million in the same period of 1999. Revenue per mile in the truck segment,
exclusive of fuel surcharges, rose 3.7% in the current quarter compared with
the first quarter of 1999.
JBI segment business includes primarily truckload freight which is
transported by rail over any portion of the movement. This segment also
includes certain repositioning truck freight moved by JBI or third-party
equipment when such highway or other movement is intended to direct JBI
equipment back into intermodal operations. JBI segment revenue declined
approximately 3% during the current quarter, to $151 million, from $155
million in 1999. Intermodal rates in 2000 were essentially flat when compared
with the same period in 1999.
DCS segment operations typically include services provided with
company-owned revenue equipment and employee drivers which are assigned to
specific customers or traffic lanes. DCS operations usually involve written,
long-term agreements or contracts. During the current quarter DCS revenue
increased 40%, to $98 million, from $70 million in the comparable period of
1999. Operating income was $4.0 million during the first
11
quarter of 2000, compared with $4.6 million in the first quarter of 1999. The
decline in 2000 DCS operating income was due, in part, to significantly higher
fuel costs and increased computer system and corporate support expenses.
The JBL segment includes a wide range of comprehensive transportation
and management services. These services may include experienced professional
managers, information and optimization technology and the actual design or
redesign of transportation system solutions. JBL may utilize JBT, JBI, or DCS
owned or controlled assets and employees or third-party equipment and
employees, or a combination to meet customers' service requirements. JBL
services also typically involve long-term, written agreements. JBL revenue
grew 34% during the current quarter to $107 million, from $80 million in 1999.
Operating income was $1.7 million in 2000, compared with $2.8 million in 1999.
This decline in operating income was due primarily to increased computer
system and corporate support charges and higher bad debt expense.
Summary of Operating Segments Results
For Three Months Ended March 31
(dollars in millions)
Gross Revenue Operating Income
------------------------------- ---------------------
2000 1999 % Change 2000 1999
----- ----- -------- ----- ----
JBT $203 $182 12% $(0.2) --
JBI 151 155 (3%) 7.7 --
----- ----- -------- ----- -----
Van/Intermodal 354 337 5% 7.5 $15.3
DCS 98 70 40% 4.0 4.6
JBL 107 80 34% 1.7 2.8
Other -- -- -- (1.0) 1.5
----- ----- -------- ----- -----
Subtotal 559 487 15% 12.2 24.2
Inter-segment eliminations (25) (17) -- -- --
----- ----- -------- ----- -----
Total $534 $470 13% $12.2 $24.2
===== ===== ======== ===== =====
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the
percentage increase or decrease of those items as compared with the prior
period.
12
Three Months Ended March 31
------------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------------------ -----------------------
2000 1999 2000 vs. 1999
---------------- ------------- -----------------
Operating revenues 100.0% 100.0% 13.5%
Operating expenses
Salaries, wages and employee benefits 34.8% 36.7% 7.6%
Rents and purchased transportation 35.4% 30.7% 30.7%
Fuel and fuel taxes 10.6% 7.8% 54.5%
Depreciation 5.9% 8.1% (17.3%)
Operating supplies and expenses 5.6% 5.9% 8.3%
Insurance and claims 1.8% 2.1% (2.5%)
Operating taxes and licenses 1.4% 1.4% 17.9%
General and administrative expenses 1.1% 1.1% 17.8%
Communication and utilities 1.1% 1.2% 2.4%
-------------------------------
Total operating expenses 97.7% 94.9% 16.9%
-------------------------------
Operating income 2.3% 5.1% (49.4%)
Interest expense 1.1% 1.6% (20.5%)
-------------------------------
Earnings before income taxes 1.2% 3.5% (62.4%)
Income taxes 0.3% 1.2% (79.4%)
-------------------------------
Net earnings 0.9% 2.3% (52.6%)
===============================
Total operating expenses for the first quarter of 2000 increased 16.9%
over the comparable period of 1999. As previously discussed, operating
revenues increased 13.5% during the current quarter. Total operating expenses
expressed as a percentage of operating revenues (operating ratio) were 97.7%
for the first quarter of 2000, compared with 94.9% in 1999. Salaries, wages
and employee benefits increased 7.6% during the current quarter, but declined
to 34.8% of revenue from 36.7% of revenue in 1999. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline in percentage of revenue was primarily due to the
growth of Logistics (JBL) revenue. Rents and purchased transportation expense
increased 30.7% and increased as a percentage of revenue. This increase was
due to the growth of JBL business, additional use of third-party dray
companies and higher revenue equipment rental expense. A transaction to sell
and leaseback certain trailing equipment, which closed in late 1999, increased
equipment rent and decreased depreciation expense. Fuel and fuel taxes expense
rose 54.5% during the current quarter, driven by a 54% higher cost per gallon.
Fuel surcharges, which were initiated in late 1999, recovered approximately
60% of the higher fuel costs during the first quarter. However, the Company
estimates that the net negative impact of higher fuel charges on net earnings
for the first quarter was $6.1 million, or $.17 per share.
13
Depreciation expense declined 17.3% during 2000, primarily due to the
sale and leaseback transaction previously discussed. Operating supplies and
expenses increased 8.3%, partly due to increased spending for tractor and
trailing equipment maintenance. The nearly 18% increase in operating taxes and
license expense was due to the larger size of the tractor fleet and a higher
state base plate cost per tractor in 2000. The significant increase in general
and administrative costs was primarily a result of higher levels of spending
for computer equipment rental and maintenance, offset, in part, by reduced bad
debt expense. Interest expense decreased 20.5% in 2000. This decrease was
primarily due to reduced debt levels associated with the sale and leaseback
transaction. The effective income tax rates were 20% in 2000 and 36.5% in
1999. These were the effective rates expected for the full year 2000 and 1999,
respectively. The Company estimates the sale and leaseback transaction
increased diluted earnings per share by $.03 during the first quarter of 2000.
This amount includes the impact of the lower effective income tax rate.
As a result of the above, net earnings for the first quarter of 2000
decreased to $5.0 million, or diluted earnings per share of $.14, compared
with $10.6 million, or $.29 per diluted share, in 1999.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Condensed Consolidated
Statements of Cash Flows and the Condensed Consolidated Balance Sheets.
Net cash used in operating activities was $8.1 million for the three
month period ended March 31, 2000, compared with $27.6 million provided for
the first quarter of 1999. This decrease in net cash provided was primarily
due to the reduced level of net earnings, lower depreciation expense and a
$40.6 million increase in other assets. As previously mentioned, the lower
depreciation expense was due to the sale and leaseback of certain trailing
equipment. The increase in other assets was due to prepaid lease charges which
were also related to the sale and leaseback transaction. Net cash used in
investing activities was $64.6 million in 2000, up from $37.1 million in 1999.
Purchases of new revenue equipment were up significantly during the first
quarter of 2000. New tractor purchases totaled approximately 1,030 during
2000, compared with about 220 in 1999. This increase in capital spending for
tractors was partly offset by reduced purchases of trailing equipment.
Financing activities generated $63.9 million during the current quarter,
compared with $4.1 million in 1999. Financing activities included net
borrowings of $68.8 million, $3.1 million to repurchase treasury stock and
$1.8 million paid out in dividends. The Company announced in February of 2000
an intent to cease the payment of dividends and to utilize those funds to
purchase additional treasury stock.
14
SELECTED BALANCE SHEET DATA
As of
----------------------------------------------------------------
March 31, 2000 December 31, 1999 March 31, 1999
-------------- ----------------- --------------
Working capital ratio 1.18 1.09 1.18
Current maturities of long-
term debt (millions) $ 60 $ 60 $ 22
Total debt (millions) $ 396 $ 328 $ 439
Total debt to equity .99 .82 1.14
Total debt as a percentage
of total capital .50 .45 .53
The Company's debt levels increased approximately $68 million from
December 31, 1999 to March 31, 2000. As of March 31, 2000, the Company had
commitments to purchase approximately $234 million of revenue and service
equipment net of expected proceeds from sale or trade-in allowances. Funding
for such expenditures is expected to come from cash generated from operations
and existing borrowing facilities.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement requires the
recognition of all derivatives in the statement of financial position as
either assets or liabilities and their measurement at fair value. Statement
No. 133 is effective for fiscal years beginning after June 15, 2000. The
Company has not determined what impact, if any, Statement No. 133 will have on
its financial statements.
YEAR 2000
As of the date of this filing, the Company had not experienced any
material Year 2000 problems or disruptions with internal systems, nor had any
material problems or disruptions been experienced with customers or suppliers.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short-term interest
rates as a result of its issuance of short-term commercial paper. However, due
to its selective utilization of interest rate swaps, the effects of interest
rate changes are mitigated. Risk can be estimated by measuring the impact of a
near-term adverse movement of 10% in short-term market interest rates. If
short-term market interest rates average 10% more in 2000 than in 1999, there
would be no material adverse impact on the Company's results of operations. At
March 31, 2000, the fair value of the Company's fixed rate long-term
obligations approximated carrying value.
Although the Company conducts business in foreign countries,
international operations are not material to the Company's consolidated
financial position, results of operations or cash flows. Additionally, foreign
currency transaction gains and losses were not material to the Company's
results of operations for the three months ended March 31, 2000. Accordingly,
the Company is not currently subject to material foreign currency exchange
rate risks from the effects that exchange rate movements of foreign currencies
would have on the Company's future costs or on future cash flows it would
receive from its foreign investment. To date, the Company has not entered into
any foreign currency forward exchange contracts or other derivative financial
instruments to hedge the effects of adverse fluctuation in foreign currency
exchange rates.
15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of J.B. Hunt Transport Services,
Inc. was held on April 20, 2000. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Securities Exchange Act of
1934. At the meeting, stockholders voted on the following resolutions
with the vote tabulations so indicated:
Votes
----------------------------------------
For Against Abstained
----------------------------------------
1. To elect three Class II Directors
for a term of three years each. 31,917,489 0 1,777,428
2. To amend the Company's
Management Incentive Plan by
authorizing additional shares
in the Plan. 24,582,537 5,862,777 459,477
3. To amend and extend the
Chairman's Stock Option
Incentive Plan. 28,614,049 1,798,582 492,160
4. To ratify the appointment of
KPMG LLP as the Company's
principal independent public
accountants for the next
fiscal year. 32,651,829 25,011 18,077
There was no solicitation in opposition to management's nominees for
Directors as listed in the proxy statement and each nominee was
elected by greater than ninety-two percent of the shares entitled to
vote. No additional business or other matters came before the meeting
or any adjournment thereof.
ITEM 5. OTHER INFORMATION
On March 14, 2000, a news release was issued announcing that six of
the nation's largest truckload transportation companies: Covenant
Transport, Inc.; J.B. Hunt Transport Services, Inc.; M.S. Carriers,
Inc.; Swift Transportation Co., Inc.; U.S. Xpress Enterprises, Inc.
and Werner Enterprises, Inc., intended to merge their logistics
business units into a commonly owned, Internet-based global
transportation logistics company, Transplace.com. The combined
logistics businesses had total revenues of approximately $650 million
in 1999.
16
The Company will invest $5 million of cash and merge all or
substantially all of its JBL segment business into the new entity.
The Company will have a 28% equity stake in Transplace.com. The six
companies also intend to develop programs for the cooperative
purchasing of products, supplies and services and the achievement of
other synergies.
The consummation of the transaction is dependent upon receiving
approval of various regulators, but could be effective as early as
July 1, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. HUNT TRANSPORT SERVICES, INC.
DATE: May 10, 2000 BY: /s/ Kirk Thompson
------------------------------- -------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: May 10, 2000 BY: /s/ Jerry W. Walton
------------------------------- -------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
DATE: May 10, 2000 BY: /s/ Donald G. Cope
----------------------------------- -------------------------------
Donald G. Cope
Vice President, Controller
and Chief Accounting Officer
17