J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Dollars in thousands, except per share amounts)
Years ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Operating revenues $1,020,921 $911,982 $733,288
Operating expenses:
Salaries, wages and employee
benefits (note 5) 371,849 347,972 293,390
Purchased transportation and spotting 187,726 111,579 51,180
Fuel and fuel taxes 126,966 129,999 119,600
Depreciation 83,210 86,825 69,111
Operating supplies and expenses 73,511 67,215 59,006
Insurance and claims 40,424 43,473 34,210
Operating taxes and licenses 28,905 25,728 21,829
General and administrative expenses 19,032 18,613 15,223
Communication and utilities 10,672 11,488 10,314
---------- ------- -------
Total operating expenses 942,295 842,892 673,863
---------- ------- -------
Operating income 78,626 69,090 59,425
Interest expense 13,800 10,908 10,732
---------- ------- -------
Earnings before income taxes
and cumulative effect of changes
in accounting methods 64,826 58,182 48,693
Income taxes (note 4) 26,605 21,249 19,234
---------- ------- -------
Earnings before cumulative
effect of changes in
accounting methods 38,221 36,933 29,459
Cumulative effect on prior years
of changes in accounting methods:
Revenue recognition, net of $1,017
in income taxes (note 1(d)) - - (1,558)
Tires in service, net of $1,049
in income taxes (note 1(b)) - 1,825 -
---------- ------- -------
Net earnings (notes 1(b) and 1(d)) $ 38,221 $ 38,758 $ 27,901
---------- -------- --------
Earnings per share:
Earnings before cumulative effect
of changes in accounting methods $ 1.00 $ 1.03 $ .85
Cumulative effect of changes
in accounting methods:
Revenue recognition (note 1(d)) - - (.05)
Tires in service (note (b)) - .05 -
------ ------ ------
Net earnings (notes 1(b) and 1(d)) $ 1.00 $ 1.08 $ .80
------ ------ ------
------ ------ ------
Proforma amounts assuming the new
accounting methods are applied
retroactively (notes 1(b) and 1(d))
(unaudited):
Net earnings $38,221 $ 36,933 $ 28,338
------- -------- --------
------- -------- --------
Earnings per share $ 1.00 $ 1.03 $ .82
------- -------- --------
------- -------- --------
See accompanying notes to consolidated financial statements.
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except par value) December 31,
------------
1993 1992
---- ----
Assets
Current assets:
Cash and temporary investments $ 3,390 $ 1,833
Accounts receivable 137,284 105,909
Prepaid expenses:
Taxes, licenses and permits 11,359 11,636
Repair parts and supplies 6,878 4,836
Other (note 4) 4,973 7,830
------- -------
Total prepaid expenses 23,210 24,302
------- -------
Deferred income taxes (note 4) 4,593 9,864
------- -------
Total current assets 168,477 141,908
------- -------
Property and equipment, at cost:
Revenue and service equipment 791,907 674,536
Land 11,950 11,841
Structures and improvements 44,198 40,685
Furniture and office equipment 65,907 61,943
------- -------
Total property and equipment 913,962 789,005
Less accumulated depreciation 232,323 221,192
------- -------
Net property and equipment 681,639 567,813
------- -------
Other assets (note 7) 12,326 6,020
------- -------
$862,442 $715,741
-------- --------
-------- --------
Liabilities and Stockholders' Equity
1993 1992
---- ----
Current liabilities:
Trade accounts payable $ 37,578 $ 31,995
Claims accruals 35,124 28,988
Accrued payroll 6,733 6,887
Other accrued expenses 13,274 10,733
Other current liabilities (note 2) 2,981 2,115
------- -------
Total current liabilities 95,690 80,718
------- -------
Long-term debt (note 2) 303,499 216,254
Claims accruals 12,000 20,250
Deferred income taxes (note 4) 107,289 89,893
------- -------
Total liabilities 518,478 407,115
------- -------
Stockholders' equity (notes 2 and 3):
Preferred stock, par value $100.
Authorized 10,000,000 shares; none
outstanding - -
Common stock, par value $.01 per share.
Authorized 100,000,000 shares;
issued 39,009,858 shares 390 390
Additional paid-in capital 102,362 99,521
Retained earnings 245,073 214,503
------- -------
347,825 314,414
Less cost of common stock in treasury
(592,483 shares at December 31,
1993 and 882,261 shares at
December 31, 1992) 3,861 5,788
------- -------
Total stockholders' equity 343,964 308,626
------- -------
Commitments and contingencies
(notes 4, 5 and 8)
------- -------
$862,442 $715,741
------- -------
------- -------
See accompanying notes to consolidated financial statements.
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1993, 1992, 1991
(Dollars in thousands, except per share amounts)
Total
Additional Retained stockholders'
Common paid-in earnings Treasury equity
stock capital (note 2) stock (note 3)
------- --------- --------- ------- ----------
Balance, December 31, 1990 $361 $38,782 $161,345 $(9,414) $191,074
Tax benefit of stock options exercised - 479 - - 479
Sale of treasury stock to employees - 1,220 - 1,560 2,780
Cash dividends paid ($.19 per share) - - (6,473) - (6,473)
Net earnings - - 27,901 - 27,901
---- ------- ------- ------ --------
Balance, December 31, 1991 361 40,481 182,773 (7,854) 215,761
Tax benefit of stock options exercised - 723 - - 723
Sale of treasury stock to employees - 2,783 - 2,066 4,849
Cash dividends paid ($.20 per share) - - (7,028) - (7,028)
Net earnings - - 38,758 - 38,758
Issuance of common stock (2,950,000) shares 29 55,534 - - 55,563
---- ------- ------- ------ --------
Balance, December 31, 1992 390 99,521 214,503 (5,788) 308,626
Tax benefit of stock options exercised - 890 - - 890
Sale of treasury stock to employees - 1,951 - 1,927 3,878
Cash dividends paid ($.20 per share) - - (7,651) - (7,651)
Net earnings - - 38,221 - 38,221
---- ------- ------- ------ --------
Balance, December 31, 1993 $390 $102,362 $245,073 $(3,861) $343,964
---- ------- ------- ------ -------
---- ------- ------- ------ -------
See accompanying notes to consolidated financial statements.
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years ended December 31,
------------------------
1993 1992 1991
---- ---- ----
Cash flows from operating activities:
Net earnings $ 38,221 $ 38,758 $ 27,901
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Cumulative effect of accounting changes - (1,825) 1,558
Depreciation, net of gain on disposition of equipment 83,210 86,825 69,111
Provision for noncurrent deferred income taxes 17,396 16,637 9,925
Tax benefit of stock options exercised 890 723 479
Changes in assets and liabilities:
Decrease (increase) in deferred tax asset 5,271 (9,864) -
Increase in accounts receivable (31,375) (14,631) (17,450)
Decrease (increase) in prepaid expenses 1,092 (4,161) (11,601)
Increase in trade accounts payable 5,583 15,742 2,874
Increase (decrease) in claims accruals (2,114) 8,374 10,325
Increase in other current liabilities 3,253 1,620 1,269
------- ------- -------
Net cash provided by operating activities 121,427 138,198 94,391
------- ------- -------
Cash flows from investing activities:
Additions to property and equipment (285,687) (289,409) (151,781)
Proceeds from sale of equipment 88,651 40,110 38,774
Increase in other assets (6,306) (2,299) (2,880)
------- ------- -------
Net cash used in investing activities (203,342) (251,598) (115,887)
------- ------- -------
Cash flows from financing activities:
Proceeds from sale of common stock - 55,563 -
Proceeds from long-term debt 99,691 182,270 72,617
Repayments of long-term debt (12,446) (122,946) (53,284)
Proceeds from sale of treasury stock 3,878 4,849 2,780
Dividends paid (7,651) (7,028) (6,473)
------- ------- -------
Net cash provided by financing activities 83,472 112,708 15,640
------- ------- -------
Net increase (decrease) in cash 1,557 (692) (5,856)
Cash - beginning of year 1,833 2,525 8,381
------- ------- -------
Cash - end of year $ 3,390 $ 1,833 $ 2,525
------- ------- -------
------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $12,014 $ 10,395 $ 9,715
Income taxes $ 3,743 $ 11,056 $ 13,862
------- ------- -------
------- ------- -------
See accompanying notes to consolidated financial statements.
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J.B. Hunt Transport Services, Inc. (the "Company"), through its wholly-owned
subsidiaries, operates as an irregular route, common motor carrier
operating under the jurisdiction of the Interstate Commerce Commission
(ICC) and various state regulatory commissions.
(a) PRINCIPALS OF CONSOLIDATION.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(b) TIRES IN SERVICE.
Prior to 1992, the cost of tires placed in service, including
replacement tires, was capitalized and amortized on the straight-line
method over their estimated useful life. Effective January 1, 1992,
the Company began capitalizing tires placed in service on new revenue
equipment as a part of the equipment cost. Replacement tires are
expensed at the time they are placed in service. This new method of
accounting for tires placed in service is consistent with frequent
industry practice. Due to the increasing percentage of freight
transported on rail cars (intermodal), this new method, in the opinion
of management, provides a better matching of tire costs with revenues.
This change increased net earnings for 1992 by $1,310,000 ($.04 per
share). The cumulative impact of $1,825,000 ($.05 per share) to
retroactively apply the new method has also been credited to earnings
for 1992. This accounting change resulted in the reduction of prepaid
tires by $21,541,000, an increase in net revenue equipment of
$24,415,000 and an increase in deferred income taxes of $1,049,000.
The proforma amounts shown on the statements of earnings have been
adjusted for the effect of retroactive application on expenses and the
related income taxes.
(c) PROPERTY AND EQUIPMENT.
Property and equipment are stated at cost. Depreciation of property
and equipment is calculated on the straight-line method over the
estimated useful lives of 5 - 10 years for revenue and service
equipment, 10 to 25 years for structures and improvements, and 3 to 10
years for furniture and office equipment. Gains on dispositions of
revenue equipment are offset against depreciation expense.
On April 1, 1993, the Company changed the estimated salvage value for
some of its revenue and service equipment. The effect upon 1993 net
earnings was $2,639,000 ($.07 per share).
(d) REVENUE RECOGNITION.
Prior to 1991, operating revenues, in accordance with transportation
industry practices, were recognized as of the date freight was picked
up for shipment. On January 23, 1992, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board reached a consensus
that certain transportation industry practices of revenue and expense
recognition were no longer appropriate. Effective for 1991, the
Company began recognizing revenue based on relative transit time in
each reporting period with expenses recognized as incurred as
permitted by the EITF. The effect of this change reduced net earnings
for 1991 by $620,000 ($.02 per share) and reduced accounts receivable
by
(Continued)
2
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$2,575,000 while increasing current deferred income taxes by
$1,017,000. The cumulative impact of $1,558,000 ($.05 per share) to
apply retroactively the new method has also been charged to earnings
for 1991.
(e) INCOME TAXES.
In February 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Effective January 1, 1992, the Company adopted Statement 109. The
effect of this change in the method of accounting for income taxes
in the 1992 consolidated statement of earnings is not significant.
(f) EARNINGS PER SHARE.
Earnings per share have been computed based on the
weighted average number of shares outstanding during each year
(38,276,109 in 1993; 35,785,692 in 1992; and 34,689,461 in 1991).
Shares issuable under employee stock options are excluded from the
weighted average number of shares as their effect is not dilutive.
On January 15, 1992, the Company announced a three-for-two stock split
in the form of a 50% stock dividend payable on March 13, 1992, from
authorized and unissued shares to stockholders of record on February
19, 1992. All references in the financial statements with regard to
number of shares of common stock and the per share amounts have been
retroactively restated to reflect this stock dividend.
(g) CREDIT RISK.
Financial instruments which potentially subject the
Company to concentrations of credit risk consist primarily of trade
receivables. Concentrations of credit risk with respect to trade
receivables are limited due to the Company's large number of customers
and the diverse range of industries which they represent. As of
December 31, 1993, the Company had no significant concentrations of
credit risk.
(h) INTEREST RATE SWAP AGREEMENTS.
The differential paid or received on interest rate swap agreements
is accrued as interest rates change and is charged or
credited to interest expense over the life of the agreements.
Any gains or losses realized upon the termination of an
interest rate swap agreement are deferred and amortized over the
original term of the respective interest rate swap agreement as an
adjustment to interest expense.
(Continued)
3
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) LONG-TERM DEBT
Long-term debt consists of (in thousands):
1993 1992
---- ----
Commercial paper $106,492 $107,270
Senior notes payable, interest at 6.25%
payable semiannually 99,691 --
Senior notes payable, interest at 9.20%
payable semiannually 6,666 13,334
Senior notes payable, interest at 7.75%
payable semiannually 15,000 20,000
Senior notes payable, interest at 7.84%
payable semiannually 25,000 25,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Other 650 650
-------- --------
$303,499 $216,254
-------- --------
-------- --------
Under its commercial paper note program, the Company is authorized to
issue up to $200 million in notes which are supported by a credit
agreement with a group of banks. The effective rate on the commercial
paper note program was 3.44% and 3.61% for the years ended December 31,
1993 and 1992, respectively. Under the terms of the credit agreement
which expires October 30, 1995, the Company is required to maintain
certain financial covenants including leverage tests, minimum tangible
net worth levels and other financial ratios. In addition, there are
certain indirect restrictions on the payment of dividends. At December 31,
1993 the amount available for payment of dividends was approximately
$16 million.
The 6.25% senior notes are payable at maturity on September 1, 2003, the
9.20% senior notes are payable in three equal annual installments
beginning July 1, 1992, the 7.75% senior notes are payable in five equal
annual installments beginning October 31, 1992, the 7.84% senior notes
are payable in five equal annual installments beginning March 31, 1995,
and the 7.80% senior subordinated notes are payable in five equal annual
installments beginning October 30, 2000. Under terms of the note
agreements, the Company is required to maintain certain financial
covenants including leverage tests, minimum tangible net worth levels
and other financial ratios.
At December 31, 1993, the Company has entered into interest rate swap
agreements to effectively convert $20 million of its variable interest
rate debt to fixed rate debt with a weighted average interest rate of
4.03% at year end 1993. In addition, the Company has entered into an
interest rate swap agreement to effectively convert $20 million of its
senior fixed rate debt to variable rate debt with a weighted average
interest rate of 3.50%. Due to the frequency of interest payments and
receipts in conjunction with the financial stability of the counter
parties, the Company's credit risk related to these interest rate swap
agreements is not significant.
(Continued)
4
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Included in other current liabilities are deferred swap gains of $1,113,000
at December 31, 1993.
The Company has approximately $106 million of uncommitted lines of credit,
none of which was outstanding at December 31, 1993. These lines are with
various domestic and international banks and are due on demand. Interest
on borrowings is generally tied to the banks' prevailing base rates or
other alternative market rates. No commitment or facility fees are paid
on these lines of credit and the obligations are evidenced by unsecured
demand notes.
The Company intends to pay 1994 maturities of the senior notes with
borrowings under its other credit arrangements. Accordingly, all debt
has been classified as long-term as of December 31, 1993. The aggregate
annual maturities of long-term debt are as follows (in thousands): 1994,
none; 1995, $128,499; 1996, $10,000; 1997, $5,000; 1998, $5,000; and
$155,000 thereafter.
(3) CAPITAL STOCK
The Company maintains a Management Incentive Plan that provides various
vehicles to compensate key employees with Company common stock. Under
the plan, the Company is authorized to award, in aggregate, not more
than 3,000,000 shares. Currently, the Company has utilized three such
vehicles to award stock or grant options to purchase the Company's
common stock: restricted stock awards, restricted options and
nonstatutory stock options.
Restricted stock awards are granted to key employees subject to
restrictions regarding transferability and assignment. Shares of Company
common stock are issued to the key employees and held by the Company until
each employee becomes vested in the award. Vesting of the awards generally
occurs over a four year period of time from the award date. Termination
of the employee for any reason other than death, disability or retirement
causes the unvested portion of the award to be forfeited.
Key employees were granted restricted options to purchase stock. The option
price is 50% of the fair market value of the stock at the date of grant.
Vesting of the award generally occurs over a four year period beginning on
the grant date. Failure to exercise a vested option within 210 days after
vesting or termination of the employee for any reason other than death,
disability or retirement will cause unexercised and nonvested options to
be forfeited.
The plan provides that nonstatutory stock options may be granted to key
employees for the purchase of Company common stock for 100% of the fair
market value at the grant date. The options generally vest over a ten year
period and are forfeited if the employee terminates for any reason other
than death, disability or retirement.
(Continued)
5
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1993 there were 728,714 shares available for granting
under the plan. A summary of the options to purchase restricted stock
and nonstatutory stock options activity follows:
Number Option Number
of price of shares
shares per share exercisable
------ --------- -----------
Outstanding at December 31, 1991 1,440,021 $ 6.00 - 19.50 344,831
Granted 122,500 18.50 - 24.63
Exercised (185,426) 6.17 - 24.63
Terminated (45,000) 9.33 - 18.67
---------
Outstanding at December 31, 1992 1,332,095 6.00 - 24.63 369,706
Granted 148,500 18.25 - 23.50
Exercised (219,809) 6.00 - 20.25
Terminated (71,430) 6.00 - 20.25
---------
Outstanding at December 31, 1993 1,189,356 $ 6.00 - 24.63 369,663
--------- -------------- -------
--------- -------------- -------
On January 13, 1994, the Company's Board of Directors declared a cash
dividend of $.05 per share-payable on February 18, 1994, to shareholders
of record on February 3, 1994.
(4) INCOME TAXES
As discussed in note 1(e), the Company adopted Statement 109 as of
January 1, 1992. There was no significant impact upon earnings as a
result of this change in accounting for income taxes. Total income tax
expense for the years ended December 31, 1993 and 1992 was allocated
as follows (in thousands):
1993 1992
---- ----
Income from operations $26,605 $21,249
Changes in accounting methods -- 1,049
Stockholders' equity, for tax benefit of
stock options exercised (890) (723)
------- -------
$25,715 $21,575
------- -------
------- -------
Income tax expense attributable to income from operations consists of
(in thousands):
1993 1992 1991
Current expense:
Federal $ 2,596 $13,477 $ 9,618
State and Local 1,344 661 1,637
------- ------- -------
3,940 14,138 11,255
------- ------- -------
Deferred expense:
Federal 20,238 7,216 6,611
State and Local 2,427 (105) 1,368
------- ------- -------
22,665 7,111 7,979
------- ------- -------
------- ------- -------
Total tax expense $26,605 $21,249 $19,234
------- ------- -------
------- ------- -------
(Continued)
6
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense attributable to income from operations differs from the
amounts computed by applying the U.S. Federal income tax rate to pre-tax
income from operations as a result of the following (in thousands):
1993 1992 1991
---- ---- ----
35% of pre-tax income in 1993 and 34%
in 1992 and 1991 $22,690 $19,782 $16,556
Increase in income taxes resulting from:
State and Local income taxes, net of
Federal income tax benefit 2,685 367 1,983
Environmental tax 100 132 76
Other, net 1,130 968 619
------- ------- -------
$26,605 $21,249 $19,234
------- ------- -------
------- ------- -------
The significant components of deferred income tax expense attributable to income
from operations are as follows (in thousands):
1993 1992 1991
---- ---- ----
Deferred tax expense (exclusive of the
effects of other components listed below) $22,665 $13,808 $7,979
Adjustments to deferred tax assets and
liabilities primarily for negotiated
IRS settlement -- (6,697) --
------- ------- ------
$22,665 $ 7,111 $7,979
------- ------- ------
------- ------- ------
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31,
1993 and 1992 are presented below (in thousands):
1993 1992
---- ----
Deferred tax assets:
Claims accruals, principally due to accrual
for financial reporting purposes $(15,680) $(17,117)
Alternative minimum tax credit carryforwards (13,218) (9,296)
Other (2,872) (2,363)
-------- --------
Total gross deferred tax assets (31,770) (28,776)
-------- --------
-------- --------
(Continued)
7
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and capitalized
interest 126,429 106,151
Prepaid permits and insurance 4,818 --
Other 3,219 2,654
-------- --------
Total gross deferred tax liabilitie 134,466 108,805
-------- --------
Net deferred tax liability $102,696 $ 80,029
-------- --------
-------- --------
The Company believes its substantiated history of profitability and taxable
income, its taxes paid within the three year carryback period and its
utilization of tax planning sufficiently supports the value of the
deferred tax assets. Accordingly, the Company has not recorded a
valuation allowance on its books as all deferred tax assets are more
than likely to be recovered.
Included in other prepaid expenses are refundable income taxes of $428,000
and $625,000 at December 31, 1993 and 1992, respectively.
(5) EMPLOYEE BENEFIT PLANS
The Company maintains bonus compensation programs for certain of its
employees. Bonuses earned under the programs are based on attainment
of profit objectives established by the Company's Board of Directors.
Bonuses paid under the programs for 1993, 1992 and 1991 were
$2,600,000, $7,400,000 and $4,700,000, respectively.
The Company maintains a profit sharing Plan under which employees are
eligible to participate after they complete one year of service.
Company contributions to the plan each year are made at a
discretionary amount determined by the Company's Board of Directors.
For the years ended December 31, 1993, 1992 and 1991 Company
contributions to the plan were $1,900,000, $1,850,000 and $1,500,000,
respectively.
The Company has an employee stock purchase plan which provides for the
purchase of the Company's common stock on the open market for eligible
employees. Employees may contribute through payroll deductions to the
plan. The Company will contribute an amount equal to 15% of the
participating employee's contribution. Company contributions to the
plan for the years ended December 31, 1993, 1992 and 1991 were
$275,000, $209,000 and $178,000, respectively.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND TEMPORARY INVESTMENTS, ACCOUNTS RECEIVABLE AND TRADE ACCOUNTS
PAYABLE.
The carrying amount approximates fair value because of the short maturity
of these instruments.
LONG-TERM DEBT
The carrying amount of the commercial paper debt
approximates the fair value because of the short maturity of the
commercial paper instruments.
(Continued)
8
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the fixed rate debt is presented as the present value of
future cash flows discounted using the Company's current borrowing
rate for loans of comparable maturity. The calculation arrives at a
theoretical amount the Company would pay a creditworthy third party to
assume its fixed rate obligations and not the termination value of
these obligations. Consistent with market practices, such termination
values would include various prepayment and termination fees that the
Company would contractually be required to pay if it retired the debt
early.
Interest Rate Swap Agreements. The fair values of interest rate swap
agreements are obtained from dealer quotes. These values represent the
estimated amount the Company would receive to terminate such
agreements, taking into consideration current interest rates and the
creditworthiness of the counterparties.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
At December 31, 1993
--------------------------
Carrying Estimated
amount fair value
---------- ----------
Cash and temporary investments $ 3,390 $ 3,390
Accounts receivable 137,284 137,284
Trade accounts payable 38,690 38,690
Long-term debt:
Commercial paper 106,491 106,491
Fixed rate obligations 197,008 238,920
Interest rate swap agreements -- (180)
-------- --------
-------- --------
(7) RELATED PARTY TRANSACTIONS
The Company advances premiums on a life insurance policy on the joint lives
of Mr. and Mrs. J.B. Hunt. The Company has advanced $3,015,000 on this
policy which, along with related accrued interest thereon of
approximately $262,000, is included in other assets at December 31,
1993. All premiums paid by the Company, along with accrued interest
thereon, are reimbursable from a trust which is the owner and
beneficiary of the policy.
(8) COMMITMENTS AND CONTINGENCIES
The Company has committed to purchase approximately $208 million of revenue
and service equipment (net cost, after expected proceeds from sale or
trade-in allowances of $24 million).
The Company is involved in certain claims and pending litigation arising
from the normal conduct of business. Based on the present knowledge of
the facts and, in certain cases, opinions of outside counsel,
management believes the resolution of claims and pending litigation
will not have a material adverse effect on the financial condition of
the Company.
(Continued)
(9) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Operating results by quarter for the years ended December 31, 1993 and
1992 are as follows (in thousands, except per share data):
Quarter
------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
1993:
Operating revenues $ 247,181 $ 260,400 $ 253,579 $ 259,761 $ 1,020,921
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Operating income $ 10,859 $ 24,354 $ 21,712 $ 21,701 $ 78,626
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Net earnings $ 4,983 $ 13,500 $ 8,782 $ 10,956 $ 38,221
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Earnings per share $ .13 $ .35 $ .23 $ .29 $ 1.00
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1992:
Operating revenues $ 201,298 $ 223,842 $ 241,195 $ 245,647 $ 911,982
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Operating income $ 12,798 $ 19,540 $ 19,623 $ 17,129 $ 69,090
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Earnings before cumulative effect of change
in accounting method $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933
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Net earnings $ 8,125 $ 10,137 $ 10,672 $ 9,824 $ 38,758
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Earnings per share before cumulative effect
of change in accounting method $ .18 $ .29 $ .30 $ .26 $ 1.03
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Earnings per share $ .23 $ .29 $ .30 $ .26 $ 1.08
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Proforma amounts assuming the new accounting
method is applied retroactively:
Net earnings $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933
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Earnings per share $ .18 $ .29 $ .30 $ .26 $ 1.03
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