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 September 30, 1995
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 SEPTEMBER 30, 1995 WAS 38,692,399.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim consolidated financial statements contained herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of the 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 and nine month periods ended
September 30, 1995 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1995.
The interim consolidated financial statements have been reviewed by KPMG
Peat Marwick LLP, independent public accountants.
These interim 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, 1994.
Index
-----
Consolidated Statements of Earnings for the Three and Nine Months
Ended September 30, 1995 and 1994................................ Page 3
Consolidated Balance Sheets as of
September 30, 1995 and December 31,1994.......................... Page 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994.................... Page 5
Notes to Consolidated Financial Statements
as of September 30, 1995......................................... Page 6
Review Report of KPMG Peat Marwick LLP............................ Page 8
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................... Page 9
2
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
- ---------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
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1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------
Operating revenues $355,114 $313,911 $993,757 $876,308
Operating expenses:
Salaries, wages and employee benefits 119,082 103,411 339,686 296,575
Purchased transportation 101,451 77,173 262,265 205,947
Fuel and fuel taxes 35,818 32,712 105,956 97,180
Depreciation 30,974 28,028 96,751 78,384
Operating supplies and expenses 24,875 20,952 72,192 59,524
Insurance and claims 14,074 9,242 36,589 28,304
Operating taxes and licenses 6,535 7,122 19,390 19,363
General and administrative expenses 7,893 7,017 23,794 20,706
Communication and utilities 4,696 3,228 10,466 9,096
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Total operating expenses 345,398 288,885 967,089 815,079
- ---------------------------------------------------------------------------------------------
Operating income 9,716 25,026 26,668 61,229
Interest expense 6,135 5,257 18,720 14,275
Other non-operating expense 660 -- 660 --
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Earnings before income taxes 2,921 19,769 7,288 46,954
Income taxes 1,081 7,509 2,697 17,393
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Net earnings $1,840 $12,260 $4,591 $29,561
- ---------------------------------------------------------------------------------------------
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Common shares outstanding 38,669 38,616 38,598 38,553
- ---------------------------------------------------------------------------------------------
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Earnings per share: $0.05 $0.32 $0.12 $0.77
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3
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
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September 30, 1995 December 31, 1994
- -------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and temporary investments $ 4,368 $ 2,142
Accounts receivable 156,601 138,295
Prepaid expenses 24,082 32,713
Deferred income taxes 8,103 8,083
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Total current assets 193,154 181,233
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Property and equipment 1,166,571 1,089,235
Less accumulated depreciation 366,838 299,539
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Net property and equipment 799,733 789,696
Other 25,616 22,770
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$1,018,503 $ 993,699
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 74,930 $ 68,075
Trade accounts payable 76,712 48,847
Claims accruals 40,361 34,248
Accrued expenses 23,581 24,031
Other current liabilities 128 2,720
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Total current liabilities 215,712 177,921
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Long-term debt 293,950 299,243
Claims accruals 16,750 16,750
Deferred income taxes 118,430 121,887
Stockholders' equity 373,661 377,898
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$1,018,503 $ 993,699
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4
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30
(In thousands) (Unaudited)
- -----------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 4,591 $ 29,561
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, net of gain on disposition
of equipment 96,751 78,384
Deferred income tax expense (benefit) (3,477) 7,046
Tax benefit of stock options exercised 316 718
Changes in assets and liabilities:
Accounts receivable (18,306) (901)
Prepaid expenses 8,631 (445)
Trade accounts payable 27,865 28,169
Claims accruals 6,113 (526)
Other current liabilities (3,042) 3,992
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Net cash provided by operating activities 119,442 145,998
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Cash flows from investing activities:
Additions to property and equipment (145,400) (246,421)
Proceeds from sale of equipment 38,612 60,040
Increase in other assets (8,464) (7,206)
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Net cash used in investing activities (115,252) (193,587)
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Cash flows from financing activities:
Net borrowings of long-term debt 1,562 50,184
Proceeds from sale of treasury stock 2,263 2,615
Dividends paid (5,789) (5,780)
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Net cash provided by (used in) financing
activities (1,964) 47,019
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Net increase (decrease) in cash 2,226 (570)
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Cash - beginning of period 2,142 3,390
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Cash - end of period $ 4,368 $ 2,820
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 19,056 $ 15,563
Income Taxes 3,050 8,133
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5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) LONG-TERM DEBT
Long-term debt consists of (in thousands):
9/30/95 12/31/94
------- --------
Commercial paper $189,133 $182,595
Senior notes payable, interest at
6.25% payable semiannually 99,747 99,723
Senior notes payable, interest at
7.75% payable semiannually 10,000 10,000
Senior notes payable, interest at
7.84% payable semiannually 20,000 25,000
Senior subordinated notes, interest
at 7.80% payable semiannually 50,000 50,000
-------- --------
368,880 367,318
Less current maturities (74,930) (68,075)
-------- --------
$293,950 $299,243
-------- --------
-------- --------
The Company is authorized to issue up to $250 million in notes
under its commercial paper note program. The notes are supported by two
credit agreements with a group of banks. One agreement for $125 million
expires March 31, 1996 and $125 million expires March 31, 1997.
The 6.25% senior notes were issued on September 1, 1993 and are due on
September 1, 2003.
The 7.75% senior notes were issued on October 1, 1991 and are payable
in five equal annual installments beginning October 31, 1992.
The 7.84% senior notes were issued on March 31, 1992 and are payable in
five equal annual installments beginning March 31, 1995.
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
(2) 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 nonstatutory options to
purchase Company common stock follows:
Number of
Number of Option price shares
shares per share exercisable
-------- ------------ -----------
Outstanding at December 31, 1994 1,334,461 $6.00 - 24.63 399,536
-------
-------
Granted 1,487,500 15.63 - 19.25
Exercised (113,980) 6.00 - 15.33
Terminated (100,750) 10.83 - 23.00
--------- -------------
Outstanding at September 30, 1995 2,607,231 9.33 - 24.63 418,906
--------- ------------- -------
--------- ------------- -------
On October 19, 1995, the Company's Board of Directors declared a
regular quarterly cash dividend of $.05 per share payable on November
22, 1995 to stockholders of record on November 3, 1995.
7
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the condensed consolidated balance sheet of J.B. Hunt
Transport Services, Inc. and subsidiaries as of September 30, 1995, and the
related condensed consolidated statements of earnings and cash flows for the
three-month and nine-month periods ended September 30, 1995 and 1994, in
accordance with standards established by the American Institute of Certified
Public Accountants.
A review of interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review 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, 1994, 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 7, 1995,
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, 1994, is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
October 16, 1995
8
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 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, 1994.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage change
between the third quarter of 1995 and the comparable period in 1994 of
certain revenue, expense and operating items.
Three Months Ended September 30, 1995 vs. 1994
(In thousands except tractor data)
Increase
(Decrease) %
in amounts change
---------- ------
Operating revenues $41,203 13%
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Average number of tractors in the fleet 484 7%
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Operating expenses:
Salaries, wages and employee benefits $15,671 15%
Purchased transportation 24,278 31%
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Fuel and fuel taxes 3,106 9%
Depreciation 2,946 11%
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Operating supplies and expenses 3,923 19%
Insurance and claims 4,832 52%
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Operating taxes and licenses (587) (8%)
General and administrative expenses 876 12%
Communication and utilities 1,468 45%
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Total operating expenses 56,513 20%
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Operating income (15,310) (61%)
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- ---------------------------------------------------------------------------
The following discussion relates to the table set forth above and the
attached interim consolidated financial statements for the quarter ended
September 30, 1995 and 1994.
Operating revenues for the third quarter of
1995 increased 13 percent to $355.1 million, from $313.9 million in the third
quarter of 1994. The average number of total tractors in the fleet increased
7 percent during the same period. The truckload market remained soft during
the third quarter of 1995. This soft demand combined with excess equipment
capacity resulted in lower truck and intermodal rates. Lower revenue per
loaded mile, in turn, reduced margins compared to the third quarter of 1994.
Revenue and load count for core dry van operations during the current quarter
were essentially equal to 1994. Within dry van operations, intermodal load
count increased 24 percent for the third quarter of 1995, while truck only
load count decreased 11 percent.
9
Total operating expenses for the third quarter of 1995 increased $56.5
million, or 20 percent, over the comparable period of 1994. Operating income
declined $15.3 million to $9.7 million. In addition to soft demand and lower
revenue per mile, a number of expense categories increased more rapidly than
revenue. The continued increase of intermodal and third party logistics
volume changes the typical relationship of certain expense categories to
operating revenues. This business results in revenue growth since the
Company bills the customer for freight transportation services. However,
Company equipment and driver related expenses such as fuel and fuel taxes,
depreciation and driver wages may not remain proportional to revenue. At the
same time, purchased transportation may increase significantly reflecting
payments to railroads and third party carriers. The Company believes that
increased intermodal and logistics operations may ultimately impact expense
and margin trends. However, no material specific trends or components have
yet been identified which significantly impact the results of operations.
Salaries, wages and employee benefits increased 15 percent, reflecting a
pay increase implemented in April, 1995 for the Company's least experienced
drivers. Higher worker's compensation, medical and retirement plan costs
also contributed to this increase. Purchased transportation increased 31
percent, primarily due to continued growth of intermodal and third party
logistics volume. Fuel and fuel taxes increased 9 percent, essentially in
line with the 7 percent growth in the tractor fleet, combined with slightly
higher fuel cost per gallon. Depreciation expense increased 11 percent,
reflecting a 9 percent increase in the trailing fleet and on-board computer
equipment installed in all road tractors. Depreciation expense also reflects
net gain on the disposition of revenue equipment which approximated $3.5
million in each quarter.
Operating supplies and expenses increased 19 percent, primarily due to
higher tractor maintenance and repair expenses. The Company has elected to
retain certain older model tractors. The significant increase in insurance
and claims expense was due primarily to two serious accidents which occurred
during the third quarter of 1995. Operating taxes and licenses declined, in
part, due to growth of intermodal and third-party logistics, and certain
credits and refunds from taxing authorities. The general and administrative
expense increase reflects higher reserves for certain questionable or
uncollectible accounts receivable. The 45 percent increase in communications
and utilities was primarily due to certain rate reductions and credits
recognized during the third quarter of 1994.
Interest expense increased by $.9 million, primarily related to higher
levels of debt associated with the acquisition of new containers and chassis.
Other non-operating expense relates to losses incurred in connection with
non-operating investments which were recognized according to the equity
method of accounting. The effective income tax rate was 37 percent in 1995
and 38 percent in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ending
September 30, 1995 was $119.4 million, compared to $146.0 million in 1994.
Cash flow was negatively impacted by lower net earnings and increased
accounts receivable. The increase in accounts receivable was primarily a
result of higher operating revenues, since the average time to collect was
similar for both periods. The Company's current
10
ratio was 1.02 at December 31, 1994, .80 at June 30, 1995, and .90 at
September 30, 1995. The primary reason for the improved current ratio from
June, 1995 to the current quarter was a decrease in the current portion of
long-term debt. The Company expects its short-term liquidity measurements to
fluctuate slightly with capital spending levels, funding programs and
earnings. Net additions to property and equipment were $106.8 million for
the nine months ended September 30, 1995, compared to $186.4 in 1994. This
decrease primarily reflects lower capital expenditures for trailing
equipment. The dry van fleet consisted of 82 percent new-design containers
and chassis at September 30, 1995.
The Company filed a prospectus supplement with the Securities and Exchange
Commission on June 14, 1995. The supplement enables the Company to sell up
to $150 million of medium-term notes, with maturities of nine months or more
from the date of issuance. To date no sales have been made related to this
supplement.
The Company plans to fund future capital expenditures with cash provided
by operating activities and additional borrowings, if required.
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
None applicable.
ITEM 5. OTHER INFORMATION
The Company announced on October 19, 1995 that the Board of
Directors had authorized the repurchase of up to 1.0 million shares
of outstanding common stock. This announcement was in addition to
a Board authorization in October, 1994 to repurchase up to 500,000
shares, of which approximately 410,000 have been purchased. The
Company intends to hold these shares in treasury for general
corporate purposes, which may include employee stock options and
restricted stock awards.
11
At an October 19, 1995 meeting, the Board of Directors established
a special non-qualified stock option plan to provide incentive
compensation to the new Chairman of the Board. The plan must be
approved by the shareholders of the Company at the annual meeting
in May of 1996. The plan allows the Chairman the option to purchase
up to 2.5 million shares of the company's $0.01 par value common
stock at a price of $17.63. These options are exercisable after
five years, except for special circumstances in which the options
vest earlier. The options must be exercised within one year of
vesting and all unexercised options will terminate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
12
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: November 1, 1995 BY: /s/ Kirk Thompson
--------------------------- ---------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: November 1, 1995 BY: /s/ Jerry W. Walton
--------------------------- ---------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
13