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, 1996
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 organization) Identification No.)
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, 1996 was 37,996,906
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 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, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996.
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, 1995.
INDEX
Consolidated Statements of Earnings for the Three and Nine Months
Ended September 30, 1996 and 1995.................................... Page 3
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995............................. Page 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995........................ Page 5
Notes to Consolidated Financial Statements
as of September 30, 1996............................................. 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
- ------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------
Operating revenues $378,739 $355,114 $1,105,326 $993,757
Operating expenses
Salaries, wages and employee benefits 124,914 119,082 363,536 339,686
Purchased transportation 115,258 101,451 312,086 262,265
Fuel and fuel taxes 38,043 35,818 120,292 105,956
Depreciation 28,147 30,974 92,158 96,751
Operating supplies and expenses 22,957 24,875 69,460 72,192
Insurance and claims 14,021 14,074 45,191 36,589
General and administrative expenses 6,645 7,893 22,459 19,390
Operating taxes and licenses 6,738 6,535 21,020 23,794
Communication and utilities 4,583 4,696 13,823 10,466
- ------------------------------------------------------------------------------------------
Total operating expenses 361,306 345,398 1,060,025 967,089
- ------------------------------------------------------------------------------------------
Operating income 17,433 9,716 45,301 26,668
Interest expense 6,010 6,135 18,283 18,720
Other non-operating expense -- 660 -- 660
- ------------------------------------------------------------------------------------------
Earnings before income taxes 11,423 2,921 27,018 7,288
Income taxes 4,341 1,081 10,267 2,697
- ------------------------------------------------------------------------------------------
Net earnings $ 7,082 $ 1,840 $ 16,751 $ 4,591
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Common shares outstanding 38,095 38,669 38,077 38,598
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Earnings per share $ 0.19 $ 0.05 $ 0.44 $ 0.12
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
3
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- ----------------------------------------------------------------------------
September 30, 1996 December 31, 1995
- ----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,938 $ 4,260
Accounts receivable 171,007 143,002
Prepaid expenses 14,884 29,645
Deferred income taxes 10,171 10,171
- ----------------------------------------------------------------------------
Total current assets 199,000 187,078
- ----------------------------------------------------------------------------
Property and equipment 1,223,443 1,184,808
Less accumulated depreciation 400,346 375,798
- ----------------------------------------------------------------------------
Net property and equipment 823,097 809,010
- ----------------------------------------------------------------------------
Other assets 26,851 20,694
- ----------------------------------------------------------------------------
$ 1,048,948 $ 1,016,782
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt $ 64,550 $ 30,310
Trade accounts payable 79,442 86,466
Claims accruals 32,931 38,014
Accrued expenses 30,184 25,986
Other current liabilities 4,254 3,823
- ----------------------------------------------------------------------------
Total current liabilities 211,361 184,599
- ----------------------------------------------------------------------------
Long-term debt 332,510 339,015
Claims accruals 13,500 13,500
Deferred income taxes 125,466 122,729
Stockholders' equity 366,111 356,939
- ----------------------------------------------------------------------------
$ 1,048,948 $ 1,016,782
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
4
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- --------------------------------------------------------------------------------------------
Nine Months Ended September 30
- --------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 16,751 $ 4,591
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, net of gain on disposition of equipment 92,158 96,751
Deferred income taxes 2,737 (3,477)
Tax benefit of stock options exercised 381 316
Changes in assets and liabilities:
Accounts receivable (28,005) (18,306)
Prepaid expenses 14,761 8,631
Trade accounts payable (7,024) 27,865
Claims accruals (5,083) 6,113
Accrued expenses and other current liabilities 4,629 (3,042)
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 91,305 119,442
- --------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (146,927) (145,400)
Proceeds from sale of equipment 40,682 38,612
Increase in other assets (4,759) (8,464)
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (111,004) (115,252)
- --------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings of long-term obligations 27,735 1,562
Proceeds from sale of treasury stock 2,137 2,263
Repurchase of treasury stock (5,806) --
Dividends paid (5,689) (5,789)
- --------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 18,377 (1,964)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,322) 2,226
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 4,260 2,142
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,938 $ 4,368
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 18,364 $ 19,056
Income Taxes 974 3,050
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
5
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) LONG-TERM DEBT
Long-term debt consists of (in thousands):
9/30/96 12/31/95
-------- --------
Commercial paper $179,550 $145,310
Senior notes payable, interest at 6.25%
payable semiannually 98,260 100,000
Senior notes payable, interest at 7.75%
payable semiannually 5,000 5,000
Senior notes payable, interest at 7.84%
payable semiannually 15,000 20,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25%
payable semiannually 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
-------- --------
397,810 370,310
Less current maturities (64,550) (30,310)
Unamortized discount (750) (985)
-------- --------
$332,510 $339,015
-------- --------
-------- --------
The Company is authorized to issue up to $250 million in notes under its
commercial paper note program. These notes are supported by two credit
agreements with a group of banks. One agreement for $125 million expires
March 27, 1997 and $125 million expires March 31, 1999.
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
The 6.25% senior notes were issued on November 17, 1995 and are payable
at maturity on November 17, 2000.
The 6.00% senior notes were issued on December 12, 1995 and are payable
at maturity on December 12, 2000.
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 non-statutory options to purchase Company common stock
follows:
Number of
Number of Option price shares
shares per share exercisable
------ --------- -----------
Outstanding at December 31, 1995 2,725,731 $ 9.33 - 24.63 415,606
-------
-------
Granted 2,792,500 17.63 - 21.25
Exercised (191,456) 9.67 - 18.75
Terminated (270,350) 11.58 - 23.00
--------- --------------
Outstanding at September 30, 1996 5,056,425 $ 9.33 - 24.63 322,850
--------- -------------- -------
--------- -------------- -------
On October 17, 1996, the Company's Board of Directors declared a regular
quarterly cash dividend of $.05 per share payable on November 22, 1996 to
stockholders of record as of November 4, 1996.
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, 1996, and the
related condensed consolidated statements of earnings and cash flows for the
three-month and nine-month periods ended September 30, 1996 and 1995, 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, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
then ended (not presented herein); and in our report dated February 9, 1996,
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, 1995, 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 11, 1996
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, 1995.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage
change between the third quarter of 1996 and the comparable period in 1995 of
certain revenue, expense and operating items.
Three Months Ended September 30, 1996 vs. 1995
(In thousands except tractor data)
Increase
(decrease) %
in amounts change
---------- ------
Operating revenues $23,625 7%
- ---------------------------------------------------------------
Average number of tractors in the fleet (50) (1%)
- ---------------------------------------------------------------
Operating expenses:
Salaries, wages and employee benefits $ 5,832 5%
Purchased transportation 13,807 14%
- ---------------------------------------------------------------
Fuel and fuel taxes 2,225 6%
Depreciation (2,827) (9%)
- ---------------------------------------------------------------
Operating supplies and expenses (1,918) (8%)
Insurance and claims (53) 0%
- ---------------------------------------------------------------
General and administrative expenses (1,248) (16%)
Operating taxes and licenses 203 3
Communication and utilities (113) (2%)
- ---------------------------------------------------------------
Total operating expenses 15,908 5%
- ---------------------------------------------------------------
Operating income $ 7,717 79%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
The following discussion relates to the table set forth above and the
attached interim statements for the quarter ended September 30, 1996 and
1995.
OPERATING REVENUES
Operating revenues for the third quarter of 1996 increased approximately
$24 million, or 7 percent, to $378.7 million from $355.1 million in the third
quarter of
9
1995. The average number of total tractors in the fleet decreased 1 percent
during the same period. The change in revenue between quarters includes the
following by type of freight:
Change in Revenue
Third Quarter 1996 vs. Third Quarter 1995
(millions of dollars)
Intermodal $ 16
Logistics management 27
Dedicated contract 2
Other, net (21)
----
$ 24
----
----
Intermodal loads increased 13 percent during the third quarter of 1996.
Operating revenues increased 5 percent in the van division, approximately 100
percent in logistics management and 5 percent in dedicated contract. The
decrease in other above reflects the sale of the special commodities and
parcel management businesses. Van division truck only rates were
approximately 1.4 percent lower during the third quarter of 1996, while
intermodal rates were unchanged.
OPERATING EXPENSES
Total operating expenses for the third quarter of 1996 increased
approximately $16 million, or 5 percent over the comparable period of 1996.
Operating income increased by $7.7 million to $17.4 million from $9.7
million. The significant increase in 1996 operating income, from an
unusually low third quarter of 1995, was due primarily to higher tractor
utilization and reduced operating expenses. In addition, a pretax gain of
approximately $3 million was recognized during the current quarter, from the
sale of the special commodities business. Gains on the disposition of
revenue equipment, which had been significant in some prior reporting
periods, were approximately $1.2 million in the third quarter of 1996
(excluding the special commodities gain), compared with $3.6 million in 1995.
Gains are classified as a reduction of depreciation expense in the
Consolidated Statements of Earnings.
Salaries, wages and employee benefits increased 5 percent during the
third quarter of 1996, due, in part, to $1.7 million paid to drivers in
connection with a new safe driving bonus program. Purchased transportation
expense increased 14 percent, reflecting payments to railroads and
third-party companies that furnished intermodal and truck transportation
services to the Company. Fuel and fuel tax expense increased 6 percent
during the third quarter of 1996. This increase was primarily due to an 11
percent increase in cost per gallon partially offset by a nearly 5 percent
increase in miles per gallon. The higher fuel cost was also partially
recovered through additional fuel surcharge revenue billed to customers.
Rapid changes in fuel costs can significantly impact earnings.
10
The 9 percent decline in depreciation expense was primarily due to the
gain on sale of the special commodities business described above. The 8
percent decline in operating supplies and expenses was due, in part, to lower
tractor and trailing equipment maintenance costs. Insurance and claims costs
were flat when comparing the third quarter of 1996 to the same period in
1995. However, 1996 insurance and claims expense was down nearly $4 million
from the second quarter of 1996 to the third quarter of 1996. The Company
announced a decision in June, 1996 to limit the speed of its tractors to 59
miles per hour in order to improve safety. General and administrative
expenses declined 16 percent, due, in part, to lower driver advertising and
recruiting cost.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Consolidated Statements
of Cash Flows and the Consolidated Balance Sheets.
Net cash provided by operating activities was approximately $91 million
for the nine months ended September 30, 1996 compared with $119 million in
1995. This decrease in net cash provided was primarily due to an increase in
accounts receivable and certain cash payments made during the first quarter
of 1996 for claims settlements and payables for revenue equipment purchases.
SELECTED BALANCE SHEET DATA
As of
-----------------------------------------------------------
September 30, 1996 December 31, 1995 September 30, 1995
------------------ ----------------- ------------------
Working capital ratio .94 1.01 .91
Current maturities of long-
term debt (millions) $ 65 $ 30 $ 75
Total debt (millions) $ 397 $ 369 $369
Total debt to equity 1.08 1.03 .99
Total debt as a percentage
of total capital .52 .51 .50
Net additions to property and equipment during the nine months ended
September 30, 1996 totaled $106 million compared with $107 million in 1995.
While total debt levels have increased slightly during the past year, the
Company's liquidity has not changed significantly. The Company generates
significant cash from operating activities and has borrowing capacity to meet
its committed and contemplated cash expenditures.
In October, 1996 Standard and Poor's lowered its ratings on the Company
as follows:
* corporate credit to BBB+ from A-
* senior unsecured to BBB+ from A-
* subordinated debt to BBB from BBB+
11
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
On August 8, 1996 the Company announced an agreement to combine J.B.
Hunt's special commodities business into Trism Secured. Trism acquired the
business and certain other assets in exchange for cash and stock options.
On October 17, 1996 the Company announced that its Board of
Directors had authorized the repurchase of up to 2.0 million shares of
outstanding common stock. This action was in addition to previous
authorizations in 1994 and 1995.
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 11, 1996 BY: /s/ Kirk Thompson
------------------------- ---------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: November 11, 1996 BY: /s/ Jerry W. Walton
------------------------- ---------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
13