<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
COMMISSION FILE NO. 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(exact name of registrant as specified in its charter)
ARKANSAS 71-0335111
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
615 J.B. HUNT CORPORATE DRIVE 72745
LOWELL, ARKANSAS (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (501) 820-0000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 aggregate market value of 18,065,067 shares of the registrant's $.01 par
value common stock held by non-affiliates of the registrant as of March 11, 1994
was $438,077,875,(based upon $24.25 per share being the closing sale price on
that date, as reported by NASDAQ). In making this calculation, the issuer has
assumed, without admitting for any purpose, that all executive officers and
directors of the registrant, and no other persons, are affiliates.
At March 11, 1994, the registrant had outstanding 38,546,916 shares of common
stock at $.01 par value.
Part II of this report incorporates by reference certain portions of the Notice
and Proxy Statement for the 1994 annual stockholders' meeting and certain
portions of the 1993 Annual Report to Stockholders.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
J.B. Hunt Transport Services, Inc. (Services) is a diversified
transportation company focusing on the movement of full-load containerizable
freight in North America. Services is an Arkansas holding company incorporated
on August 10, 1961. Through its wholly-owned subsidiaries, Services operates as
an irregular route, common motor carrier operating under the jurisdiction of the
Interstate Commerce Commission (ICC) and various state regulatory agencies.
References to "J.B. Hunt" or "the Company" are to Services and its wholly-owned
subsidiaries.
Utilizing its various operating authorities, the Company may transport any
type of freight (except certain types of explosives) from any point in the
continental United States to any other point in another state, over any route
selected by the Company. The Company also has certain intrastate authorities,
allowing it to pick-up and deliver within those states. The principal types of
freight transported include foodstuffs, automotive parts, plastics and plastic
products, general retail store merchandise, chemicals, paper and paper products,
and manufacturing materials and supplies.
The Company received Canadian authority in 1988 and 1989, which allowed
general commodity service between certain Canadian provinces. Transportation
services are also provided to and from all points in the continental United
States to Quebec, British Columbia and Ontario. An agreement announced in March
1993 with Canada's largest railway, Canadian National, provides for expanded
joint truck and rail service to Canada. J.B. Hunt has provided transportation
services to and from Mexico since 1989 through interchange operations with
various Mexican motor carriers. In May 1992 a joint venture with Transportacion
Maritima Mexicana, the largest transportation company in Mexico, was announced.
In 1990, the Company and the Atchison, Topeka and Santa Fe Railway Company
(Santa Fe) initiated an intermodal operation with trailer-on-flatcar (TOFC)
service. Since this initial agreement with Santa Fe, intermodal operations have
been expanded to include nine railroads. The Company also provides
double-stack container services which utilize a newly-designed container on
a number of rail routes. Substantially all of the freight carried under these
rail agreements is guaranteed space on trains and receives preferential loading
and unloading at rail terminal facilities.
The Company offers related full truckload transportation services such as
regional, intrastate, flatbed, special (hazardous) commodities and dedicated
equipment and logistics management services. Growth and expansion of these
related businesses has been achieved through a combination of new internal
service offerings and acquisitions. The new flatbed and special commodities
operations were created in 1991. A company with Texas intrastate authority was
acquired in 1991. A small hazardous waste carrier was acquired in 1992, and a
new dedicated unit commenced operation in 1993.
MARKETING AND OPERATIONS
J.B. Hunt has targeted the service sensitive segment of the truckload dry
van market rather than those segments that use price as their primary
consideration. The truckload market has traditionally been a lower price, lower
service market when
2
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compared to the less-than-truckload segment. The Company has opted to provide a
premium service and charge compensating rates rather than compete primarily on
the basis of price.
The Company's business is well diversified and no one customer accounted
for more than 6% of revenues during 1992 or 1993. Marketing efforts include
significant focus on the diversified group of "Fortune 500" customers. A broad
geographic dispersion and a good balance in the type of industries served allows
J.B. Hunt some protection from major seasonal fluctuations. However, consistent
with the truckload industry in general, freight is typically stronger in the
second half of the year with peak months being August, September and October, In
addition, demand for services is usually strong at the end of the first two
quarters, (i.e. March and June). Revenue is also affected by bad weather and
holidays, since revenue is directly related to available working days of
shippers.
The Company markets door-to-door truckload service through its nationwide
marketing network. Services involving intermodal transportation mediums are
billed by J.B. Hunt and all inquiries, claims and other customer contact is
handled by the Company.
PERSONNEL
At December 31, 1993, J.B. Hunt employed 10,476 people including 7,531
drivers. The Company increased the rate of over-the-road driver compensation in
late 1990 in order to attract and retain experienced drivers. The pay scale for
certain local drivers was increased in January 1993. Both experienced and
non-experienced drivers are trained in all phases of Company policies and
operations as well as defensive driving, safety techniques and fuel efficient
operations of equipment. During 1992 three distinct driving jobs (local,
regional and over-the-road) were identified in order to get drivers home more
frequently and provide quality service to intermodal and regional operations.
Drivers receive additional incentive compensation based upon fuel economy and
other operating performance criteria.
Each operating unit measures the quality of on-time service provided to
customers each day. This focus on quality has also generated internal operating
efficiencies in a number of functional areas.
None of the Company's drivers or other employees are represented by a
collective bargaining unit. In the opinion of management, the Company's
relationship with all of its employees is excellent.
REVENUE EQUIPMENT
At December 31, 1993, J.B. Hunt operated 6,775 tractors and 19,089
trailers/containers. The average age of the tractor fleet at year-end was less
than two years. The trailer pool consisted primarily of 48-foot and 53-foot dry
vans or containers. The number of 53-foot trailers/containers has been
increased during the last few years in order to offer improved cost advantages
to customers. In late 1992, J.B. Hunt announced the development of a new
multi-purpose container which can be utilized for over-the-road truck
transportation and provide double-stack capabilities for intermodal movements.
The Company intends to convert a significant portion of its trailer fleet to
these containers
3
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during the next few years. At December 31, 1993, there were approximately 7,600
containers in the fleet.
The Company strictly enforces a periodic maintenance program based upon the
specific type and use of a vehicle. This commitment to a quality maintenance
program minimizes equipment downtime and enhances the trade-in value of all used
equipment. The Company believes that modern, late-model, clean equipment
differentiates service in the market place.
COMPETITION
J.B. Hunt is one of the two largest irregular route truckload carriers in
the country. It competes primarily with other irregular route, short,
intermediate and long-haul truckload common carriers. Less-than-truckload motor
common carriers and private carriers generally provide competition to a lesser
degree. Although any one of these may represent competition on a regional basis,
there are a very limited number of companies that represent competition in all
markets. The principal method of competition since deregulation of the industry
has been through price reductions. Increasingly, shippers are looking for "core
carriers" that can offer equipment availability, geographical coverage and
technical expertise to handle a substantial part of their transportation needs.
REGULATION
The Company is a motor common carrier regulated by the ICC. The ICC
generally governs activities such as authority to engage in motor carrier
operations, accounting systems, certain mergers, consolidations, acquisitions,
and periodic financial reporting.
Motor carrier operations are subject to safety requirements prescribed by
the United States Department of Transportation (DOT) governing interstate
operation. Such matters as weight and dimensions of equipment and commercial
driver's licensing are also subject to federal and state regulations. A new
federal requirement that all drivers obtain a commercial driver's license became
effective in April 1992.
The federal Motor Carrier Act of 1980 was the start of a program to
increase competition among motor carriers and limit the level of regulation in
the industry (sometimes referred to as "deregulation"). The Motor Carrier Act of
1980 enables applicants to obtain ICC operating authority more easily and allows
interstate motor carriers, such as the Company, to change their rates by a
certain percentage per year without ICC approval. The new law also allowed for
the removal of many route and commodity restrictions regarding the
transportation of freight. As a result of the Motor Carrier Act of 1980, the
Company was able to obtain unlimited authority to carry general commodities
throughout the 48 contiguous states.
ITEM 2. PROPERTIES
The Company's corporate headquarters are in Lowell, Arkansas. A 150,000
square foot building was constructed and occupied in September 1990. The
building is situated on a 127-acre tract of land. In addition, to the corporate
headquarters, the Company owns a separate 62-acre tract in Lowell, Arkansas with
four separate buildings totaling 21,000 square feet of office space and 90,000
square feet of maintenance and
4
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warehouse space. These buildings serve as the Lowell operations terminal,
tractor and trailer maintenance facilities and additional administrative
offices.
A summary of the Company's principal facilities follows:
<TABLE>
<CAPTION>
VAN DIVISION TERMINALS
Maintenance Shop Office Space
Location Acreage (square feet) (square feet)
-------- ------ ---------------- -------------
<S> <C> <C> <C>
Atlanta, Georgia 30 29,800 10,400
Chicago, Illinois 10 5,800 6,400
Dallas, Texas 14 24,000 7,800
Detroit, Michigan 9 44,300 10,800
East Brunswick, New Jersey 19 3,000 7,800
Houston, Texas 13 24,700 7,200
Little Rock, Arkansas 24 29,200 7,200
Lowell, Arkansas 40 50,200 14,000
Lowell, Arkansas (trailer facilities) 14 29,800 3,700
Oklahoma City, Oklahoma 12 15,000 3,500
South Gate, California 12 12,000 5,500
Springfield, Ohio 12 25,900 10,400
FLATBED DIVISION TERMINALS
Hueytown, Alabama 9 16,000 3,000
</TABLE>
The Company owns all of the above listed facilities except Chicago and
Oklahoma City which are leased. In addition to the above facilities, the Company
leases several small offices and/or trailer parking yards in various locations
throughout the country.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred in
the transportation of freight. The Company maintains excess insurance above its
self-insured levels which covers extraordinary liability resulting from such
claims. Adverse results in one or more of these cases would not have a material
adverse affect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1993 Annual Meeting of stockholders was held on May 13, 1993. At that
meeting, the following matters were submitted to a vote of security holders:
5
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1. To elect nine (9) directors as recommended by the Board of Directors
For Against Abstain
--- ------- -------
Number of shares voted 32,070,726 0 60,585
Percentage of shares voted 99.81% -- .19%
2. To fix the number of Directors for the ensuing year at nine (9)
For Against Abstain
--- ------- -------
Number of shares voted 32,102,143 13,385 15,783
Percentage of shares voted 99.91% .04% .05%
No matters were submitted during the fourth quarter of 1993 to a vote of
security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded in the over-the-counter market under
the symbol "JBHT". The following table sets forth, for the calendar periods
indicated, the range of high and low sales prices for the Company's common stock
as reported by the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ"). The following quotations reflect
a three-for-two stock split paid on March 13, 1992.
<TABLE>
<CAPTION>
Period High Low
<S> <C> <C>
Calendar Year 1992
1st Quarter 26 16 7/8
2nd Quarter 26 16 1/4
3rd Quarter 23 1/2 17 1/2
4th Quarter 24 1/4 20 1/4
Calendar Year 1993
1st Quarter 26 1/4 18 1/8
2nd Quarter 22 1/2 17 1/4
3rd Quarter 24 1/2 20 1/8
4th Quarter 24 1/4 20 1/4
</TABLE>
6
<PAGE>
On March 11, 1994, the high and low sales prices for the Company's common
stock as reported by the NASDAQ were 24 3/4 and 24 1/4 respectively. As of
March 11, 1994, the Company had 1,778 stockholders of record.
DIVIDEND POLICY
On January 13, 1994, the Board of Directors declared a quarterly dividend
of $.05 per share, payable to shareholders of record on February 3, 1994.
Although it is the present intention of the Board of Directors to continue
quarterly dividends, payment of future dividends will depend upon the Company's
financial condition, results of operations and other factors deemed relevant by
the Board of Directors. The Company declared and paid cash dividends of $.20
per share in 1993 and $.20 per share in 1992.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth under the sections entitled "Management's
Discussion and Analysis of Results of Operations and Financial Condition",
"Selected Financial Data", "Independent Auditors' Report", "Consolidated
Statements of Earnings", "Consolidated Balance Sheets", "Consolidated Statements
of Stockholders' Equity", "Consolidated Statements of Cash Flows", and "Notes to
Consolidated Financial Statements", of the Company's 1993 Annual Report to
Stockholders is hereby incorporated by reference for items 6, 7 and 8 above.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K have been filed within the twenty-four months prior
to December 31, 1993, involving a change of accountants or disagreements on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under sections entitled "Proposal One Election of
Directors", "Board Committees", "Executive Officers", "Voting Securities and
Security Ownership of Management and Principal Stockholders", "Executive
Compensation and
7
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Other Information", "1994 Performance Based Compensation" and "Proposal Two
Ratification of Appointment of Auditors" of the Notice and Proxy Statement For
Annual Stockholders' meeting is hereby incorporated by reference for items 10,
11 and 12 above.
The Proxy Statement had not yet been mailed to stockholders and was not
available as of March 31, 1994. It will be filed no later than April 30, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) The following additional information for the years 1993, 1992 and
1991 is submitted herewith. Page references are to the consecutively
numbered pages of this report on Form 10-K.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . 11
Schedule V - Property and Equipment - Years ended
December 31, 1993, 1992, 1991. . . . . . . . . . . . . . . . . 12
Schedule VI - Accumulated Depreciation of Property and Equipment -
Years ended December 31, 1993, 1992, 1991. . . . . . . . . . . 13
Schedule X - Supplementary Statement of Earnings Information -
Years ended December 31, 1993, 1992, 1991. . . . . . . . . . . 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1993.
(c) Exhibits
The response to this portion of ITEM 14 is submitted as a separate
section of this report ("Exhibit Index").
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Lowell,
Arkansas, on the 25th day of March 1994.
J.B. HUNT TRANSPORT SERVICES, INC.
(Registrant)
By: /s/ Kirk Thompson
------------------------------------------
Kirk Thompson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ John A. Cooper, Jr. Member of the Board March 25, 1994
- ---------------------------- of Directors
John A. Cooper, Jr.
/s/ Fred K. Darragh, Jr. Member of the Board March 25, 1994
- ---------------------------- of Directors
Fred K. Darragh, Jr.
/s/ Wayne Garrison Member of the Board March 25, 1994
- ---------------------------- of Directors
Wayne Garrison
/s/ Gene George Member of the Board March 25, 1994
- --------------------------- of Directors
Gene George
/s/ Roy Grimsley Member of the Board March 25, 1994
- --------------------------- of Directors
Roy Grimsley
/s/ Bryan Hunt Member of the Board March 25, 1994
- --------------------------- of Directors (Vice Chairman)
J. Bryan Hunt, Jr.
/s/ J.B. Hunt Member of the Board March 25, 1994
- --------------------------- of Directors (Chairman)
J.B. Hunt
/s/ Johnelle Hunt Member of the Board March 25, 1994
- --------------------------- of Directors (Corporate
Johnelle Hunt Secretary)
/s/ Lloyd E. Peterson Member of the Board March 25, 1994
- --------------------------- of Directors
Lloyd E. Peterson
/s/ Kirk Thompson Member of the Board March 25, 1994
- --------------------------- of Directors (President and
Kirk Thompson Chief Executive Officer)
/s/ Jerry W. Walton Executive Vice President, March 25, 1994
- --------------------------- Finance and Chief Financial
Jerry W. Walton Officer
9
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EXHIBIT INDEX
Exhibit
Number
3A The Company's Amended and Restated Articles of Incorporation dated
May 19, 1988 (incorporated by reference from Exhibit 4A of the Company's
S-8 Registration Statement filed April 16, 1991; Registration Statement
Number 33-40028).
3B The Company's Bylaws as amended (incorporated by reference from Exhibit 3B
of the Company's S-1 Registration Statement filed November 22, 1983;
Registration Number 2-86684).
3C The Company's Amended Bylaws dated September 19, 1983 (incorporated by
reference from Exhibit 3C of the Company's S-1 Registration Statement filed
February 7, 1985; Registration Number 2-95714).
10A Material Contracts of the Company (incorporated by reference from Exhibits
10A-10N of the Company's S-1 Registration Statement; Registration Number
2-95714).
10B The Company has an Employee Stock Purchase Plan filed on Form S-8 on
February 3, 1984 (Registration Number 2-93928), and a Management Incentive
Plan filed on Form S-8 on April 16, 1991 (Registration Statement
Number 33-40028). The Management Incentive Plan is incorporated herein by
reference from Exhibit 4B of Registration Statement 33-40028.
13A Selected Financial Data
13B Management's Discussion and Analysis of Results of Operations and
Financial Condition
13C Independent Auditor's Report
13D Financial Statements and Supplementary Data
22 Subsidiaries of J.B. Hunt Transport Services, Inc.
* J.B. Hunt Transport, Inc., a Georgia corporation
* L.A., Inc., an Arkansas corporation
* J.B. Hunt Corp., a Delaware corporation
* J.B. Hunt Special Commodities, Inc., an Arkansas corporation
* Great Western Trucking Co., Inc., a Texas corporation
* J.B. Hunt Logistics, Inc., an Arkansas corporation
* Comercializadora Internacional De Cargo S.A. De C.V., a Mexican
corporation
* Hunt Mexicana, S.A. de C.V., a Mexican corporation
23 Consent of KPMG Peat Marwick
10
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
Under date of February 11, 1994, we reported on the consolidated balance sheets
of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1993, as contained in the 1993 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1993. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedules as listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
Little Rock, Arkansas
February 11, 1994
11
<PAGE>
Schedule V
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Property and Equipment
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning Additions at end
Classification of period at cost Retirements Other of period
-------------- ---------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Revenue and service equipment $674,536 277,565 (160,194) -- 791,907
Land 11,841 109 -- -- 11,950
Structures and improvements 40,685 3,860 (347) -- 44,198
Furniture and office equipment 61,943 4,153 (189) -- 65,907
-------- ------- -------- -------- -------
$789,005 285,687 (160,730) -- 913,962
-------- ------- -------- -------- -------
-------- ------- -------- -------- -------
Year ended December 31, 1992:
Revenue and service equipment 454,829 253,517 70,139 36,329(A) 674,536
Land 12,181 -- 340 -- 11,841
Structures and improvements 38,671 2,014 -- -- 40,685
Furniture and office equipment 42,910 33,878 14,845 -- 61,943
-------- ------- -------- -------- -------
$548,591 289,409 85,324 36,329 789,005
-------- ------- -------- -------- -------
-------- ------- -------- -------- -------
Year ended December 31, 1991:
Revenue and service equipment 391,676 143,342 80,189 -- 454,829
Land 11,116 1,065 -- -- 12,181
Structures and improvements 38,198 473 -- -- 38,671
Furniture and office equipment 36,217 6,901 208 -- 42,910
-------- ------- -------- -------- -------
$477,207 151,781 80,397 -- 548,591
-------- ------- -------- -------- -------
-------- ------- -------- -------- -------
<FN>
(A) Represents reclassification made as a result of the change in method of
accounting for tires in service as described in note 1(b) to the
consolidated financial statements.
</TABLE>
12
<PAGE>
Schedule VI
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Accumulated Depreciation of Property and Equipment
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end
Classification of period expenses Retirements Other of period
-------------- --------- --------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Revenue and service equipment $189,991 91,834 (91,991) -- 189,834
Structures and improvements 11,061 2,357 -- -- 13,418
Furniture and office equipment 20,140 9,111 (180) -- 29,071
-------- ------- ------- ------- -------
$221,192 103,302 (92,171) -- 232,323
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Year ended December 31, 1992:
Revenue and service equipment 138,681 83,791 44,395 11,914(A) 189,991
Structures and improvements 8,721 2,339 -- -- 11,061
Furniture and office equipment 20,265 7,872 7,996 -- 20,140
-------- ------- ------- ------- -------
$167,667 94,002 52,391 11,914 221,192
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Year ended December 31, 1991:
Revenue and service equipment 120,452 64,923 46,694 -- 138,681
Structures and improvements 6,389 2,332 -- -- 8,721
Furniture and office equipment 13,338 7,019 92 -- 20,265
-------- ------- ------- ------- -------
$140,179 74,274 46,786 -- 167,667
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
<FN>
(A) Represents accumulated depreciation applicable to tires in service
reclassified to revenue and equipment as a result of the change in
accounting method described in note 1(b) to the consolidated financial
statements.
</TABLE>
13
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Schedule X
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Supplementary Statements of Earnings Information
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $21,708 18,827 15,622
------- ------ ------
------- ------ ------
Taxes, other than payroll and income taxes $61,920 60,187 53,878
------- ------ ------
------- ------ ------
</TABLE>
14
<PAGE>
SLECTED FINANCIAL DATA
J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years endedDecember 31,
1993 1992 1991 1990 1989 1988 1987
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $1,020,921 $911,982 $733,288 $579,831 $509,278 $392,553 $286,419
Earnings before cumulative effect of
changes in accounting methods 38,221 36,933 29,459 30,048 30,615 33,045 25,971*
Earnings per share before
cumulative effect of changes
in accounting methods 1.00 1.03 .85 .85 .87 .93 .73*
Cash dividends per share .20 .20 .19 .16 .16 .13 .11
Total assets 862,442 715,741 520,130 452,734 384,684 300,199 250,274
Long-term debt 303,499 216,254 156,930 137,597 104,955 65,358 69,000
Stockholders' equity 343,964 308,626 215,761 191,074 175,518 150,126 121,316
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Percentage of Operating Revenue Years ended December 31,
1993 1992 1991 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------------------------
Operating revenues 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating expenses:
- --------------------------------------------------------------------------------------------------------------
Salaries, wages and employee benefits 36.4 38.2 40.0 41.4 42.1 41.4 39.6
Fuel and fuel taxes 12.4 14.2 16.3 17.3 15.7 14.3 15.8
Purchased transportation and spotting 18.4 12.2 7.0 0.7 0.7 0.6 0.4
Depreciation 8.2 9.5 9.4 9.7 9.5 9.7 10.3
Operating suppLies and expenses 7.2 7.4 8.0 8.8 8.5 7.8 7.1
Insurance and claims 4.0 4.8 4.7 5.4 4.5 4.3 4.4
Operating taxes and licenses 2.8 2.8 3.0 3.2 3.5 3.4 3.7
Communication and utilities 1.0 1.3 1.4 1.4 1.7 2.0 2.4
General and administrative expenses 1.9 2.0 2.1 2.3 1.7 1.3 1.3
- --------------------------------------------------------------------------------------------------------------
Total operating expenses 92.3 92.4 91.9 90.2 87.9 84.8 85.0
- --------------------------------------------------------------------------------------------------------------
Operating income 7.7 7.6 8.1 9.8 12.1 15.2 15.0
Interest expense 1.4 1.2 1.5 1.2 1.8 1.7 1.5
Income taxes 2.6 2.3 2.6 3.4 4.3 5.1 4.5*
Cumulative effect of changes in
accounting methods -- 0.2 (0.2) -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Net earnings 3.7% 4.3% 3.8% 5.2% 6.0% 8.4% 9.0%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<FN>
* Includes cumulative effect on prior years of change in method of accounting
for income taxes of $3,556 ($.10 per share).
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following table sets forth the change in amounts and percentage change
between years of certain revenue, expense and operating items:
<TABLE>
<CAPTION>
(in thousands except tractor data)
- ------------------------------------------------------------------------------------------
Changes in Results of Operations
- ------------------------------------------------------------------------------------------
1993 vs. 1992 1992 vs. 1991
------------- --------------
Increase Increase
(Decrease) % (Decrease) %
in Amounts Change in Amounts Change
------------- ------ ------------- ------
<S> <C> <C> <C> <C>
Operating revenues $108,939 12 % $178,694 24 %
- -----------------------------------------------------------------------------------------------
Average number of tractors in the fleet 466 7 1,138 22
- -----------------------------------------------------------------------------------------------
Operating expenses:
Salaries, wages and employee benefits 23,877 7 54,582 19
Purchased transportaton and spotting 76,147 68 60,399 118
Fuel and fuel taxes (3,033) (2) 10,399 9
Depreciation (3,615) (4) 17,714 26
Operating supplies and expenses 6,296 9 8,209 14
Insurance and claims (3,049) (7) 9,263 27
Operating taxes and licenses 3,177 12 3,899 18
General and administrative expenses 419 2 3,390 22
Communication and utilities (816) (7) 1,174 11
- -----------------------------------------------------------------------------------------------
Total operating expenses 99,403 12 % 169,029 25 %
- -----------------------------------------------------------------------------------------------
Operating income $9,536 14 % $9,665 16 %
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth certain industry operating data of the Company.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
--------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total loads 1,081,013 960,031 796,929 596,574 536,448
Average number of tractors in the
fleet during the year 6,890 6,424 5,286 4,413 3,616
Tractors operated (at year end) 6,775 7,004 5,843 4,729 4,096
Trailers/containers (at year end) 19,089 17,391 12,389 10,563 9,339
Average tractor miles per load 615 693 724 839 870
Tractor miles (in thousands) 718,767 733,700 638,926 551,175 495,377
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
RESULTS OF OPERATIONS
OPERATING REVENUES
Operating revenues increased 12% from 1992 to 1993, and 24% from 1991 to
1992. The increase in revenue was primarily a result of continued growth of
railroad (intermodal) volume and specialized carrier operations. The average
number of tractors in the fleet increased 7% from 1992 to 1993 and 22% from 1991
to 1992. Fleet size and revenue growth were negatively impacted by a shortage of
qualified drivers during the second half of 1993. Average rate increases of 2%
in 1993 and 1% in 1992 also enhanced revenue growth.
Revenue from specialized carrier operations such as flatbed, special
(hazardous) commodities, dedicated contract and logistics services was 14%, 8%
and 4% of total operating revenue, respectively in 1993, 1992 and 1991. The
company offers a broad range of services and alternative modes of
transportation. Arrangements with nine railroads allow the company to transport
freight utilizing a combination of truck and rail mediums.
See Note 1(d) of the Notes to Consolidated Financial Statements for a
discussion of the change in accounting principle during 1991 related to the
method of recognizing revenue for shipments in transit.
OPERATING EXPENSES
Operating expenses of transportation companies would frequently be expected
to vary between years in proportion to changes in operating revenues and tractor
fleet size. Due to the company's significant utilization of intermodal and third
party transportation services, the relationship of operating expense to
operating revenues and fleet size has changed. Certain expenses related to
drivers and revenue equipment such as salaries, wages and employee benefits;
fuel and fuel taxes; depreciation and operating supplies and expenses have
shifted to the category of purchased transportation and spotting.
Salaries, wages and employee benefits increased during 1993 and 1992 in
approximate proportion to the growth of the tractor fleet. No significant
changes in the rates of employee salaries and wages were experienced. Purchased
transportation and spotting expense increases reflect the significant growth in
the utilization of intermodal and third party transportation services. Fuel and
fuel taxes decreased from 1992 to 1993, reflecting a decrease in total tractor
miles due to utilization of intermodal and third party transportation services.
Improved fuel
<PAGE>
miles per gallon in 1993 also reduced fuel expense. Fuel cost per gallon
increased slightly during 1993, but was more than offset by the above items.
Fuel cost per gallon declined approximately $.03 during 1992. This decrease and
the growth of intermodal resulted in fuel and fuel tax expense increasing by
only 9 percent while the tractor fleet grew by 22 percent.
The decrease in depreciation expense from 1992 to 1993 reflects gains on
the disposition of revenue equipment and a change in the estimated salvage value
on certain revenue and service equipment (see Note 1(c) of the Notes to
Consolidated Financial Statements). Depreciation expense increased from 1991 to
1992 primarily due to the increase in the size of the tractor fleet.
Operating supplies and expenses increased during 1993 in relative
proportion to the fleet size. The change in operating supplies and expenses from
1991 to 1992 was impacted by a change in the method of accounting for tires (see
Note 1(b) of the Notes to Consolidated Financial Statements).
Insurance and claims expense in 1993 reflected a significant reduction in
accident frequency. The Company implemented a series of programs during late
1992 and early 1993 directed at reducing accidents. Insurance and claims expense
increased during 1992 due to an increase in the level of self-insurance elected
by the company and an increase in accident frequency.
Operating taxes and licenses reflect the increase in the size of the fleet
and rate increases enacted by various state regulatory agencies. General and
administrative expenses were favorably impacted during 1993 by changes which
reduced legal, professional service and certain driver training costs.
Communications and utilities expense declined during 1993 primarily due to
certain rate reductions applicable to voice communications and the
implementation of on-board communication devices in a portion of the Company's
fleet. Rate reductions were also achieved during 1992.
Interest expense increased during 1993 primarily due to higher levels of
long-term debt associated with the acquisition of new containers and chassis.
The effective income tax rate increased to 41% in 1993, due primarily to
the increased federal tax rate on both current and deferred income taxes,
effective retroactive to January 1, 1993. The effective tax rate in 1992 was
36.5%, down from 39.5% in 1991, primarily due to a settlement with the Internal
Revenue Service of a tax case dealing with several prior years.
<PAGE>
EARNINGS
The Company intends to continue expanding its utilization of intermodal
operations. Accordingly, a substantial capital investment in newly-designed,
multi-purpose containers and chassis was made during 1993 and is planned for the
next two to three years. This strategy involves the disposition of significant
numbers of van type trailers. Future earnings may be favorably or unfavorably
impacted by market prices for used revenue equipment or other factors related to
this transition.
LIQUIDITY AND CAPITAL RESOURCES
The growth of the company's business and the commitment to new technology
in terms of containers, chassis and on-board tractor communication devices has
resulted in significant capital investments during 1993 and 1992. Net capital
investments were $197 million in 1993, $249 million in 1992 and $113 million in
1991. These expenditures were funded with cash generated from operations and
proceeds from long-term debt. Accounts receivable at December 31, 1993 includes
approximately $29 million related to sales of revenue equipment for which funds
were received during the first quarter of 1994.
In July 1993, the company filed a shelf registration statement for an
aggregate principal amount of $250 million of debt securities to be issued on
terms to be determined at the time of sale. In September, 1993, the shelf
registration was utilized to issue $100 million of 6.25% unsecured notes which
are due 2003. This was the initial public offering of debt securities for the
company. The company received approximately $56 million from a secondary
offering of common stock completed in 1992. Net proceeds from these offerings
were used initially to reduce indebtedness outstanding under the company's
commercial paper program. Proceeds from the commercial paper program are
typically utilized to supplement cash provided by operating activities and fund
the acquisition of revenue equipment, on-board communication devices and other
funding requirements.
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 expects to fund future capital
expenditures from cash provided by operating activities and proceeds from
long-term debt. Approximately $100 million of uncommitted lines of credit were
available at December 31, 1993, with no outstanding borrowings.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have audited the accompanying consolidated balance sheets of J.B. Hunt
Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended
December 31, 1993. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of J.B. Hunt
Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in notes 1(b) and (d), respectively, to the consolidated
financial statements, the Company changed its methods of accounting for
the costs of tires in service during 1992 and recognizing revenues for
freight in transit during 1991.
KPMG Peat Marwick
LITTLE ROCK, ARKANSAS
FEBRUARY 11, 1994
<PAGE>
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
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
------- -------- --------
------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands, except par value) December 31,
------------
1993 1992
---- ----
<S> <C> <C>
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
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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)
<TABLE>
<CAPTION>
Total
Additional Retained stockholders'
Common paid-in earnings Treasury equity
stock capital (note 2) stock (note 3)
------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
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
---- ------- ------- ------ -------
---- ------- ------- ------ -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J.B. Hunt Transport Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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
------- ------- -------
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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)
<PAGE>
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)
<PAGE>
3
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of (in thousands):
1993 1992
---- ----
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
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)
<PAGE>
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)
<PAGE>
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:
<TABLE>
<CAPTION>
Number Option Number
of price of shares
shares per share exercisable
------ --------- -----------
<S> <C> <C> <C>
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
--------- -------------- -------
--------- -------------- -------
</TABLE>
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):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
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
------- -------
------- -------
</TABLE>
Income tax expense attributable to income from operations consists of
(in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
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
------- ------- -------
------- ------- -------
</TABLE>
(Continued)
<PAGE>
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):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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
------- ------- -------
------- ------- -------
</TABLE>
The significant components of deferred income tax expense attributable to income
from operations are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
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
------- ------- ------
------- ------- ------
</TABLE>
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):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
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)
-------- --------
-------- --------
</TABLE>
(Continued)
<PAGE>
7
J.B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
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)
<PAGE>
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):
<TABLE>
<CAPTION>
At December 31, 1993
--------------------------
Carrying Estimated
amount fair value
---------- ----------
<S> <C> <C>
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)
-------- --------
-------- --------
</TABLE>
(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)
<PAGE>
(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):
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
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
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Net earnings $ 4,983 $ 13,500 $ 8,782 $ 10,956 $ 38,221
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Earnings per share $ .13 $ .35 $ .23 $ .29 $ 1.00
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
1992:
Operating revenues $ 201,298 $ 223,842 $ 241,195 $ 245,647 $ 911,982
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Operating income $ 12,798 $ 19,540 $ 19,623 $ 17,129 $ 69,090
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Earnings before cumulative effect of change
in accounting method $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Net earnings $ 8,125 $ 10,137 $ 10,672 $ 9,824 $ 38,758
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Earnings per share before cumulative effect
of change in accounting method $ .18 $ .29 $ .30 $ .26 $ 1.03
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Earnings per share $ .23 $ .29 $ .30 $ .26 $ 1.08
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Proforma amounts assuming the new accounting
method is applied retroactively:
Net earnings $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
Earnings per share $ .18 $ .29 $ .30 $ .26 $ 1.03
--------- ---------- --------- --------- -----------
--------- ---------- --------- --------- -----------
</TABLE>
<PAGE>
EXHIBIT 23
The Board of Directors
J.B. Hunt Transport Services, Inc.
We consent to incorporation by reference in the Registration Statements No.
2-93928 and No. 33-40028 on Form S-8 of J.B. Hunt Transport Services, Inc. of
our report dated February 11, 1994 relating to the consolidated balance sheets
of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1993, which report is incorporated by reference in the
December 31, 1993 annual report on Form 10-K of J.B. Hunt Transport Services,
Inc.
KPMG Peat Marwick
Little Rock, Arkansas
March 9, 1994
