<PAGE>
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 COMMISSION FILE NUMBER
DECEMBER 31, 1994 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 _____
---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SS229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN
DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART
III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K.
THE AGGREGATE MARKET VALUE OF 18,179,616 SHARES OF THE REGISTRANT'S $.01 PAR
VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY
28, 1995 WAS $354,502,512 (BASED UPON $19.50 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.
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF
FEBRUARY 28, 1995: 38,557,629.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE 1995
ANNUAL STOCKHOLDERS' MEETING TO BE HELD MAY 11, 1995, PART II.
<PAGE>
2
PART I
ITEM 1. BUSINESS
GENERAL
J.B. Hunt Transport Services, Inc., together with its wholly-
owned subsidiaries ("JBH" or the "Company") is a diversified
transportation services and logistics company operating under the
jurisdiction of the Interstate Commerce Commission ("ICC") and
various state regulatory agencies. JBH is an Arkansas holding
company incorporated on August 10, 1961. Through its subsidiaries
JBH transports full-load containerizable freight throughout the
continental United States and portions of Canada and Mexico. The
Company also provides logistics and transportation-related
services which may utilize JBH equipment and employees or may
employ equipment and services provided by unrelated third parties
in the transportation industry.
JBH has various operating authorities granted by the ICC and state
regulatory agencies. 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 pick-up and
delivery within those states. Federal legislation was enacted effective
January 1, 1995 which preempted each state's right to limit entry into
intrastate operations. A wide range of products are transported including
automotive parts, department store merchandise, paper and paper products,
plastics, chemicals and manufacturing materials and supplies.
JBH was granted certain Canadian authority initially in 1988 and
currently transports freight to and from all points in the continental United
States to Quebec, British Columbia and Ontario. Transportation services are
also provided between certain Canadian provinces. The Company has provided
transportation services to and from Mexico since 1989 through interchange
operations with various Mexican motor carriers. A joint venture agreement
with Transportacion Maritima Mexicana, the largest transportation company in
Mexico, was signed in 1992.
In 1990, JBH initiated intermodal operations with the Atchison, Topeka
and Santa Fe Railway Company. In accordance with this agreement, freight may
be transported by rail utilizing traditional trailer-on-flatcar (TOFC) or
container-on-flatcar (COFC) medium. Since this initial agreement with Santa
Fe, intermodal operations have been expanded to include arrangements with
twelve railroads. A number of these rail routes allow the utilization of a
newly-designed container which can be double-stacked to provide improved
productivity. Substantially all of the freight carried under these rail
arrangements is guaranteed space on trains and receives preferential loading
and unloading at rail facilities.
The Company also offers related full truckload transportation services.
Flatbed and special (hazardous) commodities operations were commenced in
1991. A Texas intrastate operation was also acquired in 1991. A growing
number of shippers are interested in logistics and dedicated equipment
services, whereby all transportation requirements can be outsourced and
provided by one management and services company. JBH organized a logistics
services unit in 1992 and a dedicated equipment operation in 1993.
<PAGE>
3
MARKETING AND OPERATIONS
The truckload market has traditionally been a lower price, lower service
market when compared to the less-than-truckload (LTL) 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 1994 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
allow JBH some protection from major seasonal fluctuations. However, consistent
with the T/L 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
calendar 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 T/L service through its nationwide
marketing network. Services involving intermodal transportation mediums are
billed by JBH and all inquiries, claims and other customer contact are
handled by the Company. In late 1994, the Company reorganized its dry van and
intermodal operations into five geographically based regions.
PERSONNEL
At December 31, 1994, JBH employed 11,837 people, including 8,667
drivers. The transportation industry and the Company have experienced
shortages of qualified drivers from time to time. The Company has developed
an extensive program to attract, train and retain drivers.
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 operation of equipment. During 1992, three
distinct driving designations (local, regional or zone and over-the road)
were identified in order to get drivers home more frequently and provide
specific support for intermodal and regional operations. Drivers are
compensated based upon miles driven, a specified rate per week, or a
combination of both. Additional compensation may be earned based upon fuel
economy and other performance criteria. The Company also employed
approximately 1000 mechanics as of December 31, 1994. In the opinion of
management, the Company's relationship with all of its employees is excellent.
REVENUE EQUIPMENT
At December 31, 1994, JBH owned 7,412 tractors, 8,636 trailers and
14,051 specially designed containers. The average age of the tractor and
trailing equipment fleet was approximately two years. In late 1992, the
Company announced the development of a new multi-purpose container which can
be placed on a chassis for transportation over-the-road by truck and also
moved by rail or ship. The container and chassis combination may be
transported by rail (TOFC) or the container can be separated from the chassis
and double-stacked (COFC) on the rail for improved productivity. The Company
intends to continue the conversion of a significant portion of its dry van
trailer fleet to these containers.
<PAGE>
4
A periodic maintenance program is strictly enforced for all revenue
equipment based upon the specific type and use of the equipment. JBH believes
that modern, late-model, clean equipment differentiates quality service in
the marketplace. A professional maintenance program minimizes downtime,
increases utilization and enhances the trade-in value of used equipment.
COMPETITION
JBH is the largest publicly-held T/L carrier in the United States. It
competes primarily with other irregular route, T/L common carriers. LTL
common carriers and private carriers generally provide limited competition.
JBH is one of a few carriers offering nationwide logistics management and
dedicated revenue equipment services. Although a number of carriers may
provide competition on a regional basis, only a limited number of companies
represent competition in all markets. The extensive rail network developed in
conjunction with the various railroads also allows the Company the
opportunity to differentiate its services in the marketplace.
REGULATION
The Company is a motor common carrier regulated by the ICC. The ICC
generally governs activities such as authority to engage in interstate 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
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 enabled 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. Effective January 1, 1995,
the federal government issued guidelines which allow motor carriers more
flexibility in intrastate operations. Although this reduced level of state
regulation may increase the level of competition in some regions, the Company
believes it will ultimately benefit from this legislation.
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.
<PAGE>
5
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
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>
MAINTENANCE SHOP OFFICE SPACE
LOCATION ACREAGE (SQUARE FEET) (SQUARE FEET)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
VAN DIVISION TERMINALS
-----------------------
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
South Gate, California 12 12,000 5,500
Springfield, Ohio 12 25,900 10,400
FLATBED DIVISION TERMINAL
-------------------------
Hueytown, Alabama 9 16,000 3,000
</TABLE>
The Company owns all of the above listed facilities except Chicago which
is 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 effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1994 Annual Stockholders' Meeting was held on May 12, 1994. At that
meeting, the following matters were submitted to a vote of security holders:
<PAGE>
6
1. To elect ten (10) directors and to fix the number of directors for the
ensuing year at ten (10).
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------------------------------------------------------------------
<S>> <C> <C> <C>
Number of shares voted 33,875,269 0 30,465
Percentage of shares voted 99.91% 0.00% .09%
</TABLE>
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the next fiscal year.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
-------------------------------------------------------------------
<S> <C> <C> <C>
Number of shares voted 33,881,297 6,761 17,676
Percentage of shares voted 99.93% .02% .05%
</TABLE>
No matters were submitted during the fourth quarter of 1994 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").
<TABLE>
<CAPTION>
PERIOD HIGH LOW HIGH LOW
-----------------------------------------------------------------
CALENDAR YEAR 1993 CALENDAR YEAR 1994
------------------ ------------------
<S> <C> <C> <C> <C>
1st Quarter $26.8 $17.8 $25.8 $21.8
2nd Quarter 22.5 17.3 23.4 17.5
3rd Quarter 24.8 19.8 19.3 15.8
4th Quarter 24.0 20.0 15.9 15.0
</TABLE>
On February 28, 1995, the high and low sales prices for the Company's
common stock as reported by the NASDAQ were $19.50 and $19.25, respectively.
As of February 28, 1995, the Company had 2,032 stockholders of record.
DIVIDEND POLICY
On January 25, 1995, the Board of Directors declared a quarterly
dividend of $.05 per share, payable to shareholders of record on February 2,
1995. 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 1994 and $.20 per share in 1993.
<PAGE>
7
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988 1987
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $1,207,601 $1,020,921 $911,982 $733,288 $579,831 $509,278 $392,553 $286,419
Earnings before cumulative
effect of changes in
accounting methods 40,392 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 1.05 1.00 1.03 .85 .85 .87 .93 .73*
Cash dividends per share .20 .20 .20 .19 .16 .16 .13 .11
Total assets 993,699 862,442 715,741 520,130 452,734 384,684 300,199 250,274
Long-term debt 299,243 303,499 216,254 156,930 137,597 104,955 65,358 69,000
Stockholders' equity 377,898 343,964 308,626 215,761 191,074 175,518 150,126 121,316
</TABLE>
PERCENTAGE OF OPERATING REVENUE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988 1987
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages
and employee benefits 33.5 36.4 38.2 40.0 41.4 42.1 41.4 39.6
Purchased transportation 23.9 18.4 12.2 7.0 0.7 0.7 0.6 0.4
Fuel and fuel taxes 10.9 12.4 14.2 16.3 17.3 15.7 14.3 15.8
Depreciation 9.2 8.2 9.5 9.4 9.7 9.5 9.7 10.3
Operating supplies and
expenses 6.9 7.2 7.4 8.0 8.8 8.5 7.8 7.1
Insurance and claims 3.1 4.0 4.8 4.7 5.4 4.5 4.3 4.4
Operating taxes and licenses 2.2 2.8 2.8 3.0 3.2 3.5 3.4 3.7
General and administrative
expenses 2.2 1.9 2.0 2.1 2.3 1.7 1.3 1.3
Communication and utilities 1.1 1.0 1.3 1.4 1.4 1.7 2.0 2.4
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses 93.0 92.3 92.4 91.9 90.2 87.9 84.8 85.0
Operating income 7.0 7.7 7.6 8.1 9.8 12.1 15.2 15.0
Interest expense 1.6 1.4 1.2 1.5 1.2 1.8 1.7 1.5
Income taxes 2.1 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 3.3% 3.7% 4.3% 3.8% 5.2% 6.0% 8.4% 9.0%*
----- ----- ----- ----- ----- ----- ----- -----
<FN>
* Including cumulative effect on prior years of change in method of accounting
for income taxes of $3,556 ($.10 per share).
</TABLE>
<PAGE>
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following should be read in conjunction with the Selected Financial
Data and the Company's Consolidated Financial Statements and Notes to
Consolidated Financial Statements which appear elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage
change between years of certain revenue, expense and operating items.
(Dollars in thousands, except tractor data)
<TABLE>
<CAPTION>
1994 vs. 1993 1993 vs.1992
INCREASE INCREASE
(DECREASE) % (DECREASE) %
IN AMOUNTS CHANGE IN AMOUNTS CHANGE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $186,680 18% $108,939 12%
Average number of tractors
in the fleet 204 3 466 7
Operating expenses:
Salaries, wages and
employee benefits 33,287 9 23,877 7
Purchased transportation 100,427 53 76,147 68
Fuel and fuel taxes 4,060 3 (3,033) (2)
Depreciation 27,452 33 (3,615) (4)
Operating supplies and
expenses 9,428 13 6,296 9
Insurance and claims (2,473) (6) (3,049) (7)
Operating taxes and (1,889) (7) 3,177 12
General and administrative
expenses 7,927 42 419 2
Communication and utilities 2,191 21 (816) (7)
-------- --- -------- ----
Total operating expenses 180,410 19% 99,403 12%
-------- --- -------- ----
Operating income $ 6,270 8% $ 9,536 14%
-------- --- -------- ----
</TABLE>
The following table sets forth certain industry operating data
of the Company.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total loads 1,187,815 1,081,013 960,031 796,929 596,574 536,448
Average number of tractors in
the fleet during the year 7,094 6,890 6,424 5,286 4,413 3,616
Tractors operated (at year end) 7,412 6,775 7,004 5,843 4,729 4,096
Trailers/containers (at year end) 22,687 19,089 17,391 12,389 10,563 9,339
Tractor miles (in thousands) 740,626 718,767 733,700 638,926 551,175 495,377
</TABLE>
<PAGE>
9
OPERATING REVENUES
Operating revenues increased 18% from 1993 to 1994 and 12% from 1992 to
1993. These increases in revenue were primarily due to continued growth of
intermodal dry van volume, expansion of specialized carrier operations and
modest increases in base truck freight rates. The average number of tractors
in the fleet increased only 3% in 1994 and 7% in 1993. Due to the Company's
strategy of providing diversified transportation services including
intermodal and full-service logistics management, revenue growth is no longer
directly related to size of the tractor fleet. The $187 million increase in
revenue from 1993 to 1994 included $89 million from logistics and dedicated
contract services, $71 million of dry van volume and $27 million from other
specialized carrier operations. The increase in 1994 dry van revenue includes
intermodal revenue and an approximate 4% increase in truck freight rates. The
$109 million increase in revenue from 1992 to 1993 included $43 million from
dry van volume, $38 million of logistics and dedicated contract services and
$28 million from other specialized carrier operations. The 1993 dry van
revenue increase includes intermodal and an approximate 2% increase in truck
freight rates.
Revenue growth during 1994 and 1993 continued to reflect a focus on
utilizing intermodal transportation services. Intermodal operations at
December 31, 1994 include arrangements with twelve different railroads across
the United States and portions of Canada and Mexico. Intermodal revenue
increased 37% in 1994 and 66% in 1993, including incremental freight and some
conversion of freight previously transported entirely by truck.
Increased operating revenues also reflect growth of logistics management
and dedicated contract services. Customers continue to request customized
transportation solutions to their distribution needs. Since 1992, the Company
has offered customers the ability to outsource their total freight
distribution process. Revenue from these logistics and dedicated contract
services has more than doubled in each of the years 1994 and 1993.
OPERATING EXPENSES
Salaries, wages and employee benefits expense increased 9% from 1993 to
1994, reflecting primarily additional staffing in the logistics and dedicated
contract services areas. The increase of 7% in 1993 was in proportion to the
size of the fleet. Purchased transportation expense increased significantly
during 1994 and 1993, reflecting the growth of intermodal and third- party
transportation services. Fuel and fuel tax expense remained reasonably
constant during 1994 and 1993 in relation to slight changes in the cost per
gallon of fuel. Depreciation expense increased 33% in 1994 due to
significantly lower gains on the disposition of revenue equipment and an 18%
increase in the number of trailers and containers in the fleet. The decrease
in depreciation expense in 1993 was primarily due to the amount of gains on
equipment dispositions during that year.
Operating supplies and expenses increased 13% in 1994. This increase was
due to increased spending for tractor and trailer repairs. The increase in
operating supplies and expenses during 1993 was in relative proportion to the
size of the tractor fleet. Insurance and claims expense decreased in both
1994 and 1993. The Company has continued to focus on reducing accident
frequency and severity since late 1992. Operating taxes and licenses
decreased during 1994 due to the growth of intermodal volume and the
utilization of third-party services and certain credits recognized during the
year. The 12% increase in 1993 reflects the size of the tractor fleet and
rate increases enacted by various state regulatory agencies.
<PAGE>
10
The significant increase in general and administrative expenses during
1994 is primarily due to higher levels of driver advertising and recruitment
cost. The Company experienced a shortage of qualified drivers during the
first half of 1994. Communication and utilities expense increased 21% during
1994, primarily due to increased volume of loads and revenue. In addition,
certain satellite transmission charges related to on- board tractor
communication devices commenced during 1994. The decrease of communication
and utilities expense in 1993 was primarily due to certain rate reductions
and credits.
Interest expense increased significantly during 1994 and 1993, primarily
due to higher levels of debt associated with the acquisition of new
containers and chassis and slightly higher interest rates.
The effective income tax rate was 38% in 1994 and 41% in 1993. The
higher effective rate in 1993 was due to the increase in the federal tax rate
on both current and deferred income taxes which was effective retroactive to
January 1, 1993.
LIQUIDITY AND CAPITAL RESOURCES
In 1992, the Company committed to increased levels of capital spending
on new technology including custom-designed on board tractor communication
devices and multi-purpose container and chassis equipment. As of December 31,
1994, more than 14,000 of the newly designed containers were in service. Net
capital expenditures were $219 million in 1994, $197 million in 1993 and $249
million in 1992, compared to $113 million in 1991. These expenditures were
funded with proceeds from long-term debt, a secondary offering of common
stock in 1992 and cash generated from operations.
The Company is authorized to issue up to $250 million in notes, $183
million of which was outstanding at December 31, 1994. A shelf registration
statement for an aggregate principal amount of $250 million of debt
securities was filed in 1993. At December 31, 1994, $100 million of 6.25%
unsecured notes were outstanding in connection with this registration
statement. The Company received approximately $56 million from a secondary
offering of common stock in 1992. In addition, the Company had approximately
$125 million of uncommitted lines of credit, none of which were outstanding
at December 31, 1994.
With more than 70% of the dry van fleet converted to the new container
equipment, the level of capital spending should decline during 1995. As of
December 31, 1994, the Company had committed to purchase approximately $160
million of revenue and service equipment (net cost after expected proceeds
from the sale or trade-in allowances of $15 million). The Company expects to
fund future capital expenditures from cash provided by operating activities
and proceeds from long-term debt.
<PAGE>
11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
---------------------------------------------------------------------------
<S> <C>
Independent Auditors' Report 12
Consolidated Balance Sheets at
December 31, 1994 and 1993 13
Consolidated Statements of Earnings for the years ended
December 31, 1994, 1993 and 1992 14
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1994, 1993 and 1992 15
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 16
Notes to Consolidated Financial Statements 17
</TABLE>
<PAGE>
12
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of J.B. Hunt
Transport Services, Inc. and subsidiaries as of December 31, 1994 and 1993,
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, 1994. 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, 1994 and 1993,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in note 1(b) to the consolidated financial statements, the
Company changed its method of accounting for the cost of tires in service
during 1992.
KPMG Peat Marwick LLP
February 7, 1995
MANAGEMENT'S REPORT
Management is responsible for the financial statements and other information
contained in its annual report. The financial statements have been prepared
in accordance with appropriate, generally accepted accounting principles, and
the other information presented is consistent with the financial statements.
In preparing these financial statements, it is necessary to make informed
judgments and estimates regarding the expected effects of certain events and
transactions that are currently being reported.
To meet its financial reporting responsibilities, management depends
upon systems of internal controls which are intended to provide reasonable
assurance, in relationship to reasonable cost, that assets are safeguarded,
that transactions are executed in accordance with management's authorization
and that the transactions are properly recorded so as to permit preparation
of financial statements in accordance with generally accepted accounting
principles. Management seeks to provide reasonable assurance that the
objectives of internal accounting control are met by prudent selection of
personnel, adoption of appropriate policies, effective communication to
personnel and establishment of an effective system of authorization.
The Board of Directors performs an oversight role with respect to
management's financial reporting responsibilities. To ensure effective
discharge of its responsibilities, the Board of Directors has established an
audit committee. The majority of the committee members are nonemployees of
the Company and its subsidiaries. The audit committee has met and reviewed
accounting issues, financial reporting and audit matters, including those
pertaining to the effectiveness of the Company's systems of internal control.
The consolidated financial statements have been audited by KPMG Peat
Marwick LLP. As part of their audit of the Company's financial statements,
our independent accountants considered the Company's system of internal
control structure to the extent they deemed necessary to determine the
nature, timing and extent of their audit tests. These auditing procedures are
intended to provide a reasonable level of assurance that the financial
statements are fairly stated in all material respects.
Kirk Thompson Jerry W. Walton
President and Chief Executive Officer Executive Vice President,
Finance and Chief
Financial Officer
March 17, 1995
<PAGE>
13
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
ASSETS 1994 1993
------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and temporary investments $ 2,142 3,390
Accounts receivable 138,295 137,284
Prepaid expenses:
Taxes, licenses and permits 11,987 11,359
Repair parts and supplies 16,277 6,878
Other (note 4) 4,449 4,973
---------- -------
Total prepaid expenses 32,713 23,210
---------- -------
Deferred income taxes (note 4) 8,083 4,593
---------- -------
Total current assets 181,233 168,477
---------- -------
Property and equipment, at cost:
Revenue and service equipment 966,878 791,907
Land 12,268 11,950
Structures and improvements 44,799 44,198
Furniture and office equipment 65,290 65,907
---------- -------
Total property and equipment 1,089,235 913,962
Less accumulated depreciation 299,539 232,323
---------- -------
Net property and equipment 789,696 681,639
---------- -------
Other assets (note 7) 22,770 12,326
---------- -------
$ 993,699 862,442
========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt
(note 2) $ 68,075 -
Trade accounts payable 48,847 37,578
Claims accruals 34,248 35,124
Accrued payroll 9,626 6,733
Other accrued expenses 14,405 13,274
Other current liabilities (note 9) 2,720 2,981
---------- -------
Total current liabilities 177,921 95,690
---------- -------
Long-term debt (notes 2 and 9) 299,243 303,499
Claims accruals 16,750 12,000
Deferred income taxes (note 4) 121,887 107,289
---------- -------
Total liabilities 615,801 518,478
---------- -------
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 104,723 102,362
Retained earnings 277,718 245,073
---------- -------
382,831 347,825
Less cost of common stock in treasury
(504,732 shares at December 31, 1994
and 592,483 at December 31, 1993) 4,933 3,861
---------- -------
Total stockholders' equity 377,898 343,964
Commitments and contingencies
(notes 4, 5, 8 and 9)
---------- -------
$ 993,699 862,442
========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
14
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $1,207,601 1,020,921 911,982
Operating expenses:
Salaries, wages and employee benefits (note 5) 405,136 371,849 347,972
Purchased transportation 288,153 187,726 111,579
Fuel and fuel taxes (note 9) 131,026 126,966 129,999
Depreciation 110,662 83,210 86,825
Operating supplies and expenses 82,939 73,511 67,215
Insurance and claims 37,951 40,424 43,473
Operating taxes and licenses 27,016 28,905 25,728
General and administrative expenses 26,959 19,032 18,613
Communication and utilities 12,863 10,672 11,488
---------- --------- --------
Total operating expenses 1,122,705 942,295 842,892
---------- --------- --------
Operating income 84,896 78,626 69,090
Interest expense 19,748 13,800 10,908
---------- --------- --------
Earnings before income taxes and cumulative
effect of change in accounting method 65,148 64,826 58,182
Income taxes (note 4) 24,756 26,605 21,249
---------- --------- --------
Earnings before cumulative effect of
change in accounting method 40,392 38,221 36,933
Cumulative effect on prior years of change in
accounting method - tires in service, net of
$1,049 in income taxes (note 1(b)) - - 1,825
---------- --------- --------
Net earnings (note 1(b)) $ 40,392 38,221 38,758
========== ========= ========
Earnings per share:
Earnings before cumulative effect of change
in accounting method $ 1.05 1.00 1.03
Cumulative effect of change in accounting
method - tires in service (note 1(b)) - - .05
------- ---- ----
Net earnings (note 1(b)) $ 1.05 1.00 1.08
======= ==== ====
Proforma amounts assuming the new accounting
method is applied retroactively (note 1(b))
(unaudited):
Net earnings $ 40,392 38,221 36,933
---------- --------- --------
Earnings per share $ 1.05 1.00 1.03
======= ==== ====
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
15
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(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, 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 ($.20 per share) - - (7,651) - (7,651)
Net earnings - - 38,221 - 38,221
---- ------- ------- ------ -------
Balance, December 31, 1993 390 102,362 245,073 (3,861) 343,964
Tax benefit of stock options exercised - 735 - - 735
Sale of treasury stock to employees - 1,626 - 1,008 2,634
Repurchase of treasury stock - - - (2,080) (2,080)
Cash dividends paid ($.20 per share) - - (7,747) - (7,747)
Net earnings - - 40,392 - 40,392
---- ------- ------- ------ -------
Balance, December 31, 1994 $390 104,723 277,718 (4,933) 377,898
==== ======= ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
16
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 40,392 38,221 38,758
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Cumulative effect of accounting changes - - (1,825)
Depreciation, net of gain on disposition of equipment 110,662 83,210 86,825
Provision for noncurrent deferred income taxes 14,598 17,396 16,637
Tax benefit of stock options exercised 735 890 723
Changes in assets and liabilities:
Accounts receivable (1,011) (31,375) (14,631)
Prepaid expenses (9,503) 1,092 (4,161)
Deferred income taxes (3,490) 5,271 (9,864)
Trade accounts payable 11,269 5,583 15,742
Claims accruals 3,874 (2,114) 8,374
Other current liabilities 3,763 3,253 1,620
--------- -------- --------
Net cash provided by operating activities 171,289 121,427 138,198
--------- -------- --------
Cash flows from investing activities:
Additions to property and equipment (282,581) (285,687) (289,409)
Proceeds from sale of equipment 63,862 88,651 40,110
Increase in other assets (10,444) (6,306) (2,299)
--------- -------- --------
Net cash used in investing activities (229,163) (203,342) (251,598)
--------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock - - 55,563
Proceeds from long-term debt 82,628 99,691 182,270
Repayments of long-term debt (18,809) (12,446) (122,946)
Proceeds from sale of treasury stock 2,634 3,878 4,849
Repurchase of treasury stock (2,080) - -
Dividends paid (7,747) (7,651) (7,028)
--------- -------- --------
Net cash provided by financing activities 56,626 83,472 112,708
--------- -------- --------
Net increase (decrease) in cash (1,248) 1,557 (692)
Cash - beginning of year 3,390 1,833 2,525
--------- -------- --------
Cash - end of year $ 2,142 3,390 1,833
--------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 20,366 12,014 10,395
Income taxes 13,606 3,743 11,056
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
17
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
J. B. Hunt Transport Services, Inc., together with its wholly-owned
subsidiaries ("Company"), is a diversified transportation services
and logistics company operating under the jurisdiction of the Interstate
Commerce Commission ("ICC") and various state regulatory agencies.
(A) PRINCIPLES 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 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 consolidated 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 to 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 an increase of approximately $2,639,000 ($.07 per share).
(D) REVENUE RECOGNITION
The Company recognizes revenue based on relative transit time in
each reporting period with expenses recognized as incurred as
permitted by the Emerging Issues Task Force of the Financial Accounting
Standards Board.
<PAGE>
18
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(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 (38,559,528 in 1994;
38,276,109 in 1993; and 35,785,692 in 1992). 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 consolidated 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, 1994, the
Company had no significant concentrations of credit risk.
(H) DERIVATIVES
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 remaining life of the original term as a charge or credit to
interest expense.
The differential paid or received on fuel swap agreements is
accrued as fuel prices change and is charged or credited to fuel expense on
a monthly basis.
<PAGE>
19
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(2) LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- -------
<S> <C> <C>
Commercial paper $ 182,595 106,492
Senior notes payable, interest at 6.25% payable
semiannually 99,723 99,691
Senior notes payable, interest at 7.75% payable
semiannually 10,000 15,000
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
Senior notes payable, interest at 9.20% payable
semiannually - 6,666
Other - 650
--------- -------
367,318 303,499
Less: current maturities (68,075) -
--------- -------
$ 299,243 303,499
========= =======
</TABLE>
Under its commercial paper note program, the Company is authorized
to issue up to $250 million in notes. These notes are supported by two
credit agreements, which aggregate $250 million, with a group of banks, of
which $125 million expires March 31, 1995 and $125 million expires March 31,
1997. The effective rate on the commercial note program was 5.90% and 3.51%
for the years ended December 31, 1994 and 1993, respectively.
The 6.25% senior notes are payable at maturity on September 1, 2003,
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 the terms of the credit agreements and the note agreements,
the Company is required to maintain certain financial covenants including
leverage tests, minimum tangible net worth levels and other financial
ratios.
The Company has approximately $125 million of uncommitted lines of
credit none of which were outstanding at December 31, 1994. 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 typically
evidenced by unsecured demand notes.
<PAGE>
20
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The Company restructured the credit facilities supporting its commercial
paper note program by establishing two credit agreements during
1994 in order to reduce administrative expenses. Accordingly, current
maturities of long-term debt at December 31, 1994 consist of
outstanding commercial paper associated with the revolving credit
agreement which expires March 31, 1995 and two installments of the senior
notes. The aggregate annual maturities of long-term debt for each of
the five years ending December 31 are as follows (in thousands): 1995,
$68,075; 1996, $9,243; 1997, $130,000; 1998, $5,000; and 1999, $5,000.
(3) CAPITAL STOCK
The Company maintains a Management Incentive Plan ("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. At December 31, 1994 there were
approximately 70,000 shares available for granting under the Plan. 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 certain
cases of 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 or disability 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.
<PAGE>
21
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of the restricted and nonstatutory options to
purchase Company common stock follows:
<TABLE>
<CAPTION>
NUMBER
NUMBER OPTION PRICE OF SHARES
OF SHARES PER SHARE EXERCISABLE
--------- ------------ -----------
<S> <C> <C> <C>
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
Granted 391,750 17.00 - 23.00
Exercised (194,270) 6.00 - 19.50
Terminated (52,375) 11.58 - 18.25
---------
Outstanding at December 31, 1994 1,334,461 6.00 - 24.63 399,536
========= ------------- -------
</TABLE>
On January 25, 1995, the Company's Board of Directors declared a
cash dividend of $.05 per share payable on February 17, 1995 to
shareholders of record on February 2, 1995.
(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, 1994, 1993 and 1992 was allocated as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- ----- -------
<S> <C> <C> <C>
Earnings before income taxes and
cumulative effect of change in
accounting method $ 24,756 26,605 21,249
Changes in accounting methods - - 1,049
Stockholders' equity, for tax
benefit of stock options
exercised (735) (890) (723)
-------- ------ ------
$ 24,009 25,715 21,575
======== ====== ======
</TABLE>
<PAGE>
22
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Income tax expense attributable to earnings before income taxes and
cumulative effect of change in accounting method consists of (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Current expense:
Federal $ 12,897 2,596 13,477
State and local 751 1,344 661
-------- ------ ------
13,648 3,940 14,138
-------- ------ ------
Deferred expense:
Federal 9,929 20,238 7,216
State and local 1,179 2,427 (105)
-------- ------ ------
11,108 22,665 7,111
-------- ------ ------
Total tax expense $ 24,756 26,605 21,249
======== ====== ======
</TABLE>
The following is a reconciliation between the effective income tax
rate and the applicable statutory Federal income tax rate for each of
the three fiscal years in the period ended December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Income tax - statutory rate 35.00% 35.00 34.00
State tax, net of Federal benefit 2.24 3.15 3.35
Other, net .76 2.90 (.85)
----- ----- -----
Effective income tax rate 38.00% 41.05 36.50
===== ===== =====
</TABLE>
The significant components of deferred income tax expense attributable
to earnings before income taxes and cumulative effect of change in accounting
method are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------ ------
<S> <C> <C> <C>
Deferred tax expense (exclusive of
the effects of other components
listed below) $ 12,788 22,665 13,808
Adjustments to deferred tax assets
and liabilities for negotiated
income tax settlements (1,680) - (6,697)
--------- ------ ------
$ 11,108 22,665 7,111
========= ====== ======
</TABLE>
<PAGE>
23
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1994 and 1993 are presented below (in thousands):
<TABLE>
<CAPTION>
1994 1993
---------- -------
<S> <C> <C>
Deferred tax assets:
Claims accruals, principally due to accrual
for financial reporting purposes $ (17,809) (15,680)
Alternative minimum tax credit carryforwards (21,215) (13,218)
Other (6,869) (2,872)
---------- --------
Total gross deferred tax assets (45,893) (31,770)
---------- --------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and capitalized
interest 147,653 126,429
Prepaid permits and insurance 5,373 4,818
Other 6,671 3,219
---------- --------
Total gross deferred tax liabilities 159,697 134,466
--------- -------
Net deferred tax liability $ 113,804 102,696
========= =======
</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
$386,000 and $428,000 at December 31, 1994 and 1993, 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 expensed under the programs for 1994, 1993 and 1992 were
$4,900,000, $2,600,000 and $7,400,000, respectively.
The Company maintains a defined contribution employee retirement
plan, which includes a 401(k) option, under which employees are
eligible to participate after they complete one year of service. Company
contributions to the plan each year are made at the discretionary amount
determined by the Company's Board of Directors. For the year ended
December 31, 1994, 1993 and 1992, total Company contributions to the
plan, including matching 401(k) contributions were $1,950,000, $1,900,000
and $1,850,000, respectively.
<PAGE>
24
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(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.
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 notes 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
may 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 pay 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, 1994
---------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
--------- ----------
<S> <C> <C>
Cash and temporary investments $ 2,142 2,142
Accounts receivable 138,295 138,295
Trade accounts payable 48,847 48,847
Long-term debt:
Commercial paper 182,595 182,595
Fixed rate obligations 184,723 166,807
Interest rate swap agreements - (1,964)
--------- -------
</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 $3,280,000
on this policy which, along with related accrued interest thereon of
approximately $416,000, is included in other assets at December 31, 1994.
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.
<PAGE>
25
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(8) COMMITMENTS AND CONTINGENCIES
The Company has committed to purchase approximately $160 million of
revenue and service equipment (net cost, after expected proceeds
from sale or trade-in allowances of $15 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.
(9) DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements are used to reduce the potential
impact of changes in interest rates on the Company's debt portfolio. At
December 31, 1994, an interest rate swap agreement with an aggregate
notional amount of $20 million was outstanding. The estimated fair value
of the swap at December 31, 1994 was a liability of approximately $2.0
million. This value was determined from a dealer quotation and represents
the estimated amount the Company would pay to terminate the
agreement. Included in other current liabilities are deferred swap gains
of $0.8 million at December 31, 1994 and $1.1 million at December 31, 1993.
The Company uses fuel swap agreements to hedge anticipated purchases
of diesel fuel. Under these agreements, the Company receives or makes
payments on the differential between a contractual index price and the
actual average index during such period.
(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Operating results by quarter for the years ended December 31, 1994
and 1993 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
--------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
1994:
Operating revenues $ 264,663 297,735 313,911 331,292 1,207,601
========= ======= ======= ======= =========
Operating income $ 13,019 23,185 25,026 23,666 84,896
========= ======= ======= ======= =========
Net earnings $ 5,726 11,575 12,260 10,831 40,392
========= ======= ======= ======= =========
Earnings per share $ .15 .30 .32 .28 1.05
===== === === === ====
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
===== === === === ====
</TABLE>
<PAGE>
26
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, 1994, 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 required for Items 10, 11 and 12 is hereby incorporated
by reference from the Notice and Proxy Statement For Annual Stockholders'
Meeting 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 Other Information", "1995 Performance Based Compensation"
and "Proposal Two Proposal to Approve the Adoption of The Executive
Performance Bonus Plan", "Proposal Three Proposal to Approve the Management
Incentive Plan", and "Proposal Four Ratification of Appointment of Auditors".
The Proxy Statement had not yet been mailed to stockholders and was not
available as of March 17, 1995. It will be filed no later than April 30, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS
The following documents are filed as part of this report:
(a) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report ("Exhibit Index").
<PAGE>
27
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant had duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lowell, Arkansas, on
the 17th day of March, 1995.
J.B.HUNT TRANSPORT SERVICES, INC.
(Registrant)
By: /s/ Kirk Thompson
-------------------------------------
Kirk Thompson
President and Chief Executive Officer
By: /s/ Jerry W. Walton
-------------------------------------
Jerry W. Walton
Executive Vice President
Finance and Chief Financial 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 17, 1995
------------------------------
John A. Cooper, Jr. of Directors
/s/ Fred K. Darragh, Jr. Member of the Board March 17, 1995
------------------------------
Fred K. Darragh, Jr. of Directors
/s/ Wayne Garrison Member of the Board March 17, 1995
------------------------------
Wayne Garrison of Directors
/s/ Gene George Member of the Board March 17, 1995
------------------------------
Gene George of Directors
/s/ Thomas L. Hardeman Member of the Board March 17, 1995
------------------------------
Thomas L. Hardeman of Directors
/s/ J. Bryan Hunt, Jr. Member of the Board March 17, 1995
------------------------------
J. Bryan Hunt, Jr. of Directors (Vice Chairman)
/s/ J.B. Hunt Member of the Board March 17, 1995
------------------------------
J.B. Hunt of Directors (Chairman)
/s/ Johnelle Hunt Member of the Board March 17, 1995
------------------------------
Johnelle Hunt of Directors (Corporate
Secretary)
/s/ Lloyd E. Peterson Member of the Board March 17, 1995
------------------------------
Lloyd E. Peterson of Directors
/s/ Kirk Thompson Member of the Board March 17, 1995
------------------------------
Kirk Thompson of Directors (President and
Chief Executive Officer)
<PAGE>
28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------
<S> <C>
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
filed February 7, 1985; 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. The Company amended and
restated its Employee Retirement Plan on Form S-8 (Registration
Statement Number 33-57127) filed December 30, 1994. The Employee
Retirement Plan is incorporated herein by reference from Exhibit
99 of Registration Statement Number 33-57127.
21 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
- Queen City Express, Inc.
23 Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE>
EXHIBIT 23
[KPMG PEAT MARWICK LETTERHEAD]
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We consent to incorporation by reference in the Registration Statements No.
2-93928, No. 33-57127 and No. 33-40028 on Form S-8 of J.B. Hunt Transport
Services, Inc. of our report dated February 7, 1995 relating to the
consolidated balance sheets of J.B. Hunt Transport Services, Inc. and
subsidiaries as of December 31, 1994 and 1993, 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, 1994, which report is
included in the December 31, 1994 annual report on Form 10-K of J.B. Hunt
Transport Services, Inc.
KPMG PEAT MARWICK LLP
Little Rock, Arkansas
March 22, 1995
