<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-11757
J.B. HUNT TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in its charter)
Arkansas 71-0335111
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745
(Address of principal executive offices, and Zip Code)
(501) 820-0000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.
Yes X No
--- ---
The number of shares of the Company's $.01 par value common stock outstanding on
March 31, 1996 was 38,046,421
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim consolidated financial statements contained herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of financial condition, results of operations and cash flows for the
periods presented. They have been prepared in accordance with Rule 10-01 of
Regulation S-X and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996.
The interim consolidated financial statements have been reviewed by KPMG
Peat Marwick LLP, independent public accountants.
These interim consolidated financial statements should be read in
conjunction with the Company's latest annual report and Form 10-K for the year
ended December 31, 1995.
INDEX
Consolidated Statements of Earnings for the Three
Months Ended March 31, 1996 and 1995.................................. Page 3
Consolidated Balance Sheets as of
March 31, 1996 and December 31,1995................................... Page 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995............................ Page 5
Notes to Consolidated Financial Statements
as of March 31, 1996.................................................. Page 6
Review Report of KPMG Peat Marwick LLP....................................Page 8
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................... Page 9
2
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- - --------------------------------------------------------------------------------
1996 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
Operating revenues $ 354,014 $ 309,424
Operating expenses
Salaries, wages and employee benefits 116,436 105,117
Purchased transportation 97,971 77,452
Fuel and fuel taxes 40,134 35,582
Depreciation 34,144 32,023
Operating supplies and expenses 22,598 20,987
Insurance and claims 13,165 10,541
General and administrative expenses 7,463 6,312
Operating taxes and licenses 7,162 5,879
Communication and utilities 4,509 1,793
- - --------------------------------------------------------------------------------
Total operating expenses 343,582 295,686
- - --------------------------------------------------------------------------------
Operating income 10,432 13,738
Interest expense 5,911 5,976
- - --------------------------------------------------------------------------------
Earnings before income taxes 4,521 7,762
Income taxes 1,718 2,872
- - --------------------------------------------------------------------------------
Net earnings $ 2,803 $ 4,890
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Common shares outstanding 38,074 38,555
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Earnings per share $ 0.07 $ 0.13
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
MARCH 31, 1996 DECEMBER 31, 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ -- $ 4,260
Accounts receivable 163,001 143,002
Prepaid expenses 22,193 29,645
Deferred income taxes 13,967 10,171
- - --------------------------------------------------------------------------------
Total current assets 199,161 187,078
- - --------------------------------------------------------------------------------
Property and equipment 1,197,091 1,184,808
Less accumulated depreciation 386,801 375,798
- - --------------------------------------------------------------------------------
Net property and equipment 810,290 809,010
- - --------------------------------------------------------------------------------
Other 18,815 20,694
- - --------------------------------------------------------------------------------
$ 1,028,266 $ 1,016,782
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 43,250 $ 30,310
Trade accounts payable 88,001 86,466
Claims accruals 33,654 38,014
Accrued expenses 28,762 25,986
Other current liabilities 4,079 3,823
- - --------------------------------------------------------------------------------
Total current liabilities 197,746 184,599
- - --------------------------------------------------------------------------------
Long-term debt 339,392 339,015
Claims accruals 13,500 13,500
Deferred income taxes 123,377 122,729
Stockholders' equity 354,251 356,939
- - --------------------------------------------------------------------------------
$ 1,028,266 $ 1,016,782
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- - --------------------------------------------------------------------------------
1996 1995
- - --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,803 $ 4,890
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 34,144 32,023
Deferred income taxes (3,148) (2,053)
Tax benefit of stock options exercised 162 264
Changes in assets and liabilities:
Accounts receivable (19,999) (6,842)
Prepaid expenses 7,452 6,355
Trade accounts payable 1,535 20,515
Claims accruals (4,360) 1,246
Accrued expenses and other current
liabilities 3,032 (230)
- - --------------------------------------------------------------------------------
Net cash provided by operating
activities 21,621 56,168
- - --------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (50,601) (48,408)
Proceeds from sale of equipment 15,177 15,196
Increase in other assets 555 (4,149)
- - --------------------------------------------------------------------------------
Net cash used in investing activities (34,869) (37,361)
- - --------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) of short-term
obligations 13,317 (13,471)
Proceeds from sale of treasury stock 550 427
Repurchase of treasury stock (2,998) --
Dividends paid (1,881) (1,927)
- - --------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 8,988 (14,971)
- - --------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary
investments (4,260) 3,836
- - --------------------------------------------------------------------------------
Cash and temporary investments at beginning
of period 4,260 2,142
- - --------------------------------------------------------------------------------
Cash and temporary investments at end of
period $ 0 $ 5,978
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Supplemental disclosure of cash flow
information:
Cash paid (refunded) during the period for:
Interest $ 5,255 $ 6,833
Income Taxes (1,114) 1,875
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) LONG-TERM DEBT
Long-term debt consists of (in thousands):
3/31/96 12/31/95
------- --------
Commercial paper $158,250 $145,310
Senior notes payable, interest at 6.25%
payable semiannually 100,000 100,000
Senior notes payable, interest at 7.75%
payable semiannually 5,000 5,000
Senior notes payable, interest at 7.84%
payable semiannually 20,000 20,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25%
payable semiannually 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
-------- --------
383,250 370,310
Less current maturities (43,250) (30,310)
Unamortized discount (608) (985)
-------- --------
$339,392 $339,015
-------- --------
-------- --------
The Company is authorized to issue up to $250 million in notes under its
commercial paper note program. These notes are supported by two credit
agreements with a group of banks. One agreement for $125 million expires March
27, 1997 and $125 million expires March 31, 1999.
The 6.25% senior notes were issued on September 1, 1993 and are due on
September 1, 2003.
The 7.75% senior notes were issued on October 1, 1991 and are payable in
five equal annual installments beginning October 31, 1992.
The 7.84% senior notes were issued on March 31, 1992 and are payable in
five equal annual installments beginning March 31, 1995.
The 7.80% senior subordinated notes were issued on October 30, 1992 and are
payable in five equal annual installments beginning October 30, 2000.
6
<PAGE>
The 6.25% senior notes were issued on November 17, 1995 and are payable at
maturity on November 17, 2000.
The 6.00% senior notes were issued on December 12, 1995 and are payable at
maturity on December 12, 2000.
2) CAPITAL STOCK
The Company maintains a Management Incentive Plan that provides various
vehicles to compensate key employees with Company common stock. A summary of
the restricted and non-statutory options to purchase Company common stock
follows:
Number of
Number of Option price shares
shares per share exercisable
------ --------- -----------
Outstanding at December 31, 1995 2,725,731 $ 9.33 - 24.63 415,606
-------
-------
Granted 75,000 15.63 - 19.25
Exercised (112,581) 6.00 - 13.17
Terminated (110,450) 13.17 - 22.75
-------- -------------
Outstanding at March 31, 1996 2,577,700 $ 9.33 - 24.63 285,375
--------- -------------- -------
--------- -------------- -------
On April 16, 1996, the Company's Board of Directors declared a regular
quarterly cash dividend of $.05 per share payable on May 20, 1996 to
stockholders of record on May 3, 1996.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the condensed consolidated balance sheet of J.B. Hunt Transport
Services, Inc. and subsidiaries as of March 31, 1996, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1996 and 1995, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of J.B. Hunt Transport Services, Inc.
and subsidiaries as of December 31, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated February 9, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly presented, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG Peat Marwick LLP
-------------------------
Little Rock, Arkansas
April 12, 1996
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the attached
interim consolidated financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes thereto for the
calendar year ended December 31, 1995.
RESULTS OF OPERATIONS
The following table sets forth the change in amounts and percentage change
between the first quarter of 1996 and the comparable period in 1995 of certain
revenue, expense and operating items.
Three Months Ended March 31, 1996 vs. 1995
(in thousands except tractor data)
Increase
(Decrease) %
in amounts Change
---------- ------
Average number of tractors in the fleet 273 4%
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Operating revenues $44,590 14%
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Operating expenses:
Salaries, wages and employee benefits $11,319 11%
Purchased transportation 20,519 26%
- - --------------------------------------------------------------------------------
Fuel and fuel taxes 4,552 13%
Depreciation 2,121 7%
- - --------------------------------------------------------------------------------
Operating supplies and expenses 1,611 8%
Insurance and claims 2,624 25%
- - --------------------------------------------------------------------------------
General and administrative expenses 1,151 18%
Operating taxes and licenses 1,283 22%
Communication and utilities 2,716 151%
- - --------------------------------------------------------------------------------
Total operating expenses $47,896 16%
- - --------------------------------------------------------------------------------
Operating Income ($3,306) (24)%
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The following discussion relates to the table set forth above and the
attached interim consolidated financial statements for the quarter ended March
31, 1996 and 1995.
9
<PAGE>
OPERATING REVENUES
Operating revenues for the first quarter of 1996 increased approximately
$45 million, or 14 percent, to $354 million, from $309 million in the first
quarter of 1995. The average number of total tractors in the fleet increased 4
percent during the same period. The increase in revenue between quarters
includes the following by type of freight:
Increase in Revenue
First Quarter 1996 vs. First Quarter 1995
(millions of dollars)
Intermodal $27
Dedicated Contract 8
Logistics Management 5
Other, net 5
----
$45
----
----
Intermodal volume continued to grow with loads up 26 percent during the
first quarter of 1996. The market also continued to respond favorably to the
Company's dedicated contract and logistics management service offerings.
Dedicated and logistics arrangements typically involve a written contract to
provide revenue equipment and/or management services for a period of one year or
more. Revenues and earnings were negatively impacted during the first quarter
of 1996 by a two to three percent decline in general freight rates, depending
upon the type of service.
OPERATING EXPENSES
Total operating expenses for the first quarter of 1996 increased
approximately $48 million, or 16 percent over the comparable period of 1995.
Operating income declined $3.3 million to $10.4 million. In addition to the
decline in freight rates, operating income was reduced by lower gains on
equipment dispositions. Equipment gains were only $125,000 in the first quarter
of 1996, compared with $1.6 million in 1995. Although the Company plans to
continue trading and disposing of revenue equipment, gains are not expected to
be significant during the remainder of 1996. Equipment gains offset
depreciation expense in the Consolidated Statements of Earnings.
Salaries, wages and employee benefits increased 11 percent during the first
quarter of 1996, reflecting a pay increase effective in April, 1995 for the
Company's least experienced drivers. Purchased transportation expense increased
26 percent. This increase primarily reflects payments to railroads and
third-party companies for intermodal and transportation services provided to the
Company. Fuel and fuel taxes increased 13 percent, primarily due to a 9 percent
increase in cost per gallon. Fuel cost per gallon continued to increase rapidly
in March and April of 1996. The Company initiated a fuel surcharge in April to
help offset this cost increase, however, fuel costs will most likely reduce
earnings during the second quarter of 1996.
10
<PAGE>
Insurance and claims expense increased 25 percent. Management was
disappointed with a significant increase in the number of accidents and cargo
claims and has focused on preventative measures. General and administrative
expense increased 18 percent, primarily due to higher driver recruiting and
training expenses. Operating taxes and licenses increased 22 percent, partly
due to higher state licensing and use tax expense. The significant increase in
communication and utilities was primarily due to certain rate reductions and
one-time credits recognized during the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be read
in conjunction with information presented in the Consolidated Statements of Cash
Flows and the Consolidated Balance Sheets.
Net cash provided by operating activities was approximately $22 million
during the first quarter of 1996 compared with $56 million in 1995. This
decrease in net cash provided was primarily due to an increase in accounts
receivable and cash payments made during the first quarter of 1996 for claims
accruals and payables for revenue equipment purchases.
SELECTED BALANCE SHEET DATA
As of
-------------------------------------------------
March 31, 1996 December 31, 1995 March 31, 1995
-------------- ----------------- --------------
Working capital ratio 1.01 1.01 .97
Current maturities of long-
term debt (millions) $43 $30 $61
Total debt (millions) $383 $369 $354
Total debt to equity 1.08 1.03 .93
Total debt as a percentage
of total capital .52 .51 .48
Net additions to property and equipment during the first quarter of 1996
totaled $35.4 million compared with $33.2 million in 1995. While total debt
levels have increased during the past year, the Company's liquidity has not
changed significantly. The Company generates significant cash from operating
activities and has borrowing capacity to meet its committed and contemplated
cash expenditures.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None applicable.
ITEM 5. OTHER INFORMATION
The Company announced on April 22, 1996 the completion of a combination
of its Parcel Management Services division into CTC Distribution
Services, L.L.C. (CTC) of St. Paul Minnesota. The Company received a 5
percent ownership stake in CTC with warrants that allow an increase in
its ownership position in the future. The transaction will be
accounted for as a contribution of assets for CTC ownership units.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. HUNT TRANSPORT SERVICES, INC.
DATE: May 7, 1996 BY: /s/ Kirk Thompson
----------------------- --------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: May 7, 1996 BY: /s/ Jerry W. Walton
----------------------- ---------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 163,001
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199,161
<PP&E> 1,197,091
<DEPRECIATION> 386,801
<TOTAL-ASSETS> 1,028,266
<CURRENT-LIABILITIES> 197,746
<BONDS> 0
0
0
<COMMON> 390
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,028,266
<SALES> 354,014
<TOTAL-REVENUES> 354,014
<CGS> 0
<TOTAL-COSTS> 343,582
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,911
<INCOME-PRETAX> 4,521
<INCOME-TAX> 1,718
<INCOME-CONTINUING> 2,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,803
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
