<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, 1997
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, 1997 WAS 36,456,276
<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, 1997 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1997.
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, 1996.
INDEX
-----
Consolidated Statements of Earnings for the Three
Months Ended March 31, 1997 and 1996............................ Page 3
Consolidated Balance Sheets as of
March 31, 1997 and December 31,1996............................. Page 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996...................... Page 5
Notes to Consolidated Financial Statements
as of March 31, 1997............................................ 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)
- ---------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
Operating revenues $ 365,401 $ 354,014
Operating expenses
Salaries, wages and employee benefits 121,444 116,436
Purchased transportation 116,780 97,971
Fuel and fuel taxes 38,057 40,134
Depreciation 33,250 34,144
Operating supplies and expenses 22,146 22,598
Insurance and claims 10,113 13,165
General and administrative expenses 6,042 7,463
Operating taxes and licenses 6,078 7,162
Communication and utilities 4,171 4,509
- ---------------------------------------------------------------------------
Total operating expenses 358,081 343,582
- ---------------------------------------------------------------------------
Operating income 7,320 10,432
Interest expense 6,404 5,911
- ---------------------------------------------------------------------------
Earnings before income taxes 916 4,521
Income taxes 348 1,718
- ---------------------------------------------------------------------------
Net earnings $ 568 $ 2,803
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Common shares outstanding 36,750 38,074
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Earnings per share $ 0.02 $ 0.07
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
3
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
- ------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1997 1996
- ------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,114 $ 3,786
Accounts receivable 162,288 151,357
Prepaid expenses 24,327 35,964
Deferred income taxes 11,000 11,000
- ------------------------------------------------------------------------------
Total current assets 209,729 202,107
- ------------------------------------------------------------------------------
Property and equipment 1,201,622 1,218,245
Less accumulated depreciation 415,322 404,992
- ------------------------------------------------------------------------------
Net property and equipment 786,300 813,253
- ------------------------------------------------------------------------------
Other assets 22,490 25,565
- ------------------------------------------------------------------------------
$1,018,519 $1,040,925
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 67,950 $ 49,750
Trade accounts payable 72,447 83,846
Claims accruals 31,101 33,693
Accrued payroll 15,797 12,852
Other accrued expenses 7,374 15,999
- ------------------------------------------------------------------------------
Total current liabilities 194,669 196,140
- ------------------------------------------------------------------------------
Long-term debt 322,467 332,571
Claims accruals 12,800 12,800
Deferred income taxes 142,358 142,159
Stockholders' equity 346,225 357,255
- ------------------------------------------------------------------------------
$1,018,519 $1,040,925
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
4
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
- ------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 568 $ 2,803
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 33,250 34,144
Deferred income taxes 199 (3,148)
Tax benefit (expense) of stock options exercised (27) 162
Changes in assets and liabilities:
Accounts receivable (10,931) (19,999)
Prepaid expenses 11,637 7,452
Trade accounts payable (11,399) 1,535
Claims accruals (2,592) (4,360)
Accrued payroll and other accrued expenses (5,680) 3,032
- ------------------------------------------------------------------------------
Net cash provided by operating activities 15,025 21,621
- ------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (32,687) (50,601)
Proceeds from sale of equipment 26,390 15,177
Decrease in other assets 3,809 555
- ------------------------------------------------------------------------------
Net cash used in investing activities (2,488) (34,869)
- ------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (5,000) --
Net borrowings under commercial paper program 13,096 13,317
Proceeds from sale of treasury stock 34 550
Repurchase of treasury stock (10,479) (2,998)
Dividends paid (1,860) (1,881)
- ------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (4,209) 8,988
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 8,328 (4,260)
- ------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 3,786 4,260
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,114 $ 0
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 6,551 $ 5,255
Income Taxes 196 (1,114)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
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):
3/31/97 12/31/96
-------- --------
Commercial paper $182,950 $169,750
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/03 98,260 98,260
Senior notes payable, interest at 7.84%
payable semiannually 10,000 15,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/00 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
-------- --------
391,210 383,010
Less current maturities (67,950) (49,750)
Unamortized discount (793) (689)
-------- --------
$322,467 $332,571
-------- --------
-------- --------
The Company is authorized to issue up to $240 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 $120 million expires March
19, 1998 and $120 million expires March 20, 2002.
The 6.25% senior notes were issued on September 1, 1993 and are due on
September 1, 2003.
The 7.84% senior notes were issued on March 31, 1992 and are payable in
five equal annual installments on March 31.
The 7.80% senior subordinated notes were issued on October 30, 1992 and are
payable in five equal annual installments beginning October 30, 2000.
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.
6
<PAGE>
(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, 1996 2,740,925 $11.58-24.63 294,950
-------
Granted 5,000 14.25
Exercised (3,000) 11.58
Terminated (32,750) 12.83-23.00
--------- ------------ -------
Outstanding at March 31, 1997 2,710,175 $11.58-24.63 313,150
--------- ------------ -------
--------- ------------ -------
On April 17, 1997, the Company's Board of Directors declared a regular
quarterly cash dividend of $.05 per share payable on May 19, 1997 to
stockholders of record on May 2, 1997.
(3) NEW ACCOUNTING STATEMENT
The Financial Accounting Standards Board issued Statement No. 128, Earnings
per Share, in February of 1997, which the Company is required to adopt as of
December 31, 1997. At that time the method of computing earnings per share will
change and all prior periods which are presented will be restated to conform
with Statement 128. Under the new requirements "basic earnings per share" will
replace the current term of "primary earnings per share" and "diluted earnings
per share" will replace the current term of "fully diluted earnings per share".
The Company expects basic earnings per share for the quarters ended March 31,
1997 and March 31, 1996 to be unchanged when compared to primary earnings per
share for those same periods.
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, 1997, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended March 31, 1997 and 1996, 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, 1996, 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 7, 1997, 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, 1996, 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 11, 1997
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, 1996.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to operating revenues for the periods indicated:
Three Months Ended
March 31
---------------------
1997 1996
------ ------
Operating revenues 100.0% 100.0%
Operating expenses
Salaries, wages and employee benefits 33.2 32.9
Purchased transportation 32.0 27.7
Fuel and fuel taxes 10.4 11.3
Depreciation 9.1 9.7
Operating supplies and expenses 6.1 6.4
Insurance and claims 2.8 3.7
General and administrative expenses 1.6 2.1
Operating taxes and licenses 1.7 2.0
Communication and utilities 1.1 1.3
----- -----
Total operating expenses 98.0 97.1
----- -----
Operating income 2.0 2.9
Interest expense 1.7 1.6
----- -----
Earnings before income taxes 0.3 1.3
Income taxes 0.1 0.5
----- -----
Net earnings 0.2% 0.8%
----- -----
----- -----
The following discussion relates to the table set forth above and the
attached interim consolidated financial statements for the quarters ended
March 31, 1997 and 1996.
OPERATING REVENUES
Operating revenues for the first quarter of 1997 increased approximately
$11 million, or 3 percent, to $365 million, from $354 million in the first
quarter of 1996. This comparison of revenue was negatively affected by
approximately $17.8 million of revenue generated during the first quarter of
1996 by the special commodities and parcel management businesses which were
disposed of later in 1996. This comparison was also negatively impacted by
approximately $8.8 million due to fewer workdays during the first quarter of
1997.
9
<PAGE>
The average number of total tractors in the fleet decreased during the
current quarter by 1 percent from 1996. In addition, approximately 150
tractors were without drivers during the first quarter of 1997. Failing to
fill those tractors negatively impacted revenue, utilization and operating
income during the first quarter. Load volume in the van division increased 8
percent, but was partly offset by a decrease in length of haul. Truck only
freight rates increased .2 percent from 1996, while intermodal rates were
down .8 percent. The change in revenue between quarters includes the
following by type of freight:
Change in Revenue
First Quarter 1997 vs. First Quarter 1996
(millions of dollars)
Logistics management $ 26
Van/intermodal 7
Dedicated contract 5
Businesses disposed of and fewer workdays (27)
----
$ 11
----
----
Operating revenues increased 91% in logistics management, 3 percent in
Van/intermodal and 16% in dedicated contract.
OPERATING EXPENSES
Total operating expenses expressed as a percentage of operating revenues
increased from 97.1% in the first quarter of 1996 to 98.0% in the first quarter
of 1997. Operating income declined to $7.3 million, or 2.0 percent of revenue
in 1997 from $10.4 million, or 2.9 percent of revenue in 1996. The increase in
operating expenses and decline in operating income was due to a number of
factors. Salaries, wages and employee benefits increased as a percentage of
revenue from 32.9% in 1996 to 33.2%. This percentage had declined in recent
periods, primarily due to the growth of intermodal and logistics business
wherein third parties may transport freight rather than Company tractors and
drivers. A new compensation package for van over-the-road drivers, announced in
September of 1996, was effective February 25, 1997. This new package increased
salaries, wages and employee benefits by approximately $4.5 million during the
first quarter of 1997. This compensation change is expected to increase
salaries, wages and employee benefits by $45 million to $50 million annually.
Funding of this increased cost is planned to come from the reduction of driver
turnover and lower associated costs of advertising, recruiting, driver training
schools, and accidents. Increased tractor utilization is also expected to help
offset the higher wage and benefit costs.
Purchased transportation expense increased as a percentage of revenue
from 27.7% in 1996 to 32.0% in 1997. This increase is consistent with trends
in recent periods and reflects the increase in payments to railroads and
third-parties for intermodal and transportation services provided to the
Company. Fuel and fuel taxes reflects an increase of approximately 7 cents
per gallon, offset by significantly higher fuel miles per gallon and
10
<PAGE>
the impact of additional freight moved by railroads and third-party
transportation companies.
The decline of insurance and claims expense from 3.7 percent in 1996 to
2.8 percent in 1997 was primarily due to a substantial reduction in accident
frequency. The total cost of insurance and claims in the first quarter of
1997 decreased approximately $3 million from 1996. This decrease relates to
a higher number of experienced drivers in the fleet attracted by the new
compensation package. General and administrative expenses decreased
approximately $1.4 million due, in part, to decreased driver school and
advertising costs. Interest expense increased due to slightly higher debt
levels and higher interest rates on commercial paper.
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 $15 million for
the first quarter of 1997 compared with $21.6 million in 1996. This decrease in
net cash provided was primarily due to lower earnings, a reduced rate of
accounts receivable growth and a reduction of accounts payable and accrued
expenses related to timing of vendor and other cash disbursements. Net cash
used in investing activities was $2.5 million in 1997 compared to $34.9 million
in 1996. With the van trailing equipment fleet substantially converted to
containers and chassis, the level of net additions to property and equipment was
down by nearly $30 million. Net cash used in financing activities was $4.2
million in 1997 compared with net cash provided of $9.0 million in 1996. This
change was primarily due to the purchase of treasury stock during the first
quarter of 1997.
SELECTED BALANCE SHEET DATA
<TABLE>
As of
---------------------------------------------------
March 31, 1997 December 31, 1996 March 31, 1996
-------------- ----------------- --------------
<S> <C> <C> <C>
Working capital ratio 1.08 1.03 1.01
Current maturities of long-
term debt (millions) $68 $50 $43
Total debt (millions) $390 $382 $383
Total debt to equity 1.13 1.07 1.08
Total debt as a percentage
of total capital .53 .52 .52
</TABLE>
During the first quarter of 1997, the Company renewed its commercial paper
note program and reduced the total amount of authorized borrowing from $250
million to $240 million. The notes are supported by two credit agreements with
a group of banks. One agreement for $120 million expires March 19, 1998 and
$120 million expires March 20, 2002.
11
<PAGE>
While total debt levels have increased slightly during the past year,
the Company's liquidity has not changed significantly. The Company generates
significant cash from operating activities and has borrowing capacity to meet
its committed and contemplated cash expenditures.
FORWARD-LOOKING STATEMENTS
This report contains statements that may be considered as
forward-looking or predictions concerning future operations. Such statements
are based on management's belief or interpretation of information currently
available. These statements and assumptions involve certain risks and
uncertainties and management can give no assurance that such expectations
will be realized. Among all the factors and events that are not within the
Company's control and could have a material impact on future operating
results are general economic conditions, cost and availability of diesel
fuel, adverse weather conditions and competitive rate fluctuations. In
addition, the ultimate net cost of the new driver compensation package will
be dependent on the mix of experienced drivers attracted to the Company and
on future accident, cargo and worker's compensation claims, as well as other
factors.
12
<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
The annual meeting of stockholders of J. B. Hunt Transport Services,
Inc. was held on April 17, 1997. Proxies for the meeting were solicited
pursuant to Regulation 14A of the Securities Exchange Act of 1934. At the
meeting, stockholders voted on the following resolutions with the vote
tabulations so indicated:
<TABLE>
VOTES
------------------------------------
FOR AGAINST ABSTAINED
------------------------------------
<S> <C> <C> <C> <C>
1. To elect nine (9) directors and to
fix the number of directors for
the ensuing year at nine (9). 33,855,423 0 323,799
2. To ratify the appointment of
KPMG Peat Marwick LLP as the
Company's independent public
accountants for the next fiscal year. 34,157,116 12,452 9,654
3. To transact such other business as
may properly come before the
meeting or any adjournments thereof. 30,560,028 2,683,497 935,697
</TABLE>
There was no solicitation in opposition to management's nominees for
Directors as listed in the proxy statement and each nominee was elected by
greater than ninety-nine percent of the shares entitled to vote. No additional
business or other matters came before the meeting or any adjournment thereof.
ITEM 5. OTHER INFORMATION
None applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
13
<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 9, 1997 BY: /s/ Kirk Thompson
--------------------- ------------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: May 9, 1997 BY: /s/ Jerry W. Walton
--------------------- ------------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,114
<SECURITIES> 0
<RECEIVABLES> 162,288
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 209,729
<PP&E> 1,201,622
<DEPRECIATION> 415,322
<TOTAL-ASSETS> 1,018,519
<CURRENT-LIABILITIES> 194,669
<BONDS> 0
0
0
<COMMON> 390
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,018,519
<SALES> 365,401
<TOTAL-REVENUES> 365,401
<CGS> 0
<TOTAL-COSTS> 358,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,404
<INCOME-PRETAX> 916
<INCOME-TAX> 348
<INCOME-CONTINUING> 568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 568
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
