<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, 1997 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 17,434,979 SHARES OF THE REGISTRANT'S $.01 PAR
VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY 27,
1998 WAS $466,385,688 (BASED UPON $26.75 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 27, 1998: 35,653,708.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE 1998 ANNUAL
STOCKHOLDERS' MEETING TO BE HELD APRIL 16, 1998 PART II.
<PAGE>
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 U.S.
Department of Transportation ("DOT") and various state regulatory agencies.
JBH is an Arkansas holding company incorporated on August 10, 1961. Through
its subsidiaries JBH transports primarily full-load containerizable freight
throughout the continental United States and portions of Canada and Mexico.
The Company also manages or 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 DOT and state
regulatory agencies. The Company may transport any type of freight (except
certain types of explosives) from any point in the contiguous United States
to any other point in the contiguous United States, 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. JBH transports a wide range of products
including automotive parts, department store merchandise, paper and wood
products, food and beverages, 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. The Company has authorization
to operate directly in all the Canadian provinces, but to date has served
limited points in Canada primarily through interchange operations with
Canadian motor carriers. 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 a new type of truck-load ("T/L") service with the
Atchison, Topeka and Santa Fe Railway Company (formally Santa Fe, now
Burlington Northern Santa Fe). This new method of operating initially
involved transporting 48 foot or 53 foot trailers by rail utilizing
traditional trailer-on-flatcar ("TOFC") medium for a portion of the line-haul
move. In 1993, rail operations were expanded to utilize newly-designed
high-cube containers which could be separated from the chassis and
double-stacked ("COFC") on rail cars to provide improved productivity. Since
this initial agreement, intermodal operations have grown to include arrangements
with nine railroads. Operating revenues from intermodal operations totaled
$576 million in 1997. Substantially all of the freight carried under rail
arrangements receives priority space on trains and preferential loading and
unloading at rail facilities.
The Company commenced offering formal transportation logistics services in
1992. Logistics services refer to an arrangement whereby a shipper may
outsource a substantial portion of or their entire distribution and
transportation process to one organization. JBH Logistics provides a range
of comprehensive transportation and management services including experienced
professional managers, information and optimization technology and the actual
design or redesign of system solutions. Once a logistics arrangement is in
place, JBH Logistics may utilize Company owned and controlled transportation
equipment or third-party equipment and employees or a combination of the two
to meet the customer's service requirements. Dedicated equipment services
are similar to logistics services and typically involve specifically assigned
revenue equipment, drivers, and management to service customers that wish to
augment or outsource their private fleet. Operating revenues were $405
million for the logistics and dedicated contract service businesses in 1997.
In early 1996, the Company embarked upon a strategy to concentrate its
efforts on the two service offerings of dry-van T/L (including intermodal)
and logistics services (including dedicated contract). In accordance with
that strategy, assets and operations of other service offerings were
subsequently sold. During 1996, operations involved in the transportation of
small parcels and hazardous commodities were sold. A sale of flatbed
operations in July of 1997 completed this initiative. The Company views the
growth opportunity and potential to integrate solutions associated with its
two-part service offering strategy as a key to driving down costs and
providing customers with quality service.
2
<PAGE>
MARKETING AND OPERATIONS
The truckload market has historically 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
1997 or 1996. 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. Certain marketing and sales functions are assigned
to each of the primary businesses of dry-van, logistics management and
dedicated equipment. However, marketing strategy and national account
service coordination is managed at the corporate level.
PERSONNEL
At December 31, 1997, JBH employed approximately 11,780 people,
including 8,430 drivers. Historically the T/L transportation industry and
the Company have experienced shortages of qualified drivers. In addition,
driver turnover rates at JBH and other T/L carriers had exceeded 100%. In
September of 1996, a new compensation program was announced for the
approximate 3,500 over-the-road van drivers. This comprehensive package,
which was effective February 25, 1997, included an average 33% increase in
wages for this group of employees. This program was designed to attract and
retain a professional and experienced work force capable of delivering a high
level of customer service. As anticipated, this increase in driver wages and
benefits was partially offset by lower driver recruiting and training
expense, reduced accident costs and better equipment utilization. The
average driver turnover in the van business was 45% in 1997, down from 86% in
1996. Drivers are frequently designated as local, regional, regular or
dedicated and over-the-road and typically compensated on a rate-per-mile
basis, a rate per week basis or a combination of factors. JBH also employed
approximately 2,180 office personnel and 1,170 mechanics at December 31,
1997. No employees are represented by collective bargaining agreements and
management believes that its relationship with all of its employees is
excellent.
REVENUE EQUIPMENT
At December 31, 1997, JBH owned approximately 7,510 tractors and operated
10,450 trailers and 19,940 specially designed containers. JBH believes that
modern, late-model, clean equipment differentiates quality customer service,
increases equipment utilization and reduces maintenance costs and downtime.
Accordingly, the average age of the van tractor and trailing fleet was
approximately two years and three years, respectively, at December 31, 1997.
In 1993, the Company commenced receiving a newly-designed container and
chassis combination that could be transported over the road by truck and also
be moved by rail or ship. The container and chassis may be transported as a
single unit by rail (TOFC) or the container can be separated from the chassis
and double-stacked (COFC) on rail cars for improved productivity. Containers
comprised approximately 70% of the van trailing fleet at December 31, 1997.
The composition of the dedicated contract fleet varies with specific customer
service requirements. All JBH revenue equipment is maintained in accordance
with a specific maintenance program primarily based on age and miles traveled.
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
for T/L carriers. 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
3
<PAGE>
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
Prior to December of 1995, the Company's operations in interstate
commerce were regulated by the Interstate Commerce Commission ("ICC").
Commencing in January of 1996, the Interstate Commerce Commission Termination
Act closed the ICC and transferred all remaining regulatory responsibilities
to a new Surface Transportation Board and to the Federal Highway Administration.
Motor carrier operations are subject to safety requirements prescribed by the
United States DOT governing interstate operation. Such matters as weight and
dimension 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 operating authority more easily and
allowed interstate motor carriers, such as the Company, to change their rates
by a certain percentage per year without 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.
In addition to the corporate headquarters, the Company owns a separate
40-acre tract in Lowell, Arkansas with three separate buildings totaling
18,000 square feet of office space and 80,000 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 new terminal and maintenance facility was constructed and
occupied in Chicago, Illinois during 1996.
A summary of the Company's principal facilities follows:
<TABLE>
Maintenance Shop Office Space
Location Acreage (square feet) (square feet)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Atlanta, Georgia 30 29,800 10,400
Chicago, Illinois 27 50,000 14,000
Dallas, Texas 14 24,000 7,800
Detroit, Michigan 27 44,300 10,800
East Brunswick, New Jersey 20 20,000 7,800
Houston, Texas 13 24,700 7,200
Little Rock, Arkansas 24 29,200 7,200
Louisville, Kentucky 14 40,000 10,000
Lowell, Arkansas 40 50,200 14,000
Lowell, Arkansas (trailer facilities) 14 29,800 3,700
San Bernardino, California 8 14,000 4,000
South Gate, California 12 12,000 5,500
</TABLE>
In addition to the above facilities, the Company leases numerous small
offices and trailer parking yards in various locations throughout the country.
4
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
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 or results of operations of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1997 to a vote of
security holders.
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the executive officers of the Company is set
forth below:
<TABLE>
Executive
Name Age Position with Company Officer Since
- ---- --- --------------------- -------------
<S> <C> <C> <C>
J.B. Hunt 71 Senior Chairman of the Board; Director 1961
Wayne Garrison 45 Chairman of the Board; Director 1979
Johnelle Hunt 66 Secretary; Director 1972
Kirk Thompson 44 President and Chief Executive Officer; Director 1984
Paul R. Bergant 51 Executive Vice President, Marketing 1985
Bob D. Ralston 51 Executive Vice President, Maintenance 1989
Jerry W. Walton 51 Executive Vice President, Finance and Chief
Financial Officer 1991
Robert E. Logan (1) 59 Chief Information Officer 1997
A. Craig Harper (2) 40 Executive Vice President, Operations 1997
</TABLE>
(1) Mr. Logan retired from United Parcel Service of America in 1991. He
served as a consultant to the Company in 1995 and 1996 and was named Chief
Information Officer in January of 1997.
(2) Mr. Harper joined the Company in 1992 as Executive Vice President, Special
Commodities. In May of 1993, he was named President, Special Commodities.
In April of 1997, he was named Executive Vice President, Operations.
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
years 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>
Calendar Year 1997 Calendar Year 1996
Period High Low High Low
--------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter $15.00 $13.38 $22.13 $15.13
2nd Quarter 16.13 13.63 22.13 18.75
3rd Quarter 18.50 14.50 21.88 15.06
4th Quarter 19.25 15.00 16.00 13.75
</TABLE>
5
<PAGE>
On February 27, 1998, the high and low sales prices for the Company's
common stock as reported by the NASDAQ were $27.75 and $26.63, respectively.
As of February 27, 1998, the Company had 1,749 stockholders of record.
DIVIDEND POLICY
On January 21, 1998, the Board of Directors declared a quarterly dividend
of $.05 per share, payable on February 17, 1998 to shareholders of record on
February 3, 1998. 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 1997 and 1996.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except revenue and per share amounts)
<TABLE>
Years Ended December 31 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues (mil.) $ 1,554 $ 1,487 $ 1,352 $ 1,208 $ 1,021 $ 912 $ 733 $ 580 $ 509 $ 393
Earnings (loss) before
cumulative effect of
changes in accounting
methods 11,366 22,115 (2,170) 40,392 38,221 36,933 29,459 30,048 30,615 33,045
Basic earnings (loss) per
share before cumulative
effect of changes in
accounting methods .31 .58 (.06) 1.05 1.00 1.03 .85 .85 .87 .93
Cash dividends per share .20 .20 .20 .20 .20 .20 .19 .16 .16 .13
Total assets 1,021,919 1,043,439 1,016,782 993,699 862,442 715,741 520,130 452,734 384,684 300,199
Long-term debt 322,790 332,571 339,015 299,243 303,499 216,254 156,930 137,597 104,955 65,358
Stockholders' equity 337,964 357,255 356,939 377,898 343,964 308,626 215,761 191,074 175,518 150,126
</TABLE>
Percentage of Operating Revenue
<TABLE>
Years Ended December 31 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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% 100.0% 100.0%
Operating expenses:
Salaries, wages
and employee benefits 34.4 32.6 33.8 33.5 36.4 38.2 40.0 41.4 42.1 41.4
Purchased transportation 30.6 27.2 25.4 23.9 18.4 12.2 7.0 0.7 0.7 0.6
Fuel and fuel taxes 9.1 10.8 10.6 10.9 12.4 14.2 16.3 17.3 15.7 14.3
Depreciation 8.4 8.4 9.6 9.2 8.2 9.5 9.4 9.7 9.5 9.7
Operating supplies and
expenses 8.4 8.0 8.4 6.9 7.2 7.4 8.0 8.8 8.5 7.8
Insurance and claims 2.4 3.9 3.8 3.1 4.0 4.8 4.7 5.4 4.5 4.3
Operating taxes and licenses 1.6 1.9 2.0 2.2 2.8 2.8 3.0 3.2 3.5 3.4
General and administrative
expenses 1.2 1.9 2.4 2.2 1.9 2.0 2.1 2.3 1.7 1.3
Communication and utilities 1.1 1.2 1.1 1.1 1.0 1.3 1.4 1.4 1.7 2.0
Special charges - - 1.3 - - - - - - -
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses 97.2 95.9 98.4 93.0 92.3 92.4 91.9 90.2 87.9 84.8
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income 2.8 4.1 1.6 7.0 7.7 7.6 8.1 9.8 12.1 15.2
Interest expense 1.6 1.7 1.8 1.6 1.4 1.2 1.5 1.2 1.8 1.7
Income taxes .5 .9 - 2.1 2.6 2.3 2.6 3.4 4.3 5.1
Cumulative effect of changes
in accounting methods - - - - - 0.2 (0.2) - - -
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net earnings (loss) .7% 1.5% (0.2%) 3.3% 3.7% 4.3% 3.8% 5.2% 6.0% 8.4%
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements of the Company and related footnotes
appearing in this annual report.
The following table sets forth certain operating data of the Company.
<TABLE>
Years Ended December 31 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total loads 1,802,006 1,605,546 1,361,251 1,187,815 1,081,013 960,031 796,929 596,574 536,448 397,290
Average number of tractors in
the fleet during the year 7,629 7,728 7,559 7,094 6,890 6,424 5,286 4,413 3,616 2,840
Tractors operated (at year end) 7,508 7,750 7,706 7,412 6,775 7,004 5,843 4,729 4,096 3,135
Trailers/containers (at
year end) 30,391 27,773 24,618 22,687 19,089 17,391 12,389 10,563 9,339 7,071
Tractor miles (in thousands) 790,018 810,450 772,199 740,626 718,767 733,700 638,926 551,175 495,377 382,743
</TABLE>
GENERAL
J.B. Hunt's 1997 financial and operating results reflect some significant
management actions which were implemented during 1997 and 1996. In early
1996, a decision was made to concentrate company resources on the two core
transportation service offerings of dry-van truck (including intermodal), and
logistics (including dedicated contract). Assets and businesses which did
not relate to these three types of operations were sold. Operations which
transported small parcels and hazardous commodities were sold during 1996 and
the flatbed business was sold during 1997. In September of 1996, a new
over-the-road driver compensation package was announced which was effective
in February of 1997. This new program was intended to breakout of a common
industry practice of hiring and training inexperienced truck drivers and
experiencing annual driver turnover rates of approximately 100 percent. This
new pay and benefit package, which increased annual pay by an average of 33%
for van over-the-road drivers, was successful in attracting and retaining
experienced and professional drivers. Driver turnover in the van business
was reduced to 45% in 1997 from 86% in 1996. The increased cost of the new
pay and benefit package was partially offset, as anticipated, by closing the
two company-owned driver schools, lower driver hiring expense, reduced
accident expense and higher equipment utilization. The ability to hire
additional van drivers and a strong demand for transportation services
combined to produce revenue growth of nine percent during the fourth quarter
of 1997. This increase in revenue and concurrent down-ward trends in certain
operating expenses resulted in improved operating income during the fourth
quarter of 1997.
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues and the percentage increase
or decrease of those items as compared with the prior year.
<TABLE>
Percentage of Percentage
Operating Revenues Change
------------------ -------------
1997 1996 1997 vs. 1996
------ ------ -------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 4.5%
Operating expenses
Salaries, wages and employee benefits 34.4% 32.6% 10.3%
Purchased transportation 30.6 27.2 17.7
Fuel and fuel taxes 9.1 10.8 (11.5)
Depreciation 8.4 8.4 4.6
Operating supplies and expenses 8.4 8.0 8.8
Insurance and claims 2.4 3.9 (35.1)
Operating taxes and licenses 1.6 1.9 (10.3)
General and administrative expenses 1.2 1.9 (32.5)
Communication and utilities 1.1 1.2 (8.0)
----- ----- -----
Total operating expenses 97.2 95.9 6.0
----- ----- -----
Operating income 2.8 4.1 (28.9)
Interest expense 1.6 1.7 (.5)
----- ----- -----
Earnings before income taxes 1.2 2.4 (48.6)
Income taxes 0.5 .9 (48.6)
----- ----- -----
Net earnings 0.7% 1.5% (48.6)%
----- ----- -----
----- ----- -----
</TABLE>
8
<PAGE>
OPERATING REVENUES
Operating revenues increased a net of $67 million, or 5%, to $1,554
million in 1997, from $1,487 in 1996. The increase in revenue was $137
million, or 9%, adjusted for the sale of the parcel management, hazardous
commodities and flatbed businesses. An analysis of this increase in revenue
is as follows:
<TABLE>
Increase (Decrease)
In Revenue
(millions of dollars)
---------------------
<S> <C>
Logistics Management and Dedicated Contract $ 87
Dry Van and Intermodal 49
Businesses Sold (69)
----
$ 67
----
----
</TABLE>
The Company provides diversified transportation and logistics management
services which frequently utilize railroad and other third-party revenue
equipment and employees. This strategy allows consolidated revenue to grow
without requiring a comparable increase in the Company's tractor and trailing
equipment fleet. The average number of trucks in the fleet declined during
1997 by approximately 1%, reflecting, in part, the sale of the flatbed
business. Dry van truck rates increased by nearly 2% during 1997, while
intermodal rates declined by approximately 2%.
OPERATING EXPENSES
Total operating expenses in 1997 increased 6% over 1996. Operating
expenses expressed as a percentage of operating revenues (operating ratio)
were 97.2% in 1997, compared with 95.9% in 1996. The increase in salaries,
wages and employee benefits was primarily due to the new driver compensation
package, which was effective in February of 1997. The significant increase
in purchased transportation was consistent with trends in recent years and
reflects payments to railroads and other third-party companies that provided
transportation services to the Company. Fuel and fuel taxes expense
declined, primarily due to lower fuel cost per gallon and improved miles per
gallon performance.
The increase in operating supplies and expenses was primarily due to
higher trailing equipment lease and rental costs. The decline in insurance
and claims expense was a result of lower collision frequency, primarily
related to a decision to limit the speed of the tractor fleet to 59 miles per
hour and the more experienced driver force attracted by the new compensation
package. A related reduction in general and administrative expenses was
primarily due to reduced driver recruiting and training costs. Reduced
insurance related costs and lower driver hiring expenses were two primary
sources for funding the new driver compensation program.
As a result of the above, net earnings declined to $11.4 million, or 31
cents per share in 1997, from $22.1 million, or 58 cents per share in 1996.
The average number of shares outstanding during 1997 was 36.4 million, down
from 37.9 million in 1996. This decrease in shares outstanding was primarily
due to the Company's acquisition of treasury shares.
9
<PAGE>
1996 COMPARED WITH 1995
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues and the percentage increase
or decrease of those items as compared with the prior year.
<TABLE>
Percentage of Percentage
Operating Revenues Change
------------------ ------
1996 1995 1996 vs. 1995
------ ------ -------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 9.9%
Operating expenses
Salaries, wages and employee benefits 32.6% 33.8% 5.9%
Purchased transportation 27.2 25.4 17.6
Fuel and fuel taxes 10.8 10.6 11.9
Depreciation 8.4 9.6 (4.1)
Operating supplies and expenses 8.0 8.4 4.9
Insurance and claims 3.9 3.8 15.1
Operating taxes and licenses 1.9 2.0 3.8
General and administrative expenses 1.9 2.4 (13.6)
Communication and utilities 1.2 1.1 24.5
Special charges -- 1.3 --
----- ----- -----
Total operating expenses 95.9 98.4 7.2
Operating income 4.1 1.6 182.8
Interest expense 1.7 1.8 (.4%)
----- ----- -----
Earnings (loss) before income taxes 2.4 (.2) --
Income taxes .9 -- --
----- ----- -----
Net earnings (loss) 1.5% (0.2%) --
----- ----- -----
----- ----- -----
</TABLE>
OPERATING REVENUES
Operating revenues increased $135 million, or 10%, to $1,487 million in
1996 from $1,352 million in 1995. An analysis of this increase in revenue is
as follows:
<TABLE>
Increase (Decrease)
In Revenue
(millions of dollars)
---------------------
<S> <C>
Dry Van and Intermodal $106
Logistics Management and Dedicated Contract 64
Businesses Sold (35)
----
$135
----
----
</TABLE>
Dry van intermodal volume grew rapidly during 1996. Dry van truck rates
declined approximately 2% during 1996, while intermodal rates declined 1%.
These rate decreases negatively impacted revenues and earnings during 1996.
The average number of tractors in the fleet increased approximately 2% during
1996.
OPERATING EXPENSES
Total operating expenses in 1996 increased 7% over 1995. Operating
expenses expressed as a percentage of operating revenues (operating ratio)
were 95.9% in 1996, compared with 98.4% in 1995. The change in salaries,
wages and employee benefits reflects a small increase in the company-owned
tractor and driver employee fleet and a higher growth rate for intermodal and
third-party logistics operations. No significant changes in driver
compensation occurred during 1996. The increase in purchased transportation
was primarily due to the growth of intermodal and logistics businesses, which
results in additional payments to railroads and third-party companies for
purchased transportation services. Fuel and fuel taxes increased due to
significantly higher fuel costs per gallon. This increased cost was partly
offset by fuel surcharge revenue which was billed to customers. The decrease
in depreciation expense was due, in part, to gains on the sale of the parcel
management and hazardous commodities business. Gains on the sale of revenue
equipment were offset against depreciation expense. Significantly higher
accident rates during the first half of 1996 contributed to the increase in
insurance and claims expense.
10
<PAGE>
The significant decline in general and administrative expenses was
primarily due to lower driver advertising expenditures. The increase in
communication and utilities was due to certain rate reductions and one-time
credits recognized in early 1995. Special charges of $17.3 million were
recorded in 1995 to reduce the carrying value of idle and under-performing
assets.
As a result of the above, net earnings increased to $22.1 million, or 58
cents per share, in 1996, compared with a loss of $2.2 million, or six cents
per share, after special charges in 1995. The average number of shares
outstanding during 1996 was 37.9 million, down from 38.5 million in 1995. The
decrease in shares outstanding was primarily due to the Company's acquisition
of treasury shares.
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.
The Company generates significant cash from operating activities. Net
cash provided by operating activities was $161 million in 1997, $141 million
in 1996 and $149 million in 1995. Increased levels of trade accounts
receivable related to revenue growth and longer payment terms consumed cash
in 1995 through 1997, as did payments in 1997 and 1996 to settle pending
accident and cargo claims. Changes in trade accounts payable, current assets
and deferred income taxes generated cash in 1997.
Net cash used in investing activities was $90 million in 1997, $131
million in 1996 and $137 million in 1995. The lower consumption of cash in
1997 was primarily due to fewer purchases of trailing equipment. While the
Company leased and rented a significant amount of trailing equipment during
1997 and late 1996, orders were placed in late 1997 and early 1998 for
approximately $39 million of trailing equipment.
Financing activities consumed $71 million in 1997, $10 million in 1996
and $10 million in 1995. The primary reasons for the increased use of cash
in financing activities were net repayments of short-term obligations without
incurring additional long-term debt and the purchase of treasury stock in
1997 and 1996.
SELECTED BALANCE SHEET DATA
<TABLE>
As of December 31 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Working capital ratio .97 1.03 1.01
Current maturities of long-term debt (millions) $ 17.5 $ 49.8 $ 30.3
Total debt (millions) $ 340 $ 382 $ 369
Total debt to equity 1.01 1.07 1.03
Total debt as a percentage of total capital .50 .52 .51
</TABLE>
The Company is authorized to issue up to $240 million in notes under a
commercial paper note program, of which $133 million was outstanding at
December 31, 1997. In addition, the Company has approximately $121 million
of uncommitted lines of credit, none of which were outstanding at December
31, 1997.
From time to time the Board of Directors authorizes the repurchase of
company common stock. Purchases totaled 1.468 million shares during 1997 at
prices ranging from $13.50 per share to $17.00 per share, 1.159 million
shares during 1996 at prices ranging from $14.13 to $16.63 per share, and
.514 million shares during 1995 at prices ranging from $13.13 to $15.63 per
share. The Company typically holds these shares in treasury for general
corporate purposes, which may include employee stock options and other
transactions.
At December 31, 1997, the Company had committed to purchase
approximately $115 million of revenue and service equipment (net cost, after
expected proceeds from sale or trade-in allowances of approximately $24
million). Additional spending for new revenue equipment is anticipated
during 1998, however, funding for such expenditures is expected to come from
cash generated from operations and existing borrowing facilities.
11
<PAGE>
YEAR 2000
In 1996, the Company developed a plan to deal with the Year 2000 problem
and began converting its computer systems to be Year 2000 compliant. The
plan provides for the conversion efforts to be completed by the end of 1998.
The Year 2000 problem is the result of computer programs being written using
two digits rather than four to define the applicable year. The total cost of
the project is estimated to be $820,000 and is being funded through operating
cash flows. The Company is expensing all costs associated with these systems
changes as the costs are incurred. As of December 31, 1997, approximately
$325,000 had been expensed.
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. Future
financial and operating results of the Company may fluctuate as a result of
these and other risk factors as detailed from time to time in Company filings
with the Securities and Exchange Commission.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standands ("SFAS") No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company is currently evaluating the
effect of SFAS No. 130. The Company plans to commence reporting separately
on its two segments, dry-van T/L (including intermodal) and logistics
services (including dedicated contract) in 1998.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company for this annual report on Form 10-k.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
PAGE
- -----------------------------------------------------------------------------
<S> <C>
Independent Auditors' Report 13
Consolidated Balance Sheets as of December 31, 1997 and 1996 14
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 16
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995 17
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 18
Notes to Consolidated Financial Statements 19
</TABLE>
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
J. B. Hunt Transport Services, Inc.:
We have audited the accompanying consolidated balance sheets of J. B. Hunt
Transport Services, Inc. and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1997. 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, 1997 and
1996, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1997, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Little Rock, Arkansas
January 30, 1998
13
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in thousands, except per share amounts)
<TABLE>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,701 3,786
Trade accounts receivable 169,198 153,871
Refundable income taxes (note 4) 2,711 8,426
Inventories 6,339 6,772
Prepaid expenses 15,666 20,766
Deferred income taxes (note 4) 2,337 11,000
---------- ---------
Total current assets 199,952 204,621
---------- ---------
Property and equipment, at cost:
Revenue and service equipment 1,045,069 1,052,993
Land 19,109 19,354
Structures and improvements 59,446 56,884
Furniture and office equipment 93,854 89,014
---------- ---------
Total property and equipment 1,217,478 1,218,245
Less accumulated depreciation 420,671 404,992
---------- ---------
Net property and equipment 796,807 813,253
---------- ---------
Other assets (note 7) 25,160 25,565
---------- ---------
$1,021,919 1,043,439
---------- ---------
---------- ---------
</TABLE>
(Continued)
14
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1997 and 1996
(Dollars in thousands, except per share amounts)
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 2) $ 17,500 49,750
Trade accounts payable 138,509 92,078
Claims accruals 22,306 33,693
Accrued payroll 16,096 13,988
Other accrued expenses 10,677 9,145
---------- ---------
Total current liabilities 205,088 198,654
---------- ---------
Long-term debt, excluding current maturities (note 2) 322,790 332,571
Claims accruals 15,168 12,800
Deferred income taxes (note 4) 140,909 142,159
---------- ---------
Total liabilities 683,955 686,184
---------- ---------
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 105,682 105,897
Retained earnings 286,409 282,364
Foreign currency translation adjustment (5,621) (5,621)
---------- ---------
386,860 383,030
Less common stock in treasury at cost (3,346,550
shares in 1997 and 1,814,084 shares in 1996) 48,896 25,775
---------- ---------
Total stockholders' equity 337,964 357,255
Commitments and contingencies (notes 2, 3, 5 and 8)
---------- ---------
$1,021,919 1,043,439
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands, except per share amounts)
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating revenues $1,554,292 1,486,748 1,352,225
Operating expenses:
Salaries, wages and employee benefits (note 5) 534,415 484,702 457,567
Purchased transportation 475,768 404,140 343,601
Fuel and fuel taxes 141,770 160,265 143,239
Depreciation 130,661 124,931 130,265
Operating supplies and expenses 130,065 119,581 113,980
Insurance and claims 37,904 58,387 50,707
Operating taxes and licenses 24,588 27,422 26,422
General and administrative expenses 19,225 28,501 32,981
Communication and utilities 16,986 18,456 14,822
Special charges - - 17,296
---------- --------- ---------
Total operating expenses 1,511,382 1,426,385 1,330,880
---------- --------- ---------
Operating income 42,910 60,363 21,345
Interest expense 24,578 24,694 24,790
---------- --------- ---------
Earnings (loss) before income taxes 18,332 35,669 (3,445)
Income taxes (note 4) 6,966 13,554 (1,275)
---------- --------- ---------
Net earnings (loss) $ 11,366 22,115 (2,170)
---------- --------- ---------
---------- --------- ---------
Basic earnings (loss) per share $ .31 .58 .(06)
---------- --------- ---------
---------- --------- ---------
Diluted earnings (loss) per share $ .31 .58 .(06)
---------- --------- ---------
---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands, except per share amounts)
<TABLE>
Foreign Total
Additional currency stockholders'
Common paid-in Retained translation Treasury equity
stock capital earnings adjustment stock (notes 2 and 3)
------ ---------- -------- ----------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $390 104,723 277,718 - (4,933) 377,898
Tax benefit of stock options
exercised - 301 - - - 301
Sale of treasury stock to
employees - 553 - - 1,878 2,431
Repurchase of treasury stock - - - - (7,057) (7,057)
Cash dividends paid ($.20 per
share) - - (7,725) - - (7,725)
Foreign currency translation
adjustment - - - (6,739) - (6,739)
Net loss - - (2,170) - - (2,170)
---- ------- ------- ------ ------- -------
Balances at December 31, 1995 390 105,577 267,823 (6,739) (10,112) 356,939
Tax benefit of stock options
exercised - 325 - - - 325
Sale of treasury stock to
employees - (5) - - 2,114 2,109
Repurchase of treasury stock - - - - (17,777) (17,777)
Cash dividends paid ($.20 per
share) - - (7,574) - - (7,574)
Foreign currency translation
adjustment - - - 1,118 - 1,118
Net earnings - - 22,115 - - 22,115
---- ------- ------- ------ ------- -------
Balances at December 31, 1996 390 105,897 282,364 (5,621) (25,775) 357,255
Tax benefit (expense) of stock
options exercised - (54) - - - (54)
Sale of treasury stock to
employees - 146 - - 182 328
Forfeiture of restricted stock - (307) - - (1,269) (1,576)
Repurchase of treasury stock - - - - (22,034) (22,034)
Cash dividends paid ($.20 per
share) - - (7,321) - - (7,321)
Net earnings - - 11,366 - - 11,366
---- ------- ------- ------ ------- -------
Balances at December 31, 1997 $390 105,682 286,409 (5,621) (48,896) 337,964
---- ------- ------- ------ ------- -------
---- ------- ------- ------ ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 11,366 22,115 (2,170)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation 130,661 124,931 130,265
Provision (benefit) for noncurrent deferred
income taxes (1,250) 19,430 842
Tax benefit (expense) of stock options exercised (54) 325 301
Termination of restricted stock (1,576) (277) -
Special charges - - 17,296
Amortization of discount, net 219 296 22
Changes in operating assets and liabilities:
Trade accounts receivable (15,327) (8,734) (6,024)
Other current assets 11,248 (6,319) (4,637)
Deferred income taxes 8,663 (829) (2,088)
Trade accounts payable 22,165 (9,291) 11,970
Claims accruals (9,019) (5,021) 516
Accrued payroll and other accrued expenses 3,640 4,035 2,988
-------- ------- -------
Net cash provided by operating activities 160,736 140,661 149,281
-------- ------- -------
Cash flows from investing activities:
Additions to property and equipment (174,141) (190,377) (180,534)
Proceeds from sale of equipment 84,192 63,260 51,350
Decrease (increase) in other assets 405 (3,753) (7,613)
-------- ------- -------
Net cash used in investing activities (89,544) (130,870) (136,797)
-------- ------- -------
Cash flows from financing activities:
Net borrowings (repayments) on short-term
obligations (37,250) 24,440 (37,765)
Proceeds from long-term debt - - 49,750
Repayments of long-term debt (5,000) (11,740) (10,000)
Proceeds from sale of treasury stock 328 2,386 2,431
Repurchase of treasury stock (22,034) (17,777) (7,057)
Dividends paid (7,321) (7,574) (7,725)
-------- ------- -------
Net cash used in financing activities (71,277) (10,265) (10,366)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents (85) (474) 2,118
Cash and cash equivalents at beginning of year 3,786 4,260 2,142
-------- ------- -------
Cash and cash equivalents at end of year $ 3,701 3,786 4,260
-------- ------- -------
-------- ------- -------
Supplemental disclosure of cash flow information:
Cash paid (received) during the year for:
Interest $ 24,634 25,258 25,019
Income taxes (6,162) (2,602) 3,431
-------- ------- -------
-------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
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 U.S. Department
of Transportation and various state regulatory agencies.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three
months or less to be cash equivalents.
(d) TIRES IN SERVICE
The Company capitalizes tires placed in service on new revenue equipment as
a part of the equipment cost. Replacement tires and costs for recapping
tires are expensed at the time the tires are placed in service.
(e) PROPERTY AND EQUIPMENT
Depreciation of property and equipment is calculated on the straight-line
method over the estimated useful lives of 5 - 10 years for revenue and
service equipment, 10 to 40 years for structures and improvements, and 3
to 10 years for furniture and office equipment. Gains (losses) on
dispositions of revenue and other equipment, which are included in
depreciation expense, were approximately $(664,000), $7,949,000, and
$7,181,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
(f) REVENUE RECOGNITION
The Company recognizes revenue based on relative transit time in each
reporting period with expenses recognized as incurred.
(Continued)
19
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(g) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
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 and operating loss and tax credit carryforwards. 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. 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.
(h) EARNINGS PER SHARE
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, EARNINGS PER SHARE, on a retroactive basis,
which requires entities to report both basic earnings per share and
diluted earnings per share for all periods presented. A reconciliation
of the numerator and denominator of basic and diluted earnings (loss) per
share is shown below:
<TABLE>
For the year ended
-----------------------------------------
December 31, December 31, December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Basic earnings (loss) per share:
Numerator (net earnings
(loss)) $11,366,000 22,115,000 (2,170,000)
----------- ---------- ----------
----------- ---------- ----------
Denominator (weighted
average shares outstanding) 36,404,932 37,913,331 38,520,323
----------- ---------- ----------
----------- ---------- ----------
Earnings (loss) per share $ .31 .58 (.06)
------ --- ---
Diluted earnings (loss) per share:
Numerator (net earnings
(loss)) $11,366,000 22,115,000 (2,170,000)
----------- ---------- ----------
----------- ---------- ----------
Denominator:
Weighted average shares
outstanding 36,404,932 37,913,331 38,520,323
Effect of common stock
options 43,510 61,482 -
----------- ---------- ----------
36,448,442 37,974,813 38,520,323
----------- ---------- ----------
----------- ---------- ----------
Earnings (loss) per share $ .31 .58 (.06)
------ --- ---
</TABLE>
(Continued)
20
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Options to purchase shares of common stock that were outstanding during
1997 and 1996 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater than
the average market price of the common shares are shown in the table
below. None of the options outstanding during 1995 were included in the
computation of diluted earnings per share because they would have been
anti-dilutive.
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Number of shares under option 4,420,000 613,800
Range of exercise prices $15.63 - $24.63 $17.81 - $24.63
</TABLE>
(i) 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, 1997 and
1996, the Company had no significant concentrations of credit risk.
(j) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate swaps to hedge the effects of fluctuations
in interest rates. 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.
(k) FOREIGN CURRENCY TRANSLATION
Local currencies are generally considered the functional currencies outside
the United States. Assets and liabilities are translated at year-end
exchange rates for operations in local currency environments. Income and
expense items are translated at average rates of exchange prevailing
during the year.
Prior to January 1, 1997, foreign currency translation adjustments, which
reflect foreign currency exchange rate changes applicable to the net
assets of the Mexican operations, were recorded as a separate charge
against stockholders' equity. As of January 1, 1997, Mexico is
considered a highly inflationary economy as defined by SFAS No. 52,
FOREIGN CURRENCY TRANSLATION. Accordingly, the more stable currency of
the reporting parent (the Company) has been used, and the effect of
exchange rates resulting in translation adjustments have been recorded as
a component of net earnings for the year ended December 31, 1997.
(Continued)
21
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) MANAGEMENT INCENTIVE PLAN
Prior to January 1, 1996, the Company accounted for its management
incentive plan in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted the provisions of SFAS No. 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro forma net
earnings and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected
to continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123.
(m) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company continually evaluates the carrying value of its assets for
events or changes in circumstances which indicate that the carrying value
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
During 1995, the Company recorded special charges of approximately
$17,296,000 to reduce the carrying value of idle and under-performing
assets, primarily property and equipment and inventories associated with
the auto hauling operations. The effect of these charges reduced net
earnings for 1995 by approximately $10,896,000 ($.29 per share).
(n) YEAR 2000
In 1996, the Company developed a plan to deal with the Year 2000 problem
and began converting its computer systems to be Year 2000 compliant. The
plan provides for the conversion efforts to be completed by the end of
1998. The Year 2000 problem is the result of computer programs being
written using two digits rather than four to define the applicable year.
The total cost of the project is estimated to be $820,000 and is being
funded through operating cash flows. The Company is expensing all costs
associated with these systems changes as the costs are incurred. As of
December 31, 1997, approximately $325,000 had been expensed.
(Continued)
22
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(o) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare the consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(p) RECLASSIFICATIONS
To conform to the 1997 presentation, certain accounts for 1996 and 1995
have been reclassified. The reclassifications had no effect on net
earnings (loss) for either period.
(2) LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Commercial paper $132,500 169,750
Senior notes payable, interest at 6.25%
payable semiannually 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 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually 25,000 25,000
-------- -------
340,760 383,010
Less current maturities (17,500) (49,750)
Unamortized discount (470) (689)
-------- -------
$322,790 332,571
-------- -------
-------- -------
</TABLE>
Under its commercial paper note program, the Company is authorized to issue
up to $240 million in notes. These notes are supported by two credit
agreements, which aggregate $240 million, with a group of banks, of which
$120 million expires March 19, 1998 and $120 million expires March 20,
2002. The effective rate on the commercial note program was 5.69% and
6.18% for the years ended December 31, 1997 and 1996, respectively.
(Continued)
23
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The 6.25% senior notes are payable at maturity on September 1, 2003; the
7.84% senior notes are payable in annual installments of $5,000,000 on
March 31; the 7.80% senior subordinated notes are payable in five equal
annual installments beginning October 30, 2000; the 6.25% senior notes are
payable at maturity on November 17, 2000; and the 6.00% senior notes are
payable at maturity on December 12, 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 was in compliance with all of the financial covenants at December
31, 1997.
The Company has approximately $121 million of uncommitted lines of credit,
none of which were outstanding at December 31, 1997. 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.
Current maturities of long-term debt at December 31, 1997 consist of
outstanding commercial paper associated with the revolving credit agreement
which expires March 19, 1998 and one installment 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): 1998, $17,500; 1999,
$5,000; 2000, $60,000; 2001, $10,000; and 2002, $130,000.
(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 5,000,000 shares. At December 31, 1997 there were approximately
11,000 shares available for grant 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.
Prior to 1994, key employees were granted restricted options to purchase
stock. Vesting of the award generally occurred 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 resulted in forfeiture.
(Continued)
24
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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 of the common stock at the grant date. The options generally
vest over a ten year period and are forfeited if the employee terminates
for any reason.
Compensation expense (benefit) under the Plan is charged to earnings over the
vesting period and amounted to approximately $(78,000), $628,000, and
$1,100,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
A summary of the restricted and nonstatutory options to purchase Company
common stock follows:
<TABLE>
Weighted average Number
Number exercise price of shares
of shares per share exercisable
--------- --------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1994 1,334,461 $16.08 399,536
Granted 1,626,000 17.51
Exercised (116,980) 9.25
Terminated (117,750) 17.45
---------
Outstanding at December 31, 1995 2,725,731 17.16 415,606
Granted 493,000 17.34
Exercised (192,956) 13.39
Terminated (284,850) 17.32
---------
Outstanding at December 31, 1996 2,740,925 17.45 294,950
Granted 800,000 14.73
Exercised (57,650) 16.81
Terminated (443,350) 17.81
---------
Outstanding at December 31, 1997 3,039,925 16.70 274,225
--------- ----- -------
--------- ----- -------
</TABLE>
During 1995, the Board of Directors established a nonqualified stock option
plan to provide performance based compensation to the Chairman of the
Board. The plan allows the Chairman the option to purchase up to 2.5
million shares of the Company's common stock at a price of $17.63 per
share. These options vest after five years, except for special
circumstances in which the options vest earlier. The options must be
exercised within one year of vesting and all unexercised options will
terminate.
(Continued)
25
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net
earnings (loss) would have been reduced to the pro forma amounts indicated
below.
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) As reported $11,366 22,115 (2,170)
Pro forma 7,800 19,180 (2,820)
Basic earnings (loss) per share As reported .31 .58 (.06)
Pro forma .21 .51 (.07)
Diluted earnings (loss) per share As reported .31 .58 (.06)
Pro forma .21 .51 (.07)
</TABLE>
Pro forma net earnings (loss) reflects only options granted since December
31, 1994. Therefore, the full impact of calculating compensation costs for
stock options under SFAS No. 123 is not reflected in the pro forma net
earnings (loss) amounts presented above because compensation cost is
reflected over the options' vesting periods of 5 to 10 years and
compensation cost for options granted prior to January 1, 1995 is not
considered.
The per share weighted-average fair value of stock options granted during
1997, 1996 and 1995 was $6.86, $7.88 and $6.35, respectively, on the date
of grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1997 - expected dividend yield 1.1%,
volatility of 34.1%, risk-free interest rate of 5.8%, and an expected life
of 7.7 years; 1996 - expected dividend yield 1.4%, volatility of 34.8%,
risk-free interest rate of 6.2%, and an expected life of 5.6 years; 1995 -
expected dividend yield 1.4%, volatility of 34.8%, risk-free interest rate
of 5.6%, and an expected life of 5.6 years.
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
Options outstanding Options exercisable
--------------------------------------- ----------------------
Weighted Weighted Weighted
average average average
Range remaining exercise exercise
of exercise Options contractual price Options price
prices outstanding life (in years) per share exercisable per share
------ ----------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$11.58 - 14.00 348,450 4.9 $13.34 111,225 $12.73
14.01 - 18.75 4,815,725 5.9 17.10 77,300 16.23
18.76 - 23.00 358,250 7.1 20.72 76,950 21.44
23.01 - 24.63 17,500 5.5 23.82 8,750 23.82
-------------- --------- --- ------ ------- ------
$11.58 - 24.63 5,539,925 5.9 $17.12 274,225 $16.52
-------------- --------- --- ------ ------- ------
-------------- --------- --- ------ ------- ------
</TABLE>
(Continued)
26
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On January 21, 1998, the Company's Board of Directors declared a cash
dividend of $.05 per share payable on February 17, 1998 to shareholders of
record on February 3, 1998.
(4) INCOME TAXES
Total income tax expense (benefit) for the years ended December 31, 1997,
1996 and 1995 was allocated as follows (in thousands):
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Earnings (loss) before income taxes $6,966 13,554 (1,275)
Stockholders' equity, for tax benefit
(expense) of stock options exercised 54 (325) (301)
------ ------ ------
$7,020 13,229 (1,576)
------ ------ ------
------ ------ ------
</TABLE>
Income tax expense (benefit) attributable to earnings (loss) before income
taxes consists of (in thousands):
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current expense (benefit):
Federal $ (715) (5,830) (1,193)
State and local 268 783 1,164
------ ------ -------
(447) (5,047) (29)
------ ------ -------
Deferred expense (benefit):
Federal 7,096 20,366 (591)
State and local 317 (1,765) (655)
------ ------ -------
7,413 18,601 (1,246)
------ ------ -------
Total tax expense (benefit) $ 6,966 13,554 (1,275)
------ ------ -------
------ ------ -------
</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, 1997:
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income tax - statutory rate 35.00% 35.00 (35.00)
State tax, net of Federal benefit 2.07 (1.79) 9.60
Tax credits - (0.87) (9.65)
Other, net 0.93 3.92 (1.95)
----- ----- ------
Effective income tax rate 38.00% 38.00 (37.00)
----- ----- ------
----- ----- ------
</TABLE>
(Continued)
27
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1996 are presented below (in thousands):
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Claims accruals, principally due to accrual
for financial reporting purposes $(12,449) (16,288)
Tax credit carryforwards (7,321) (9,193)
Accounts receivable, principally due to
allowance for doubtful accounts (1,770) (5,410)
Other (3,518) (4,489)
-------- -------
Total gross deferred tax assets (25,058) (35,380)
-------- -------
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation and
capitalized interest 149,093 153,303
Prepaid permits and insurance, principally
due to write-offs for income tax purposes 4,846 6,709
Other 9,691 6,527
-------- -------
Total gross deferred tax liabilities 163,630 166,539
-------- -------
Net deferred tax liability $138,572 131,159
-------- -------
-------- -------
</TABLE>
The Company believes its history of profitability and taxable income and its
utilization of tax planning sufficiently supports the carrying amount of
the deferred tax assets. Accordingly, the Company has not recorded a
valuation allowance as all deferred tax benefits are more likely than not
to be realized.
At December 31, 1997, the Company had general business tax credit
carryforwards of approximately $2,621,000 expiring from the year 2007 to
2009, and alternative minimum tax credit carryforwards with no expiration
of approximately $4,700,000.
(5) EMPLOYEE BENEFIT PLANS
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. Beginning January 1, 1998,
employees will be eligible to participate immediately upon employment. The
Company matches a specified percentage of employee contributions, subject
to certain limitations. For the years ended December 31, 1997, 1996 and
1995, total Company contributions to the plan, including matching 401(k)
contributions, were $4,951,000, $3,450,000, and $3,394,000, respectively.
(Continued)
28
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS, 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>
At December 31, 1997 At December 31, 1996
----------------------- ----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 3,701 3,701 3,786 3,786
Accounts receivable 169,198 169,198 153,871 153,871
Trade accounts payable 138,509 138,509 92,078 92,078
Other assets 25,160 (a) 25,565 (a)
Long-term debt:
Commercial paper 132,500 132,500 169,750 169,750
Fixed rate obligations 207,790 204,889 212,571 208,966
Interest rate swap agreements - (198) - -
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
(a) The fair value for these assets either approximated carrying value because
of the nature of these instruments, or was impracticable to determine.
(Continued)
29
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) RELATED PARTY TRANSACTIONS
The Company advances premiums on life insurance policies on the lives of the
Company's principal stockholder and his wife. 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. The Company has a
guarantee from the stockholder for the amount of premiums paid by the
Company together with interest at the rate of 5% per annum. The amounts
reimbursable to the Company amount to approximately $5,408,000 and
$4,630,000 at December 31, 1997 and 1996, respectively. These amounts are
included in other assets in the accompanying consolidated balance sheets.
(8) COMMITMENTS AND CONTINGENCIES
The Company has committed to purchase approximately $115 million of revenue
and service equipment (net cost, after expected proceeds from sale or trade-
in allowances of approximately $24 million).
The Company is involved in certain claims and pending litigation arising from
the normal conduct of business. Based on the present knowledge of the
facts and, in certain cases, opinions of outside counsel, management
believes the resolution of claims and pending litigation will not have a
material adverse effect on the financial condition or results of operations
of the Company.
(9) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Included in the fourth quarter 1997 results is a pre-tax charge of $4.3
million to adjust workers compensation reserves. The additional workers
compensation expense was accrued as a result of an in-depth case by case
analysis.
Operating results by quarter for the years ended December 31, 1997 and 1996
are as follows (in thousands, except per share data):
<TABLE>
Quarter
---------------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
1997:
Operating revenues $365,401 385,198 388,460 415,233 1,554,292
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Operating income $ 7,320 9,254 9,038 17,298 42,910
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Net earnings $ 568 1,865 1,922 7,011 11,366
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Basic earnings per share $.02 .05 .05 .19 .31
---- --- --- --- ---
---- --- --- --- ---
Diluted earnings per share $.02 .05 .05 .19 .31
---- --- --- --- ---
---- --- --- --- ---
</TABLE>
(Continued)
30
<PAGE>
J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
Quarter
---------------------------------------------------------------
First Second Third Fourth Total
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
1996:
Operating revenues $354,014 372,573 378,739 381,422 1,486,748
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Operating income $ 10,432 17,436 17,433 15,062 60,363
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Net earnings $ 2,803 6,866 7,082 5,364 22,115
-------- ------- ------- ------- ---------
-------- ------- ------- ------- ---------
Basic earnings per share $.07 .18 .19 .14 .58
---- --- --- --- ---
---- --- --- --- ---
Diluted earnings per share $.07 .18 .19 .14 .58
---- --- --- --- ---
---- --- --- --- ---
</TABLE>
31
<PAGE>
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, 1997 involving a change of accountants or disagreements on
accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The schedule of directors is hereby incorporated by reference from the
Notice and Proxy Statement For Annual Stockholder's Meeting of April 16,
1998 set forth under section entitled "Proposal One Election of Directors".
EXECUTIVE OFFICERS
Information with respect to executive officers of the Company is set forth
in Item 4 of this Report under the caption "Executive Officers of the
Company".
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for Items 11 and 12 is hereby incorporated by
reference from the Notice and Proxy Statement For Annual Stockholders'
Meeting of April 16, 1998 set forth under sections entitled "Stock
Ownership," "Executive Compensation and Other Information," "1998
Performance Based Compensation," and "Compensation Committee Interlocks and
Insider Participation."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for Item 13 is hereby incorporated by reference
from Note (7) Related Party Transactions of the Notes to Consolidated
Financial Statements and from the Notice and Proxy Statement For Annual
Stockholders' Meeting of April 16, 1998 set forth under the section entitled
"Compensation Committee Interlocks and Insider Participation."
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").
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 6th day of March, 1998.
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
32
<PAGE>
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 6, 1998
- --------------------------- of Directors
John A. Cooper, Jr.
/s/ Fred K. Darragh, Jr. Member of the Board March 6, 1998
- --------------------------- of Directors
Fred K. Darragh, Jr.
/s/ Wayne Garrison Member of the Board March 6, 1998
- --------------------------- of Directors (Chairman)
Wayne Garrison
/s/ Gene George Member of the Board March 6, 1998
- --------------------------- of Directors
Gene George
/s/ Thomas L. Hardeman Member of the Board March 6, 1998
- --------------------------- of Directors
Thomas L. Hardeman
/s/ J. Bryan Hunt, Jr. Member of the Board March 6, 1998
- --------------------------- of Directors (Vice Chairman)
J. Bryan Hunt, Jr.
/s/ J.B. Hunt Member of the Board March 6, 1998
- --------------------------- of Directors (Senior Chairman)
J.B. Hunt
/s/ Johnelle Hunt Member of the Board March 6, 1998
- --------------------------- of Directors (Corporate
Johnelle Hunt Secretary)
/s/ Lloyd E. Peterson Member of the Board March 6, 1998
- --------------------------- of Directors
Lloyd E. Peterson
/s/ Kirk Thompson Member of the Board March 6, 1998
- --------------------------- of Directors (President and
Kirk Thompson Chief Executive Officer)
33
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- -------------------------------------------------------------------------
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 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 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
- Servicios de Logistica de Mexico, S.A. de C.V., a Mexican
corporation
- Servicios Administratios de Logistica, S.A. de C.V., a Mexican
corporation
- Asesoria Administrativa de Logistica, S.A. de C.V., a Mexican
corporation.
- Lake City Express, Inc., an Arkansas Corporation
- FIS, Inc., a Nevada corporation
23 Consent of KPMG Peat Marwick LLP
27 A Financial Data Schedule for the year ended December 31, 1997.
34
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,701
<SECURITIES> 0
<RECEIVABLES> 169,198
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199,952
<PP&E> 1,217,478
<DEPRECIATION> 420,671
<TOTAL-ASSETS> 1,021,919
<CURRENT-LIABILITIES> 205,088
<BONDS> 0
0
0
<COMMON> 390
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,021,919
<SALES> 1,554,292
<TOTAL-REVENUES> 1,554,292
<CGS> 0
<TOTAL-COSTS> 1,511,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,578
<INCOME-PRETAX> 18,332
<INCOME-TAX> 6,966
<INCOME-CONTINUING> 11,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,366
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
