<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 SEPTEMBER 30, 2000
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 SEPTEMBER 30, 2000 WAS 35,165,323.
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim condensed 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 and nine month
periods ended September 30, 2000 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 2000.
The interim condensed consolidated financial statements have been
reviewed by KPMG LLP, independent public accountants.
These interim condensed 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, 1999.
INDEX
<TABLE>
<S> <C>
Condensed Consolidated Statements of Earnings for the Three
and Nine Months Ended September 30, 2000 and 1999............................. Page 3
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999...................................... Page 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999................................. Page 5
Notes to Condensed Consolidated Financial Statements
as of September 30, 2000...................................................... Page 6
Review Report of KPMG LLP.............................................................. Page 10
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition....................................................... Page 11
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk............................. Page 18
</TABLE>
2
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-----------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 509,422 $ 523,901 $ 1,626,478 $ 1,491,699
Operating expenses
Salaries, wages and employee benefits 190,995 181,206 571,153 530,068
Rents and purchased transportation 140,997 179,958 545,226 485,591
Fuel and fuel taxes 61,282 44,305 176,156 120,226
Depreciation 34,244 38,129 98,911 114,563
Operating supplies and expenses 35,505 34,922 96,844 93,165
Insurance and claims 9,459 11,410 28,676 29,405
Operating taxes and licenses 8,390 6,694 24,383 20,259
General and administrative expenses 6,178 7,268 21,245 22,084
Communication and utilities 6,555 5,233 18,167 15,895
-----------------------------------------------------------------------------------------------------------------
Total operating expenses 493,605 509,125 1,580,761 1,431,256
-----------------------------------------------------------------------------------------------------------------
Operating income 15,817 14,776 45,717 60,443
Interest expense 6,813 7,166 19,666 21,926
Equity in earnings of associated companies 548 198 3,584 2,945
-----------------------------------------------------------------------------------------------------------------
Earnings before income taxes 9,552 7,808 29,635 41,462
Income taxes 429 2,850 4,445 15,134
-----------------------------------------------------------------------------------------------------------------
Net earnings $ 9,123 $ 4,958 $ 25,190 $ 26,328
=================================================================================================================
Average basic shares outstanding 35,161 35,635 35,359 35,625
=================================================================================================================
Basic earnings per share $ 0.26 0.14 $ 0.71 $ 0.74
=================================================================================================================
Average diluted shares outstanding 35,280 35,692 35,478 35,957
=================================================================================================================
Diluted earnings per share $ 0.26 0.14 $ 0.71 $ 0.73
=================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,147 $ 12,606
Accounts receivable 225,335 238,573
Prepaid expenses 55,855 43,962
------------------------------------------------------------------------------------------------
Total current assets 290,337 295,141
------------------------------------------------------------------------------------------------
Property and equipment 1,281,682 1,239,394
Less accumulated depreciation 475,176 453,509
------------------------------------------------------------------------------------------------
Net property and equipment 806,506 785,885
------------------------------------------------------------------------------------------------
Investments and other assets 57,485 46,438
------------------------------------------------------------------------------------------------
$ 1,154,328 $ 1,127,464
================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 64,109 $ 60,000
Trade accounts payable 137,428 180,009
Claims accruals 4,687 788
Accrued payroll 31,128 19,462
Other accrued expenses 11,625 10,371
------------------------------------------------------------------------------------------------
Total current liabilities 248,977 270,630
------------------------------------------------------------------------------------------------
Long-term debt 300,174 267,639
Claims accruals 5,436 7,368
Deferred income taxes 182,781 180,441
Stockholders' equity 416,960 401,386
------------------------------------------------------------------------------------------------
$ 1,154,328 $ 1,127,464
================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 25,190 $ 26,328
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 98,911 114,563
Provision for noncurrent deferred income taxes 2,341 11,766
Equity in earnings of associated companies (3,584) (2,945)
Tax benefit of stock options exercised 7 55
Forefeiture of restricted stock 0 (18)
Amortization of discount, net 135 461
Changes in assets and liabilities:
Trade accounts receivable 13,238 (40,938)
Prepaid expenses (11,893) (7,027)
Trade accounts payable (42,581) 35,333
Claims accruals 1,967 (3,807)
Accrued payroll and other accrued expenses 12,920 655
--------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 96,651 134,426
--------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (235,186) (133,626)
Proceeds from sale of equipment 115,654 18,922
Investment in associated company (5,000) 0
Increase in investments and other assets (3,080) (24,316)
--------------------------------------------------------------------------------------------------------
Net cash used in investing activities (127,612) (139,020)
--------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under commercial paper program 17,309 7,950
Net borrowings (payments) of long-term debt 19,200 (5,000)
Repurchase of treasury stock (7,576) 0
Proceeds from sale of treasury stock 351 580
Dividends paid (1,782) (5,346)
--------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 27,502 (1,816)
--------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (3,459) (6,410)
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,606 9,227
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 9,147 $ 2,817
========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 21,012 $ 23,742
Income taxes 639 295
Contribution of assets to associated company 2,927 0
========================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
J.B. HUNT TRANSPORT SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) The interim condensed consolidated financial statements at September 30, 2000
and for the three and nine months ended September 30, 2000 and 1999 are
unaudited and include all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of
financial position and operating results. The unaudited condensed consolidated
financial statements have been prepared in accordance with Rule 10-01 of
Regulation S-X and, therefore, do not contain all information and footnotes
normally contained in annual financial statements. Accordingly, they should be
read in conjunction with the financial statements and notes thereto appearing in
the annual report on Form 10-K of the Company for the year ended December 31,
1999.
2) The results of operations for the three and nine months ended September 30,
2000 are not necessarily indicative of those to be expected for the calendar
year ending December 31, 2000.
3) LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
9/30/2000 12/31/1999
--------- ----------
<S> <C> <C>
Commercial paper $ 48,200 $ 35,000
Senior notes payable, interest at 6.25%
payable semiannually, due 11/17/2000 25,000 25,000
Senior notes payable, interest at 6.00%
payable semiannually, due 12/12/2000 25,000 25,000
Senior notes payable, interest at 6.25%
payable semiannually, due 9/1/2003 98,260 98,260
Senior notes payable, interest at 7.00%
payable semiannually, due 9/15/2004 95,000 95,000
Senior subordinated notes, interest at 7.80%
payable semiannually 50,000 50,000
Capitalized lease obligations 23,309 --
-------- --------
364,769 328,260
Less current maturities (64,109) (60,000)
Unamortized discount (486) (621)
-------- --------
$300,174 $267,639
======== ========
</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 6, 2001 and $120 million expires March 20, 2002.
6
<PAGE>
4) 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:
<TABLE>
<CAPTION>
Weighted average Number of
Number of exercise price shares
shares per share exercisable
--------- ----------------- -----------
<S> <C> <C> <C>
Outstanding at December 31, 1999 3,737,565 $16.65 551,940
=======
Granted 746,000 13.06
Exercised (28,550) 13.02
Terminated (134,950) 16.14
--------- ------
Outstanding at September 30, 2000 4,320,065 $16.07 915,350
========= ====== =======
</TABLE>
The Company announced in February of 2000, a decision to discontinue a
policy of paying dividends and an intent to use those funds to repurchase up to
500,000 shares of its common stock. These shares were repurchased during the
first six months of 2000.
5) EARNINGS PER SHARE
A reconciliation of the numerator and denominator of basic and diluted
earnings per share is shown below:
<TABLE>
<CAPTION>
(in thousands, except per share data)
------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ -----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator (net earnings) $ 9,123 $ 4,958 $25,190 $26,328
Denominator - Basic earnings per share
Weighted average shares outstanding 35,161 35,635 35,359 35,625
======= ======= ======= =======
Basic earnings per share $ .26 $ .14 $ .71 $ .74
======= ======= ======= =======
Denominator - Diluted earnings per share
Weighted average share outstanding 35,161 35,635 35,359 35,625
Effect of common stock options 119 57 119 332
------- ------- ------- -------
Weighted average shares assuming dilution 35,280 35,692 35,478 35,957
======= ======= ======= =======
Diluted earnings per share $ .26 $ .14 $ .71 $ .73
======= ======= ======= =======
</TABLE>
Options which were outstanding to purchase shares of common stock
during the periods indicated above, but were excluded from the computation of
diluted earnings per share because the option price was greater than the average
market price of the common shares were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of shares under option 2,852,965 4,754,115 2,840,465 623,675
Range of exercise price $14.19-$37.50 $15.00-$37.50 $14.25-$37.50 $18.75-$37.50
</TABLE>
6) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings and foreign currency
translation adjustments. During the three and nine months ended September 30,
2000 and 1999, comprehensive income was equal to (in thousands):
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<C> <C> <C> <C> <C>
Net earnings $9,123 $4,958 $25,190 $26,328
Foreign currency
translation (loss) gain 412 430 (616) 374
--------- --------- --------- ---------
Comprehensive income $9,535 $5,388 $24,574 $26,702
========= ========= ========= =========
</TABLE>
7) INCOME TAXES
The effective income tax rates were approximately 4% for the three
months ended September 30, 2000 and 15% for the nine months ended September 30,
2000, compared with 36.5% for both comparable periods in 1999. The primary
reasons for the decrease in the current year's effective income tax rates were
two sale and lease back transactions and a change in the expected effective rate
for the full year 2000 from 20% during the second quarter to 15% during the
third quarter.
8) BUSINESS SEGMENTS
The Company had four reportable business segments during the first nine
months of 2000. Segments included Truck (JBT), Intermodal (JBI), Dedicated
Contract Services (DCS) and Logistics (JBL). JBT business includes full
truck-load, dry-van freight which is typically transported utilizing
company-owned or controlled revenue equipment. This freight is typically
transported over roads and highways and does not move by rail. The JBI segment
includes freight which is transported by rail over at least some portion of the
movement and also includes certain repositioning truck freight moved by JBI
equipment or third-party carriers, when such highway movement is intended to
direct JBI equipment back toward intermodal operations. The JBT and JBI business
segments were operated in combined fashion (formally reported as Van/Intermodal
in prior periods) and limited identifiable comparative information is available
for JBT and JBI prior to January 1, 2000. Accordingly, the Company has provided
comparable segment information for the three and nine months ended September 30,
2000 based on the prior segmentation, which included JBT and JBI as the former
segment, "Van/Intermodal."
DCS segment business typically includes company-owned revenue equipment
and employee drivers which are assigned to a specific customer, traffic lane or
service. DCS operations usually include formal, written long-term agreements or
contracts which govern services performed and applicable rates.
The JBL business segment prior to July 1, 2000, included a wide range
of comprehensive transportation and freight management services. Such services
included experienced professional managers, information and optimization
technology and the actual design or redesign of freight system solutions. JBL
utilized JBT, JBI or DCS owned or controlled assets and employees, or
third-party carriers, or a combination to meet customer service requirements.
JBL services typically were provided in accordance with written long-term
agreements. Effective July 1, 2000, the Company, along with five other motor
carriers, contributed all of its non-asset based logistics business into a new
joint venture, Transplace.com. This contribution included all of the Company's
JBL segment business and all related intangible assets, plus $5.0 million of
cash, in exchange for an approximate 27% initial membership interest in
Transplace.com. As a result of this transaction, effective July 1, 2000, the
Company did not report JBL segment revenue, expenses and operating income as
components of its consolidated statements of earnings. Effective July 1, 2000,
the Company began reporting its approximate 27% interest in Transplace.com
utilizing the equity method of accounting. No gain or loss was recognized upon
formation and contribution of JBL segment assets to Transplace.com. The
Company's share of Transplace.com's results of operations and its share of
Mexican joint venture operating results were reported on a one-line,
non-operating item on the condensed consolidated statements of earnings for the
three and nine months ended September 30, 2000 and 1999. A summary of certain
segment information is presented below (in millions):
8
<PAGE>
<TABLE>
<CAPTION>
Assets
--------------------
As of September 30
--------------------
2000 1999
------- -------
<S> <C> <C>
JBT $ 816 $ --
JBI 108 --
------- -------
Van/Intermodal 924 913
DCS 128 88
JBL 15 63
Other (includes corporate and
intersegment eliminations) 87 177
------- -------
Total $1,154 $1,241
======= =======
</TABLE>
<TABLE>
<CAPTION>
Revenues
----------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
JBT $209 $191 $ 615 $ 566
JBI 178 167 495 482
------- ------- ------- -------
Van/Intermodal 387 358 1,110 1,048
DCS 128 83 344 230
JBL 1 104 230 272
------- ------- ------- -------
Subtotal 516 545 1,684 1,550
Inter-segment eliminations (7) (21) (58) (58)
------- ------- ------- -------
Total $509 $524 $1,626 $1,492
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
----------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
JBT $(2.0) $ -- $(5.4) $ --
JBI 10.4 -- 27.5 --
------- ------- ------- -------
Van/Intermodal 8.4 6.8 22.1 38.5
DCS 8.0 4.5 21.7 15.7
JBL .2 3.2 7.2 6.9
Other (includes corporate) (.8) .3 (5.3) (.7)
------- ------- ------- -------
Total $15.8 $14.8 $45.7 $60.4
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Net Depreciation Expense
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
JBT $16.8 $ -- $49.6 $ --
JBI 5.9 -- 17.7 --
------- ------- ------- -------
Van/Intermodal 22.7 29.3 67.3 86.6
DCS 9.6 6.8 26.3 19.6
JBL -- .3 .5 .9
Other (includes corporate) 1.9 1.7 4.8 7.5
------- ------- ------- -------
Total $34.2 $38.1 $98.9 $114.6
======= ======= ======= =======
</TABLE>
9) RECLASSIFICATIONS
Certain amounts for 1999 have been reclassified to conform to the 2000
classifications.
9
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
J.B. Hunt Transport Services, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of September 30, 2000, and the
related condensed consolidated statements of earnings for the three and nine
months ended September 30, 2000 and 1999, and the condensed consolidated
statements of cash flows for the nine months ended September 30, 2000 and 1999.
These condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical 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
auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of J.B.
Hunt Transport Services, Inc. and subsidiaries as of December 31, 1999, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 4, 2000, 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, 1999, is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ KPMG LLP
-----------------------
Tulsa, Oklahoma
October 13, 2000
10
<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 condensed 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, 1999 and Management's Discussion and
Analysis of Results of Operations and Financial Condition included in the 1999
Annual Report to Shareholders.
RESULTS OF OPERATIONS
COMPARISON OF THIRD QUARTER 2000 TO THIRD QUARTER 1999
SUMMARY
Consolidated operating revenues for the third quarter of 2000 were $509
million, compared with $524 million during the third quarter of 1999. The lower
revenue reflected the previously announced contribution of all the Company's JBL
segment logistics business to the jointly owned logistics company,
Transplace.com. Adjusted for this contributed logistics business, which was
effective July 1, 2000, the revenue growth for the third quarter of 2000 was
approximately 21%. While the Company's results of operations includes
approximately 27% of Transplace.com's net results of operations, all JBL segment
revenue will be excluded from the Company's financial statements subsequent to
June 30, 2000.
JBT segment revenue, which consists primarily of full truckload, dry-van
freight, increased 9%, to $209 million, during the third quarter of 2000. Prior
to January 1, 2000, the JBT and JBI units had been operated and reported
together as the Van/Intermodal segment. Accordingly, the only identifiable
comparative segment information for JBT and JBI prior to January 1, 2000, is
revenue. The JBT tractor fleet totaled 5,770 at September 30, 2000. Revenue
growth in this segment was reduced by the transfer of some revenue equipment to
the DCS segment during the current quarter. Revenue per loaded mile in the JBT
segment, exclusive of fuel surcharges, rose 3.3% in the current quarter,
compared with the third quarter of 1999.
JBI segment business, which includes primarily truckload freight
transported by rail and some repositioning truck freight, grew 7% to $178
million, during the third quarter of 2000. The JBI tractor fleet totaled 846 at
September 30, 2000. Intermodal revenue per loaded mile, exclusive of fuel
surcharges, increased approximately .7% in the current quarter, compared with
the third quarter of 1999
DCS segment business primarily includes services with company-owned
revenue equipment and employee drivers assigned to specific customers or traffic
lanes. During the third quarter of 2000, DCS revenue grew 54%, to $128 million,
from $83 million, in the comparable period of 1999. A portion of the DCS segment
revenue growth was due to transfers of equipment and drivers from the JBT
business segment. The DCS tractor fleet totaled 3,793 units at September 30,
2000. Margins in the DCS segment increased during the third quarter of 2000,
partly due to the recovery of fuel costs through fuel surcharge revenues.
11
<PAGE>
As previously mentioned, all JBL segment business was contributed to
Transplace.com effective July 1, 2000. The small amount of revenue and operating
income reported in the JBL segment for the third quarter of 2000 was primarily
due to differences between accruals and estimates versus final amounts,
determined during the current quarter. During the third quarter of 2000, the
Company recognized approximately $340,000 and $208,000 of equity in earnings of
associated companies from Transplace.com and it's Mexican operations,
respectively. Approximately $198,000 of equity in earnings was recognized during
the third quarter of 1999 from Mexican operations.
Summary of Operating Segments Results
For Three Months Ended September 30
(dollars in millions)
<TABLE>
<CAPTION>
Gross Revenue Operating Income
------------------------------- ----------------------
2000 1999 % Change 2000 1999
----- ----- -------- ------ ------
<S> <C> <C> <C> <C> <C>
JBT $209 $191 9 % $(2.0) --
JBI 178 167 6 % 10.4 --
----- ----- ----- ------ ------
Van/Intermodal 387 358 8 % 8.4 $6.8
DCS 128 83 54 % 8.0 4.5
JBL 1 104 -- .2 3.2
Other -- -- -- (.8) .3
----- ----- ----- ------ ------
Subtotal 516 545 (5)% 15.8 14.8
Inter-segment eliminations (7) (21) -- -- --
----- ----- ----- ------ ------
Total $509 $524 (3)% $15.8 $14.8
===== ===== ===== ====== ======
</TABLE>
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the percentage
increase or decrease of those items as compared with the prior period.
<TABLE>
<CAPTION>
Three Months Ended September 30
----------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------- -----------------
2000 1999 2000 VS. 1999
-------- -------- -----------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% (2.8)%
Operating expenses
Salaries, wages and employee benefits 37.5% 34.6% 5.4 %
Rents and purchased transportation 27.7% 34.3% (21.7)%
Fuel and fuel taxes 12.0% 8.4% 38.3 %
Depreciation 6.7% 7.3% (10.2)%
Operating supplies and expenses 7.0% 6.7% 1.7 %
Insurance and claims 1.9% 2.2% (17.1)%
Operating taxes and licenses 1.6% 1.3% 25.3 %
General and administrative expenses 1.2% 1.4% (15.0)%
Communication and utilities 1.3% 1.0% 25.3 %
-------------------- ---------
Total operating expenses 96.9% 97.2% (3.0)%
-------------------- ---------
Operating income 3.1% 2.8% 7.0 %
Interest expense 1.3% 1.3% (4.9)%
Equity in earnings of associated companies 0.1% 0.0% 176.8 %
-------------------- ---------
Earnings before income taxes 1.9% 1.5% 22.3 %
Income taxes 0.1% .5% (84.9)%
Net earnings 1.8% 1.0% 84.0 %
-------------------- ---------
</TABLE>
12
<PAGE>
Total operating expenses for the third quarter of 2000 decreased 3.0%
from the comparable period of 1999. As previously discussed, operating
revenues decreased 2.8% during the same period. These comparisons were
impacted by the contribution of the JBL segment business to Transplace.com,
effective July 1, 2000. The Company's operating ratio improved slightly to
96.9% during the third quarter of 2000, compared with 97.2% in 1999.
Salaries, wages and employee benefits increased 5.4% during the current
quarter and rose to 37.5% of revenue in 2000, from 34.6% in 1999. These
increases were primarily due to increases in driver compensation and medical
insurance costs. The increase as a percentage of revenue was partly a result
of the contribution of the non-asset based JBL segment business to an
associated company during the current quarter. The higher level of driver
compensation in 2000 was due to changes in the mix of drivers and not a pay
rate change. Rents and purchased transportation declined 21.7% and decreased
as a percentage of revenue. This decrease was partly due to the contribution
of the JBL segment business. This decline in purchased transportation expense
was partly offset by increases in drayage and revenue equipment rents.
Transactions to sell and leaseback or rent certain trailing equipment, which
closed in the fourth quarter of 1999 and the third quarter of 2000, resulted
in higher revenue equipment rent and lower depreciation expense. Fuel and
fuel taxes expense rose 38.3% during the current quarter, driven by a 30%
higher cost per gallon and slightly lower fuel miles per gallon. Fuel
surcharges, which were initiated in late 1999, recovered the majority of the
increased fuel cost relative to the third quarter of 1999.
Depreciation expense declined 10.2% during the third quarter of 2000,
primarily due to the sale and leaseback transaction which closed in late 1999.
Insurance and claims expense declined 17.1%, primarily due to lower liability
and accident costs. The 25.3% increase in operating taxes and license expense
was due to the larger size of the tractor fleet and a higher state base plate
cost per tractor in 2000. The 15.0% decrease in general and administrative costs
was partly due to certain support service charges which were charged to
Transplace.com and lower professional fees and bad debt expenses, partly offset
by higher driver recruiting and increased computer rental expense. Communication
and utility costs were up 25.3%, primarily due to expanded data and
telecommunication networks and higher satellite communication expenses. Interest
expense declined 4.9%, primarily due to reduced debt levels associated with the
sale and leaseback transactions. The effective income tax rates were
approximately 4% in the third quarter of 2000 and 36.5% in the comparable period
of 1999. The primary reasons for the decrease in the current quarter's effective
income tax rate were two sale and lease back transactions and a change in the
expected effective rate for the full year 2000 from 20% during the second
quarter to 15% during the third quarter.
As a result of the above, net earnings for the third quarter of 2000
increased to $9.1 million, or diluted earnings per share of $.26, compared with
$5.0 million, or $.14 per diluted share, in 1999.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
SUMMARY
Consolidated operating revenues for the nine months ended September 30,
2000 increased 9.0%, to $1.626 billion, from $1.492 billion in 1999. This
increase in revenue was 15%, adjusted for the contributed JBL business. Revenue
in the JBT segment increased approximately 9%, to $615 million in 2000, from
$566 million in 1999. Revenue growth in this segment was reduced by the transfer
of some revenue equipment to the DCS segment during the period. Revenue per
loaded mile in the JBT segment, exclusive of fuel surcharges, rose 3.7% during
the first nine months of 2000, compared with the same period in 1999.
13
<PAGE>
JBI segment business grew approximately 3%, to $495 million during the
first nine months of 2000, from $482 million in the comparable period of 1999.
Intermodal revenue per loaded mile during the first nine months of 2000,
exclusive of fuel surcharges, were essentially flat when compared with the same
period in 1999.
DCS segment revenue grew approximately 50% during the first nine months
of 2000, to $344 million, from $230 million in 1999. A portion of this segment
revenue growth was due to transfers of equipment and drivers from the JBT
business segment. Operating income was $21.7 million during the first nine
months of 2000, compared with $15.7 million in 1999. This increase was due
primarily to higher segment revenue.
As previously mentioned, all JBL segment business was contributed to
Transplace.com effective July 1, 2000. Substantially all of the $230 million of
JBL revenue reported for the first nine months of 2000 was generated between
January 1, 2000 and June 30, 2000. While the Company's results of operations
includes approximately 27% of Transplace.com's net results of operations, all
JBL revenue will be excluded from the Company's financial statements subsequent
to June 30, 2000.
<TABLE>
<CAPTION>
Summary of Operating Segments Results
For Nine Months Ended September 30
(dollars in millions)
Gross Revenue Operating Income
------------------------------- --------------------
2000 1999 % Change 2000 1999
------ ------ -------- ----- -----
<S> <C> <C> <C> <C> <C>
JBT $ 615 $ 566 9 % $(5.4) --
JBI 495 482 3 % 27.5 --
------ ------ ---- ----- -----
Van/Intermodal 1,110 1,048 6 % 22.1 $38.5
DCS 344 230 50 % 21.7 15.7
JBL 230 272 (15)% 7.2 6.9
Other -- -- -- (5.3) (.7)
------ ----- ----- ----- -----
Subtotal 1,684 1,550 9 % 45.7 60.4
Inter-segment eliminations (58) (58) -- -- --
------ ------ ----- ----- -----
Total $1,626 $1,492 9 % $45.7 $60.4
====== ====== ===== ===== =====
</TABLE>
14
<PAGE>
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percentage of operating revenues and the percentage
increase or decrease of those items as compared with the prior period.
<TABLE>
<CAPTION>
Nine Months Ended September 30
----------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------- -----------------
2000 1999 2000 VS. 1999
---- ---- -------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 9.0 %
Operating expenses
Salaries, wages and employee benefits 35.1% 35.5% 7.8 %
Rents and purchased transportation 33.5% 32.5% 12.2 %
Fuel and fuel taxes 10.8% 8.1% 46.5 %
Depreciation 6.1% 7.7% (13.7)%
Operating supplies and expenses 6.0% 6.2% 3.9 %
Insurance and claims 1.8% 2.0% (2.5)%
Operating taxes and licenses 1.5% 1.3% 20.4 %
General and administrative expenses 1.3% 1.5% (3.8)%
Communication and utilities 1.1% 1.1% 14.3 %
-------------------- ---------
Total operating expenses 97.2% 95.9% 10.4 %
-------------------- ---------
Operating income 2.8% 4.1% (24.4)%
Interest expense 1.2% 1.5% (10.3)%
Equity in earnings of associated companies 0.2% 0.2% 21.7 %
-------------------- ---------
Earnings before income taxes 1.8% 2.8% (28.5)%
Income taxes 0.3% 1.0% (70.6)%
-------------------- ---------
Net earnings 1.5% 1.8% (4.3)%
-------------------- ---------
</TABLE>
Total operating expenses for the nine month period ended September 30,
2000 increased 10.4% over the comparable period of 1999. As previously
discussed, operating revenues increased 9.0% during this same period. These
comparisons were impacted by the contribution of the JBL segment business to
Transplace.com, effective July 1, 2000. The Company's operating ratio
increased to 97.2% during the first nine months of 2000, compared with 95.9%
in 1999. Salaries, wages and employee benefits increased 7.8% during the
first nine months of 2000, but declined slightly as a percentage of revenue.
The increase in the dollar amount of this expense category was partly due to
increases in driver compensation and higher costs of medical insurance. The
slight decline in percentage of revenue was primarily due to growth of the
non-asset based JBL business during the first six months of 2000 and growth
of the JBI business. The higher level of driver compensation in 2000 was due
to changes in the mix of drivers and not a pay rate change. Rents and
purchased transportation expense increased 12.2% and increased as a
percentage of revenue. This increase was due primarily to the additional use
of third-party dray carriers and higher revenue equipment rental expense. A
transaction to sell and leaseback certain trailing equipment, which closed in
late 1999, increased equipment rent and decreased depreciation expense. Fuel
and fuel tax expense increased 46.5% and increased as a percentage of
revenue, driven by a 39% higher cost per gallon and slightly lower fuel miles
per gallon. Fuel surcharges, which were initiated in late 1999, recovered
approximately 77% of higher fuel costs during the nine months ended September
30, 2000.
15
<PAGE>
Depreciation expense declined 13.7% and also declined as a percentage of
revenue, primarily due to the sale and leaseback transactions previously
discussed. Operating supplies and expenses and insurance and claims costs
remained relatively consistent in proportion to revenue during 2000 and 1999.
The 20.4% increase in operating taxes and licenses expense was due to the larger
size of the tractor fleet and a higher state base plate cost per tractor in
2000. Communication and utility costs were up 14.3%, primarily due to expanded
data and telecommunication networks and higher satellite communication expenses.
Interest expense declined 10.3% in 2000, primarily due to reduced debt levels
associated with the sale and leaseback transactions. The effective income tax
rates were approximately 15% in 2000 and 36.5% in 1999. These were the effective
rates expected for the full year 2000 and 1999, respectively. The primary reason
for the decrease in the effective income tax rate was the sale and leaseback
transaction, which closed in late 1999.
As a result of the above, net earnings for the nine months ended
September 30, 2000 were $25.2 million, or diluted earnings per share of $.71,
compared with $26.3 million, or $.73 per diluted share, in 1999.
LIQUIDITY AND CAPITAL RESOURCES
This discussion of corporate liquidity and capital resources should be
read in conjunction with information presented in the Condensed Consolidated
Statements of Cash Flows and the Condensed Consolidated Balance Sheets.
Net cash provided by operating activities was $96.7 million for the first
nine months of 2000, compared with $134.4 million provided during the same
period of 1999. This decrease in net cash provided was primarily due to funds
used for prepaid expenses and trade accounts payable, partly offset by cash
generated from accounts receivable, claims accruals and accrued payroll and
other accrued expenses. In addition, net earnings, depreciation expense and the
provision for noncurrent deferred income taxes all declined in 2000. As
previously discussed, the lower depreciation expense was due to the sale and
leaseback of certain trailing equipment. Net cash used in investing activities
was $127.6 million in 2000, down from $139.0 million in 1999. Additions to
property and equipment were up significantly during 2000. New tractor purchases
totaled approximately 1,860 during the first nine months of 2000, compared with
about 1,120 in 1999. This increase in capital spending for tractors was offset
by reduced purchases of trailing equipment and the conversion of approximately
$66 million of trailing equipment from owned to leased in September of 2000. The
Company also commenced tractor leasing programs in July of 2000 and anticipates
leasing a significant number of new tractor acquisitions during the remainder of
year 2000 and in 2001. Financing activities generated $27.5 million during the
first nine months of 2000, compared with a use of $1.8 million in 1999.
Financing activities included net borrowings of $36.5 million, $7.6 million used
to repurchase treasury stock and $1.8 million paid out in dividends. The Company
announced in February of 2000, an intent to cease the payment of dividends and
to utilize those funds to purchase additional treasury stock. The purchase of
additional treasury stock was completed during the first six months of 2000.
16
<PAGE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
As of
---------------------------------------------------------------------
September 30, 2000 December 31, 1999 September 30, 1999
------------------ ----------------- ------------------
<S> <S> <C> <C>
Working capital ratio 1.17 1.09 1.11
Current maturities of long-
term debt (millions) $ 64 $ 60 $ 19
Total debt (millions) $ 364 $ 328 $ 437
Total debt to equity .87 .82 1.10
Total debt as a percentage
of total capital .47 .45 .52
</TABLE>
The Company's total debt levels increased approximately $36 million from
December 31, 1999 to September 30, 2000. As of September 30, 2000, the Company
had intentions to acquire or lease approximately $405 million of revenue and
service equipment net of expected proceeds from sale or trade-in allowances. As
previously discussed, the Company has been leasing significant portions of its
tractor and trailing equipment since July of 2000. Funding for future
acquisitions of revenue equipment is expected to come from cash generated from
operations, existing borrowing facilities and rental or leasing arrangements.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, as amended, ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement requires the
recognition of all derivatives in the statement of financial position as either
assets or liabilities and their measurement at fair value. Statement No. 133 is
effective for fiscal years beginning after June 15, 2000. The Company has not
completed its analysis of Statement No. 133, but does not expect adoption on
January 1, 2001 to have a material effect on results of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q may contain statements that may constitute
"forward-looking statements." Such statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Shareholders and prospective investors are cautioned that actual results and
experience may differ materially from the forward-looking statements as a result
of many factors, possibly including changes in general economic conditions, fuel
prices, driver availability and other items as described in periodic Company
filings with the SEC, including the annual report filed on Form 10-K for the
year ended December 31, 1999.
YEAR 2000
As of the date of this filing, the Company had not experienced any
material Year 2000 problems or disruptions with internal systems, nor had any
material problems or disruptions been experienced with customers or suppliers.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's earnings are affected by changes in short-term interest
rates as a result of its issuance of short-term commercial paper. The Company
from time to time utilizes interest rate swaps to mitigate the effects of
interest rate changes; none were outstanding at September 30, 2000. Risk can be
estimated by measuring the impact of a near-term adverse movement of 10% in
short-term market interest rates. If short-term market interest rates average
10% more during the next twelve months, there would be no material adverse
impact on the Company's results of operations based on variable rate debt
outstanding at September 30, 2000. At September 30, 2000, the fair value of the
Company's fixed rate long-term obligations approximated carrying value.
Although the Company conducts business in foreign countries,
international operations are not material to the Company's consolidated
financial position, results of operations or cash flows. Additionally, foreign
currency transaction gains and losses were not material to the Company's results
of operations for the three and nine months ended September 30, 2000.
Accordingly, the Company is not currently subject to material foreign currency
exchange rate risks from the effects that exchange rate movements of foreign
currencies would have on the Company's future costs or on future cash flows it
would receive from its foreign investment. To date, the Company has not entered
into any foreign currency forward exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None applicable.
ITEM 2. CHANGES IN SECURITIES
None applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None applicable.
ITEM 5. OTHER INFORMATION
On November 1, 2000, Moody's Investors Service announced that it
had placed the Company's Baa2 Senior unsecured and Prime-2
short-term ratings under review for possible downgrade.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
18
<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: November 13, 2000 BY: /s/ Kirk Thompson
------------------------- --------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: November 13, 2000 BY: /s/ Jerry W. Walton
------------------------- --------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
DATE: November 13, 2000 BY: /s/ Donald G. Cope
------------------------- --------------------------------
Donald G. Cope
Vice President, Controller
and Chief Accounting Officer
19
