<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 JUNE 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 JUNE 30, 2000 WAS 35,152,588.
<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 six month periods ended June 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>
<CAPTION>
<S> <C>
Condensed Consolidated Statements of Earnings for the Three
and Six Months Ended June 30, 2000 and 1999............................. Page 3
Condensed Consolidated Balance Sheets as of
June 30, 2000 and December 31,1999...................................... Page 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999................................. Page 5
Notes to Condensed Consolidated Financial Statements
as of June 30, 2000..................................................... Page 6
Review Report of KPMG LLP...................................................... Page 11
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition................................................ Page 12
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk..................... Page 19
</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 SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------------------------------------------------------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 583,500 $ 497,554 $ 1,117,056 $ 967,798
Operating expenses
Salaries, wages and employee benefits 194,273 176,175 380,158 348,863
Rents and purchased transportation 215,497 161,283 404,229 305,632
Fuel and fuel taxes 58,168 39,211 114,874 75,920
Depreciation 33,320 38,524 64,668 76,434
Operating supplies and expenses 31,491 30,693 61,338 58,243
Insurance and claims 9,682 8,214 19,216 17,995
Operating taxes and licenses 8,329 7,064 15,993 13,566
General and administrative expenses 6,108 7,042 12,031 12,069
Communication and utilities 5,924 5,109 11,612 10,662
--------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 562,792 473,315 1,084,119 919,384
--------------------------------------------------------------------------------------------------------------------------------
Operating income 20,708 24,239 32,937 48,414
Interest expense 6,890 7,255 12,854 14,760
--------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 13,818 16,984 20,083 33,654
Income taxes 2,764 6,199 4,016 12,284
--------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 11,054 $ 10,785 $ 16,067 $ 21,370
================================================================================================================================
Average basic shares outstanding 35,315 35,625 35,459 35,620
================================================================================================================================
Basic earnings per share $ 0.31 0.30 $ 0.45 $ 0.60
================================================================================================================================
Average diluted shares outstanding 35,505 35,847 35,548 36,226
================================================================================================================================
Diluted earnings per share $ 0.31 0.30 $ 0.45 $ 0.59
================================================================================================================================
</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>
--------------------------------------------------------------------------------------------------------
JUNE 30, 2000 DECEMBER 31, 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,930 $ 12,606
Accounts receivable 253,546 238,573
Prepaid expenses 57,778 43,962
--------------------------------------------------------------------------------------------------------
Total current assets 317,254 295,141
--------------------------------------------------------------------------------------------------------
Property and equipment 1,282,936 1,239,394
Less accumulated depreciation 457,116 453,509
--------------------------------------------------------------------------------------------------------
Net property and equipment 825,820 785,885
--------------------------------------------------------------------------------------------------------
Investments and other assets 53,197 46,438
--------------------------------------------------------------------------------------------------------
$ 1,196,271 $ 1,127,464
========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 60,000 $ 60,000
Trade accounts payable 160,535 180,009
Claims accruals 3,433 788
Accrued payroll 32,718 19,462
Other accrued expenses 11,899 10,371
--------------------------------------------------------------------------------------------------------
Total current liabilities 268,585 270,630
--------------------------------------------------------------------------------------------------------
Long-term debt 331,938 267,639
Claims accruals 5,647 7,368
Deferred income taxes 182,840 180,441
Stockholders' equity 407,261 401,386
--------------------------------------------------------------------------------------------------------
$ 1,196,271 $ 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>
-------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30
-------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 16,067 $ 21,370
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation 64,668 76,434
Provision for noncurrent deferred income taxes 2,399 9,756
Tax benefit of stock options exercised 8 69
Forefeiture of restricted stock 0 (18)
Amortization of discount, net (1) 430
Changes in assets and liabilities:
Trade accounts receivable (14,973) (13,863)
Prepaid expenses (20,656) 7,788
Trade accounts payable (19,474) (25,858)
Claims accruals (924) (7,825)
Accrued payroll and other accrued expenses 14,784 7,740
-------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 41,898 76,023
-------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (146,269) (68,840)
Proceeds from sale of equipment 41,666 4,724
Increase in investments and other assets 902 (9,695)
-------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (103,701) (73,811)
-------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under commercial paper program 64,299 (50)
Net payments of long-term debt 0 (5,000)
Repurchase of treasury stock (7,576) 0
Proceeds from sale of treasury stock 186 422
Dividends paid (1,782) (3,563)
-------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 55,127 (8,191)
-------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6,676) (5,979)
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 12,606 9,227
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,930 $ 3,248
=============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 12,744 $ 15,031
Income taxes 426 300
=============================================================================================================
</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 June 30,
2000 and for the three and six months ended June 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 six months ended June 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>
6/30/2000 12/31/1999
--------- ----------
<S> <C> <C>
Commercial paper $ 99,300 $ 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
-------- --------
392,560 328,260
Less current maturities (60,000) (60,000)
Unamortized discount (622) (621)
-------- --------
$331,938 $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.
The 7.80% senior subordinated notes were issued on October 30, 1992 and
are payable in five equal annual installments beginning October 30, 2000.
6
<PAGE>
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 627,000 12.98
Exercised 13.68
Terminated (13,700) 16.43
(118,650)
--------- ------
Outstanding at June 30, 2000 4,232,215 $16.13 880,600
========== ====== =======
</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.
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 Six Months Ended
June 30 June 30
--------------------- ----------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator (net earnings) $11,054 $10,785 $16,067 $21,370
Denominator - Basic earnings per share
Weighted average shares outstanding 35,315 35,625 35,459 35,620
======= ======= ======= =======
Basic earnings per share $ .31 $ .30 $ .45 $ .60
======= ======= ======= =======
Denominator - Diluted earnings per share
Weighted average share outstanding 35,315 35,625 35,459 35,620
Effect of common stock options 190 222 89 606
Weighted average shares assuming dilution 35,505 35,847 35,548 36,226
======= ======= ======= =======
Diluted earnings per share $ .31 $ .30 $ .45 $ .59
======= ======= ======= =======
</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 Six Months Ended
June 30 June 30
-------------------------------- --------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of shares under option 1,951,915 682,525 2,663,915 387,675
Range of exercise price $15.69-$37.50 $18.00-$37.50 $14.33-$37.50 $20.38-$37.50
</TABLE>
7
<PAGE>
6) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings and foreign currency
translation adjustments. During the three and six months ended June 30, 2000 and
1999, comprehensive income was equal to: (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------- --------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings $11,054 $10,785 $16,067 $21,370
Foreign currency
translation (loss) gain (1,891) 79 (1,028) (56)
------- ------- ------- -------
Comprehensive income $ 9,163 $10,864 $15,039 $21,314
======= ======= ======= =======
</TABLE>
7) INCOME TAXES
The effective income tax rates for the three and six months ended June
30, 2000 and 1999 were based on estimated annual combined effective rates of 20%
and 36.5%, respectively.
8) BUSINESS SEGMENTS
The Company had four reportable business segments during the first six
months of 2000: 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 six months ended June 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 segment includes a wide range of comprehensive transportation
and freight management services which may include experienced professional
managers, information and optimization technology and the actual design or
redesign of system solutions. JBL may utilize JBT, JBI or DCS owned or
controlled assets and employees, or third-party carriers, or a combination to
meet the customer's service requirements. JBL services also typically are
provided in accordance with written long-term agreements. See note 9.
Intersegment revenues consist of services provided by one or more segments to
another segment. A summary of certain segment information is presented below (in
millions):
8
<PAGE>
<TABLE>
<CAPTION>
Assets
--------------------
As of June 30
--------------------
2000 1999
------ ------
<S> <C> <C>
JBT $ 799 --
JBI 98 --
------ ------
Van/Intermodal 897 900
DCS 119 76
JBL 80 56
Other (includes corporate) 100 137
------ ------
Total $1,196 $1,169
====== ======
</TABLE>
<TABLE>
<CAPTION>
REVENUES
-------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
----------------- ------------------
2000 1999 2000 1999
---- ---- ------ ------
<S> <C> <C> <C> <C>
JBT $204 194 407 375
JBI 166 159 317 314
---- ---- ------ ------
Van/Intermodal 370 353 724 689
DCS 118 77 216 147
JBL 121 88 228 169
Other (includes corporate) -- -- -- --
---- ---- ------ ------
Subtotal 609 518 1,168 1,005
Inter-segment eliminations (25) (20) (51) (37)
---- ---- ------ ------
Total $584 $498 $1,117 $ 968
==== ==== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
---------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
JBT $(3.3) -- $(3.5) --
JBI 9.5 -- 17.2 --
------ ------ ------ ------
Van/Intermodal 6.2 16.5 13.7 31.8
DCS 9.7 6.7 13.7 11.3
JBL 5.1 .9 6.8 3.7
Other (includes corporate) (.3) .1 (1.3) 1.6
------ ------ ------ ------
Total $20.7 $24.2 $32.9 $48.4
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Net Depreciation Expense
---------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
JBT $16.8 -- $32.8 --
JBI 5.9 -- 11.8 --
------ ------ ------ ------
Van/Intermodal 22.7 28.8 44.6 57.3
DCS 8.8 6.5 16.7 12.7
JBL .2 .3 .5 .6
Other (includes corporate) 1.6 2.9 2.9 5.8
------ ------ ------ ------
Total $33.3 $38.5 $64.7 $76.4
====== ====== ====== =====
</TABLE>
9
<PAGE>
9) OTHER
On March 14, 2000, the Company, along with five other motor carriers,
announced the intent to contribute all of its non-asset based logistics
business into a recently formed joint venture, Transplace.com.
Transplace.com, which is jointly owned by six of the largest
publicly-held truckload transportation companies and its Chief
Executive Officer, Jun-Sheng Li, commenced operations effective July 1,
2000. The Company will contribute all of its 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
will no longer report the JBL segment revenue, expenses and operating
income as components of its consolidated statements of earnings. The
Company will account for its approximate 27% interest in Transplace.com
utilizing the equity method of accounting. No gain or loss will be
recognized upon formation and contribution of JBL segment assets to
Transplace.com. The Company's share of Transplace.com's results of
operations will appear as a one-line non-operating item on the
consolidated statements of earnings subsequent to June 30, 2000.
10) RECLASSIFICATIONS
Certain amounts for 1999 have been reclassified to conform to the 2000
classifications.
10
<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 June 30, 2000, and the
related condensed consolidated statements of earnings for the three and six
month periods ended June 30, 2000 and 1999, and the condensed consolidated
statements of cash flows for the six month periods ended June 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
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of J.B. Hunt Transport Services, Inc.
and subsidiaries as of December 31, 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
July 17, 2000
11
<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 SECOND QUARTER 2000 TO SECOND QUARTER 1999
SUMMARY
Consolidated operating revenues for the second quarter of 2000 increased
17%, to $584 million, from $498 million in the comparable period of 1999. The
Company had four reportable business segments for the second quarter of 2000:
Truck (JBT), Intermodal (JBI), Dedicated Contract Services (DCS) and Logistics
(JBL). 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 is revenue prior to
January 1, 2000.
The JBT segment consists primarily of full truckload, dry-van freight
which is typically transported over roads and highways by company-owned or
controlled revenue equipment. JBT segment revenue grew approximately 5%, to $204
million, during the second quarter of 2000, compared with $194 million in the
same period of 1999. Revenue growth in this segment was reduced by the transfer
of some revenue equipment to the DCS segment during the current quarter. Revenue
per mile in the JBT segment, exclusive of fuel surcharges, rose 3.9% in the
current quarter, compared with the second quarter of 1999.
JBI segment business includes primarily truckload freight which is
transported by rail over any portion of the movement. This segment also includes
certain repositioning truck freight moved by JBI or third-party equipment when
such highway or other movement is intended to direct equipment back into
intermodal operations. JBI segment revenue increased approximately 5% during the
current quarter, to $166 million, from $159 million in 1999. Intermodal rates,
exclusive of fuel surcharges, in the second quarter of 2000 were essentially
flat when compared with the same period in 1999.
DCS segment operations typically include services provided with
company-owned revenue equipment and employee drivers which are assigned to
specific customers or traffic lanes. DCS operations usually involve written,
long-term agreements or contracts. During the second quarter of 2000, DCS
revenue increased 53%, to $118 million, from $77 million in the comparable
period of 1999. A portion of the DCS segment revenue
12
<PAGE>
growth was due to transfers of equipment and drivers from the JBT business
segment. Margins in the DCS segment declined slightly in 2000, due, in part, to
higher fuel costs and increased computer system and corporate support expenses.
The JBL segment includes a wide range of comprehensive transportation and
management services. These services may include experienced professional
managers, information and optimization technology and the actual design or
redesign of transportation system solutions. JBL may utilize JBT, JBI, or DCS
owned or controlled assets and employees or third-party equipment and employees,
or a combination to meet customers' service requirements. JBL services also
typically involve long-term, written agreements. JBL revenue grew 38% during the
second quarter of 2000 to $121 million, from $88 million in 1999. Operating
income was $5.1 million in the second quarter of 2000, compared with $.9 million
in 1999. This increase in operating income was due, in part, to increased
revenue and lower purchased transportation expenses.
On March 14, 2000, the Company announced the intent to contribute all of
its non-asset based logistics business into a recently formed joint venture,
Transplace.com. The entire JBL business segment was contributed to
Transplace.com effective July 1, 2000. As a result of this transaction, the
Company will no longer report the JBL segment revenue, expenses and operating
income as components of its consolidated statements of earnings. The Company
will account for its approximate 27% interest in Transplace.com utilizing the
equity method of accounting. No gain or loss will be recognized upon formation
and contribution of JBL segment assets to Transplace.com. The Company's share of
Transplace.com results of operations will appear as a one-line non-operating
item on the consolidated statements of earnings subsequent to June 30, 2000.
Summary of Operating Segments Results
For Three Months Ended June 30
(dollars in millions)
<TABLE>
<CAPTION>
Gross Revenue Operating Income
------------------------------- ----------------------
2000 1999 % Change 2000 1999
---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
JBT $204 194 5% $(3.3) --
JBI 166 159 5% 9.5 --
----- ----- ----- ----- -----
Van/Intermodal 370 353 5% 6.2 $16.5
DCS 118 77 53% 9.7 6.7
JBL 121 88 38% 5.1 .9
Other -- -- -- (.3) .1
----- ----- ----- ----- -----
Subtotal 609 518 18% 20.7 24.2
Inter-segment eliminations (25) (20) -- -- --
----- ----- ----- ----- -----
Total $584 $498 17% $20.7 $24.2
===== ===== ===== ===== =====
</TABLE>
13
<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>
Three Months Ended June 30
-------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
---------------------------- ------------------
2000 1999 2000 vs. 1999
------------- ------------ ------------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 17.3%
Operating expenses
Salaries, wages and employee benefits 33.3% 35.4% 10.3%
Rents and purchased transportation 36.9% 32.4% 33.6%
Fuel and fuel taxes 10.0% 7.9% 48.3%
Depreciation 5.7% 7.7% (13.5%)
Operating supplies and expenses 5.4% 6.2% 2.6%
Insurance and claims 1.7% 1.7% 17.9%
Operating taxes and licenses 1.4% 1.4% 17.9%
General and administrative expenses 1.0% 1.4% (13.3%)
Communication and utilities 1.0% 1.0% 16.0%
---------------------------- ------------------
Total operating expenses 96.5% 95.1% 18.9%
---------------------------- ------------------
Operating income 3.5% 4.9% (14.6%)
Interest expense 1.2% 1.5% (5.0%)
---------------------------- ------------------
Earnings before income taxes 2.4% 3.4% (18.6%)
Income taxes 0.5% 1.2% (55.4%)
---------------------------- ------------------
Net earnings 1.9% 2.2% 2.5%
============================ ==================
</TABLE>
Total operating expenses for the second quarter of 2000 increased 18.9%
over the comparable period of 1999. As previously discussed, operating revenues
increased 17.3% during the current quarter. Total operating expenses expressed
as a percentage of operating revenues (operating ratio) were 96.5% for the
second quarter of 2000, compared with 95.1% in 1999. Salaries, wages and
employee benefits increased 10.3% during the current quarter, but declined to
33.3% of revenue from 35.4% of revenue in 1999. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline in percentage of revenue was primarily due to the growth
of the non-asset based Logistics (JBL) revenue. Rents and purchased
transportation expense increased 33.6% and increased as a percentage of revenue.
This increase was due to the growth of JBL business, additional use of
third-party dray companies and higher revenue equipment rental expense. A
transaction to sell and leaseback certain trailing equipment, which closed in
late 1999, resulted in higher equipment rent and lower depreciation expense.
Fuel and fuel taxes expense rose 48.3% during the current quarter, driven by a
35% higher cost per gallon and slightly lower fuel miles per gallon. Fuel
surcharges, which were initiated in late 1999, recovered the majority of this
increased cost relative to the second quarter of 1999.
14
<PAGE>
Depreciation expense declined 13.5% during the second quarter of 2000,
primarily due to the sale and leaseback transaction previously discussed.
Operating supplies and expenses increased 2.6%, but declined as a percentage of
revenue. The small increase in the dollar amount of this expense was for
spending on tractor and trailing equipment maintenance and tires. The decline in
percentage of revenue was primarily due to growth of the non-asset based JBL
segment revenue. Insurance and claims expense remained at 1.7% of revenue in
2000 and 1999, but increased 17.9%, primarily due to higher liability and
accident costs. The nearly 18% 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 13.3% decrease in general and administrative costs
was primarily due to lower professional fees and bad debt expenses.
Communication and utilities expense increased 16.0% primarily due to expanded
data and telecommunication networks and higher satellite communication costs.
Interest expense declined slightly in 2000, due to reduced debt levels
associated with the sale and leaseback transaction. The effective income tax
rates were 20% 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 second quarter of 2000
increased to $11.1 million, or diluted earnings per share of $.31, compared with
$10.8 million, or $.30 per diluted share, in 1999.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999
SUMMARY
Consolidated operating revenues for the six months ended June 30, 2000
increased 15.4%, to $1.117 billion, from $967.8 million in 1999. Revenue in the
JBT segment increased approximately 9% in 2000, to $407 million, compared with
$375 million in 1999. Revenue growth of JBT was reduced by the transfer of some
revenue equipment to the DCS segment. As previously mentioned, the JBT and JBI
had been operated and reported together as the Van/Intermodal segment prior to
January 1, 2000. Accordingly, the only identifiable comparative 1999 segment
information for JBT and JBI is revenue. Revenue per mile in the JBT segment,
exclusive of fuel surcharges, rose approximately 4% during the first six months
of 2000, compared with the same period in 1999.
The JBI segment revenue increased approximately 1% during 2000, to $317
million, from $314 million in 1999. Intermodal rates in 2000 were essentially
flat when compared with the same period in 1999.
DCS segment revenue grew 47% during the first six months of 2000, to $216
million, from $147 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
15
<PAGE>
was $13.7 million during the first six months of 2000, compared with $11.3
million in 1999. This decline in margin was due primarily to significantly
higher fuel costs and increased computer system and corporate support expenses.
JBL segment revenue increased 35% during the first six months of 2000,
to $228 million, from $169 million in 1999. Operating income was $6.8 million
in 2000, compared with $3.7 million in 1999. This increase in operating income
was due to higher revenue levels and relatively lower purchased transportation
expense.
On March 14, 2000, the Company announced the intent to contribute all
of its non-asset based logistics business into a recently formed joint
venture, Transplace.com. The entire JBL business segment was contributed to
Transplace.com effective July 1, 2000. As a result of this transaction, the
Company will no longer report the JBL segment revenue, expenses and operating
income as components of its consolidated statements of earnings. The Company
will account for its approximate 27% interest in Transplace.com utilizing the
equity method of accounting. No gain or loss will be recognized upon formation
and contribution of JBL segment assets to Transplace.com. The Company's share
of Transplace.com results of operations will appear as a one-line
non-operating item on the consolidated statements of earnings subsequent to
June 30, 2000.
Summary of Operating Segments Results
For Six Months Ended June 30
(dollars in millions)
<TABLE>
<CAPTION>
Gross Revenue Operating Income
------------------------------- ---------------------
2000 1999 % CHANGE 2000 1999
------ ------ -------- ----- -----
<S> <C> <C> <C> <C> <C>
JBT $ 407 375 9% $(3.5) -
JBI 317 314 1% 17.2 -
------ ------ --- ----- -----
Van/Intermodal 724 689 5% 13.7 $31.8
DCS 216 147 47% 13.7 11.3
JBL 228 169 35% 6.8 3.7
Other - - - (1.3) 1.6
------ ------ --- ----- -----
Subtotal 1,168 1,005 16% 32.9 48.4
Inter-segment eliminations (51) (37) - - -
------ ------ --- ----- -----
Total $1,117 $ 968 15% $32.9 $48.4
====== ====== === ===== =====
</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.
16
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30
-----------------------------------------------------
Percentage of Percentage Change
Operating Revenues Between Quarters
------------------------------ ----------------------
2000 1999 2000 vs. 1999
---------------- ------------- ---------------
<S> <C> <C> <C>
Operating revenues 100.0% 100.0% 15.4%
Operating expenses
Salaries, wages and employee benefits 34.0% 36.0% 9.0%
Rents and purchased transportation 36.2% 31.6% 32.3%
Fuel and fuel taxes 10.3% 7.8% 51.3%
Depreciation 5.8% 7.9% (15.4%)
Operating supplies and expenses 5.5% 6.0% 5.3%
Insurance and claims 1.7% 1.9% 6.8%
Operating taxes and licenses 1.4% 1.4% 17.9%
General and administrative expenses 1.1% 1.2% (3.0%)
Communication and utilities 1.0% 1.1% 8.9%
------------------------------ ---------------
Total operating expenses 97.1% 95.0% 17.9%
------------------------------ ---------------
Operating income 2.9% 5.0% (31.6%)
Interest expense 1.1% 1.5% (12.9%)
------------------------------ ---------------
Earnings before income taxes 1.8% 3.5% (40.3%)
Income taxes 0.4% 1.3% (67.3%)
------------------------------ ---------------
Net earnings 1.4% 2.2% (24.8%)
============================== ===============
</TABLE>
Total operating expenses for the six months ended June 30, 2000
increased 17.9% over the comparable period of 1999. As previously discussed,
operating revenues increased 15.4% during the same period. Total operating
expenses expressed as a percentage of operating revenues (operating ratio)
were 97.1% for 2000, compared with 95.0% in 1999. Salaries, wages and employee
benefits increased 9% during the first six months of 2000, but declined to
34.0% of revenue from 36.0% of revenue in 1999. The increase in the dollar
amount of this expense category was partly due to higher costs of medical
insurance. The decline in percentage of revenue was primarily due to growth of
the non-asset based JBL segment business. Rents and purchased transportation
expense increased 32.3% and increased as a percentage of revenue. This
increase was due to the growth of JBL business, 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
taxes rose 51.3% during 2000, driven by a 44% higher cost per gallon and
slightly lower fuel miles per gallon. Fuel surcharges, which were initiated in
late 1999, recovered approximately 60% of the higher fuel costs during the
first quarter of 2000 and the majority of this increased fuel cost during the
second quarter of 2000 relative to the same periods in 1999.
Depreciation expense declined 15.4% during 2000, primarily due to the
sale and leaseback transaction previously discussed. Operating supplies and
expenses increased
17
<PAGE>
5.3%, but declined as a percentage of revenue. The increase in the dollar
amount of this expense was primarily due to spending on tractor and trailing
equipment. The decline in percentage of revenue was primarily due to growth of
the non-asset based JBL segment revenue. Insurance and claims expense
increased 6.8%, but declined slightly as a percentage of revenue. The
increased cost was primarily due to higher liability and accident costs. The
nearly 18% 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. Communication and utilities expense increased 8.9%, primarily
due to expanded data and telecommunication networks and higher satellite
communication costs. Interest expense declined 12.9% in 2000, primarily due to
reduced debt levels associated with the sale and leaseback transaction. The
effective income tax rates were 20% 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 six months ended June
30, 2000 declined to $16.1 million, or diluted earnings per share of $.45,
compared with $21.4 million, or $.59 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 $41.9 million for the
first six months of 2000, compared with $76.0 million provided during the same
period of 1999. This decrease in net cash provided was primarily due to funds
used for accounts receivable, prepaid expenses, and accounts payable, partly
offset by cash generated from accrued payroll and other expenses. In addition,
net earnings and depreciation were down 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 $103.7 million
in 2000, up from $73.8 million in 1999. Purchases of new revenue equipment
were up significantly during 2000. New tractor purchases totaled approximately
1,720 during the six months ended June 30, 2000, compared with about 600 in
1999. This increase in capital spending for tractors was partly offset by
reduced purchases of trailing equipment. The Company has been leasing or
renting a significant portion of its trailing equipment fleet and plans to
commence leasing some tractors during the third quarter of 2000. Financing
activities generated $55.1 million during the first half of 2000, compared
with a use of $8.2 million in 1999. Financing activities included net
borrowings of $64.3 million, $7.6 million 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.
18
<PAGE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
As of
-------------------------------------------------------------
June 30, 2000 December 31, 1999 June 30, 1999
------------- ----------------- -------------
<S> <C> <C> <C>
Working capital ratio 1.18 1.09 1.27
Current maturities of long-
term debt (millions) $ 60 $ 60 $ 11
Total debt (millions) $ 392 $ 328 $ 429
Total debt to equity .96 .82 1.09
Total debt as a percentage
of total capital .49 .45 .52
</TABLE>
The Company's debt levels increased approximately $64 million from
December 31, 1999 to June 30, 2000. As of June 30, 2000, the Company had
commitments to acquire approximately $196 million of revenue and service
equipment net of expected proceeds from sale or trade-in allowances. Funding
for such expenditures is expected to come from cash generated from operations,
existing borrowing facilities and leases of certain equipment commencing
during the third quarter of 2000.
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 determined what impact, if any, Statement No. 133 will
have on its financial statements.
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION: AN INTERPRETATION OF APB
OPINION NO. 25. Among other issues, Interpretation No. 44 clarifies the
application of Accounting Principles Board Opinion No. 25 (APB No. 25)
regarding (a) the definition of employee for purposes of applying APB No. 25,
(b) the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms of
a previously fixed stock option or award, and (d) the accounting for an
exchange of stock options in a business combination. The provisions of
Interpretation No. 44 affecting the Company are to be applied on a prospective
basis effective July 1, 2000.
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.
19
<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. 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 in 2000 than in 1999, there
would be no material adverse impact on the Company's results of operations. At
June 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 six months ended June 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
<TABLE>
<S> <C>
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 March 14, 2000, a news release was issued announcing that six of
the nation's largest truckload transportation companies: Covenant
Transport, Inc.; J.B. Hunt Transport Services, Inc.; M.S. Carriers,
Inc.; Swift Transportation Co., Inc.; U.S. Xpress Enterprises, Inc.
and Werner Enterprises, Inc., intended to merge their logistics
business units into a jointly owned, Internet-based global
transportation logistics company, Transplace.com.
On July 13, 2000, Transplace.com announced that its operations
commenced as scheduled on July 1, 2000.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Form 8-K on July 17, 2000, relating to Items
2, 5 and 7 of that Form and announcing that effective June 30,
2000 the Company completed the conversion of its non-asset based
logistics business into Transplace.com. In addition, a copy of a
Transplace.com news release was filed as an exhibit to the Form
8-K.
The Company has not determined whether this transaction requires
the filing of historical financial statements or proforma
financial information.
</TABLE>
21
<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: August 11, 2000 BY: /s/ Kirk Thompson
---------------------- ------------------------------------
Kirk Thompson
President and
Chief Executive Officer
DATE: August 11, 2000 BY: /s/ Jerry W. Walton
---------------------- ------------------------------------
Jerry W. Walton
Executive Vice President, Finance
and Chief Financial Officer
DATE: August 11, 2000 BY: /s/ Donald G. Cope
---------------------- ------------------------------------
Donald G. Cope
Vice President, Controller
and Chief Accounting Officer
22
