-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DTDjEFFJMYQ9tjna1Ad+5hRq8iwrJx55N7KhdKrJeSb5qxmaxKFIgH+IrmGv+1qq L5+gF+P6PHIQLjmutcADGw== /in/edgar/work/20000811/0000912057-00-036469/0000912057-00-036469.txt : 20000921 0000912057-00-036469.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-036469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT J B TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000728535 STANDARD INDUSTRIAL CLASSIFICATION: [4213 ] IRS NUMBER: 710335111 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11757 FILM NUMBER: 693186 BUSINESS ADDRESS: STREET 1: 615 JB HUNT CORPORATE DR CITY: LOWELL STATE: AR ZIP: 72745 BUSINESS PHONE: 5018200000 10-Q 1 a10-q.txt 10-Q 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. 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
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
2 J.B. HUNT TRANSPORT SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share data) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 - -------------------------------------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------------------- 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 ================================================================================================================================
See accompanying notes to condensed consolidated financial statements. 3 J.B. HUNT TRANSPORT SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
- -------------------------------------------------------------------------------------------------------- JUNE 30, 2000 DECEMBER 31, 1999 - -------------------------------------------------------------------------------------------------------- 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 ========================================================================================================
See accompanying notes to condensed consolidated financial statements. 4 J.B. HUNT TRANSPORT SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
- ------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30 - ------------------------------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------------------------------- 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 =============================================================================================================
See accompanying notes to condensed consolidated financial statements. 5 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):
6/30/2000 12/31/1999 --------- ---------- 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 ======== ========
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 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:
Weighted average Number of Number of exercise price shares Shares Per Share Exercisable --------- ---------------- ----------- 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 ========== ====== =======
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:
(in thousands, except per share data) -------------------------------------------------- Three Months Ended Six Months Ended June 30 June 30 --------------------- ---------------------- 2000 1999 2000 1999 ------- ------- ------- ------- 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 ======= ======= ======= =======
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:
Three Months Ended Six Months Ended June 30 June 30 -------------------------------- -------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- 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
7 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):
Three Months Ended Six Months Ended June 30 June 30 ---------------------- -------------------- 2000 1999 2000 1999 ------- ------- ------- ------- 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 ======= ======= ======= =======
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
Assets -------------------- As of June 30 -------------------- 2000 1999 ------ ------ JBT $ 799 -- JBI 98 -- ------ ------ Van/Intermodal 897 900 DCS 119 76 JBL 80 56 Other (includes corporate) 100 137 ------ ------ Total $1,196 $1,169 ====== ======
REVENUES ------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 ----------------- ------------------ 2000 1999 2000 1999 ---- ---- ------ ------ 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 ==== ==== ====== ======
Operating Income (Loss) --------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 --------------------- -------------------- 2000 1999 2000 1999 ------ ------ ------ ------ 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 ====== ====== ====== ======
Net Depreciation Expense --------------------------------------------- Three Months Six Months Ended June 30 Ended June 30 --------------------- -------------------- 2000 1999 2000 1999 ------ ------ ------ ------ 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 ====== ====== ====== =====
9 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 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 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 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)
Gross Revenue Operating Income ------------------------------- ---------------------- 2000 1999 % Change 2000 1999 ---- ---- -------- ---- ---- 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 ===== ===== ===== ===== =====
13 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.
Three Months Ended June 30 ------------------------------------------------- Percentage of Percentage Change Operating Revenues Between Quarters ---------------------------- ------------------ 2000 1999 2000 vs. 1999 ------------- ------------ ------------------ 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% ============================ ==================
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 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 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)
Gross Revenue Operating Income ------------------------------- --------------------- 2000 1999 % CHANGE 2000 1999 ------ ------ -------- ----- ----- 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 ====== ====== === ===== =====
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
Six Months Ended June 30 ----------------------------------------------------- Percentage of Percentage Change Operating Revenues Between Quarters ------------------------------ ---------------------- 2000 1999 2000 vs. 1999 ---------------- ------------- --------------- 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%) ============================== ===============
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 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 SELECTED BALANCE SHEET DATA
As of ------------------------------------------------------------- June 30, 2000 December 31, 1999 June 30, 1999 ------------- ----------------- ------------- 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
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 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 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 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.
21 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 EX-27 2 ex-27.txt EXHIBIT 27
5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 5,930 0 253,546 0 0 317,254 1,282,936 457,116 1,196,271 268,586 0 0 0 390 0 1,196,271 1,117,056 1,117,056 0 1,083,919 200 0 12,854 20,083 4,016 16,067 0 0 0 16,067 .45 .45
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