-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, hiHONwgVtBWl28FsjnaOk1L+jvuiatA1jJQYETFvdntyDHJJMribNsH9iw7v92Eq ifQlkJS1xqrXG3CASG0WNQ== 0000912057-94-001228.txt : 19940404 0000912057-94-001228.hdr.sgml : 19940404 ACCESSION NUMBER: 0000912057-94-001228 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 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-K SEC ACT: 34 SEC FILE NUMBER: 000-11757 FILM NUMBER: 94519777 BUSINESS ADDRESS: STREET 1: 615 JB HUNT CORPORATE DR CITY: LOWELL STATE: AR ZIP: 72745 BUSINESS PHONE: 5018200000 10-K 1 FORM 10K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NO. 0-11757 J.B. HUNT TRANSPORT SERVICES, INC. (exact name of registrant as specified in its charter) ARKANSAS 71-0335111 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 615 J.B. HUNT CORPORATE DRIVE 72745 LOWELL, ARKANSAS (Zip Code) (Address of Principal Executive Offices) Registrant's telephone number, including area code: (501) 820-0000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01 PAR VALUE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. YES X NO ----- ----- The aggregate market value of 18,065,067 shares of the registrant's $.01 par value common stock held by non-affiliates of the registrant as of March 11, 1994 was $438,077,875,(based upon $24.25 per share being the closing sale price on that date, as reported by NASDAQ). In making this calculation, the issuer has assumed, without admitting for any purpose, that all executive officers and directors of the registrant, and no other persons, are affiliates. At March 11, 1994, the registrant had outstanding 38,546,916 shares of common stock at $.01 par value. Part II of this report incorporates by reference certain portions of the Notice and Proxy Statement for the 1994 annual stockholders' meeting and certain portions of the 1993 Annual Report to Stockholders. PART I ITEM 1. BUSINESS GENERAL J.B. Hunt Transport Services, Inc. (Services) is a diversified transportation company focusing on the movement of full-load containerizable freight in North America. Services is an Arkansas holding company incorporated on August 10, 1961. Through its wholly-owned subsidiaries, Services operates as an irregular route, common motor carrier operating under the jurisdiction of the Interstate Commerce Commission (ICC) and various state regulatory agencies. References to "J.B. Hunt" or "the Company" are to Services and its wholly-owned subsidiaries. Utilizing its various operating authorities, the Company may transport any type of freight (except certain types of explosives) from any point in the continental United States to any other point in another state, over any route selected by the Company. The Company also has certain intrastate authorities, allowing it to pick-up and deliver within those states. The principal types of freight transported include foodstuffs, automotive parts, plastics and plastic products, general retail store merchandise, chemicals, paper and paper products, and manufacturing materials and supplies. The Company received Canadian authority in 1988 and 1989, which allowed general commodity service between certain Canadian provinces. Transportation services are also provided to and from all points in the continental United States to Quebec, British Columbia and Ontario. An agreement announced in March 1993 with Canada's largest railway, Canadian National, provides for expanded joint truck and rail service to Canada. J.B. Hunt has provided transportation services to and from Mexico since 1989 through interchange operations with various Mexican motor carriers. In May 1992 a joint venture with Transportacion Maritima Mexicana, the largest transportation company in Mexico, was announced. In 1990, the Company and the Atchison, Topeka and Santa Fe Railway Company (Santa Fe) initiated an intermodal operation with trailer-on-flatcar (TOFC) service. Since this initial agreement with Santa Fe, intermodal operations have been expanded to include nine railroads. The Company also provides double-stack container services which utilize a newly-designed container on a number of rail routes. Substantially all of the freight carried under these rail agreements is guaranteed space on trains and receives preferential loading and unloading at rail terminal facilities. The Company offers related full truckload transportation services such as regional, intrastate, flatbed, special (hazardous) commodities and dedicated equipment and logistics management services. Growth and expansion of these related businesses has been achieved through a combination of new internal service offerings and acquisitions. The new flatbed and special commodities operations were created in 1991. A company with Texas intrastate authority was acquired in 1991. A small hazardous waste carrier was acquired in 1992, and a new dedicated unit commenced operation in 1993. MARKETING AND OPERATIONS J.B. Hunt has targeted the service sensitive segment of the truckload dry van market rather than those segments that use price as their primary consideration. The truckload market has traditionally been a lower price, lower service market when 2 compared to the less-than-truckload segment. The Company has opted to provide a premium service and charge compensating rates rather than compete primarily on the basis of price. The Company's business is well diversified and no one customer accounted for more than 6% of revenues during 1992 or 1993. Marketing efforts include significant focus on the diversified group of "Fortune 500" customers. A broad geographic dispersion and a good balance in the type of industries served allows J.B. Hunt some protection from major seasonal fluctuations. However, consistent with the truckload industry in general, freight is typically stronger in the second half of the year with peak months being August, September and October, In addition, demand for services is usually strong at the end of the first two quarters, (i.e. March and June). Revenue is also affected by bad weather and holidays, since revenue is directly related to available working days of shippers. The Company markets door-to-door truckload service through its nationwide marketing network. Services involving intermodal transportation mediums are billed by J.B. Hunt and all inquiries, claims and other customer contact is handled by the Company. PERSONNEL At December 31, 1993, J.B. Hunt employed 10,476 people including 7,531 drivers. The Company increased the rate of over-the-road driver compensation in late 1990 in order to attract and retain experienced drivers. The pay scale for certain local drivers was increased in January 1993. Both experienced and non-experienced drivers are trained in all phases of Company policies and operations as well as defensive driving, safety techniques and fuel efficient operations of equipment. During 1992 three distinct driving jobs (local, regional and over-the-road) were identified in order to get drivers home more frequently and provide quality service to intermodal and regional operations. Drivers receive additional incentive compensation based upon fuel economy and other operating performance criteria. Each operating unit measures the quality of on-time service provided to customers each day. This focus on quality has also generated internal operating efficiencies in a number of functional areas. None of the Company's drivers or other employees are represented by a collective bargaining unit. In the opinion of management, the Company's relationship with all of its employees is excellent. REVENUE EQUIPMENT At December 31, 1993, J.B. Hunt operated 6,775 tractors and 19,089 trailers/containers. The average age of the tractor fleet at year-end was less than two years. The trailer pool consisted primarily of 48-foot and 53-foot dry vans or containers. The number of 53-foot trailers/containers has been increased during the last few years in order to offer improved cost advantages to customers. In late 1992, J.B. Hunt announced the development of a new multi-purpose container which can be utilized for over-the-road truck transportation and provide double-stack capabilities for intermodal movements. The Company intends to convert a significant portion of its trailer fleet to these containers 3 during the next few years. At December 31, 1993, there were approximately 7,600 containers in the fleet. The Company strictly enforces a periodic maintenance program based upon the specific type and use of a vehicle. This commitment to a quality maintenance program minimizes equipment downtime and enhances the trade-in value of all used equipment. The Company believes that modern, late-model, clean equipment differentiates service in the market place. COMPETITION J.B. Hunt is one of the two largest irregular route truckload carriers in the country. It competes primarily with other irregular route, short, intermediate and long-haul truckload common carriers. Less-than-truckload motor common carriers and private carriers generally provide competition to a lesser degree. Although any one of these may represent competition on a regional basis, there are a very limited number of companies that represent competition in all markets. The principal method of competition since deregulation of the industry has been through price reductions. Increasingly, shippers are looking for "core carriers" that can offer equipment availability, geographical coverage and technical expertise to handle a substantial part of their transportation needs. REGULATION The Company is a motor common carrier regulated by the ICC. The ICC generally governs activities such as authority to engage in motor carrier operations, accounting systems, certain mergers, consolidations, acquisitions, and periodic financial reporting. Motor carrier operations are subject to safety requirements prescribed by the United States Department of Transportation (DOT) governing interstate operation. Such matters as weight and dimensions of equipment and commercial driver's licensing are also subject to federal and state regulations. A new federal requirement that all drivers obtain a commercial driver's license became effective in April 1992. The federal Motor Carrier Act of 1980 was the start of a program to increase competition among motor carriers and limit the level of regulation in the industry (sometimes referred to as "deregulation"). The Motor Carrier Act of 1980 enables applicants to obtain ICC operating authority more easily and allows interstate motor carriers, such as the Company, to change their rates by a certain percentage per year without ICC approval. The new law also allowed for the removal of many route and commodity restrictions regarding the transportation of freight. As a result of the Motor Carrier Act of 1980, the Company was able to obtain unlimited authority to carry general commodities throughout the 48 contiguous states. ITEM 2. PROPERTIES The Company's corporate headquarters are in Lowell, Arkansas. A 150,000 square foot building was constructed and occupied in September 1990. The building is situated on a 127-acre tract of land. In addition, to the corporate headquarters, the Company owns a separate 62-acre tract in Lowell, Arkansas with four separate buildings totaling 21,000 square feet of office space and 90,000 square feet of maintenance and 4 warehouse space. These buildings serve as the Lowell operations terminal, tractor and trailer maintenance facilities and additional administrative offices. A summary of the Company's principal facilities follows:
VAN DIVISION TERMINALS Maintenance Shop Office Space Location Acreage (square feet) (square feet) -------- ------ ---------------- ------------- Atlanta, Georgia 30 29,800 10,400 Chicago, Illinois 10 5,800 6,400 Dallas, Texas 14 24,000 7,800 Detroit, Michigan 9 44,300 10,800 East Brunswick, New Jersey 19 3,000 7,800 Houston, Texas 13 24,700 7,200 Little Rock, Arkansas 24 29,200 7,200 Lowell, Arkansas 40 50,200 14,000 Lowell, Arkansas (trailer facilities) 14 29,800 3,700 Oklahoma City, Oklahoma 12 15,000 3,500 South Gate, California 12 12,000 5,500 Springfield, Ohio 12 25,900 10,400 FLATBED DIVISION TERMINALS Hueytown, Alabama 9 16,000 3,000
The Company owns all of the above listed facilities except Chicago and Oklahoma City which are leased. In addition to the above facilities, the Company leases several small offices and/or trailer parking yards in various locations throughout the country. ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains excess insurance above its self-insured levels which covers extraordinary liability resulting from such claims. Adverse results in one or more of these cases would not have a material adverse affect on the financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 1993 Annual Meeting of stockholders was held on May 13, 1993. At that meeting, the following matters were submitted to a vote of security holders: 5 1. To elect nine (9) directors as recommended by the Board of Directors For Against Abstain --- ------- ------- Number of shares voted 32,070,726 0 60,585 Percentage of shares voted 99.81% -- .19% 2. To fix the number of Directors for the ensuing year at nine (9) For Against Abstain --- ------- ------- Number of shares voted 32,102,143 13,385 15,783 Percentage of shares voted 99.91% .04% .05% No matters were submitted during the fourth quarter of 1993 to a vote of security holders. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS PRICE RANGE OF COMMON STOCK The Company's common stock is traded in the over-the-counter market under the symbol "JBHT". The following table sets forth, for the calendar periods indicated, the range of high and low sales prices for the Company's common stock as reported by the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ"). The following quotations reflect a three-for-two stock split paid on March 13, 1992.
Period High Low Calendar Year 1992 1st Quarter 26 16 7/8 2nd Quarter 26 16 1/4 3rd Quarter 23 1/2 17 1/2 4th Quarter 24 1/4 20 1/4 Calendar Year 1993 1st Quarter 26 1/4 18 1/8 2nd Quarter 22 1/2 17 1/4 3rd Quarter 24 1/2 20 1/8 4th Quarter 24 1/4 20 1/4
6 On March 11, 1994, the high and low sales prices for the Company's common stock as reported by the NASDAQ were 24 3/4 and 24 1/4 respectively. As of March 11, 1994, the Company had 1,778 stockholders of record. DIVIDEND POLICY On January 13, 1994, the Board of Directors declared a quarterly dividend of $.05 per share, payable to shareholders of record on February 3, 1994. Although it is the present intention of the Board of Directors to continue quarterly dividends, payment of future dividends will depend upon the Company's financial condition, results of operations and other factors deemed relevant by the Board of Directors. The Company declared and paid cash dividends of $.20 per share in 1993 and $.20 per share in 1992. ITEM 6. SELECTED FINANCIAL DATA ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth under the sections entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition", "Selected Financial Data", "Independent Auditors' Report", "Consolidated Statements of Earnings", "Consolidated Balance Sheets", "Consolidated Statements of Stockholders' Equity", "Consolidated Statements of Cash Flows", and "Notes to Consolidated Financial Statements", of the Company's 1993 Annual Report to Stockholders is hereby incorporated by reference for items 6, 7 and 8 above. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No reports on Form 8-K have been filed within the twenty-four months prior to December 31, 1993, involving a change of accountants or disagreements on accounting and financial disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under sections entitled "Proposal One Election of Directors", "Board Committees", "Executive Officers", "Voting Securities and Security Ownership of Management and Principal Stockholders", "Executive Compensation and 7 Other Information", "1994 Performance Based Compensation" and "Proposal Two Ratification of Appointment of Auditors" of the Notice and Proxy Statement For Annual Stockholders' meeting is hereby incorporated by reference for items 10, 11 and 12 above. The Proxy Statement had not yet been mailed to stockholders and was not available as of March 31, 1994. It will be filed no later than April 30, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are filed as part of this report: (a) The following additional information for the years 1993, 1992 and 1991 is submitted herewith. Page references are to the consecutively numbered pages of this report on Form 10-K. Independent Auditors' Report . . . . . . . . . . . . . . . . . . 11 Schedule V - Property and Equipment - Years ended December 31, 1993, 1992, 1991. . . . . . . . . . . . . . . . . 12 Schedule VI - Accumulated Depreciation of Property and Equipment - Years ended December 31, 1993, 1992, 1991. . . . . . . . . . . 13 Schedule X - Supplementary Statement of Earnings Information - Years ended December 31, 1993, 1992, 1991. . . . . . . . . . . 14 (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 1993. (c) Exhibits The response to this portion of ITEM 14 is submitted as a separate section of this report ("Exhibit Index"). 8 SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) 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, in the City of Lowell, Arkansas, on the 25th day of March 1994. J.B. HUNT TRANSPORT SERVICES, INC. (Registrant) By: /s/ Kirk Thompson ------------------------------------------ Kirk Thompson President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ John A. Cooper, Jr. Member of the Board March 25, 1994 - ---------------------------- of Directors John A. Cooper, Jr. /s/ Fred K. Darragh, Jr. Member of the Board March 25, 1994 - ---------------------------- of Directors Fred K. Darragh, Jr. /s/ Wayne Garrison Member of the Board March 25, 1994 - ---------------------------- of Directors Wayne Garrison /s/ Gene George Member of the Board March 25, 1994 - --------------------------- of Directors Gene George /s/ Roy Grimsley Member of the Board March 25, 1994 - --------------------------- of Directors Roy Grimsley /s/ Bryan Hunt Member of the Board March 25, 1994 - --------------------------- of Directors (Vice Chairman) J. Bryan Hunt, Jr. /s/ J.B. Hunt Member of the Board March 25, 1994 - --------------------------- of Directors (Chairman) J.B. Hunt /s/ Johnelle Hunt Member of the Board March 25, 1994 - --------------------------- of Directors (Corporate Johnelle Hunt Secretary) /s/ Lloyd E. Peterson Member of the Board March 25, 1994 - --------------------------- of Directors Lloyd E. Peterson /s/ Kirk Thompson Member of the Board March 25, 1994 - --------------------------- of Directors (President and Kirk Thompson Chief Executive Officer) /s/ Jerry W. Walton Executive Vice President, March 25, 1994 - --------------------------- Finance and Chief Financial Jerry W. Walton Officer 9 EXHIBIT INDEX Exhibit Number 3A The Company's Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the Company's S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028). 3B The Company's Bylaws as amended (incorporated by reference from Exhibit 3B of the Company's S-1 Registration Statement filed November 22, 1983; Registration Number 2-86684). 3C The Company's Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the Company's S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714). 10A Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the Company's S-1 Registration Statement; Registration Number 2-95714). 10B The Company has an Employee Stock Purchase Plan filed on Form S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form S-8 on April 16, 1991 (Registration Statement Number 33-40028). The Management Incentive Plan is incorporated herein by reference from Exhibit 4B of Registration Statement 33-40028. 13A Selected Financial Data 13B Management's Discussion and Analysis of Results of Operations and Financial Condition 13C Independent Auditor's Report 13D Financial Statements and Supplementary Data 22 Subsidiaries of J.B. Hunt Transport Services, Inc. * J.B. Hunt Transport, Inc., a Georgia corporation * L.A., Inc., an Arkansas corporation * J.B. Hunt Corp., a Delaware corporation * J.B. Hunt Special Commodities, Inc., an Arkansas corporation * Great Western Trucking Co., Inc., a Texas corporation * J.B. Hunt Logistics, Inc., an Arkansas corporation * Comercializadora Internacional De Cargo S.A. De C.V., a Mexican corporation * Hunt Mexicana, S.A. de C.V., a Mexican corporation 23 Consent of KPMG Peat Marwick 10 INDEPENDENT AUDITORS' REPORT The Board of Directors J.B. Hunt Transport Services, Inc.: Under date of February 11, 1994, we reported on the consolidated balance sheets of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick Little Rock, Arkansas February 11, 1994 11 Schedule V J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Property and Equipment Years ended December 31, 1993, 1992 and 1991 (Dollars in thousands)
Balance at Balance beginning Additions at end Classification of period at cost Retirements Other of period -------------- ---------- ---------- ----------- ----- --------- Year ended December 31, 1993: Revenue and service equipment $674,536 277,565 (160,194) -- 791,907 Land 11,841 109 -- -- 11,950 Structures and improvements 40,685 3,860 (347) -- 44,198 Furniture and office equipment 61,943 4,153 (189) -- 65,907 -------- ------- -------- -------- ------- $789,005 285,687 (160,730) -- 913,962 -------- ------- -------- -------- ------- -------- ------- -------- -------- ------- Year ended December 31, 1992: Revenue and service equipment 454,829 253,517 70,139 36,329(A) 674,536 Land 12,181 -- 340 -- 11,841 Structures and improvements 38,671 2,014 -- -- 40,685 Furniture and office equipment 42,910 33,878 14,845 -- 61,943 -------- ------- -------- -------- ------- $548,591 289,409 85,324 36,329 789,005 -------- ------- -------- -------- ------- -------- ------- -------- -------- ------- Year ended December 31, 1991: Revenue and service equipment 391,676 143,342 80,189 -- 454,829 Land 11,116 1,065 -- -- 12,181 Structures and improvements 38,198 473 -- -- 38,671 Furniture and office equipment 36,217 6,901 208 -- 42,910 -------- ------- -------- -------- ------- $477,207 151,781 80,397 -- 548,591 -------- ------- -------- -------- ------- -------- ------- -------- -------- ------- (A) Represents reclassification made as a result of the change in method of accounting for tires in service as described in note 1(b) to the consolidated financial statements.
12 Schedule VI J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Accumulated Depreciation of Property and Equipment Years ended December 31, 1993, 1992 and 1991 (Dollars in thousands)
Additions Balance at charged to Balance beginning costs and at end Classification of period expenses Retirements Other of period -------------- --------- --------- ----------- ----- --------- Year ended December 31, 1993: Revenue and service equipment $189,991 91,834 (91,991) -- 189,834 Structures and improvements 11,061 2,357 -- -- 13,418 Furniture and office equipment 20,140 9,111 (180) -- 29,071 -------- ------- ------- ------- ------- $221,192 103,302 (92,171) -- 232,323 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Year ended December 31, 1992: Revenue and service equipment 138,681 83,791 44,395 11,914(A) 189,991 Structures and improvements 8,721 2,339 -- -- 11,061 Furniture and office equipment 20,265 7,872 7,996 -- 20,140 -------- ------- ------- ------- ------- $167,667 94,002 52,391 11,914 221,192 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Year ended December 31, 1991: Revenue and service equipment 120,452 64,923 46,694 -- 138,681 Structures and improvements 6,389 2,332 -- -- 8,721 Furniture and office equipment 13,338 7,019 92 -- 20,265 -------- ------- ------- ------- ------- $140,179 74,274 46,786 -- 167,667 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- (A) Represents accumulated depreciation applicable to tires in service reclassified to revenue and equipment as a result of the change in accounting method described in note 1(b) to the consolidated financial statements.
13 Schedule X J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Supplementary Statements of Earnings Information Years ended December 31, 1993, 1992 and 1991 (Dollars in thousands)
1993 1992 1991 ---- ---- ---- Maintenance and repairs $21,708 18,827 15,622 ------- ------ ------ ------- ------ ------ Taxes, other than payroll and income taxes $61,920 60,187 53,878 ------- ------ ------ ------- ------ ------
14 EX-13.A 2 EXHIBIT 13A SLECTED FINANCIAL DATA J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES (Dollars in thousands, except per share amounts)
Years endedDecember 31, 1993 1992 1991 1990 1989 1988 1987 -------------------------------------------------------------------------------- Operating revenues $1,020,921 $911,982 $733,288 $579,831 $509,278 $392,553 $286,419 Earnings before cumulative effect of changes in accounting methods 38,221 36,933 29,459 30,048 30,615 33,045 25,971* Earnings per share before cumulative effect of changes in accounting methods 1.00 1.03 .85 .85 .87 .93 .73* Cash dividends per share .20 .20 .19 .16 .16 .13 .11 Total assets 862,442 715,741 520,130 452,734 384,684 300,199 250,274 Long-term debt 303,499 216,254 156,930 137,597 104,955 65,358 69,000 Stockholders' equity 343,964 308,626 215,761 191,074 175,518 150,126 121,316 - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
Percentage of Operating Revenue Years ended December 31, 1993 1992 1991 1990 1989 1988 1987 - -------------------------------------------------------------------------------------------------------------- Operating revenues 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - -------------------------------------------------------------------------------------------------------------- Operating expenses: - -------------------------------------------------------------------------------------------------------------- Salaries, wages and employee benefits 36.4 38.2 40.0 41.4 42.1 41.4 39.6 Fuel and fuel taxes 12.4 14.2 16.3 17.3 15.7 14.3 15.8 Purchased transportation and spotting 18.4 12.2 7.0 0.7 0.7 0.6 0.4 Depreciation 8.2 9.5 9.4 9.7 9.5 9.7 10.3 Operating suppLies and expenses 7.2 7.4 8.0 8.8 8.5 7.8 7.1 Insurance and claims 4.0 4.8 4.7 5.4 4.5 4.3 4.4 Operating taxes and licenses 2.8 2.8 3.0 3.2 3.5 3.4 3.7 Communication and utilities 1.0 1.3 1.4 1.4 1.7 2.0 2.4 General and administrative expenses 1.9 2.0 2.1 2.3 1.7 1.3 1.3 - -------------------------------------------------------------------------------------------------------------- Total operating expenses 92.3 92.4 91.9 90.2 87.9 84.8 85.0 - -------------------------------------------------------------------------------------------------------------- Operating income 7.7 7.6 8.1 9.8 12.1 15.2 15.0 Interest expense 1.4 1.2 1.5 1.2 1.8 1.7 1.5 Income taxes 2.6 2.3 2.6 3.4 4.3 5.1 4.5* Cumulative effect of changes in accounting methods -- 0.2 (0.2) -- -- -- -- - -------------------------------------------------------------------------------------------------------------- Net earnings 3.7% 4.3% 3.8% 5.2% 6.0% 8.4% 9.0% - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- * Includes cumulative effect on prior years of change in method of accounting for income taxes of $3,556 ($.10 per share).
EX-13.B 3 EXHIBIT 13B MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table sets forth the change in amounts and percentage change between years of certain revenue, expense and operating items:
(in thousands except tractor data) - ------------------------------------------------------------------------------------------ Changes in Results of Operations - ------------------------------------------------------------------------------------------ 1993 vs. 1992 1992 vs. 1991 ------------- -------------- Increase Increase (Decrease) % (Decrease) % in Amounts Change in Amounts Change ------------- ------ ------------- ------ Operating revenues $108,939 12 % $178,694 24 % - ----------------------------------------------------------------------------------------------- Average number of tractors in the fleet 466 7 1,138 22 - ----------------------------------------------------------------------------------------------- Operating expenses: Salaries, wages and employee benefits 23,877 7 54,582 19 Purchased transportaton and spotting 76,147 68 60,399 118 Fuel and fuel taxes (3,033) (2) 10,399 9 Depreciation (3,615) (4) 17,714 26 Operating supplies and expenses 6,296 9 8,209 14 Insurance and claims (3,049) (7) 9,263 27 Operating taxes and licenses 3,177 12 3,899 18 General and administrative expenses 419 2 3,390 22 Communication and utilities (816) (7) 1,174 11 - ----------------------------------------------------------------------------------------------- Total operating expenses 99,403 12 % 169,029 25 % - ----------------------------------------------------------------------------------------------- Operating income $9,536 14 % $9,665 16 % - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
The following table sets forth certain industry operating data of the Company. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Years Ended December 31 - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- 1993 1992 1991 1990 1989 --------- ------- ------- ------- ------- Total loads 1,081,013 960,031 796,929 596,574 536,448 Average number of tractors in the fleet during the year 6,890 6,424 5,286 4,413 3,616 Tractors operated (at year end) 6,775 7,004 5,843 4,729 4,096 Trailers/containers (at year end) 19,089 17,391 12,389 10,563 9,339 Average tractor miles per load 615 693 724 839 870 Tractor miles (in thousands) 718,767 733,700 638,926 551,175 495,377
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS OPERATING REVENUES Operating revenues increased 12% from 1992 to 1993, and 24% from 1991 to 1992. The increase in revenue was primarily a result of continued growth of railroad (intermodal) volume and specialized carrier operations. The average number of tractors in the fleet increased 7% from 1992 to 1993 and 22% from 1991 to 1992. Fleet size and revenue growth were negatively impacted by a shortage of qualified drivers during the second half of 1993. Average rate increases of 2% in 1993 and 1% in 1992 also enhanced revenue growth. Revenue from specialized carrier operations such as flatbed, special (hazardous) commodities, dedicated contract and logistics services was 14%, 8% and 4% of total operating revenue, respectively in 1993, 1992 and 1991. The company offers a broad range of services and alternative modes of transportation. Arrangements with nine railroads allow the company to transport freight utilizing a combination of truck and rail mediums. See Note 1(d) of the Notes to Consolidated Financial Statements for a discussion of the change in accounting principle during 1991 related to the method of recognizing revenue for shipments in transit. OPERATING EXPENSES Operating expenses of transportation companies would frequently be expected to vary between years in proportion to changes in operating revenues and tractor fleet size. Due to the company's significant utilization of intermodal and third party transportation services, the relationship of operating expense to operating revenues and fleet size has changed. Certain expenses related to drivers and revenue equipment such as salaries, wages and employee benefits; fuel and fuel taxes; depreciation and operating supplies and expenses have shifted to the category of purchased transportation and spotting. Salaries, wages and employee benefits increased during 1993 and 1992 in approximate proportion to the growth of the tractor fleet. No significant changes in the rates of employee salaries and wages were experienced. Purchased transportation and spotting expense increases reflect the significant growth in the utilization of intermodal and third party transportation services. Fuel and fuel taxes decreased from 1992 to 1993, reflecting a decrease in total tractor miles due to utilization of intermodal and third party transportation services. Improved fuel miles per gallon in 1993 also reduced fuel expense. Fuel cost per gallon increased slightly during 1993, but was more than offset by the above items. Fuel cost per gallon declined approximately $.03 during 1992. This decrease and the growth of intermodal resulted in fuel and fuel tax expense increasing by only 9 percent while the tractor fleet grew by 22 percent. The decrease in depreciation expense from 1992 to 1993 reflects gains on the disposition of revenue equipment and a change in the estimated salvage value on certain revenue and service equipment (see Note 1(c) of the Notes to Consolidated Financial Statements). Depreciation expense increased from 1991 to 1992 primarily due to the increase in the size of the tractor fleet. Operating supplies and expenses increased during 1993 in relative proportion to the fleet size. The change in operating supplies and expenses from 1991 to 1992 was impacted by a change in the method of accounting for tires (see Note 1(b) of the Notes to Consolidated Financial Statements). Insurance and claims expense in 1993 reflected a significant reduction in accident frequency. The Company implemented a series of programs during late 1992 and early 1993 directed at reducing accidents. Insurance and claims expense increased during 1992 due to an increase in the level of self-insurance elected by the company and an increase in accident frequency. Operating taxes and licenses reflect the increase in the size of the fleet and rate increases enacted by various state regulatory agencies. General and administrative expenses were favorably impacted during 1993 by changes which reduced legal, professional service and certain driver training costs. Communications and utilities expense declined during 1993 primarily due to certain rate reductions applicable to voice communications and the implementation of on-board communication devices in a portion of the Company's fleet. Rate reductions were also achieved during 1992. Interest expense increased during 1993 primarily due to higher levels of long-term debt associated with the acquisition of new containers and chassis. The effective income tax rate increased to 41% in 1993, due primarily to the increased federal tax rate on both current and deferred income taxes, effective retroactive to January 1, 1993. The effective tax rate in 1992 was 36.5%, down from 39.5% in 1991, primarily due to a settlement with the Internal Revenue Service of a tax case dealing with several prior years. EARNINGS The Company intends to continue expanding its utilization of intermodal operations. Accordingly, a substantial capital investment in newly-designed, multi-purpose containers and chassis was made during 1993 and is planned for the next two to three years. This strategy involves the disposition of significant numbers of van type trailers. Future earnings may be favorably or unfavorably impacted by market prices for used revenue equipment or other factors related to this transition. LIQUIDITY AND CAPITAL RESOURCES The growth of the company's business and the commitment to new technology in terms of containers, chassis and on-board tractor communication devices has resulted in significant capital investments during 1993 and 1992. Net capital investments were $197 million in 1993, $249 million in 1992 and $113 million in 1991. These expenditures were funded with cash generated from operations and proceeds from long-term debt. Accounts receivable at December 31, 1993 includes approximately $29 million related to sales of revenue equipment for which funds were received during the first quarter of 1994. In July 1993, the company filed a shelf registration statement for an aggregate principal amount of $250 million of debt securities to be issued on terms to be determined at the time of sale. In September, 1993, the shelf registration was utilized to issue $100 million of 6.25% unsecured notes which are due 2003. This was the initial public offering of debt securities for the company. The company received approximately $56 million from a secondary offering of common stock completed in 1992. Net proceeds from these offerings were used initially to reduce indebtedness outstanding under the company's commercial paper program. Proceeds from the commercial paper program are typically utilized to supplement cash provided by operating activities and fund the acquisition of revenue equipment, on-board communication devices and other funding requirements. The company has committed to purchase approximately $208 million of revenue and service equipment (net cost after expected proceeds from sale or trade-in allowances of $24 million). The company expects to fund future capital expenditures from cash provided by operating activities and proceeds from long-term debt. Approximately $100 million of uncommitted lines of credit were available at December 31, 1993, with no outstanding borrowings. EX-13.C 4 EXHIBIT 13C INDEPENDENT AUDITORS' REPORT The Board of Directors J.B. Hunt Transport Services, Inc.: We have audited the accompanying consolidated balance sheets of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in notes 1(b) and (d), respectively, to the consolidated financial statements, the Company changed its methods of accounting for the costs of tires in service during 1992 and recognizing revenues for freight in transit during 1991. KPMG Peat Marwick LITTLE ROCK, ARKANSAS FEBRUARY 11, 1994 EX-13.D 5 EXHIBIT 13D J.B. Hunt Transport Services, Inc. and Subsidiaries Consolidated Statements of Earnings (Dollars in thousands, except per share amounts)
Years ended December 31, ------------------------ 1993 1992 1991 ------ ------ ------ Operating revenues $1,020,921 $911,982 $733,288 Operating expenses: Salaries, wages and employee benefits (note 5) 371,849 347,972 293,390 Purchased transportation and spotting 187,726 111,579 51,180 Fuel and fuel taxes 126,966 129,999 119,600 Depreciation 83,210 86,825 69,111 Operating supplies and expenses 73,511 67,215 59,006 Insurance and claims 40,424 43,473 34,210 Operating taxes and licenses 28,905 25,728 21,829 General and administrative expenses 19,032 18,613 15,223 Communication and utilities 10,672 11,488 10,314 ---------- ------- ------- Total operating expenses 942,295 842,892 673,863 ---------- ------- ------- Operating income 78,626 69,090 59,425 Interest expense 13,800 10,908 10,732 ---------- ------- ------- Earnings before income taxes and cumulative effect of changes in accounting methods 64,826 58,182 48,693 Income taxes (note 4) 26,605 21,249 19,234 ---------- ------- ------- Earnings before cumulative effect of changes in accounting methods 38,221 36,933 29,459 Cumulative effect on prior years of changes in accounting methods: Revenue recognition, net of $1,017 in income taxes (note 1(d)) - - (1,558) Tires in service, net of $1,049 in income taxes (note 1(b)) - 1,825 - ---------- ------- ------- Net earnings (notes 1(b) and 1(d)) $ 38,221 $ 38,758 $ 27,901 ---------- -------- -------- Earnings per share: Earnings before cumulative effect of changes in accounting methods $ 1.00 $ 1.03 $ .85 Cumulative effect of changes in accounting methods: Revenue recognition (note 1(d)) - - (.05) Tires in service (note (b)) - .05 - ------ ------ ------ Net earnings (notes 1(b) and 1(d)) $ 1.00 $ 1.08 $ .80 ------ ------ ------ ------ ------ ------ Proforma amounts assuming the new accounting methods are applied retroactively (notes 1(b) and 1(d)) (unaudited): Net earnings $38,221 $ 36,933 $ 28,338 ------- -------- -------- ------- -------- -------- Earnings per share $ 1.00 $ 1.03 $ .82 ------- -------- -------- ------- -------- --------
See accompanying notes to consolidated financial statements. J.B. Hunt Transport Services, Inc. and Subsidiaries Consolidated Balance Sheets
(Dollars in thousands, except par value) December 31, ------------ 1993 1992 ---- ---- Assets Current assets: Cash and temporary investments $ 3,390 $ 1,833 Accounts receivable 137,284 105,909 Prepaid expenses: Taxes, licenses and permits 11,359 11,636 Repair parts and supplies 6,878 4,836 Other (note 4) 4,973 7,830 ------- ------- Total prepaid expenses 23,210 24,302 ------- ------- Deferred income taxes (note 4) 4,593 9,864 ------- ------- Total current assets 168,477 141,908 ------- ------- Property and equipment, at cost: Revenue and service equipment 791,907 674,536 Land 11,950 11,841 Structures and improvements 44,198 40,685 Furniture and office equipment 65,907 61,943 ------- ------- Total property and equipment 913,962 789,005 Less accumulated depreciation 232,323 221,192 ------- ------- Net property and equipment 681,639 567,813 ------- ------- Other assets (note 7) 12,326 6,020 ------- ------- $862,442 $715,741 -------- -------- -------- -------- Liabilities and Stockholders' Equity 1993 1992 ---- ---- Current liabilities: Trade accounts payable $ 37,578 $ 31,995 Claims accruals 35,124 28,988 Accrued payroll 6,733 6,887 Other accrued expenses 13,274 10,733 Other current liabilities (note 2) 2,981 2,115 ------- ------- Total current liabilities 95,690 80,718 ------- ------- Long-term debt (note 2) 303,499 216,254 Claims accruals 12,000 20,250 Deferred income taxes (note 4) 107,289 89,893 ------- ------- Total liabilities 518,478 407,115 ------- ------- Stockholders' equity (notes 2 and 3): Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding - - Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 39,009,858 shares 390 390 Additional paid-in capital 102,362 99,521 Retained earnings 245,073 214,503 ------- ------- 347,825 314,414 Less cost of common stock in treasury (592,483 shares at December 31, 1993 and 882,261 shares at December 31, 1992) 3,861 5,788 ------- ------- Total stockholders' equity 343,964 308,626 ------- ------- Commitments and contingencies (notes 4, 5 and 8) ------- ------- $862,442 $715,741 ------- ------- ------- -------
See accompanying notes to consolidated financial statements. J.B. Hunt Transport Services, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity Years ended December 31, 1993, 1992, 1991 (Dollars in thousands, except per share amounts)
Total Additional Retained stockholders' Common paid-in earnings Treasury equity stock capital (note 2) stock (note 3) ------- --------- --------- ------- ---------- Balance, December 31, 1990 $361 $38,782 $161,345 $(9,414) $191,074 Tax benefit of stock options exercised - 479 - - 479 Sale of treasury stock to employees - 1,220 - 1,560 2,780 Cash dividends paid ($.19 per share) - - (6,473) - (6,473) Net earnings - - 27,901 - 27,901 ---- ------- ------- ------ -------- Balance, December 31, 1991 361 40,481 182,773 (7,854) 215,761 Tax benefit of stock options exercised - 723 - - 723 Sale of treasury stock to employees - 2,783 - 2,066 4,849 Cash dividends paid ($.20 per share) - - (7,028) - (7,028) Net earnings - - 38,758 - 38,758 Issuance of common stock (2,950,000) shares 29 55,534 - - 55,563 ---- ------- ------- ------ -------- Balance, December 31, 1992 390 99,521 214,503 (5,788) 308,626 Tax benefit of stock options exercised - 890 - - 890 Sale of treasury stock to employees - 1,951 - 1,927 3,878 Cash dividends paid ($.20 per share) - - (7,651) - (7,651) Net earnings - - 38,221 - 38,221 ---- ------- ------- ------ -------- Balance, December 31, 1993 $390 $102,362 $245,073 $(3,861) $343,964 ---- ------- ------- ------ ------- ---- ------- ------- ------ -------
See accompanying notes to consolidated financial statements. J.B. Hunt Transport Services, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands)
Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- Cash flows from operating activities: Net earnings $ 38,221 $ 38,758 $ 27,901 Adjustments to reconcile net earnings to net cash provided by operating activities: Cumulative effect of accounting changes - (1,825) 1,558 Depreciation, net of gain on disposition of equipment 83,210 86,825 69,111 Provision for noncurrent deferred income taxes 17,396 16,637 9,925 Tax benefit of stock options exercised 890 723 479 Changes in assets and liabilities: Decrease (increase) in deferred tax asset 5,271 (9,864) - Increase in accounts receivable (31,375) (14,631) (17,450) Decrease (increase) in prepaid expenses 1,092 (4,161) (11,601) Increase in trade accounts payable 5,583 15,742 2,874 Increase (decrease) in claims accruals (2,114) 8,374 10,325 Increase in other current liabilities 3,253 1,620 1,269 ------- ------- ------- Net cash provided by operating activities 121,427 138,198 94,391 ------- ------- ------- Cash flows from investing activities: Additions to property and equipment (285,687) (289,409) (151,781) Proceeds from sale of equipment 88,651 40,110 38,774 Increase in other assets (6,306) (2,299) (2,880) ------- ------- ------- Net cash used in investing activities (203,342) (251,598) (115,887) ------- ------- ------- Cash flows from financing activities: Proceeds from sale of common stock - 55,563 - Proceeds from long-term debt 99,691 182,270 72,617 Repayments of long-term debt (12,446) (122,946) (53,284) Proceeds from sale of treasury stock 3,878 4,849 2,780 Dividends paid (7,651) (7,028) (6,473) ------- ------- ------- Net cash provided by financing activities 83,472 112,708 15,640 ------- ------- ------- Net increase (decrease) in cash 1,557 (692) (5,856) Cash - beginning of year 1,833 2,525 8,381 ------- ------- ------- Cash - end of year $ 3,390 $ 1,833 $ 2,525 ------- ------- ------- ------- ------- ------- Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $12,014 $ 10,395 $ 9,715 Income taxes $ 3,743 $ 11,056 $ 13,862 ------- ------- ------- ------- ------- -------
See accompanying notes to consolidated financial statements. J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992 AND 1991 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES J.B. Hunt Transport Services, Inc. (the "Company"), through its wholly-owned subsidiaries, operates as an irregular route, common motor carrier operating under the jurisdiction of the Interstate Commerce Commission (ICC) and various state regulatory commissions. (a) PRINCIPALS OF CONSOLIDATION. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. (b) TIRES IN SERVICE. Prior to 1992, the cost of tires placed in service, including replacement tires, was capitalized and amortized on the straight-line method over their estimated useful life. Effective January 1, 1992, the Company began capitalizing tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires are expensed at the time they are placed in service. This new method of accounting for tires placed in service is consistent with frequent industry practice. Due to the increasing percentage of freight transported on rail cars (intermodal), this new method, in the opinion of management, provides a better matching of tire costs with revenues. This change increased net earnings for 1992 by $1,310,000 ($.04 per share). The cumulative impact of $1,825,000 ($.05 per share) to retroactively apply the new method has also been credited to earnings for 1992. This accounting change resulted in the reduction of prepaid tires by $21,541,000, an increase in net revenue equipment of $24,415,000 and an increase in deferred income taxes of $1,049,000. The proforma amounts shown on the statements of earnings have been adjusted for the effect of retroactive application on expenses and the related income taxes. (c) PROPERTY AND EQUIPMENT. Property and equipment are stated at cost. Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of 5 - 10 years for revenue and service equipment, 10 to 25 years for structures and improvements, and 3 to 10 years for furniture and office equipment. Gains on dispositions of revenue equipment are offset against depreciation expense. On April 1, 1993, the Company changed the estimated salvage value for some of its revenue and service equipment. The effect upon 1993 net earnings was $2,639,000 ($.07 per share). (d) REVENUE RECOGNITION. Prior to 1991, operating revenues, in accordance with transportation industry practices, were recognized as of the date freight was picked up for shipment. On January 23, 1992, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board reached a consensus that certain transportation industry practices of revenue and expense recognition were no longer appropriate. Effective for 1991, the Company began recognizing revenue based on relative transit time in each reporting period with expenses recognized as incurred as permitted by the EITF. The effect of this change reduced net earnings for 1991 by $620,000 ($.02 per share) and reduced accounts receivable by (Continued) 2 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS $2,575,000 while increasing current deferred income taxes by $1,017,000. The cumulative impact of $1,558,000 ($.05 per share) to apply retroactively the new method has also been charged to earnings for 1991. (e) INCOME TAXES. In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective January 1, 1992, the Company adopted Statement 109. The effect of this change in the method of accounting for income taxes in the 1992 consolidated statement of earnings is not significant. (f) EARNINGS PER SHARE. Earnings per share have been computed based on the weighted average number of shares outstanding during each year (38,276,109 in 1993; 35,785,692 in 1992; and 34,689,461 in 1991). Shares issuable under employee stock options are excluded from the weighted average number of shares as their effect is not dilutive. On January 15, 1992, the Company announced a three-for-two stock split in the form of a 50% stock dividend payable on March 13, 1992, from authorized and unissued shares to stockholders of record on February 19, 1992. All references in the financial statements with regard to number of shares of common stock and the per share amounts have been retroactively restated to reflect this stock dividend. (g) CREDIT RISK. Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers and the diverse range of industries which they represent. As of December 31, 1993, the Company had no significant concentrations of credit risk. (h) INTEREST RATE SWAP AGREEMENTS. The differential paid or received on interest rate swap agreements is accrued as interest rates change and is charged or credited to interest expense over the life of the agreements. Any gains or losses realized upon the termination of an interest rate swap agreement are deferred and amortized over the original term of the respective interest rate swap agreement as an adjustment to interest expense. (Continued) 3 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) LONG-TERM DEBT
Long-term debt consists of (in thousands): 1993 1992 ---- ---- Commercial paper $106,492 $107,270 Senior notes payable, interest at 6.25% payable semiannually 99,691 -- Senior notes payable, interest at 9.20% payable semiannually 6,666 13,334 Senior notes payable, interest at 7.75% payable semiannually 15,000 20,000 Senior notes payable, interest at 7.84% payable semiannually 25,000 25,000 Senior subordinated notes, interest at 7.80% payable semiannually 50,000 50,000 Other 650 650 -------- -------- $303,499 $216,254 -------- -------- -------- --------
Under its commercial paper note program, the Company is authorized to issue up to $200 million in notes which are supported by a credit agreement with a group of banks. The effective rate on the commercial paper note program was 3.44% and 3.61% for the years ended December 31, 1993 and 1992, respectively. Under the terms of the credit agreement which expires October 30, 1995, the Company is required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios. In addition, there are certain indirect restrictions on the payment of dividends. At December 31, 1993 the amount available for payment of dividends was approximately $16 million. The 6.25% senior notes are payable at maturity on September 1, 2003, the 9.20% senior notes are payable in three equal annual installments beginning July 1, 1992, the 7.75% senior notes are payable in five equal annual installments beginning October 31, 1992, the 7.84% senior notes are payable in five equal annual installments beginning March 31, 1995, and the 7.80% senior subordinated notes are payable in five equal annual installments beginning October 30, 2000. Under terms of the note agreements, the Company is required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios. At December 31, 1993, the Company has entered into interest rate swap agreements to effectively convert $20 million of its variable interest rate debt to fixed rate debt with a weighted average interest rate of 4.03% at year end 1993. In addition, the Company has entered into an interest rate swap agreement to effectively convert $20 million of its senior fixed rate debt to variable rate debt with a weighted average interest rate of 3.50%. Due to the frequency of interest payments and receipts in conjunction with the financial stability of the counter parties, the Company's credit risk related to these interest rate swap agreements is not significant. (Continued) 4 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Included in other current liabilities are deferred swap gains of $1,113,000 at December 31, 1993. The Company has approximately $106 million of uncommitted lines of credit, none of which was outstanding at December 31, 1993. These lines are with various domestic and international banks and are due on demand. Interest on borrowings is generally tied to the banks' prevailing base rates or other alternative market rates. No commitment or facility fees are paid on these lines of credit and the obligations are evidenced by unsecured demand notes. The Company intends to pay 1994 maturities of the senior notes with borrowings under its other credit arrangements. Accordingly, all debt has been classified as long-term as of December 31, 1993. The aggregate annual maturities of long-term debt are as follows (in thousands): 1994, none; 1995, $128,499; 1996, $10,000; 1997, $5,000; 1998, $5,000; and $155,000 thereafter. (3) CAPITAL STOCK The Company maintains a Management Incentive Plan that provides various vehicles to compensate key employees with Company common stock. Under the plan, the Company is authorized to award, in aggregate, not more than 3,000,000 shares. Currently, the Company has utilized three such vehicles to award stock or grant options to purchase the Company's common stock: restricted stock awards, restricted options and nonstatutory stock options. Restricted stock awards are granted to key employees subject to restrictions regarding transferability and assignment. Shares of Company common stock are issued to the key employees and held by the Company until each employee becomes vested in the award. Vesting of the awards generally occurs over a four year period of time from the award date. Termination of the employee for any reason other than death, disability or retirement causes the unvested portion of the award to be forfeited. Key employees were granted restricted options to purchase stock. The option price is 50% of the fair market value of the stock at the date of grant. Vesting of the award generally occurs over a four year period beginning on the grant date. Failure to exercise a vested option within 210 days after vesting or termination of the employee for any reason other than death, disability or retirement will cause unexercised and nonvested options to be forfeited. The plan provides that nonstatutory stock options may be granted to key employees for the purchase of Company common stock for 100% of the fair market value at the grant date. The options generally vest over a ten year period and are forfeited if the employee terminates for any reason other than death, disability or retirement. (Continued) 5 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At December 31, 1993 there were 728,714 shares available for granting under the plan. A summary of the options to purchase restricted stock and nonstatutory stock options activity follows:
Number Option Number of price of shares shares per share exercisable ------ --------- ----------- Outstanding at December 31, 1991 1,440,021 $ 6.00 - 19.50 344,831 Granted 122,500 18.50 - 24.63 Exercised (185,426) 6.17 - 24.63 Terminated (45,000) 9.33 - 18.67 --------- Outstanding at December 31, 1992 1,332,095 6.00 - 24.63 369,706 Granted 148,500 18.25 - 23.50 Exercised (219,809) 6.00 - 20.25 Terminated (71,430) 6.00 - 20.25 --------- Outstanding at December 31, 1993 1,189,356 $ 6.00 - 24.63 369,663 --------- -------------- ------- --------- -------------- -------
On January 13, 1994, the Company's Board of Directors declared a cash dividend of $.05 per share-payable on February 18, 1994, to shareholders of record on February 3, 1994. (4) INCOME TAXES As discussed in note 1(e), the Company adopted Statement 109 as of January 1, 1992. There was no significant impact upon earnings as a result of this change in accounting for income taxes. Total income tax expense for the years ended December 31, 1993 and 1992 was allocated as follows (in thousands):
1993 1992 ---- ---- Income from operations $26,605 $21,249 Changes in accounting methods -- 1,049 Stockholders' equity, for tax benefit of stock options exercised (890) (723) ------- ------- $25,715 $21,575 ------- ------- ------- -------
Income tax expense attributable to income from operations consists of (in thousands):
1993 1992 1991 Current expense: Federal $ 2,596 $13,477 $ 9,618 State and Local 1,344 661 1,637 ------- ------- ------- 3,940 14,138 11,255 ------- ------- ------- Deferred expense: Federal 20,238 7,216 6,611 State and Local 2,427 (105) 1,368 ------- ------- ------- 22,665 7,111 7,979 ------- ------- ------- ------- ------- ------- Total tax expense $26,605 $21,249 $19,234 ------- ------- ------- ------- ------- -------
(Continued) 6 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income tax expense attributable to income from operations differs from the amounts computed by applying the U.S. Federal income tax rate to pre-tax income from operations as a result of the following (in thousands):
1993 1992 1991 ---- ---- ---- 35% of pre-tax income in 1993 and 34% in 1992 and 1991 $22,690 $19,782 $16,556 Increase in income taxes resulting from: State and Local income taxes, net of Federal income tax benefit 2,685 367 1,983 Environmental tax 100 132 76 Other, net 1,130 968 619 ------- ------- ------- $26,605 $21,249 $19,234 ------- ------- ------- ------- ------- -------
The significant components of deferred income tax expense attributable to income from operations are as follows (in thousands):
1993 1992 1991 ---- ---- ---- Deferred tax expense (exclusive of the effects of other components listed below) $22,665 $13,808 $7,979 Adjustments to deferred tax assets and liabilities primarily for negotiated IRS settlement -- (6,697) -- ------- ------- ------ $22,665 $ 7,111 $7,979 ------- ------- ------ ------- ------- ------
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 and 1992 are presented below (in thousands):
1993 1992 ---- ---- Deferred tax assets: Claims accruals, principally due to accrual for financial reporting purposes $(15,680) $(17,117) Alternative minimum tax credit carryforwards (13,218) (9,296) Other (2,872) (2,363) -------- -------- Total gross deferred tax assets (31,770) (28,776) -------- -------- -------- --------
(Continued) 7 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and capitalized interest 126,429 106,151 Prepaid permits and insurance 4,818 -- Other 3,219 2,654 -------- -------- Total gross deferred tax liabilitie 134,466 108,805 -------- -------- Net deferred tax liability $102,696 $ 80,029 -------- -------- -------- --------
The Company believes its substantiated history of profitability and taxable income, its taxes paid within the three year carryback period and its utilization of tax planning sufficiently supports the value of the deferred tax assets. Accordingly, the Company has not recorded a valuation allowance on its books as all deferred tax assets are more than likely to be recovered. Included in other prepaid expenses are refundable income taxes of $428,000 and $625,000 at December 31, 1993 and 1992, respectively. (5) EMPLOYEE BENEFIT PLANS The Company maintains bonus compensation programs for certain of its employees. Bonuses earned under the programs are based on attainment of profit objectives established by the Company's Board of Directors. Bonuses paid under the programs for 1993, 1992 and 1991 were $2,600,000, $7,400,000 and $4,700,000, respectively. The Company maintains a profit sharing Plan under which employees are eligible to participate after they complete one year of service. Company contributions to the plan each year are made at a discretionary amount determined by the Company's Board of Directors. For the years ended December 31, 1993, 1992 and 1991 Company contributions to the plan were $1,900,000, $1,850,000 and $1,500,000, respectively. The Company has an employee stock purchase plan which provides for the purchase of the Company's common stock on the open market for eligible employees. Employees may contribute through payroll deductions to the plan. The Company will contribute an amount equal to 15% of the participating employee's contribution. Company contributions to the plan for the years ended December 31, 1993, 1992 and 1991 were $275,000, $209,000 and $178,000, respectively. (6) FAIR VALUE OF FINANCIAL INSTRUMENTS CASH AND TEMPORARY INVESTMENTS, ACCOUNTS RECEIVABLE AND TRADE ACCOUNTS PAYABLE. The carrying amount approximates fair value because of the short maturity of these instruments. LONG-TERM DEBT The carrying amount of the commercial paper debt approximates the fair value because of the short maturity of the commercial paper instruments. (Continued) 8 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of the fixed rate debt is presented as the present value of future cash flows discounted using the Company's current borrowing rate for loans of comparable maturity. The calculation arrives at a theoretical amount the Company would pay a creditworthy third party to assume its fixed rate obligations and not the termination value of these obligations. Consistent with market practices, such termination values would include various prepayment and termination fees that the Company would contractually be required to pay if it retired the debt early. Interest Rate Swap Agreements. The fair values of interest rate swap agreements are obtained from dealer quotes. These values represent the estimated amount the Company would receive to terminate such agreements, taking into consideration current interest rates and the creditworthiness of the counterparties. The estimated fair values of the Company's financial instruments are summarized as follows (in thousands):
At December 31, 1993 -------------------------- Carrying Estimated amount fair value ---------- ---------- Cash and temporary investments $ 3,390 $ 3,390 Accounts receivable 137,284 137,284 Trade accounts payable 38,690 38,690 Long-term debt: Commercial paper 106,491 106,491 Fixed rate obligations 197,008 238,920 Interest rate swap agreements -- (180) -------- -------- -------- --------
(7) RELATED PARTY TRANSACTIONS The Company advances premiums on a life insurance policy on the joint lives of Mr. and Mrs. J.B. Hunt. The Company has advanced $3,015,000 on this policy which, along with related accrued interest thereon of approximately $262,000, is included in other assets at December 31, 1993. All premiums paid by the Company, along with accrued interest thereon, are reimbursable from a trust which is the owner and beneficiary of the policy. (8) COMMITMENTS AND CONTINGENCIES The Company has committed to purchase approximately $208 million of revenue and service equipment (net cost, after expected proceeds from sale or trade-in allowances of $24 million). The Company is involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, management believes the resolution of claims and pending litigation will not have a material adverse effect on the financial condition of the Company. (Continued) (9) QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Operating results by quarter for the years ended December 31, 1993 and 1992 are as follows (in thousands, except per share data):
Quarter ------------------------------------------------------ First Second Third Fourth Total ----- ------ ----- ------ ----- 1993: Operating revenues $ 247,181 $ 260,400 $ 253,579 $ 259,761 $ 1,020,921 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Operating income $ 10,859 $ 24,354 $ 21,712 $ 21,701 $ 78,626 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Net earnings $ 4,983 $ 13,500 $ 8,782 $ 10,956 $ 38,221 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Earnings per share $ .13 $ .35 $ .23 $ .29 $ 1.00 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- 1992: Operating revenues $ 201,298 $ 223,842 $ 241,195 $ 245,647 $ 911,982 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Operating income $ 12,798 $ 19,540 $ 19,623 $ 17,129 $ 69,090 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Earnings before cumulative effect of change in accounting method $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Net earnings $ 8,125 $ 10,137 $ 10,672 $ 9,824 $ 38,758 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Earnings per share before cumulative effect of change in accounting method $ .18 $ .29 $ .30 $ .26 $ 1.03 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Earnings per share $ .23 $ .29 $ .30 $ .26 $ 1.08 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Proforma amounts assuming the new accounting method is applied retroactively: Net earnings $ 6,300 $ 10,137 $ 10,672 $ 9,824 $ 36,933 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- ----------- Earnings per share $ .18 $ .29 $ .30 $ .26 $ 1.03 --------- ---------- --------- --------- ----------- --------- ---------- --------- --------- -----------
EX-23 6 AUDITORS CONSENT OF INCORPORATION EXHIBIT 23 The Board of Directors J.B. Hunt Transport Services, Inc. We consent to incorporation by reference in the Registration Statements No. 2-93928 and No. 33-40028 on Form S-8 of J.B. Hunt Transport Services, Inc. of our report dated February 11, 1994 relating to the consolidated balance sheets of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three year period ended December 31, 1993, which report is incorporated by reference in the December 31, 1993 annual report on Form 10-K of J.B. Hunt Transport Services, Inc. KPMG Peat Marwick Little Rock, Arkansas March 9, 1994 -----END PRIVACY-ENHANCED MESSAGE-----