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 MARCH 31, 2001 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 MARCH 31, 2001 WAS 35,286,216.
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 period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2001. 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, 2000. INDEX <TABLE> <S> <C> Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2001 and 2000............................. Page 3 Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000............................. Page 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000....................... Page 5 Notes to Condensed Consolidated Financial Statements as of March 31, 2001..............................................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 15 </TABLE> 2
J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Statements of Earnings (in thousands, except per share data) (unaudited) <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31 - ---------------------------------------------------------------------------------------------------- 2001 2000 - ---------------------------------------------------------------------------------------------------- <S> <C> <C> Operating revenues $ 495,419 $ 533,556 Operating expenses Salaries, wages and employee benefits 196,685 185,885 Rents and purchased transportation 131,789 188,732 Fuel and fuel taxes 62,279 56,706 Depreciation and amortization 35,513 32,012 Operating supplies and expenses 34,262 29,847 Insurance and claims 12,218 9,534 Operating taxes and licenses 8,072 7,665 General and administrative expenses, net of gains (372) 7,933 Communication and utilities 6,606 5,688 - ---------------------------------------------------------------------------------------------------- Total operating expenses 487,052 524,002 - ---------------------------------------------------------------------------------------------------- Operating income 8,367 9,554 Interest expense (6,264) (5,963) Equity in earnings of associated companies 166 2,675 - ---------------------------------------------------------------------------------------------------- Earnings before income taxes 2,269 6,266 Income taxes 624 1,253 - ---------------------------------------------------------------------------------------------------- Net earnings $ 1,645 $ 5,013 ==================================================================================================== Average basic shares outstanding 35,273 35,604 ==================================================================================================== Basic earnings per share $ 0.05 $ 0.14 ==================================================================================================== Average diluted shares outstanding 35,792 35,622 ==================================================================================================== Diluted earnings per share $ 0.05 $ 0.14 ==================================================================================================== </TABLE> See accompanying notes to condensed consolidated financial statements. 3
J.B. HUNT TRANSPORT SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) <TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------ MARCH 31, 2001 DECEMBER 31, 2000 - ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 19,224 $ 5,370 Accounts receivable 216,715 225,797 Prepaid expenses and other 85,859 99,804 - ------------------------------------------------------------------------------------------------------------------------------ Total current assets 321,798 330,971 - ------------------------------------------------------------------------------------------------------------------------------ Property and equipment 1,251,264 1,334,457 Less accumulated depreciation 435,010 489,282 - ------------------------------------------------------------------------------------------------------------------------------ Net property and equipment 816,254 845,175 - ------------------------------------------------------------------------------------------------------------------------------ Other assets 71,793 55,775 - ------------------------------------------------------------------------------------------------------------------------------ $ 1,209,845 $ 1,231,921 ============================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 62,000 $ 84,400 Current installments of obligations under capital leases 20,756 16,489 Trade accounts payable 135,906 158,585 Claims accruals 15,030 13,260 Accrued payroll 29,629 29,148 Other accrued expenses 6,642 10,390 Deferred income taxes 13,002 13,002 - ------------------------------------------------------------------------------------------------------------------------------ Total current liabilities 282,965 325,274 - ------------------------------------------------------------------------------------------------------------------------------ Long-term debt 222,855 222,694 Obligations under capital leases, excluding current installments 95,340 77,694 Claims accruals 5,138 4,974 Deferred income taxes 173,301 173,282 Stockholders' equity 430,246 428,003 - ------------------------------------------------------------------------------------------------------------------------------ $ 1,209,845 $ 1,231,921 ============================================================================================================================== </TABLE> See accompanying notes to condensed consolidated financial statements. 4
J.B. Hunt Transport Services, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) <TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31 - ----------------------------------------------------------------------------------------------------------------------------- 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 1,645 $ 5,013 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 35,513 32,012 Gain on sale of revenue equipment (5,337) (665) Provision for noncurrent deferred income taxes 20 633 Tax benefit (expense) of stock options exercised 80 (1) Amortization of discount, net 160 (11) Changes in operating assets and liabilities: Trade accounts receivable 9,081 33 Other assets 10,248 (40,616) Trade accounts payable (22,678) (11,085) Claims accruals 1,769 309 Accrued payroll and other accrued expenses (3,102) 6,326 - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 27,399 (8,052) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Additions to property and equipment (13,411) (89,733) Proceeds from sale of equipment 38,583 23,106 Decrease (increase) in other assets (12,792) 2,061 - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 12,380 (64,566) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under commercial paper program and revolving credit agreements (22,400) 68,800 Principal payments under capital lease obligations (4,513) -- Repurchase of treasury stock -- (3,126) Proceeds from sale of treasury stock 988 8 Dividends paid -- (1,782) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (25,925) 63,900 - ----------------------------------------------------------------------------------------------------------------------------- Net change in cash and cash equivalents 13,854 (8,718) - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 5,370 12,606 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 19,224 $ 3,888 ============================================================================================================================= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 8,371 $ 7,450 Income taxes 186 50 Non-cash activities: Capital lease obligations for revenue equipment $ 26,426 $ -- ============================================================================================================================= </TABLE> 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 March 31, 2001 and for the three months ended March 31, 2001 and 2000 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 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, 2000. 2) The results of operations for the three-month period ended March 31, 2001 are not necessarily indicative of those to be expected for the calendar year ending December 31, 2001. 3) LONG-TERM DEBT Long-term debt consists of (in thousands): <TABLE> <CAPTION> 3/31/2001 12/31/2000 --------- ---------- <S> <C> <C> Senior revolving credit $52,000 -- Commercial paper -- $74,400 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 40,000 40,000 -------- -------- 285,260 307,660 Less current maturities (62,000) (84,400) Unamortized discount (405) (566) -------- -------- $222,855 $222,694 ======== ======== </TABLE> The Company is authorized to borrow up to $150 million under its current revolving lines of credit. These loans are supported by a credit agreement with a number of banks, which expires December 14, 2001. 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: <TABLE> <CAPTION> Weighted average Number of Number of exercise price shares Shares Per Share Exercisable ------- ---------- ----------- <S> <C> <C> <C> Outstanding at December 31, 2000 4,309,765 $15.94 831,812 ======== Granted 31,000 16.98 Exercised (70,754) 13.70 Terminated (409,000) 17.52 ---------- ------ Outstanding at March 31, 2001 3,861,011 $15.82 739,208 ========== ====== ======== </TABLE> The Company announced in February of 2000, a decision to discontinue paying dividends and an intent to use those funds to repurchase up to 500,000 shares of its common stock. These shares were repurchased during the first six months of 2000. 5) EARNINGS PER SHARE A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below: <TABLE> <CAPTION> Three Months Ended March 31 (in thousands, except per share data) ------------------------------------- 2001 2000 ---- ---- <S> <C> <C> Numerator (net earnings) $1,645 $5,013 Denominator - Basic earnings per share Weighted average shares outstanding 35,273 35,604 ====== ====== Basic earnings per share $ .05 $ .14 ====== ====== Denominator - Diluted earnings per share Weighted average share outstanding 35,273 35,604 Effect of common stock options 519 18 ------ ------ Weighted average shares assuming dilution 35,792 35,622 ====== ====== Diluted earnings per share $ .05 $ .14 ====== ====== </TABLE> Options which were outstanding to purchase shares of common stock during the first quarter of 2001 and 2000, but were excluded from the computation of diluted earnings per share because the option price was greater than the average market price of the common shares were: <TABLE> <CAPTION> Three Months Ended March 31 --------------------------- 2001 2000 ---- ---- <S> <C> <C> Number of shares under option 4,040,275 5,963,740 Range of exercise price $17.50-$37.50 $12.88-$37.50 </TABLE> 6) COMPREHENSIVE INCOME 7
Comprehensive income consists of net earnings and foreign currency translation adjustments. During the three months ended March 31, 2001 and 2000, comprehensive income was equal to: (in thousands): <TABLE> <CAPTION> Three Months Ended March 31 --------------------------- 2001 2000 ------ ------- <S> <C> <C> Net earnings $1,645 $5,013 Foreign currency translation gain (loss) (470) 863 ------- ------- Comprehensive income $1,175 $5,876 ====== ====== </TABLE> 7) INCOME TAXES The effective income tax rates for the three months ended March 31, 2001 and 2000 were based on estimated annual combined effective rates of 27.5% and 20%, respectively. 8) BUSINESS SEGMENTS The Company had three reportable business segments during the first quarter of 2001. Segments included Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). 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. 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. In addition, the Company operated a logistics business segment during the first six months of 2000. Effective July 1, 2000, substantially all of the logistics business and related assets were contributed to a newly-formed, commonly-owned company, Transplace.com (TPC). The Company presently has an approximate 27% interest in TPC and the financial results of TPC are included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled "equity in earnings of associated companies." A summary of certain segment information is presented below ( in millions): 8
<TABLE> <CAPTION> Assets ---------------------------- As of March 31 ---------------------------- 2001 2000 -------- ------- <S> <C> <C> JBT $878 $830 JBI 124 78 DCS 148 104 JBL -- 69 Other (includes corporate) 60 112 -------- ------- Total $1,210 $1,193 ======== ====== </TABLE> <TABLE> <CAPTION> Revenues ------------------------------------------- For The Three Months Ended March 31 ------------------------------------------- 2001 2000 -------- --------- <S> <C> <C> JBT $204 $203 JBI 168 151 DCS 128 98 JBL -- 107 -------- --------- Subtotal 500 559 Inter-segment eliminations (5) (25) -------- --------- Total $495 $534 ======== ========= </TABLE> <TABLE> <CAPTION> Operating Income (Loss) ------------------------------------------- For The Three Months Ended March 31 ------------------------------------------- 2001 2000 -------- ------- <S> <C> <C> JBT ($3.2) ($0.2) JBI 7.3 7.7 DCS 4.3 4.0 JBL -- 1.7 Other -- (3.6) -------- -------- Total $8.4 $9.6 ======== ======== </TABLE> <TABLE> <CAPTION> Depreciation and Amortization Expense For The Three Months Ended March 31 ------------------------------------- 2001 2000 ------- ------- <S> <C> <C> JBT $18 $17 JBI 6 6 DCS 10 8 JBL -- -- Other 2 1 -------- -------- Total $36 $32 ======== ======== </TABLE> 9) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (Statement 133), amended by Statement 138. Statement 138 amended the accounting and reporting standards of Statement 133 for certain derivative instruments and hedging activities. Statement 138 also amends Statement 133 for decisions made by the FASB relating to the Derivatives Implementation Group (DIG) process. The FASB DIG is addressing Statement 133 implementation issues the ultimate resolution of which may impact the application of Statement 133. 9
Under Statement 133, entities are required to record all derivative instruments in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately. Adoption of Statement 133, as of January 1, 2001, did not have an effect on results of operations or financial position of the Company, because the Company does not have any free standing derivatives or embedded derivatives that would be required to be separated from the host contract and accounted for under SFAS 133. 10) GAIN ON SALE OF EQUIPMENT In March of 2001, the Company sold approximately 2,800 trailers and recognized a gain of approximately $5.5 million. It is the Company's intent to replace these trailers with an operating lease of 2,800 new trailers. 11) RECLASSIFICATIONS Certain amounts for 2000 have been reclassified to conform to the 2001 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 March 31, 2001, and the related condensed consolidated statements of earnings and cash flows for the three-month periods ended March 31, 2001 and 2000. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2000, 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 2, 2001, 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, 2000, 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 April 16, 2001 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, 2000 and Management's Discussion and Analysis of Results of Operations and Financial Condition included in the 2000 Annual Report to Shareholders. This report contains statements that may be considered as forward-looking or predictions concerning future operations. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's belief or interpretation of information currently available. Shareholders and prospective investors are cautioned that actual results and experience may differ materially from the forward-looking statements as a result of many factors. Among all the factors and events that are not within the Company's control and could have a material impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions and competitive rate fluctuations and availability of drivers. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. Financial and operating results of the Company may fluctuate as a result of these and other risk factors as detailed from time to time in Company filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS COMPARISON OF FIRST QUARTER 2001 TO FIRST QUARTER 2000 SUMMARY Consolidated operating revenue for the first quarter of 2001 was $495 million, compared with $534 million during the first quarter of 2000. The lower revenue reflects the contribution of all the Company's non-asset based logistics business to a jointly owned logistics company, Transplace.com (TPC). The Company's revenue growth for the first quarter of 2001 was approximately 16%, excluding the former logistics segment. While the Company's results of operations includes approximately 27% of TPC's net results of operations, all logistics revenue is excluded from the Company's financial statements subsequent to June 30, 2000. JBT segment revenue grew 1% during the first quarter of 2001, to $204 million, compared with $203 million in 2000. The JBT tractor fleet was 206 units larger at March 31, 2001, compared with March 31, 2000. This increase included 131 independent contractor tractors which the Company began utilizing in late 2000. Revenue per loaded mile in the JBT segment, excluding fuel surcharges, rose 1.9% in the current quarter, compared with the first quarter of 2000. The JBT segment incurred an operating loss of $3.2 million during the first quarter of 2001, compared with a loss of $.2 million in 2000. The operating loss in the current quarter was reduced by a $4.1 million gain on the sale of trailers, which closed in March of 2001. The significant JBT operating loss in 2001 was primarily due to reduced freight demand associated with the slowing U.S. economy, additional empty miles run and higher maintenance and safety costs. Revenue in the JBI segment rose 11% to $168 million in 2001, compared with $151 million in 2000. Revenue per mile, excluding fuel surcharges, declined .6% in 2001 compared with the first quarter of 2000. Operating income in the JBI segment declined to $7.3 million in 2001 from $7.7 million in 2000. The decline in operating income was partly due to higher equipment costs. 12
DCS segment revenue increased 30% to $128 million in 2001 from $98 million in 2000. Operating income was $4.3 million in 2001, compared with $4.0 million in 2000. Current quarter operating income included a $1.3 million gain on the sale of certain trailers. The decline in 2001 operating income, excluding this gain, was partly due to reduced freight demand associated with the slowing U.S. economy and higher accident and equipment costs. <TABLE> <CAPTION> Summary of Operating Segments Results For Three Months Ended March 31 (dollars in millions) Gross Revenue Operating Income ----------------------------------- ------------------ 2001 2000 % Change 2001 2000 ---- ---- -------- ---- ---- <S> <C> <C> <C> <C> <C> JBT $204 $203 1% ($3.2) ($0.2) JBI 168 151 11% 7.3 7.7 DCS 128 98 30% 4.3 4.0 JBL -- 107 -- -- 1.7 Other -- -- -- -- (3.6) ----- ----- ----- ---- ----- Subtotal 500 559 (11%) 8.4 9.6 Inter-segment eliminations (5) (25) -- -- -- ----- ----- ------ ---- ---- Total $495 $534 (7%) $8.4 $9.6 ==== ==== ==== ==== ==== </TABLE> The following table sets forth items in the Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period. <TABLE> <CAPTION> Three Months Ended March 31 --------------------------------------------- Percentage of Percentage Change Operating Revenues Between Quarters --------------------- -------------------- 2001 2000 2001 VS. 2000 ---------- ---------- -------------------- <S> <C> <C> <C> Operating revenues 100.0% 100.0% (7.1%) Operating expenses Salaries, wages and employee benefits 39.7% 34.8% 5.8% Rents and purchased transportation 26.6% 35.4% (30.2%) Fuel and fuel taxes 12.6% 10.6% 9.8% Depreciation and amortization 7.2% 6.0% 10.9% Operating supplies and expenses 6.9% 5.6% 14.8% Insurance and claims 2.5% 1.8% 28.2% Operating taxes and licenses 1.6% 1.4% 5.3% General and administrative expenses, net of gains (0.1%) 1.5% (104.7%) Communication and utilities 1.3% 1.1% 16.1% ------------------------ -------------- Total operating expenses 98.3% 98.2% (7.1%) ------------------------ -------------- Operating income 1.7% 1.8% (12.4%) Interest expense (1.3%) (1.1%) 5.0% Equity in earnings of associated companies 0.0% 0.5% (93.8%) ------------------------ -------------- Earnings before income taxes 0.4% 1.2% (63.8%) Income taxes 0.1% 0.3% (50.2%) ------------------------ -------------- Net earnings 0.3% 0.9% (67.2%) ======================== -------------- </TABLE> 13
Total operating expenses for the first quarter of 2001 decreased 7.1% from the comparable period of 2000. This decrease was significantly impacted by the contribution of the logistics business to TPC, effective July 1, 2000. The Company's operating ratio was 98.3% for the first quarter of 2001 and 98.2% in the comparable quarter of 2000. Salaries, wages and employee benefits increased 5.8% during the current quarter due, in part, to higher workers' compensation and other fringe benefit expenses. The contribution of the logistics business also significantly decreased 2001 revenue, resulting in an increase of this cost category as a percentage of revenue. Rents and purchased transportation decreased 30.2% and declined significantly as a percentage of revenue. This decrease was primarily due to the contribution of the logistics business which resulted in a significant decrease of purchased transportation expense. Fuel and fuel taxes increased 9.8%, primarily due to an approximate 9% increase in tractor miles and a 1% increase in fuel cost per gallon. Fuel cost per gallon declined about 10% during the first quarter of 2001, relative to the fourth quarter of 2000. Depreciation and amortization expense increased 10.9% during the current quarter due primarily to an 8% increase in the tractor fleet. The Company commenced a tractor leasing program in July of 2000 and has acquired the majority of its new tractors since that time utilizing capital leases. Gains and losses on dispositions of revenue equipment are included in general and administrative expense. Operating supplies and expenses increased 14.8%, primarily due to the 9% increase in tractor miles and higher tractor maintenance costs. A portion of the higher tractor repair costs is due to more work being outsourced to outside vendors and was partly offset by lower mechanic wage expense. Insurance and claims costs rose 28.2%, primarily due to higher accident and collision expenses. General and administrative expenses declined nearly 105%, partly due to an approximate $5.5 million gain on the sale of a group of trailers which was closed during March of 2001. This expense category was also reduced in 2001 by charges to TPC for computer system and support work and other administrative services. Communication and utilities expenses were up 16.1%, primarily due to expanded data and telecommunication networks and increased satellite communication expenses. The effective income tax rates were approximately 27.5% in 2001 and 20% in 2000, which were the rates expected for the full year 2001 and 2000, respectively. As a result of the above, net earnings for the three months ended March 31, 2001 were $1.6 million, or diluted earnings per share of $.05, compared with $5.0 million, or $.14 per diluted share, in 2000. 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 $27.4 million for the first quarter of 2001, compared with a use of $8.1 million during the first quarter of 2000. This increase in cash provided was due to higher levels of accounts payable in 2001 and funds paid out during the first quarter of 2000 for prepaid lease charges. Net cash provided by investing activities was $12.4 million in 2001, compared with $64.6 million used in 2000. This change was primarily a result of reduced purchases of trailing equipment and the sale of trailing equipment in March of 2001. The Company commenced tractor leasing programs in July of 2000. The majority of new tractor acquisitions since mid 2000 have been under capital lease arrangements. The majority of new trailing equipment additions since late 2000 have been under operating lease arrangements. Due to reduced funding requirements for revenue equipment, treasury stock and the payment of dividends, net cash used in financing activities was $25.9 million in 2001, compared with $63.9 million provided by financing activities in 2000. 14
SELECTED BALANCE SHEET DATA <TABLE> <CAPTION> As of ------------------------------------------------------------ March 31, 2001 December 31, 2000 March 31, 2000 -------------- ----------------- -------------- <S> <C> <C> <C> Working capital ratio 1.14 1.02 1.18 Current maturities of long-term debt and obligations under capital leases (millions) $ 83 $ 101 $ 60 Total debt and obligations under capital leases (millions) $ 401 $ 401 $ 396 Total debt to equity .93 .94 .99 Total debt as a percentage of total capital .48 .48 .50 </TABLE> The Company's total debt level, including capitalized lease obligations, remained at approximately $401 million from December 31, 2000 to March 31, 2001 and was up $5 million from March 31, 2000. As of March 31, 2001, the Company had intentions to acquire or lease approximately $60 million of revenue and service equipment during the next twelve month period. Funding for future acquisitions of revenue equipment is expected to come from cash generated from operations, existing borrowing facilities and rental or leasing arrangements. The Company discontinued its commercial paper program in early 2001. The Company is authorized to borrow up to $150 million under its current revolving lines of credit. These loans are supported by a credit agreement with a number of banks, which expires December 14, 2001. 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 use of short-term revolving lines of credit. The Company from time to time utilizes interest rate swaps to mitigate the effects of interest rate changes; none were outstanding at March 31, 2001. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more during the next twelve months, there would be no material adverse impact on the Company's results of operations based on variable rate debt outstanding at March 31, 2001. At March 31, 2001, 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 months ended March 31, 2001. 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 fluctuation in foreign currency exchange rates. 15
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 The annual meeting of stockholders of J.B. Hunt Transport Services, Inc. was held on April 26, 2001. Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934. At the meeting, stockholders voted on the following resolutions with the vote tabulations so indicated: <TABLE> <CAPTION> VOTES ------------------------------------------- FOR AGAINST ABSTAINED ------------------------------------------ <S> <C> <C> <C> 1. To elect three Class III Directors for a term of three years each. 31,811,268 0 453,751 2. To ratify the appointment of KPMG LLP as the Company's principal independent public accountants for the next fiscal year. 31,635,358 619,041 10,620 </TABLE> There was no solicitation in opposition to management's nominees for Directors as listed in the proxy statement and each nominee was elected by greater than ninety-two percent of the shares entitled to vote. No additional business or other matters came before the meeting or any adjournment thereof. ITEM 5. OTHER INFORMATION On April 27, 2001, Standard and Poor's Corporation announced that it had lowered its ratings for J.B. Hunt Transport Services, Inc. The corporate credit rating was lowered to BBB from BBB+; senior unsecured debt was lowered to BBB from BBB+ and subordinated debt was lowered to BBB- from BBB. The commercial paper rating of A-2 was affirmed, with a stable outlook. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 15 -- Awareness letter related to Independent Accountants' Review Report (b) Reports on Form 8-K The Company filed a Form 8-K on May 7, 2001, relating to Items 7 and 9 of that Form and announcing that the Company had prepared a slide presentation and intended to utilize it in meetings with investors, stockholders and analysts. A copy of the slide presentation was filed as an exhibit to the Form 8-K. 16
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: May 14, 2001 BY: /s/ Kirk Thompson ------------------------ --------------------------------------- Kirk Thompson President and Chief Executive Officer DATE: May 14, 2001 BY: /s/ Jerry W. Walton ------------------------ --------------------------------------- Jerry W. Walton Executive Vice President, Finance and Chief Financial Officer DATE: MAY 14, 2001 BY: /s/ Donald G. Cope ------------------------ --------------------------------------- Donald G. Cope Senior Vice President, Controller and Chief Accounting Officer 17