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
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
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.
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
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:
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.
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.
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:
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.
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.
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.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 8.
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.
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.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
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
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
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").
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
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
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
Schedule V
J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES
Property and Equipment
Years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
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)
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)