jbhunt_10q-093009.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
X
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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THE
SECURITIES EXCHANGE ACT OF 1934
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For
the quarterly period ended September 30, 2009
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OR
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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THE
SECURITIES EXCHANGE ACT OF 1934
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Commission
file number 0-11757
J.B.
HUNT TRANSPORT SERVICES, INC.
(Exact name of registrant as specified
in its charter)
Arkansas
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71-0335111
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(State
or other jurisdiction
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(I.R.S.
Employer
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of
incorporation or
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Identification
No.)
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organization)
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615
J.B. Hunt Corporate Drive, Lowell, Arkansas 72745
(Address
of principal executive offices)
479-820-0000
(Registrant's
telephone number, including area code)
www.jbhunt.com
(Registrant's
web site)
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 the past 90 days.
Yes
X No __
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer X Accelerated
filer ___ Non-accelerated filer
___ Smaller reporting company ___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
The
number of shares of the registrant’s $0.01 par value common stock outstanding on
September 30, 2009 was 127,137,339.
Form
10-Q
For
The Quarterly Period Ended September 30, 2009
Table
of Contents
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Page
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Part
I. Financial Information
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3
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4
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5
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6
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11
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19
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19
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Part
II. Other Information
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20
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20
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20
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20
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20
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20
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21
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Exhibits
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22
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Part I. Financial
Information
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ITEM
1. FINANCIAL STATEMENTS
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J.B.
HUNT TRANSPORT SERVICES, INC.
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Condensed
Consolidated Statements of Earnings
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(in
thousands, except per share amounts)
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(unaudited)
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Three
Months Ended
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Nine
Months Ended
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September
30
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September
30
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2009
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2008
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2009
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2008
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Operating
revenues, excluding fuel surcharge revenues
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$ |
740,697 |
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$ |
770,656 |
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$ |
2,107,337 |
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$ |
2,258,130 |
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Fuel
surcharge revenues
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93,052 |
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225,778 |
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219,032 |
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594,026 |
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Total
operating revenues
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833,749 |
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996,434 |
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2,326,369 |
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2,852,156 |
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Operating
expenses:
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Rents
and purchased transportation
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365,057 |
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400,641 |
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1,001,048 |
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1,108,749 |
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Salaries,
wages and employee benefits
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203,446 |
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217,194 |
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588,725 |
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651,790 |
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Fuel
and fuel taxes
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72,510 |
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143,028 |
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194,452 |
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434,667 |
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Depreciation
and amortization
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47,098 |
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50,666 |
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141,555 |
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151,934 |
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Operating
supplies and expenses
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40,398 |
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41,924 |
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114,690 |
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119,686 |
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Insurance
and claims
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12,316 |
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13,860 |
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38,024 |
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45,924 |
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General
and administrative expenses, net of asset dispositions
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10,232 |
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10,214 |
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38,082 |
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28,328 |
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Operating
taxes and licenses
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6,984 |
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7,985 |
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20,901 |
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24,158 |
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Communication
and utilities
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4,754 |
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4,656 |
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13,857 |
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14,553 |
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Total
operating expenses
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762,795 |
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890,168 |
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2,151,334 |
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2,579,789 |
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Operating
income
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70,954 |
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106,266 |
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175,035 |
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272,367 |
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Interest
income
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119 |
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214 |
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405 |
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713 |
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Interest
expense
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6,427 |
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9,694 |
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20,974 |
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31,766 |
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Equity
in (income)/loss of affiliated company
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(229 |
) |
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247 |
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619 |
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2,125 |
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Earnings
before income taxes
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64,875 |
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96,539 |
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153,847 |
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239,189 |
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Income
taxes
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24,912 |
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36,239 |
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59,077 |
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91,872 |
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Net
earnings
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$ |
39,963 |
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$ |
60,300 |
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$ |
94,770 |
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$ |
147,317 |
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Weighted
average basic shares outstanding
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127,073 |
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125,907 |
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126,503 |
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125,206 |
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Basic
earnings per share
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$ |
0.31 |
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$ |
0.48 |
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$ |
0.75 |
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$ |
1.18 |
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Weighted
average diluted shares outstanding
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129,819 |
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129,042 |
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129,251 |
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128,480 |
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Diluted
earnings per share
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$ |
0.31 |
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$ |
0.47 |
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$ |
0.73 |
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$ |
1.15 |
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Dividends
declared per common share
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$ |
0.11 |
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$ |
0.10 |
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$ |
0.33 |
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$ |
0.30 |
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See
Notes to Condensed Consolidated Financial Statements.
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Condensed
Consolidated Balance Sheets
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(in
thousands)
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(unaudited)
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September
30, 2009
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December
31, 2008
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$ |
4,711 |
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$ |
2,373 |
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Trade
accounts receivable, net
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340,330 |
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280,614 |
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Assets
held for sale
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11,402 |
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17,843 |
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Prepaid
expenses and other
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45,459 |
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95,457 |
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Total
current assets
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401,902 |
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396,287 |
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Property
and equipment, at cost
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2,181,247 |
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2,169,893 |
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Less
accumulated depreciation
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745,335 |
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783,363 |
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Net
property and equipment
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1,435,912 |
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1,386,530 |
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Other
assets
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20,281 |
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10,636 |
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$ |
1,858,095 |
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$ |
1,793,453 |
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Current
debt
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$ |
0 |
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$ |
118,500 |
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Trade
accounts payable
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|
180,712 |
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196,059 |
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Claims
accruals
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16,787 |
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18,095 |
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Accrued
payroll
|
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|
46,777 |
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33,156 |
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Other
accrued expenses
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|
10,398 |
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31,995 |
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Deferred
income taxes
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|
13,859 |
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|
10,083 |
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Total
current liabilities
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268,533 |
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407,888 |
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Long-term
debt
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|
625,800 |
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515,000 |
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Other
long-term liabilities
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|
30,201 |
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30,490 |
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Deferred
income taxes
|
|
|
325,907 |
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|
311,064 |
|
Stockholders'
equity
|
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|
607,654 |
|
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|
529,011 |
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$ |
1,858,095 |
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$ |
1,793,453 |
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See
Notes to Condensed Consolidated Financial Statements.
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Condensed
Consolidated Statements of Cash Flows
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(in
thousands)
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(unaudited)
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Nine
Months Ended
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September
30
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2009
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|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
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Net
earnings
|
|
$ |
94,770 |
|
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$ |
147,317 |
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
141,555 |
|
|
|
151,934 |
|
Share-based
compensation
|
|
|
12,418 |
|
|
|
8,644 |
|
(Gain)/loss
on sale of revenue equipment and other
|
|
|
7,061 |
|
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|
(377 |
) |
Impairment
on assets held for sale
|
|
|
10,284 |
|
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|
0 |
|
Benefit
from deferred income taxes
|
|
|
18,619 |
|
|
|
29,486 |
|
Equity
in loss of affiliated company
|
|
|
619 |
|
|
|
2,125 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
|
(59,833 |
) |
|
|
(47,038 |
) |
Income
tax payable
|
|
|
(14,750 |
) |
|
|
(9,960 |
) |
Other
assets
|
|
|
48,080 |
|
|
|
57,069 |
|
Trade
accounts payable
|
|
|
(15,831 |
) |
|
|
292 |
|
Claims
accruals
|
|
|
(1,309 |
) |
|
|
282 |
|
Accrued
payroll and other accrued expenses
|
|
|
6,477 |
|
|
|
9,904 |
|
Net
cash provided by operating activities
|
|
|
248,160 |
|
|
|
349,678 |
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|
|
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|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to property and equipment
|
|
|
(281,740 |
) |
|
|
(201,045 |
) |
Net
proceeds from sale of equipment
|
|
|
80,433 |
|
|
|
78,663 |
|
Net
distributions of available for sale investments
|
|
|
2,005 |
|
|
|
5,456 |
|
Changes
in other assets
|
|
|
(9,573 |
) |
|
|
(378 |
) |
Net
cash used in investing activities
|
|
|
(208,875 |
) |
|
|
(117,304 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Payments
on long-term debt
|
|
|
(68,500 |
) |
|
|
(10,500 |
) |
Net
borrowings/(repayments) on revolving lines of credit and
other
|
|
|
61,285 |
|
|
|
(217,870 |
) |
Stock
option exercises and other
|
|
|
4,644 |
|
|
|
6,543 |
|
Tax
benefit on stock options exercised
|
|
|
7,326 |
|
|
|
14,485 |
|
Dividends
paid
|
|
|
(41,702 |
) |
|
|
(37,539 |
) |
Net
cash used in financing activities
|
|
|
(36,947 |
) |
|
|
(244,881 |
) |
Net
increase/(decrease) in cash and cash equivalents
|
|
|
2,338 |
|
|
|
(12,507 |
) |
Cash
and cash equivalents at beginning of period
|
|
|
2,373 |
|
|
|
14,957 |
|
Cash
and cash equivalents at end of period
|
|
$ |
4,711 |
|
|
$ |
2,450 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
26,918 |
|
|
$ |
37,783 |
|
Income
taxes
|
|
$ |
48,647 |
|
|
$ |
58,124 |
|
|
|
|
|
|
|
|
|
|
See
Notes to Condensed Consolidated Financial Statements.
|
|
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|
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Basis
of Presentation
The
accompanying unaudited interim Condensed Consolidated Financial Statements have
been prepared in accordance with U.S. generally accepted accounting principles
(GAAP) for interim financial information. We believe such statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for the fair presentation of our financial position, results of
operations and cash flows at the dates and for the periods
indicated. Pursuant to the requirements of the Securities and
Exchange Commission (SEC) applicable to quarterly reports on Form 10-Q, the
accompanying financial statements do not include all disclosures required by
GAAP for annual financial statements. While we believe the
disclosures presented are adequate to make the information not misleading, these
unaudited interim Condensed Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and related notes
included in our Annual Report on Form 10-K for the year ended December 31,
2008. Operating results for the periods presented in this report are
not necessarily indicative of the results that may be expected for the calendar
year ending December 31, 2009, or any other interim period. Our
business is somewhat seasonal with slightly higher freight volumes typically
experienced during August through early November.
Impairment
of Long-lived Assets and Assets Held for Sale
In June
2009, we entered into a plan to sell approximately 700 tractors, the majority of
which were operating in our JBI and DCS segments. We reclassified the
net book value of this equipment from net property and equipment to assets held
for sale and discontinued recording depreciation expense for these assets held
for sale. We recorded a pretax charge of $10.3 million to reduce the
carrying value of these assets to estimated fair value, less cost to
sell. These impairment charges are included in “general and
administrative expenses, net of asset dispositions” in our Condensed
Consolidated Statements of Earnings and are reflected in our applicable business
segments’ final results.
Recent
Accounting Pronouncements
In June 2009, the Financial
Accounting Standards Board (FASB) issued a Codification of FASB Accounting
Standards and the Hierarchy of GAAP, which establishes the Codification as the
single source of authoritative U.S. GAAP recognized by the FASB. SEC
rules and interpretive releases are also sources of authoritative GAAP for SEC
registrants. The Codification became effective for us beginning July
1, 2009. The Codification is not intended to change or alter existing GAAP and
accordingly, it did not impact our results of operations, cash flows or
financial position. We have adjusted historical GAAP references in
this quarterly report and will adjust future filings to reflect authoritative
guidance included in the Codification.
In May 2009, the FASB issued
authoritative guidance related to subsequent events, which became effective for
us during second quarter 2009. This guidance sets forth the
circumstances and the period after the balance sheet date for which an entity
should evaluate events for recognition or disclosure in its financial
statements. In addition, the guidance identifies the disclosures that
an entity should make about such events. We have evaluated subsequent
events from September 30, 2009 through October 28, 2009, when the financial
statements were issued, in accordance with this guidance. Adoption
did not have an effect on our financial results.
We
adopted the authoritative guidance related to fair value measurements for
nonfinancial assets and liabilities effective January 1,
2009. Adoption of this guidance increased our disclosures regarding
fair value instruments, but did not have an effect on our operating income or
net earnings. See Note 7, Fair Value Measurements, for
more description.
We
compute basic earnings per share by dividing net earnings available to common
stockholders by the actual weighted average number of common shares outstanding
for the reporting period. Diluted earnings per share reflects the
potential dilution that could occur if holders of options or unvested restricted
share units exercised or converted their holdings into common
stock. The dilutive effect of stock options and restricted share
units was 2.7 million shares during the third quarter 2009 and 3.1 million
shares during the third quarter 2008. During the nine months ended
September 30, 2009 and September 30, 2008, the dilutive effect of stock options
and restricted share units was 2.7 million shares and 3.3 million shares,
respectively.
3.
|
Share-based
Compensation
|
The following table summarizes the
components of our share-based compensation program expense (in
thousands):
|
|
Three
Months Ended
September
30
|
|
|
Nine
Months Ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Restricted
share units:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax
compensation expense
|
|
$ |
2,107 |
|
|
$ |
1,629 |
|
|
$ |
10,458 |
|
|
$ |
6,020 |
|
Tax
benefit
|
|
|
809 |
|
|
|
626 |
|
|
|
4,016 |
|
|
|
2,312 |
|
Restricted
share unit expense, net of tax
|
|
$ |
1,298 |
|
|
$ |
1,003 |
|
|
$ |
6,442 |
|
|
$ |
3,708 |
|
Stock
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax
compensation expense
|
|
$ |
812 |
|
|
$ |
989 |
|
|
$ |
1,960 |
|
|
$ |
2,624 |
|
Tax
benefit
|
|
|
312 |
|
|
|
380 |
|
|
|
753 |
|
|
|
1,008 |
|
Stock
option expense, net of tax
|
|
$ |
500 |
|
|
$ |
609 |
|
|
$ |
1,207 |
|
|
$ |
1,616 |
|
As of
September 30, 2009, we had $34.2 million and $7.4 million of total unrecognized
compensation expense related to restricted share units and nonstatutory stock
options, respectively, which is expected to be recognized over the remaining
weighted-average period of 2.1 years for restricted share units and 1.6 years
for stock options. During the nine months ended September 30, 2009,
we issued 221,977 shares for vested restricted share units and 888,093 shares as
a result of stock option exercises.
4. Financing
Arrangements
Outstanding
borrowings under our current financing arrangements consist of the following (in
millions):
|
|
September
30, 2009
|
|
|
December
31, 2008
|
|
Revolving
line of credit
|
|
$ |
225.8 |
|
|
$ |
165.0 |
|
Senior
notes
|
|
|
400.0 |
|
|
|
400.0 |
|
Term
loan
|
|
|
0.0 |
|
|
|
68.5 |
|
Less
current portion
|
|
|
(0.0
|
) |
|
|
(118.5
|
) |
Total
long-term debt
|
|
$ |
625.8 |
|
|
$ |
515.0 |
|
Revolving
Lines of Credit
At September 30, 2009, we were
authorized to borrow up to $350 million under a revolving line of credit, which
expires in March 2012 and is supported by a credit agreement with a group of
banks. The applicable interest rate under this agreement is based on
either the prime rate or LIBOR, depending upon the specific type of borrowing,
plus a margin based on the level of borrowings and our credit
rating. At September 30, 2009, we had $225.8 million outstanding at
an average interest rate of 0.99% under this agreement.
Effective June 29, 2009, we terminated
a $75 million accounts receivable securitization facility. Concurrent
with this termination, we dissolved a wholly-owned subsidiary called JBH
Receivables LLC, which was formed in July 2006 as a bankruptcy remote entity
associated with the accounts receivable securitization facility.
Senior
Notes
Our senior notes consist of two
separate issuances. The first is $200 million of 5.31% senior notes,
which mature in March 2011. Interest payments are due semiannually in
March and September of each year. The second is $200 million of 6.08%
senior notes, which mature in July 2014. For this second issuance,
principal payments in the amount of $50.0 million are due in July 2012 and 2013,
with the remainder due upon maturity. Interest payments are due
semiannually in January and July of each year.
Term
Loan
Our $100 million term loan facility,
which was arranged in connection with our purchase of used, dry-van trailers,
matured on September 29, 2009. The balance at maturity of
$61.5 million was paid during September 2009 reducing the balance to zero at
September 30, 2009. Concurrent with the loan and credit agreement, we
entered into an interest rate swap agreement that expired when the related term
loan matured.
Our
revolving line of credit requires us to maintain certain covenants and financial
ratios. We were in compliance with all covenants and financial ratios at
September 30, 2009.
On July
16, 2009, our Board of Directors declared a regular quarterly dividend of $0.11
per common share, which was paid on August 14, 2009, to stockholders of record
on July 31, 2009.
Comprehensive
income includes changes in the fair value of our interest rate swap, which
qualifies for hedge accounting. Our interest rate swap expired
effective September 29, 2009. A reconciliation of net earnings and
comprehensive income follows (in thousands):
|
|
Three
Months
Ended
September
30
|
|
|
Nine
Months
Ended
September
30
|
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net
earnings
|
|
$ |
39,963 |
|
|
$ |
60,300 |
|
|
$ |
94,770 |
|
|
$ |
147,317 |
|
Unrealized
gain (loss) on derivative instruments,
net
of income taxes
|
|
|
440 |
|
|
|
295 |
|
|
|
1,187 |
|
|
|
261 |
|
Comprehensive
income
|
|
$ |
40,403 |
|
|
$ |
60,595 |
|
|
$ |
95,957 |
|
|
$ |
147,578 |
|
7.
|
Fair
Value Measurements
|
Our assets and liabilities measured at
fair value are based on the market approach valuation technique which considers
prices and other relevant information generated by market transactions involving
identical or comparable assets and liabilities.
Current accounting standards for fair
value measurements state that fair value is an exit price, representing the
amount that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants. As such, fair
value is a market-based measurement that should be determined based on
assumptions market participants would use in pricing an asset or
liability. As a basis for evaluating such assumptions, accounting
standards establish a three-tier fair value hierarchy, which prioritizes the
inputs in measuring fair value as follows:
|
Level
1
|
Quoted
prices in active markets for identical assets or
liabilities
|
|
Level
2
|
Inputs,
other than the quoted prices in active markets, that are observable either
directly or indirectly
|
|
Level
3
|
Unobservable
inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions about what market
participants would use in pricing the asset or
liability
|
The
following are assets and liabilities measured at fair value, based on quoted
market prices (Level 1) and completed sales or market asking prices for similar
assets (Level 2), at September 30, 2009 (in millions):
|
|
Quoted
Prices in Active Markets for Identical Assets/(Liabilities)
(Level
1)
|
|
Significant
Other Observable Inputs Assets/(Liabilities)
(Level
2)
|
Trading
investments
|
|
$ |
8.1 |
|
|
$ |
-- |
|
Assets
held for sale
|
|
$ |
-- |
|
|
$ |
11.4 |
|
The
carrying amounts and estimated fair values, based on their net present value
using market rates obtained from third parties, of our long-term debt at
September 30, 2009, were as follows (in millions):
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
Revolving
line of credit
|
|
$ |
225.8 |
|
|
$ |
225.8 |
|
Senior
notes
|
|
$ |
400.0 |
|
|
$ |
361.3 |
|
The
carrying amounts of all other instruments at September 30, 2009, approximate
their fair value due to the short maturity of these instruments.
Our
effective income tax rate was 38.4% for the three and nine month periods ended
September 30, 2009, compared with 37.5% for the three month period ended
September 30, 2008 and 38.4% for the nine month period ended September 30,
2008. In determining our quarterly provision for income taxes, we use
an estimated annual effective tax rate, which is based on our expected annual
income, statutory tax rates, best estimate of nontaxable and nondeductible items
of income and expense and the ultimate outcome of tax audits. The
2009 effective income tax rate reflects changes in estimates of state income
taxes and nontaxable and nondeductible items as they relate to expected annual
income.
At September 30, 2009, we had a total
of $15.0 million in gross unrecognized tax benefits, which is a component of
other long-term liabilities on our balance sheet. Of this amount, $9.7 million
represents the amount of unrecognized tax benefits that, if recognized, would
impact our effective tax rate. The total amount of accrued interest
and penalties for such unrecognized tax benefits was $2.9 million at September
30, 2009.
We are 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, we believe the resolution of these claims and pending litigation will
not have a material adverse effect on our financial condition, results of
operations or liquidity.
We reported four distinct business
segments during the three and nine months ended September 30,
2009. These segments included: Intermodal (JBI), Dedicated Contract
Services (DCS), Truck (JBT), and Integrated Capacity Solutions
(ICS). The operation of each of these businesses is described in Note
13, Segment
Information, of our Annual Report (Form 10-K) for the year ended December
31, 2008. A summary of certain segment information is presented below
(in millions):
|
|
Assets
(Excludes
intercompany accounts)
As
of September 30
|
|
|
|
2009 |
|
|
2008 |
|
JBI
|
|
$ |
906 |
|
|
$ |
803 |
|
DCS
|
|
|
449 |
|
|
|
397 |
|
JBT
|
|
|
328 |
|
|
|
440 |
|
ICS
|
|
|
31 |
|
|
|
26 |
|
Other
(includes corporate)
|
|
|
144 |
|
|
|
138 |
|
Total
|
|
$ |
1,858 |
|
|
$ |
1,804 |
|
|
|
Operating
Revenues
|
|
|
|
Three
Months Ended
September
30
|
|
|
Nine
Months Ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
JBI
|
|
$ |
456 |
|
|
$ |
532 |
|
|
$ |
1,272 |
|
|
$ |
1,464 |
|
DCS
|
|
|
197 |
|
|
|
244 |
|
|
|
550 |
|
|
|
716 |
|
JBT
|
|
|
119 |
|
|
|
171 |
|
|
|
329 |
|
|
|
547 |
|
ICS
|
|
|
68 |
|
|
|
59 |
|
|
|
192 |
|
|
|
149 |
|
Subtotal
|
|
|
840 |
|
|
|
1,006 |
|
|
|
2,343 |
|
|
|
2,876 |
|
Inter-segment
eliminations
|
|
|
(6 |
) |
|
|
(10 |
) |
|
|
(17 |
) |
|
|
(24 |
) |
Total
|
|
$ |
834 |
|
|
$ |
996 |
|
|
$ |
2,326 |
|
|
$ |
2,852 |
|
|
|
Operating
Income/(Loss)
|
|
|
|
Three
Months Ended
September
30
|
|
|
Nine
Months Ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
JBI
|
|
$ |
49.6 |
|
|
$ |
74.0 |
|
|
$ |
129.7 |
|
|
$ |
192.0 |
|
DCS
|
|
|
18.9 |
|
|
|
26.8 |
|
|
|
44.3 |
|
|
|
67.3 |
|
JBT
|
|
|
(0.4
|
) |
|
|
2.5 |
|
|
|
(10.3 |
) |
|
|
5.8 |
|
ICS
|
|
|
3.0 |
|
|
|
3.1 |
|
|
|
11.4 |
|
|
|
7.3 |
|
Other
(includes corporate)
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.0 |
) |
Total
|
|
$ |
71.0 |
|
|
$ |
106.3 |
|
|
$ |
175.0 |
|
|
$ |
272.4 |
|
|
|
Depreciation and Amortization
Expense
|
|
|
|
Three
Months Ended
September
30
|
|
|
Nine
Months Ended
September
30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
JBI
|
|
$ |
16.2 |
|
|
$ |
14.7 |
|
|
$ |
46.7 |
|
|
$ |
42.1 |
|
DCS
|
|
|
15.7 |
|
|
|
17.1 |
|
|
|
47.2 |
|
|
|
51.5 |
|
JBT
|
|
|
12.4 |
|
|
|
16.2 |
|
|
|
39.7 |
|
|
|
50.1 |
|
ICS
|
|
|
0.1 |
|
|
|
0.0 |
|
|
|
0.1 |
|
|
|
0.0 |
|
Other
(includes corporate)
|
|
|
2.7 |
|
|
|
2.7 |
|
|
|
7.9 |
|
|
|
8.2 |
|
Total
|
|
$ |
47.1 |
|
|
$ |
50.7 |
|
|
$ |
141.6 |
|
|
$ |
151.9 |
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS
You should refer to the attached
interim Condensed Consolidated Financial Statements and related notes and also
to our Annual Report (Form 10-K) for the year ended December 31, 2008 as you
read the following discussion. We may make statements in this report
that reflect our current expectation regarding future results of operations,
performance and achievements. These are “forward-looking” statements
as defined in the Private Securities Litigation Reform Act of 1995, and are
based on our belief or interpretation of information currently
available. You should realize there are many risks and uncertainties
that could cause actual results to differ materially from those
described. Some of the factors and events that are not within our
control and could have a significant impact on future operating results are
general economic conditions, cost and availability of fuel, accidents, adverse
weather conditions, competitive rate fluctuations, availability of drivers,
adverse legal decisions and audits or tax assessments of various federal, state
or local taxing authorities. Additionally, our business is somewhat
seasonal with slightly higher freight volumes typically experienced during
August through early November. You should also refer to Item 1A of
our Annual Report (Form 10-K) for the year ended December 31, 2008, for
additional information on risk factors and other events that are not within our
control. Our future financial and operating results may fluctuate as
a result of these and other risk factors as described from time to time in our
filings with the SEC.
GENERAL
We are one of the largest surface
transportation companies in North America. We operate four distinct,
but complementary, business segments and provide a wide range of transportation
services to a diverse group of customers throughout the continental United
States, Canada and Mexico. We generate revenues primarily from the
movement of freight from shippers to consignees and from serving as a logistics
provider by offering or arranging for others to provide the transportation
service. In addition, we offer services that generally are not
provided by common truckload or intermodal carriers, including specialized
equipment, on-site management and final-mile-delivery services. We
account for our business on a calendar year basis with our full year ending on
December 31 and our quarterly reporting periods ending on March 31, June 30 and
September 30.
Critical
Accounting Policies and Estimates
The preparation of our financial
statements in conformity with U.S. GAAP requires us to make estimates and
assumptions that impact the amounts reported in our Consolidated Financial
Statements and accompanying notes. Therefore, the reported amounts of
assets, liabilities, revenues, expenses and associated disclosures of contingent
assets and liabilities are affected by these estimates. We evaluate
these estimates on an ongoing basis, utilizing historical experience,
consultation with experts and other methods considered reasonable in the
particular circumstances. Nevertheless, actual results may differ
significantly from our estimates. Any effects on our business,
financial position or results of operations resulting from revisions to these
estimates are recognized in the accounting period in which the facts that give
rise to the revision become known.
Information regarding our Critical
Accounting Policies and Estimates can be found in our most current Form 10-K
(Annual Report). The four critical accounting policies that we
believe require us to make more significant judgments and estimates when we
prepare our financial statements include those relating to self-insurance
accruals, revenue equipment, revenue recognition and income taxes. We
have discussed the development and selection of these critical accounting
policies and estimates with the Audit Committee of our Board of
Directors. In addition, Note 2, Summary of Significant Accounting
Policies, to the financial statements in our Annual Report for the year
ended December 31, 2008, contains a summary of our critical accounting
policies. There have been no material changes to the methodology we
apply for critical accounting estimates as previously disclosed in our Annual
Report.
Segments
We operated four segments during the
third quarter 2009. The operation of each of these businesses is
described in Note 13, Segment
Information, of our Annual Report for the year ended December 31,
2008.
RESULTS
OF OPERATIONS
Comparison
of Three Months Ended September 30, 2009 to Three Months Ended September 30,
2008
|
|
Summary
of Operating Segment Results
For
the Three Months Ended September 30
(in
millions)
|
|
|
|
Operating
Revenues
|
|
|
Operating
Income/(Loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
|
2009
|
|
|
2008
|
|
JBI
|
|
$ |
456 |
|
|
$ |
532 |
|
|
|
(14 |
)% |
|
$ |
49.6 |
|
|
$ |
74.0 |
|
DCS
|
|
|
197 |
|
|
|
244 |
|
|
|
(19 |
) |
|
|
18.9 |
|
|
26.8 |
|
JBT
|
|
|
119 |
|
|
|
171 |
|
|
|
(30 |
) |
|
|
(0.4 |
) |
|
|
2.5 |
|
ICS
|
|
|
68 |
|
|
|
59 |
|
|
|
16 |
|
|
|
3.0 |
|
|
|
3.1 |
|
Other
(includes corporate)
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Subtotal
|
|
|
840 |
|
|
|
1,006 |
|
|
|
(16 |
)% |
|
|
71.0 |
|
|
|
106.3 |
|
Inter-segment
eliminations
|
|
|
(6 |
) |
|
|
(10 |
) |
|
|
28 |
|
|
|
-- |
|
|
|
-- |
|
Total
|
|
$ |
834 |
|
|
$ |
996 |
|
|
|
(16 |
)% |
|
$ |
71.0 |
|
|
$ |
106.3 |
|
Our total
consolidated operating revenues decreased to $834 million for the third quarter
2009, a 16% decrease from the $996 million for the third quarter
2008. Lower fuel prices resulted in fuel surcharge revenues of $93.1
million during the current quarter, compared with $225.8 million in
2008. If fuel surcharge revenues were excluded from both periods, the
decrease of 2009 revenue from 2008 was 4%. The total consolidated
tractor fleet declined from 10,029 units in the third quarter 2008 to 9,905
units in the third quarter 2009. Total consolidated container and
trailer count grew from 61,406 to 62,471, while the JBT segment fleet decreased
from 16,382 trailers at September 30, 2008 to 12,485 at September 30,
2009. The overall growth in the consolidated trailing equipment fleet
was primarily to support additional intermodal business.
JBI
segment revenue decreased 14%, to $456 million during the third quarter 2009,
compared with $532 million in 2008. This decrease in segment revenue
was primarily the result of decreases in fuel prices, resulting in lower fuel
surcharge revenue. JBI revenue decreased slightly over the comparable
prior year quarter when the impact of fuel surcharges is
excluded. While overall load volume grew 9% during the current
quarter, over the comparable period of 2008, an extremely competitive bid season
resulting in lower rates, along with a 1% decrease in length of haul from the
third quarter 2008 contributed to the decline in revenues. Operating
income of the JBI segment declined to $49.6 million in the third quarter 2009,
from $74.0 million in 2008, primarily due to lower revenue levels.
DCS
segment revenue decreased 19%, to $197 million in 2009, from $244 million in
2008. Excluding fuel surcharges, revenue declined 8%, compared to the
third quarter 2008, primarily due to fleet reductions in response to changes in
our customers’ business demands. Average truck count at our base
business accounts (locations that commenced operations prior to the current
calendar year) declined by approximately 19% to 3,732 units in the current
quarter compared to the third quarter 2008. Operating income of our
DCS segment decreased to $18.9 million in 2009, from $26.8 million in
2008. The decrease in operating income was primarily due to reduced
volume as well as approximately $2.7 million of implementation expenses related
to new business development.
JBT
segment revenue totaled $119 million for the third quarter 2009, a decrease of
30% from the $171 million in the third quarter 2008. Excluding fuel
surcharges, revenue declined 21%, compared to third quarter
2008. This decrease in revenue was primarily a result of a 10%
reduction in loads hauled, compared to the same quarter a year ago, lower rates
and reduced fleet size in the third quarter 2009. Rate per loaded
mile, excluding fuel surcharges, decreased sharply compared to the prior year
period. Average length-of-haul increased 4.9%, but spot rate per
mile, excluding fuel surcharges, declined 18.7%. JBT operated at a
loss of $0.4 million in the third quarter 2009, compared to operating income of
$2.5 million in the third quarter 2008. Operating income declined
primarily due to the decreased revenue.
ICS
segment revenue grew 16%, to $68 million in the third quarter 2009, from $59
million in the third quarter 2008, which was attributable to a 76% increase in
loads from new and existing customers. Our third-party carrier base
grew 38% during the current quarter to over 21,000 carriers by
quarter-end. Operating income of our ICS segment decreased slightly
to $3.0 million, from $3.1 million in 2008. This decrease in
operating income was partly due to increases in salaries and wages as a result
of employee growth. Our ICS staff count grew 50% during the third
quarter 2009, compared with 2008.
Consolidated
Operating Expenses
The
following table sets forth items in our Condensed Consolidated Statements of
Earnings as a percentage of operating revenues and the percentage increase or
decrease of those items as compared with the prior period.
|
|
Three
Months Ended September 30
|
|
|
|
Dollar
Amounts as a
Percentage
of Total
Operating
Revenues
|
|
|
Percentage
Change
of
Dollar Amounts Between Quarters
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
vs. 2008 |
|
Total
operating revenues
|
|
|
100.0
|
% |
|
|
|
100.0 |
%
|
|
|
|
(16.3 |
)% |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rents
and purchased transportation
|
|
|
43.8 |
|
|
|
|
40.2 |
|
|
|
|
(8.9 |
) |
|
Salaries,
wages and employee benefits
|
|
|
24.4 |
|
|
|
|
21.8 |
|
|
|
|
(6.3 |
) |
|
Fuel
and fuel taxes
|
|
|
8.7 |
|
|
|
|
14.4 |
|
|
|
|
(49.3 |
) |
|
Depreciation
and amortization
|
|
|
5.6 |
|
|
|
|
5.1 |
|
|
|
|
(7.0 |
) |
|
Operating
supplies and expenses
|
|
|
4.8 |
|
|
|
|
4.2 |
|
|
|
|
(3.6 |
) |
|
Insurance
and claims
|
|
|
1.5 |
|
|
|
|
1.4 |
|
|
|
|
(11.1 |
) |
|
General
and administrative expenses, net of asset dispositions
|
|
|
1.3 |
|
|
|
|
1.0 |
|
|
|
|
0.2 |
|
|
Operating
taxes and licenses
|
|
|
0.8 |
|
|
|
|
0.8 |
|
|
|
|
(12.5 |
) |
|
Communication
and utilities
|
|
|
0.6 |
|
|
|
|
0.4 |
|
|
|
|
2.1 |
|
|
Total
operating expenses
|
|
|
91.5 |
|
|
|
|
89.3 |
|
|
|
|
(14.3 |
) |
|
Operating
income
|
|
|
8.5 |
|
|
|
|
10.7 |
|
|
|
|
(33.2 |
) |
|
Interest
income
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
(44.4 |
) |
|
Interest
expense
|
|
|
0.7 |
|
|
|
|
1.0 |
|
|
|
|
(33.7 |
) |
|
Equity
in loss of affiliated company
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
192.7 |
|
|
Earnings
before income taxes
|
|
|
7.8 |
|
|
|
|
9.7 |
|
|
|
|
(32.8 |
) |
|
Income
taxes
|
|
|
3.0 |
|
|
|
|
3.6 |
|
|
|
|
(31.3 |
) |
|
Net
earnings
|
|
|
4.8
|
% |
|
|
|
6.1 |
%
|
|
|
|
(33.7 |
)% |
|
Total
operating expenses decreased 14.3% and operating revenues declined 16.3%, during
the third quarter 2009, from the comparable period 2008. Changes in
fuel costs and fuel surcharge revenues can have an impact on the comparison of
revenues and costs between reporting periods. Operating income
decreased to $71.0 million during the third quarter 2009, from $106.3 million in
the third quarter 2008.
Rents and
purchased transportation costs decreased 8.9% in 2009. This decrease
was primarily the result of the lower cost of fuel, since fuel costs of
third-party rail and truck carriers are included in purchased transportation
expense. This decrease was partially offset by an increase in load
volume in our JBI and ICS segments.
Salaries, wages and employee benefit
costs decreased 6.3% in 2009 compared with 2008. This decrease was
primarily related to reductions in the number of company drivers in our DCS and
JBT segments, caused by the reduction in business demand and freight
movement.
Fuel costs decreased 49.3% in 2009,
compared with 2008. Our fuel cost per gallon during the current
quarter decreased 41% due to the steep decline in fuel prices, compared with the
third quarter 2008. We have fuel surcharge programs in place with the
majority of our customers. These programs typically involve a
specified computation based on the change in national, regional or local fuel
prices. While these programs may incorporate fuel cost changes as
frequently as weekly, most also reflect a specified miles per gallon factor and
require a certain minimum change in fuel costs (e.g., $0.05 per gallon) to
trigger a change in fuel surcharge revenue. As a result, some of
these programs have a timing lag between when fuel costs change and when this
change is reflected in revenues. For such programs, this lag
negatively impacts operating income in times of rapidly increasing fuel costs
and positively impacts operating income when fuel costs decrease
rapidly.
It is not meaningful to compare the
amount of fuel surcharge revenue or the change in fuel surcharge revenue between
reporting periods to fuel and fuel taxes expense, or the change of fuel expense
between periods, as a significant portion of fuel cost is included in our
payments to railroads, dray carriers and other third parties. These
payments are classified as purchased transportation expense.
Depreciation
and amortization expense decreased 7.0%, which was primarily the result of the
reduction of our tractor fleet. Operating supplies and expenses
decreased 3.6%, primarily due to lower maintenance costs and a decrease in toll
costs, compared with the third quarter 2008. Insurance and claims
expense decreased 11.1% for 2009 compared with 2008, primarily due to a lower
number of accidents and lower claims costs.
General
and administrative expenses increased slightly for the current quarter from the
comparable period in 2008, primarily as a result of an increase in facilities
expense and an increase in the loss on the sale of assets. This
increase was partially offset by decreases in bad debt expense and other driver
expenses. Net losses from the sale of revenue equipment were $1.0
million in 2009, compared with $0.1 million in 2008. Operating taxes
and licenses decreased by 12.5% primarily due to the decrease in truck miles and
registered equipment.
Net interest expense decreased 33.5% in
2009, due to a reduction in debt levels and lower interest rates. We
continue to use operating cash flows to pay down debt and have reduced total
debt to $626 million at September 30, 2009 from $692 million at September 30,
2008.
The “equity in (income)/loss of
affiliated company” item on our Condensed Consolidated Statement of Earnings
reflects our share of the operating results of Transplace, Inc.
(TPI).
Our effective income tax rate was 38.4%
for the third quarter 2009 and for the nine months ended September 2009, as
compared to 37.5% for the third quarter 2008 and 38.4% for the nine months ended
September 30, 2008. In determining our quarterly provision for income
taxes, we use an estimated annual effective tax rate, which is based on our
expected annual income, statutory tax rates, best estimate of nontaxable and
nondeductible items of income and expense and the ultimate outcome of tax
audits.
Comparison
of Nine Months Ended September 30, 2009 to Nine Months Ended September 30,
2008
|
|
Summary
of Operating Segment Results
For
the Nine Months Ended September 30
(in
millions)
|
|
|
|
Operating
Revenues
|
|
|
Operating
Income/(Loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
%
Change
|
|
|
2009
|
|
|
2008 |
|
JBI
|
|
$ |
1,272 |
|
|
$ |
1,464 |
|
|
|
(13 |
)% |
|
$ |
129.7 |
|
|
$ |
192.0 |
|
DCS
|
|
|
550 |
|
|
|
716 |
|
|
|
(23 |
) |
|
|
44.3 |
|
|
67.3 |
|
JBT
|
|
|
329 |
|
|
|
547 |
|
|
|
(40 |
) |
|
|
(10.3 |
) |
|
|
5.8 |
|
ICS
|
|
|
192 |
|
|
|
149 |
|
|
|
29 |
|
|
|
11.4 |
|
|
|
7.3 |
|
Other
(includes corporate)
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(0.1 |
) |
|
|
0.0 |
|
Subtotal
|
|
|
2,343 |
|
|
|
2,876 |
|
|
|
(19 |
)% |
|
|
175.0 |
|
|
|
272.4 |
|
Inter-segment
eliminations
|
|
|
(17 |
) |
|
|
(24 |
) |
|
|
28 |
|
|
|
-- |
|
|
|
-- |
|
Total
|
|
$ |
2,326 |
|
|
$ |
2,852 |
|
|
|
(18 |
)% |
|
$ |
175.0 |
|
|
$ |
272.4 |
|
Our total consolidated operating
revenues decreased to $2,326 million for the nine months ended September 30,
2009, an 18% decrease from the $2,852 million for the comparable period
2008. Significantly lower fuel prices resulted in fuel surcharge
revenues of $219.0 million during the nine months ended September 30, 2009,
compared with $594.0 million in 2008. If fuel surcharge revenues were
excluded from both periods, the decrease of 2009 revenue from 2008 was
6.7%. The decreased level of revenue, excluding fuel surcharge, was
primarily attributable to lower load volume in our DCS and JBT segments,
partially offset by higher volumes in our JBI and ICS segments. The
significant decline in JBT revenues was primarily a result of our ongoing
long-term strategy to reduce the size of the segment’s tractor fleet and weaker
demand brought about by the current economic recession. As previously
mentioned, our total consolidated company-owned tractor fleet declined from
10,029 units in 2008 to 9,905 units in 2009. Containers and trailers
grew from 61,406 to 62,471 during the comparable periods.
JBI segment revenue decreased 13% to
$1,272 million in 2009, compared with $1,464 million in 2008. This
decrease in revenue was primarily a result of the reduction in fuel costs and
fuel surcharge revenue partly offset by a 7% growth in overall load
volume. Operating income of the JBI segment declined to $129.7
million in 2009, from $192.0 million in 2008, primarily due to decreased revenue
and declining length of haul, as well as a pretax charge to write down the fair
value of certain assets held for sale recorded in the second quarter
2009.
DCS
segment revenue decreased 23%, to $550 million in 2009, from $716 million in
2008. This decline in DCS segment revenue was partly due to decreased
fuel surcharges related to lower costs of fuel and fewer
loads. Excluding fuel surcharges, revenue declined 13%, compared to
the first nine months 2008, primarily due to the decline in the average truck
count. The lower truck count reflects fleet reductions in response to changes in
our customers’ business demands and our action to reduce units that operate in
more generic dedicated business. Operating income of our DCS segment
decreased to $44.3 million in 2009, from $67.3 million in 2008. The
decline in operating income was due to decreased demand, as well as increased
implementation expenses related to new business and a pretax charge to write
down the fair value of certain assets held for sale recorded in the second
quarter 2009.
JBT
segment revenue totaled $329 million in 2009, a decrease of 40% from the $547
million in 2008. This decrease in revenue was primarily a result of a
25% decrease in loads hauled, compared to the same period a year ago, as demand
was less in 2009. Rate per loaded mile, excluding fuel surcharges,
decreased by 9%, compared to the prior year period. Our JBT segment
operated at a loss of $10.3 million in 2009, compared to operating income of
$5.8 million in 2008. The decrease in operating income was the result
of decreased revenue and decreased demand.
ICS
segment revenue grew 29%, to $192 million in 2009, from $149 million in 2008,
which was primarily attributable to increases in load volume from both new and
existing customers. Operating income of our ICS segment increased to
$11.4 million in 2009, from $7.3 million in 2008, due to volume growth, as our
third-party carrier base grew 38% to over 21,000 carriers by quarter
end. Our ICS employee count increased 32% in 2009, compared with
2008, which was primarily in the sales and operations functions.
Consolidated
Operating Expenses
The
following table sets forth items in our 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.
|
|
Nine
Months Ended September 30
|
|
|
|
Dollar
Amounts as a
Percentage
of Total
Operating
Revenues
|
|
|
Percentage
Change
of
Dollar Amounts Between Periods
|
|
|
|
2009 |
|
|
2008
|
|
|
2009
vs. 2008 |
|
Total
operating revenues
|
|
|
100.0
|
% |
|
|
|
100.0
|
% |
|
|
|
(18.4 |
)% |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rents
and purchased transportation
|
|
|
43.0 |
|
|
|
|
39.0 |
|
|
|
|
(9.7 |
) |
|
Salaries,
wages and employee benefits
|
|
|
25.3 |
|
|
|
|
22.9 |
|
|
|
|
(9.7 |
) |
|
Fuel
and fuel taxes
|
|
|
8.4 |
|
|
|
|
15.2 |
|
|
|
|
(55.3 |
) |
|
Depreciation
and amortization
|
|
|
6.1 |
|
|
|
|
5.3 |
|
|
|
|
(6.8 |
) |
|
Operating
supplies and expenses
|
|
|
4.9 |
|
|
|
|
4.2 |
|
|
|
|
(4.2 |
) |
|
Insurance
and claims
|
|
|
1.6 |
|
|
|
|
1.6 |
|
|
|
|
(17.2 |
) |
|
General
and administrative expenses, net of asset dispositions
|
|
|
1.7 |
|
|
|
|
1.0 |
|
|
|
|
34.4 |
|
|
Operating
taxes and licenses
|
|
|
0.9 |
|
|
|
|
0.8 |
|
|
|
|
(13.5 |
) |
|
Communication
and utilities
|
|
|
0.6 |
|
|
|
|
0.5 |
|
|
|
|
(4.8 |
) |
|
Total
operating expenses
|
|
|
92.5 |
|
|
|
|
90.5 |
|
|
|
|
(16.6 |
) |
|
Operating
income
|
|
|
7.5 |
|
|
|
|
9.5 |
|
|
|
|
(35.7 |
) |
|
Interest
income
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
(43.2 |
) |
|
Interest
expense
|
|
|
0.9 |
|
|
|
|
1.1 |
|
|
|
|
(34.0 |
) |
|
Equity
in loss of affiliated company
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
70.9 |
|
|
Earnings
before income taxes
|
|
|
6.6 |
|
|
|
|
8.4 |
|
|
|
|
(35.7 |
) |
|
Income
taxes
|
|
|
2.5 |
|
|
|
|
3.2 |
|
|
|
|
(35.7 |
) |
|
Net
earnings
|
|
|
4.1
|
% |
|
|
|
5.2
|
% |
|
|
|
(35.7 |
)% |
|
Total
operating expenses decreased 16.6% and operating revenues decreased 18.4%,
during the nine months ended September 30, 2009, from the comparable period of
2008. Changes in fuel costs and fuel surcharge revenues can have an
impact on the comparison of revenues and costs between reporting
periods. Operating income declined to $175.0 million during the first
nine months 2009, from $272.4 million in 2008.
Rents and purchased transportation
costs decreased 9.7% in 2009. This decrease was a direct result of
decreases in the cost of fuel, since fuel costs of third-party rail and truck
carriers are included in purchased transportation expense. This
decrease was partially offset by an increase of outsourced freight through our
ICS segment.
Salaries, wages and employee benefit
costs decreased 9.7% in 2009 from 2008. This decrease was primarily
related to reductions in the number of drivers in our DCS and JBT segments, due
to the reduction in business demand and freight movement.
Fuel costs decreased 55.3% in 2009,
compared with 2008. Our fuel cost per gallon during the first nine
months 2009 decreased nearly 45% due to the decline in fuel
prices. As previously discussed, changes in fuel prices impact our
fuel costs and results of operations.
Depreciation and amortization expense
decreased 6.8% in 2009, which was primarily the result of the reduction in our
tractor fleet. Operating supplies and expenses decreased 4.2%,
primarily due to lower maintenance costs and lower travel expenses, compared
with 2008. Insurance and claims expense decreased 17.2% for 2009
compared with 2008, primarily due to a lower number of accidents and lower
claims costs. Operating taxes and licenses decreased by 13.5% due to
the decrease in miles and freight demand, as well as a reduction in tractor
units.
General
and administrative expenses increased 34.4% in 2009 from the comparable period
in 2008, primarily as a result of an impairment charge to write down the fair
value of certain assets held for sale, implementation charges for new business,
and increases in professional fees and facility expenses. Net losses
from sale of revenue equipment were $0.9 million in 2009, compared with net
gains of $0.6 million in 2008.
Net
interest expense decreased 33.8% in 2009, primarily due to reduced debt levels
and lower interest rates. Total debt decreased to $626 million at
September 30, 2009, from $692 million at September 30, 2008.
The
“equity in (income)/loss of affiliated company” item on our Condensed
Consolidated Statement of Earnings reflects our share of the operating results
of TPI.
Liquidity and Capital
Resources
Cash
Flow
Net cash
provided by operating activities totaled $248 million during the nine months
ended September 30, 2009, compared with $350 million for the same period
2008. Operating cash flows decreased primarily due to lower earnings
and changes in the volume and timing of payments to vendors. In
addition, the volume and timing of collections of accounts receivable resulted
in lower operating cash flows compared to the 2008 period, primarily due to an
increase in the respective period operating revenues. Net cash used
in investing activities totaled $209 million in 2009, compared with $117 million
in 2008. The higher level of cash used in investing activities in
2009 primarily related to implementation costs and investing in new start-up DCS
business, as well as expanding our container fleet. This increase was
partially offset by proceeds on asset sales through further execution of our
strategy of reduced investment in the asset-based operations of our JBT
segment. Net cash used in financing activities totaled $37 million,
compared with $245 million in 2008, primarily as a result of our decreased net
payments on outstanding debt during the comparable period. The
decrease in financing activity outflows was partially offset by an increase in
our quarterly dividend payments.
Debt
and Liquidity Data
|
September
30, 2009
|
|
December
31, 2008
|
|
September
30, 2008
|
Working
capital ratio
|
1.5
|
0
|
|
0.9
|
7
|
|
1.0
|
1
|
Current
portion of debt (millions)
|
$0.
|
0
|
|
$118.
|
5
|
|
$147.
|
0
|
Total
debt (millions)
|
$625.
|
8
|
|
$633.
|
5
|
|
$692.
|
2
|
Total
debt to equity ratio
|
1.0
|
3
|
|
1.2
|
0
|
|
1.4
|
3
|
Total
debt to capital ratio
|
0.5
|
1
|
|
0.5
|
4
|
|
0.5
|
9
|
Liquidity
Our need
for capital has typically resulted from the acquisition of intermodal containers
and chassis, trucks, tractors and trailers required to support our growth and
the replacement of older equipment with new, late model equipment. We
have, during the past few years, obtained capital through cash generated from
operations, revolving lines of credit and long-term debt
issuances. We have also periodically utilized operating leases to
acquire revenue equipment. At September 30, 2009, the operating
leases outstanding are primarily for facilities, none of which contain any
guaranteed residual value clauses.
At September 30, 2009, we were
authorized to borrow up to $350 million under a revolving line of credit, which
expires in March 2012 and is supported by a credit agreement with a group of
banks. The applicable interest rate under this agreement is based on
either the prime rate or LIBOR, depending upon the specific type of borrowing,
plus a margin based on the level of borrowings and our credit
rating. At September 30, 2009, we had $225.8 million outstanding at
an average interest rate of 0.99% under this agreement.
Effective June 29, 2009, we terminated
a $75 million accounts receivable securitization facility. Concurrent
with this termination, we dissolved a wholly-owned subsidiary called JBH
Receivables LLC, which was formed in July 2006 as a bankruptcy remote entity
associated with the accounts receivable securitization facility.
Our
revolving line of credit requires us to maintain certain covenants and financial
ratios. We were in compliance with all covenants and financial ratios at
September 30, 2009.
We
believe our liquid assets, cash generated from operations and revolving line of
credit will provide sufficient funds for our operating and capital requirements
for the foreseeable future.
|
|
Contractual
Cash Obligations
As
of September 30, 2009
Amounts
Due by Period (in millions)
|
|
|
|
Total |
|
|
One
Year
Or
Less
|
|
|
Two
to
Three
Years
|
|
|
Four
to
Five
Years
|
|
|
After
Five
Years
|
|
Operating
leases
|
|
$ |
12 |
|
|
$ |
5 |
|
|
$ |
5 |
|
|
$ |
1 |
|
|
$ |
1 |
|
Debt
payments
|
|
|
626 |
|
|
|
0 |
|
|
|
476 |
|
|
|
150 |
|
|
|
0 |
|
Interest
payments on debt (1)
|
|
|
71 |
|
|
|
25 |
|
|
|
32 |
|
|
|
14 |
|
|
|
0 |
|
Commitments
to acquire revenue equipment and facilities
|
|
|
174 |
|
|
|
174 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Total
|
|
$ |
883 |
|
|
$ |
204 |
|
|
$ |
513 |
|
|
$ |
165 |
|
|
$ |
1 |
|
(1) Interest
payments on debt are based on the debt balance and applicable rate, at September
30, 2009.
Our net capital expenditures were
approximately $209 million during the first nine months of 2009, compared with
$122 million for the same period 2008. The $209 million of net
capital expenditures includes net additions to revenue equipment and non-revenue
producing assets, including those recorded in “Other Assets” in our Condensed
Consolidated Balance Sheets that are necessary to contribute to and support the
future growth of our various business segments. Capital expenditures
in 2009 were primarily for tractor trades, additional intermodal containers,
chassis, and other trailing equipment. We are currently committed to
spend approximately $85 million during the remainder of 2009, net of $37 million
of expected sales proceeds from equipment dispositions. We expect to
spend approximately $294 million for net capital expenditures during calendar
year 2009. The table above excludes $17.9 million of potential
liabilities, including interest and penalties, for uncertain tax positions as we
are unable to reasonably estimate the ultimate timing of
settlement.
Off-Balance
Sheet Arrangements
Our only off-balance sheet arrangements
are related to operating leases primarily for facilities.
Risk
Factors
You should refer to Item 1A of our
Annual Report for the year ended December 31, 2008, under the caption “Risk
Factors” for specific details on the following factors and events that are not
within our control and could affect our financial results.
|
·
|
Our
business is subject to general economic and business factors, any of which
could have a material adverse effect on our results of
operations. Recent economic trends and the current tightening
of credit in financial markets could adversely affect our ability, and the
ability of our suppliers and customers, to obtain financing for operations
and capital expenditures.
|
|
·
|
We
depend on third parties in the operation of our
business.
|
|
·
|
We
derive a significant portion of our revenue from a few major customers,
the loss of one or more of which could have a material adverse effect on
our business.
|
|
·
|
Ongoing
insurance and claims expenses could significantly reduce our
earnings.
|
|
·
|
We
operate in a regulated industry, and increased direct and indirect costs
of compliance with, or liability for violation of, existing or future
regulations could have a material adverse effect on our
business.
|
|
·
|
Our
operations are subject to various environmental laws and regulations, the
violation of which could result in substantial fines or
penalties.
|
|
·
|
Rapid
changes in fuel costs could impact our periodic financial
results.
|
|
·
|
Difficulty
in attracting and retaining drivers, delivery personnel and third-party
carriers could affect our profitability and ability to
grow.
|
|
·
|
We operate in a competitive and
somewhat fragmented industry. Numerous factors could impair our
ability to maintain our current profitability and to compete with other
carriers and private fleets.
|
|
·
|
Extreme
or unusual weather conditions can disrupt our operations, impact freight
volumes and increase our costs, all of which could have a material adverse
effect on our business results.
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
We had
$626 million of debt outstanding at September 30, 2009, including our revolving
line of credit and senior notes issuances. Currently, our senior
notes have fixed interest rates of 5.31% and 6.08%. These fixed-rate
facilities reduce the impact of changes to market interest rates on future
interest expense. For our revolving line of credit, rates are based
on either the prime rate or LIBOR plus an applicable margin. Our
earnings are affected by changes in these short-term interest
rates. Risk can be quantified by measuring the financial impact of a
near-term adverse increase in short-term interest rates. At our
current level of borrowing, a one percent increase in our applicable rate would
reduce annual pretax earnings by $2.3 million.
Although
we conduct business in foreign countries, international operations are not
material to our consolidated financial position, results of operations or cash
flows. Additionally, foreign currency transaction gains and losses
were not material to our results of operations for the nine months ended
September 30, 2009. Accordingly, we are not currently subject to
material foreign currency exchange rate risks from the effects that exchange
rate movements of foreign currencies would have on our future costs or on future
cash flows we would receive from our foreign investment. As of
September 30, 2009, we had no foreign currency forward exchange contracts or
other derivative financial instruments to hedge the effects of adverse
fluctuations in foreign currency exchange rates.
The price
and availability of diesel fuel are subject to fluctuations due to changes in
the level of global oil production, seasonality, weather and other market
factors. Historically, we have been able to recover a majority of
fuel price increases from our customers in the form of fuel
surcharges. We cannot predict the extent to which fuel price levels
will fluctuate in the future or the extent to which fuel surcharges could be
collected to offset such changes. As of September 30, 2009, we had no
derivative financial instruments to reduce our exposure to fuel price
fluctuations.
ITEM 4. CONTROLS AND PROCEDURES
As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our internal controls and disclosure
controls. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded our disclosure controls and procedures were
effective as of September 30, 2009, in alerting them on a timely basis to
material information required to be disclosed by us in our periodic reports to
the SEC.
In
addition, there were no changes in our internal control over financial reporting
during our first nine months of 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Part
II. Other Information
ITEM 1. LEGAL PROCEEDINGS
We are
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, we believe the resolution of
these claims and pending litigation will not have a material adverse effect on
our financial condition, our results of operations or liquidity.
Information
regarding risk factors appears in Part I, Item 2, Management’s Discussion and
Analysis of Financial Condition and Results of Operations of this report on Form
10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
Not
applicable.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
Not
applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not
applicable.
ITEM 5. OTHER INFORMATION
Not
applicable.
Index to
Exhibits
Exhibit
3.1
|
Amended
and Restated Articles of Incorporation of J.B. Hunt Transport Services,
Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the
Company’s Quarterly Report on Form 10-Q for the period ended March 31,
2005, filed on April 29, 2005)
|
3.2
|
Restated
Bylaws of J. B. Hunt Transport Services, Inc. dated February 27, 2008
(incorporated by reference from Exhibit 3(ii) of the Company’s Quarterly
Report on Form 10-Q for the period ended March 31, 2008, filed on April
30, 2008)
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification
|
32.1
|
Section
1350 Certification
|
32.2
|
Section
1350 Certification
|
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, in the
city of Lowell, Arkansas, on the 28th day of October, 2009.
|
J.B.
HUNT TRANSPORT SERVICES, INC.
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/ Kirk
Thompson |
|
|
|
Kirk
Thompson
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/
David G. Mee |
|
|
|
David
G. Mee
Executive
Vice President, Finance and
Administration,
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
BY:
|
/s/
Donald G. Cope |
|
|
|
Donald
G. Cope
Senior
Vice President, Controller,
Chief
Accounting Officer
|
|
|
|
|
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21