HUNT J B TRANSPORT SERVICES INC DEF 14A 2006
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
Filed by the Registrant x
Filed by a Party other than the Registrant o
Payment of Filing Fee (Check the appropriate box):
J. B. HUNT TRANSPORT SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of J.B. Hunt Transport Services, Inc. (the Company) will be held on April 20, 2006, at 10:00 a.m. (CDT) at the Companys headquarters, located at 615 J. B. Hunt Corporate Drive, Lowell, Arkansas, for the following purposes:
Only stockholders of record on January 31, 2006, will be entitled to vote at the meeting or any adjournments thereof. The stock transfer books will not be closed.
The 2005 Annual Report to Stockholders is included in this publication.
YOUR VOTE IS IMPORTANT
HOW TO VOTE IF YOU ARE A STOCKHOLDER OF RECORD
Your vote is important. You can save the Company the expense of a second mailing by voting promptly. Stockholders of record can vote by telephone, on the Internet, by mail or by attending the Meeting and voting by ballot as described below. (Please note: if you are a beneficial owner, please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.)
The Internet and telephone voting procedures are designed to authenticate stockholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m. on April 19, 2006.
VOTE BY TELEPHONE
You can vote by calling the toll-free telephone number on your proxy card. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.
VOTE ON THE INTERNET
You also can choose to vote on the Internet. The website for Internet voting is www.computershare.com/us/proxy As with the telephone voting, you can confirm that your instructions have been properly recorded. If you vote on the Internet, you can also request electronic delivery of future proxy materials.
VOTE BY MAIL
If you choose to vote by mail, simply mark your proxy, date and sign it, and return it to Computershare Trust Company, N.A., in the postage-paid envelope provided. If the envelope is missing, please mail your completed proxy card to J.B. Hunt Transport Services, Inc., c/o Computershare Trust Company, N.A., P. O. Box 43101, Edison, New Jersey 08818-9271.
VOTING AT THE ANNUAL MEETING
The method by which you vote will not limit your right to vote at the Annual Meeting if you decide to attend in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Meeting.
All shares that have been properly voted and not revoked will be voted at the Annual Meeting. If you sign and return your proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board of Directors.
J. B. HUNT TRANSPORT SERVICES, INC.
This Proxy Statement and the accompanying proxy card are being mailed in connection with the solicitation of proxies by the Board of Directors (the Board) of J.B. Hunt Transport Services, Inc. (the Company), for use at the Annual Meeting of Stockholders. This Proxy Statement was first mailed to stockholders of the Company on March 15, 2006.
This introduction is a summary of selected information from this Proxy Statement and may not contain all of the information that is important to you. To better understand the nominees being solicited for Directors and the proposals that are submitted for a vote, you should carefully read this entire document and other documents to which we refer.
The proxies being solicited hereby are being solicited by the Company. The expense of soliciting proxies, including the cost of preparing, assembling and mailing the material submitted herewith, will be paid by the Company. The Company will also reimburse brokerage firms, banks, trustees, nominees and other persons for the expense of forwarding proxy material to beneficial owners of shares held by them of record. Solicitations of proxies may be made personally or by telephone or telegraphic communications, by Directors, officers and regular employees, who will not receive any additional compensation in respect of such solicitations.
When and Where Is the Annual Meeting?
What Is the Purpose of the Annual Meeting?
At the Companys Annual Meeting, stockholders will act upon matters outlined in the accompanying Notice of Annual Meeting. In addition, the Companys management will report on the performance of the Company during calendar year 2005.
Who Is Entitled to Vote?
Only stockholders of record at the close of business on the record date, January 31, 2006, are entitled to receive the Notice of Annual Meeting and to vote the shares of common stock that they held on that date at the Meeting or at any postponement or adjournment of the Meeting. Each outstanding share entitles its holder to cast one vote on each matter to be voted on.
Who Can Attend the Meeting?
All stockholders as of the record date, or their duly appointed proxies, may attend the Meeting, and each may be accompanied by one guest. Seating is limited and will be on a first-come, first-served basis. Registration will begin at 9:30 a.m. and seating will be available at approximately 9:30 a.m.
No cameras, electronic devices, large bags, briefcases or packages
Please note that if you hold your shares in street name (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the Meeting.
What Constitutes a Quorum?
The presence at the Meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum, permitting the Company to conduct its business. As of the record date, 153,822,689 shares of common stock of the Company were outstanding. Proxies received, but marked as abstentions and broker non-votes, will be included in the calculation of the number of shares considered to be present at the Meeting.
Can a Stockholder Nominate a Director?
The Nominating and Corporate Governance Committee of the Board of Directors will consider a candidate properly and timely recommended for Directorship by a stockholder or group of stockholders of the Company. The recommendation must be submitted by one or more stockholders that own individually, or as a group beneficially, 2% or more of the outstanding common stock. Stockholder recommendations must be submitted to the Chairman of the Nominating and Corporate Governance Committee in writing via Certified U.S. mail not less than 120 days prior to the first anniversary of the date of the Proxy Statement relating to the Companys previous Annual Meeting. Recommendations must be addressed as follows:
J.B. Hunt Transport Services, Inc.
Generally, candidates for a Director position should possess:
The full text of the Companys Policy Regarding Director Recommendations by Stockholders and Nominating and Corporate Governance Committee Directorship Guidelines and Selection Policy is published on the Companys website at www.jbhunt.com and can be found under the caption Who We Are/Investor Relations/Corporate Governance.
How Can I Communicate Directly with the Board?
Stockholder communications to the Board of Directors, any Committee of the Board of Directors, or any individual Director must be sent in writing via Certified U.S. mail to the Corporate Secretary at the following address:
J.B. Hunt Transport Services, Inc.
The Companys Stockholder Communications Policy is published on the Companys website at www.jbhunt.com and can be found under the caption Who We Are/Investor Relations/Corporate Governance.
How Do I Vote?
The enclosed proxy card indicates the number of shares you own. There are four ways to vote:
If you vote by Internet or telephone, your vote must be received before midnight of the day before the Meeting. Your shares will be voted as you indicate. If you do not indicate your voting preferences, Wayne Garrison and Kirk Thompson will vote your shares FOR Proposals 1 and 2.
If you Vote by Telephone or on the Internet, You Do NOT Need to Return Your Proxy Card
If you complete and properly sign the accompanying proxy card and return it to the Company, or tender your vote via telephone or the Internet, it will be voted as you direct. If you attend the Meeting, you may deliver your completed proxy card in person. Proxies duly executed and returned by a stockholder, and not revoked prior to or at the Meeting, will be voted in accordance with the instructions thereon.
If your shares are held in street name, you will need to contact your broker or other nominee to determine whether you will be able to vote by telephone or Internet.
What Are the Boards Recommendations?
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Boards recommendation is set forth together with each proposal in this Proxy Statement. In summary, the Board recommends a vote:
As of the date of this Proxy Statement, the Board knows of no other business that may properly be, or is likely to be, brought before the Annual Meeting. With respect to any other matter that properly comes before the Meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, at their own discretion.
What Vote Is Required to Approve Each Proposal?
If you hold shares in street name through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to some of the matters to be acted upon. Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. Shares represented by such broker non-votes will, however, be counted in determining whether there is a quorum.
The authorized common stock of the Company consists of 1,000,000,000 shares at $.01 par value. As of the close of business on January 31, 2006, there were 153,822,689 shares eligible to vote.
Can I Change My Vote After I Return the Proxy Card?
Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by filing with the Secretary of the Company either a notice of revocation or a duly executed proxy bearing a later date. The powers of the proxy holders will be suspended if you attend the Meeting in person and so request, although attendance at the Meeting will not by itself revoke a previously granted proxy.
You Should Carefully Read this Proxy Statement in its Entirety
INFORMATION ABOUT THE BOARD
The Board of Directors is currently divided into three classes, each having three year terms that expire in successive years. The term of office of Directors in each class expires at the Annual Meeting held on the following dates:
The shares represented by your proxy will be voted at the 2006 Annual Meeting for the election of all nominees unless you instruct otherwise
PROPOSAL ONE - ELECTION OF DIRECTORS
Our Bylaws provide that the number of directors shall not be less than three or more than twelve, with the exact number to be fixed by the Board. The Board of Directors proposes that the nominees for Class II Directors described below be re-elected for a new term of three years and until their successors are duly elected and qualified. All nominees are currently serving as Class II Directors.
Each of the nominees has consented to serve the term for which he is nominated. If any nominee becomes unavailable for election, which is not anticipated, the Directors proxies will vote for the election of such other person as the Board may nominate, unless the Board resolves to reduce the number of directors to serve on the Board and thereby reduce the number of directors to be elected at the meeting.
The Board of Directors Recommends that Stockholders Vote
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION
Number of Directors and Term of Directors and Executive Officers
The Companys Bylaws provide that the number of directors shall not be less than three or more than twelve, with the exact number to be fixed by the Board. The Companys Certificate of Incorporation divides the Board into three classes of as equal size as possible, with the terms of each class expiring in consecutive years so that only one class is elected in any given year. Currently, there are ten directors with four directors serving in Class I, and three directors in serving in Class II and Class III.
The stockholders of the Company elect successors for directors whose terms have expired at the Companys Annual Meeting. The Board elects members to fill new membership positions and vacancies in unexpired terms on the Board. At the Board meeting held on January 26, 2006, the Board of Directors adopted a retirement policy. Effective immediately, no director will be eligible to stand for re-election once he or she has reached 72 years of age. Executive officers are elected by the Board and hold office until their successors are elected and qualified or until the earlier of their death, retirement, resignation or removal.
Directors and Executive Officers
The names of the Companys directors and executive officers as of January 31, 2006, and their respective ages and positions are as follows:
NOMINEES FOR DIRECTOR
CLASS II TERM EXPIRES APRIL 2009
REMAINING MEMBERS OF THE CURRENT BOARD
The remaining members of the current Board, their experience and qualifications as Board members, the class in which they serve, and the expiration of their terms are as follows:
CLASS III - TERM EXPIRES APRIL 2007
CLASS I TERM EXPIRES APRIL 2008
The Company pays only independent, non-employee Directors for their services. Directors who are also officers of the Company are not eligible to receive any of the compensation described below.
In calendar year 2005, compensation for independent, non-employee Directors, serving on the Board, was as follows:
The Executive Compensation Committee met on July 21, 2005, with Watson Wyatt, an independent consultant, who was commissioned to review competitive market practices, which included an analysis of compensation for the industry and its peer groups. The Committee determined that to bring
compensation up to the median range of its peers, adjustments were warranted. As such, effective January 1, 2006, compensation was implemented for independent, non-employee directors serving on the board and the boards committees as shown below:
Non-Employee Board of Director Compensation Paid in Calendar Year 2005
Non-employee, independent members of the board of directors did not receive any stock options or restricted stock awards in calendar year 2005. Each member had the option of receiving his or her annual retainer in Company stock, cash or any combination thereof. All of the eligible directors received their annual retainer in Company stock with the exception of Bryan Hunt, who took his retainer in cash and Tom Hardeman, who took 40% of his retainer in stock and 60% of his retainer in cash.
Johnelle D. Hunt, an employee of the Company and member of the Board of Directors, received a salary of $100,000 for her services as the Companys corporate secretary. The Company also submitted payment of $10,000 on her behalf for professional fees and provided a Company match of $3,000 to her 401(k) account.
Bryan Hunt, a member of the Board of Directors, exercised his remaining 266,400 stock options, which created $3,936,708 in taxable compensation or market value of $5,110,557. The options were granted to him while he was an employee of the Company and were due to expire in 2006.
Duties of the Board
The Board of Directors has the responsibility to serve as the trustee for the stockholders. It also has the responsibility for establishing broad corporate policies and for the overall performance of the Company. The Board, however, is not involved in day-to-day operating details. Members of the Board are kept informed of the Companys business through discussion with the Chairman, Chief Executive Officer and other officers, by reviewing analyses and reports sent to them each month, and by participating in Board and Committee meetings.
Corporate Governance Guidelines
We believe that good corporate governance helps ensure that the Company is managed for the long-term benefit of its stockholders. We continue to review our corporate governance policies and practices, corporate governance rules and regulations of the Securities and Exchange Commission (the SEC), and the listing standards of the NASDAQ, the stock exchange on which our common stock is traded. The Board has adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities to the Company and its stockholders. The guidelines address, among other items, director independence and qualifications. You can access and print the charters of our Audit Committee, Executive Compensation Committee, Nominating and Corporate Governance Committee, as well as our Corporate Governance Guidelines, Code of Ethical and Professional Standards, Whistleblower Policy and other Company policies and procedures required by applicable law or regulation on our website at www.jbhunt.com under the caption Who We Are/Investor Relations/Corporate Governance.
The Board has determined that no non-employee Director has a material relationship with the Company (either directly or indirectly as a partner, stockholder or officer of an organization that has a relationship with the Company) and all non-employee Directors meet the criteria for independence under the NASDAQ listing standards. The Board has also determined that no member of the Audit Committee, Executive Compensation Committee or Nominating and Corporate Governance Committee has any material relationship with the Company (either directly or indirectly as a partner, stockholder or officer of an organization that has a relationship with the Company) and that all members of these committees meet the criteria for independence under the NASDAQ.
The Board has selected Dr. John A. White to act as presiding Director of executive sessions to be held on a regular basis by non-employee, independent Directors. This group of Directors met three times in executive session during calendar year 2005. Dr. White presided as Chairman in each of these meetings. It will remain standard practice of the Company to conduct these meetings either before or after each regularly scheduled Board meeting or on an as-needed basis.
Code of Conduct
The Board has adopted a Code of Ethical and Professional Standards, applicable to all directors, officers and employees of the Company. The purpose and role of this Code is to focus our directors, officers and employees on areas of ethical risk, provide guidance to help them recognize and deal with ethical issues, provide mechanisms to report unethical or unlawful conduct, and to help enhance and formalize our culture of integrity, honesty and accountability. This Code is published on the Companys website at www.jbhunt.com.
All members of the Board are strongly encouraged to attend each meeting of the Board and meetings of the Board Committees on which they serve, as well as the Annual Meeting. Please refer to the Companys Director Attendance Policy, published on the Companys website at www.jbhunt.com under the caption Who We Are/Investor Relations/Corporate Governance for further details.
The business of the Company is managed under the direction of the Board of Directors, who meet on a regularly scheduled basis during its calendar year to review significant developments affecting the Company and to act on matters that require Board approval. Special meetings are also held when Board action is required on matters arising between regularly scheduled meetings. The Board of Directors held four regularly scheduled meetings and two telephonic meetings during calendar year 2005. During this period all members of the Board participated in at least 75% of all meetings, including the Annual Meeting.
Standing committees of the Board include the Audit, Executive Compensation, and Nominating and Corporate Governance Committee. Committee members are elected annually by the Board and serve until their successors are elected and qualified or until their earlier resignation or removal.
The following table discloses the Board members who served on each of the Boards Committees and the number of meetings held by each Committee during calendar year 2005.
Upon recommendation of the Nominating and Corporate Governance Committee on January 27, 2006, the Board voted to retain the committee appointments as shown above for calendar year 2006.
Under the terms of its charter, the Audit Committee represents and assists the Board in fulfilling its oversight responsibility relating to the integrity of the Companys financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function, the annual independent audit of the Companys financial statements, the Companys compliance with legal and regulatory requirements, the independent auditors qualifications and independence, the performance of the Companys internal audit function and the performance of its independent auditors. In fulfilling its duties, the Audit Committee, among other things, shall:
Each member of the Audit Committee meets the independence requirements of the NASDAQ, the 1934 Act and the Companys Corporate Governance Guidelines. Each member of the Audit Committee is financially literate, knowledgeable and qualified to review financial statements. The audit committee financial expert designated by the Board is Dr. John A. White.
EXECUTIVE COMPENSATION COMMITTEE
Under the term of its charter, the Executive Compensation Committee has overall responsibility for evaluating and approving executive officers compensation plans, policies and programs of the Company. In fulfilling its duties, the Compensation Committee, among other things, shall:
Each member of the Compensation Committee meets the independence requirements of the NASDAQ, the Internal Revenue Code of 1986, as amended (the Code), and the Companys Corporate Governance Guidelines.
Executive Compensation Committee Interlocks And Insider Participation
Messrs. Cooper, Hardeman and Peterson are non-employee, independent Directors of the Company. None of the members of the Executive Compensation Committee was an officer or an employee of the Company during calendar year 2005. No member of the Committee is a former officer of the Company or had any related-party transactions with the Company in calendar year 2005.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee develops and maintains the corporate governance policies of J.B. Hunt Transport Services, Inc. and assists the Companys Board of Directors in:
All members of the Committee are qualified as non-employee, independent Directors as determined by the rules of the SEC and NASDAQ. Further detail regarding qualifications and responsibilities is outlined in the Committees charter published on the Companys website at www.jbhunt.com under the caption Who We Are/ Investor Relations/ Corporate Governance. The Committee met one time in calendar year 2005.
The Nominating and Corporate Governance Committee guidelines outline the qualifications the Committee looks for in a nominee. Generally, the candidate should possess:
After assessing and considering prevailing business conditions of the Company, legal and listing standard requirements for Board composition, the size and composition of the current Board, and the skills and experience of current Board members, any of the Chairman, the Committee or any Board member may identify the need to add a Board member to meet specific criteria or to fill a vacancy on the Board. The Committee identifies qualified Director nominees from among persons known to the members of the Committee, by reputation or otherwise, and through referrals from trusted sources, including senior management, existing Board members, stockholders and independent consultants hired for such purpose. The Committee may request that senior officers of the Company assist the Committee in identifying and assessing prospective candidates who meet the criteria established by the Board.
Candidates are evaluated based upon their qualifications or other relevant information, including a personal interview. The Committee convenes a meeting and approves the candidates to be presented to the Board. The Board considers the recommendations of the Committee and approves candidates for nomination.
The Nominating and Corporate Governance Committee is comprised of Thomas L. Hardeman, Chairman, John A. Cooper, Jr., and James L. Robo. Messrs. Hardeman, Cooper and Robo served as members of the Committee during the entire year of 2005. The Nominating and Corporate Governance Committee met once during calendar year 2005. The Board has determined that all members of the Committee satisfy independence requirements of the NASDAQ. The Nominating and Corporate Governance Committee Charter is published on the Companys website at www.jbhunt.com under the caption Who We Are/ Investor Relations/ Corporate Governance.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee
Compensation of officers and senior executives of the Company is determined by the Executive Compensation Committee of the Board of Directors (the Committee). The Committee, comprised entirely of non-employee, independent Directors, meets:
In 2005, the Committee commissioned Watson Wyatt, an independent consultant, to analyze the Companys current executive compensation package to review salaries, bonuses and other compensation for its officers and senior executives, including the Chairman, Chief Executive Officer and Board of Directors. Salary modifications and awards of restricted stock were made to more closely align executive management with the industry and its peers at the direction of the independent consultant.
General Compensation Policy
The Companys executive compensation program is designed to provide fair compensation to executives based on their performance and contributions to the Company, provide incentives to attract and retain key executives, and instill a long-term commitment to the Company through Company ownership, all in a manner consistent with stockholder interests.
The executive compensation package has three main components:
This mix of compensation places more of total compensation at risk and emphasizes performance.
The Committee believes that competitive levels of cash compensation, together with equity and other incentive programs, are necessary for the attraction, motivation and retention of the highest-caliber employees.
Executives base salaries are based on the Companys performance for the prior calendar year and upon a subjective evaluation of each executives contribution to that performance and his or her overall corporate responsibilities.
Performance-based cash bonuses are paid quarterly to executives based on the Companys achievement of pre-established performance goals of earnings-per-share amounts. The amount of the bonus paid is a percentage of the executives salary. The bonus increases as a percentage of base salary as the Companys earnings per share increases.
Incentive awards are made under the Companys Management Incentive Plan. As a persons level of responsibility increases, a greater portion of potential total compensation opportunity is shifted from salary to performance-based incentives and to greater reliance on growing total return to the stockholders through stock-based awards. This directly aligns the interest of management with stockholders.
The Company offers the option of deferring a portion of their base salary and/or bonus into a Deferred Compensation Program to a select group of management or highly compensated employees as such phrase is defined under ERISA. The program is voluntary and the employee determines the amount of his or her contribution and choice of investment vehicles. The Company does not contribute to this plan. An independent administrator monitors investment options and distributions.
Equity Compensation Program
Shares of restricted stock and stock options of the Company are granted under the Management Incentive Plan in an effort to link executives future compensation to the long-term financial success of the Company. These awards are intended to attract and retain employees who contribute to the Companys success, to provide incentives to enhance job performance of the executives and enable those persons to participate in the long-term success and growth through an equity interest in the Company.
In 2005, the Executive Compensation Committee began granting restricted stock in lieu of stock options under the Management Incentive Plan. The Committee believes restricted stock awards are currently more effective than stock options in achieving the Companys compensation objectives, as restricted stock is subject to less market volatility and is potentially less dilutive to the Companys stock. As such, restricted stock was issued at one-third of what a normal stock-option grant would have been. Employees realize immediate value as restricted stock awards vest, with such value increasing as the Companys stock performance increases.
The Compensation Committee anticipates granting restricted stock awards in lieu of stock options for the foreseeable future, but in the event stock options are granted, such options will be granted with an exercise price equal to 100% of the fair market value of the Companys common stock on the date of grant.
Management Incentive Plan Information
The Management Incentive Plan table provides information as of December 31, 2005, with respect to shares of the Companys common stock that may be issued under our existing equity compensation plans.
Stock Ownership Guidelines
To motivate the Companys officers and senior management to emulate its stockholders, the Company strongly encourages ownership of Company stock. Stock ownership is defined as stock owned:
The Board of Directors implemented a program that set stock ownership goals for certain categories of officers and senior management, as shown below.
The Committee has determined that as of January 31, 2006, all of the Companys officers and members of senior management covered by these guidelines have met their ownership goals.
Employment and Change of Control Arrangements
The Company has no such contracts or arrangements dealing with employment. The Company does, however, have an adjustment provision in its Management Incentive Plan for its outstanding shares in the event of a recapitalization, merger or consolidation.
Chairman and Chief Executive Officer Compensation
The Committee has attempted to set base salary and overall compensation for Messrs. Garrison and Thompson competitively with companies of similar size and aligned with companies in our respective industry. The goal is to reward these executives for corporate performance in line with the interests of the stockholders.
Cash bonuses paid to Messrs. Garrison and Thompson in calendar year 2005 were determined by the previously mentioned formula relating bonuses to earnings per share.
In calendar year 2005, in accordance with the Committees policy of aligning executive interest with the interests of stockholders and after review of an evaluation prepared by Watson Wyatt, an independent consultant, the Committee awarded and the Board ratified grants of restricted stock for Messrs. Garrison and Thompson. A grant of 20,000 shares was awarded to Mr. Garrison. His grant will vest 25% in year 2010, 25% in year 2011 and 50% in year 2012. A grant of 35,000 shares was made to Mr. Thompson that vests 25% in year 2013, 25% in year 2014 and 50% in year 2015. The fair market value of our stock on the date of the grants was $18.68.
Messrs. Garrisons and Thompsons cash compensation is comparable to other transportation company peers. After evaluating the independent consultants review of compensation practices and policies, the Committee recommended, and the Board approved, an increase in base salary for Mr. Garrison of $100,000 and an increase in base salary to Mr. Thompson of $40,000. The increases became effective on October 21, 2005. Both Messrs. Garrison and Thompson participate in the Companys 401(k) Employee Retirement Plan.
2006 Performance-Based Compensation
For calendar year 2006, the Company has established, and the Executive Compensation Committee has approved, a cash bonus program for the above-named executives and its senior management. The amount of the bonus earned will be a percentage of the executives base salary and will increase by percentage of base salary in direct correlation to the Companys increase in earnings per share similar to prior years.
The Companys Management Incentive Plan is designed to be a performance-based plan as defined in the Internal Revenue Code. Therefore, under Internal Revenue Code Section 162(m), compensation paid in 2005 under this type of plan is intended to be fully deductible, and it is our intention to continue to maximize deductibility to the extent practicable.
We firmly believe that the quality and motivation of all of the Companys employees, including its managers, make a significant difference in the Companys long-term performance. We also believe that stockholders directly benefit from compensation programs that:
We believe that the Companys management compensation program meets these requirements and will continue to be an important factor in driving the Companys success.
J.B. Hunt Transport Services, Inc.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee
The Audit Committee is comprised of Dr. John A. White, Chairman, James L. Robo and Leland E. Tollett. Messrs. White, Robo and Tollett served as members of the Audit Committee during calendar year 2005. The Companys Board of Directors has determined that all members of the Audit Committee satisfy the independence and other requirements for audit committee membership and has also made the determination that Messrs. White, Robo and Tollett each have the attributes of an audit committee financial expert as defined by the regulations of the SEC.
The Audit Committee operates under a written charter adopted by the Board. A copy of the Audit Committee Charter is available on the Corporate Governance page of the Companys website at www.jbhunt.com. It is also attached to this Proxy Notice and Statement as Appendix A. In carrying out its responsibilities, the Audit Committee, among other things:
In 2005, the Audit Committee met ten times. The Audit Committee schedules its meetings with a view to ensure that it devotes appropriate attention to all of its responsibilities and duties. The Audit Committees meetings include, whenever appropriate, executive sessions with the Companys independent auditors and the Companys internal auditors, in each case outside the presence of the Companys management.
In performing its oversight role, the Audit Committee reviewed the audited consolidated financial statements for the 2005 calendar year and met and held discussions with management, the Companys internal auditors and Ernst & Young LLP, the Companys independent auditors, to discuss those financial statements and the audit related thereto. Management has represented to the Audit Committee that the Companys consolidated financial statements were prepared in accordance with the auditing standards of the Public Company Accounting Oversight Board.
The Audit Committee discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61, as may be modified, supplemented or amended, which includes, among other items, matters related to the conduct of the audit of the Companys consolidated financial statements. The independent auditors also provided the Audit Committee with written disclosures and the letter required by Independence Standards Board Standard No. 1, as may be modified, supplemented or amended, which relates to the auditors independence from the Company and its related entities, and the Audit Committee discussed with the independent auditors their independence.
Based on the Audit Committees discussions with management, the internal auditors and the independent auditors as described above, and upon its review of the representation of management and the independent auditors and the reports of the independent auditors, the Audit Committee recommended to the Board that the Companys audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the calendar year ended December 31, 2005, as filed with the SEC.
J.B. Hunt Transport Services, Inc.
The following table sets forth information concerning total compensation earned or paid by the Company or any of its subsidiaries to the Chairman (as one of the five highest-paid executives other than the Chief Executive Officer), the Chief Executive Officer, and the three highest-paid executive officers of the Company for such period in all capacities in which they served.
Calendar year 2005 amounts reflect:
Calendar year 2004 amounts reflect:
Calendar year 2003 amounts reflect:
RESTRICTED STOCK GRANTS DURING CALENDAR YEAR 2005
This table shows all restricted stock grants to the Chairman, President and CEO, and three highest-paid executives of the Company during the calendar year ended December 31, 2005. All restricted grants have no cash dividend or voting rights. The fair market value of the restricted shares granted on October 27, 2005, was $18.68 per share
AGGREGATED OPTION EXERCISES DURING CALENDAR YEAR 2005 AND
This table shows all stock options exercised by the Chairman, President and CEO, and the three highest-paid executives of the Company during the calendar year ended December 31, 2005, and the number and value of options they held at calendar year-end.
The above table reflects options only. The Company issued no restricted shares until October 27, 2005.
CODES OF BUSINESS CONDUCT AND ETHICS
The Board has adopted codes of business conduct and ethics that apply to all of the Companys Directors, officers and employees. The purpose of these codes is to focus our Directors and employees on areas of ethical risk, provide guidance to help them recognize and deal with ethical issues, provide mechanisms to report unethical or unlawful conduct, and help enhance and formalize our culture of integrity, honesty and accountability. These codes are published in their entirety on the Companys website at www.jbhunt.com under the caption Who We Are/Investor Relations/Corporate Governance. The Company will post on its website any amendment to this code and any waivers of any provision of this code made for the benefit of any of our senior executive officers or Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Johnelle D. Hunt is the wife of founder and former Senior Chairman of the Board J.B. Hunt, and Bryan Hunt is the son of J. B. and Johnelle D. Hunt. There are no other family relationships among the foregoing Directors. As an employee of the Company, she received a salary of $100,000 for her services as the Companys corporate secretary. The Company also submitted payment of $10,000 on her behalf for professional fees and provided a Company match of $3,000 to her 401(k) account.
A son-in-law of Mr. Thompson, President and Chief Executive Officer of the Company, was employed by the Company in calendar year 2005 and received in calendar year 2005 compensation that exceeded $60,000. He was employed in calendar year 2000, prior to becoming Mr. Thompsons son-in-law.
On October 13, 2005, the Company announced a gift of $10 million to the University of Arkansas to facilitate the construction of the new J.B. Hunt Transport Services, Inc. Center for Academic Excellence. Mrs. Hunt serves as Treasurer for the University of Arkansas Campaign for the 21st Century, and Dr. John A. White serves as Chancellor of the University of Arkansas. Neither of the aforementioned Board members was instrumental in securing the contribution, nor did either participate in the voting processes related to this transaction.
The contribution represents an investment by our Company in a growing institution, located only 10 miles from our headquarters, in the pursuit of excellence that has not only provided training and skills for many of our current employees, but also allows us to participate in the education of the next generation of J.B. Hunt Transport Services team members. The J.B. Hunt Transport Services, Inc. Center for Academic Excellence will serve as a focal point and enabling infrastructure for information technology, supply chain management, computational science and engineering, and technology-enabled education, research and outreach on the University campus to prepare students for the diverse, innovative, collaborative, team-oriented environment prevalent in todays workspace. The close proximity of the University to our Company is invaluable as we jointly identify transportation and technology issues that require the brightest and best minds to insure that the American supply chain remains the model for the world.
SECTION 16(a) BENEFICIAL OWNERSHIP
Section 16 of the Securities and Exchange Act of 1934, as amended, requires each Director, officer, and any individual beneficially owning more than 10 percent of the Companys common stock to file reports of holdings and transactions in J.B. Hunt Transport Services, Inc. with the SEC and NASDAQ within specified time frames. These specified time frames were shortened by the SEC during 2003 and generally require the reporting of changes in ownership within two business days of the transaction. To the Companys knowledge, all required Section 16(a) filings were timely and correctly made during 2005.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The authorized common stock of the Company consists of 1,000,000,000 shares at $.01 par value. As of the close of business on January 31, 2006, there were 153,822,689 shares outstanding held by 1,338 stockholders of record. There are no other classes of capital stock of the Company authorized.
Holdings of Executive Officers and Directors
The following table sets forth the beneficial ownership of our common stock as of February 28, 2006, by each Director of the Company, by each named executive officer, by all officers and Directors as a group, and by all persons known to be the beneficial owner of more than 5 percent of the Companys common stock. As used in this Proxy Statement, beneficially owned means the sole power to vote or direct the voting of a security and the sole power to dispose or direct the disposition of a security.
The following graph presents a five-year comparison of cumulative total returns for the Company, the S&P 500 composite index and NASDAQ Trucking Stocks (CRSP Transportation Index). The CRSP Transportation Index was prepared by the Center for Research in Security Prices and includes all NASDAQ motor freight and warehousing companies classified under SIC codes 4200-4299. A listing of the companies included in the CRSP Transportation Index is available upon request from the Company. The values on the graph show the relative performance of an investment of $100 made on December 31, 2000, in Company common stock and in each of the indices.
Comparison of Five-Year Cumulative Total Return
J. B. Hunt Transport Services, Inc.
Total Return for Index Dollars
PROPOSAL TWO - RATIFICATION OF THE APPOINTMENT OF AUDITORS
On March 29, 2005, the Audit Committee of the Board of Directors concluded its proposal process for a new independent accounting firm. The Audit Committee appointed Ernst & Young LLP as the Companys independent registered public accounting firm for the calendar year ended December 31, 2005, thereby dismissing KPMG LLP, effective immediately.
The audit reports of KPMG LLP on the consolidated financial statements of the Company and subsidiaries as of and for the years ended December 31, 2004 and 2003, and managements assessment of internal control over financial reporting as of December 31, 2004, and the effectiveness of internal control over financial reporting as of December 31, 2004, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the two most recent calendar years ended December 31, 2004 and 2003, and from December 31, 2004, through the effective date of KPMG LLPs dismissal, there have been no disagreements between the Company and KPMG LLP on any matters of accounting principles or practice, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused KPMG LLP to make reference to the subject matter of such disagreements in connection with its reports. During the period described in the preceding sentence, there were no reportable events as defined in Item 301(a)(1)(iv) or (v) of Regulation S-K of the SECs rules and regulations.
During the two calendar years ended December 31, 2004, and 2003, and from December 31, 2004 through the engagement of Ernst & Young LLP as the Companys independent accountant on March 29, 2005, neither the Company nor anyone on its behalf had consulted Ernst & Young LLP with respect to any accounting or auditing issues involving the Company. In particular, there was no discussion with the Company regarding the application of accounting principles to a specified transaction, the type of audit opinion that might be rendered on the financial statements, or any matter that was either the subject of a disagreement with KPMG LLP on accounting principles or practices, financial statement disclosure or auditing scope or procedures, which, if not resolved to the satisfaction of KPMG LLP, would have caused KPMG LLP to make reference to the matter in their reports, or a reportable event as defined in Item 304(a)(1)(iv) or (v) of Regulation S-K of the SECs rules and regulations.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions. The auditors will also have the opportunity to make a statement, if they desire to do so.
The Board of Directors Recommends that the Stockholders Vote
AUDIT AND NON-AUDIT FEES
Effective January 1, 2005, Ernst & Young LLP (E&Y) became the Companys independent auditor, replacing KPMG LLP (KPMG), who had served as the Companys independent auditors for calendar year 2004. The following table represents aggregate fees billed for professional audit services rendered by each independent accounting firm to provide the audit of the Companys annual financial statements for the years ended December 31, 2005, and December 31, 2004, respectively.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor
The Audit Committee has the responsibility of appointing, setting compensation for and overseeing the work of the independent auditor, and has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.
Prior to engagement of the independent auditor for next years audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
Prior to the engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.
The Audit Committee may delegate pre-approval authority to one or more of its members. The members to whom such authority is delegated must report, for informational purposes only, the pre-approval decisions to the Audit Committee at its next scheduled meeting.
Expenses Related to Sarbanes-Oxley Compliance
The Company remains proactive in its approach to implementing and adhering to the regulations imposed by the Sarbanes-Oxley Act of 2002. As such, the Company incurred a substantial amount of additional expense due to the increase in legal, accounting, insurance, and Board and Committee fees. Since calendar year 2003, the Company incurred $4.0 million in additional expense. It is anticipated that at least $1.5 million of these expenses will continue to recur each year.
SUBMISSION OF STOCKHOLDER PROPOSALS
In order for a proposal by a stockholder to be presented at an Annual Meeting of the Companys stockholders, the proposal must be included in the related Proxy Statement and proxy form. For a stockholder proposal to be included in the Proxy Statement and proxy form for the Annual Meeting of Stockholders in 2006, the proposal must: 1) be received by the Company at its home office, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745, Attention: Johnelle D. Hunt, Secretary, on or before November 6, 2006; and 2) concern a matter that may be properly considered and acted upon at the Annual Meeting in accordance with applicable laws, including the Companys Bylaws and Rule 14a-8 of the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
The Company files reports, Proxy Statements, and other information with the SEC. You can read and copy these reports, Proxy Statements, and other information concerning the Company at the SECs public reference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE
J.B. HUNT TRANSPORT SERVICES, INC.
This Proxy is being solicited on behalf of the Board of Directors of:
J.B. HUNT TRANSPORT SERVICES, INC.
Your vote is important. Please vote immediately.
X Please mark your vote as in this sample
The undersigned hereby constitutes and appoints Wayne Garrison and Kirk Thompson or either of them, proxies for the undersigned, with power of substitution, to represent the undersigned and to vote all of the shares of common stock of J.B. Hunt Transport Services, Inc. (the Company) which the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held on April 20, 2006, at the offices of the Corporation, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas, and at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by the undersigned. IF
The Board of Directors recommends a vote FOR Proposals 1 and 2.
I wish to vote FOR all of the foregoing nominees £
The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof.
NOTE: Please mark, sign, date and promptly return this proxy card in the enclosed envelope. Please sign exactly as your name(s) appear(s) above. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized persons.
______Change of Address/Comments on Reverse Side
J.B. HUNT TRANSPORT SERVICES, INC.
Stockholders of J.B. Hunt Transport Services, Inc. can now take advantage of several new services available through our transfer agent, Computershare Trust Company, N.A. These services include:
Electronic Delivery of Proxy Materials
To take advantage of the opportunity to receive future copies of the Annual Report and Proxy Statement via the Internet, please sign-up at www.econsent.com/jbht
By enrolling in eDelivery, you will receive an e-mail notification when future annual reports and proxy statements become available. You will be able to view these documents via the Internet and then vote your shares via the Internet.
Vote by Internet
Stockholders may now vote their shares via the Internet by following the directions on the reverse side of this card. Votes may be cast by Internet up until 11:59 p.m. on the day before the Annual Meeting.
Internet Account Access
Stockholders may now access their accounts on-line at www.computershare.com.
Among the services offered through Account Access, certificate histories can be viewed, address changes requested and tax identification numbers certified.
Transfer Agent Contact Information
(If you have written in the above space, please mark the corresponding box on the reverse side of this card)
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors recommendations. The Proxy Committee cannot vote your shares unless you sign and return this card.