SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
[x]
Filed by a Party other than the Registrant
[_]
Check the appropriate
box:
[_] Preliminary Proxy
Statement
[_] Soliciting Material Under
Rule
[_] Confidential, For Use of
the
14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive
Additional Materials
J.B. HUNT
TRANSPORT SERVICES, INC.
------------------------------------------------------------------------------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the
appropriate box):
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required.
[_] Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
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securities to which transaction applies:
____________________________________________________________________________________
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statement number, or the
form or
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filing.
____________________________________________________________________________________
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paid:
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4) Date Filed:
J.B. HUNT TRANSPORT SERVICES,
INC.
615 J.B. Hunt Corporate
Drive
Lowell, Arkansas 72745
(479) 820-0000
Internet Site:
www.jbhunt.com
____________________________________________________________
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be Held on May 2,
2007
____________________________________________________________
The Annual Meeting of Stockholders of J.B. Hunt Transport Services, Inc. (the “Company”) will be held on May 2, 2007, at 10 a.m. (CDT) at the Company’s headquarters, located at 615 J.B. Hunt Corporate Drive, Lowell, Arkansas, for the following purposes:
| (1) | To elect three (3) Class III Directors for a term of three (3) years | ||
| (2) | To ratify the appointment of Ernst & Young LLP as the Company’s registered independent public accounting firm for the next fiscal year | ||
| (3) | To transact such other business as may properly come before the annual meeting or any adjournments thereof | ||
Only stockholders of record on February 23, 2007, will be entitled to vote at the meeting or any adjournments thereof. The stock transfer books will not be closed.
The 2006 Annual Report to Stockholders is included in this publication.
| By Order of the Board of Directors |
| JOHNELLE HUNT |
| Secretary |
Lowell, Arkansas
March 30, 2007
YOUR VOTE IS IMPORTANT
PLEASE EXECUTE YOUR PROXY WITHOUT DELAY
J.B. HUNT TRANSPORT SERVICES,
INC.
615 J.B. Hunt Corporate
Drive
Lowell, Arkansas 72745
(479) 820-0000
Internet Site:
www.jbhunt.com
________________________________________________________________
PROXY STATEMENT
________________________________________________________________
This Proxy Statement is furnished in connection with the solicitation of proxies by J.B. Hunt Transport Services, Inc. (the “Company”), on behalf of its Board of Directors (the “Board”), for the 2007 Annual Meeting of Stockholders. The Proxy Statement and the related proxy card are being distributed on or about March 30, 2007.
QUESTIONS AND ANSWERS ABOUT THE PROXY
MATERIALS AND
THE ANNUAL MEETING
| When And Where Is The Annual Meeting? | |
| Date: | Wednesday, May 2, 2007 |
| Time: | 10 a.m., Central Daylight Time |
| Location: | J.B. Hunt Transport Services, Inc. |
| Corporate Offices | |
| First Floor Auditorium | |
| 615 J.B. Hunt Corporate Drive | |
| Lowell, Arkansas 72745 | |
What Matters Will Be Voted Upon
At The Annual Meeting?
At the annual meeting you will be asked
to:
Consider and vote upon a proposal to elect nominees Wayne Garrison, Gary Charles George and Bryan Hunt as Class III directors to hold office for a term of three years, expiring at the close of the Annual Meeting of Stockholders on 2010.
Consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP (“E&Y”) as the Company’s independent registered public accounting firm for the 2007 calendar year.
Transact such other business as may properly come before the annual meeting or any adjournments thereof.
What Constitutes A
Quorum?
The presence, either in person or by
proxy, of the holders of at least a majority of the voting power of our issued
and outstanding shares of common stock is required to constitute a quorum for
the transaction of business at the annual meeting. Abstentions and broker
non-votes, which are described in more detail below, are counted as shares
present at the annual meeting for purposes of determining whether a quorum
exists.
Who Is Entitled To
Vote?
Only stockholders of record of the
Company’s common stock at the close of business on Friday, February 23, 2007,
which is the “record date,” are entitled to notice of, and to vote at, the
annual meeting. Shares that may be voted include shares that are held:
(1) directly by the stockholder of record, and
(2) beneficially through a
broker, bank, or other nominee.
Each share of our common stock will be entitled to one vote on all matters submitted for a vote at the annual meeting.
As of the record date, there were approximately 142,889,538 shares of our common stock issued and outstanding and entitled to be voted at the annual meeting.
What Is The Difference Between
Holding Shares As A “Registered Owner” And A “Beneficial
Owner”?
Most of the Company’s stockholders hold their shares through a
broker, bank or other nominee rather than directly in their own name. As
summarized below, there are some distinctions between registered shares and
those owned beneficially:
What Stockholder Approval Is Necessary For Approval Of The Proposals?
Election of Directors
The election of directors requires the affirmative vote of a plurality of the shares on our common stock cast at the annual meeting. This means that the three Class III director nominees receiving the most votes will be elected. For purposes of this vote, a failure to vote, a vote to abstain or withholding your vote (or a direction to your broker to do so) are not counted as votes cast and, therefore, will have no effect on the outcome of the election of directors.
Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm
The ratification of the Audit Committee’s appointment of E&Y as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the shares of our common stock cast at the annual meeting. For purposes of this vote, a failure to vote, a vote to abstain or withholding your vote (or a direction to your broker to do so) are not counted as votes cast and, therefore, will have no effect on the outcome of this vote. Stockholder ratification is not required for the appointment of the Company’s independent registered public accounting firm. However, we are submitting the proposal to solicit the opinion of our stockholders.
As of record date, directors and executive officers of the Company beneficially owned as an aggregate approximately 44,269,372 shares of common stock representing 30.98% of our common stock issued and outstanding and, therefore, 30.98% of the voting power entitled to vote at the annual meeting. The Company believes that its directors and executive officers currently intend to vote their shares in favor of the election of the Class III director nominees and in favor of the ratification of E&Y as the Company’s independent registered public accounting firm.
May I Vote My Shares In Person At
The Annual Meeting?
If you are the registered owner of shares
of the Company’s common stock on the record date, you have the right to vote
your shares in person at the annual meeting.
If you are the beneficial owner of shares of the Company’s common stock on the record date, you may vote these shares in person at the annual meeting if you have requested a legal proxy from your broker, banker or other nominee (the stockholder of record) giving you the right to vote the shares at the annual meeting, complete such legal proxy and present it to the Company at the annual meeting.
Even if you plan to attend the annual meeting, we recommend that you submit your proxy card or voting instructions so that your vote will be counted if you later decide not to attend the annual meeting.
How Can I Vote My Shares Without
Attending The Annual Meeting?
If you are a registered owner, you may
instruct the named proxy holders on how to vote your shares by completing,
signing, dating and returning the enclosed proxy card in the postage-paid
envelope provided with this Proxy Statement, or by using the Internet voting
site or the toll-free telephone number listed on the proxy card. Specific
instructions for using the Internet and telephone voting systems are on the
proxy card. The Internet and telephone voting systems will be available until
11:59 p.m. Central Daylight Time on Tuesday, May 1, 2007 (the day before the
annual meeting).
If you are the beneficial owner of shares held in street name, you may instruct your broker, bank or other nominee on how to vote your shares. Your nominee has enclosed with this Proxy Statement a voting instruction card for you to use in directing your nominee on how to vote your shares. The instructions from your nominee will indicate if Internet or telephone voting is available and, if so, will provide details regarding how to use those systems.
If My Shares Are Held In “Street
Name,” Will My Broker, Bank Or Other Nominee Vote My Shares For
Me?
Brokers, banks and other nominees who do not have instructions
from their “street name” customers may not use their discretion in voting their
customers’ shares on “non-routine” matters. The proposals to elect the director
nominees and ratify the appointment of E&Y as the Company’s independent
registered public accounting firm are considered routine matters and, therefore,
if beneficial owners fail to give voting instructions, nominees will have the
discretionary authority to vote shares of our common stock with respect to these
proposals. You should follow the directions provided by your nominee regarding
instructions on how to vote your shares.
What Is A Broker
Non-Vote?
Generally, a “broker non-vote” occurs when a broker, bank or
other nominee that holds shares in “street name” for customers is precluded from
exercising voting discretion on a particular proposal because:
(1) the
beneficial owner has not instructed the nominee on how to vote, and
(2)
the nominee lacks discretionary voting power to
vote such issues.
Under the rules of NASDAQ, a nominee does not have discretionary voting power with respect to the approval of “non-routine” matters absent specific voting instructions from the beneficial owners of such shares.
How Will My Proxy Be
Voted?
Shares represented by a properly executed proxy (in paper
form, by Internet or by telephone) that is timely received, and not subsequently
revoked, will be voted at the annual meeting or any adjournment or postponement
thereof in the manner directed on the proxy. Wayne Garrison and Kirk Thompson
are named as proxies in the proxy form and have been designated by the Board as
the directors’ proxies to represent you and vote your shares at the annual
meeting. All shares represented by a properly executed proxy on which no choice
is specified will be voted:
| (1) | FOR the election of the nominees for director named in this Proxy Statement, | ||
| (2) | FOR the ratification of the appointment of E&Y as the Company’s independent registered public accounting firm for the 2007 calendar year, and | ||
| (3) | in accordance with the proxy holders’ best judgment as to any other business that properly comes before the annual meeting. |
This Proxy Statement is considered to be voting instructions for the trustees of the J.B. Hunt Transport Services, Inc. Employee Retirement Plan for our common stock allocated to individual accounts under this plan. If account information is the same, participants in the plan (who are stockholders of record) will receive a single proxy representing all of their shares. If a plan participant does not submit a proxy to us, the trustees of the plan in which shares are allocated to his or her individual account will vote such shares in the same proportion as the total shares in such plan for which directions have been received.
May I Revoke My Proxy And Change
My Vote?
Yes. You may revoke your proxy and change your vote at any
time prior to the vote at the annual meeting.
If you are the registered owner, you may revoke your proxy and change your vote by:
| (1) | submitting a new proxy bearing a later date (which automatically revokes the earlier proxy), | ||
| (2) | giving notice of your changed vote to us in writing mailed to the attention of Johnelle Hunt, Corporate Secretary, at our executive offices, or | ||
| (3) | attending the annual meeting and giving oral notice of your intention to vote in person. |
You should be aware that simply attending the annual meeting will not in and of itself constitute a revocation of your proxy.
Who Will Pay The Costs Of
Soliciting Proxies?
Proxies will be solicited initially by
mail. Further solicitation may be made in person or by telephone, electronic
mail or facsimile. The Company will bear the expense of preparing, printing and
mailing this Proxy Statement and accompanying materials to our stockholders.
Upon request, the Company will reimburse brokers, banks and other nominees for
reasonable expenses incurred in forwarding copies of the proxy materials
relating to the annual meeting to the beneficial owners of our common stock.
The Company has retained ADP, an independent proxy solicitation firm, to assist in soliciting proxies from stockholders. ADP will receive a fee of approximately $30,000 as compensation for its services and will be reimbursed for its out-of-pocket expenses. The fee amount is not contingent on the number of stockholder votes cast in favor of any proposals, and ADP is prohibited from making any recommendation to our stockholders to either accept or reject any proposal or otherwise express an opinion concerning a proposal.
What Other Business Will Be
Presented At The Annual Meeting?
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. If any other
matters should arise at the annual meeting, the persons named as proxy holders,
Wayne Garrison and Kirk Thompson, will have the discretion to vote your shares
on any additional matters properly presented for a vote at the meeting. If, for
any unforeseen reason, any of the Class III director nominees are not available
to serve as a director, the named proxy holders will vote your proxy for such
other director candidate or candidates as may be nominated by the Board.
What Is The Deadline For
Stockholder Proposals For The 2008 Annual Meeting?
In order for a
stockholder proposal to be eligible to be included in the Company’s Proxy
Statement and proxy card for the 2008 Annual Meeting of Stockholders, the
proposal:
| (1) | must be received by the Company at its executive offices, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745, Attention: Corporate Secretary on or before November 9, 2007, and | ||
| (2) | must concern a matter that may be properly considered and acted upon at the annual meeting in accordance with applicable laws, regulations and the Company’s Bylaws and policies, and must otherwise comply with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
Where Can I Find The Voting
Results Of The Annual Meeting?
The Company will publish final voting
results of the annual meeting in its quarterly report on Form 10-Q for the
second quarter of the 2007 calendar year.
What Should I Do If I Receive
More Than One Set Of Voting Materials?
You may
receive more than one set of voting materials, including multiple copies of this
Proxy Statement and multiple proxy or voting instruction cards. For example, if
you hold your shares in more than one brokerage account, you may receive a
separate voting instruction card for each brokerage account. If you are a
registered owner and your shares are registered in more than one name, you will
receive more than one proxy card. Please vote each proxy and instruction card
that you receive.
What Is
Householding?
In an effort to reduce printing costs and
postage fees, the Company has adopted a practice approved by the Securities and
Exchange Commission (the “SEC”) called “householding.” Under this practice,
certain stockholders who have the same address and last name will receive only
one copy of this Proxy Statement and the Company’s annual report, unless one or
more of these stockholders notifies the Company that he or she wishes to
continue receiving individual copies. Stockholders who participate in
householding will continue to receive separate proxy cards.
If you share an address with another stockholder and received only one copy of this Proxy Statement and the Company’s annual report and would like to request a separate copy of these materials, or if you do not wish to participate in householding in the future, please:
| (1) | mail such request to J.B. Hunt Transport Services, Inc., Attention: Corporate Secretary, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745, or | ||
| (2) | contact the Corporate Secretary toll-free at 1-800-643-3622. |
Similarly, you may also contact the Company if you received multiple copies of the Company’s proxy materials and would prefer to receive a single copy in the future.
What Do I Need To Do
Now?
First, read this Proxy Statement carefully. Then, if you are a
registered owner, you should, as soon as possible, submit your proxy by either
executing and returning the proxy card or by voting electronically via the
Internet or by telephone. If you are the beneficial owner of shares held in
street name, then you should follow the voting instructions of your broker, bank
or other nominee. Your shares will be voted in accordance with the directions
you specify. If you submit an executed proxy card to the Company, but fail to
specify voting directions, your shares will be voted:
(1) FOR the approval of the director nominees, and
(2) FOR the ratification of E&Y as the
Company’s independent registered public accounting firm for the 2007 calendar
year.
Who Can Help Answer My
Questions?
If you have questions concerning a proposal or the annual
meeting, if you would like additional copies of this Proxy Statement, or if you
need special assistance at the annual meeting, please call the Corporate
Secretary toll-free at 1-800-643-3622. In addition, information regarding the
annual meeting is available via the Internet at our website
www.jbhunt.com.
YOU SHOULD CAREFULLY READ THIS PROXY STATEMENT IN ITS ENTIRETY
The summary information provided above in the question-and-answer format is for your convenience only and is merely a brief description of material information contained in this Proxy Statement.
YOUR VOTE IS IMPORTANT
IF YOU ARE A REGISTERED OWNER, YOU MAY VOTE
BY TELEPHONE,
INTERNET OR BY FILLING IN, SIGNING AND
DATING
THE ENCLOSED PROXY CARD AND RETURNING
IT TO US
IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE
IF YOU ARE A BENEFICIAL OWNER, PLEASE FOLLOW
THE VOTING INSTRUCTIONS OF
YOUR BROKER, BANK OR OTHER
NOMINEE
AS PROVIDED WITH THIS PROXY STATEMENT
AS PROMPTLY AS POSSIBLE
PROPOSALS TO BE VOTED AT THE ANNUAL MEETING
| PROPOSAL NUMBER ONE |
| ELECTION OF DIRECTORS |
Our Board nominates Wayne Garrison, Gary Charles George and Bryan Hunt as Class III directors, to hold office for a term of three years, expiring at the close of the 2010 Annual Meeting of Stockholders or until their successors are elected and qualified or until their earlier resignation or removal. The Board believes these incumbent directors standing for re-election are well qualified and experienced to direct and manage the Company’s operations and business affairs and will represent the interests of the stockholders as a whole. Biographical information on each of these nominees is set forth below in “Nominees for Director.”
If any director nominee becomes unavailable for election, which is not anticipated, the named proxies will vote for the election of such other person as the Board may nominate, unless the Board resolves to reduce the number of Class III directors to serve on the Board and thereby reduce the number of directors to be elected at the annual meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE
FOR
EACH OF THE DIRECTOR
NOMINEES LISTED HEREIN
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:
| Class | Year Term Expires | ||
| Class I | 2008 | ||
| Class II | 2009 | ||
| Class III | 2007 |
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Number of Directors and Term of
Directors and Executive Officers
The Company’s 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 Company’s 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 nine directors, with
four directors serving in Class I, two directors serving in Class II and three
directors serving in Class III.
The stockholders of the Company elect successors for directors whose terms have expired at the Company’s annual meeting. The Board elects members to fill new membership positions and vacancies in unexpired terms on the Board. At its Board Meeting on January 26, 2006, the Board of Directors adopted a retirement policy stating that 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 Company’s directors and executive officers as of February 23, 2007, and their respective ages and positions are as follows:
| Name | Age | Position |
| Paul R. Bergant | 60 | Executive Vice President, Marketing, Chief Marketing Officer and President of Intermodal |
| David N. Chelette | 43 | Vice President and Treasurer |
| Donald G. Cope | 56 | Sr. Vice President, Finance, Controller and Chief Accounting Officer |
| Wayne Garrison | 54 | Chairman of the Board; Class III Director |
| Gary Charles George | 56 | Class III Director |
| Craig Harper | 49 | Executive Vice President, Operations and Chief Operations Officer |
| Bryan Hunt | 48 | Class III Director |
| Johnelle Hunt | 75 | Corporate Secretary; Class I Director |
| Terrence D. Matthews | 48 | Sr. Vice President, Marketing |
| David G. Mee | 46 | Sr. Vice President, Tax and Risk Management |
| Kay J. Palmer | 43 | Executive Vice President and Chief Information Officer |
| Coleman H. Peterson | 58 | Class II Director |
| Bob D. Ralston | 60 | Executive Vice President, Equipment and Properties |
| John N. Roberts III | 42 | Executive Vice President and President, Dedicated Contract Services |
| James L. Robo | 44 | Class II Director |
| Kirk Thompson | 53 | President and Chief Executive Officer; Class I Director |
| Leland Tollett | 70 | Class I Director |
| Jerry W. Walton | 60 | Executive Vice President, Finance and Administration and Chief Financial Officer |
| John A. White | 67 | Class I Director |
NOMINEES FOR DIRECTOR
| CLASS III – TERM EXPIRES 2007 | |
| Wayne Garrison | Director Since 1981 |
| Mr. Garrison, age 54, is Chairman of the Board and has held this title since 1995. Joining the Company in 1976 as Plant Manager, he has also served the Company as Vice President of Finance in 1978, Executive Vice President of Finance in 1979, President in 1982, Chief Executive Officer in 1987 and Vice Chairman of the Board from January 1986 until May 1991. | |
| Gary Charles George | Director Since 2006 |
| Mr. George, age 56, is President and Chief Executive Officer of George’s, Inc., a private, fully integrated poultry company in Northwest Arkansas. He was appointed by the Company’s Nominating and Corporate Governance Committee and the Board of Directors on August 29, 2006, to assume the positions vacated when director Thomas L. Hardeman passed away on August 20, 2006, and John A. Cooper, Jr. tendered his resignation on August 1, 2006. Mr. George is a graduate of the University of Arkansas with a degree in business administration. He served on the Board of Trustees for the University of Arkansas from 1995 through 2005 and on the Board of Directors for the First National Bank of Springdale until 2003. | |
| Bryan Hunt | Director Since 1991 |
| Mr. Hunt, age 48, is President of Best Automotive, Best Automotive of Mississippi, Best Buy Here Pay Here, Progressive Auto Finance Corporation and Bryan Hunt LLC (all private companies with operations in motor vehicle sales, leasing and financing). He served as Assistant Secretary of the Company from October 1988 until May 2000. Until his retirement from the Company in 1997, he served separate terms as the Company’s Treasurer and Chief Operating Officer of the Van Division. Bryan Hunt is the son of Johnelle Hunt. | |
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 I – TERM EXPIRES 2008 | |
| Johnelle Hunt | Director Since 1993 |
| Mrs. Hunt, age 75, is the Corporate Secretary of the Company. Serving as Credit Manager from 1962 to 1987, she was elected Secretary-Treasurer in 1972 and served in that capacity until October 1988, at which time she was elected Corporate Secretary. Johnelle Hunt is the widow of founder and former Senior Chairman of the Board J.B. Hunt and the mother of Bryan Hunt. She serves on the Board of Advisors for the University of Arkansas and on the board for the Harvey and Bernice Jones Eye Institute. She also served on the executive committee and as treasurer for the University of Arkansas’ Campaign for the 21st Century. | |
| Kirk Thompson | Director Since 1985 |
| Mr. Thompson, age 53, is President and Chief Executive Officer of the Company. Mr. Thompson, a certified public accountant, joined the Company in 1973. He served as Vice President of Finance from 1979 until 1984, Executive Vice President and Chief Financial Officer until 1985, and President and Chief Operating Officer from 1986 until 1987, when he was elected President and Chief Executive Officer. | |
| Leland Tollett | Director Since 2001 |
| Mr. Tollett, age 70, is a private investor. He served as Chairman of the Board and Chief Executive Officer of Tyson Foods, Inc. from 1995 to 1998. He is currently a consultant to that company. A Tyson Foods employee since 1959, he also served as President and Chief Executive Officer from 1991 to 1995. He first became a board member of Tyson Foods, Inc. in 1984 and continues to serve in that capacity. | |
| John A. White | Director Since 1998 |
| Dr. White, age 67, is Chancellor of the University of Arkansas, a position he has held since July 1997. A graduate of the University of Arkansas (BSIE), Virginia Tech (MSIE) and The Ohio State University (PhD), he also holds honorary doctorates from the Katholieke Universitiet of Leuven in Belgium and from George Washington University. Dr. White is a member of the National Academy of Engineering. Locally, he serves as the presiding co-chair of the Northwest Arkansas Council, on the Northwest Arkansas Regional Airport Authority Board, and on the Arkansas Science and Technology Authority Board. He also serves on the Board of Directors and the Audit Committees of Logility, Inc. and Motorola, Inc. | |
| CLASS II – TERM EXPIRES 2009 | |
| Coleman H. Peterson | Director Since 2004 |
| Mr. Peterson, age 58, is President and CEO of Hollis Enterprises LLC, a human resources consulting firm founded in 2004 following his retirement from Wal-Mart Stores, Inc. as its Executive Vice President of the People Division. During his tenure, Mr. Peterson was responsible for recruitment, retention and development of the world’s largest corporate work force. Prior to his experience with Wal-Mart, Mr. Peterson spent 16 years with Venture Stores, with his last position as the Senior Vice President of Human Resources. He holds Master’s and Bachelor’s degrees from Loyola University of Chicago. He serves as a member of the Board of Directors and chairs the Compensation Committees of The ServiceMaster Company and Build-A-Bear Workshop. He also sits on the Executive Committee of the NAACP, where he serves as Treasurer of the NAACP’s Special Contribution Fund. | |
| James L. Robo | Director Since 2002 |
| Mr. Robo, age 44, is President and Chief Operating Officer of FPL Group. He served as President of FPL Energy until December 2006 and Vice President of Corporate Development and Strategy of FPL Group until July 2002. FPL Group is a U.S. electric company whose two main subsidiaries are Florida Power & Light and FPL Energy. Prior to joining FPL Group in 2002, Mr. Robo spent ten years at the General Electric Company. He served as President and Chief Executive Officer of GE Mexico from 1997-1999 and was President and Chief Executive Officer of the GE Capital TIP/Modular Space division from 1999 until February 2002. From 1984 through 1992, Mr. Robo worked for Mercer Management Consulting. He received a BA Summa Cum Laude from Harvard College and an MBA from Harvard Business School, where he was a Baker Scholar. | |
DIRECTOR COMPENSATION
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 2006, compensation for independent, non-employee directors, serving on the Board, was as follows:
Non-Employee Board of Director Compensation Paid in Calendar Year 2006
| Fees | Change in Pension | |||||||
| Earned | Value and | |||||||
| or Paid | Nonqualified | |||||||
| in Cash | Restricted Share | Non-Equity | Deferred | |||||
| or Stock | or Stock Option | Incentive Plan | Compensation | All Other | ||||
| Board Member | ($) | Awards (#) | Compensation ($) | Earnings ($) | Compensation ($) | Total ($) | ||
| John A. Cooper, Jr. | 80,000 | – | – | – | – | 80,000 | ||
| Gary Charles George | 48,833 | – | – | – | – | 48,833 | ||
| Thomas L. Hardeman | 83,250 | – | – | – | – | 83,250 | ||
| Bryan Hunt | 75,500 | – | – | – | – | 75,500 | ||
| Coleman H. Peterson | 95,000 | – | – | – | – | 95,000 | ||
| James L. Robo | 92,000 | – | – | – | – | 92,000 | ||
| Leland Tollett | 92,000 | – | – | – | – | 92,000 | ||
| John A. White | 115,000 | – | – | – | – | 115,000 | ||
To more closely align their interests with those of the stockholders, each Board member is required to own three times their estimated annual compensation in Company stock.
Independent, non-employee members of the Board of Directors did not receive any stock options or restricted share units in calendar year 2006.
Independent, non-employee members of the Board of Directors did not participate in either a pension plan or deferred compensation plan in calendar year 2006.
Each independent, non-employee member of the Board of Directors had the choice of receiving his or her annual retainer of $62,000 in Company stock, cash or any combination thereof. Gary Charles George’s retainer was prorated at the time of his appointment to the board on August 29, 2006.
Johnelle Hunt, an employee of the Company and member of the Board of Directors, received a salary of $100,000 for her services as the Company’s Corporate Secretary. The Company also remitted payment of $10,000 on her behalf for professional fees and provided a Company match of $3,000 to her 401(k) account. Remittances for professional fees were also made for Wayne Garrison and Kirk Thompson and are disclosed on page 28 of this Proxy Statement in the table titled “Components of Perquisites for Calendar Year 2006.”
Security Ownership of
Management
The following table sets forth the beneficial ownership
of the Company’s common stock as of February 23, 2007, by each of its current
directors (including all nominees for director), the Named Executive Officers
(the “NEOs”) and all other executive officers, and by all such persons as a
group, as of February 23, 2007. Unless otherwise indicated in the footnotes
below, “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.
| Number of Shares | Number of Shares | |||||||
| Beneficially Owned | Beneficially Owned | Percent | ||||||
| Owner | Directly (1) | Indirectly (2) | of Class (3) | |||||
| Paul Bergant | 467,597 | 0 | * | |||||
| Wayne Garrison | 7,264,085 | 12,000 | 5. | 09 | ||||
| Gary Charles George | 22,076 | 624,310 | (4) | * | ||||
| Craig Harper | 271,634 | 0 | * | |||||
| Bryan Hunt | 95,300 | 0 | * | |||||
| Johnelle Hunt | 34,400,550 | (5) | 0 | 24. | 07 | |||
| Coleman H. Peterson | 8,231 | 0 | * | |||||
| James L. Robo | 22,553 | 0 | * | |||||
| Kirk Thompson | 455,924 | 0 | * | |||||
| Leland Tollett | 42,755 | 0 | * | |||||
| Jerry W. Walton | 357,240 | 0 | * | |||||
| John A. White | 33,414 | 0 | * | |||||
| All executive officers and Directors | ||||||||
| as a group (19 persons) | 44,269,372 | 30. | 98 | |||||
| *Less than 1 percent | ||
|
(1) |
Includes shares that are owned by the director or executive officer that are (a) held in a 401(k) or deferred compensation account, (b) options that are currently exercisable, (c) options that will become exercisable within 60 days and (d) shares held as trustee of family trusts in which the trustee has no beneficial ownership. Also includes pledged shares as shown below: | |
| Wayne Garrison | 450,000 |
| Craig Harper | 254,398 |
| Bryan Hunt | 70,877 |
| Johnelle Hunt | 18,910,184 |
| Kirk Thompson | 430,210 |
|
(2) |
Indirect beneficial ownership includes shares owned by the director or executive officer, (a) as beneficiary or trustee of a personal trust, (b) by a spouse or as trustee or beneficiary of a spouse’s trust, or (c) in a spouse’s retirement account. | |
|
(3) |
Calculated on the basis of 142,889,538 shares of common stock outstanding of the Company on February 23, 2007. | |
|
(4) |
The reporting person disclaims beneficial ownership of these shares, which are held in limited partnerships. This report shall not be deemed an admission that the reporting person is the beneficial owner of such securities for the purposes of Section 16 or for any other purposes. | |
|
(5) |
Includes shares owned in family limited liability companies in which Mrs. Hunt is the sole manager. Until the death of Mr. J.B. Hunt on December 7, 2006, she and Mr. Hunt were co-managers of these companies. Includes shares previously held directly by Mr. Hunt that have been transferred into a marital trust in which Johnelle Hunt is the trustee. |
CORPORATE
GOVERNANCE
We believe that good corporate
governance helps to ensure that the Company is managed for the long-term benefit
of our stockholders. We continually review and consider our corporate governance
policies and practices, the SEC’s corporate governance rules and regulations,
and the corporate governance listing standards of NASDAQ, the stock exchange on
which our common stock is traded.
You can access and print the Charters of our Audit Committee, Compensation Committee and Corporate Governance Committee as well as our Corporate Governance Guidelines, Corporate Code of Ethics, Whistleblower Policy, and other Company policies and procedures required by applicable law, regulation or NASDAQ corporate governance listing standards on the “Corporate Governance” page of the “Who We Are”/“Investor Relations” section of our website at www.jbhunt.com. Additionally, you can request copies of any of these documents by writing to our Corporate Secretary at the following address:
| J.B. Hunt Transport Services, Inc. |
| 615 J.B. Hunt Corporate Drive |
| Lowell, Arkansas 72745 |
| Attention: Corporate Secretary |
Director
Independence
The Board is composed of a majority
of directors who satisfy the criteria for independence under the NASDAQ
corporate governance listing standards. In determining independence, each year
the Board affirmatively determines, among other items, whether the directors
have no material relationship with the Company or any of its subsidiaries
pursuant to the NASDAQ corporate listing standards. When assessing the
“materiality” of a director’s relationship with the Company, if any, the Board
considers all relevant facts and circumstances, not merely from the director’s
standpoint, but from that of the persons or organizations with which the
director has an affiliation and the frequency or regularity of the services,
whether the services are being carried out at arm’s length in the ordinary
course of business, and whether the services are being provided substantially on
the same terms to the Company as those prevailing at the time from unrelated
parties for comparable transactions. Material relationships can include
commercial, banking, industrial, consulting, legal, accounting, charitable and
familial relationships. The Board also considers any other relationship that
could interfere with the exercise of independence or judgment in carrying out
the duties of a director.
Applying these independence standards, the Board has determined that Gary Charles George, Coleman H. Peterson, James L. Robo, Leland Tollett and John A. White are all independent directors. After due consideration, the Board has determined that none of these non-management directors has a material relationship with the Company or any of its subsidiaries (either directly or indirectly as a partner, stockholder or officer of any organization that has a relationship with the Company or any of its subsidiaries) and that they all meet the criteria for independence under the NASDAQ corporate governance listing standards.
Director Recommendations By
Stockholders
In
addition to recommendations from Board members, management or professional
search firms, the Corporate Governance Committee will consider director
candidates properly submitted by stockholders who individually or as a group
have beneficially owned at least two percent of the outstanding shares of the
Company’s common stock for at least one year from the date the recommendation is
submitted. Stockholders must submit director candidate recommendations in
writing by Certified Mail to the Company’s Corporate Secretary not less than 120
days prior to the first anniversary of the date of the Proxy Statement relating
to the Company’s previous annual meeting. Accordingly, for the 2008 Annual
Meeting of Stockholders, director candidates must be submitted to the Company’s
Corporate Secretary by November 9, 2007. Director candidates submitted by
stockholders must contain at least the following information:
In addition, the recommending stockholder and the candidate must submit, with the recommendation, a signed statement agreeing and acknowledging that:
For a complete list of the information that must be included in director recommendations submitted by stockholders, please see the “Policy Regarding Director Recommendations by Stockholders” on the “Corporate Governance” page of the “Who We Are” section of our website at www.jbhunt.com. The Corporate Governance Committee will consider all director candidates submitted through its established processes and will evaluate each of them, including incumbents, based on the same criteria. However, the Corporate Governance Committee may prefer incumbent directors and director candidates whom they know personally or who have relevant industry experience and in-depth knowledge of the Company’s business and operations.
The policies and procedures as set forth above are intended to provide flexible guidelines for the effective functioning of the Company’s director nomination process. The Board intends to review these policies and procedures periodically and anticipates that modifications may be necessary from time to time as the Company’s needs and circumstances change.
Board Composition and Director
Qualifications
The
Corporate Governance Committee periodically assesses the appropriate size and
composition of the Board and whether any vacancies on the Board are expected. In
the event that vacancies are anticipated or otherwise arise, the Corporate
Governance Committee will review and assess potential director candidates. The
Corporate Governance Committee utilizes various methods for identifying and
evaluating candidates for director. Candidates may come to the attention of the
Corporate Governance Committee through recommendations of Board members,
management, stockholders or professional search firms. Generally, director
candidates should, at a minimum:
In addition, the Corporate Governance Committee seeks director candidates who possess the following qualities and skills:
The director qualifications set forth above are general in nature and may be modified by the Board or the Corporate Governance Committee from time to time as the Board or the Corporate Governance Committee deems appropriate.
Communications With The
Board
Stockholders and
other interested parties may communicate with the Board, Board Committees, the
independent or non-management directors, each as a group and individual
directors by submitting their communications in writing to the attention of the
Company’s Corporate Secretary. All communications must identify the recipient,
author, state whether the author is a stockholder of the Company and be
forwarded to the following address via Certified Mail:
| J.B. Hunt Transport Services, Inc. |
| 615 J.B. Hunt Corporate Drive |
| Lowell, Arkansas 72745 |
| Attention: Corporate Secretary |
The directors of the Company, including the non-management directors, have instructed the Corporate Secretary not to forward to the intended recipient any communications that are reasonably determined in good faith by the Corporate Secretary to relate to improper or irrelevant topics or are substantially incomplete.
Board
Meetings
The Board held four meetings and two telephonic meetings during the 2006
calendar year. All directors attended at least 75% of the Board meetings. The
Company has adopted a Director Attendance Policy to stress the importance of
attendance, director preparedness and active and effective participation at
Board and Board committee meetings.
Additionally, the independent directors held three executive sessions in 2006. John A. White served as chairman of each of the executive sessions, with the exception of one session that was chaired by Thomas L. Hardeman.
Board
Committees
Standing committees of the Board include the Audit,
Compensation, and Corporate Governance Committees. Committee members are elected
annually by the Board and serve until their successors are elected and qualified
or until their earlier death, retirement, resignation or removal.
Upon recommendation of the Corporate Governance Committee on January 31, 2007, the Board appointed the following members to serve on the Board’s committees for the 2007 calendar year.
| Corporate | |||
| Audit | Compensation | Governance | |
| Gary Charles George | X | X | |
| Coleman H. Peterson | Chair | X | |
| James L. Robo | X | Chair | |
| Leland Tollett | X | X | |
| John A. White | Chair | X | X |
The following table discloses the Board members who served on each of the Board’s committees during calendar year 2006 and the number of meetings held by each Committee.
| Corporate | |||
| Audit | Compensation | Governance | |
| John A. Cooper, Jr. | X | X | |
| Gary Charles George | X | X | |
| Thomas L. Hardeman | X | Chair | |
| Coleman H. Peterson | Chair | ||
| James L. Robo | X | Chair | |
| Leland Tollett | X | ||
| John A. White | Chair | X | |
| Number of Meetings | 8 | 5 | 1 |
As a result of the retirement of John A. Cooper, Jr. from the Board of Directors on August 1, 2006, and the death of Thomas L. Hardeman on August 20, 2006, Gary Charles George and John A. White were appointed by the Chairman of the Board to fill vacancies on the Compensation and Corporate Governance Committees. Both Messrs. George and White are independent, non-employee directors and qualified to serve on the designated committees.
AUDIT
COMMITTEE
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 Company’s 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 Company’s financial
statements, the Company’s compliance with legal and regulatory requirements, the
independent auditor’s qualifications and independence, the performance of the
Company’s internal audit function and the performance of its independent
auditors.
In fulfilling its duties, the Audit Committee, among other things, shall:
The Board has determined that all three members of the Audit Committee satisfy the independence and other requirements for audit committee membership of the NASDAQ corporate governance listing standards and SEC requirements. The Board has also determined that Messrs. White, Robo and Tollett have the attributes of an audit committee financial expert as defined by the SEC. The Board determined that these members acquired such attributes through their experience in preparing, auditing, analyzing or evaluating financial statements, or actively supervising one or more persons engaged in such activities and their experience of overseeing or assessing the performance of companies and public accountants with respect to preparation, auditing or evaluation of financial statements. In 2006, the Audit Committee met eight times. All of the members attended at least 75% of the Audit Committee meetings. For additional information concerning the Audit Committee, see “Report of the Audit Committee” set forth below.
EXECUTIVE COMPENSATION
COMMITTEE
The Executive Compensation Committee shall:
None of the individuals serving on the Compensation Committee has ever been an officer or employee of the Company. The Board has determined that all of the members of the Compensation Committee satisfy the independence requirements of the NASDAQ corporate governance listing standards. All of the members of the Compensation Committee qualify as “non-employee directors” for purposes of SEC requirements, and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code.
The Compensation Committee met five times in 2006. All of the members attended at least 75% of the Compensation Committee meetings.
NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE
The Nominating and Corporate Governance Committee shall:
l annually review the Company’s Corporate Governance
Guidelines,
l assist the Board in identifying,
screening and recruiting qualified individuals to become Board members,
l propose nominations for Board membership and committee
membership,
l assess the composition of the
Board and its committees,
l oversee the performance of the Board and committees
thereof,
l oversee the receipt,
investigation, resolution and retention of all complaints submitted under the
Company’s Whistleblower Policy, and
l otherwise comply with its responsibilities and duties as
set forth in the Company’s Corporate Governance Committee Charter.
The Board has determined that all members of the Corporate Governance Committee satisfy the independence requirements of the NASDAQ corporate governance listing standards. The Corporate Governance Committee met one time during calendar year 2006. All of the members attended the Corporate Governance Committee meeting.
Code of Business Conduct and
Ethics
The Board has adopted a Corporate Code
of Ethical and Professional Standards for Directors, Officers and Employees that
applies to all of the Company’s directors, officers and employees. 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 help
enhance and formalize our culture of integrity, honesty and accountability. As
required by applicable law, the Company will post on the “Corporate Governance”
page of the “Who We Are”/“Investor Relations” section of its website at
www.jbhunt.com any amendments or waivers of any provision of this Code made for
the benefit of executive officers or directors of the Company.
Corporate Governance
Guidelines
The Board has adopted Corporate Governance
Guidelines to assist it in exercising its responsibilities to the Company and
its stockholders. The guidelines address, among other items, director
responsibilities, Board committees and non-employee director compensation.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
each director, officer and any individual beneficially owning more than 10% of
the Company’s common stock to file with the SEC reports of security ownership
and reports on subsequent changes in ownership. These reports are generally due
within two business days of the transaction giving rise to the reporting
obligation.
To the Company’s knowledge, all required Section 16(a) filings were timely and correctly made by the reporting persons during calendar year 2006.
Certain Relationships and
Related Transactions
The Corporate Governance Committee is
charged with the responsibility of reviewing and pre-approving all related-party
transactions (as defined in SEC regulations) and periodically reassessing any
related-party transaction entered into by the Company’s Corporate Code of
Ethical and Professional Standards for Directors and Employees.
Johnelle Hunt is the mother of Bryan Hunt and widow of founder J.B. Hunt. Bryan Hunt is the son of J.B. and Johnelle Hunt. There are no other family relationships among the foregoing Directors. As an employee of the Company, Johnelle Hunt received a salary of $100,000 for her services as the Company’s 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.
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 served 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 today’s 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 ensure that the American supply chain remains the model for the world.
Compensation Committee
Interlocks and Insider Participation
During the 2006 calendar year, none of the Company’s executive officers
served on the Board of Directors of any entities whose directors or officers
serve on the Company’s Compensation Committee. No current or past executive
officers of the Company serve on the Compensation Committee.
PRINCIPAL STOCKHOLDERS OF THE
COMPANY
The following table sets forth all persons known to be the beneficial
owner of more than 5% of the Company’s common stock as of December 31, 2006.
Unless otherwise indicated in the footnotes below, “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.
| Number of | Percent of | ||||
| Name and Address | Shares | Class | |||
| Impala Asset Management | 12,716,150 | 8.80 | |||
| Barclays Global Investors NA | 7,240,514 | 5.01 | |||
The numbers shown above were taken directly from the NASDAQ Corporate Services Network Ownership Tables and Form 13F reports filed with the SEC.
REPORT OF THE COMPENSATION
COMMITTEE
The Compensation Committee (the
“Committee”) is composed of Coleman H. Peterson, Chairman, Gary Charles George
and John A. White, none of whom is an officer or employee of the Company and all
of whom have been determined by the Board of Directors of the Company (the
“Board”) to be independent. Additionally, all members of the Committee qualify
as “non-employee directors” for purposes of Rule 16b-3 of the Exchange Act, and
as “outside directors” for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”). Mr. Peterson served as the chairman of
the Committee during the entire 2006 year. Both Messrs. George and White filled
vacancies created when John A. Cooper, Jr. submitted his resignation from the
Board on August 1, 2006, and Thomas L. Hardeman passed away on August 20,
2006.
The Committee operates under a written charter adopted by the Board, a copy of which is available on the “Corporate Governance” page of the “Who We Are”/“Investor Relations” section of the Company’s website at www.jbhunt.com. In carrying out its responsibilities, the Committee, among other things:
The Committee may appoint subcommittees for any purpose the Committee deems appropriate and delegate to such subcommittees power and authority as the Committee deems appropriate; however, the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole. The Committee did not utilize the services of a subcommittee in 2006.
The Chairman of the Board and the Chief Executive Officer provide recommendations to the Committee regarding the form and amount of compensation paid to executive officers who report directly to them. Additionally, the Chairman of the Board and the Chief Financial Officer regularly attend Committee meetings, except for executive sessions. Traditionally, management has provided to the Committee historical and prospective breakdowns of primary compensation components for each executive officer, as well as tally sheets, wealth accumulation analyses and internal pay equity analyses as described in more detail below.
In 2005, the Committee engaged Watson Wyatt (“WW”) to review certain of its executive compensation policies and practices. WW is retained by, and reports to, the Committee in order to provide various compensation analyses and consultation at the request of the Committee and has served as its compensation consultant since 2003. For 2006, the Committee consulted with WW by telephone. No formal report was written by WW, but the 2005 report was utilized as a reference. In the current year, the secretary to the Compensation Committee and the Chief Financial Officer of the Company were requested to analyze available market data with respect to the compensation of executive officers of public transportation companies in comparison to the Company’s executive officers, including the NEOs. In prior years, the Committee has also requested similar market data and analysis of non-employee director compensation and completed a thorough review and discussion of such compensation.
The Committee met four times in 2006 and held one telephonic meeting in 2006 to discuss, among other items, the salaries, bonuses and other compensation of the senior executive officers and other key employees of the Company, including the Chairman of the Board and the Chief Executive Officer. The Committee did not act by unanimous consent at any time in 2006.
Historically, the Committee meets each February to finalize discussion regarding the Company’s performance goals for the previous and current year with respect to performance-based compensation to be paid to executive officers and to approve its letter for the Proxy. These goals are approved within 90 days of the beginning of the year pursuant to the Code. Each year in October, the Committee generally discusses any new compensation issues, the compensation, bonus and MIP award analyses, and the engagement of the compensation consultant for annual executive and director compensation. The Committee also meets in October to:
Management also advises the full Board, including the Committee members, throughout the year of any new issues and developments regarding executive compensation.
The Company’s MIP was originally adopted and approved by the Board of Directors on March 17, 1989, and subsequently approved by the stockholders on May 11, 1995. The MIP has been amended since the time of its adoption, and all amendments required to have been approved by the stockholders were so approved.
The Committee has reviewed and discussed the following CD&A with management and based upon such discussions, the Committee recommended to the Board that the CD&A be included in the Company’s Proxy Statement.
| J.B. Hunt Transport Services, Inc. |
| Executive Compensation Committee |
| Coleman H. Peterson, Chairman |
| Gary Charles George |
| John A. White |
COMPENSATION DISCUSSION & ANALYSIS
Compensation Philosophy and
Principles
The Committee acknowledges that the transportation industry is highly
competitive and that experienced professionals have career mobility. The Company
believes it competes for executive talent with a large number of companies, some
of which are privately owned and others of which have significantly larger
market capitalization than the Company. Retention of key talent remains critical
to our success. The Company’s need to focus on retention is compounded by its
size, geographic location and lean executive management team. As a consequence,
the Company’s compensation program is structured to attract, retain and develop,
over the long term, executive talent with the ability to succeed in a broad span
of responsibilities over complex business units on a relatively individualized
basis. The Committee believes that the ability to attract, retain and provide
appropriate incentives for professional personnel, including the senior
executive officers and other key employees of the Company, is essential to
maintaining the Company’s leading competitive position, thereby providing for
the long-term success of the Company. The Committee’s goal is to maintain
compensation programs that are competitive with the transportation industry.
Each year, the Committee reviews the executive compensation program with respect
to the external competitiveness of the program and linkage between executive
compensation and the creation of stockholder value and determines what changes,
if any, are appropriate.
The overall compensation philosophy of the Committee and management is guided by the following principles:
The Company’s executive compensation program is designed to reward the achievement of initiatives regarding growth, productivity and people, including:
PROCESS OF SETTING COMPENSATION
Benchmarking Against Our Peer
Group
The Committee looks to external
market data from the transportation industry in reviewing and establishing
individual pay components and total compensation, thus ensuring that our
executive compensation is competitive in the marketplace. We benchmark our
performance and compensation against a group of ten publicly traded companies in
the transportation industry that compete for market share, executive talent and
employees. The peer group includes, CH Robinson Worldwide (“CH Robinson”),
Covenant Transport (“Covenant”), Heartland Express (“Heartland”), Knight
Transportation (“Knight”), Landstar System (“Landstar”), Pacer International
(“Pacer”), Ryder System (“Ryder”), Swift Transportation (“Swift”), Werner
Enterprises (“Werner”), and US Xpress Enterprises (“US Xpress”).
We are unique in the transportation industry in that we provide a blend of services. Our Intermodal business is comparable to Pacer. Our DCS segment is comparable to Ryder. We use owner-operators similar to Landstar and Heartland. We provide brokerage services like CH Robinson. Finally, our Truck and DCS segments are comparable to Covenant, Knight, Swift, Werner and US Xpress. While no one of the selected peer group provides the wide spectrum of services we provide, we believe the group as a whole is a good cross-section of competitors.
Market data is collected from these companies by our financial group on a quarterly basis. The Board is given this information. The Committee reviews and discusses annually our competitive positioning compared to our peers on a relative basis and for individual executive officers, with a particular focus on the positioning of base salary, short-term annual incentives and long-term, equity-based awards. The Committee also annually reviews our overall compensation program compared to our peers.
COMPENSATION ANALYSIS TOOLS
2006
Compensation
Compensation paid or awarded to
executives in 2006, in general, attained our goals. The Company’s performance
exceeded that of our peers in most of the metrics that were reviewed. Our EPS
did not increase as much in the past few years; therefore, bonuses were reduced
from 2005 because we did not achieve our goals for 2006. Our philosophy of tying
compensation to stockholder value was attained.
In addition to the competitive compensation survey information for each officer provided by our financial group, the Committee also reviewed compensation tally sheets, wealth accumulation analyses and internal pay equity analyses. The Committee began reviewing tally sheets in 2005, and the Committee anticipates further developing and enhancing these aids as compensation practices are reviewed and evolve in order to provide the Committee with the most relevant information and analyses practicable.
Wealth Accumulation
Analysis
This analysis illustrated prior
long-term incentive awards (options and restricted share units), prior and
future vesting schedules and overall value of stock owned plus the value of
unvested options and restricted share units.
We concluded that current-year awards would continue to provide a retirement vehicle for the NEOs, incent the executive officers to continue with the Company, and align their interests with those of our stockholders.
Our Company has a 401(k) plan which assists participants in providing for retirement. The Company contributes approximately $6,000 to each NEO’s account per year. The equity build-up in unvested equity-based awards and stock owned currently is critical to each executive’s ability to adequately provide for his or her retirement. As previously explained, we have a Company stock ownership policy for our executives, but we do not have a “hold until retirement” restriction. We do not believe such a restriction is prudent for the employee or necessary to protect our Company.
Tally Sheets
Compensation
tally sheets for each of the NEOs were prepared and reviewed by the Committee in
2006. These tally sheets detail dollar amounts for components of the NEO’s total
compensation in 2006, including current salary and estimated cash bonus, both
current and outstanding equity-based awards, change in control severance
payments, personal benefits, if any, and other perquisites. These elements were
found to be in line with our compensation goals and philosophies.
Our objective for executive base pay and total compensation is to provide compensation in the range of the 50th to 75th percentile of our peer group. We arrived at this conclusion because of our size and our performance compared to our peers. We believe that a sizeable portion of overall compensation should be at risk and tied to stockholder value. Our bonuses are tied to EPS. As EPS increases, so do executive bonuses. Long-term incentives are used as tools to reward executives for current and future performance, to encourage an executive to remain with the Company and to make the executive align his or her interests with those of our stockholders. As part of our long-term incentive strategy, executives are expected to maintain stock ownership values as a multiple of their base salary.
Internal Pay Equity
Analyses
The Committee commissioned management to conduct an internal
pay equity analysis in 2006. This study involved a review of 2006 total cash
compensation for all participants in the Company’s MIP for 2006, as well as
certain non-exempt salaried employees. Compensation reviewed included base
salary, short-term cash bonus and commissions. In order to provide an “apples to
apples” comparison, the Committee reviewed this compensation information for all
participants in the 2006 MIP, grouped by officer position, but also reviewed
salary comparisons between these individuals and individuals in the Company’s
lowest non-exempt, salaried pay grade. The study provided no information that
the Company felt should alter executive compensation goals or our compensation
philosophy. Executive compensation was determined to be reasonable when
consideration was given to performance, seniority and responsibility.
Long-Term Compensation Analyses and
Policies
With respect to long-term, equity-based awards, the Company
maintains an MIP. Restricted share units and stock options of the Company are
granted under the MIP in an effort to link future compensation to the long-term
financial success of the Company. These equity-based awards are granted to
executive officers, including the NEOs, and other key employees (approximately
250 individuals) and are intended to attract and retain employees who contribute
to the Company’s success, to provide incentives to enhance job performance, and
to enable those persons to participate in the long-term success and growth
through an equity interest in the Company.
In December 2005, the Committee began granting time-vested restricted share units in lieu of stock options under the MIP. The Committee believes restricted share units are currently more effective than stock options in achieving the Company’s compensation objectives, as these grants are subject to less market volatility and are less dilutive to stockholders. Employees realize immediate value as restricted share units vest, with such value increasing as the Company’s stock performance increases. Cash dividends are not paid and there are no voting rights on unvested restricted share units.
The Company does not have a formal policy, but has an established practice described below, with respect to the granting of any form of equity compensation. The Company does not have a policy or practice of timing equity-based compensation grants to current or new executive officers, or timing the release of material, non-public information to affect the value of executive compensation. The Committee has approved, and will continue to approve, all grants of equity-based compensation to the NEOs and Section 16 filers in October each year. Final approval of awards for the Company’s Chairman of the Board and Chief Executive Officer is obtained from the Company’s independent board members. Although the Chairman of the Board and the Chief Executive Officer make recommendations regarding individual allocations of equity–based compensation awards to be approved, the Committee reviews the recommendations and makes the final determination of the awards. The Committee does not expect to delegate approval authority to grant awards to management or any subcommittee at this time or in the near future. The grant date is typically set by the Committee. Historically, annual awards of equity compensation have been granted to all awardees, including the NEOs, in October. Grants have been made in months other than October on a very limited basis and did not involve grants to executive officers or an isolated group. For stock options granted prior to October 2005, the Committee typically set grant dates in the fourth quarter of the fiscal year. Limited exceptions to this grant-date practice have included, for example, the hiring of a key employee or the promotion of an employee to an executive office.
Pursuant to the provision of the MIP, all stock options are granted with an exercise price equal to 100% of the fair market value of the Company’s common stock on the grant date. Stock options are exercisable over five to 10 years from the grant date. The exercise price of stock options may be satisfied with payment of cash or previously owned Company stock, or through a cashless simultaneous exercise and sale program.
In response to emerging changes in the area of accounting for equity-based compensation and to position ourselves competitively with our peers, beginning in 2005, the Committee began granting restricted share units in lieu of stock options under its MIP. The Committee anticipates granting restricted share units in lieu of stock options for the foreseeable future, but in the event stock options are granted, such stock options will be granted under the terms discussed above. Similar to stock options, the total number of restricted share units that may be awarded to an individual is within the discretion of the Committee but also limited by the MIP and is generally based on the Company’s performance and the individual’s current level of compensation, individual performance, potential for promotion and marketability outside of the Company. The number of restricted share units or stock options previously granted to an individual may be, but is not always, a consideration in determining the amount of awards granted to that individual in the future. Generally, restricted share units vest over five to 10 years.
The Committee granted stock options in 2002 through 2004 for all awardees, including the NEOs. In 2004 and 2005, the Committee set the annual grant date for all awardees in October. For 2006, the Committee set a grant date of October 16, 2006, for restricted share units.
The Committee anticipates that it will continue to adhere to these general grant dates for the foreseeable future for administrative ease and consistency. Awards are made in the fourth quarter because the Committee has a good view as to financial and individual performance for the current year.
As stated above, the Company does not have a policy or practice of timing the grant of equity-based awards and the release of material non-public information in a manner that would affect compensation for new or current executive officers, nor has it deliberately or knowingly done so.
In the event that material non-public information becomes known to the Committee, the Company or its employees at a time when such information could affect or otherwise impact the imminent grant of equity-based compensation, management and the Committee would take the existence of such information under advisement and determine whether to delay the grant of such equity-based compensation to a later date in order to avoid the appearance of any impropriety.
Deductibility of Compensation and
Other Regulatory Considerations
The
Code places a limit of $1,000,000 on the amount of compensation the Company may
deduct for federal income tax purposes in any one year with respect to the
Company’s Chief Executive Officer and the next four most highly compensated
officers (the “Covered Employees”). There is an exception to this $1,000,000
limitation for performance-based compensation that meets certain requirements.
In reviewing the effectiveness of the Company’s compensation program, the
Committee considers the anticipated tax treatment to the Company and to its
executives of various payments and benefits. Additionally, the deductibility of
certain compensation payments depends upon the timing of an executive’s vesting
or exercise of previously granted awards, as well as interpretations and changes
in the tax laws and other factors beyond the Committee’s control. For these and
other reasons, including the need to maintain flexibility in compensating
executive officers in a manner designed to promote varying corporate goals, the
Committee will not necessarily, nor in all circumstances, limit executive
compensation to that which is deductible under the Code. The Company has not
adopted a policy requiring all compensation to be deductible.
The Committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with its other compensation objectives. Base salary, bonuses or the vesting of restricted share units do not qualify as performance-based compensation under the Code. In 2006, all compensation paid to the Company’s Covered Employees was deductible by the Company.
Derivative Trading
It is
the Company’s policy that officers and directors not engage in any put or call
transactions on Company stock. Such transactions create a significant enticement
for abusive trading and, in many instances, give the unwelcome appearance of the
officer or director betting against the Company. There is no Company policy that
would prohibit the Company’s executive officers from entering into a
forward-sale or forward-purchase contract.
Stock Ownership
Guidelines
To motivate the Company’s officers and senior management to
emulate its stockholders, the Company expects its management to own Company
stock at levels described in the table shown below.
Stock ownership is defined as stock owned:
| Position | Ownership Multiple of Base Salary |
| Chief Executive Officer | 6 times |
| Executive Vice Presidents | 3.50 times |
| Senior Vice Presidents and Vice Presidents of Operations | 2.75 times |
| Vice Presidents, Regional Operations Managers, and Directors of Operations | 2 times |
The Committee has determined that as of February 23, 2007, all of the Company’s officers and members of senior management covered by these guidelines have met their ownership goals.
Stock Retention
Policy
Other than indicated above, the
Company does not have any other stock retention policy.
Recovery of Awards
The
Company does not have a policy requiring replacement of awards or payments as a
result of an officer’s illegal transactions or restatements. The Company became
a public company in 1983. Since that time, it has had no illegal actions by its
officers.
Summary
The Company
intends to continue its practice of compensating its executives through programs
that emphasize performance. To that end, executive compensation is tied directly
to the performance of the Company and is structured to ensure that, due to the
nature of the business and the degree of competitiveness for executive talent,
there is an appropriate balance between short-term and long-term compensation,
base salary and incentive compensation, and cash and non-cash compensation, all
of which are determined and measured by financial, operational and strategic
goals, long-term and short-term performance of the Company and individual
contributions.
For 2006, the actual total compensation of the NEOs generally fell between the 29th and 65th percentile of the mean of total compensation paid to executives holding equivalent positions in the transportation industry peer group companies. The Committee believes that payments and awards were consistent with the Company’s financial performance, size and the individual performance of each of the NEOs, and also believes that the compensation was reasonable in its totality.
Elements of
Compensation
The Company’s primary compensation
components are summarized below. Generally, the Company’s compensation program
consists of annual base salary, a short-term cash incentive award, and an annual
long-term, equity-based award. Primary benefits for executives include
participation in the Company’s 401(k) plan, health, dental and vision plans, and
various insurance plans, including disability and life insurance, all of which
are available to all employees on a non-discriminatory basis. The Company
provides limited perquisites to executive officers and other key employees and
is described in more detail on page 26 under the section titled “Other
Perquisites.”
Total compensation for executive officers, including the NEOs, consists of one or more of the following components:
The Committee, with recommendations from management, works to create what it believes is the best mix of these components in delivering total compensation and in determining annual compensation, reviews all elements of compensation separately and in the aggregate. These compensation components are comparable to the Company’s competitors and peer group.
In its review of executive compensation, and, in particular, in determining the amount and form of incentive awards discussed below, the Committee generally considers, among other things, market information with respect to cash and long-term compensation for comparable companies in the transportation industry, amounts paid to the executive officer in prior years as salary, annual bonus and other compensation, the officer’s responsibilities and performance during the fiscal year, and the Company’s overall performance during prior fiscal years and its future objectives and challenges.
At transportation companies, generally the largest elements of compensation are paid in the form of annual short-term incentives and long-term compensation. Compensation mix and industry profitability does vary as the industry faces many risk factors, such as the economy and fuel prices.
As a result, cash usually comprises a much greater percentage of the total compensation package than long-term equity-based compensation. Our executive officers, including NEOs, receive approximately 48% to 66% of their total compensation in cash. Cash compensation varies as the EPS of the Company changes, thus affecting bonus payouts. Grants of stock options or restricted share units are made annually. Stock options and restricted share units are based on each employee’s level of responsibility and are computed as a multiple of base salary as a maximum.
It has been the policy of the Company to put a significant portion of the executive’s compensation at risk. This is accomplished by our cash bonus plan, which is directly tied to EPS increases. Equity-based awards from our MIP may also vary in vesting from five to 10 years. These awards are subject to forfeiture if the employee leaves the Company. The Committee and management believe that the proportion of compensation at risk should rise as the employee’s level of responsibility increases.
The Company has retained WW as its compensation consultant. WW reports directly to the Committee. In 2005, WW prepared a study providing information and an independent analysis of the executive compensation program and practices. WW’s 2005 study was updated by management in 2006 and reviewed by the Committee. The results of the study included observations about the Company’s 2006 executive compensation.
In general:
Base Salary
The
Committee believes that competitive levels of cash compensation, together with
equity-based and other incentive programs, are necessary for the motivation and
retention of the Company’s executives. Salaries provide executives with a base
level of monthly income and help achieve the objectives outlined above by
attracting and retaining strong talent. Base salaries are evaluated annually for
all executive officers, including the Chairman of the Board and the Chief
Executive Officer. Generally, base salaries are not directly related to specific
measures of corporate performance, but are determined by the relevance of
experience, the scope and complexity of the position, current job
responsibilities, retention and relative salaries of peers in the transportation
industry. The Committee may elect not to increase an executive officer’s annual
salary, and has so elected in prior years. However, if warranted, the Committee
may increase base salary where an executive officer takes on added
responsibilities or was promoted.
For 2006, the Committee reviewed and approved the salaries of all Section 16 reporting persons. The Committee presented to the independent, non-employee board members, for their approval, salary recommendations for Messrs. Garrison and Thompson, the Company’s Chairman of the Board and Chief Executive Officer, respectively. Mr. Garrison received no salary increase in the current year. Mr. Thompson received an increase of $30,000. In October 2006, the Committee approved the salaries for executive officers, including the other NEOs. Executive salaries increased between 0% and 15%.
Annual Bonus Award
As previously mentioned, the Company
has had a bonus plan in place for several years that is tied to EPS. As EPS
increases, so do executive bonus payments. All non-commissioned, salaried
employees participate in the same plan. Each year the Compensation Committee,
with recommendations from the Chairman of the Board and Chief Executive Officer,
establishes the EPS targets for the following year. The bonus is computed from a
matrix of EPS targets and percentages of the executive’s base salary. If EPS
does not reach a base level, no bonus is paid. In October 2005 and October 2006
the Committee approved the bonus plan for 2006 and 2007, respectively. The
Committee believes this plan directly aligns current compensation to the
stockholder’s interest by providing the executives with incentives to increase
the profits of the Company, thereby increasing stockholder value.
The Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the performance of the Chairman of the Board, the Chief Executive Officer or the other NEOs. In 2006, the Committee considered management’s continuing achievement of its short-term and long-term goals versus its strategic imperatives and general individual performance objectives. The Committee also considers recommendations from the Chief Executive Officer regarding total compensation for those executives reporting directly to him. General individual performance objectives for the NEOs include the following and vary depending on the business function in which the executive works.
In assessing individual performance against the objectives, the Committee considers actual results against deliverables. The Committee based its compensation decisions for Messrs. Garrison and Thompson on:
Where possible, the above criteria were compared to the peer group. The compensation decisions for other NEOs were also based on those assessments, as well as the Chief Executive Officer’s recommendations to determine levels of payout.
Long-Term, Equity-Based
Award
Each executive is eligible to
receive an incentive award of restricted share units. Restricted share units are
intended to help achieve the objectives of the compensation program, including
the retention of high-performing and experienced talent, a career orientation
and strong alignment with stockholders’ interests. Long-term incentive awards
also facilitate the development and retention of strong management through share
ownership and recognition of future performance. The restricted share unit is
awarded and settled from shares reserved for issuance under the MIP. As
previously mentioned, the Committee awards restricted share units based on an
executive’s level of responsibility and prior and expected future performance.
Awards are set as a multiple of the executive’s base salary, as recommended by
the Committee’s consultant, WW. The Committee approves or adjusts the award
based on the above criteria for all Section 16 filers who are employees of the
Company. The awards for the Company’s Chairman of the Board and Chief Executive
Officer are presented for final approval to the Company’s independent board
members. The Company also has stock ownership requirements for all participants
in the MIP who hold the position of director and above. The Committee believes
that restricted share units must be sufficient in size to provide a strong,
long-term performance and retention incentive for executives and to increase
their vested interest in the Company. Restricted share units have been awarded
for the last two years because they are less dilutive to shares outstanding and
to profits. Restricted share units vest from five to 10 years.
For 2006, the Company granted, in aggregate, 126,000 restricted share units to the NEOs participating in the MIP with Messrs. Garrison, Thompson, Walton, Bergant and Harper receiving grants of 40,000, 40,000, 14,000, 12,000 and 20,000 units, respectively. These awards represent the Committee’s and the Board’s view of both the Company’s and the individuals’ performance in the marketplace during calendar year 2006.
In administering our MIP and awarding long-term incentive awards, we are sensitive to the potential for dilution of future earnings per share. The MIP is a broad-based equity compensation program. We focus the program on employees who will have the greatest impact on strategic direction and long-term results of the Company by virtue of their senior roles and responsibilities. A total of 676,720 restricted share units were granted in 2006. Of that number, approximately 30% of the units granted were issued to the executive officer group. Approximately 19% of the total share units were granted to the NEOs. MIP participants who hold the title of director and above have an ownership requirement in Company stock. Our peers all have similar long-term equity-based award plans. Our peers do not disclose any ownership requirements.
Deferred Compensation
The
Company administers a Deferred Compensation Plan for certain of its officers.
The employee or participant may elect on an annual basis to defer part of his or
her salary and/or bonus. This plan assists key employees in planning for
retirement. The Company contributes nothing to the plan. Some of our peers have
deferred compensation plans that provide for some form of matching.
Health and Welfare
Benefits
The Company provides benefits such as medical, vision, life
insurance, long-term disability coverage, and 401(k) plan opportunities to all
eligible employees, including the NEOs. The Company provides up to $750,000 in
life insurance coverage and up to $10,000 per month in long-term disability
coverage. The value of these benefits is not required to be included in the
Summary Compensation Table since they are available to all employees on a
non-discriminatory basis. The Company matches employee contributions to the
401(k) plan. The Company provides no post-retirement medical or retirement
benefits to its employees. These benefits are comparable to those offered by our
peers.
The Company also provides vacation, sick leave and other paid holidays to employees, including the NEOs, that are comparable to those provided at other transportation companies. The Company believes that its commitment to provide employee benefits such as these recognizes that the health and well-being of our employees contributes directly to a productive and successful work life that produces better results for the Company and for its employees.
Personal Benefits
The
Company provides certain perquisites to management employees, including the
NEOs, as summarized below.
Company Aircraft
The Company no longer owns and
operates its own aircraft. Since 1998, the Company has actively participated in
shared ownership of aircraft services with NetJets. With the approval of the
Chairman of the Board or the Chief Executive Officer, the NEOs and other
management employees use Company aircraft for business purposes. Personal use of
the Company plane is provided to executive officers on a very limited basis and
to other management employees in the event of emergency or other urgent
situations.
Company Vehicles
The
Company does not provide company-owned cars to executives.
Other Perquisites
The Company provides executive
officers a taxable allowance of up to $10,000 a year for financial counseling
services, which may include legal, financial, estate and/or tax planning and tax
return preparation. This benefit is based on actual cost to the Company. The
Company also provides country club memberships to certain of its executive
officers. These memberships are valued on the actual costs of the membership,
including dues, regardless of whether use was personal or business. The Company
believes the clubs provide a quiet venue for negotiations and entertainment of
clients, bankers, investment bankers, stockholders, etc.
Severance Agreements
The
Company does not have employment contracts or personal severance agreements with
any of its executives. However, according to the terms of the previously
mentioned MIP, all outstanding options and restricted share units would
immediately vest upon a “change in control.”
Generally, a “change in control” per the MIP would be deemed to occur when more than 30% of the outstanding shares of common stock of the Company changes ownership in a transaction that is a merger, reorganization or consolidation or when more than 50% of the outstanding shares change ownership in a transaction that is not a merger, reorganization or consolidation.
Most of our peers have similar “change in control” language in their stock incentive plans. Some of our peers have employment agreements and severance packages for their executives.
The Company does not believe severance agreements or employee contracts are necessary in order to compete in the transportation marketplace.
Compensation of the Chairman of the
Board and the Chief Executive Officer
As of December 31, 2006, Messrs.
Garrison and Thompson have a base salary of $500,000 and $630,000, respectively.
Mr. Garrison received no increase in salary during 2006. Mr. Thompson received a
5% increase or $30,000 during 2006. Additionally, under the bonus plan, Messrs.
Garrison and Thompson received a cash incentive bonus of $225,000 and $270,000,
respectively. These bonus payments were less than those paid in the prior year
because EPS goals for 2006 were not attained.
Messrs. Garrison’s and Thompson’s base salaries are not directly related to specific measures of corporate performance, but are determined by their experience, current job responsibilities, the relative salaries of their peers in the transportation industry and, to a lesser extent, upon a subjective evaluation of their contribution to the Company’s corporate and financial goals and objectives. Messrs. Garrison and Thompson each received 40,000 restricted share units from the MIP in 2006. Their awards were approved by the independent, non-employee directors of the board and vest from 2011 to 2016. The Committee exercised its right under the MIP to increase the restricted share units awarded above the salary multiple maximum to both Messrs. Garrison and Thompson. In view of cash versus equity awards, the Committee viewed equity-based awards as a means of more closely aligning their positions with the stockholders’ interests.
In 2005, the Committee retained WW to review the compensation for Messrs. Garrison and Thompson. As discussed above, the study was updated by management in 2006. WW and management reviewed industry and peer groups they believe are representative of companies that the Company competes with for executive talent and compared Messrs. Garrison’s and Thompson’s compensation to their peers in those groups.
The Committee believes each element of compensation paid to Messrs. Garrison and Thompson and other senior managers is reasonably appropriate and in the best interests of the stockholders. The Company is one of the largest companies in comparison to the peer group and its financial performance is better than most of its peers. The elements of compensation have generally been consistent over the past few years and have served the stockholders well in receiving outstanding performance from its executives and outstanding performance from the Company.
SUMMARY COMPENSATION
The following table summarizes the total compensation earned or paid to the Chief Executive Officer, Chief Financial Officer and the three most highly compensated executive officers of the Company who served in such capacities as of December 31, 2006, for services rendered to the Company. These five officers are referred to as the NEOs in this Proxy Statement.
| Non- | Change in | |||||||||||||||||||||||||||||||
| Equity | Restricted | Stock | Value for | |||||||||||||||||||||||||||||
| Incentive | Share | Option |
Deferred |
All Other | ||||||||||||||||||||||||||||
| Principal | Salary | Awards | Units | Awards | Compensation | Compensation | ||||||||||||||||||||||||||
| and Position | Year | ($) (1) | (1) | ($) (2) | ($) (2) | ($) | ($) | Total ($) | ||||||||||||||||||||||||
| Kirk Thompson | 2006 | 605,769 | 270,000 | 96,139 | 330,135 | 0 | 11,652 | 1,313,695 | ||||||||||||||||||||||||
| President | ||||||||||||||||||||||||||||||||
| and CEO | ||||||||||||||||||||||||||||||||
| Jerry Walton | 2006 | 358,269 | 159,750 | 57,737 | 160,971 | 0 | 11,467 | 748,194 | ||||||||||||||||||||||||
| EVP, Finance/ | ||||||||||||||||||||||||||||||||
| Administration | ||||||||||||||||||||||||||||||||
| and CFO | ||||||||||||||||||||||||||||||||
| Wayne Garrison | 2006 | 500,000 | 225,000 | 87,201 | 137,933 | 0 | 13,530 | 963,664 | ||||||||||||||||||||||||
| Chairman | ||||||||||||||||||||||||||||||||
| of the Board | ||||||||||||||||||||||||||||||||
| Paul Bergant | 2006 | 317,884 | 141,750 | 53,673 | 166,253 | 0 | 13,549 | 693,109 | ||||||||||||||||||||||||
| EVP Marketing, | ||||||||||||||||||||||||||||||||
| CMO, and | ||||||||||||||||||||||||||||||||
| President of | ||||||||||||||||||||||||||||||||
| Intermodal | ||||||||||||||||||||||||||||||||
| Craig Harper | 2006 | 311,365 | 137,250 | 52,929 | 168,883 | 0 | 4,233 | 674,660 | ||||||||||||||||||||||||
| EVP, Operations | ||||||||||||||||||||||||||||||||
| and COO | ||||||||||||||||||||||||||||||||
| (1) | Non-equity incentive awards (paid as a bonus) and salary amounts shown above are reported as gross earnings. Totals may include amounts transferred into deferred compensation. All non-equity awards are reported in the year in which they are earned. | |
| (2) | Amounts reflect totals expensed in the Company’s financial statements in 2006 under SFAS 123R. See Note 5 of the Company’s annual report as reported on Form 10-K for assumptions used in the valuation. |
Components of All Other Compensation for Calendar Year 2006
| Perquisites | Company | ||||||||||
| and Other | Contributions | ||||||||||
| Personal Benefits | to 401(k) Plan | Total | |||||||||
| Name | Year | ($) | ($) | ($) | |||||||
| Kirk Thompson | 2006 | 5,789 | 5,863 | 11,652 | |||||||
| Jerry Walton | 2006 | 5,232 | 6,235 | 11,467 | |||||||
| Wayne Garrison | 2006 | 9,315 | 4,215 | 13,530 | |||||||
| Paul Bergant | 2006 | 7,532 | 6,017 | 13,549 | |||||||
| Craig Harper | 2006 | 0 | 4,233 | 4,233 | |||||||
Components of Perquisites for Calendar Year 2006
| Total | |||||||||||||||||
| Legal and | Club | Perquisites | |||||||||||||||
| Personal Use of | Accounting | Dues and | and Other | ||||||||||||||
| Company Plane | Fees | Security | Personal | ||||||||||||||
| Name | Year | ($) | ($) | ($) | Benefits ($) | ||||||||||||
| Kirk Thompson | 2006 | 0 | 3,500 | 2,289 | 5,789 | ||||||||||||
| Jerry Walton | 2006 | 0 | 0 | 5,232 | 5,232 | ||||||||||||
| Wayne Garrison | 2006 | 0 | 9,315 | 0 | 9,315 | ||||||||||||
| Paul Bergant | 2006 | 0 | 0 | 7,532 | 7,532 | ||||||||||||
| Craig Harper | 2006 | 0 | 0 | 0 | 0 | ||||||||||||
Messrs. Thompson and Bergant had family members accompanying them on one business trip each using the Company aircraft. The Company incurred no incremental cost for these family members to utilize available seating on these trips, thus, no value is assigned to the perquisites. Both Messrs. Thompson and Bergant have included the taxable value of this perquisite in their salaries detailed in the Summary Compensation Table above and for income tax reporting purposes.
Grants of Plan-Based
Awards
The following table reflects estimated
possible payouts under equity and non-equity incentive plans to the NEOs during
2006. The Company’s equity-based and incentive-based awards are granted to the
NEOs based upon pre-established performance goals set annually by the
Compensation Committee with a performance period equal to the calendar year for
which the performance goals are set.
The MIP is an annual plan consisting of equity-based awards only. The number of shares awarded are measured based on the executive’s level of responsibility and other matters described on page 25 under “Long-Term Equity-Based Award.” Dividends are not paid on awards of restricted share units.
NEOs are eligible to earn cash bonuses under the non-equity incentive award plan based on the Company’s EPS for the calendar year. Please refer to page 24 of the Proxy Statement under “Annual Bonus Award” for further detail.
| All Other | All Other | |||||||||||||||||||||||
| Stock | Option | Grant | ||||||||||||||||||||||
| Awards: | Awards: | Date Fair | ||||||||||||||||||||||
| Number | Number | Exercise | Value | |||||||||||||||||||||
| Estimated Possible Payouts | Estimated Possible Payouts | of | of | or Base | of Stock | |||||||||||||||||||
| Under Non-Equity | Under Equity Incentive | Shares | Securities | Price of | and | |||||||||||||||||||
| Incentive Awards (1) | Plan Awards (2) | of Stock | Underlying | Option | Option | |||||||||||||||||||
| Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units | Options | Awards | Awards | ||||||||||||||
| Name | Date | ($) | ($) | ($) (1) | (#) | (#) | (#) | (#) (3) | (#) | ($/Sh) | ($) (4) | |||||||||||||
| Kirk Thompson | 10/26/06 | 30,288 | 454,327 | 1,332,691 | N/A | N/A | N/A | 40,000 | – | – | 19.90 | |||||||||||||
| Jerry Walton | 10/16/06 | 17,913 | 268,702 | 788,192 | N/A | N/A | N/A | 14,000 | – | – | 20.78 | |||||||||||||
| Wayne Garrison | 10/26/06 | 25,000 | 375,000 | 1,100,000 | N/A | N/A | N/A | 40,000 | – | – | 19.90 | |||||||||||||
| Paul Bergant | 10/16/06 | 15,894 | 238,413 | 699,345 | N/A | N/A | N/A | 12,000 | – | – | 20.78 | |||||||||||||
| Craig Harper | 10/16/06 | 15,568 | 233,524 | 685,003 | N/A | N/A | N/A | 20,000 | – | – | 20.78 | |||||||||||||
| (1) | This column reflects the maximum non-equity incentive award each NEO was eligible to receive for 2006 under the percentage assigned to each NEO for the cash bonus pool. The actual awards earned are reported in the Summary Compensation Table shown on page 27 of this Proxy Statement. | |
| (2) | The Company has no equity incentive plan awards. | |
| (3) | This column reflects the number of restricted share units that were granted to the NEOs in 2006. Grants to Messrs. Thompson and Garrison were made on October 26, 2006. Grants to Messrs. Walton, Bergant and Harper were made on October 16, 2006. | |
| (4) | Market value of the share units on the date of grant was $19.90 for grants made to Messrs. Thompson and Garrison and $20.78 for grants made to Messrs. Walton, Bergant and Harper. This market value is an 8.03% discount from the Company’s closing stock price on the date of grant. The discount represents the present value of expected dividends to be paid on the Company’s common stock, using the current dividend rate and the risk-free interest rate, over the vesting period. The Company believes this discount is appropriate to value the restricted share units as the units do not collect or accrue dividends until the awards vest and are settled with Company stock. |
Outstanding Equity Awards At
Calendar Year-End
The following table sets forth
information concerning stock options and restricted share units held by the NEOs
as of December 31, 2006.
| Option Awards | RSU Awards | |||||||||||||||||
| Equity | ||||||||||||||||||
| Incentive | Equity | |||||||||||||||||
| Equity | Plan | Incentive | ||||||||||||||||
| Incentive | Awards: | Plan Awards: | ||||||||||||||||
| Plan | Number | Number of | Market of | |||||||||||||||
| Number of | Number of | Awards: | of Shares | Market | Unearned | Payout Value | ||||||||||||
| Securities | Securities | Number of | or | Value of | Shares, | of Unearned | ||||||||||||
| Underlying | Underlying | Securities | Units of | Shares or | Units or | Shares, Units | ||||||||||||
| Unexercised | Unexercised | Underlying | Option | Stock that | Units of | Other | or Other | |||||||||||
| Options | Options | Unexercised | Exercise | Option | Have Not | Stock That | Rights That | Rights That | ||||||||||
| Exercisable | Unexercisable | Unearned | Price | Expiration | Vested | Have Not | Have Not | Have Not | ||||||||||
| Name | (#) | (#) (1) | Options (#) | ($) | Date | (#) (2) | Vested ($)(3) | Vested (#) | Vested ($) | |||||||||
| Kirk Thompson | – | 45,600 | – | 3.37 | 11/5/10 | 35,000 | 726,950 | – | – | |||||||||
| 150,000 | 3.47 | 11/2/12 | 40,000 | 830,800 | ||||||||||||||
| 106,672 | 7.08 | 10/24/13 | ||||||||||||||||
| 100,000 | 12.20 | 10/23/14 | ||||||||||||||||
| 100,000 | 20.36 | 10/21/15 | ||||||||||||||||
| Jerry Walton | – | 16,000 | – | 4.88 | 12/4/09 | 10,000 | 207,700 | – | – | |||||||||
| 30,000 | 7.08 | 10/24/10 | 14,000 | 290,780 | ||||||||||||||
| 40,000 | 12.20 | 10/23/10 | ||||||||||||||||
| 40,000 | 20.36 | 10/21/12 | ||||||||||||||||
| Wayne Garrison | – | 120,000 | – | 5.86 | 2/28/12 | 20,000 | 415,400 | – | – | |||||||||
| 40,000 | 12.20 | 10/23/10 | 40,000 | 830,800 | ||||||||||||||
| Paul Bergant | – | 16,000 | – | 5.05 | 12/28/09 | 10,000 | 207,700 | – | – | |||||||||
| 30,000 | 7.08 | 10/24/10 | 12,000 | 249,240 | ||||||||||||||
| 40,000 | 12.20 | 10/23/10 | ||||||||||||||||
| 40,000 | 20.36 | 10/21/11 | ||||||||||||||||
| Craig Harper | – | 8,000 | – | 3.75 | 4/15/08 | 17,000 | 353,090 | – | – | |||||||||
| 8,000 | 7.21 | 6/15/09 | 20,000 | 415,400 | ||||||||||||||
| 8,000 | 3.12 | 10/8/09 | ||||||||||||||||
| 100,000 | 3.47 | 11/2/12 | ||||||||||||||||
| 53,336 | 7.08 | 10/24/13 | ||||||||||||||||
| 48,000 | 12.20 | 10/23/14 | ||||||||||||||||
| 48,000 | 20.36 | 10/21/15 | ||||||||||||||||
| (1) Unvested and unexercisable options. Effective vesting dates are noted. | |||||||
| Shares Vesting | Vesting Date | Shares Vesting | Vesting Date | ||||
| Kirk Thompson | 15,200 | 6/1/07 | 17,776 | 6/1/10 | |||
| 15,200 | 6/1/08 | 17,776 | 6/1/11 | ||||
| 15,200 | 6/1/09 | 17,792 | 6/1/12 | ||||
| 30,000 | 6/1/07 | 20,000 | 6/1/09 | ||||
| 30,000 | 6/1/08 | 20,000 | 6/1/10 | ||||
| 30,000 | 6/1/09 | 20,000 | 6/1/11 | ||||
| 30,000 | 6/1/10 | 20,000 | 6/1/12 | ||||
| 30,000 | 6/1/11 | 20,000 | 6/1/13 | ||||
| 17,776 | 6/1/07 | 20,000 | 6/1/12 | ||||
| 17,776 | 6/1/08 | 40,000 | 6/1/13 | ||||
| 17,776 | 6/1/09 | 40,000 | 6/1/14 | ||||
| Jerry Walton | 8,000 | 6/1/07 | 13,332 | 6/1/07 | |||
| 8,000 | 6/1/08 | 13,332 | 6/1/08 | ||||
| 10,000 | 6/1/07 | 13,336 | 6/1/09 | ||||
| 10,000 | 6/1/08 | 20,000 | 6/1/10 | ||||
| 10,000 | 6/1/09 | 20,000 | 6/1/11 | ||||
| Wayne Garrison | 120,000 | 2/28/07 | 20,000 | 6/1/09 | |||
| 20,000 | 6/1/08 | ||||||
| Paul Bergant | 8,000 | 6/1/07 | 13,332 | 6/1/07 | |||
| 8,000 | 6/1/08 | 13,332 | 6/1/08 | ||||
| 10,000 | 6/1/07 | 13,336 | 6/1/09 | ||||
| 10,000 | 6/1/08 | 40,000 | 6/1/10 | ||||
| 10,000 | 6/1/09 | ||||||
| Craig Harper | 8,000 | 6/1/07 | 8,888 | 6/1/09 | |||
| 4,000 | 6/1/07 | 8,888 | 6/1/10 | ||||
| 4,000 | 6/1/08 | 8,888 | 6/1/11 | ||||
| 4,000 | 6/1/07 | 8,896 | 6/1/12 | ||||
| 4,000 | 6/1/08 | 9,600 | 6/1/09 | ||||
| 20,000 | 6/1/07 | 9,600 | 6/1/10 | ||||
| 20,000 | 6/1/08 | 9,600 | 6/1/11 | ||||
| 20,000 | 6/1/09 | 9,600 | 6/1/12 | ||||
| 20,000 | 6/1/10 | 9,600 | 6/1/13 | ||||
| 20,000 | 6/1/11 | 16,000 | 6/1/12 | ||||
| 8,888 | 6/1/07 | 16,000 | 6/1/13 | ||||
| 8,888 | 6/1/08 | 16,000 | 6/1/14 | ||||
| (2) Restricted share units are time-vested awards. Effective vesting dates are noted. | |||||||
| Shares Vesting | Vesting Date | Shares Vesting | Vesting Date | ||||
| Kirk Thompson | 8,750 | 7/15/13 | 5,000 | 7/15/13 | |||
| 8,750 | 7/15/14 | 5,000 | 7/15/14 | ||||
| 17,500 | 7/15/15 | 10,000 | 7/15/15 | ||||
| 5,000 | 7/15/11 | 10,000 | 7/15/16 | ||||
| 5,000 | 7/15/12 | ||||||
| Jerry Walton | 5,000 | 7/15/10 | 2,996 | 7/15/09 | |||
| 5,000 | 7/15/11 | 4,004 | 7/15/10 | ||||
| 2,996 | 7/15/08 | 4,004 | 7/15/11 | ||||
| Wayne Garrison | 5,000 | 7/15/10 | 5,000 | 7/15/13 | |||
| 5,000 | 7/15/11 | 5,000 | 7/15/14 | ||||
| 10,000 | 7/15/12 | 10,000 | 7/15/15 | ||||
| 5,000 | 7/15/11 | 10,000 | 7/15/16 | ||||
| 5,000 | 7/15/12 | ||||||
| Paul Bergant | 2,500 | 7/15/10 | 3,000 | 7/15/09 | |||
| 7,500 | 7/15/11 | 3,000 | 7/15/10 | ||||
| 3,000 | 7/15/08 | 3,000 | 7/15/11 | ||||
| Craig Harper | 3,400 | 7/15/12 | 5,000 | 7/15/12 | |||
| 4,250 | 7/15/13 | 4,000 | 7/15/13 | ||||
| 4,250 | 7/15/14 | 3,000 | 7/15/14 | ||||
| 5,100 | 7/15/15 | 2,000 | 7/15/15 | ||||
| 6,000 | 7/15/11 | ||||||
| (3) Values are based on the market closing price of $20.77 on December 31, 2006. | |||||||
| Options Exercised and Stock Vested | |||||
|
The following table describes stock options only. No restricted share units vested in calendar year 2006. | |||||
| Option Awards | |||||
| Number of Shares | Value Realized | ||||
| Acquired on Exercise | on Exercise | ||||
| Name | (#) | ($) (1) (2) | |||
| Kirk Thompson | 30,000 | 594,900 | |||
| 15,200 | 329,232 | ||||
| 30,000 | 646,800 | ||||
| 17,776 | 319,079 | ||||
| Total | 92,976 | 1,890,011 | |||
| Jerry Walton | 4,000 | 80,930 | |||
| 4,000 | 66,280 | ||||
| 8,000 | 164,421 | ||||
| 8,000 | 135,120 | ||||
| 4,000 | 91,130 | ||||
| 24,000 | 527,104 | ||||
| 24,000 | 439,200 | ||||
| 10,000 | 183,527 | ||||
| 10,000 | 146,900 | ||||
| Total | 96,000 | 1,834,612 | |||
| Wayne Garrison | 120,000 | 1,881,600 | |||
| Total | 120,000 | 1,881,600 | |||
| Paul Bergant | 4,000 | 69,080 | |||
| 8,000 | 162,480 | ||||
| 8,000 | 139,360 | ||||
| 20,000 | 380,000 | ||||
| 10,000 | 182,800 | ||||
| 10,000 | 153,900 | ||||
| Total | 60,000 | 1,087,620 | |||
| Craig Harper | 6,000 | 121,380 | |||
| 8,000 | 170,240 | ||||
| 4,000 | 71,280 | ||||
| 4,000 | 87,360 | ||||
| 14,284 | 313,676 | ||||
| 8,888 | 158,917 | ||||
| Total | 45,172 | 922,853 | |||
| (1) | Value realized on the exercise of stock options shown above are gross earnings. Values are earned over multiple years. Election to exercise an option in calendar year 2006 should not be interpreted to mean that all value was earned in the year the option was exercised. | |
| Messrs. Garrison and Thompson exercised and purchased all of the shares shown in column number two above. | ||
| Mr. Harper exercised and purchased 18,000 shares, which was a portion of the available vested shares. | ||
| (2) | Values are calculated by subtracting the exercise price from the fair market value on the underlying common stock on the date of exercise. | |
Components of Non-Qualified Deferred Compensation for Calendar Year 2006
| Executive | Registrant | Aggregate | Aggregate | Aggregate | |||||
| Contributions | Contributions | Contributions | Withdrawals / | Balance | |||||
| Name | in 2006 ($) (1) | in 2006 ($) | in 2006 ($) | Distributions ($) | at 2005 ($) | ||||
| Kirk Thompson | 67,514 | 0 | 67,514 | 0 | 179,302 | ||||
| Jerry Walton | 115,562 | 0 | 115,562 | 1,826 | 494,776 | ||||
| Wayne Garrison | 0 | 0 | 0 | 0 | 0 | ||||
| Paul Bergant | 149,908 | 0 | 149,908 | 0 | 913,611 | ||||
| Craig Harper | 98,819 | 0 | 98,819 | 13,804 | 416,272 | ||||
| (1) | Amounts of executive contributions are included as part of the NEOs salary in the Summary Compensation Table detailed above. | |
| (2) | We have a non-qualified deferred compensation plan that allows eligible employees to defer a portion of their compensation. Participants can elect to defer up to a maximum of 50% of their base salary as well as up to 85% of their bonus for the year. The compensation deferred under this plan is credited with earnings or losses of investments elected by plan participants. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until actually distributed to the employee. A participant may elect to receive deferred amounts in one payment or, if the balance is greater than $25,000, in quarterly installments payable over a period of 3, 5, 10 or 15 years upon reaching the age of 55, having 15 years of service, or being disabled. Our total liability under this plan was $8.6 million as of December 31, 2006, and $6.7 million as of December 31, 2005. These amounts are included in other long-term liabilities in our Consolidated Balance Sheets. Participant withholdings are held by a trustee and invested in equity securities as directed by participants. These investments are included in other assets in our Consolidated Balance Sheets and totaled $8.6 million as of December 31, 2006, and $6.7 million as of December 31, 2005. |
Potential Post-Employment
Benefits
The Company does not have employment
contracts or personal severance agreements with any of its executives. However,
according to the terms of the previously mentioned MIP, all outstanding options
and restricted share units would immediately vest upon a “change in
control.”
Generally, a “change in control” per the MIP would be deemed to occur when more than 30% of the outstanding shares of common stock of the Company changes ownership in a transaction that is a merger, reorganization or consolidation or when more than 50% of the outstanding shares change ownership in a transaction that is not a merger, reorganization or consolidation.
Potential benefits of the NEOs due to a “change in control” are shown below. The amounts represent the immediate vesting of all outstanding options and restricted share units and are valued using the closing market price of $20.77 on December 31, 2006.
| Kirk Thompson | $7,304,530 |
| Jerry Walton | $1,522,620 |
| Wayne Garrison | $3,378,200 |
| Paul Bergant | $1,478,360 |
| Craig Harper | $4,045,540 |
REPORT OF THE AUDIT COMMITTEE
The Audit
Committee
The Audit Committee is composed of Dr. John A. White,
Chairman, James L. Robo and Leland Tollett. Messrs. White, Robo and Tollett
served as members of the Audit Committee during calendar year 2006. The
Company’s 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 Company’s website at “Who We Are”/“Investor Relations” at www.jbhunt.com. In carrying out its responsibilities, the Audit Committee, among other things:
In 2006, the Audit Committee met eight 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 Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent auditors and the Company’s internal auditors, in each case outside the presence of the Company’s management.
In performing its oversight role, the Audit Committee reviewed the audited consolidated financial statements for the 2006 calendar year and met and held discussions with management, the Company’s internal auditors and E&Y, the Company’s independent registered auditors, to discuss those financial statements and the audit related thereto. Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles.
The Audit Committee discussed with the independent auditors matters required to be discussed by the 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 Company’s 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 Committee’s 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 Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the calendar year ended December 31, 2006, as filed with the SEC.
J.B. Hunt Transport Services, Inc.
2006 Audit Committee Members
John A. White, Chairman
James L. Robo
Leland Tollett
| PROPOSAL NUMBER TWO |
| RATIFICATION OF INDEPENDENT REGISTERED |
| PUBLIC ACCOUNTING FIRM |
On March 29, 2005, the Audit Committee of the Board of Directors concluded its proposal process for a new independent registered public accounting firm. The Audit Committee appointed Ernst & Young LLP (“E&Y”) as the Company’s independent registered public accounting firm. The Audit Committee appointed E&Y as the Company’s independent registered public accounting firm for the calendar year ended December 31, 2005, thereby dismissing KPMG LLP (“KPMG”) effective immediately. The Company filed a Form 8-K dated March 29, 2005, with the SEC announcing this change. As required, a letter to the SEC from KPMG indicating KPMG’s agreement with certain statements made by the Company was also filed with this Form 8-K. These documents are available at www.sec.gov.
The Audit Committee has selected E&Y as the Company’s independent registered public accounting firm to examine the consolidated financial statements of the Company for the 2007 calendar year. The Board seeks an indication from our stockholders of their approval or disapproval of the Audit Committee’s selection of E&Y as the Company’s independent registered public accounting firm for the 2007 calendar year.
E&Y has been our independent auditor since 2005. No relationships existed other than the usual relationships between auditor and client. Representatives of E&Y are expected to be present at the annual meeting to respond to appropriate questions and will have the opportunity to make a statement if the representatives desire to do so. If our stockholders do not ratify the appointment of E&Y at the annual meeting, the Audit Committee will consider such event in its selection of the Company’s independent registered public accounting firm for the 2008 calendar year. Additionally, even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the 2007 calendar year if it determines that such a change would be in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS
THAT THE STOCKHOLDERS VOTE
FOR
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE 2007 CALENDAR YEAR
AUDIT AND NON-AUDIT
FEES
The Audit Committee or its Chairman
pre-approves the audit and non-audit services to be rendered to the Company, as
well as the fees associated with such services. Generally, management will
submit to the Audit Committee a detailed list of services that it recommends the
Audit Committee engage the independent auditors to provide for the calendar
year. The Audit Committee pre-approves certain audit and non-audit services and
establishes a dollar limit on the amount of fees the Company will pay for each
category of services. The Audit Committee is informed from time to time on the
non-audit services actually provided pursuant to the pre-approval process.
During the year, the Audit Committee periodically reviews the types of services
and dollar amounts approved and adjusts such amounts, as it deems appropriate.
Unless a service to be provided by the independent auditors has received general
pre-approval, it will require specific pre-approval by the Audit Committee. The
Audit Committee also periodically reviews all non-audit services to ensure such
services do not impair the independence of the Company’s independent registered
public accounting firm. The Audit Committee approved all services provided by
E&Y for the 2005 and 2006 calendar years. These services included the audit
of the Company’s annual financial statements, audit of the Company’s internal
control over financial reporting, review of the Company’s quarterly financial
statements, tax consultation services, and consents for and review of
registration statements filed with the SEC. See “Report of Audit Committee” set
forth earlier for a discussion of auditor independence.
The following table shows the fees billed by E&Y for audit and other services provided to the Company for the 2006 and 2005 calendar years respectively:
| 2006 ($) | 2005 ($) | |||
| Audit fees (1) | 1,037,500 | 1,000,700 | ||
| Audit-related fees | – | – | ||
| Tax fees (2) | – | 26,320 | ||
| All other fees | – | – |
| (1) | Audit fees consisted of the audit of the Company’s annual financial statements, including the audit of management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, the review of the Company’s quarterly reports on Form 10-Q, and consents for and review of registration statements filed with the SEC. | |
| (2) | Tax fees consisted principally of assistance with tax compliance and reporting. |
The Audit Committee has considered whether the non-audit services provided by E&Y, including the services rendered in connection with income tax consultation, were compatible with maintaining E&Y’s independence and has determined that the nature and substance of the limited non-audit services did not impair the status of E&Y as the Company’s independent registered public accounting firm. E&Y did not bill the Company for any other services during calendar year 2005 or 2006.
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 year’s 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.
| (1) | Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, attestation services and consultation regarding financial accounting and or reporting standards. | ||
| (2) | Audit-related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements. | ||
| (3) | Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning and tax advice. | ||
| (4) | Other fees are those associated with services not captured in the other categories. The Company generally doesn’t request such services from the independent auditor. | ||
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.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE
MEETING
ARE URGED TO VOTE BY TELEPHONE, MAIL OR INTERNET.
IF YOU VOTE BY TELEPHONE OR THE INTERNET,
DO NOT
RETURN YOUR PROXY CARD
|
By Order of the Board of
Directors |
Your vote is important. Please vote immediately.
VOTE BY INTERNET - www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the Annual
Meeting. Have your proxy card in hand when you access the web site and follow
the instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE
STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs
incurred by J.B. Hunt Transport Services, Inc. in mailing proxy materials, you
can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access stockholder
communications electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the Annual
Meeting. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have provided or return
it to J.B. Hunt Transport Services, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY
11717.
If you vote over the Internet or by telephone, please do
not mail your card.
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | JBHUN1 | KEEP THIS PORTION FOR YOUR RECORDS |
|
|
DETACH AND RETURN THIS PORTION ONLY | |
|
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED. | ||
| J.B. HUNT TRANSPORT SERVICES, INC. | ||||||||||||||||||||||||
|
The Board of Directors recommends a vote FOR Proposals 1 and 2. |
||||||||||||||||||||||||
| Vote on Directors | For All |
Withhold All |
For
All Except |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. |
||||||||||||||||||||
| 1. |
Election of
Directors |
|||||||||||||||||||||||
| Nominees: |
o | o | o | |||||||||||||||||||||
| 01) Wayne Garrison 02) Gary Charles George 03) Bryan Hunt |
||||||||||||||||||||||||
| Vote on Proposals | For | Against | Abstain | |||||||||||||||||||||
| 2. |
To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for calendar year 2007. |
o | o | o | ||||||||||||||||||||
| 3. |
To transact such other business as may properly come before the meeting or any adjournments thereof. |
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|
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. |
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|
For address changes and/or comments, please check this box and write them on the back where indicated. |
o | |||||||||||||||||||||||
| Yes | No | |||||||||||||||||||||||
|
The signer hereby revokes all proxies heretofore given by the signer to vote at said meeting or any adjournments thereof. |
o | o | ||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||
The undersigned hereby constitutes and appoints Wayne Garrison and Kirk Thompson or either of them, proxies of the undersigned, with power of substitution, to represent the undersigned and to vote all of the 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 May 2, 2007, 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 NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
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 the shares unless you sign and return this card.
| Address Changes/Comments: | |