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J.B. Hunt Transport Services, Inc. Reports Earnings for the Second Quarter 2019

July 15, 2019 4:01 PM

LOWELL, Ark.--(BUSINESS WIRE)-- J.B. Hunt Transport Services, Inc., (NASDAQ: JBHT) announced second quarter 2019 net earnings of $133.6 million, or diluted earnings per share of $1.23 vs. second quarter 2018 net earnings of $151.7 million, or $1.37 per diluted share.

Total operating revenue for the current quarter was $2.26 billion, compared with $2.14 billion for the second quarter 2018, an increase of 6%. Current quarter total operating revenue, excluding fuel surcharges, increased 6.5% vs. the comparable quarter 2018. Revenue growth was driven primarily by a 19% increase in revenue producing trucks and an 8% increase in truck productivity in Dedicated Contract Services (DCS), but partially offset by an 8% decline in volume in Intermodal (JBI), a 7% decline in volume in Integrated Capacity Solutions (ICS), and fewer tractors operating in Truck (JBT) compared to prior year.

The amount of ICS operating revenue executed through Marketplace for J.B. Hunt 360° increased to $222 million from $137 million in second quarter 2018. JBI executed approximately $41 million of third-party dray cost and JBT executed approximately $5 million of its independent contractor costs through the platform during this quarter.

Operating income for the current quarter totaled $193.1 million versus $214.8 million for the second quarter 2018. The benefits of customer rate increases and increases in revenue producing truck counts were partially offset by increases in insurance and claims costs (particularly a $20.0 million pre-tax charge, $0.14 per diluted share, in settlement of a DCS Final Mile claim), increases in rail purchased transportation costs, start-up costs associated with expansion and integration of DCS Final Mile network, higher driver wages and recruiting costs, increased technology costs for modernization and further development of J.B. Hunt 360°, and increased facility costs all compared to the same period 2018.

Interest expense in the current quarter increased due to higher debt levels compared to the same period last year. The effective income tax rate for the quarter was 25% versus 26.0% for the second quarter 2018.

Segment Information:

Intermodal (JBI)

JBI load volumes declined 8% over the same period in 2018. Transcontinental loads decreased approximately 5% and Eastern network volumes declined 11% from second quarter 2018. A softer freight market limited the ability to offset rail network rationalization effects in the Eastern network though loads per workday trends improved throughout the quarter particularly in the Transcontinental network. Revenue decreased 1% reflecting the 8% volume decline and an approximate 7% increase in revenue per load, which is the combination of customer rate changes, fuel surcharges, and freight mix. Revenue per load excluding fuel surcharge revenue increased 8% from second quarter 2018.

Operating income decreased 7% from prior year. Benefits from customer rate increases were offset by the volume decline, higher rail purchased transportation costs, higher driver pay, retention and recruiting costs, increased technology modernization costs, and increased equipment and facilities ownership costs. The current period ended with approximately 96,700 units of trailing capacity and 5,640 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

DCS revenue increased 28% during the current quarter over the same period in 2018. Productivity, defined as revenue per truck per week, increased approximately 8% vs. 2018. Productivity excluding fuel surcharges increased approximately 9% over a year ago primarily from customer rate increases, improved integration of assets between customer accounts, and increased customer supply chain fluidity. Included in the DCS revenue growth, Final Mile Services (FMS) recorded an increase in revenue of $49 million (primarily from the February 2019 acquisition) compared to second quarter 2018. A net additional 1,755 revenue producing trucks, 259 net additions compared to first quarter 2019, were in the fleet by the end of the quarter compared to prior year. Approximately 44% of these additions represent private fleet conversions and 8% represent FMS versus traditional dedicated capacity fleets. Customer retention rates remain above 98%.

Operating income increased 3% over the prior year quarter. Benefits from increased productivity, additional trucks under contract, and a $4.3 million reduction in salaries and wages accruals were partially offset by increased insurance and claims costs (primarily a $20.0 million pre-tax charge to settle a Final Mile claim), increased technology and facilities costs in the expanding FMS network, increased driver wages and recruiting costs, and an incremental $1.7 million in non-cash amortization expense attributable to the February 2019 acquisition compared to second quarter 2018.

Integrated Capacity Solutions (ICS)

ICS revenue was down 4% compared to the second quarter 2018. Volumes decreased 7% while revenue per load increased approximately 4%, primarily due to customer freight mix. Higher contractual truckload volume was offset by a 33% decrease in less-than-truckload shipments and weaker spot market activity compared to second quarter 2018. Contractual volumes represented approximately 68% of total load volume and 55% of total revenue compared to 68% and 45%, respectively, in second quarter 2018. Of the total reported ICS revenue, $222 million was executed through Marketplace for J.B. Hunt 360° compared to $137 million in second quarter 2018.

Operating income decreased approximately 104% from the same period 2018 primarily from lower gross profit margin, higher personnel costs, increased digital marketing costs, and higher technology development costs as investments continue to be made to expand capacity and functionality of Marketplace for J.B. Hunt 360°. Gross profit margins decreased to 13.4% in the current quarter versus 14.8% in the same period last year due to weaker spot market activity and lower contractual rates on committed business. The carrier base increased 26% and the employee count increased 15% from a year ago.

Truck (JBT)

JBT revenue decreased 2% from the same period in 2018. Revenue excluding fuel surcharges was flat compared to second quarter 2018 on flat load count. Revenue per load excluding fuel surcharges was up approximately 1% from a 4% increase in rates per loaded mile and a 3% decrease in length of haul compared to the same period in 2018. At the end of the period, JBT operated 1,879 tractors compared to 1,976 a year ago.

Operating income increased 19% compared to the same quarter 2018. The benefits from lower equipment ownership costs and decreased non-driver personnel expense were partially offset by higher driver and independent contractor costs per mile compared to the second quarter 2018.

Cash Flow and Capitalization:
At June 30, 2019, we had approximately $1.4 billion outstanding on various debt instruments compared to $1.0 billion at June 30, 2018 and $1.15 billion at December 31, 2018.

Our net capital expenditures for the six months ended June 30, 2019 approximated $475 million compared to $354 million for the same period 2018. At June 30, 2019, we had cash and cash equivalents of $6.9 million.

We purchased approximately 1.98 million shares of our common stock during the second quarter 2019 for approximately $190 million. At June 30, 2019, we had approximately $181 million remaining under our share repurchase authorization. Actual shares outstanding at June 30, 2019 approximated 106.8 million.

Conference Call Information:
The Company will hold a conference call today at 4:00 – 5:00 pm CDT to discuss the quarterly earnings. The call-in number for participants is (877) 369-5230, access code: 0620659##. A replay of the call will be posted on its website later this evening.

This press release may contain forward-looking statements, which are based on information currently available. Actual results may differ materially from those currently anticipated due to a number of factors, including, but not limited to, those discussed in Item 1A of our Annual Report filed on Form 10-K for the year ended December 31, 2018. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason. This press release and additional information will be available immediately to interested parties on our web site, www.jbhunt.com.

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

Three Months Ended June 30

2019

2018

% Of

% Of

Amount

Revenue

Amount

Revenue

Operating revenues, excluding fuel surcharge revenues

$

1,996,266

$

1,874,388

Fuel surcharge revenues

265,381

264,639

Total operating revenues

2,261,647

100.0%

2,139,027

100.0%

Operating expenses

Rents and purchased transportation

1,086,416

48.0%

1,073,164

50.2%

Salaries, wages and employee benefits

535,147

23.7%

465,326

21.8%

Depreciation and amortization

123,995

5.5%

107,423

5.0%

Fuel and fuel taxes

118,037

5.2%

115,541

5.4%

Operating supplies and expenses

84,264

3.7%

76,446

3.6%

General and administrative expenses, net of asset dispositions

46,539

2.1%

37,306

1.7%

Insurance and claims

52,013

2.3%

28,371

1.3%

Operating taxes and licenses

13,565

0.6%

12,234

0.6%

Communication and utilities

8,578

0.4%

8,404

0.4%

Total operating expenses

2,068,554

91.5%

1,924,215

90.0%

Operating income

193,093

8.5%

214,812

10.0%

Net interest expense

14,763

0.6%

9,855

0.4%

Earnings before income taxes

178,330

7.9%

204,957

9.6%

Income taxes

44,697

2.0%

53,305

2.5%

Net earnings

$

133,633

5.9%

$

151,652

7.1%

Average diluted shares outstanding

108,373

110,682

Diluted earnings per share

$

1.23

$

1.37

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

Six Months Ended June 30

2019

2018

% Of

% Of

Amount

Revenue

Amount

Revenue

Operating revenues, excluding fuel surcharge revenues

$

3,851,608

$

3,587,321

Fuel surcharge revenues

499,666

499,951

Total operating revenues

4,351,274

100.0%

4,087,272

100.0%

Operating expenses

Rents and purchased transportation

2,086,305

47.9%

2,038,057

49.9%

Salaries, wages and employee benefits

1,051,472

24.2%

915,592

22.4%

Depreciation and amortization

243,924

5.6%

213,006

5.2%

Fuel and fuel taxes

230,162

5.3%

223,422

5.5%

Operating supplies and expenses

162,436

3.7%

147,126

3.6%

General and administrative expenses, net of asset dispositions

91,578

2.1%

69,630

1.6%

Insurance and claims

81,007

1.9%

56,870

1.4%

Operating taxes and licenses

26,725

0.6%

23,822

0.6%

Communication and utilities

16,777

0.4%

16,153

0.4%

Total operating expenses

3,990,386

91.7%

3,703,678

90.6%

Operating income

360,888

8.3%

383,594

9.4%

Net interest expense

27,796

0.6%

19,008

0.5%

Earnings before income taxes

333,092

7.7%

364,586

8.9%

Income taxes

79,858

1.9%

94,792

2.3%

Net earnings

$

253,234

5.8%

$

269,794

6.6%

Average diluted shares outstanding

109,015

110,771

Diluted earnings per share

$

2.32

$

2.44

Financial Information By Segment

(in thousands)

(unaudited)

Three Months Ended June 30

2019

2018

% Of

% Of

Amount

Total

Amount

Total

Revenue

Intermodal

$

1,149,723

51%

$

1,164,508

54%

Dedicated

679,871

30%

529,982

25%

Integrated Capacity Solutions

334,267

15%

347,295

16%

Truck

99,627

4%

101,241

5%

Subtotal

2,263,488

100%

2,143,026

100%

Intersegment eliminations

(1,841)

(0%)

(3,999)

(0%)

Consolidated revenue

$

2,261,647

100%

$

2,139,027

100%

Operating income

Intermodal

$

124,357

64%

$

133,993

62%

Dedicated

60,489

31%

58,452

27%

Integrated Capacity Solutions

(570)

(0%)

14,934

7%

Truck

8,889

5%

7,484

4%

Other (1)

(72)

(0%)

(51)

(0%)

Operating income

$

193,093

100%

$

214,812

100%

Six Months Ended June 30

2019

2018

% Of

% Of

Amount

Total

Amount

Total

Revenue

Intermodal

$

2,237,822

51%

$

2,234,772

54%

Dedicated

1,281,783

29%

1,024,462

25%

Integrated Capacity Solutions

635,078

15%

643,400

16%

Truck

201,479

5%

193,959

5%

Subtotal

4,356,162

100%

4,096,593

100%

Intersegment eliminations

(4,888)

(0%)

(9,321)

(0%)

Consolidated revenue

$

4,351,274

100%

$

4,087,272

100%

Operating income

Intermodal

$

227,674

63%

$

248,235

65%

Dedicated

110,734

31%

99,013

26%

Integrated Capacity Solutions

6,395

2%

23,810

6%

Truck

16,128

4%

12,614

3%

Other (1)

(43)

(0%)

(78)

(0%)

Operating income

$

360,888

100%

$

383,594

100%

(1) Includes corporate support activity
Operating Statistics by Segment
(unaudited)

Three Months Ended June 30

2019

2018

Intermodal
Loads

480,938

520,341

Average length of haul

1,660

1,634

Revenue per load

$

2,391

$

2,238

Average tractors during the period *

5,652

5,496

Tractors (end of period)
Company-owned

4,969

4,873

Independent contractor

668

666

Total tractors

5,637

5,539

Net change in trailing equipment during the period

847

1,082

Trailing equipment (end of period)

96,659

90,575

Average effective trailing equipment usage

82,367

86,451

Dedicated
Loads

915,033

731,137

Average length of haul

169

179

Revenue per truck per week**

$

4,915

$

4,565

Average trucks during the period***

10,710

8,973

Trucks (end of period)
Company-owned

10,311

8,526

Independent contractor

41

57

Customer-owned (Dedicated operated)

462

476

Total trucks

10,814

9,059

Trailing equipment (end of period)

27,882

25,501

Average effective trailing equipment usage

28,357

26,540

Integrated Capacity Solutions
Loads

306,817

331,278

Revenue per load

$

1,089

$

1,048

Gross profit margin

13.4%

14.8%

Employee count (end of period)

1,198

1,043

Approximate number of third-party carriers (end of period)

80,000

63,500

Marketplace for J.B. Hunt 360°:
Approximate carrier tractor count (end of period)

600,600

412,100

Revenue (millions)

$

222.4

$

136.8

Truck
Loads

87,994

88,301

Average length of haul

418

433

Loaded miles (000)

36,744

38,221

Total miles (000)

45,155

45,468

Average nonpaid empty miles per load

95.6

82.1

Revenue per tractor per week**

$

3,940

$

3,935

Average tractors during the period *

1,973

2,003

Tractors (end of period)
Company-owned

946

1,262

Independent contractor

933

714

Total tractors

1,879

1,976

Trailers (end of period)

6,829

6,928

Average effective trailing equipment usage

6,580

6,497

* Includes company-owned and independent contractor tractors
** Using weighted workdays
*** Includes company-owned, independent contractor, and customer-owned trucks
Operating Statistics by Segment
(unaudited)

Six Months Ended June 30

2019

2018

Intermodal
Loads

940,862

1,016,105

Average length of haul

1,656

1,648

Revenue per load

$

2,378

$

2,199

Average tractors during the period *

5,656

5,495

Tractors (end of period)
Company-owned

4,969

4,873

Independent contractor

668

666

Total tractors

5,637

5,539

Net change in trailing equipment during the period

1,757

1,965

Trailing equipment (end of period)

96,659

90,575

Average effective trailing equipment usage

82,798

86,858

Dedicated
Loads

1,740,207

1,419,487

Average length of haul

171

180

Revenue per truck per week**

$

4,757

$

4,453

Average trucks during the period***

10,522

8,906

Trucks (end of period)
Company-owned

10,311

8,526

Independent contractor

41

57

Customer-owned (Dedicated operated)

462

476

Total trucks

10,814

9,059

Trailing equipment (end of period)

27,882

25,501

Average effective trailing equipment usage

27,977

26,804

Integrated Capacity Solutions
Loads

595,750

582,799

Revenue per load

$

1,066

$

1,104

Gross profit margin

14.9%

14.6%

Employee count (end of period)

1,198

1,043

Approximate number of third-party carriers (end of period)

80,000

63,500

Marketplace for J.B. Hunt 360°:
Approximate carrier tractor count (end of period)

600,600

412,100

Revenue (millions)

$

408.9

$

233.2

Truck
Loads

172,922

169,800

Average length of haul

427

443

Loaded miles (000)

73,712

75,146

Total miles (000)

90,852

89,313

Average nonpaid empty miles per load

99.3

83.5

Revenue per tractor per week**

$

3,913

$

3,857

Average tractors during the period*

2,024

1,973

Tractors (end of period)
Company-owned

946

1,262

Independent contractor

933

714

Total tractors

1,879

1,976

Trailers (end of period)

6,829

6,928

Average effective trailing equipment usage

6,583

6,529

* Includes company-owned and independent contractor tractors
** Using weighted workdays
*** Includes company-owned, independent contractor, and customer-owned trucks
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, 2019 December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents

$

6,875

$

7,600

Accounts Receivable, net

1,040,153

1,051,698

Prepaid expenses and other, net

337,336

443,683

Total current assets

1,384,364

1,502,981

Property and equipment

5,635,867

5,329,243

Less accumulated depreciation

1,957,782

1,884,132

Net property and equipment

3,678,085

3,445,111

Other assets, net

358,290

143,555

$

5,420,739

$

5,091,647

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current debt

$

-

$

250,706

Trade accounts payable

640,324

709,736

Claims accruals

277,669

275,139

Accrued payroll

59,282

80,922

Other accrued expenses

84,247

35,845

Total current liabilities

1,061,522

1,352,348

Long-term debt

1,372,143

898,398

Other long-term liabilities

175,656

96,056

Deferred income taxes

676,062

643,461

Stockholders' equity

2,135,356

2,101,384

$

5,420,739

$

5,091,647

Supplemental Data
(unaudited)
June 30, 2019 December 31, 2018
Actual shares outstanding at end of period (000)

106,768

108,711

Book value per actual share outstanding at end of period

$

20.00

$

19.33

Six Months Ended June 30

2019

2018

Net cash provided by operating activities (000)

$

606,661

$

529,033

Net capital expenditures (000)

$

475,331

$

354,131

David G. Mee

Executive Vice President, Finance/Administration and Chief Financial Officer

(479) 820-8363

Source: J.B. Hunt Transport Services, Inc.

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