J.B. Hunt Transport Services, Inc. Reports Earnings for the Third Quarter 2019 and Schedules Conference Call

Oct 15, 2019 04:01 pm
LOWELL, Ark. -- 

J.B. Hunt Transport Services, Inc., (NASDAQ: JBHT) announced third quarter 2019 net earnings of $151.2 million, or diluted earnings per share of $1.40 vs. third quarter 2018 net earnings of $131.1 million, or $1.19 cents per diluted share. Included in the third quarter 2018 results were after-tax charges of $31.1 million or 28 cents per share related to arbitration and other legal claims and a customer bankruptcy.

Total operating revenue for the current quarter was $2.4 billion, compared with $2.2 billion for the third quarter 2018. A revenue per load increase of 2% in Intermodal (JBI), a 13% increase in revenue producing trucks and an increase of 9% in asset productivity in Dedicated Contract Services (DCS) were partially offset by a 4% decrease in load count in Integrated Capacity Solutions (ICS) and a 5% decrease in rates per loaded mile in Truck (JBT). Current quarter total operating revenue, excluding fuel surcharges, increased 9% vs. the comparable quarter 2018.

The amount of ICS operating revenue executed through Marketplace for J.B. Hunt 360° increased to $205 million compared to $151 million in third quarter 2018. In addition, JBI executed approximately $46 million of third-party dray cost and JBT executed approximately $16 million of its independent contractor costs through the platform during the quarter.

Operating income for the current quarter totaled $212.1 million vs. $174.7 million for the third quarter 2018. Operating income in third quarter 2018 included $39 million in pre-tax charges reflected in increased rail purchase transportation expense, insurance and claims costs, and bad debt expense. Excluding these charges, operating income decreased 1% from third quarter 2018 primarily from higher building rental for Final Mile Services network expansion, lower gross margins in ICS, increases in driver wages and recruiting costs, increased rail purchase transportation rates, and increased technology spend on new applications and legacy operating systems.

Interest expense in the current quarter increased primarily from a higher debt balance and higher fixed interest rates compared to third quarter 2018. The effective income tax rate for the current quarter is 24.3% compared to 20.4% for third quarter 2018. We expect our 2019 annual tax rate to be approximately 24.5%.

Segment Information:

Intermodal (JBI)

  • Third Quarter 2019 Segment Revenue: $1.24 billion; up 2%
  • Third Quarter 2019 Operating Income: $132.9 million; up 10%

Overall volumes were flat with the same period in 2018. Transcontinental loads increased 7% while the Eastern network loads declined 11% compared to the third quarter 2018. Revenue increased 2% reflecting flat volumes and an approximate 2% increase in revenue per load, which is the combination of changes in customer rate, freight mix, and fuel surcharges. Revenue per load excluding fuel surcharges increased approximately 5%, compared to third quarter 2018.

Operating income increased 10% over prior year. Third quarter 2018 included $27.3 million in pre-tax charges for arbitration and other legal claims and a customer bankruptcy. Excluding these charges, operating income decreased approximately 10% from the same period in 2018 primarily due to higher rail purchase transportation costs, higher box repositioning costs, lower box turns, and increased costs to attract, place, and retain drivers. The current period ended with approximately 96,700 units of trailing capacity and 5,643 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

  • Third Quarter 2019 Segment Revenue: $696 million; up 28%
  • Third Quarter 2019 Operating Income: $78.3 million; up 124%

DCS revenue increased 28% during the current quarter over the same period in 2018. Productivity (revenue per truck per week) increased by approximately 9% vs. 2018. Productivity excluding fuel surcharge revenue increased approximately 11% from a year ago primarily from the February 2019 acquisition, 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 $53 million (primarily from the February 2019 acquisition) compared to the third quarter 2018. A net additional 1,277 revenue producing trucks, 120 net additions sequentially from second quarter 2019, were in the fleet by the end of the quarter. Approximately 64% of these additions represent private fleet conversions and 11% represent FMS vs. traditional dedicated capacity services. Customer retention rates remain above 98%.

Operating income increased by 124% from a year ago. Third quarter 2018 included $8.4 million in pre-tax charges to insurance and claims costs. Excluding these charges, operating income increased 80% primarily from increased trucks under contract, higher productivity and more predictable and consistent contract start-up costs partially offset by increased costs to expand the FMS network, increased driver wages, and an incremental $1.4 million in non-cash amortization expense attributable to the February 2019 acquisition compared to third quarter 2018.

Integrated Capacity Solutions (ICS)

  • Third Quarter 2019 Segment Revenue: $337 million; down 3%
  • Third Quarter 2019 Operating (Loss): $(5.6 million); compared to $10.2 Operating Income in 2018

ICS revenue decreased 3% in the current quarter vs. the third quarter 2018. Volumes decreased 4% while revenue per load increased approximately 2% primarily due to a decreased mix of contractual less-than-truckload volume and a competitive pricing environment for contractual truckload business compared to third quarter 2018. Total contractual volumes represented approximately 74% of total load volume and 62% of total revenue in the current period compared to 72% and 49%, respectively, in the third quarter 2018. Of the total reported ICS revenue, approximately $205 million was executed through the Marketplace for J.B. Hunt 360° compared to $151 million in the third quarter 2018.

Operating income decreased by $15.9 million compared to the same period 2018. Third quarter 2018 included $3 million in pre-tax charges due to a customer bankruptcy and insurance and claims costs. Excluding these charges, operating income decreased $18.9 million from prior year primarily from a lower gross profit margin percentage, increased costs to expand capacity and functionality of the Marketplace for J.B. Hunt 360°, increased personnel costs, and increased digital marketing costs. Gross profit margin decreased to 12.7% in the current quarter vs. 15.5% compared to the prior year primarily from a competitive pricing environment in the contractual business and a softer overall spot market. ICS carrier base increased 20% and the employee count increased 5% vs. third quarter 2018.

Truck (JBT)

  • Third Quarter 2019 Segment Revenue: $94 million; down 11%
  • Third Quarter 2019 Operating Income: $6.6 million; down 28%

JBT revenue decreased 11% from the same period in 2018. Revenue excluding fuel surcharge decreased approximately 10%, primarily from a 5% decrease in rates per loaded mile, a 2% decrease in length of haul, and a 3% decrease in load count compared to a year ago. Comparable contractual customer rates increased approximately 1.5% compared to the same period in 2018. At the end of the period, JBT operated 1,896 tractors compared to 1,972 a year ago.

Operating income decreased 28% compared to third quarter 2018. A smaller percentage of spot market loads moved to total loads moved, higher empty miles per load, and an overall decrease in total loads compared to third quarter 2018 all contributed to lower operating income.

Cash Flow and Capitalization:

At September 30, 2019, we had a total of $1.29 billion outstanding on various debt instruments compared to $1.07 billion at September 30, 2018 and $1.15 billion at December 31, 2018.

Our net capital expenditures for the nine months ended September 30, 2019, approximated $587 million compared to $585 million for the same period 2018. At September 30, 2019, we had cash and cash equivalents of approximately $75 million.

We purchased approximately 380,000 shares of our common stock during the third quarter 2019 for approximately $36 million. At September 30, 2019, we had approximately $145 million remaining under our share repurchase authorization. Actual shares outstanding at September 30, 2019, approximated 106.6 million.

Conference Call Information:

The company will hold a conference call today at 4:00-5:00 pm CT to discuss the quarterly earnings. To receive a dial-in number and personal access code, participants must register here. A replay of the call will be posted on its website following the call.

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 website, www.jbhunt.com.

 
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
     
 

Three Months Ended September 30

 

2019

 

2018

  % Of   % Of
  Amount Revenue   Amount Revenue
     
Operating revenues, excluding fuel surcharge revenues  

$

2,102,494

 

$

1,936,653

Fuel surcharge revenues  

261,166

 

273,107

Total operating revenues  

2,363,660

100.0%

 

2,209,760

100.0%

     
Operating expenses    
Rents and purchased transportation  

1,169,577

49.5%

 

1,125,386

50.9%

Salaries, wages and employee benefits  

554,872

23.5%

 

495,350

22.4%

Depreciation and amortization  

126,803

5.3%

 

108,801

4.9%

Fuel and fuel taxes  

114,764

4.8%

 

117,976

5.3%

Operating supplies and expenses  

87,044

3.7%

 

79,225

3.6%

General and administrative expenses, net of asset dispositions  

49,077

2.1%

 

42,449

1.9%

Insurance and claims  

26,543

1.1%

 

45,594

2.1%

Operating taxes and licenses  

14,266

0.6%

 

13,203

0.7%

Communication and utilities  

8,639

0.4%

 

7,088

0.3%

Total operating expenses  

2,151,585

91.0%

 

2,035,072

92.1%

Operating income  

212,075

9.0%

 

174,688

7.9%

Net interest expense  

12,357

0.5%

 

9,961

0.5%

Earnings before income taxes  

199,718

8.5%

 

164,727

7.4%

Income taxes  

48,502

2.1%

 

33,617

1.5%

Net earnings  

$

151,216

6.4%

 

$

131,110

5.9%

Average diluted shares outstanding  

107,692

 

110,235

Diluted earnings per share  

$

1.40

 

$

1.19

 
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
     
 

Nine Months Ended September 30

 

2019

 

2018

  % Of   % Of
  Amount Revenue   Amount Revenue
     
Operating revenues, excluding fuel surcharge revenues  

$

5,954,102

 

$

5,523,974

Fuel surcharge revenues  

760,832

 

773,058

Total operating revenues  

6,714,934

100.0%

 

6,297,032

100.0%

     
Operating expenses    
Rents and purchased transportation  

3,255,882

48.5%

 

3,163,443

50.2%

Salaries, wages and employee benefits  

1,606,344

23.9%

 

1,410,942

22.4%

Depreciation and amortization  

370,728

5.5%

 

321,807

5.1%

Fuel and fuel taxes  

344,926

5.1%

 

341,398

5.4%

Operating supplies and expenses  

249,480

3.7%

 

226,352

3.6%

General and administrative expenses, net of asset dispositions  

140,654

2.2%

 

112,078

1.8%

Insurance and claims  

107,550

1.6%

 

102,464

1.6%

Operating taxes and licenses  

40,991

0.6%

 

37,025

0.6%

Communication and utilities  

25,416

0.4%

 

23,241

0.4%

Total operating expenses  

6,141,971

91.5%

 

5,738,750

91.1%

Operating income  

572,963

8.5%

 

558,282

8.9%

Net interest expense  

40,153

0.6%

 

28,969

0.5%

Earnings before income taxes  

532,810

7.9%

 

529,313

8.4%

Income taxes  

128,360

1.9%

 

128,409

2.0%

Net earnings  

$

404,450

6.0%

 

$

400,904

6.4%

Average diluted shares outstanding  

108,569

 

110,591

Diluted earnings per share  

$

3.73

 

$

3.63

 
Financial Information By Segment
(in thousands)
(unaudited)
 
 
 

Three Months Ended September 30

 

2019

 

 

2018

 

 

 

% Of

 

 

 

 

% Of

 

Amount

 

Total

 

 

Amount

 

Total

     
Revenue    
     
Intermodal  

$

1,239,671

 

52%

 

$

1,218,408

 

55%

Dedicated  

696,088

 

30%

 

542,884

 

24%

Integrated Capacity Solutions  

336,721

 

14%

 

345,830

 

16%

Truck  

94,182

 

4%

 

105,685

 

5%

Subtotal  

2,366,662

 

100%

 

2,212,807

 

100%

Intersegment eliminations  

(3,002

)

(0%)

 

(3,047

)

(0%)

Consolidated revenue  

$

2,363,660

 

100%

 

$

2,209,760

 

100%

     
     
Operating income    
     
Intermodal  

$

132,921

 

63%

 

$

120,319

 

69%

Dedicated  

78,280

 

37%

 

34,990

 

20%

Integrated Capacity Solutions  

(5,639

)

(3%)

 

10,216

 

6%

Truck  

6,597

 

3%

 

9,218

 

5%

Other (1)  

(84

)

(0%)

 

(55

)

(0%)

Operating income  

$

212,075

 

100%

 

$

174,688

 

100%

     
 

Nine Months Ended September 30

 

2019

 

2018

  % Of   % Of
  Amount Total   Amount Total
Revenue    
     
Intermodal  

$

3,477,493

 

52%

 

$

3,453,180

 

55%

Dedicated  

1,977,871

 

29%

 

1,567,346

 

25%

Integrated Capacity Solutions  

971,799

 

15%

 

989,230

 

15%

Truck  

295,661

 

4%

 

299,644

 

5%

Subtotal  

6,722,824

 

100%

 

6,309,400

 

100%

Intersegment eliminations  

(7,890

)

(0%)

 

(12,368

)

(0%)

Consolidated revenue  

$

6,714,934

 

100%

 

$

6,297,032

 

100%

     
     
Operating income    
     
Intermodal  

$

360,595

 

63%

 

$

368,554

 

66%

Dedicated  

189,014

 

33%

 

134,003

 

24%

Integrated Capacity Solutions  

755

 

0%

 

34,026

 

6%

Truck  

22,725

 

4%

 

21,832

 

4%

Other (1)  

(126

)

(0%)

 

(133

)

(0%)

Operating income  

$

572,963

 

100%

 

$

558,282

 

100%

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

Three Months Ended September 30

 

 

 

2019

 

2018

     
Intermodal    
     
Loads  

517,409

 

 

519,974

 

Average length of haul  

1,697

 

 

1,636

 

Revenue per load  

$

2,396

 

 

$

2,343

 

Average tractors during the period *  

5,642

 

 

5,582

 

     
Tractors (end of period)    
Company-owned  

5,039

 

 

4,969

 

Independent contractor  

604

 

 

631

 

Total tractors  

5,643

 

 

5,600

 

     
Net change in trailing equipment during the period  

30

 

 

2,577

 

Trailing equipment (end of period)  

96,689

 

 

93,152

 

Average effective trailing equipment usage  

89,175

 

 

89,456

 

     
     
Dedicated    
     
Loads  

929,466

 

 

753,814

 

Average length of haul  

169

 

 

174

 

Revenue per truck per week**  

$

4,927

 

 

$

4,504

 

Average trucks during the period***  

10,837

 

 

9,331

 

     
Trucks (end of period)    
Company-owned  

10,424

 

 

9,182

 

Independent contractor  

41

 

 

56

 

Customer-owned (Dedicated operated)  

469

 

 

419

 

Total trucks  

10,934

 

 

9,657

 

     
Trailing equipment (end of period)  

27,965

 

 

26,116

 

Average effective trailing equipment usage  

28,331

 

 

26,600

 

     
     
Integrated Capacity Solutions    
     
Loads  

320,183

 

 

334,321

 

Revenue per load  

$

1,052

 

 

$

1,034

 

Gross profit margin  

12.7

%

 

15.5

%

Employee count (end of period)  

1,193

 

 

1,137

 

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

82,600

 

 

69,000

 

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

667,000

 

 

479,400

 

Revenue (millions)  

$

205.4

 

 

$

151.0

 

     
     
Truck    
     
Loads  

86,647

 

 

89,491

 

Average length of haul  

409

 

 

417

 

Loaded miles (000)  

35,411

 

 

37,348

 

Total miles (000)  

43,639

 

 

44,850

 

Average nonpaid empty miles per load  

95.0

 

 

83.7

 

Revenue per tractor per week**  

$

3,829

 

 

$

4,366

 

Average tractors during the period *  

1,910

 

 

1,904

 

     
Tractors (end of period)    
Company-owned  

859

 

 

1,136

 

Independent contractor  

1,037

 

 

836

 

Total tractors  

1,896

 

 

1,972

 

     
Trailers (end of period)  

6,826

 

 

6,818

 

Average effective trailing equipment usage  

6,422

 

 

6,462

 

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

Nine Months Ended September 30

2019

2018

Intermodal
Loads

1,458,271

1,536,079

Average length of haul

1,670

1,644

Revenue per load

$

2,385

$

2,248

Average tractors during the period *

5,651

5,524

Tractors (end of period)
Company-owned

5,039

4,969

Independent contractor

604

631

Total tractors

5,643

5,600

Net change in trailing equipment during the period

1,787

4,542

Trailing equipment (end of period)

96,689

93,152

Average effective trailing equipment usage

84,924

87,724

Dedicated
Loads

2,669,673

2,173,301

Average length of haul

170

178

Revenue per truck per week**

$

4,816

$

4,471

Average trucks during the period***

10,627

9,048

Trucks (end of period)
Company-owned

10,424

9,182

Independent contractor

41

56

Customer-owned (Dedicated operated)

469

419

Total trucks

10,934

9,657

Trailing equipment (end of period)

27,965

26,116

Average effective trailing equipment usage

28,095

26,736

Integrated Capacity Solutions
Loads

915,932

917,120

Revenue per load

$

1,061

$

1,079

Gross profit margin

14.1%

14.9%

Employee count (end of period)

1,193

1,137

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

82,600

69,000

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

667,000

479,400

Revenue (millions)

$

614.3

$

383.4

Truck
Loads

259,568

259,290

Average length of haul

421

434

Loaded miles (000)

109,122

112,494

Total miles (000)

134,491

134,163

Average nonpaid empty miles per load

97.8

83.6

Revenue per tractor per week**

$

3,885

$

4,023

Average tractors during the period*

1,986

1,950

Tractors (end of period)
Company-owned

859

1,136

Independent contractor

1,037

836

Total tractors

1,896

1,972

Trailers (end of period)

6,826

6,818

Average effective trailing equipment usage

6,515

6,506

* 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)
 
  September 30, 2019 December 31, 2018
ASSETS  
Current assets:  
Cash and cash equivalents  

$

75,132

$

7,600

Accounts receivable, net  

1,051,027

1,051,698

Prepaid expenses and other, net  

257,297

443,683

Total current assets  

1,383,456

1,502,981

Property and equipment  

5,615,289

5,329,243

Less accumulated depreciation  

1,964,927

1,884,132

Net property and equipment  

3,650,362

3,445,111

Other assets, net  

352,519

143,555

 

$

5,386,337

$

5,091,647

 
 
LIABILITIES & STOCKHOLDERS' EQUITY  
Current liabilities:  
Current debt  

$

-

$

250,706

Trade accounts payable  

628,159

709,736

Claims accruals  

264,345

275,139

Accrued payroll  

66,692

80,922

Other accrued expenses  

77,465

35,845

Total current liabilities  

1,036,661

1,352,348

 
Long-term debt  

1,293,312

898,398

Other long-term liabilities  

180,656

96,056

Deferred income taxes  

649,373

643,461

Stockholders' equity  

2,226,335

2,101,384

 

$

5,386,337

$

5,091,647

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

106,578

108,711

 
Book value per actual share outstanding at end of period  

$

20.89

$

19.33

 
 
 
  Nine Months Ended September 30
 

2019

2018

 
Net cash provided by operating activities (000)  

$

937,595

$

777,603

 
Net capital expenditures (000)  

$

586,607

$

584,977

 

 

David G. Mee
Executive Vice President, Finance/Administration
and Chief Financial Officer
(479) 820-8363