ex_160449.htm

J.B. HUNT TRANSPORT SERVICES, INC. REPORTS EARNINGS FOR THE THIRD QUARTER 2019
AND SCHEDULES CONFERENCE CALL

LOWELL, Ark., October 15, 2019 - 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%.

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.

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.

■ 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.

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.

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.

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)

J.B. Hunt Transport Services, Inc.	Contact: David G. Mee
615 J.B. Hunt Corporate Drive	Executive Vice President, Finance/Administration
Lowell, Arkansas 72745	and Chief Financial Officer
(NASDAQ: JBHT)	(479) 820-8363

■	Third Quarter 2019 Revenue:	$2.4 billion; up 7%
■	Third Quarter 2019 Operating Income:	$212.1 million; up 21%
■	Third Quarter 2019 EPS:	$1.40 vs. $1.19

	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

	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	%

	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


	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

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

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