J B Hunt Transport Services : Q4 2016 Earnings

J.B. Hunt Transport Services, Inc. Contact: David G. Mee‌

615 J.B. Hunt Corporate Drive Executive Vice President,

Lowell, Arkansas 72745 Finance/Administration

(NASDAQ: JBHT) and Chief Financial Officer

(479) 820-8363

 Full Year 2016 EPS: $3.81 vs. $3.66; up 4%

LOWELL, ARKANSAS, January 19, 2017 - J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced fourth quarter 2016 net earnings of $117.6 million, or diluted earnings per share of $1.05 vs. fourth quarter 2015 net earnings of $116.7 million, or $1.01 per diluted share. Fourth quarter 2016 net earnings included a one-time after tax benefit of $9.5 million or $0.08 per diluted share for a change in the company's paid time off policy.

Total operating revenue for the current quarter was $1.72 billion, compared with $1.62 billion for the fourth quarter 2015. Load growth of 5% in Intermodal (JBI) was the primary reason for a 3% increase in segment revenue. Dedicated Contract Services (DCS) segment revenue increased by 8%, primarily from the addition of new customer accounts, rate increases implemented in the current and earlier periods and improved asset utilization. Integrated Capacity Solutions (ICS) segment revenue increased by 22% primarily from a 38% increase in load growth. Truck (JBT) segment revenue decreased 3% primarily from customer rate per mile decreases. Current quarter total operating revenue, excluding fuel surcharges, increased 6% vs. the comparable quarter 2015.

Operating income for the current quarter increased to $194.4 million vs. $192.9 million for the fourth quarter 2015. The increase primarily reflects higher revenue in JBI, DCS and ICS business segments and a $15.2 million pre-tax, one-time benefit recorded to reflect a change in employee paid time off policy. The one-time benefit was partially offset with corporate charges totaling approximately $5 million pre-tax that included charitable contributions, employment tax audit settlements and increases to reserves for uncollectable accounts. Continuing operational cost increases in rail purchased transportation, wages paid to drivers, driver and independent contractor recruiting, equipment ownership, increased technology spending and lower gross profit margins in the brokerage business also offset the benefits from increases in revenue and the change in paid time off policy.

Net earnings increased to $117.6 million in the current quarter from $116.7 million in 2015, due to the increased revenue, the paid time off policy change benefit and a lower effective income tax rate. The fourth

quarter effective tax rates for 2016 and 2015 were 37.63% and 38.10%, respectively. The annual effective tax rates for 2016 and 2015 were 37.89% and 38.10%, respectively.

• Fourth quarter 2016 Segment Revenue: $998 million; up 3%
• Fourth quarter 2016 Operating Income: $124 million; down 3%

  JBI total volumes grew 5% over the same period in 2015. Eastern network loads were flat and transcontinental loads increased 9% compared to the fourth quarter 2015. Revenue increased 3%, reflecting volume growth of 5% and a 2% decrease in revenue per load which is the combination of freight mix, customer rate increases and fuel surcharges. Revenue per load excluding fuel surcharges decreased approximately 2% compared to a year ago.

  Operating income decreased 3% from the prior year. Benefits from increased revenue, improved utilization and approximately $5.7 million from the change in paid time off policy were more than offset with increases in rail purchased transportation costs, insurance and claims costs, equipment ownership costs and driver recruiting and retention costs. The current period ended with approximately 84,600 units of trailing capacity and approximately 5,280 power units in the dray fleet.

  Dedicated Contract Services (DCS)
• Fourth quarter 2016 Segment Revenue: $398 million; up 8%
• Fourth quarter 2016 Operating Income: $57.5 million; up 37%

  DCS revenue increased 8% during the current quarter over the same period 2015. Productivity (revenue per truck per week) increased approximately 5% vs. 2015. Productivity excluding fuel surcharge revenue increased approximately 3% from a year ago primarily from improved integration of assets between customer accounts, fewer unseated trucks, increased customer supply chain fluidity and customer rate increases. A year over year net additional 193 revenue producing trucks, 29 net additions compared to third quarter 2016, were in the fleet by the end of the quarter. Approximately 82% of these additions represent private fleet conversions versus traditional dedicated capacity fleets and primarily reflect new contract implementations in this and prior periods. Customer retention rates remain above 98%.

  Operating income increased by 37% from a year ago. The increase in revenue, improved asset utilization and approximately $7.3 million from the change in paid time off policy were partially offset with higher driver wages, higher driver recruiting costs and higher equipment ownership costs compared to the same period in 2015.

  Integrated Capacity Solutions (ICS)
  • Fourth Quarter 2016 Segment Revenue: $232 million; up 22%
  • Fourth Quarter 2016 Operating Income: $6.1 million; down 52%

  ICS revenue increased 22% in the current quarter vs. the fourth quarter 2015 mostly due to a 38% increase in volume offset by a 12% decrease in revenue per load and freight mix changes driven by customer demand. Contractual volumes represent approximately 75% of the total load volume and 62% of the total revenue in the current quarter compared to 73% and 62%, respectively, in fourth quarter 2015.

  Operating income decreased 52% over the same period in 2015 primarily due to a lower gross profit margin, increased claim costs, higher technology costs and increased personnel costs partially offset with approximately $1.0 million from the change in paid time off policy. Gross profit margin decreased to 12.9% in the current period from 16.0% last year primarily from new customer rates implemented during the quarter and lower spot rates compared to the fourth quarter 2015. Total branches at the end of the period grew to 42 from 34 at the end of the same period in 2015. ICS's carrier base increased 11% and the employee count increased 23% from a year ago.

  Truck (JBT)
• Fourth quarter 2016 Segment Revenue: $ 96 million; down 3%
• Fourth quarter 2016 Operating Income: $ 6.8 million; down 35%

JBT revenue for the current quarter decreased 3% from the same period in 2015. Revenue excluding fuel surcharges also decreased 3% primarily from a 3% decrease in rate per mile due to core customer rate decreases of approximately 1.4% and freight mix changes compared to fourth quarter 2015. At the end of the period, JBT operated 2,128 tractors compared to 2,149 a year ago.

Operating income decreased 35% from fourth quarter 2015 levels. Favorable changes from increased load count, fewer empty miles and approximately $1.2 million from the change in paid time off policy were more than offset by lower customer rates per mile, increased equipment maintenance costs and higher safety and insurance costs compared to fourth quarter 2015.

At December 31, 2016, we had total debt outstanding of $986 million on various debt instruments compared to $998 million at December 31, 2015 and $944 million at September 30, 2016.

Our net capital expenditures for 2016 approximated $485 million vs. $556 million in 2015. At December 31, 2016, we had cash and cash equivalents of $6.4 million.

In the fourth quarter 2016, we purchased 880,000 shares of our common stock for approximately $75 million. At December 31, 2016, we had approximately $201 million remaining under our share repurchase authorization. Actual shares outstanding at December 31, 2016 approximated 111.3 million.

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, 2015. 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.

(in thousands, except per share data) (unaudited)

Three Months Ended December 31

(in thousands, except per share data) (unaudited)

Twelve Months Ended December 31