J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced first quarter 2016 net earnings of $100.1 million, or diluted earnings per share of 88 cents vs. first quarter 2015 net earnings of $91.9 million, or 78 cents per diluted share.

Total operating revenue for the current quarter was $1.53 billion, compared with $1.44 billion for the first quarter 2015. Current quarter total operating revenue, excluding fuel surcharges, increased 12.9% vs. first quarter 2015. Intermodal (JBI) load growth was 12% over first quarter 2015 levels. Dedicated Contract Services (DCS) segment revenue increased by 4% over prior year primarily from additional customer contracts from a year ago and rate increases from more mature customer contracts. Integrated Capacity Solutions (ICS) load growth was 45% over the same period in 2015. Truck (JBT) segment revenue increased 5% on a 12% increase in fleet size.

Operating income for the current quarter totaled $168 million vs. $155 million for the first quarter 2015. Benefits from volume growth, improved network operations, higher equipment utilization, lower equipment maintenance costs and increased contract pricing established throughout 2015 across all business units was partially offset by increased rail purchased transportation costs, higher driver wages and recruiting costs, increased equipment ownership costs and increased costs from corporate wide technology upgrades.

Net interest expense for the current quarter decreased 4% from the same period in 2015 due to lower effective interest rates on our debt. The effective income tax rate decreased slightly to 38.0% in the current quarter compared to 38.1% in the first quarter 2015.

Management maintains its previously published full year 2016 Expectations, posted on its web site, www.jbhunt.com, as the annual customer bid season is still in progress and customer freight demand is expected to be closely aligned with the current choppy and unpredictable nature of the overall United States economy. Management expects to update its full year 2016 Expectations, if necessary, after the release of the second quarter 2016 results.

Segment Information:

Intermodal (JBI)

  • First Quarter 2016 Segment Revenue: $895 million; up 6%
  • First Quarter 2016 Operating Income: $103.1 million; down 1%

JBI load volumes grew 12% over the same period 2015. Eastern network realized load growth of 13% and Transcontinental loads grew 11% compared to prior year as the west coast port volumes returned to a more normal velocity and rail service significantly improved from a year ago. Overall revenue grew 6% reflecting the 12% volume growth and a 5% decrease in revenue per load, which is the combination of customer rate increases, fuel surcharges and freight mix. Revenue per load excluding fuel surcharge revenue increased 2% year over year.

Operating income decreased 1% from prior year. Benefits from improved volume growth, customer rate increases, improved dray network efficiency and box utilization from higher on-time rail service and lower tractor maintenance costs were not sufficient to offset increases in rail purchased transportation costs, equipment ownership costs, driver recruiting and driver retention costs. The current period ended with approximately 79,800 units of trailing capacity and 5,160 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

  • First Quarter 2016 Segment Revenue: $358 million; up 4%
  • First Quarter 2016 Operating Income: $44.8 million; up 25%

DCS revenue increased 4% during the current quarter over the same period 2015. Productivity, defined as revenue per truck per week, was down approximately 2% vs. 2015 primarily from lower fuel surcharges. Productivity excluding fuel surcharges was up approximately 3% from improved overall operational efficiencies including better integration of assets between customer accounts, fewer unseated trucks, increased customer supply chain fluidity and load counts from a less severe winter and customer rate increases. A net additional 345 revenue producing trucks, 18 net reductions compared to fourth quarter 2015, were in the fleet by the end of the quarter compared to prior year. Approximately 70% of these additions represent private fleet conversions versus traditional dedicated capacity fleets that were implemented in the current and prior periods. Customer retention rates remain above 98%.

Operating income increased 25% from a year ago. The increase is primarily due to increased revenue, improved asset utilization and less reliance on third party carriers. These benefits were partially offset by higher driver wage and recruiting costs, increased salaries for front line managers, increased group insurance costs and higher equipment ownership costs.

Integrated Capacity Solutions (ICS)

  • First Quarter 2016 Segment Revenue: $183 million; up 12%
  • First Quarter 2016 Operating Income: $10.8 million; up 63%

ICS revenue increased 12% vs. first quarter 2015. Volumes increased 45% while revenue per load decreased 23% primarily due to lower fuel prices and freight mix changes driven by customer demand. Spot volumes increased 51% and contractual business load counts increased 42% from a year ago. Contractual business represents approximately 73% of total load volume and 64% of total revenue in the current period compared to 74% and 65%, respectively, in first quarter 2015.

Operating income increased 63% over the same period in 2015 primarily from improved gross profit margin. Gross profit margin increased to 17.3% in the current quarter vs. 13.7% last year primarily due to rate increases on contractual business. Personnel costs increased as the total branch count grew to 35 compared to 30 at the end of the comparable period last year. ICS’s carrier base increased over 17% and employee count increased 11% compared to first quarter 2015.

Truck (JBT)

  • First Quarter 2016 Segment Revenue: $96 million; up 5%
  • First Quarter 2016 Operating Income: $9.2 million; up 8%

JBT revenue increased 5% from the same quarter 2015. Revenue excluding fuel surcharge increased 12% primarily from a 12% increase in fleet count. Rates per loaded mile excluding fuel surcharges were down 1.7% primarily from customer driven freight mix changes, including a 4% increase in length of haul and an increase in spot market loads accepted as the network is reconfigured. Core customer rate increases were up 2.3% compared to the same period in 2015. At the end of the current quarter JBT operated 2,270 tractors compared to 2,020 in 2015.

Operating income for the current quarter increased by 8% compared to the same quarter of 2015. Benefits from the larger fleet and improved fuel economy were partially offset by increased driver wages and hiring costs, higher independent contractor cost per mile and increased tractor maintenance costs compared to first quarter 2015.

Cash Flow and Capitalization:

At March 31, 2016, we had a total of $968 million outstanding on various debt instruments compared to $878 million at March 31, 2015, and $1.0 billion at December 31, 2015. At March 31, 2016, we had cash and cash equivalents of $6.0 million.

Our net capital expenditures for the first quarter 2016 approximated $114 million compared to $141 million for the first quarter 2015.

We purchased approximately 1.3 million shares of our common stock during the quarter for $100 million. At March 31, 2016, we had approximately $351 million remaining under our share repurchase authorization. Actual shares outstanding at March 31, 2016 approximated 112.7 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.

 

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

 
      Three Months Ended March 31
2016     2015
    % Of     % Of
Amount     Revenue Amount     Revenue
 
Operating revenues, excluding fuel surcharge revenues $ 1,426,654 $ 1,263,910
Fuel surcharge revenues 102,058 176,270
Total operating revenues 1,528,712 100.0 % 1,440,180 100.0 %
 
Operating expenses
Rents and purchased transportation 740,402 48.4 % 693,685 48.2 %
Salaries, wages and employee benefits 362,511 23.7 % 330,510 22.9 %
Fuel and fuel taxes 59,414 3.9 % 81,813 5.7 %
Depreciation and amortization 88,352 5.8 % 81,378 5.7 %
Operating supplies and expenses 54,537 3.6 % 50,481 3.4 %
Insurance and claims 17,428 1.1 % 17,428 1.2 %

General and administrative expenses, net of asset dispositions

21,833 1.5 % 13,933 1.0 %
Operating taxes and licenses 11,126 0.7 % 10,088 0.7 %
Communication and utilities 5,219 0.3 % 5,644 0.4 %
Total operating expenses 1,360,822 89.0 % 1,284,960 89.2 %
Operating income 167,890 11.0 % 155,220 10.8 %
Net interest expense 6,442 0.4 % 6,703 0.5 %
Earnings before income taxes 161,448 10.6 % 148,517 10.3 %
Income taxes 61,350 4.1 % 56,585 3.9 %
Net earnings $ 100,098 6.5 % $ 91,932 6.4 %
Average diluted shares outstanding 114,003 117,800
Diluted earnings per share $ 0.88 $ 0.78
 
 

Financial Information By Segment

(in thousands)

(unaudited)

 
 
      Three Months Ended March 31
2016     2015
    % Of     % Of
Amount     Total Amount     Total
 

Revenue

 
Intermodal $ 895,200 59 % $ 843,889 59 %
Dedicated 358,370 23 % 345,189 24 %
Integrated Capacity Solutions 183,168 12 % 163,212 11 %
Truck 96,051   6 % 91,189   6 %
Subtotal 1,532,789 100 % 1,443,479 100 %
Intersegment eliminations (4,077 ) (0 %) (3,299 ) (0 %)
Consolidated revenue $ 1,528,712   100 % $ 1,440,180   100 %
 
 

Operating income

 
Intermodal $ 103,127 61 % $ 104,262 68 %
Dedicated 44,770 27 % 35,815 23 %
Integrated Capacity Solutions 10,795 6 % 6,628 4 %
Truck 9,179 6 % 8,529 5 %
Other (1) 19   0 % (14 ) (0 %)
Operating income $ 167,890   100 % $ 155,220   100 %
 
 

(1) Includes corporate support activity

 
 
Operating Statistics by Segment
(unaudited)
 
      Three Months Ended March 31
2016       2015
 

Intermodal

 
Loads 459,526 410,297
Average length of haul 1,641 1,643
Revenue per load $ 1,948 $ 2,057
Average tractors during the period * 5,107 4,816
 
Tractors (end of period)
Company-owned 4,404 4,128
Independent contractor 755   776  
Total tractors 5,159 4,904
 
Net change in trailing equipment during the period 909 895
Trailing equipment (end of period) 79,866 74,193
Average effective trailing equipment usage 73,244 68,692
 
 

Dedicated

 
Loads 579,478 530,762
Average length of haul 175 175
Revenue per truck per week** $ 3,875 $ 3,966
Average trucks during the period*** 7,196 6,854
 
Trucks (end of period)
Company-owned 6,734 6,422
Independent contractor 14 7
Customer-owned (Dedicated operated) 442   416  
Total trucks 7,190 6,845
 
Trailing equipment (end of period) 21,818 20,819
Average effective trailing equipment usage 22,436 22,276
 
 

Integrated Capacity Solutions

 
Loads 175,623 120,962
Revenue per load $ 1,043 $ 1,349
Gross profit margin 17.3 % 13.7 %
Employee count (end of period) 674 605
Approximate number of third-party carriers (end of period) 47,500 40,400
 
 

Truck

 
Loads 94,410 86,243
Average length of haul 468 450
Loaded miles (000) 44,083 38,635
Total miles (000) 52,146 45,454
Average nonpaid empty miles per load 85.4 79.1
Revenue per tractor per week** $ 3,411 $ 3,703
Average tractors during the period * 2,211 1,944
 
Tractors (end of period)
Company-owned 1,467 1,462
Independent contractor 803   558  
Total tractors 2,270 2,020
 
Trailers (end of period) 6,970 7,182
Average effective trailing equipment usage 6,670 6,024
 
 
* 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)
 
          March 31, 2016         December 31, 2015
ASSETS            
Current assets:
Cash and cash equivalents $ 5,992 $ 5,566
Accounts Receivable 690,352 654,542
Prepaid expenses and other         119,897         199,259
Total current assets         816,241         859,367
Property and equipment 4,078,641 4,019,451
Less accumulated depreciation         1,339,275         1,318,122
Net property and equipment         2,739,366         2,701,329
Other assets         98,008         75,871
        $ 3,653,615       $ 3,636,567
 
 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable 381,185 340,332
Claims accruals 107,241 104,220
Accrued payroll 70,997 59,420
Other accrued expenses         21,291         28,445
Total current liabilities         580,714         532,417
 
Long-term debt 967,838 1,005,026
Other long-term liabilities 63,506 58,552
Deferred income taxes 755,477 740,220
Stockholders' equity         1,286,080         1,300,352
        $ 3,653,615       $ 3,636,567
 
 
Supplemental Data
(unaudited)
 
          March 31, 2016         December 31, 2015
 
Actual shares outstanding at end of period (000)         112,654         113,948
 
Book value per actual share outstanding at end of period       $ 11.42       $ 11.41
 
                     
Three Months Ended March 31
2016 2015
 
Net cash provided by operating activities (000)       $ 304,896       $ 255,543
 
Net capital expenditures (000)       $ 114,458       $ 141,344