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.

Segment Information:

Intermodal (JBI)
  • 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.

Cash Flow and Capitalization:

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.
 
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
               
Three Months Ended December 31
2016 2015
% Of % Of
Amount     Revenue Amount     Revenue
 
Operating revenues, excluding fuel surcharge revenues $ 1,558,638 $ 1,472,291
Fuel surcharge revenues   162,424   148,724
Total operating revenues 1,721,062 100.0 % 1,621,015 100.0 %
 
Operating expenses
Rents and purchased transportation 874,144 50.8 % 799,903 49.3 %
Salaries, wages and employee benefits 360,190 20.9 % 363,801 22.4 %
Fuel and fuel taxes 78,355 4.6 % 69,575 4.3 %
Depreciation and amortization 91,794 5.3 % 88,374 5.5 %
Operating supplies and expenses 60,001 3.5 % 56,100 3.5 %
Insurance and claims 20,026 1.2 % 17,975 1.1 %
General and administrative expenses, net of asset dispositions 25,483 1.4 % 16,051 1.0 %
Operating taxes and licenses 11,798 0.7 % 11,579 0.7 %
Communication and utilities   4,910 0.3 %   4,764 0.3 %
Total operating expenses   1,526,701 88.7 %   1,428,122 88.1 %
Operating income 194,361 11.3 % 192,893 11.9 %
Net interest expense   5,876 0.3 %   4,290 0.3 %
Earnings before income taxes 188,485 11.0 % 188,603 11.6 %
Income taxes   70,929 4.2 %   71,857 4.4 %
Net earnings $ 117,556 6.8 % $ 116,746 7.2 %
Average diluted shares outstanding   112,327   115,048
Diluted earnings per share $ 1.05 $ 1.01
 
 
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
 
Twelve Months Ended December 31
2016 2015
% Of % Of
Amount     Revenue Amount     Revenue
 
Operating revenues, excluding fuel surcharge revenues $ 6,007,347 $ 5,516,282
Fuel surcharge revenues   548,112   671,364
Total operating revenues 6,555,459 100.0 % 6,187,646 100.0 %
 
Operating expenses
Rents and purchased transportation 3,255,692 49.7 % 2,994,586 48.4 %
Salaries, wages and employee benefits 1,469,187 22.4 % 1,394,239 22.5 %
Fuel and fuel taxes 283,437 4.3 % 313,034 5.1 %
Depreciation and amortization 361,510 5.5 % 339,613 5.5 %
Operating supplies and expenses 233,223 3.6 % 220,597 3.6 %
Insurance and claims 78,410 1.2 % 73,689 1.2 %
General and administrative expenses, net of asset dispositions 87,053 1.3 % 72,522 1.1 %
Operating taxes and licenses 45,954 0.7 % 43,084 0.7 %
Communication and utilities   19,973 0.3 %   20,588 0.3 %
Total operating expenses   5,834,439 89.0 %   5,471,952 88.4 %
Operating income 721,020 11.0 % 715,694 11.6 %
Net interest expense   25,223 0.4 %   25,491 0.4 %
Earnings before income taxes 695,797 10.6 % 690,203 11.2 %
Income taxes   263,707 4.0 %   262,968 4.3 %
Net earnings $ 432,090 6.6 % $ 427,235 6.9 %
Average diluted shares outstanding   113,361   116,728
Diluted earnings per share $ 3.81 $ 3.66
                             
 
 
Financial Information By Segment
(in thousands)
(unaudited)
               
Three Months Ended December 31
2016 2015
% Of % Of
Amount     Total Amount     Total
 

Revenue
 
Intermodal $ 997,967 58 % $ 967,133 59 %
Dedicated 398,325 23 % 368,992 23 %
Integrated Capacity Solutions 231,594 13 % 189,540 12 %
Truck   96,296   6 %   99,292   6 %
Subtotal 1,724,182 100 % 1,624,957 100 %
Intersegment eliminations   (3,120 ) (0 %)   (3,942 ) (0 %)

Consolidated revenue
$ 1,721,062   100 % $ 1,621,015   100 %
 
 

Operating income
 
Intermodal $ 124,143 64 % $ 127,730 66 %
Dedicated 57,539 30 % 42,000 22 %
Integrated Capacity Solutions 6,074 3 % 12,754 7 %
Truck 6,750 3 % 10,416 5 %
Other (1)   (145 ) (0 %)   (7 ) (0 %)
Operating income $ 194,361   100 % $ 192,893   100 %
 
 
 
Twelve Months Ended December 31
2016 2015
% Of % Of
Amount     Total Amount     Total

Revenue
 
Intermodal $ 3,796,251 58 % $ 3,664,670 59 %
Dedicated 1,533,186 23 % 1,451,256 24 %
Integrated Capacity Solutions 851,550 13 % 699,525 11 %
Truck   387,764   6 %   385,510   6 %
Subtotal 6,568,751 100 % 6,200,961 100 %
Intersegment eliminations   (13,292 ) (0 %)   (13,315 ) (0 %)
Consolidated revenue $ 6,555,459   100 % $ 6,187,646   100 %
 
 

Operating income
 
Intermodal $ 449,768 62 % $ 476,685 67 %
Dedicated 205,240 29 % 163,511 23 %
Integrated Capacity Solutions 36,260 5 % 35,729 5 %
Truck 29,862 4 % 39,864 5 %
Other (1)   (110 ) (0 %)   (95 ) (0 %)
Operating income $ 721,020   100 % $ 715,694   100 %
 
(1) Includes corporate support activity
 
 
 
Operating Statistics by Segment
(unaudited)
       
Three Months Ended December 31
2016 2015
 

Intermodal
 
Loads 491,570 467,461
Average length of haul 1,685 1,664
Revenue per load $ 2,030 $ 2,069
Average tractors during the period * 5,274 5,088
 
Tractors (end of period)
Company-owned 4,581 4,276
Independent contractor   695     805  
Total tractors 5,276 5,081
 
Net change in trailing equipment during the period 1,773 1,020
Trailing equipment (end of period) 84,594 78,957
Average effective trailing equipment usage 81,654 76,305
 
 

Dedicated
 
Loads 606,900 578,692
Average length of haul 181 175
Revenue per truck per week** $ 4,247 $ 4,048
Average trucks during the period*** 7,390 7,177
 
Trucks (end of period)
Company-owned 6,976 6,762
Independent contractor 15 10
Customer-owned (Dedicated operated)   410     436  
Total trucks 7,401 7,208
 
Trailing equipment (end of period) 22,688 21,672
Average effective trailing equipment usage 23,334 22,594
 
 

Integrated Capacity Solutions
 
Loads 237,845 171,887
Revenue per load $ 974 $ 1,103
Gross profit margin 12.9 % 16.0 %
Employee count (end of period) 824 670
Approximate number of third-party carriers (end of period) 50,900 45,700
 
 

Truck
 
Loads 96,906 95,190
Average length of haul 439 454
Loaded miles (000) 42,476 42,749
Total miles (000) 50,472 51,437
Average nonpaid empty miles per load 82.6 91.3
Revenue per tractor per week** $ 3,540 $ 3,663
Average tractors during the period * 2,158 2,157
 
Tractors (end of period)
Company-owned 1,376 1,462
Independent contractor   752     687  
Total tractors 2,128 2,149
 
Trailers (end of period) 7,642 7,604
Average effective trailing equipment usage 7,287 6,814
 
* Includes company-owned and independent contractor tractors
** Using weighted workdays
*** Includes company-owned, independent contractor, and customer-owned trucks
 
 
 
Operating Statistics by Segment
(unaudited)
       
Twelve Months Ended December 31
2016 2015
 

Intermodal
 
Loads 1,916,303 1,772,808
Average length of haul 1,657 1,652
Revenue per load $ 1,981 $ 2,067
Average tractors during the period * 5,222 4,949
 
Tractors (end of period)
Company-owned 4,581 4,276
Independent contractor   695     805  
Total tractors 5,276 5,081
 
Net change in trailing equipment during the period 5,637 5,659
Trailing equipment (end of period) 84,594 78,957
Average effective trailing equipment usage 77,179 72,622
 
 

Dedicated
 
Loads 2,401,332 2,250,099
Average length of haul 177 175
Revenue per truck per week** $ 4,077 $ 4,028
Average trucks during the period*** 7,307 7,012
 
Trucks (end of period)
Company-owned 6,976 6,762
Independent contractor 15 10
Customer-owned (Dedicated operated)   410     436  
Total trucks 7,401 7,208
 
Trailing equipment (end of period) 22,688 21,672
Average effective trailing equipment usage 22,827 22,391
 
 

Integrated Capacity Solutions
 
Loads 852,179 542,947
Revenue per load $ 999 $ 1,288
Gross profit margin 14.3 % 15.3 %
Employee count (end of period) 824 670
Approximate number of third-party carriers (end of period) 50,900 45,700
 
 

Truck
 
Loads 385,298 366,297
Average length of haul 455 448
Loaded miles (000) 175,038 163,115
Total miles (000) 207,998 193,856
Average nonpaid empty miles per load 85.6 83.9
Revenue per tractor per week** $ 3,458 $ 3,698
Average tractors during the period* 2,191 2,051
 
Tractors (end of period)
Company-owned 1,376 1,462
Independent contractor   752     687  
Total tractors 2,128 2,149
 
Trailers (end of period) 7,642 7,604
Average effective trailing equipment usage 6,956 6,460
 
* 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)
 
      December 31, 2016     December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents $ 6,377 $ 5,566
Accounts Receivable 797,473 654,542
Prepaid expenses and other       141,831       197,817
Total current assets       945,681       857,925
Property and equipment 4,258,915 4,019,451
Less accumulated depreciation       1,440,124       1,318,122
Net property and equipment       2,818,791       2,701,329
Other assets       64,516       70,290
      $ 3,828,988     $ 3,629,544
 
 

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 384,308 $ 340,332
Claims accruals 109,745 104,220
Accrued payroll 51,929 59,420
Other accrued expenses       27,152       28,445
Total current liabilities       573,134       532,417
 
Long-term debt 986,278 998,003
Other long-term liabilities 64,881 58,552
Deferred income taxes 790,634 740,220

Stockholders' equity
      1,414,061       1,300,352
      $ 3,828,988     $ 3,629,544
 
 
 
Supplemental Data
(unaudited)
             
      December 31, 2016     December 31, 2015
 
Actual shares outstanding at end of period (000)       111,305       113,948
 
Book value per actual share outstanding at end of period     $ 12.70     $ 11.41
 
 
             
Twelve Months Ended December 31
2016 2015
 
Net cash provided by operating activities (000)     $ 854,143     $ 873,308
 
Net capital expenditures (000)     $ 485,256     $ 556,436

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