News - 2016

• Third Quarter 2016 Revenue:$1.69 billion; up 7%
• Third Quarter 2016 Operating Income:$183 million; down 6%
• Third Quarter 2016 EPS:97 cents vs. 99 cents

LOWELL, Ark.--(BUSINESS WIRE)-- J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced third quarter 2016 net earnings of $109.4 million, or diluted earnings per share of 97 cents vs. third quarter 2015 net earnings of $115.1 million, or 99 cents per diluted share.

Total operating revenue for the current quarter was $1.69 billion, compared with $1.59 billion for the third quarter 2015. Load growth of 7% in Intermodal (JBI), a 2.9% increase in revenue producing trucks and improved asset productivity in Dedicated Contract Services (DCS)™, an 88% increase in load volume in Integrated Capacity Solutions (ICS) and a 4% increase in truck count in our Truck (JBT) business segment, partially offset by lower customer rates in JBI, ICS and JBT and tepid customer demand, contributed to the increase in consolidated revenue compared to prior year. Current quarter total operating revenue, excluding fuel surcharges, increased 8.4% vs. the comparable quarter 2015.

Operating income for the current quarter totaled $183 million vs. $194 million for the third quarter 2015. Operating income decreased from third quarter 2015 primarily from lower customer rates in JBI, ICS and JBT, increased rail purchase transportation rates, lower box turns, increases in driver wages and recruiting costs, losses on the sale of used equipment (versus gains in 2015), increased legal and consulting costs and higher equipment maintenance and ownership costs.

Interest expense in the current quarter decreased primarily from the timing effect of the issuance of the senior notes that occurred in the third quarter 2015. The effective income tax rate for the current quarter is 38%, compared to 38.1% in the third quarter 2015. We expect our 2016 annual tax rate to be approximately 38%.

Segment Information:

Intermodal (JBI)

• Third Quarter 2016 Segment Revenue:$970 million; up 2%
• Third Quarter 2016 Operating Income:$116.9 million; down 7%

Overall volumes increased 7% over the same period in 2015. The Eastern network realized load growth of 5% and Transcontinental loads grew 8% over the third quarter 2015 as west coast outbound freight growth outpaced the rest of the network and western rail service continued a year over year improvement trend. Revenue increased 2% reflecting the 7% volume growth and an approximate 4.2% decrease in revenue per load, which is the combination of changes in customer rate, freight mix and fuel surcharges. Revenue per load excluding fuel surcharges decreased approximately 2% compared to third quarter 2015.

Operating income decreased 7% over prior year. Benefits from improved volumes, improved operating efficiencies from network balance and reduced reliance on third party dray carriers were offset by lower customer rates, increases in rail purchased transportation rates, equipment ownership costs including lower box utilization, increased insurance and claims costs and increased costs to attract and retain drivers. The current period ended with approximately 82,800 units of trailing capacity and 5,280 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

• Third Quarter 2016 Segment Revenue:$394 million; up 6%
• Third Quarter 2016 Operating Income:$52.5 million; up 16%

DCS revenue increased 6% during the current quarter over the same period in 2015. Productivity (revenue per truck per week) increased by approximately 3% vs. 2015. Productivity excluding fuel surcharge revenue increased approximately 4% 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 addition of 205 revenue producing trucks, 50 net additions sequentially from second quarter 2016, were in the fleet by the end of the quarter. Approximately 75% of these additions represent private fleet conversions versus traditional dedicated capacity services and primarily reflect new contract implementations in this and prior periods. Customer retention rates remain above 98%.

Operating income increased by 16% from a year ago primarily from the increased revenue and improved asset utilization partially offset by higher driver wages and recruiting costs, increased salaries and benefits costs and higher equipment ownership costs compared to the same period in 2015.

Integrated Capacity Solutions (ICS)

• Third Quarter 2016 Segment Revenue:$233 million; up 35%
• Third Quarter 2016 Operating Income:$8.5 million;down 26%

ICS revenue increased 35% in the current quarter vs. the third quarter 2015. Load volume increased 88% while revenue per load decreased 28.5% due to lower fuel prices, freight mix changes driven by customer demand and lower customer rates on contractual business. Contractual volumes represented approximately 75% of total load volume and 64% of total revenue in the current quarter compared to 66% and 60%, respectively, in third quarter 2015.

Operating income decreased 26% over the same period 2015. Gross profit margin decreased to 12.8% in the current quarter vs. 15.9% in the prior year primarily from new customer rates implemented during the quarter on contractual business and lower customer spot rates compared to third quarter 2015. Personnel costs increased compared to a year ago as the total branch count grew to 40 compared to 33 at the end of third quarter last year. ICS’s carrier base increased 14% and the employee count increased 18% vs. third quarter 2015.

Truck (JBT)

• Third Quarter 2016 Segment Revenue:$97 million; flat
• Third Quarter 2016 Operating Income:$5.1 million; down 55%

JBT revenue was flat from the same period in 2015. Revenue excluding fuel surcharge increased 2%, primarily from a 4% increased truck count and a 2% increase in utilization offset with an approximate 4% decrease in rate per mile excluding fuel mostly from customer driven freight mix changes. Core customer rates were flat compared to the same period in 2015. At the end of the period, JBT operated 2,183 tractors compared to 2,100 a year ago.

Operating income decreased by 55% compared to third quarter 2015. Favorable changes from an increased fleet count and improved utilization were more than offset by lower customer rates per mile, increased equipment maintenance costs, higher safety and insurance costs and increased driver hiring costs compared to third quarter 2015.

Cash Flow and Capitalization:

At September 30, 2016, we had a total of $944 million outstanding on various debt instruments compared to $989 million at September 30, 2015 and $998 million at December 31, 2015.

Our net capital expenditures for the nine months ended September 30, 2016 approximated $359 million compared to $431 million for the same period 2015. At September 30, 2016, we had cash and cash equivalents of approximately $5.5 million.

We purchased approximately 922,000 shares of our common stock during the quarter for $74.8 million. At September 30, 2016 we had approximately $276 million remaining under our share repurchase authorization. Shares outstanding at September 30, 2016 approximated 112.2 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.