J.B. Hunt Transport Services' Q2 net earnings up 26% year-over-year to US$65.7M on growth in revenue, operating income; revenue rose 22% to US$1.15B

Alison Gallant

LOWELL, Arkansas , July 14, 2011 (press release) –     * Second Quarter 2011 Revenue: $1.15 billion; up 22%
    * Second Quarter 2011 Operating Income: $113 million; up 24%
    * Second Quarter 2011 EPS: 53 cents vs. 40 cents

J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced record second quarter 2011 net earnings of $65.7 million, or diluted earnings per share of 53 cents vs. second quarter 2010 net earnings of $52.1 million, or 40 cents per diluted share.

Total operating revenue for the current quarter was $1.15 billion, compared with $943 million for the second quarter 2010. All four segments contributed to this increase in operating revenue. Load growth of 18% in Intermodal (JBI) helped drive a 29% increase in segment revenue. Our Integrated Capacity Solutions (ICS) and Dedicated Contract Services (DCS) segments increased operating revenue by 27% and 16%, respectively, while Truck (JBT) segment revenue rose 4%. Current quarter total operating revenue, excluding fuel surcharges, increased 14% vs. the comparable quarter 2010.

Operating income for the current quarter totaled $113 million vs. $91 million for the second quarter 2010. Three of our segments contributed to this increase in operating income with JBI accounting for nearly $17 million of the increase, while DCS and ICS combined to add approximately $5 million.

Net earnings rose 26% to $65.7 million in the current quarter from $52.1 million in 2010, due to the growth of revenue and operating income. The effective income tax rate for the quarter was 38.5% in both 2011 and 2010.

“The second quarter of 2011 yielded record revenues and record earnings. We attribute the accomplishments to the intelligence and hard work of our people who make it happen every day, every stop, and every mile. Intermodal and DCS, which make up over 80% of the Company’s total revenue, continued to demonstrate the differentiation qualities we have been working to highlight for some time. Both of these businesses have established a leadership position in their respective fields of service. During lingering economic pressures and unsteadiness in the general freight markets, JBI and DCS once again revealed a higher degree of resiliency than that of traditional, full truckload transportation models. Additionally, we realized year-over-year improvement in ICS despite continued pressure on margins created from the lackluster macroeconomic environment,” said John N. Roberts, JBHT President and CEO.

Segment Information:

Intermodal (JBI)

    * Second Quarter 2011 Segment Revenue: $676 million; up 29%
    * Second Quarter 2011 Operating Income: $76.5 million; up 29%

Current quarter revenue increased 29% over the same period 2010, primarily driven by eastern network load growth of 32% and 12% growth in transcontinental loads, resulting in an overall 18% load growth. Higher fuel surcharges and truck capacity shortages, particularly in the southeast, also contributed to revenue growth. Current quarter pricing, excluding fuel surcharges, posted a 4.4% increase over the prior year. While the bid season is substantially over for 2011, customers continued to inquire about converting freight from over-the-road tractors to intermodal as a method of managing their freight budgets.

Flooding in the upper Mid-west impacted rail service and caused a slight decline in our container utilization. However, our dray operations experienced improvements in efficiency in the current period, mitigating some of the negative service impact to our customers.

Nearly 2,000 net containers were introduced into our network during the current quarter, which brought our total box capacity to over 50,000 units. Our dray power units increased by 160 during the current quarter, bringing our total dray fleet count to approximately 2,900.

Dedicated Contract Services (DCS)

    * Second Quarter 2011 Segment Revenue: $264 million; up 16%
    * Second Quarter 2011 Operating Income: $27.4 million; up 23%

DCS revenue increased 16% during the current quarter vs. 2010, while revenue, excluding fuel surcharges, increased 9%. The increase in revenue related to an increase in truck count and an approximate 2% increase in productivity (revenue per truck per week) vs. the same quarter 2010. The increase in truck count related to both new contracts awarded and a significant increase in demand at existing accounts.

Operating income increased 23% vs. the same quarter 2010. This increase in operating income primarily related to improved cost controls and the increases in truck count and productivity mentioned above.

Truck (JBT)

    * Second Quarter 2011 Segment Revenue: $130 million; up 4%
    * Second Quarter 2011 Operating Income: $6.9 million; down 3%

Revenue for the current quarter increased 4% vs. the same period 2010. Excluding fuel surcharges, revenue for the current quarter decreased by 2%, with a 9% reduction in tractors year-over-year. Rates per mile, excluding fuel surcharges, gained 6.7% overall, while the length of haul declined 1.7%. Rates from consistent shippers improved year-over-year by 4.7%.

Operating income for the current quarter declined to $6.9 million from $7.2 million in 2010. Current quarter operating income was favorably impacted by higher freight rates, favorable changes in freight mix and improved utilization. However, higher fuel costs, net of fuel surcharges, increases in driver compensation, partly related to a shortage in the supply of drivers, and higher insurance and claims costs reduced current quarter operating income.

Integrated Capacity Solutions (ICS)

    * Second Quarter 2011 Segment Revenue: $89 million; up 27%
    * Second Quarter 2011 Operating Income: $2.6 million; up 20%

ICS revenue increased 27% in the current quarter vs. the second quarter 2010, due to an 11% increase in load volume, higher pricing in our contractual and transactional business and an increase in the cost of fuel. Our gross profit (gross revenue less purchased transportation expense) increased 12% to $11 million from second quarter 2010. Our gross profit margin decreased to 12.3% in the current quarter vs. 13.9% last year due to higher fuel prices and increased transportation costs.

Our carrier base increased 13.7% during the current quarter and our employee count at period end increased 15.5% vs. second quarter 2010.

Cash Flow and Capitalization:

At June 30, 2011, we had a total of $664 million outstanding on various debt instruments compared to $617 million at June 30, 2010, and $654 million at December 31, 2010.

Our net capital expenditures for the six months ended June 30, 2011 approximated $211 million compared to $104 million for the same period 2010. At June 30, 2011, we had cash and cash equivalents of $11.1 million.

During the six months ended June 30, 2011, we used $85 million to purchase approximately 2.0 million shares of our common stock. At June 30, 2011, we had approximately $164 million remaining under a previously announced $500 million share repurchase authorization. Actual shares outstanding at June 30, 2011 approximated 120 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, 2010. 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.

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