J.B. Hunt Transport Services, Inc. Reports Earnings for the Third Quarter 2016

LOWELL, Ark.--(BUSINESS WIRE)--

J.B. Hunt Transport Services, Inc., 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.

J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
			Three Months Ended September 30
			2016							2015
						% Of							% Of
			Amount			Revenue				Amount			Revenue
Operating revenues, excluding fuel surcharge revenues		$	1,538,701						$	1,419,451
Fuel surcharge revenues			151,958							167,043
Total operating revenues			1,690,659			100.0	%			1,586,494			100.0	%
Operating expenses
Rents and purchased transportation			846,238			50.1	%			770,148			48.5	%
Salaries, wages and employee benefits			374,517			22.2	%			351,651			22.2	%
Depreciation and amortization			91,001			5.4	%			86,201			5.4	%
Fuel and fuel taxes			74,179			4.4	%			76,755			4.8	%
Operating supplies and expenses			62,191			3.7	%			57,299			3.6	%
General and administrative expenses, net of asset dispositions			21,025			1.1	%			14,866			1.0	%
Insurance and claims			21,862			1.3	%			20,078			1.3	%
Operating taxes and licenses			11,665			0.7	%			10,683			0.7	%
Communication and utilities			5,004			0.3	%			4,967			0.3	%
Total operating expenses			1,507,682			89.2	%			1,392,648			87.8	%
Operating income			182,977			10.8	%			193,846			12.2	%
Net interest expense			6,485			0.4	%			7,838			0.5	%
Earnings before income taxes			176,492			10.4	%			186,008			11.7	%
Income taxes			67,067			3.9	%			70,869			4.4	%
Net earnings		$	109,425			6.5	%		$	115,139			7.3	%
Average diluted shares outstanding			113,363							116,282
Diluted earnings per share		$	0.97						$	0.99

J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
			Nine Months Ended September 30
			2016							2015
						% Of							% Of
			Amount			Revenue				Amount			Revenue
Operating revenues, excluding fuel surcharge revenues		$	4,448,709						$	4,043,991
Fuel surcharge revenues			385,688							522,640
Total operating revenues			4,834,397			100.0	%			4,566,631			100.0	%
Operating expenses
Rents and purchased transportation			2,381,547			49.3	%			2,194,683			48.1	%
Salaries, wages and employee benefits			1,108,997			22.9	%			1,030,438			22.6	%
Depreciation and amortization			269,717			5.6	%			251,239			5.5	%
Fuel and fuel taxes			205,082			4.2	%			243,459			5.3	%
Operating supplies and expenses			173,222			3.6	%			164,497			3.6	%
General and administrative expenses, net of asset dispositions			61,570			1.3	%			56,471			1.3	%
Insurance and claims			58,384			1.2	%			55,714			1.2	%
Operating taxes and licenses			34,156			0.7	%			31,505			0.7	%
Communication and utilities			15,063			0.3	%			15,824			0.3	%
Total operating expenses			4,307,738			89.1	%			4,043,830			88.6	%
Operating income			526,659			10.9	%			522,801			11.4	%
Net interest expense			19,347			0.4	%			21,202			0.4	%
Earnings before income taxes			507,312			10.5	%			501,599			11.0	%
Income taxes			192,778			4.0	%			191,109			4.2	%
Net earnings		$	314,534			6.5	%		$	310,490			6.8	%
Average diluted shares outstanding			113,709							117,293
Diluted earnings per share		$	2.77						$	2.65

Financial Information By Segment
(in thousands)
(unaudited)
			Three Months Ended September 30
			2016								2015
							% Of								% Of
			Amount				Total				Amount				Total
Revenue
Intermodal		$	969,654				57	%		$	948,779				60	%
Dedicated			393,770				23	%			370,360				23	%
Integrated Capacity Solutions			233,022				14	%			172,894				11	%
Truck			97,154				6	%			97,521				6	%
Subtotal			1,693,600				100	%			1,589,554				100	%
Intersegment eliminations			(2,941	)			(0	%)			(3,060	)			(0	%)
Consolidated revenue		$	1,690,659				100	%		$	1,586,494				100	%
Operating income
Intermodal		$	116,885				64	%		$	126,077				65	%
Dedicated			52,463				28	%			45,123				23	%
Integrated Capacity Solutions			8,516				5	%			11,453				6	%
Truck			5,080				3	%			11,244				6	%
Other (1)			33				0	%			(51	)			(0	%)
Operating income		$	182,977				100	%		$	193,846				100	%
			Nine Months Ended September 30
			2016								2015
							% Of								% Of
			Amount				Total				Amount				Total
Revenue
Intermodal		$	2,798,284				58	%		$	2,697,537				59	%
Dedicated			1,134,861				23	%			1,082,264				24	%
Integrated Capacity Solutions			619,956				13	%			509,985				11	%
Truck			291,468				6	%			286,218				6	%
Subtotal			4,844,569				100	%			4,576,004				100	%
Intersegment eliminations			(10,172	)			(0	%)			(9,373	)			(0	%)
Consolidated revenue		$	4,834,397				100	%		$	4,566,631				100	%
Operating income
Intermodal		$	325,625				62	%		$	348,955				67	%
Dedicated			147,700				28	%			121,511				23	%
Integrated Capacity Solutions			30,186				6	%			22,974				4	%
Truck			23,112				4	%			29,448				6	%
Other (1)			36				0	%			(87	)			(0	%)
Operating income		$	526,659				100	%		$	522,801				100	%
(1) Includes corporate support activity

Operating Statistics by Segment
(unaudited)
			Three Months Ended September 30
			2016				2015
Intermodal
Loads			489,109				458,584
Average length of haul			1,662				1,660
Revenue per load		$	1,983			$	2,069
Average tractors during the period *			5,279				4,977
Tractors (end of period)
Company-owned			4,568				4,292
Independent contractor			714				750
Total tractors			5,282				5,042
Net change in trailing equipment during the period			1,578				1,658
Trailing equipment (end of period)			82,821				77,937
Average effective trailing equipment usage			79,107				74,669
Dedicated
Loads			607,876				578,628
Average length of haul			177				174
Revenue per truck per week**		$	4,120			$	3,998
Average trucks during the period***			7,357				7,098
Trucks (end of period)
Company-owned			6,936				6,758
Independent contractor			22				9
Customer-owned (Dedicated operated)			414				400
Total trucks			7,372				7,167
Trailing equipment (end of period)			22,391				21,141
Average effective trailing equipment usage			22,939				22,420
Integrated Capacity Solutions
Loads			239,399				127,016
Revenue per load		$	973			$	1,361
Gross profit margin			12.8	%			15.9	%
Employee count (end of period)			769				650
Approximate number of third-party carriers (end of period)			50,100				44,000
Truck
Loads			97,052				91,639
Average length of haul			453				454
Loaded miles (000)			43,865				41,376
Total miles (000)			52,317				49,213
Average nonpaid empty miles per load			87.2				85.6
Revenue per tractor per week**		$	3,468			$	3,630
Average tractors during the period *			2,162				2,080
Tractors (end of period)
Company-owned			1,384				1,471
Independent contractor			799				629
Total tractors			2,183				2,100
Trailers (end of period)			7,572				7,740
Average effective trailing equipment usage			7,083				6,610
* Includes company-owned and independent contractor tractors
** Using weighted workdays
*** Includes company-owned, independent contractor, and customer-owned trucks

Operating Statistics by Segment
(unaudited)
				Nine Months Ended September 30
				2016					2015
Intermodal
Loads				1,424,733					1,305,347
Average length of haul				1,648					1,648
Revenue per load			$	1,964				$	2,067
Average tractors during the period *				5,206					4,903
Tractors (end of period)
Company-owned				4,568					4,292
Independent contractor				714					750
Total tractors				5,282					5,042
Net change in trailing equipment during the period				3,864					4,639
Trailing equipment (end of period)				82,821					77,937
Average effective trailing equipment usage				75,702					71,395
Dedicated
Loads				1,794,432					1,671,407
Average length of haul				175					175
Revenue per truck per week**			$	4,021				$	4,021
Average trucks during the period***				7,280					6,957
Trucks (end of period)
Company-owned				6,936					6,758
Independent contractor				22					9
Customer-owned (Dedicated operated)				414					400
Total trucks				7,372					7,167
Trailing equipment (end of period)				22,391					21,141
Average effective trailing equipment usage				22,657					22,324
Integrated Capacity Solutions
Loads				614,334					371,060
Revenue per load			$	1,009				$	1,374
Gross profit margin				14.9	%				15.0	%
Employee count (end of period)				769					650
Approximate number of third-party carriers (end of period)				50,100					44,000
Truck
Loads				288,392					271,107
Average length of haul				460					446
Loaded miles (000)				132,562					120,366
Total miles (000)				157,526					142,419
Average nonpaid empty miles per load				86.6					81.3
Revenue per tractor per week**			$	3,432				$	3,711
Average tractors during the period*				2,202					2,015
Tractors (end of period)
Company-owned				1,384					1,471
Independent contractor				799					629
Total tractors				2,183					2,100
Trailers (end of period)				7,572					7,740
Average effective trailing equipment usage				6,846					6,342
* 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)
			September 30, 2016					December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents		$	5,481				$	5,566
Accounts Receivable			775,020					654,542
Prepaid expenses and other			61,900					197,817
Total current assets			842,401					857,925
Property and equipment			4,209,080					4,019,451
Less accumulated depreciation			1,400,339					1,318,122
Net property and equipment			2,808,741					2,701,329
Other assets			78,852					70,290
		$	3,729,994				$	3,629,544
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable		$	402,913				$	340,332
Claims accruals			104,243					104,220
Accrued payroll			72,920					59,420
Other accrued expenses			20,769					28,445
Total current liabilities			600,845					532,417
Long-term debt			943,696					998,003
Other long-term liabilities			69,302					58,552
Deferred income taxes			731,068					740,220
Stockholders' equity			1,385,083					1,300,352
		$	3,729,994				$	3,629,544
Supplemental Data
(unaudited)
			September 30, 2016				December 31, 2015
Actual shares outstanding at end of period (000)			112,185					113,948
Book value per actual share outstanding at end of period		$	12.35				$	11.41
			Nine Months Ended September 30
			2016					2015
Net cash provided by operating activities (000)		$	683,963				$	696,960
Net capital expenditures (000)		$	358,754				$	430,660

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