J.B. Hunt Transport Services, Inc. Reports Earnings for the Second Quarter 2017 and Updates Full Year 2017 Expectations

J.B. Hunt Transport Services, Inc., JBHT announced second quarter 2017 net earnings of $97.9 million, or diluted earnings per share of 88 cents vs. second quarter 2016 net earnings of $105 million, or 92 cents per diluted share.

Total operating revenue for the current quarter was $1.73 billion, compared with $1.62 billion for the second quarter 2016, an increase of 7%. Current quarter total operating revenue, excluding fuel surcharges, increased 5% vs. the comparable quarter 2016. Load growth of 5% in Intermodal (JBI), a 5% increase in revenue producing trucks in Dedicated Contract Services (DCS) and a 20% increase in volume in Integrated Capacity Solutions (ICS) contributed to the increase in consolidated revenue compared to prior year.

Operating income for the current quarter totaled $164 million versus $176 million for the second quarter 2016. The benefits of volume growth and increases in revenue producing truck counts were substantially offset by lower customer rates, increases in rail and over the road purchased transportation costs, start-up costs associated with new DCS contracts, higher driver wages and recruiting costs, increased insurance and claims costs, increased equipment and facility maintenance costs and increased technology costs.

Interest expense in the current quarter increased due to higher interest rates compared to the same period last year. The effective income tax rate for the quarter was 37.4% versus 38.0% for the second quarter 2016. The 2017 annual tax rate is expected to be approximately 35.0% primarily from the one-time tax benefit recognized in the first quarter 2017.

The Company posted revised full year 2017 Financial Expectations on its website under the Investors tab at www.jbhunt.com.

Segment Information:

Intermodal (JBI)

• Second Quarter 2017 Segment Revenue: $1.0 billion; up 7%
• Second Quarter 2017 Operating Income: $110 million; up 4%

JBI load volumes grew 5% over the same period in 2016. Transcontinental loads grew 10% while Eastern network volumes were down 2% compared to a year ago. Revenue increased 7% reflecting the 5% volume growth and an approximate 2% increase in revenue per load, which is the combination of customer rate changes, fuel surcharges and freight mix. Revenue per load, excluding fuel surcharge revenue decreased 1% from second quarter 2016.

Operating income increased 4% from prior year. Benefits from volume growth and dray fleet productivity were offset by cost increases in rail purchased transportation, driver pay and retention costs, driver recruiting costs, technology development and modernization costs and equipment ownership costs. The current period ended with approximately 85,600 units of trailing capacity and 5,300 power units assigned to the dray fleet.

Dedicated Contract Services (DCS)

• Second Quarter 2017 Segment Revenue: $412 million; up 8%
• Second Quarter 2017 Operating Income: $49 million; down 4%

DCS revenue increased 8% during the current quarter over the same period in 2016. Productivity, defined as revenue per truck per week, increased approximately 2% vs. 2016. Productivity excluding fuel surcharges was flat over a year ago. Increased revenue from better integration of assets between customer accounts and customer rate increases was partially offset by lower productivity at new contracts implemented during the current quarter. A net additional 486 revenue producing trucks, 226 net additions compared to first quarter 2017, were in the fleet by the end of the quarter compared to prior year. Approximately 71% of these additions represent private fleet conversions versus traditional dedicated capacity fleets. Customer retention rates remain above 98%.

Operating income decreased 4% over the prior year quarter primarily from increases in driver wages, increased accident frequency driving higher insurance and claims costs and higher start-up expenses for new customer contracts compared to the second quarter 2016.

Integrated Capacity Solutions (ICS)

• Second Quarter 2017 Segment Revenue: $222 million; up 9%
• Second Quarter 2017 Operating Loss: $(0.2) million; down 102%

ICS revenue was up 9% compared to the second quarter 2016. Volumes increased 20% while revenue per load decreased 9%, primarily due to freight mix changes driven by customer demand, compared to second quarter 2016. Spot volumes increased 20% and contractual volumes increased 22% from a year ago. Contractual volumes represented approximately 73% of total load volume and 58% of total revenue compared to 72% and 65%, respectively, in second quarter 2016.

Operating income decreased 102% over the same period 2016 primarily from lower gross profit margins, increased claims cost, a higher number of branches open less than two years (16 vs. 10 in 2016), and higher technology development costs. Gross profit margins decreased to 11.6% in the current quarter versus 15.0% in the same period last year. The decrease in gross margin percentage is primarily the result of higher purchased transportation costs on dry van volumes that outpaced customer rate increases implemented on contractual business compared to second quarter 2016. Total branch count increased to 42 from 35 at second quarter 2016. The carrier base increased 9% and the employee count increased 21% vs. second quarter 2016.

Truck (JBT)

• Second Quarter 2017 Segment Revenue: $95 million; down 4%
• Second Quarter 2017 Operating Income: $5.6 million; down 37%

JBT revenue for the current quarter was down 4% compared to the same period in 2016. Revenue excluding fuel surcharges decreased 6% from a year ago. Rate per loaded mile excluding fuel surcharges was up approximately 0.9% primarily from customer driven freight mix changes, including a 6.3% decrease in length of haul. Customer contract rates decreased approximately 0.4% compared to the same period in 2016. At the end of the period, JBT operated 2,072 tractors compared to 2,186 a year ago.

Operating income decreased 37% compared to the same quarter 2016. The benefit from higher customer rates per mile was more than offset by increased driver pay and hiring costs, higher independent contractor cost per mile and increased tractor maintenance costs compared to the second quarter 2016.

Cash Flow and Capitalization:

At June 30, 2017, we had a total of $943 million outstanding on various debt instruments compared to $958 million at June 30, 2016 and $986 million at December 31, 2016.

Our net capital expenditures for the six months ended June 30, 2017 approximated $165 million compared to $258 million for the same period 2016. At June 30, 2017, we had cash and cash equivalents of $7.3 million.

We purchased approximately 564,000 shares of our common stock during the second quarter 2017 for approximately $50 million. At June 30, 2017, we had approximately $521 million remaining under our combined current and new share repurchase authorizations. Actual shares outstanding at June 30, 2017 approximated 109.4 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, 2016. 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 website, www.jbhunt.com.

J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
				Three Months Ended June 30
				2017									2016
									% Of									% Of
				Amount					Revenue				Amount					Revenue
Operating revenues, excluding fuel surcharge revenues				$	1,551,051								$	1,483,354
Fuel surcharge revenues					175,864									131,672
Total operating revenues					1,726,915				100.0	%				1,615,026				100.0	%
Operating expenses
Rents and purchased transportation					871,122				50.4	%				794,907				49.2	%
Salaries, wages and employee benefits					389,873				22.6	%				371,969				23.0	%
Depreciation and amortization					93,050				5.4	%				90,364				5.6	%
Fuel and fuel taxes					79,072				4.6	%				71,489				4.4	%
Operating supplies and expenses					64,486				3.7	%				56,495				3.5	%
Insurance and claims					27,461				1.6	%				19,094				1.2	%
General and administrative expenses, net of asset dispositions					21,728				1.3	%				18,711				1.2	%
Operating taxes and licenses					10,905				0.6	%				11,365				0.7	%
Communication and utilities					5,603				0.3	%				4,840				0.3	%
Total operating expenses					1,563,300				90.5	%				1,439,234				89.1	%
Operating income					163,615				9.5	%				175,792				10.9	%
Net interest expense					7,393				0.4	%				6,420				0.4	%
Earnings before income taxes					156,222				9.1	%				169,372				10.5	%
Income taxes					58,353				3.4	%				64,361				4.0	%
Net earnings				$	97,869				5.7	%			$	105,011				6.5	%
Average diluted shares outstanding					110,822									113,761
Diluted earnings per share				$	0.88								$	0.92
J.B. HUNT TRANSPORT SERVICES, INC.
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
				Six Months Ended June 30
				2017									2016
									% Of									% Of
				Amount					Revenue				Amount					Revenue
Operating revenues, excluding fuel surcharge revenues				$	3,012,820								$	2,910,008
Fuel surcharge revenues					343,253									233,730
Total operating revenues					3,356,073				100.0	%				3,143,738				100.0	%
Operating expenses
Rents and purchased transportation					1,677,562				50.0	%				1,535,310				48.8	%
Salaries, wages and employee benefits					770,184				22.9	%				734,480				23.4	%
Depreciation and amortization					185,238				5.5	%				178,716				5.7	%
Fuel and fuel taxes					159,719				4.8	%				130,903				4.2	%
Operating supplies and expenses					122,507				3.7	%				111,031				3.5	%
Insurance and claims					50,466				1.5	%				36,522				1.2	%
General and administrative expenses, net of asset dispositions					45,209				1.4	%				40,545				1.3	%
Operating taxes and licenses					21,585				0.6	%				22,491				0.7	%
Communication and utilities					10,599				0.3	%				10,058				0.3	%
Total operating expenses					3,043,069				90.7	%				2,800,056				89.1	%
Operating income					313,004				9.3	%				343,682				10.9	%
Net interest expense					14,211				0.4	%				12,862				0.4	%
Earnings before income taxes					298,793				8.9	%				330,820				10.5	%
Income taxes					98,222				2.9	%				125,711				4.0	%
Net earnings				$	200,571				6.0	%			$	205,109				6.5	%
Average diluted shares outstanding					111,420									113,882
Diluted earnings per share				$	1.80								$	1.80
Financial Information By Segment
(in thousands)
(unaudited)
				Three Months Ended June 30
				2017									2016
									% Of									% Of
				Amount					Total				Amount					Total
Revenue
Intermodal				$	1,001,441				58	%			$	933,430				58	%
Dedicated					411,917				24	%				382,721				24	%
Integrated Capacity Solutions					222,465				13	%				203,767				12	%
Truck					94,575				5	%				98,264				6	%
Subtotal					1,730,398				100	%				1,618,182				100	%
Intersegment eliminations					(3,483	)			(0	%)				(3,156	)			(0	%)
Consolidated revenue				$	1,726,915				100	%			$	1,615,026				100	%
Operating income
Intermodal				$	109,714				67	%			$	105,614				60	%
Dedicated					48,574				30	%				50,467				29	%
Integrated Capacity Solutions					(239	)			(0	%)				10,875				6	%
Truck					5,563				3	%				8,853				5	%
Other (1)					3				0	%				(17	)			(0	%)
Operating income				$	163,615				100	%			$	175,792				100	%
				Six Months Ended June 30
				2017									2016
									% Of									% Of
				Amount					Total				Amount					Total
Revenue
Intermodal				$	1,938,559				58	%			$	1,828,630				58	%
Dedicated					804,378				24	%				741,091				24	%
Integrated Capacity Solutions					431,884				13	%				386,934				12	%
Truck					188,263				5	%				194,315				6	%
Subtotal					3,363,084				100	%				3,150,970				100	%
Intersegment eliminations					(7,011	)			(0	%)				(7,232	)			(0	%)
Consolidated revenue				$	3,356,073				100	%			$	3,143,738				100	%
Operating income
Intermodal				$	204,975				66	%			$	208,740				61	%
Dedicated					93,328				30	%				95,237				28	%
Integrated Capacity Solutions					4,230				1	%				21,670				6	%
Truck					10,504				3	%				18,032				5	%
Other (1)					(33	)			(0	%)				3				0	%
Operating income				$	313,004				100	%			$	343,682				100	%
(1) Includes corporate support activity

Operating Statistics by Segment
(unaudited)
					Three Months Ended June 30
					2017							2016
Intermodal
Loads					501,038							476,098
Average length of haul					1,677							1,640
Revenue per load				$	1,999						$	1,961
Average tractors during the period *					5,220							5,232
Tractors (end of period)
Company-owned					4,621							4,519
Independent contractor					680							725
Total tractors					5,301							5,244
Net change in trailing equipment during the period					363							1,377
Trailing equipment (end of period)					85,581							81,243
Average effective trailing equipment usage					81,073							74,751
Dedicated
Loads					636,149							607,078
Average length of haul					178							174
Revenue per truck per week**				$	4,156						$	4,062
Average trucks during the period***					7,669							7,286
Trucks (end of period)
Company-owned					7,207							6,833
Independent contractor					9							17
Customer-owned (Dedicated operated)					592							472
Total trucks					7,808							7,322
Trailing equipment (end of period)					23,387							21,914
Average effective trailing equipment usage					23,899							22,597
Integrated Capacity Solutions
Loads					240,069							199,312
Revenue per load				$	927						$	1,022
Gross profit margin					11.6	%						15.0	%
Employee count (end of period)					876							721
Approximate number of third-party carriers (end of period)					53,400							48,900
Truck
Loads					96,897							96,929
Average length of haul					431							460
Loaded miles (000)					41,678							44,614
Total miles (000)					49,917							53,063
Average nonpaid empty miles per load					85.1							87.2
Revenue per tractor per week**				$	3,518						$	3,419
Average tractors during the period *					2,102							2,234
Tractors (end of period)
Company-owned					1,337							1,401
Independent contractor					735							785
Total tractors					2,072							2,186
Trailers (end of period)					7,604							7,249
Average effective trailing equipment usage					7,232							6,784
* Includes company-owned and independent contractor tractors
** Using weighted workdays
*** Includes company-owned, independent contractor, and customer-owned trucks
Operating Statistics by Segment
(unaudited)
					Six Months Ended June 30
					2017							2016
Intermodal
Loads					967,878							935,624
Average length of haul					1,678							1,641
Revenue per load				$	2,003						$	1,954
Average tractors during the period *					5,221							5,169
Tractors (end of period)
Company-owned					4,621							4,519
Independent contractor					680							725
Total tractors					5,301							5,244
Net change in trailing equipment during the period					987							2,286
Trailing equipment (end of period)					85,581							81,243
Average effective trailing equipment usage					79,221							73,998
Dedicated
Loads					1,232,889							1,186,556
Average length of haul					179							174
Revenue per truck per week**				$	4,135						$	3,969
Average trucks during the period***					7,553							7,241
Trucks (end of period)
Company-owned					7,207							6,833
Independent contractor					9							17
Customer-owned (Dedicated operated)					592							472
Total trucks					7,808							7,322
Trailing equipment (end of period)					23,387							21,914
Average effective trailing equipment usage					23,732							22,517
Integrated Capacity Solutions
Loads					478,127							374,935
Revenue per load				$	903						$	1,032
Gross profit margin					12.9	%						16.1	%
Employee count (end of period)					876							721
Approximate number of third-party carriers (end of period)					53,400							48,900
Truck
Loads					192,533							191,339
Average length of haul					434							464
Loaded miles (000)					83,564							88,697
Total miles (000)					99,935							105,209
Average nonpaid empty miles per load					85.1							86.3
Revenue per tractor per week**				$	3,464						$	3,415
Average tractors during the period*					2,126							2,222
Tractors (end of period)
Company-owned					1,337							1,401
Independent contractor					735							785
Total tractors					2,072							2,186
Trailers (end of period)					7,604							7,249
Average effective trailing equipment usage					7,198							6,727
* 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)
					June 30, 2017						December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents				$	7,274					$	6,377
Accounts Receivable					749,042						745,288
Prepaid expenses and other					152,035						194,016
Total current assets					908,351						945,681
Property and equipment					4,384,981						4,258,915
Less accumulated depreciation					1,564,951						1,440,124
Net property and equipment					2,820,030						2,818,791
Other assets					50,001						64,516
				$	3,778,382					$	3,828,988
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable				$	419,306					$	384,308
Claims accruals					114,073						109,745
Accrued payroll					46,288						51,929
Other accrued expenses					28,425						27,152
Total current liabilities					608,092						573,134
Long-term debt					943,174						986,278
Other long-term liabilities					66,118						64,881
Deferred income taxes					753,277						790,634
Stockholders' equity					1,407,721						1,414,061
				$	3,778,382					$	3,828,988
Supplemental Data
(unaudited)
					June 30, 2017						December 31, 2016
Actual shares outstanding at end of period (000)					109,435						111,305
Book value per actual share outstanding at end of period				$	12.86					$	12.70
					Six Months Ended June 30
					2017						2016
Net cash provided by operating activities (000)				$	443,447					$	474,138
Net capital expenditures (000)				$	165,092					$	257,958

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