EX-99.1 2 a05-12366_1ex99d1.htm EX-99.1

Exhibit 99.1

 

J.B. Hunt Transport Services, Inc.

Contact:

Kirk Thompson

615 J.B. Hunt Corporate Drive

 

President and

Lowell, Arkansas 72745

 

Chief Executive Officer

(NASDAQ: JBHT)

 

(479) 820-8110

 

FOR IMMEDIATE RELEASE

 

J. B. HUNT TRANSPORT SERVICES, INC. REPORTS RECORD REVENUES AND EARNINGS
FOR THE SECOND QUARTER OF 2005

 

LOWELL, ARKANSAS, July 15, 2005 - J. B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced second quarter 2005 net earnings of $54.6 million, or diluted earnings per share of 33 cents, compared with 2004 second quarter earnings of $45.6 million, or 27 cents per diluted share.    All of our shares outstanding and per share amounts for all periods presented reflect a two-for-one stock split paid on May 23, 2005.

 

Total operating revenue for the current quarter was $759 million, compared with $679 million during the second quarter of 2004.  During the second quarter of 2005, Truck segment revenue, excluding fuel surcharges, increased 1%, while the Intermodal segment revenue, excluding fuel surcharges, rose 12% over the comparable period of 2004.  Dedicated segment revenue, excluding fuel surcharge revenue, increased 7% during the current quarter.

 

Operating income rose 17% to $93.0 million in 2005 from $79.2 million in 2004 on a 7% rise in revenues, net of fuel surcharges.  The overall operating ratio for the Company improved 60 basis points to 87.7% compared to 88.3% in 2004.  Our calculations of operating ratios include the impact of the rise in fuel prices and the accompanying increase in fuel surcharge revenue.  The improvement in profitability was primarily driven by results in Dedicated Contract Services (DCS) and Intermodal.  The second quarter of 2005 was favorably impacted by continuing positive safety and claims cost and higher freight rates.

 

“Once again we are pleased to report record earnings and also our best operating ratio in 16 years for the second quarter,” remarked Kirk Thompson, President and Chief Executive Officer of the Company.  “Our earnings are on target with our 2005 operating plan and we remain optimistic of meeting our plan for the balance of the year.  Current quarter operating income, net earnings and earnings per share all grew faster than revenues reflecting a combination of rate increases sufficient to cover various cost increases and efficient execution in a SAFE manner across all three business segments.

 

“While the general freight economy slowed in the second quarter from its robust pace of 2004, there appears to be no indication that freight demand is headed into a significant downturn.  In fact, demand picked up toward the end of the quarter and, interestingly, operating factors for the second quarter of 2005 were remarkably similar to the second quarter of 2003, except that our current net earnings have more than doubled over the same time frame. In addition, early July 2005 load volumes are very similar to July 2004 levels.

 

“Less than one-third of our revenue is derived from the traditional truckload market.  As our results show, we have three separate and distinct businesses with unique characteristics, operating models and economic dynamics.  They are complementary, yet not dependent upon each other.  Factors that affect the truckload marketplace do not necessarily impact Intermodal and DCS.  We are strongly encouraged by the results in each segment, but particularly so with the consistency of our Intermodal margins and the improvement in the DCS margin.  Solid performance in Intermodal and DCS offset the impact of slower freight volumes and higher driver pay in Truck.

 


 

“While the pace of improvement in Truck was not repeated in the second quarter of 2005 vs. 2004, we are very pleased with an 89.0% operating ratio in that segment despite less favorable conditions than a year ago.  Given the up and down freight volumes in the truckload business so far in 2005, rising and volatile fuel prices and the never ending challenge of securing and retaining enough truck drivers, we are most gratified by the earnings improvement the Truck segment has achieved over the last five years.  The operating environment in 2004 allowed us to achieve our operating ratio goals much sooner than we had anticipated. The environment remains positive enough for us to have improved the operating ratio by 500 basis points in the two year period from second quarter 2003 to second quarter 2005, a tremendous achievement in our opinion.  The supply/demand balance remains very delicate in the truckload market.  Even a slight increase in demand would outstrip the available supply of trucks and profitability would likely improve as a result.

 

“Demand has slowed from 2004, but there is no credible evidence that capacity, significant enough to materially impact the market, is entering the truckload industry.  On the contrary, we see a shrinking supply of independent contractors which we believe is a significant proxy for the plight of thousands of smaller and struggling motor carriers.  High and increasing oil prices and rising driver pay, along with other rising costs, will continue to exacerbate the financial difficulties faced by the marginally profitable truckload industry and will likely further deplete supply.  For those of us close to the situation on a daily basis, it is inaccurate to even suggest that hundreds of new trucks are being added to our industry on a monthly basis.  It simply is not happening.  Similarly, the driver shortage that has plagued the truckload industry for close to two decades is not going to be solved in a short time frame.  Due to demographic realities and structural barriers such as low industry-wide pay scales, the qualified driver pool will continue to struggle as study after study has shown, and as those reports continue to project, shortages will continue well into the future.  Until qualified truck drivers become more plentiful, a scenario we certainly can not envision any time soon, capacity will remain tight for the traditional truckload market and growth will remain subdued across the industry.  On the other hand, we will continue to pursue profitable growth opportunities in our Intermodal and Dedicated segments as those opportunities arise.

 

“From our vantage point, the economy is stable, capacity remains quite constrained, and nothing we see in the near future is likely to materially alter the current landscape.  We are pleased with the return on capital invested in the business, the cash flow being generated and are extremely excited about the future earnings potential of the Company.”

 

The Truck operating ratio was 89.0% for the quarter vs. 87.5% for the comparable period last year.  The second quarter 2004 operating ratio was enhanced by unusually strong freight demand and a significant amount of customer paid deadhead miles resulting in a phenomenal 650 basis point improvement over the same period in 2003.  When compared to second quarter 2003, our second quarter 2005 operating ratio is better by 500 basis points and is consistent with our internal expectations of long term, year-to-year operating income growth. Rate yields continue to improve as the loaded rate per mile, excluding fuel surcharges, increased 4.6% or $0.074/mile relative to a year ago. During the same time frame, length of haul also increased 2.3% making revenue per load higher by 6.9% over the second quarter of 2004. Furthermore, this year-over-year improvement in total rate per mile was achieved with significantly fewer paid deadhead miles in 2005 vs. 2004.  This represents the 18th consecutive quarter that our rate per loaded mile, excluding fuel surcharges, has increased and underscores our ability to affect rate improvement to mitigate cost increases even when demand is not as robust.  Our intense focus on safety yielded another quarter of relatively low claims cost.  Our service levels during the second quarter of 2005 surpassed last year’s second quarter service levels by 60 basis points reflecting our commitment to provide best-in-class pick-up and delivery, flexibility and allocated capacity for our customers.  We continue to invest in people, systems and technology.  These investments separate us from others by improving our network yield, safety and service to our customers.  Empty miles were 10.2% versus 9.9% for the second quarter a year ago.  Freight demand was lower throughout the quarter compared to an exceptionally strong second quarter 2004 level.  Driver availability continues to be a serious concern for the segment, as well as the industry.  Increases in driver pay over the last few months and during the quarter have resulted in only marginal improvements in driver supply.   We continue to see no signs of fundamental improvement in driver availability for the foreseeable future.  Therefore, we do not anticipate significant capacity additions in the truckload marketplace in the near term.  The average number of trucks in the Truck segment was 5,430 for the second quarter of 2005 and 5,479 for the second quarter of 2004.

 


 

In the Intermodal segment, the operating ratio was 87.5% vs. 87.9% for the second quarter of 2004.  Revenue in the Intermodal segment advanced 17% to $309 million compared to $263 million in the same period of 2004.  Operating income increased 21% to $38.5 million from $31.8 million in the comparable period a year ago.  Growth in revenue was driven by a strong pricing environment despite continuing service and congestion related issues on the railroads.  Load volumes increased a modest 3% compared to a very robust 12% in the same period a year ago.  Given the infrastructure and service design improvements underway at the railroads, an environment of more rapid growth is expected to develop and we continue to cautiously add capacity to support this growth.  Margin improvement was primarily driven by price and freight mix changes.  While the Intermodal segment is not immune to driver shortages and pay increases, as well as the rising cost of insurance and claims, we have been successful at maintaining a relatively low driver turnover and an excellent safety record.  Productivity measures for drivers showed a small improvement while productivity measures for containers showed a 5% decline over the same period a year ago.  This is reflective of increased transit times and some underutilized capacity as freight volumes were slightly less than anticipated.

 

The operating ratio for the DCS segment was 87.1% vs. 90.5% for the second quarter of 2004, a 340 basis point improvement over the same period a year ago.  Revenue, excluding fuel surcharge, in the current quarter was up 7% compared to the second quarter of 2004.  Growth in revenue was driven by a 4.1% increase in the average number of tractors assigned to the segment and a 4.1% improvement in productivity.  Utilization for the second quarter of 2005 declined 1.1% but, net revenue, excluding fuel surcharge, per loaded mile was up 6.9%.  Operating income was $27 million, a 52% increase over the same quarter of 2004, and was a record quarter.  The average number of tractors in the segment was 5,000 for the second quarter of 2005 vs. 4,802 for the second quarter of 2004.  At the end of 2002, DCS began a concentrated effort to utilize the segment’s assets optimally and increase margins to a more acceptable level.  Although we will continue to consider trade-up opportunities for asset utilization, we are pleased with the impact these efforts have had on the segment’s performance over the past two and one-half years.  Baseline focus on revenue quality, cost controls, uncompromising SAFETY, contract structure and a unique approach to Customer Value Deliverytm (CVD) drives a reliable, consistent and adequate return on investment.  DCS continues to invest in technology, processes and people that help improve productivity, enhance customer service and facilitate future growth.  Although the market to attract and retain qualified drivers continues to be challenging, a rigorous effort in the area of driver retention has so far resulted in annualized reduction of driver turnover by over 15 percentage points when comparing the second quarter of 2005 to the same period of 2004.  We are very encouraged by this effort because having an adequate supply of drivers is a prerequisite for participating in the growth opportunities that currently exist.

 

This report contains 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 7 of our Annual Report filed on Form 10-K for the year ended December 31, 2004.  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 related 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 June 30

 

 

 

2005

 

2004

 

 

 

Amount

 

% Of
Revenue

 

Amount

 

% Of
Revenue

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

759,206

 

100.0

%

$

679,036

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

213,655

 

28.1

%

207,487

 

30.6

%

Rents and purchased transportation

 

253,299

 

33.4

%

221,642

 

32.6

%

Fuel and fuel taxes

 

89,507

 

11.8

%

66,626

 

9.8

%

Depreciation and amortization

 

40,109

 

5.3

%

36,730

 

5.4

%

Operating supplies and expenses

 

31,210

 

4.1

%

31,079

 

4.6

%

Insurance and claims

 

13,075

 

1.7

%

15,369

 

2.3

%

Operating taxes and licenses

 

9,330

 

1.2

%

8,763

 

1.3

%

General and administrative expenses, net of gains

 

10,738

 

1.4

%

6,477

 

1.0

%

Communication and utilities

 

5,278

 

0.7

%

5,689

 

0.8

%

Total operating expenses

 

666,201

 

87.7

%

599,862

 

88.3

%

Operating income

 

93,005

 

12.3

%

79,174

 

11.7

%

Interest income

 

229

 

0.0

%

911

 

0.1

%

Interest expense

 

1,758

 

0.2

%

2,491

 

0.4

%

Equity in loss of associated companies

 

1,284

 

0.2

%

914

 

0.1

%

Earnings before income taxes

 

90,192

 

11.9

%

76,680

 

11.3

%

Income taxes

 

35,561

 

4.7

%

31,055

 

4.6

%

Net earnings

 

$

54,631

 

7.2

%

$

45,625

 

6.7

%

Average basic shares outstanding *

 

158,387

 

 

 

160,995

 

 

 

Basic earnings per share *

 

$

0.34

 

 

 

$

0.28

 

 

 

Average diluted shares outstanding *

 

163,483

 

 

 

166,411

 

 

 

Diluted earnings per share *

 

$

0.33

 

 

 

$

0.27

 

 

 

 

* All shares outstanding and per share amounts for all periods presented reflect a two-for-one stock split paid on May 23, 2005.

 

 

 

Six Months Ended June 30

 

 

 

2005

 

2004

 

 

 

Amount

 

% Of
Revenue

 

Amount

 

% Of
Revenue

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

1,468,384

 

100.0

%

$

1,296,735

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

Salaries, wages and employee benefits

 

414,538

 

28.2

%

397,451

 

30.7

%

Rents and purchased transportation

 

492,375

 

33.5

%

425,350

 

32.8

%

Fuel and fuel taxes

 

172,377

 

11.7

%

130,481

 

10.1

%

Depreciation and amortization

 

79,341

 

5.4

%

73,775

 

5.7

%

Operating supplies and expenses

 

62,864

 

4.3

%

59,800

 

4.6

%

Insurance and claims

 

24,830

 

1.7

%

28,393

 

2.2

%

Operating taxes and licenses

 

18,216

 

1.2

%

17,488

 

1.3

%

General and administrative expenses, net of gains

 

20,526

 

1.4

%

15,048

 

1.2

%

Communication and utilities

 

11,144

 

0.8

%

11,558

 

0.9

%

Total operating expenses

 

1,296,211

 

88.3

%

1,159,344

 

89.4

%

Operating income

 

172,173

 

11.7

%

137,391

 

10.6

%

Interest income

 

380

 

0.0

%

1,256

 

0.1

%

Interest expense

 

2,992

 

0.2

%

5,165

 

0.4

%

Equity in loss of associated companies

 

2,135

 

0.1

%

1,383

 

0.1

%

Earnings before income taxes

 

167,426

 

11.4

%

132,099

 

10.2

%

Income taxes

 

65,296

 

4.4

%

53,500

 

4.1

%

Net earnings

 

$

102,130

 

7.0

%

$

78,599

%

6.1

%

Average basic shares outstanding *

 

159,539

 

 

 

160,663

 

 

 

Basic earnings per share *

 

$

0.64

 

 

 

$

0.49

 

 

 

Average diluted shares outstanding *

 

164,940

 

 

 

166,170

 

 

 

Diluted earnings per share *

 

$

0.62

 

 

 

$

0.47

 

 

 

 

* All shares outstanding and per share amounts for all periods presented reflect a two-for-one stock split paid on May 23, 2005.

 


 

Financial Information By Segment

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended June 30

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Gross revenue

 

 

 

 

 

 

 

 

 

 

 

Truck

 

$

246,008

 

$

232,899

 

Intermodal

 

308,967

 

263,232

 

Dedicated

 

208,617

 

187,041

 

Subtotal

 

763,592

 

683,172

 

Intersegment eliminations

 

(4,386

)

(4,136

)

Consolidated revenue

 

$

759,206

 

$

679,036

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

Truck

 

$

27,111

 

$

29,172

 

Intermodal

 

38,498

 

31,785

 

Dedicated

 

26,988

 

17,761

 

Other (1)

 

408

 

456

 

Operating income

 

$

93,005

 

$

79,174

 

 

 

 

Six Months Ended June 30

 

 

 

2005

 

2004

 

Gross revenue

 

 

 

 

 

 

 

 

 

 

 

Truck

 

$

477,882

 

$

442,915

 

Intermodal

 

596,495

 

505,430

 

Dedicated

 

403,295

 

356,602

 

Subtotal

 

1,477,672

 

1,304,947

 

Intersegment eliminations

 

(9,288

)

(8,212

)

Consolidated revenue

 

$

1,468,384

 

$

1,296,735

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

Truck

 

$

51,468

 

$

43,878

 

Intermodal

 

73,026

 

60,931

 

Dedicated

 

47,112

 

32,019

 

Other (1)

 

567

 

563

 

Operating income

 

$

172,173

 

$

137,391

 

 

(1) Includes unallocated corporate support and insurance expenses.

 


 

Operating Statistics by Segment

(unaudited)

 

 

 

Three Months Ended June 30

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Truck

 

 

 

 

 

Operating ratio

 

89.0

%

87.5

%

Loads

 

233,090

 

239,673

 

Net revenue (excl. fuel surcharge) per tractor per week*

 

$

3,025

 

$

2,976

 

Length of haul

 

545

 

533

 

Revenue per loaded mile (excl.fsc)

 

$

1.693

 

$

1.619

 

Loaded miles (000)

 

125,232

 

130,208

 

Total miles (000)

 

139,518

 

144,460

 

Empty miles %

 

10.2

%

9.9

%

Average tractors during the period

 

5,430

 

5,479

 

Tractors (end of period)

 

 

 

 

 

Company owned

 

4,471

 

4,494

 

Independent contractor

 

923

 

1,041

 

Total tractors

 

5,394

 

5,535

 

Trailers (end of period)

 

19,644

 

19,944

 

Average effective trailing equipment usage

 

14,387

 

15,009

 

 

 

 

 

 

 

Intermodal

 

 

 

 

 

Operating ratio

 

87.5

%

87.9

%

Loads

 

147,606

 

143,849

 

Net change in revenue per loaded mile (excl. fsc)

 

6.8

%

1.2

%

Revenue per load (excl. fsc)

 

$

1,881

 

$

1,727

 

Tractors (end of period)

 

1,234

 

1,165

 

Containers (end of period)

 

22,895

 

21,552

 

Average effective trailing equipment usage

 

22,601

 

21,201

 

 

 

 

 

 

 

Dedicated

 

 

 

 

 

Operating ratio

 

87.1

%

90.5

%

Loads

 

348,436

 

346,191

 

Net revenue (excl. fuel surcharge) per tractor per week*

 

$

2,990

 

$

2,892

 

Average tractors during the period**

 

5,000

 

4,802

 

Tractors (end of period)

 

 

 

 

 

Company owned

 

4,696

 

4,594

 

Independent contractor

 

177

 

138

 

Customer owned (DCS Operated)

 

96

 

174

 

Total tractors

 

4,969

 

4,906

 

Trailers (end of period)

 

6,255

 

5,852

 

Average effective trailing equipment usage

 

11,829

 

11,047

 

 

* Using weighted work days

** Includes company owned, independent contractor, and customer owned tractors

 


 

Operating Statistics by Segment

(unaudited)

 

 

 

Six Months Ended June 30

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Truck

 

 

 

 

 

Operating ratio

 

89.2

%

90.1

%

Loads

 

452,798

 

472,721

 

Net revenue (excl. fuel surcharge) per tractor per week*

 

$

2,990

 

$

2,875

 

Length of haul

 

547

 

529

 

Revenue per loaded mile (excl fsc)

 

$

1.688

 

$

1.587

 

Loaded miles (000)

 

245,586

 

254,990

 

Total miles (000)

 

273,371

 

282,714

 

Empty miles %

 

10.2

%

9.8

%

Average tractors during the period

 

5,419

 

5,458

 

Tractors (end of period)

 

 

 

 

 

Company owned

 

4,471

 

4,494

 

Independent contractor

 

923

 

1,041

 

Total tractors

 

5,394

 

5,535

 

Trailers (end of period)

 

19,644

 

19,944

 

Average effective trailing equipment usage

 

14,513

 

14,956

 

 

 

 

 

 

 

Intermodal

 

 

 

 

 

Operating ratio

 

87.8

%

87.9

%

Loads

 

289,479

 

279,845

 

Net change in revenue per loaded mile (excl. fsc)

 

6.9

%

0.6

%

Revenue per load (excl. fsc)

 

1,869

 

1,718

 

Tractors (end of period)

 

1,234

 

1,165

 

Containers (end of period)

 

22,895

 

21,552

 

Average effective trailing equipment usage

 

22,412

 

21,025

 

 

 

 

 

 

 

Dedicated

 

 

 

 

 

Operating ratio

 

88.3

%

91.0

%

Loads

 

667,150

 

660,268

 

Net revenue (excl. fuel surcharge) per tractor per week*

 

$

2,885

 

$

2,801

 

Average tractors during the period**

 

5,016

 

4,741

 

Tractors (end of period)

 

 

 

 

 

Company owned

 

4,696

 

4,594

 

Independent contractor

 

177

 

138

 

Customer owned (DCS Operated)

 

96

 

174

 

Total tractors

 

4,969

 

4,906

 

Trailers (end of period)

 

6,255

 

5,852

 

Average effective trailing equipment usage

 

11,791

 

11,082

 

 

* Using weighted work days

** Includes company owned, independent contractor, and customer owned tractors

 


 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Condensed Consolidated Balance Sheets

 

(in thousands)

 

(unaudited)

 

 

 

 

June 30, 2005

 

December 31, 2004

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

4,757

 

$

23,838

 

Accounts receivable

 

311,799

 

289,146

 

Income tax receivable

 

6,580

 

19,418

 

Prepaid expenses and other

 

103,513

 

131,640

 

Total current assets

 

426,649

 

464,042

 

 

 

 

 

 

 

Property and equipment

 

1,507,430

 

1,450,023

 

Less accumulated depreciation

 

489,430

 

438,644

 

Net property and equipment

 

1,018,000

 

1,011,379

 

 

 

 

 

 

 

Other assets

 

20,898

 

16,285

 

 

 

$

1,465,547

 

$

1,491,706

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Trade accounts payable

 

139,548

 

180,018

 

Claims accruals

 

17,714

 

18,535

 

Accrued payroll

 

45,044

 

73,750

 

Other accrued expenses

 

8,737

 

10,504

 

Deferred income taxes

 

54,585

 

25,414

 

Total current liabilities

 

265,628

 

308,221

 

 

 

 

 

 

 

Long-term debt

 

67,300

 

—

 

Other long-term liabilities

 

43,277

 

40,294

 

Deferred income taxes

 

253,505

 

282,241

 

Stockholders’ equity

 

835,837

 

860,950

 

 

 

$

1,465,547

 

$

1,491,706

 

 

Supplemental Data

(unaudited)

 

 

 

June 30, 2005

 

December 31, 2004

 

 

 

 

 

 

 

Actual shares outstanding at end of period (000) *

 

158,386

 

162,787

 

 

 

 

 

 

 

Book value per actual share outstanding at end of period *

 

$

5.28

 

$

5.29

 

 

* All shares outstanding and per share amounts for all periods presented reflect a two-for-one stock split paid on May 23, 2005.