J.B. Hunt Reports Revenues and Earnings for the Third Quarter 2009

Mike

Well-Known Member
Staff member
LOWELL, Ark.--(BUSINESS WIRE)--J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced third quarter 2009 net earnings of $40.0million, or diluted earnings per share of 31 cents vs. 2008 third quarter earnings of $60.3 million, or 47 cents per diluted share.
Total operating revenue for the current quarter was $834 million, a 16% decrease from the $996 million for the third quarter 2008. The decrease in operating revenue was primarily attributable to lower fuel surcharge revenues, which reflect significantly lower fuel costs in the current quarter. Declines in intermodal and truckload pricing also contributed to the lower revenue. Current quarter operating revenue, excluding fuel surcharges, decreased 4% from the third quarter 2008.
Operating income for the current quarter declined to $71 million vs. $106 million in the third quarter 2008. Materially lower freight rates affected operating profits in our Intermodal, Integrated Capacity Solutions and Truck segments. While we were successful at lowering costs in most categories, the reduced expenses did not offset the significant drop in rates. Net interest expense in the current quarter was lower than the previous year, while the effective income tax rate was higher in the third quarter 2009.
“The freight recession that began in the second half of 2006 continued into its third year. Our diversified transportation platform has allowed us to weather the storm in relatively strong fashion. We continue to generate growth in our Intermodal (JBI) and Integrated Capacity Solutions (ICS) segments. Additionally, our Dedicated Contract Services (DCS) segment has successfully transitioned further away from the generic dedicated business to more customized solutions and is poised to re-establish growth in the near future. DCS has been able to maintain a fairly consistent margin in the 10% range, which we believe is a remarkable achievement in the current environment. And despite the biggest decrease in freight rates in history, our Truck (JBT) segment approached break-even profitability in the current quarter and we believe will continue to edge toward recovery. We have noted some recent signs of firming demand, however, the freight economy remains weak and we are not anticipating a rapid improvement. Consequently, until freight rates start to return to a reasonable level, margins are unlikely to improve dramatically.
“While current quarter volumes did show seasonal improvements across our four business segments, pricing continues to be challenging following the implementation of various bids and proposals from customers submitted earlier in the year in both the Intermodal and Truck segments. We are not pleased with the resulting pricing in these two segments. The elimination of reasonable pricing in the transportation and logistics business could result in the inability of transportation providers to respond to a sharp pick-up in demand likely leading to service disruptions, significant price increases and more adequate returns.
“In the meantime, we are proud of our employees who have shown great ingenuity and experienced substantial personal sacrifice to keep costs as low as possible during these recessionary economic times,” said Kirk Thompson, JBHT President and CEO.
Segment Information:
Intermodal (JBI)

  • Third Quarter 2009 Segment Revenue: $456 million; down 14%
  • Third Quarter 2009 Operating Income: $50 million; down 33%
JBI continued to gain market share and make important progress in strengthening our position in the market place. Overall load volume grew at 9% during the current quarter, over the comparable period of 2008, compared to the 5% growth in the first quarter and 8% growth in the second quarter 2009 vs. the same periods in 2008. Eastern volume growth slowed during the current quarter as customers had ample truck capacity at substantially lower prices than a year ago, combined with fuel prices that were also 40% lower than a year ago. Still, our eastern volumes increased by 12% during the current quarter, while our transcontinental volume continued to rebound with 7% growth over the same quarter a year ago. Revenue declined despite the increase in volume as a result of three factors: an extremely competitive bid season, a 1% decline in the average length-of-haul from the comparable period and fuel surcharge revenue that was down more than $70 million from a year ago.
Our bid activity during this unique time in the freight economy was particularly challenging as we attempted to balance short term market realities against long term strategic objectives. We believe, as our rail partners continue to make multi-year investments to improve service and network efficiency and as shippers remain under economic and environmental pressure to find sustainable alternatives to traditional trucking, the long term outlook for our intermodal business is very attractive. As a result, it is important for us to continue to make strategic investments even in the midst of these harsh market conditions.
Successful cost reduction efforts continued, with a strong focus on filling empty miles and improving driver productivity. These efforts increased operating income 9% and our operating ratio improved to 89.1% in the current quarter from the second quarter 2009, excluding the $6.6 million second quarter charge to adjust the value of certain tractors held for sale. Both the tractor and container fleets continue to be updated with newer model equipment. The tractor fleet consists of more than 2,200 company owned tractors with an average age of less than 3 years. Our relatively new dray fleet will meet or exceed currently proposed state and federal government regulations that will require certain levels of fuel economy and emission levels.
Dedicated Contract Services (DCS)

  • Third Quarter 2009 Segment Revenue: $197 million; down 19%
  • Third Quarter 2009 Operating Income: $19 million; down 30%
DCS continues to focus marketing efforts on services that offer more sustainable margins and attractive long-term growth opportunities. In recent months, DCS has experienced growth in these newer lines of business, both in terms of record amounts of business sold and our pipeline of bid activity. Consistent with our focus on more specialized services, we have continued to reduce our exposure to the capacity-oriented model, which we believe is more susceptible to irrational competition and harsh cyclicality.
The average truck count at our base business accounts (locations that commenced operations prior to the current calendar year) declined by approximately 19% to 3,732 in the current quarter compared to the same quarter 2008. Total revenue declined 32%, while revenue, excluding fuel surcharge, declined 22%. The majority of these decreases related to continued proactive reductions in existing fleets as adjustments have been made to match lower business demand levels. In addition, we have seen a 4% decrease in the productivity of trucks at our base business accounts. We define productivity as revenue per truck, excluding fuel surcharge. This decrease in productivity also relates to lower business demand levels experienced at this point of the economic recession.
The operating income at our base business accounts declined 27% during the current quarter. However, these accounts operated at an approximate 88% operating ratio vs. an 89% operating ratio in the third quarter 2008. Though we cannot predict the speed or pace of an economic recovery, we have seen the rate of truck reductions at our base business accounts slow in the current quarter compared to the first and second quarters 2009.
We have had significant new business development in 2009, as mentioned in our second quarter release. As all new development accounts this year are incremental vs. the same quarter last year, we compare the performance of these accounts to the second quarter 2009. Our new development truck count increased in the current quarter by 437 trucks, bringing the total current quarter average count to 631 for new development. These accounts recognized a 75% increase in profit from the second quarter 2009, despite incurring approximately $2.7 million of new contract start-ups and related implementation expenses. The main reason for the improvement in new development accounts relates to the 484 trucks that have completed the early implementation phase and are moving towards operating at acceptable and forecasted margins.
As of the end of the current quarter, we had on-boarded approximately 70% of the incremental delivery contracts we first mentioned in second quarter 2009 earnings release.
Truck (JBT)

  • Third Quarter 2009 Segment Revenue: $119 million; down 30%
  • Third Quarter 2009 Operating Loss: ($0.4) million; down 117%
JBT made significant strides in the current quarter, overcoming sequential quarterly losses of $5.8 million and $4.0 million in the first and second quarters of 2009. Of the $10.3 million total loss recorded through the current three quarters, $9.1 million occurred in the first four months of the year. Cost control measures implemented over the last several months, improvements in quality of revenue, and refining our network balance have resulted in near-breakeven operating results for the current quarter despite a miserable pricing environment. Demand improved in August and September over the second quarter 2009 and capacity tightened in some regions. Improvement in monthly operating income has been consistent and in line with internal expectations.
We continue to adjust our fleet size to match customer demand and market conditions. We refined our network to achieve greater utilization and efficiency, essential as market prices declined sharply. Utilization, as measured by miles per truck per day, increased 6% during the current quarter compared to the same period last year. JBT also intensified its focus on improving fuel mileage. Focusing on unnecessary idle time and other fuel strategies resulted in an improvement in fuel economy of 5%, saving 470,000 gallons during the current quarter. JBT was able to reduce driver recruiting expense as fleet size declined and turnover improved. We believe these cost saving strategies are sustainable, regardless of economic conditions.
JBT’s revenue for the current quarter declined 30%, compared with the third quarter 2008. Excluding fuel surcharge revenue, JBT revenue declined 21%. Overall rate per loaded mile, excluding fuel surcharges, decreased sharply compared to the third quarter 2008. Average length-of-haul increased by 4.9%, but spot rate per mile, excluding fuel surcharges, declined by 18.7%. Meanwhile, rates from consistent shippers declined $0.09 per loaded mile, or 5.1%, excluding fuel surcharges.
At the end of the current quarter, our truck count was 3,227 compared to 3,309 at the end of the same period in 2008. JBT’s tractor capacity makes it one of the country’s larger for-hire carriers and underpins the Company’s full-service, multi-modal capacity offering.
Integrated Capacity Solutions (ICS)

  • Third Quarter 2009 Segment Revenue: $68 million; up 16%
  • Third Quarter 2009 Operating Income: $3 million; down 1%
ICS continued to grow our customer base, load volumes and employees during the third quarter 2009, compared to third quarter 2008. Total loads increased 76% on an 80% increase in our customer base and employee count increased 50%. While we experienced sharply lower revenue per load, due to significant rate pressures, lower fuel surcharge revenue per load and a change in the types of freight hauled, our operating income was relatively flat with the third quarter 2008. Despite this decrease in our revenue per load, our gross profit (gross revenue less purchased transportation expense) increased 19% to $11 million as gross profit margin increased to 16.5% in the current quarter from 16% in the third quarter 2008.
We believe the margins experienced during the previous three quarters were a reflection of the severe over-capacity of trucks in the marketplace. While truck capacity is still plentiful, we have seen a slight tightening in the third quarter.
Cash Flow and Capitalization:
At September 30, 2009, we had total debt outstanding of $626 million, compared with $634 million at December 31, 2008 and $692 million at September 30, 2008.
Our net capital expenditures for the nine months ended September 30, 2009 approximated $209 million, compared with $122 million for the same period 2008. The increase in current year net capital expenditures was primarily due to the acquisition of new Intermodal trailing equipment and capital related to new DCS business investments. At September 30, 2009, we had cash and cash equivalents of $4.7 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, 2008. 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 at our web site, www.jbhunt.com.



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