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 REVENUES AND EARNINGS
FOR THE SECOND QUARTER OF 2007
| | · | | Second Quarter 2007 Revenue: | | $856 million; up 2% |
| | · | | Second Quarter 2007 Operating Income: | | $96 million; up 1% |
| | · | | Second Quarter 2007 EPS: | | 45 cents* vs. 36 cents |
| | | | * 2Q 2007 includes $10.3 million benefit, net of tax, (EPS impact 7 cents) for settlement of a
proposed IRS adjustment |
LOWELL, ARKANSAS, July 17, 2007 - J. B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced second quarter 2007 net earnings of $63.9 million, or diluted earnings per share of 45 cents vs. 2006 second quarter earnings of $55.3 million, or 36 cents per diluted share. Included in the second quarter 2007 results is a benefit of $10.3 million, net of income taxes, resulting from the settlement of a proposed tax adjustment by the IRS.
Total operating revenue for the current quarter was $856 million, a 2% increase from the $838 million for the second quarter 2006. The increase in operating revenue was primarily attributable to growth in our Intermodal (JBI), Dedicated Contract Services (DCS) and Integrated Capacity Solutions (ICS) segments. The combined tractor fleet declined from 11,993 in the second quarter 2006 to 11,760 in the second quarter 2007. Containers and trailers grew from 50,738 to 55,821 over the same period. The growth in the fleet, including containers and trailers, was primarily to support additional intermodal business.
Operating income for the current quarter increased slightly to $96.2 million vs. $95.4 million for the second quarter 2006. Net interest expense increased significantly from $3.1 million in the second quarter 2006 to $10.8 million in the current quarter, primarily due to higher levels of debt. These increased borrowings were related primarily to our purchases of company stock, payment of the IRS tax settlement and purchases of trailing equipment off operating leases. Also contributing to the higher net interest expense was approximately $3 million of additional accrued interest expense as a result of the settlement of a proposed IRS adjustment. This proposed income tax adjustment was related to a 1999 sale-and-leaseback transaction which had been disclosed previously. The additional interest expense was included, net of tax benefit, in the $10.3 million net benefit previously mentioned. Our effective income tax rate for the current quarter decreased to 24.8% in 2007, from 39.0% in 2006, reflecting the settlement of the proposed IRS adjustment. We expect our effective income tax rate to approximate 35.5% for the full calendar year 2007.
“Thanks to healthy growth in volumes and higher prices in our Intermodal segment, we were able to withstand slower net growth in our DCS segment, and stagnant freight volumes and lower prices in our Truck segment to produce a solid operating performance for the second quarter 2007,” said Kirk Thompson, JBHT President and CEO.
Segment Information:
Intermodal (JBI)
· | | Second Quarter 2007 Segment Revenue: | | $387 million; up 10% |
· | | Second Quarter 2007 Operating Income: | | $54.2 million; up 25% |
Intermodal segment revenue continued its steady expansion with load growth of 14% over the same period in 2006. The majority of the load growth came from shorter haul eastern lanes impacting our freight mix and length of haul. Year over year price per mile comparisons remain positive, up 1.5%, while moderating fuel surcharge revenues grew at a slower pace than overall revenue.
Operating income improved by 25%, as we managed improvements in company dray expense, focused on reducing empty miles and reduced the use of outsourced dray carriers. Improvements were also seen in the overall cost of the container fleet as maintenance costs were reduced and several hundred older, higher maintenance containers were retired. We continue to re-invest in the container/chassis fleet as older chassis are refurbished to extend their life and new steel containers are acquired to replace the first generation containers. Our 100% 53 foot container fleet ended the quarter at just under 30,000 units.
Dedicated Contract Services (DCS)
· | | Second Quarter 2007 Segment Revenue: | | $236 million; up 2% |
· | | Second Quarter 2007 Operating Income: | | $24.8 million; down 4% |
DCS revenue grew 2%, driven by a 100 unit increase in the average tractor fleet vs. the same quarter last year. Revenue per truck per week was flat as an approximate 5% increase in revenue per loaded mile offset a decline in total utilization and an increase in empty miles. Measured as a percent of gross revenue, operating expenses were generally in line with the same period last year except for a 60 basis point increase in casualty expense.
Demand for customized dedicated services remains strong. As of the end of the second quarter 2007 we had 280 trucks operating at accounts opened within the past 90 days. We continue to see a reduction in truck count at some accounts that provide more generic dedicated business. We also experienced reductions in truck count at other fleets in response to changes in our customers’ business demand. Reducing truck count to help our customers optimize capacity and reduce their transportation costs is an integral part of Customer Value Deliverytm. 5,213 tractors were assigned to DCS, which is a sequential increase of 29 units over the first quarter of 2007.
Truck (JBT)
· | | Second Quarter 2007 Segment Revenue: | | $222 million; down 10% |
· | | Second Quarter 2007 Operating Income: | | $16.5 million; down 33% |
Truck revenue declined 10% on a 6% reduction in loads hauled compared to the same quarter a year ago. Demand was soft, especially early in the current quarter, but improved somewhat throughout the remainder of the quarter, and was on par with last year’s June demand as measured on a daily loads-per-tractor basis. We continue to reduce the number of trucks in this segment according to customer demand and in response to continued softness in the market. By the end of the second quarter, the tractor count was down by 412 trucks, or 8%, compared to the second quarter of 2006. Demand slowly improved late in the current quarter and we welcomed a small, end-of-quarter spike in activity absent since last year at this time.
Overall, our rate per loaded mile, excluding fuel surcharges, decreased 2.3% during the current quarter. We have been able to maintain much of our existing volume from consistent business without eroding previous rate gains, essentially holding rates steady, despite softer economic conditions and an exceptionally active bid season. We believe our customers realize that once volumes return, over-the-road truck capacity will likely be insufficient to meet increased demand
and many have opted for dependable capacity at reasonable prices rather than chase the cheapest carrier. Paid deadhead was notably smaller this year and contributed greatly to the decline in rate overall. In previous periods paid deadhead had been a sizable portion of the total rate but declined by 95% in the second quarter 2007 vs. the same quarter a year ago. Noteworthy, rates from spot market pricing increased late in the quarter.
Integrated Capacity Solutions (ICS)
· | | Second Quarter 2007 Segment Revenue: | | $17 million; up 53% |
· | | Second Quarter 2007 Operating Income: | | $0.7 million; down 33% |
Integrated Capacity Solutions provides non-asset and asset-light transportation solutions to customers through relationships with third-party carriers and integration with JBHT owned equipment. ICS services include flatbed, refrigerated, LTL, as well as a variety of dry van and intermodal solutions. ICS financial results in 2006 were reported as part of the Truck segment. Revenue for ICS increased 53% from 2006 on increased volume. Operating income for the second quarter continued to reflect higher expenses of increasing ICS staff to invest in future growth and for deploying new technology. Our staff is 2.9 times the size it was in the second quarter 2006.
ICS revenue increased sequentially 31% from the first quarter 2007 on volume gains from new and existing customers. Our third-party carrier base grew 25% during the second quarter to over 5,000 carriers. Technology advances deployed during the second quarter allow ICS to quickly access available carrier capacity and enhance existing communication capabilities between us and contract carriers, providing better service to customers and increased productivity of our employees.
Cash Flow and Capitalization:
Approximately 6.8 million shares of company stock were purchased during the second quarter 2007 for just over $197 million. Approximately $303 million remained authorized by our Board of Directors and available at June 30, 2007, for purchases of company stock. As of June 30, 2007, we owed approximately $704 million on our various credit facilities vs. $396 million at December 31, 2006. Approximately $187 million of this increase related to the purchase of trailing equipment off operating leases and settlement payment of the proposed IRS tax adjustment.
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, 2006. 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.
