JB Hunt Transport Services : Q4 2018 Earnings

J.B. Hunt Transport Services, Inc.	Contact:	David G. Mee
615 J.B. Hunt Corporate Drive	Executive Vice President,
Lowell, Arkansas 72745	Finance/Administration
(NASDAQ: JBHT)	and Chief Financial Officer
[phone]
FOR IMMEDIATE RELEASE

J.B. HUNT TRANSPORT SERVICES, INC. REPORTS REVENUES, NET EARNINGS AND EARNINGS

PER SHARE FOR BOTH THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2018

▪	Fourth quarter 2018 Revenue:	$2.32 billion; up 16%
▪	Fourth quarter 2018 Operating Income:	$123 million; down 16%
▪	Fourth quarter 2018 EPS:	$0.81 vs. $3.48; down 77%
▪	Full Year 2018 Revenue:	$8.61 billion; up 20%
▪	Full Year 2018 Operating Income:	$681 million; up 9%
▪	Full Year 2018 EPS:	$4.43 vs. $6.18; down 28%

LOWELL, Ark., January 17, 2019 - J.B. Hunt Transport Services, Inc., (NASDAQ:JBHT) announced fourth quarter 2018 net earnings of $88.7 million, or diluted earnings per share of $0.81 vs. fourth quarter 2017 net earnings of $385.3 million, or $3.48 per diluted share. Fourth quarter 2018 net earnings included pre-announced pretax charges of $134.0 million for contingent liabilities related to the ongoing arbitration with BNSF Railway Company. Fourth quarter 2017 net earnings included $38.9 million pre-tax charges for reserve increases on certain outstanding receivables and insurance claims as well as a $309.2 million decrease in income taxes as a result of the Tax Cuts and Jobs Act enacted during that quarter.

Total operating revenue for the current quarter was $2.32 billion, compared with $1.99 billion for the fourth quarter 2017. A 16% increase in revenue per load in Intermodal (JBI) contributed to a 15% increase in segment revenue. Dedicated Contract Services (DCS) segment revenue increased by 25%, primarily from the addition of new customer accounts and improved asset utilization. Integrated Capacity Solutions (ICS) segment revenue increased by 7% primarily from a 14% increase in load growth. Truck (JBT) segment revenue increased 21% primarily from customer rate per mile increases. Current quarter total operating revenue, excluding fuel surcharges, increased 15% vs. the comparable quarter 2017.

Operating income for the current quarter decreased to $122.7 million vs. $145.8 million for the fourth quarter 2017. The benefit from increased revenues was partly offset with cost increases in rail purchase transportation, inclusive of the $134.0 million contingent liability charge, increased driver wages, increased independent contractor rates per mile including outsourced intermodal dray, increased driver and independent contractor recruiting costs, and higher salary and wage expenses for non-driving personnel. Fourth quarter 2017 operating income included $38.9 million in charges for reserve increases on certain outstanding receivables and insurance claims.

Net earnings decreased to $88.7 million in the current quarter from $385.3 million in 2017, primarily due to the $309.2 million benefit from estimating the effect of the change in future tax rates on deferred tax balances at December 31, 2017. The fourth quarter effective tax rates for 2018 and 2017 were 20.47%and (175.65)%, respectively. The annual effective tax rates for 2018 and 2017 were 23.6% and (15.29)%, respectively.

Segment Information:

Intermodal (JBI)

• ▪ Fourth quarter 2018 Segment Revenue: $1.26 billion; up 15%

• ▪ Fourth quarter 2018 Operating Income: $32.4 million; down 65%

JBI total volumes declined 1% over the same period in 2017. Eastern network loads grew at 5% and transcontinental loads decreased 4% compared to the fourth quarter 2017. Revenue increased 15%, reflecting a 16% increase in revenue per load, the combination of freight mix, customer rate increases, and fuel surcharges, offset by the 1% decline in volume. Revenue per load excluding fuel surcharges increased approximately 15% compared to a year ago.

Operating income decreased 65% from the prior year. Benefits from customer rate increases were offset by the $134 million pre-announced charges for contingent liabilities related to the ongoing arbitration, increased costs to attract and retain drivers, higher third-party dray costs, and increased costs due to inefficiencies in the rail networks due to congestion and service delays. In fourth quarter 2017, JBI recorded $28.7 million in charges from reserve increases on certain receivables and insurance claims. The current period ended with approximately 94,900 units of trailing capacity and approximately 5,650 power units in the dray fleet.

Dedicated Contract Services (DCS)

• ▪ Fourth quarter 2018 Segment Revenue:

• ▪ Fourth quarter 2018 Operating Income:

$596 million; up 25% $59.4 million; up 70%

DCS revenue increased 25% during the current quarter over the same period 2017. Productivity (revenue per truck per week) increased approximately 7% vs. 2017. Productivity excluding fuel surcharge revenue increased approximately 5% from a year ago primarily from customer rate increases, improved integration of assets between customer accounts, and increased customer supply chain fluidity. Included in the DCS revenue growth, Final Mile Services (FMS) recorded an increase in revenue of $17 million compared to fourth quarter 2017. A net additional 1,388 revenue producing trucks, 458 net additions sequentially from third quarter 2018, were in the fleet by the end of the quarter. Approximately 32% of these additions represent private fleet conversions and 5% represent FMS versus traditional dedicated capacity fleets. Customer retention rates remain above 98%.

Operating income increased by 70% from a year ago. The increase in productivity and additional trucks under contract was partially offset by increased costs expanding the FMS network, increased driver wages and increased driver recruiting costs including the length of time to fill open positions compared to the same period a year ago. Fourth quarter 2017 operating income included $7.6 million of charges for certain insurance and claims reserve increases.

Integrated Capacity Solutions (ICS)

• • Fourth Quarter 2018 Segment Revenue:

• • Fourth Quarter 2018 Operating Income:

$345 million; up 7% $16.1 million; up 43%

ICS revenue increased 7% in the current quarter vs. the fourth quarter 2017. Volume increased 14% but revenue per load decreased 6.4%, mostly due to customer mix changes and decreased spot market activity, compared to the prior year. Contractual volumes represent approximately 71% of the total load volume and 53% of the total revenue in the current quarter compared to 66% and 46%, respectively, in fourth quarter 2017. Of the total reported ICS revenue, approximately $174 million was executed through the Marketplace for J.B. Hunt 360 compared to $151 million in third quarter 2018.

Operating income increased 43% over the same period in 2017. Gross profit margin increased to 16.9% in the current period from 14.1% last year primarily from customer rate increases on contractual volumes.

The increase in gross profit margin was partially offset by higher personnel costs, increased insurance and claims costs, and higher technology spending as the Marketplace for J.B. Hunt 360 expands capacity and adds functionality. ICS recorded a $1.8 million charge for increased reserves on certain insurance claims in the fourth quarter 2017. ICS's carrier base increased 29% and the employee count increased 20% from a year ago.

Truck (JBT)

• ▪ Fourth quarter 2018 Segment Revenue:

• ▪ Fourth quarter 2018 Operating Income:

$118 million; up 21% $14.7 million; up 131%

JBT revenue increased 21% from the same period in 2017. Revenue excluding fuel surcharges increased approximately 21% compared to a year ago. Revenue per load increased 10% primarily from an 18% increase in rates per loaded mile offset by a 6% decrease in length of haul compared to fourth quarter 2017. Comparable contractual customer rates increased approximately 15% compared to the same period a year ago. At the end of the period, JBT operated 2,112 tractors compared to 2,032 a year ago.

Operating income increased 131% from fourth quarter 2017. Favorable changes from higher rates per loaded mile and lower equipment ownership costs were partially offset by higher driver wages and independent contractor costs per mile and higher driver and independent contractor recruiting costs compared to fourth quarter 2017. JBT recorded approximately $0.7 million of the charges for increased reserves on certain insurance claims in the fourth quarter 2017.

Cash Flow and Capitalization:

At December 31, 2018, we had total debt outstanding of $1.15 billion on various debt instruments compared to $1.09 billion at December 31, 2017 and $1.07 billion at September 30, 2018.

Our net capital expenditures for 2018 approximated $885 million vs. $511 million in 2017. At December 31, 2018, we had cash and cash equivalents of $7.6 million.

In the fourth quarter 2018, we purchased approximately 494,000 shares of our common stock for approximately $50 million. At December 31, 2018, we had approximately $371 million remaining under our share repurchase authorization. Actual shares outstanding at December 31, 2018 approximated 108.7 million.

Conference Call Information:

The company will hold a conference call today at 4:00-5:00 p.m. CST to discuss the quarterly earnings. The call-in number for participants is [phone] and a replay of the call will be posted on its websitehere later this evening.

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, 2017. 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 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 December 31

2018

Amount

% Of Revenue

Operating revenues, excluding fuel surcharge revenues Fuel surcharge revenues

Total operating revenues

Operating expenses

Rents and purchased transportation Salaries, wages and employee benefits Depreciation and amortization

Fuel and fuel taxes

Operating supplies and expenses

General and administrative expenses, net of asset dispositions Insurance and claims

Operating taxes and licenses Communication and utilities

Total operating expenses

Operating income

Net interest expense

Earnings before income taxes Income taxes

Net earnings

Average diluted shares outstanding

Diluted earnings per share

$

2017

Amount

% Of Revenue

2,033,674 284,168 2,317,842

1,271,097

515,271

114,086

117,613

77,178

51,191

26,941

14,055

7,670

2,195,102

122,740

11,235

111,505

22,824

$

100.0%

$

1,765,658 224,502

1,990,160

54.8%

1,026,100

22.2% 429,853

4.9% 102,320

5.1% 100,848

3.3% 67,154

2.3% 51,279

1.2% 46,649

0.6% 12,496

0.3% 7,647

94.7%

5.3%

0.5%

4.8%

1.0%

88,681

145,814 7.3%

6,030 0.3%

3.8%

$

109,940

$

1,844,346

100.0%

51.6%

21.6%

5.1%

5.1%

3.4%

2.6%

2.3%

0.6%

0.4%

92.7%

139,784 (245,524)

7.0% (12.4%)

385,308

19.4%

110,737

0.81

$

3.48

J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

Twelve Months Ended December 31

2018

Amount

% Of Revenue

Operating revenues, excluding fuel surcharge revenues Fuel surcharge revenues

Total operating revenues

$

2017

Amount

% Of Revenue

7,557,648 1,057,226 8,614,874

$

6,435,858 753,710

100.0%

7,189,568

100.0%Operating expensesRents and purchased transportation 4,434,540

Salaries, wages and employee benefits 1,926,213

Depreciation and amortization 435,893

Fuel and fuel taxes 459,011

Operating supplies and expenses 303,529

General and administrative expenses, net of asset dispositions 163,270

Insurance and claims 129,406

Operating taxes and licenses 51,080

Communication and utilities 30,911

Total operating expenses

7,933,853

Operating income 681,021

Net interest expense 40,203

Earnings before income taxes 640,818

Income taxes 151,233

Net earnings

Average diluted shares outstanding

Diluted earnings per share

$

51.5%

22.4%

5.1%

5.3%

3.5%

1.8%

1.5%

0.6%

0.4%

92.1%

7.9% 0.5% 7.4% 1.7%

489,585 110,428

$

5.7%

3,650,806

1,608,378

383,518

347,573

257,239

125,878

123,579

44,825

23,983

6,565,779

623,789 28,550 595,239 (91,024)

$

50.8%

22.4%

5.3%

4.8%

3.6%

1.8%

1.7%

0.6%

0.3%

91.3%

8.7% 0.4% 8.3% (1.2%)

686,263 111,049

4.43

9.5%

$

6.18

Financial Information By Segment
(in thousands) (unaudited) Three Months Ended December 31 2018 2017 Amount % Of TotalAmount % Of Total Revenue
Intermodal $ 1,263,469 Dedicated 595,809 Integrated Capacity Solutions 345,400 Truck 117,707				54% 26% 15% 5%	$ 1,097,671 476,660 323,241 97,466			55% 24% 16% 5%
Subtotal 2,322,385 100% 1,995,038 100%
Intersegment eliminations (4,543)				(0%)	(4,878)			(0%)
Consolidated revenue $		2,317,842	100% $			1,990,160	100%
Operating income
Intermodal $		32,445		27% $		93,271		64%
Dedicated	59,416			48%		34,918		24%
Integrated Capacity Solutions 16,142				13%		11,277		8%
Truck	14,737			12%		6,380		4%
Other (1)	-			0%	(32)			(0%)
Operating income $		122,740	100% $			145,814	100%
Twelve Months Ended December 31 2018 2017 Amount % Of TotalAmount % Of Total Revenue
Intermodal	$	4,716,649	55% $			4,084,418	57%
Dedicated 2,163,155 Integrated Capacity Solutions 1,334,629				25% 15%	1,718,559 1,024,576			24% 14%
Truck	417,351			5%	378,361			5%
Subtotal 8,631,784 100% 7,205,914 100%
Intersegment eliminations (16,910)				(0%)	(16,346)			(0%)
Consolidated revenue $		8,614,874	100% $			7,189,568	100%
Operating income
Intermodal $		400,999		59% $		407,376		65%
Dedicated	193,419			29%		171,113		27%
Integrated Capacity Solutions 50,167				7%		22,797		4%
Truck	36,568			5%		22,597		4%
Other (1)	(132)			(0%)	(94)			(0%)
Operating income $		681,021	100% $			623,789	100%
(1) Includes corporate support activity