J.B. Hunt Transport Services, Inc. Reports Revenues and Earnings for the Second Quarter 2008

J.B. Hunt Transport Services, Inc. (NASDAQ: JBHT) announced second quarter 2008 net earnings of $50.6 million, or diluted earnings per share of 39 cents vs. 2007 second quarter earnings of $63.9 million, or 45 cents per diluted share. Included in the second quarter 2007 results was a benefit of $10.3 million (EPS positive impact 7 cents), net of income taxes, resulting from the settlement of a tax adjustment by the IRS. Total operating revenue for the current quarter was $977 million, a 14% increase from the $856 million for the second quarter 2007. The increase in operating revenue was primarily attributable to sharply higher fuel surcharge revenue and growth in our Intermodal (JBI) segment and our non-asset based Integrated Capacity Solutions (ICS) segment. Current quarter operating revenue, excluding fuel surcharges, increased 3% over the second quarter 2007. Containers and trailers grew from 55,886 to 60,290 over the same period. The growth in the fleet of containers and trailers was primarily to support additional intermodal business. The combined tractor fleet declined from 11,760 in the second quarter 2007 to 10,545 in the second quarter 2008, primarily due to our actions to reduce the size of the Truck segment fleet. Operating income for the current quarter decreased slightly to $94.0 million vs. $96.2 million for the second quarter 2007. The income tax adjustment referred to above recorded in the second quarter of 2007 was related to a 1999 sale-and-leaseback transaction which had been disclosed previously. Our effective income tax rate for the current quarter increased to 39.0% in 2008, from 24.8% in 2007 which reflected the settlement of the IRS adjustment. "We are delighted to report earnings per share growth in the second quarter 2008 (excluding the tax benefit in second quarter 2007) despite a significant freight recession and soaring fuel prices. We continue to offer our customers supply chain solutions that best suit their service and cost parameters without bias toward a particular mode or asset class. Importantly, this value enhancing strategy has allowed our customers to partially mitigate the impact of historically higher fuel prices by growing their use of intermodal vs. truckload. Whether it be saving our customers money on their transportation costs by converting truckload freight to intermodal, by offering true dedicated operations for service critical deliveries or by providing alternative outsourced capacity to complement our own trucks, we are committed to helping our customers achieve best-in-class performance of their supply chains. We are pleased to be able to achieve progress toward those goals and also produce higher earnings per share in this difficult environment,” said Kirk Thompson, JBHT President and CEO. Segment Information: Intermodal (JBI) Second Quarter 2008 Segment Revenue: $496 million; up 28% Second Quarter 2008 Operating Income: $66.2 million; up 22% JBI revenue grew by 28% compared to the same quarter a year ago, driven mostly by load count that increased 17% and by higher fuel surcharge revenue. Results for the current quarter continue to reflect our customers’ confidence in our intermodal product as they look for alternatives to high fuel prices paid to over-the-road providers. As a result, our short haul loads continue to grow at a 40% plus pace. The resultant lane mix change drove overall length of haul down 4% and pricing up 2% in the current quarter. JBI operating key factors continue to show positive results as both driver turnover and driver productivity improved during the current quarter. In conjunction with our eastern rail partner, Norfolk Southern Corporation (NSC), we have initiated service on more than a half dozen new intermodal lanes serving the Eastern half of the United States. While the initial volume impacts are expected to be small, our ability to meet new customer requests for over-the-road conversion to intermodal continues to expand. We are pleased with the execution of our network and operations by our experienced intermodal staff and in their ability to quickly adjust to a changing environment for the benefit of our customers. Dedicated Contract Services (DCS) Second Quarter 2008 Segment Revenue: $243 million; up 3% Second Quarter 2008 Operating Income: $22.2 million; down 11% DCS revenue grew 3% compared to the same quarter last year. Excluding the effect of fuel surcharges, revenue declined 6%. However, revenue per average truck per week, excluding the effect of fuel surcharges, increased 3%. This increase was partially due to a decline in average trucks to 4,715 units in the second quarter 2008 vs. 5,215 units in the second quarter 2007. The decline in truck count was driven primarily by reduction in the number of units that operate in more generic dedicated business which, by our definition, now stands at approximately 8% of our fleet. Truck count in the value-added, true dedicated business increased when compared to both the second quarter 2007 and first quarter 2008. Operating statistics in the second quarter 2008 vs. the same period last year reflect this change in business mix. Utilization was down 5% and loaded length of haul down 29 miles to 224 miles, while revenue per loaded mile, excluding fuel surcharge, was up 10%. Operating income declined $2.7 million and the operating ratio increased 140 basis points to 90.9%. The increase in the cost of fuel and the corresponding increase in fuel surcharge revenue caused a dilutive effect on the operating ratio of 80 basis points. As fuel surcharge revenue increased, the operating ratio was negatively impacted due to the additional revenue with no attendant margin. Truck (JBT) Second Quarter 2008 Segment Revenue: $192 million; down 14% Second Quarter 2008 Operating Income: $3.4 million; down 79% JBT segment revenue declined 14%, primarily due to a 17% reduction in loads, compared to the second quarter 2007. We have continued to right-size our random tractor fleet, which resulted in a reduction of 1,085 tractors, or 22%, compared to the tractor counts at the end of the second quarter 2007. As a result, current quarter revenue declined 23%, excluding fuel surcharges. We continue to make progress selling the JBT segment revenue equipment that was designated as held for sale at December 31, 2007. JBT’s overall rate per loaded mile, excluding fuel surcharges, increased 2.3% during the current quarter, compared to the prior year period. However, rates must increase in order for JBT to produce acceptable returns. Inability to achieve rapid improvement in profitability will result in further truck count reductions. We continue to be challenged by steep rises in fuel prices and, as typical in the truckload industry, unrealistic fuel economy assumptions in most customer-specific fuel surcharge programs. Fuel increased dramatically during the quarter, climbing 70 cents per gallon, or 18%, from its low in early April. We incur non-billable fuel consumption from idle time and extra miles from deadheading and mileage guide variances. Higher fuel costs, net of fuel surcharge revenues, reduced JBT operating income by approximately $3.2 million compared to the second quarter last year. JBT is evaluating its most unfavorable customer-specific fuel surcharge programs and will begin aggressively seeking improvements to better recover the high cost of fuel. Integrated Capacity Solutions (ICS) Second Quarter 2008 Segment Revenue: $53 million; up 214% Second Quarter 2008 Operating Income: $2.3 million; up 238% ICS segment revenue increased 214% from the second quarter 2007. We continue to see steady revenue growth from new and existing customers, with revenues increasing 42% from the first quarter 2008, primarily driven by increased volumes. Second quarter net operating revenue (gross revenue less purchased transportation) increased 186% year over year. Operating expenses increased 167% from the second quarter 2007, primarily due to employee growth throughout 2007 and 2008. Year over year employee count increased 191% from 2007. We continued to grow our workforce during the second quarter 2008, in anticipation of continued growth in the segment, with employees growing 32% from the first quarter 2008. Despite the significant growth in our workforce, operating expenses, as a percentage of net operating revenue, decreased to 68.5% in the second quarter from 69% in the first quarter 2008. During the current quarter, we began offering cash advance and quickpay services to our carriers. Our third party carrier base grew 21% during the current quarter to over 12,700 carriers by quarter-end. Cash Flow and Capitalization: At June 30, 2008, we had cash and cash equivalents of $1.3 million. We reduced our total debt to $825 million at June 30, 2008 from $913 million at December 31, 2007. In addition, our net capital expenditures year-to-date approximated $110 million vs. $210 million during the same time a year ago. 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, 2007. 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.   J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Statements of Earnings (in thousands, except per share data) (unaudited)     Three Months Ended June 30 2008   2007   % Of   % Of Amount   Revenue Amount   Revenue   Operating revenues, excluding fuel surcharge revenues $ 763,303 $ 742,573 Fuel surcharge revenues   214,036   113,287 Total operating revenues 977,339 100.0 % 855,860 100.0 %   Operating expenses Rents and purchased transportation 377,433 38.6 % 292,155 34.2 % Salaries, wages and employee benefits 220,961 22.6 % 223,350 26.1 % Fuel and fuel taxes 157,637 16.1 % 114,784 13.4 % Depreciation and amortization 50,728 5.2 % 50,526 5.9 % Operating supplies and expenses 40,965 4.2 % 38,880 4.5 % Insurance and claims 14,262 1.5 % 16,774 2.0 % Operating taxes and licenses 8,120 0.8 % 8,554 1.0 % General and administrative expenses, net of gains 8,584 0.9 % 9,517 1.1 % Communication and utilities   4,604 0.5 %   5,093 0.6 % Total operating expenses   883,294 90.4 %   759,633 88.8 % Operating income 94,045 9.6 % 96,227 11.2 % Net interest expense 10,065 1.0 % 10,771 1.3 % Equity in loss of associated companies   1,023 0.1 %   545 0.1 % Earnings before income taxes 82,957 8.5 % 84,911 9.9 % Income taxes   32,353 3.3 %   21,054 2.5 % Net earnings $ 50,604 5.2 % $ 63,857 7.5 % Average diluted shares outstanding   128,476   142,030 Diluted earnings per share $ 0.39 $ 0.45   J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Statements of Earnings (in thousands, except per share data) (unaudited)   Six Months Ended June 30 2008 2007 % Of % Of Amount   Revenue Amount   Revenue   Operating revenues, excluding fuel surcharge revenues $ 1,487,474 $ 1,449,045 Fuel surcharge revenues   368,248   204,266 Total operating revenues 1,855,722 100.0 % 1,653,311 100.0 %   Operating expenses Rents and purchased transportation 708,108 38.2 % 558,665 33.8 % Salaries, wages and employee benefits 434,596 23.4 % 442,575 26.8 % Fuel and fuel taxes 291,639 15.7 % 219,829 13.3 % Depreciation and amortization 101,267 5.5 % 100,047 6.0 % Operating supplies and expenses 77,762 4.2 % 75,441 4.6 % Insurance and claims 32,064 1.7 % 34,076 2.1 % Operating taxes and licenses 16,173 0.9 % 16,933 1.0 % General and administrative expenses, net of gains 18,114 1.0 % 18,593 1.1 % Communication and utilities   9,898 0.5 %   10,526 0.6 % Total operating expenses   1,689,621 91.0 %   1,476,685 89.3 % Operating income 166,101 9.0 % 176,626 10.7 % Net interest expense 21,572 1.2 % 18,126 1.1 % Equity in loss of associated companies   1,878 0.1 %   1,060 0.1 % Earnings before income taxes 142,651 7.7 % 157,440 9.5 % Income taxes   55,634 3.0 %   49,412 3.0 % Net earnings $ 87,017 4.7 % $ 108,028 6.5 % Average diluted shares outstanding   128,195   144,240 Diluted earnings per share $ 0.68 $ 0.75     Financial Information By Segment (in thousands) (unaudited)     Three Months Ended June 30 2008   2007   % Of   % Of Amount   Total Amount   Total   Revenue   Intermodal $ 495,834 51 % $ 387,371 45 % Dedicated 243,271 25 % 236,310 28 % Truck 191,842 20 % 222,456 26 % Integrated Capacity Solutions   53,123   5 %   16,942   2 % Subtotal 984,070 101 % 863,079 101 % Intersegment eliminations   (6,731 ) (1 %)   (7,219 ) (1 %) Consolidated revenue $ 977,339   100 % $ 855,860   100 %     Operating income   Intermodal $ 66,152 70 % $ 54,185 56 % Dedicated 22,161 24 % 24,830 26 % Truck 3,386 4 % 16,465 17 % Integrated Capacity Solutions 2,291 2 % 678 1 % Other1   55   0 %   69   0 % Operating income $ 94,045   100 % $ 96,227   100 %       Six Months Ended June 30 2008 2007 % Of % Of Amount   Total Amount   Total Revenue   Intermodal $ 932,638 50 % $ 741,691 45 % Dedicated 471,626 25 % 460,597 28 % Truck 376,825 20 % 436,768 26 % Integrated Capacity Solutions   90,616   5 %   29,919   2 % Subtotal 1,871,705 101 % 1,668,975 101 % Intersegment eliminations   (15,983 ) (1 %)   (15,664 ) (1 %) Consolidated revenue $ 1,855,722   100 % $ 1,653,311   100 %     Operating income   Intermodal $ 117,994 71 % $ 100,747 57 % Dedicated 40,484 24 % 46,796 26 % Truck 3,340 2 % 27,890 16 % Integrated Capacity Solutions 4,241 3 % 1,156 1 % Other1   42   0 %   37   0 % Operating income $ 166,101   100 % $ 176,626   100 %   1 Includes corporate support activity   Operating Statistics by Segment (unaudited)     Three Months Ended June 30 2008     2007   Intermodal   Loads 206,566 176,681 Average length of haul 1,844 1,918 Revenue per load $ 2,400 $ 2,192 Average tractors during the period1 2,019 1,651   Tractors (end of period) Company-owned 2,050 1,680 Independent contractor   5   14 Total tractors 2,055 1,694   Containers (end of period) 35,427 29,494 Average effective trailing equipment usage 34,578 29,037     Dedicated   Loads 343,742 356,042 Average length of haul 224 253 Revenue per truck per week2 $ 3,993 $ 3,518 Average trucks during the period3 4,715 5,215   Trucks (end of period) Company-owned 4,546 5,060 Independent contractor 82 113 Customer-owned (Dedicated operated)   94   40 Total trucks 4,722 5,213   Trailing equipment (end of period) 8,084 7,382 Average effective trailing equipment usage 12,682 13,235     Truck   Loads 174,193 209,814 Average length of haul 463 513 Loaded miles (000) 79,943 108,829 Total miles (000) 90,630 123,288 Average nonpaid empty miles per load 62.2 68.3 Revenue per tractor per week2 $ 3,804 $ 3,446 Average tractors during the period1 3,912 5,022   Tractors (end of period) Company-owned 3,015 3,854 Independent contractor   753   999 Total tractors 3,768 4,853   Trailers (end of period) 16,779 19,010 Average effective trailing equipment usage 12,198 13,167     Integrated Capacity Solutions   Loads 34,147 11,775   1 Includes company-owned and independent contractor tractors 2 Using weighted workdays 3 Includes company-owned, independent contractor, and customer-owned trucks   Operating Statistics by Segment (unaudited)     Six Months Ended June 30 2008     2007   Intermodal   Loads 397,586 337,539 Average length of haul 1,862 1,936 Revenue per load $ 2,346 $ 2,197 Average tractors during the period1 1,927 1,612   Tractors (end of period) Company-owned 2,050 1,680 Independent contractor   5   14 Total tractors 2,055 1,694   Containers (end of period) 35,427 29,494 Average effective trailing equipment usage 34,148 28,512     Dedicated   Loads 674,583 693,983 Average length of haul 228 256 Revenue per truck per week2 $ 3,809 $ 3,418 Average trucks during the period3 4,806 5,239   Trucks (end of period) Company-owned 4,546 5,060 Independent contractor 82 113 Customer-owned (Dedicated operated)   94   40 Total trucks 4,722 5,213   Trailing equipment (end of period) 8,084 7,382 Average effective trailing equipment usage 12,901 13,081     Truck   Loads 344,487 411,552 Average length of haul 478 520 Loaded miles (000) 164,864 216,481 Total miles (000) 187,555 245,759 Average nonpaid empty miles per load 66.3 70.6 Revenue per tractor per week2 $ 3,606 $ 3,343 Average tractors during the period1 4,068 5,111   Tractors (end of period) Company-owned 3,015 3,854 Independent contractor   753   999 Total tractors 3,768 4,853   Trailers (end of period) 16,779 19,010 Average effective trailing equipment usage 12,284 13,231     Integrated Capacity Solutions   Loads 62,227 20,136   1 Includes company-owned and independent contractor tractors 2 Using weighted workdays 3 Includes company-owned, independent contractor, and customer-owned trucks   J.B. HUNT TRANSPORT SERVICES, INC. Condensed Consolidated Balance Sheets (in thousands) (unaudited)           June 30, 2008       December 31, 2007           ASSETS Current assets: Cash and cash equivalents $ 1,260 $ 14,957 Accounts receivable 382,121 330,202 Assets held for sale 25,938 39,747 Prepaid expenses and other       57,030         103,988 Total current assets       466,349         488,894 Property and equipment 2,125,382 2,080,893 Less accumulated depreciation       742,988         722,170 Net property and equipment       1,382,394         1,358,723 Other assets       11,072         15,129       $ 1,859,815       $ 1,862,746     LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Current debt $ 209,000 $ 234,000 Trade accounts payable 188,325 189,987 Claims accruals 19,335 19,402 Accrued payroll 43,356 34,310 Other accrued expenses 22,870 26,663 Deferred income taxes       19,935         20,070 Total current liabilities       502,821         524,432   Long-term debt 615,700 679,100 Other long-term liabilities 35,387 34,453 Deferred income taxes 279,652 281,564 Stockholders' equity       426,255         343,197       $ 1,859,815       $ 1,862,746       Supplemental Data (unaudited)         June 30, 2008       December 31, 2007   Actual shares outstanding at end of period (000)       125,617         124,572   Book value per actual share outstanding at end of period     $ 3.39       $ 2.76     Six Months Ended June 30 2008 2007   Net cash provided by operating activities (000)     $ 202,648       $ 210,645   Net capital expenditures (000)     $ 110,400       $ 210,032   Purchases of common stock (000)     $ -       $ 300,473