Why did net earnings per share decline in 1993 even though operating income increased?

Net earnings were $38,221 thousand, or $1.00 per share, in 1993 compared with $38,758 thousand, or $1.08 per share, in 1992. The 1992 figure included a $1,825 thousand cumulative effect of a change in tire accounting. Earnings before that cumulative effect were $36,933 thousand, or $1.03 per share, in 1992. Operating income increased, but interest expense rose to $13,800 thousand from $10,908 thousand, and the effective income tax rate increased to 41% in 1993 due to the higher federal tax rate.

How is J.B. Hunt funding its capital spending on equipment and containers?

The company funded net capital investments of $197 million in 1993 with cash generated from operations and proceeds from long-term debt. Net cash provided by operating activities was $121,427 thousand in 1993. In September 1993 it issued $100 million of 6.25% unsecured notes due 2003. Commercial paper borrowings were $106,492 thousand at year end, and about $100 million of uncommitted lines of credit were available with no outstanding borrowings. The company expects to fund future capital expenditures from operations and long-term debt.

What is the company's exposure to its largest customers and to seasonal fluctuations?

No single customer accounted for more than 6% of revenues during 1992 or 1993. The company serves a diversified group of Fortune 500 customers across a broad geographic area and mix of industries. Freight is typically stronger in the second half of the year, with peak months of August, September and October, and revenue is also affected by bad weather and holidays.

What risks does the company identify from its shift toward intermodal transportation and container investments?

The company stated that its strategy involves substantial capital investment in multi-purpose containers and chassis over the next two to three years and the disposition of significant numbers of van-type trailers. Future earnings may be favorably or unfavorably affected by market prices for used revenue equipment or other factors related to this transition. Purchased transportation and spotting expense rose to $187,726 thousand in 1993 from $111,579 thousand in 1992 as intermodal and third-party utilization grew.

Is the company facing material litigation or labor issues?

The company is party to routine litigation mainly involving personal injury and property damage claims, and management believes adverse results would not have a material adverse effect on its financial position. The company maintains excess insurance above its self-insured levels. None of its drivers or other employees are represented by a collective bargaining unit, and management considers its employee relationships excellent.

JBHT 10-K FY1993 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 31, 1994. Cited figures are marked; the original filing is the authoritative source.

J.B.

Hunt Transport Services, Inc. (Services) is a diversified transportation company focused on full-load containerizable freight in North America, operating as an irregular route common motor carrier regulated by the ICC. In 1993 operating revenues rose to $1,020,921 thousand^a (about $1.02 billion) from $911,982 thousand in 1992, and operating income reached $78,626 thousand versus $69,090 thousand. Net earnings were $38,221 thousand, or $1.00 per share, compared with $38,758 thousand, or $1.08 per share, in 1992, which included a $1,825 thousand cumulative effect of a change in tire accounting.

The filing attributes revenue growth mainly to intermodal railroad volume and specialized carrier operations, while a shortage of qualified drivers in the second half of 1993 limited fleet and revenue growth. The company's balance sheet expanded substantially during 1993. Total assets increased to $862,442 thousand^b from $715,741 thousand, and long-term debt rose to $303,499 thousand from $216,254 thousand, including a $100 million issue of 6.25% unsecured notes due 2003 sold in September 1993.

Net capital investments were $197 million^c in 1993 and $249 million in 1992, funded by operations and debt. The company has committed to purchase approximately $208 million of revenue and service equipment, net of $24 million in expected sale or trade-in proceeds, and it reported approximately $100 million of uncommitted credit lines available with no borrowings outstanding at year end. The company reported that its intermodal strategy involves substantial investment in multi-purpose containers and chassis over the next two to three years, along with the disposition of significant numbers of van trailers, which may affect future earnings through used equipment prices.

Dividends were $.20 per share in 1993, and the Board declared a $.05 quarterly dividend in January 1994. Management's effective tax rate rose to 41%^d in 1993 due to a higher federal rate, and the company reported 10,476 employees at year end, none represented by a collective bargaining unit.

02—Key points

Key Highlights

Operating revenues increased 12% to $1,020,921 thousand in 1993 from $911,982 thousand in 1992, driven by intermodal railroad volume and specialized carrier operations.
Net earnings were $38,221 thousand ($1.00 per share) in 1993, compared with $38,758 thousand ($1.08 per share) in 1992.
Operating income rose to $78,626 thousand from $69,090 thousand, and the operating ratio improved to 7.7% of revenue from 7.6% in 1992 as reported in the operating data table.
Total assets grew to $862,442 thousand and long-term debt increased to $303,499 thousand, including a $100 million 6.25% senior note issue due 2003.
Net capital investments totaled $197 million in 1993 versus $249 million in 1992, with $208 million of revenue and service equipment purchases committed.
The company identified a shortage of qualified drivers in the second half of 1993 as a factor that negatively affected fleet size and revenue growth.
Fleet at year end comprised 6,775 tractors and 19,089 trailers/containers, with the company planning to convert a significant portion of its trailer fleet to multi-purpose containers.

03—Questions

Frequently Asked Questions

Why did net earnings per share decline in 1993 even though operating income increased?
Net earnings were $38,221 thousand, or $1.00 per share, in 1993 compared with $38,758 thousand, or $1.08 per share, in 1992. The 1992 figure included a $1,825 thousand cumulative effect of a change in tire accounting. Earnings before that cumulative effect were $36,933 thousand, or $1.03 per share, in 1992. Operating income increased, but interest expense rose to $13,800 thousand from $10,908 thousand, and the effective income tax rate increased to 41% in 1993 due to the higher federal tax rate.
How is J.B. Hunt funding its capital spending on equipment and containers?
The company funded net capital investments of $197 million in 1993 with cash generated from operations and proceeds from long-term debt. Net cash provided by operating activities was $121,427 thousand in 1993. In September 1993 it issued $100 million of 6.25% unsecured notes due 2003. Commercial paper borrowings were $106,492 thousand at year end, and about $100 million of uncommitted lines of credit were available with no outstanding borrowings. The company expects to fund future capital expenditures from operations and long-term debt.
What is the company's exposure to its largest customers and to seasonal fluctuations?
No single customer accounted for more than 6% of revenues during 1992 or 1993. The company serves a diversified group of Fortune 500 customers across a broad geographic area and mix of industries. Freight is typically stronger in the second half of the year, with peak months of August, September and October, and revenue is also affected by bad weather and holidays.
What risks does the company identify from its shift toward intermodal transportation and container investments?
The company stated that its strategy involves substantial capital investment in multi-purpose containers and chassis over the next two to three years and the disposition of significant numbers of van-type trailers. Future earnings may be favorably or unfavorably affected by market prices for used revenue equipment or other factors related to this transition. Purchased transportation and spotting expense rose to $187,726 thousand in 1993 from $111,579 thousand in 1992 as intermodal and third-party utilization grew.
Is the company facing material litigation or labor issues?
The company is party to routine litigation mainly involving personal injury and property damage claims, and management believes adverse results would not have a material adverse effect on its financial position. The company maintains excess insurance above its self-insured levels. None of its drivers or other employees are represented by a collective bargaining unit, and management considers its employee relationships excellent.

04—Continue

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