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J.B. Hunt Transport Services Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed March 10, 2006
Period End
December 31, 2005
Security
JBHT
In the record · 2016–202610-K1110-Q348-K102

JBHT filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 102 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Leadership change8-K · Feb ’20Feb ’20
  3. Leadership change8-K · Jan ’22Jan ’22
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 10, 2006. Cited figures are marked; the original filing is the authoritative source.

J.B.

Hunt Transport Services, Inc. (JBHT) reported record results for calendar year 2005, its fourth consecutive year of record revenues and earnings. Operating revenues rose 12.3% to $3.13 billiona, and net earnings increased 42% to $207.3 million, or $1.28 per diluted share, up from $146.3 million, or $.88 per diluted share, in 2004. Fuel surcharge revenue was $336 million in 2005 versus $167 million in 2004, and excluding fuel surcharges, revenue grew 6.6%.

The operating ratio was 89.0%, compared with 88.9% in 2004. Growth came mainly from rate increases and capacity-management actions in the DCS and JBT segments, while the JBI segment absorbed a $25.8 millionb pretax charge for the BNI arbitration settlement. Segment results were mixed.

DCS operating income rose 34% to $100 million and JBT rose to $119 millionc from $103 million. JBI operating income declined to $124 million from $131 million, reflecting the arbitration charge and higher rail purchased transportation costs. Fuel cost per gallon averaged 33% above 2004 levels, which the company said it largely recovered through surcharges.

Operating cash flow was $332 milliond, down from $405 million in 2004, and the company spent $239 million repurchasing stock during 2005. Key risks disclosed include an IRS proposal to disallow tax benefits from 1999 sale-and-leaseback transactions, with a liability of approximately $36.3 million including interest at year-end 2005 and potential impact of about $44 million excluding interest if the IRS fully prevailed.

Driver shortages, rising insurance premiums, and customer concentration (Wal-Mart at about 15% of revenue, top 10 customers about 40%) are also flagged. The company raised its quarterly dividend to $.08 for 2006 and expects a 2006 effective tax rate near 39.0%.

02—Key points

Key Highlights

  1. Record 2005 results: operating revenues of $3.13 billion (up 12.3%) and net earnings of $207.3 million, or $1.28 per diluted share, up 42% from $146.3 million, or $.88 per diluted share in 2004.
  2. Operating ratio of 89.0% in 2005 versus 88.9% in 2004; excluding fuel surcharge, revenue rose 6.6%.
  3. Fuel surcharge revenue more than doubled to $336 million from $167 million, as fuel cost per gallon averaged 33% above 2004.
  4. JBI segment absorbed a $25.8 million pretax ($16.5 million after-tax) BNI arbitration settlement charge, reducing segment operating income to $124 million from $131 million.
  5. DCS operating income rose 34% to $100 million and JBT operating income increased to $119 million from $103 million.
  6. Shareholder returns: $239 million spent on stock repurchases in 2005, $361 million remaining authorization, and quarterly dividend raised to $.08 starting February 2006.
  7. Exposure to an IRS challenge of 1999 sale-and-leaseback transactions, with a $36.3 million liability including interest at December 31, 2005; a full IRS victory could affect liquidity by about $44 million excluding interest.

03—Questions

Frequently Asked Questions

  1. How did J.B. Hunt perform financially in 2005?

    Operating revenues reached $3.13 billion, up 12.3% from 2004, and net earnings rose 42% to $207.3 million, or $1.28 per diluted share. Revenue growth was driven by rate increases, capacity management, and higher fuel surcharges, and the company reported its fourth consecutive year of record revenues and earnings.

  2. What was the impact of the BNI arbitration on 2005 results?

    The company recorded a $25.8 million pretax charge ($16.5 million after tax) in the third quarter of 2005 for the BNI arbitration settlement. Of this, $8.3 million related to 2004 freight movements. The charge reduced JBI segment operating income, and the settlement also led to higher rail purchased transportation costs starting October 1, 2005.

  3. What is the status of the IRS dispute over sale-and-leaseback transactions?

    The IRS proposed to disallow tax benefits from sale-and-leaseback transactions entered into in 1999 involving a container and chassis fleet. The company reversed prior benefits, and its contingent liability was about $36.3 million including interest at December 31, 2005. The company continues to contest the position, and if the IRS fully prevailed, the total ultimate impact on liquidity could be approximately $44 million, excluding interest.

  4. How much capital did the company return to shareholders, and what are its plans?

    In 2005 the company repurchased $239 million of common stock and paid dividends of $37.9 million, or $.24 per share. The quarterly dividend was raised from $.06 to $.08, effective with the February 2006 payment, and the company has authorization to spend an additional $361 million on repurchases through 2010.

  5. What are the main risks to the company's earnings?

    The filing cites fuel price volatility, driver shortages and rising driver compensation, higher insurance premiums (with some coverage expiring July 31, 2006), customer concentration with Wal-Mart at about 15% of revenue and the top 10 customers at about 40%, and dependence on railroads, particularly BNSF and Norfolk Southern, for the intermodal business.

04—Continue

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