01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
J.B.
Hunt Transport Services, Inc. reported record 2011 results: total operating revenues of $4.53 billiona (up 19.3% from $3.79 billion in 2010), operating income of $444.2 million versus $347.6 million, and net earnings of $257.0 million, or $2.11 per diluted share, compared with $199.6 million, or $1.56 per diluted share, in 2010. Management attributed the improvement to all four segments reporting higher operating income, with higher load counts, improved pricing and cost reduction practices. The operating ratio improved to 90.2% from 90.8%.
Fuel surcharge revenue rose to $849 millionb from $516 million, and fuel and fuel taxes expense increased 34.9%, reflecting a 30% higher fuel cost per gallon. The JBI intermodal segment remained the largest contributor, with revenue of $2.67 billion and operating income of $301 million, and accounted for 59% of consolidated revenue. DCS (dedicated services) generated $1.03 billion of revenue and $103 million of operating income, while JBT (full-load dry van) and ICS (integrated capacity solutions) contributed $504 million and $356 million of revenue, respectively.
Cash flow from operations rose to $636 millionc from $428 million, but capital additions of $502 million and share repurchases of $246 million reduced the balance sheet's cash position to $5.5 million. Total debt increased to $749.2 million, and the debt-to-equity ratio rose to 1.32 from 1.14, while stockholders' equity was $568 million. Looking ahead, the company stated it is committed to spend approximately $308 million on revenue equipment and facilities in 2012, and it raised its quarterly dividend to $0.14 per share from $0.13.
Management noted that the FMCSA's December 2011 hours-of-service Final Rule will have a negative impact on driver productivity, with some provisions effective February 27, 2012 and others July 1, 2013. The company also faces a class-action lawsuit by current and former California-based drivers, for which it cannot reasonably estimate a possible loss.
02—Key points
Key Highlights
- Record 2011 total operating revenues of $4.53 billion, up 19.3% from $3.79 billion in 2010
- Net earnings rose to $257.0 million, or $2.11 per diluted share, from $199.6 million, or $1.56 per diluted share
- Operating ratio improved to 90.2% from 90.8%, with operating income of $444.2 million versus $347.6 million
- JBI intermodal segment generated $2.67 billion of revenue and $301 million of operating income, the largest contributor
- Fuel surcharge revenue increased to $849 million from $516 million, while fuel and fuel taxes expense rose 34.9%
- Total debt increased to $749.2 million; debt-to-equity rose to 1.32 from 1.14 after $246 million of share repurchases
- Quarterly dividend increased to $0.14 per share from $0.13; $308 million of 2012 equipment and facility commitments
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.53B$3.79B | +19.3% |
| Operating Expenses | $4.08B$3.45B | +18.5% |
| Operating Income | $444.23M$347.63M | +27.8% |
| Interest Expense | $28.51M$28.01M | +1.8% |
| Net Income | $257.01M$199.62M | +28.7% |
| EPS (Basic) | $2.16$1.60 | +35.0% |
| EPS (Diluted) | $2.11$1.56 | +35.3% |
| Shares Outstanding (Basic) | 119.16M124.71M | −4.5% |
| Shares Outstanding (Diluted) | 121.92M127.77M | −4.6% |
05—Questions
Frequently Asked Questions
What drove the increase in J.B. Hunt's 2011 earnings?
Management said all four business segments reported higher operating income compared with 2010. Higher load counts, improved pricing and continued cost reduction practices provided benefit throughout 2011, and JBI and DCS together represented 88% of the $96.6 million increase in consolidated operating income.
How much debt does J.B. Hunt carry and how did it change?
Total debt was $749.2 million at December 31, 2011, up from $654.2 million in 2010. The debt-to-equity ratio rose to 1.32 from 1.14, and total debt was 57% of total capital. The company issued a $200 million variable-rate senior term loan and replaced its revolving credit facility with a $500 million facility.
What risks does the filing highlight for future results?
The filing cites fuel price volatility, reliance on railroads (primarily BNSF and Norfolk Southern) for JBI, difficulty attracting and retaining drivers, insurance and claims costs, and dependence on major customers, whose top 10 accounted for approximately 32% of 2011 revenue. It also notes the FMCSA hours-of-service Final Rule is expected to have a negative impact on productivity.
Is J.B. Hunt returning capital to shareholders?
Yes. The company paid $62.2 million in dividends in 2011 and repurchased about 6.0 million shares for $246 million. On October 27, 2011, the Board authorized an additional $500 million repurchase, leaving $503 million remaining under its share repurchase authorizations at year-end. On February 2, 2012, it announced a quarterly dividend increase to $0.14 per share.
What legal exposure does the company disclose?
J.B. Hunt is a defendant in class-action lawsuits brought by current and former California-based drivers alleging unpaid wages and missed meal and rest periods. Proceedings are stayed pending a California Supreme Court decision in an unrelated case, and the company cannot reasonably estimate the possible loss or range of loss. Other claims are not expected to have a material adverse effect.
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