01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
J.B.
Hunt Transport Services, Inc. reported a strong 2021 in its Form 10-K. Total operating revenues rose 26.3% to $12.17 billiona from $9.64 billion in 2020, and net earnings increased 50.3% to $760.8 million. Diluted earnings per share were $7.14, compared with $4.74 in 2020.
The operating ratio improved to 91.4% from 92.6%, and operating income reached $1.05 billionb. Growth was driven by ICS and JBT revenue, higher JBI revenue per load, and DCS fleet productivity. Operating expenses rose on higher rents and purchased transportation (up 30.2%) and driver-related salaries and wages (up 17.6%), reflecting a tight driver supply.
Cash generation was solid, with net cash provided by operating activities of $1.22 billionc versus $1.12 billion in 2020. Capital spending was $947.6 million in additions to property and equipment, and the company had cash of $355.5 million and no balance on its $750 million revolving credit line at year end. Current debt of $356.0 million reflects 3.30% senior notes due August 2022, which management intends to repay from existing cash, the revolver, or other long-term financing.
The company has committed approximately $1.88 billiond in net equipment purchases for 2022 and 2023. Shareholder returns were also significant: the company repurchased $151.7 million of stock and paid $124.4 million in dividends. On January 20, 2022, the quarterly dividend was raised from $0.30 to $0.40 per share.
Key risks cited include economic cycles, the continuing COVID-19 pandemic, dependence on railroads (primarily BNSF and Norfolk Southern), driver availability, fuel price volatility, insurance and claims costs, and potential reclassification of independent contractors as employees. The company also agreed on January 31, 2022 to acquire Zenith Freight Lines for $87 million, expected to close February 28, 2022, and it will be part of the FMS segment.
02—Key points
Key Highlights
- Total operating revenues increased 26.3% to $12.17 billion in 2021, from $9.64 billion in 2020.
- Net earnings rose 50.3% to $760.8 million, and diluted EPS was $7.14 versus $4.74 in 2020.
- Operating ratio improved to 91.4% from 92.6%, with operating income of $1.05 billion.
- ICS revenue increased 53% to $2.54 billion, and JBT revenue increased 72% to $796 million, the fastest-growing segments.
- Operating cash flow reached $1.22 billion, and capital expenditures were $947.6 million in 2021.
- Year-end cash was $356 million with no revolver borrowings; $350 million of 3.30% senior notes due August 2022 are to be repaid from cash or other financing.
- The quarterly dividend was increased to $0.40 per share from $0.30, and the company agreed to acquire Zenith Freight Lines for $87 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $12.17B$9.64B | +26.3% |
| Operating Expenses | $11.12B$8.92B | +24.6% |
| Operating Income | $1.05B$713.12M | +46.6% |
| Interest Expense | $46.25M$47.58M | −2.8% |
| Net Income | $760.81M$506.04M | +50.3% |
| EPS (Basic) | $7.22$4.79 | +50.7% |
| EPS (Diluted) | $7.14$4.74 | +50.6% |
| Shares Outstanding (Basic) | 105.36M105.70M | −0.3% |
| Shares Outstanding (Diluted) | 106.59M106.77M | −0.2% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and profitability in 2021?
Total operating revenues rose 26.3% to $12.17 billion, driven mainly by increased ICS and JBT revenue, higher JBI revenue per load, and increased DCS fleet productivity and FMS stops. Operating income rose to $1.05 billion from $713 million, and the operating ratio improved to 91.4% from 92.6%. Higher fuel surcharge revenue, which grew 65.5% to $1.25 billion, also contributed.
What are the main cost pressures the company reported?
Rents and purchased transportation costs rose 30.2%, reflecting higher third-party rail and truck rates and increased use of third-party carriers. Salaries, wages and employee benefits rose 17.6%, driven by driver pay increases due to a tighter supply of qualified drivers. Fuel and fuel taxes expense increased 48.4% on higher fuel prices and road miles.
How strong is the company's balance sheet and liquidity?
At December 31, 2021, the company had cash of $355.5 million and no outstanding balance on its $750 million senior revolving credit line, which expires in September 2023. Total long-term debt was $1.30 billion, including $356.0 million classified as current. Management stated it was well above compliance with its financing covenants and expects to keep its investment-grade rating.
What are the key risks investors should monitor?
The filing highlights risks from economic cycles and customer concentration, with the top 10 customers accounting for approximately 39% of revenue and one customer for approximately 12%. Other risks include reliance on railroads (mainly BNSF and Norfolk Southern), driver availability, fuel costs, insurance and claims expense, the COVID-19 pandemic, and a possible reclassification of independent contractors as employees.
What capital allocation and shareholder return actions were taken?
The company repurchased approximately 879,000 shares for $151.7 million in 2021 and paid $124.4 million in dividends. Quarterly dividends were $0.30 per share for the last three quarters of 2021, and the board raised the quarterly dividend to $0.40 per share in January 2022. About $351.1 million remained available under the repurchase authorization at year end.
06—Continue