01—Abstract
Summary
Summary of the 10-K filed February 23, 2024. Cited figures are marked; the original filing is the authoritative source.
J.B.
Hunt Transport Services, Inc. reported fiscal 2023 total operating revenues of $12.83 billiona, down 13.4% from $14.81 billion in 2022, as lower volume and revenue per load in ICS and JBI, lower revenue per load in JBT, and lower FMS revenue and stop counts drove the decline. Fuel surcharge revenues fell 23.9% to $1.85 billion. Operating income fell to $993.2 million from $1.33 billion, and the operating ratio rose to 92.3% from 91.0%.
Net earnings were $728.3 millionb, or $6.97 per diluted share, compared with $969.4 million, or $9.21 per diluted share, in 2022. The effective income tax rate was 22.1%, and the filing notes that a discrete benefit from a favorable uncertain tax position settlement helped reduce tax expense. Segment results were mixed.
JBI revenue fell 12% to $6.21 billion and operating income fell to $569 millionc from $800 million. DCS revenue rose 1% to $3.54 billion and operating income rose to $405 million from $361 million. ICS revenue fell 40% to $1.39 billion and swung to an operating loss of $44 million, though the filing ties part of the decline to lower rates and volumes and integration costs for the BNSF Logistics brokerage acquisition completed September 30, 2023.
FMS and JBT revenue declined 12% and 16%, respectively. Operating cash flow was $1.74 billiond, capital expenditures for equipment were $1.86 billion, and the company ended the year with $1.46 billion of total debt, net of discount and issuance costs ($1.58 billion carrying amount of senior credit facility and senior notes, per the fair value note). The company repurchased $159.6 million of stock and paid $173.9 million in dividends.
The quarterly dividend was raised to $0.43 per share from $0.42, effective with the February 2024 payment. Management's internal control assessment concluded that internal control over financial reporting was effective as of December 31, 2023, and PricewaterhouseCoopers LLP issued an unqualified opinion on both the financial statements and internal control. The critical audit matter identified was the personal injury and property damage claims accrual, which stood at $523 million at year end.
02—Key points
Key Highlights
- Total operating revenues fell 13.4% to $12.83 billion, while operating income declined to $993.2 million from $1.33 billion.
- Net earnings were $728.3 million, or $6.97 per diluted share, versus $969.4 million, or $9.21 per diluted share, in 2022.
- The operating ratio worsened to 92.3% from 91.0%, and net earnings margin fell to 5.7% from 6.5%.
- ICS was the weakest segment, with revenue down 40% to $1.39 billion and an operating loss of $44 million, versus operating income of $57 million in 2022.
- DCS was the bright spot, with revenue up 1% to $3.54 billion and operating income up to $405 million from $361 million, supported by long-term contracts and index-based rate increases.
- Operating cash flow was $1.74 billion, and the company returned $333.5 million to shareholders through buybacks ($159.6 million) and dividends ($173.9 million).
- The quarterly dividend was increased to $0.43 per share from $0.42, and $391.5 million remained available under the stock repurchase authorization.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 23, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $12.83B$14.81B | −13.4% |
| Operating Expenses | $11.84B$13.48B | −12.2% |
| Operating Income | $993.20M$1.33B | −25.4% |
| Interest Expense | $65.93M$51.25M | +28.7% |
| Net Income | $728.29M$969.35M | −24.9% |
| EPS (Basic) | $7.04$9.31 | −24.4% |
| EPS (Diluted) | $6.97$9.21 | −24.3% |
| Shares Outstanding (Basic) | 103.44M104.14M | −0.7% |
| Shares Outstanding (Diluted) | 104.45M105.28M | −0.8% |
05—Questions
Frequently Asked Questions
Why did J.B. Hunt's revenue and earnings decline in 2023?
The filing attributes the 13.4% revenue decline primarily to lower volume and revenue per load within ICS and JBI, decreased revenue per load within JBT, and decreased revenue and stop counts in FMS. Fuel surcharge revenue fell 23.9%, and fuel prices were lower. Operating expenses declined 12.2%, but not enough to offset the revenue drop, which pushed the operating ratio up to 92.3% from 91.0%.
How did the ICS segment perform, and what role did the BNSF Logistics acquisition play?
ICS revenue fell 40% to $1.39 billion, with volumes down 26% and revenue per load down 20%, mainly due to lower contractual and spot customer rates and changes in freight mix. The company acquired the brokerage assets of BNSF Logistics, LLC on September 30, 2023, for $85.0 million, which partly offset the revenue decline. However, ICS reported an operating loss of $44 million, which the filing attributes to lower revenue, lower gross profit margins, and integration costs related to the acquisition.
What are the company's liquidity and debt obligations?
At year end, J.B. Hunt had $53.3 million of cash and a $130.0 million revolving credit balance plus $500.0 million of term loans under its senior credit facility, at an average rate of 6.44%. Its senior notes include $250 million of 3.85% notes due March 2024 and $700 million of 3.875% notes due March 2026. The company intends to repay the 2024 notes using cash, its revolving line, or other financing, and it reported compliance with all debt covenants. It is also committed to spend approximately $868 million net of proceeds during 2024 and 2025, plus $381 million thereafter, mainly on equipment.
Is the company's dividend secure, and how much did it return to shareholders?
The Board announced in January 2024 an increase in the quarterly cash dividend from $0.42 to $0.43 per share, paid February 23, 2024. The company intends to continue paying quarterly dividends but states that no assurance can be given that future dividends will be paid. In 2023, it paid $173.9 million in dividends and repurchased about 902,100 shares for $159.6 million.
What is the outlook for the claims and insurance costs that affect the business?
The filing reports a claims accrual of approximately $523 million at December 31, 2023, up from $427 million a year earlier, and expected insurance reimbursements of $493 million. It notes substantial increases in auto liability claim severity that have exceeded insurance coverage layers. Insurance and claims expense fell 0.8% in 2023 to $315.7 million, but the company says future expenses could exceed historical levels, and it cites $16 million, $20 million, $10 million, $3 million, and $4 million of additional casualty reserve expense across JBI, DCS, ICS, FMS, and JBT, respectively, for 2023.
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