Company Quick10K Filing
Hunt JB Transport Services
Price112.51 EPS4
Shares109 P/E27
MCap12,215 P/FCF13
Net Debt1,218 EBIT617
TEV13,433 TEV/EBIT22
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-03
10-K 2020-12-31 Filed 2021-02-23
10-Q 2020-09-30 Filed 2020-10-29
10-Q 2020-06-30 Filed 2020-07-28
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-01
10-Q 2019-06-30 Filed 2019-07-26
10-Q 2019-03-31 Filed 2019-04-26
10-K 2018-12-31 Filed 2019-02-22
10-Q 2018-09-30 Filed 2018-10-29
10-Q 2018-06-30 Filed 2018-07-27
10-Q 2018-03-31 Filed 2018-04-27
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-10-27
10-Q 2017-06-30 Filed 2017-07-28
10-Q 2017-03-31 Filed 2017-04-28
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-28
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-23
10-Q 2015-09-30 Filed 2015-10-23
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-04-24
10-K 2014-12-31 Filed 2015-02-24
10-Q 2014-09-30 Filed 2014-10-30
10-Q 2014-06-30 Filed 2014-07-29
10-Q 2014-03-31 Filed 2014-04-25
10-K 2013-12-31 Filed 2014-02-21
10-Q 2013-09-30 Filed 2013-10-30
10-Q 2013-06-30 Filed 2013-07-30
10-Q 2013-03-31 Filed 2013-04-26
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-10-26
10-Q 2012-06-30 Filed 2012-07-31
10-Q 2012-03-31 Filed 2012-04-27
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-10-28
10-Q 2011-06-30 Filed 2011-07-29
10-Q 2011-03-31 Filed 2011-04-29
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-10-29
10-Q 2010-06-30 Filed 2010-07-30
10-Q 2010-03-31 Filed 2010-04-29
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-11-20
8-K 2020-10-16
8-K 2020-07-16
8-K 2020-07-16
8-K 2020-04-23
8-K 2020-04-14
8-K 2020-04-09
8-K 2020-04-07
8-K 2020-03-23
8-K 2020-02-06
8-K 2020-01-22
8-K 2020-01-17
8-K 2019-12-02
8-K 2019-10-24
8-K 2019-10-15
8-K 2019-07-15
8-K 2019-04-18
8-K 2019-04-15
8-K 2019-02-26
8-K 2019-01-23
8-K 2019-01-17
8-K 2019-01-07
8-K 2018-10-15
8-K 2018-10-05
8-K 2018-09-25
8-K 2018-07-16
8-K 2018-04-19
8-K 2018-04-16
8-K 2018-01-24
8-K 2018-01-18

JBHT 10Q Quarterly Report

Item 2.        Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3.         Quantitative and Qualitative Disclosures About Market Risk
Item 4.         Controls and Procedures
Part II. Other Information
Item 1.         Legal Proceedings
Item 1A.      Risk Factors
Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.         Defaults Upon Senior Securities
Item 4.         Mine Safety Disclosures
Item 5.         Other Information
Item 6.         Exhibits
EX-31.1 ex_244524.htm
EX-31.2 ex_244525.htm
EX-32.1 ex_244526.htm
EX-32.2 ex_244527.htm

Hunt JB Transport Services Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
2.41.91.41.00.50.02012201420172020
Rev, G Profit, Net Income
0.40.20.1-0.1-0.2-0.42012201420172020
Ops, Inv, Fin

jbht20210331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-11757

 

J.B. HUNT TRANSPORT SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Arkansas

71-0335111

(State or other jurisdiction

(I.R.S. Employer

of incorporation or

Identification No.)

organization)

 

 

615 J.B. Hunt Corporate Drive, Lowell, Arkansas  72745

(Address of principal executive offices)

 

479-820-0000

(Registrant's telephone number, including area code)

 

www.jbhunt.com

(Registrant's web site)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

JBHT

NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes             No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes             No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of large accelerated filer, accelerated filer, smaller reporting company and emerging growth company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer     Accelerated filer    Non-accelerated filer  

Smaller reporting company    Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes             No  

 

The number of shares of the registrants $0.01 par value common stock outstanding on March 31, 2021 was 105,671,006.

 

 

 

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Form 10-Q

For The Quarterly Period Ended March 31, 2021

Table of Contents

 

    Page
Part I. Financial Information
     
Item 1. Financial Statements  
     
  Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2021 and 2020 3
     
  Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 4
     
  Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 5
     
  Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 6
     
  Notes to Condensed Consolidated Financial Statements as of March 31, 2021 7
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
     
Item 4. Controls and Procedures 19
     
     
Part II. Other Information
     
Item 1. Legal Proceedings 19
     
Item 1A. Risk Factors 19
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
     
Item 3. Defaults Upon Senior Securities 20
     
Item 4. Mine Safety Disclosures 20
     
Item 5. Other Information 20
     
Item 6. Exhibits 20
     
     
Signatures 22
 

 

 

2

 
 

 

Part I.    Financial Information

 

ITEM 1.   FINANCIAL STATEMENTS

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Condensed Consolidated Statements of Earnings

(in thousands, except per share amounts)

(unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 
                 

Operating revenues, excluding fuel surcharge revenues

  $ 2,388,034     $ 2,045,694  

Fuel surcharge revenues

    230,115       235,132  

Total operating revenues

    2,618,149       2,280,826  
                 

Operating expenses:

               

Rents and purchased transportation

    1,352,301       1,136,151  

Salaries, wages and employee benefits

    620,032       574,249  

Depreciation and amortization

    137,545       130,095  

Fuel and fuel taxes

    113,040       101,123  

Operating supplies and expenses

    81,698       85,598  

General and administrative expenses, net of asset dispositions

    44,891       45,165  

Insurance and claims

    38,030       32,361  

Operating taxes and licenses

    13,814       13,312  

Communication and utilities

    9,146       8,031  

Total operating expenses

    2,410,497       2,126,085  

Operating income

    207,652       154,741  

Net interest expense

    12,024       12,036  

Earnings before income taxes

    195,628       142,705  

Income taxes

    49,022       37,871  

Net earnings

  $ 146,606     $ 104,834  
                 

Weighted average basic shares outstanding

    105,678       105,985  
                 

Basic earnings per share

  $ 1.39     $ 0.99  
                 

Weighted average diluted shares outstanding

    106,816       106,950  
                 

Diluted earnings per share

  $ 1.37     $ 0.98  
                 

Dividends declared per common share

  $ 0.28     $ 0.27  

 

See Notes to Condensed Consolidated Financial Statements.

 

3

 

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Condensed Consolidated Balance Sheets

(in thousands)

 

   

March 31, 2021

   

December 31, 2020

 
   

(unaudited)

         

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 552,970     $ 313,302  

Trade accounts receivable, net

    1,219,162       1,124,403  

Prepaid expenses and other

    359,867       404,412  

Total current assets

    2,131,999       1,842,117  

Property and equipment, at cost

    5,953,231       5,908,710  

Less accumulated depreciation

    2,302,310       2,219,816  

Net property and equipment

    3,650,921       3,688,894  

Goodwill and intangible assets, net

    208,399       212,122  

Other assets

    171,287       185,215  

Total assets

  $ 6,162,606     $ 5,928,348  
                 
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current liabilities:

               

Trade accounts payable

  $ 641,887     $ 587,510  

Claims accruals

    279,315       276,056  

Accrued payroll and payroll taxes

    161,311       130,943  

Other accrued expenses

    83,887       90,294  

Total current liabilities

    1,166,400       1,084,803  
                 

Long-term debt

    1,301,430       1,305,424  

Other long-term liabilities

    249,692       245,961  

Deferred income taxes

    723,018       692,022  

Stockholders' equity

    2,722,066       2,600,138  

Total liabilities and stockholders' equity

  $ 6,162,606     $ 5,928,348  

 

See Notes to Condensed Consolidated Financial Statements.

 

4

 

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except per share amounts)

(unaudited)

 

      

Additional

             
  

Common

  

Paid-in

  

Retained

  

Treasury

  

Stockholders

 
  

Stock

  

Capital

  

Earnings

  

Stock

  

Equity

 
                     

Balances at December 31, 2019

 $1,671  $374,049  $4,592,938  $(2,701,629) $2,267,029 

Comprehensive income:

                    

Net earnings

  -   -   104,834   -   104,834 

Cash dividend declared and paid ($0.27 per share)

  -   -   (28,688)  -   (28,688)

Purchase of treasury shares

  -   -   -   (75,193)  (75,193)

Share-based compensation

  -   18,063   -   -   18,063 

Restricted share issuances, net of stock repurchased for payroll taxes

  -   (3,535)  -   (92)  (3,627)

Balances at March 31, 2020

 $1,671  $388,577  $4,669,084  $(2,776,914) $2,282,418 
                     
                     

Balances at December 31, 2020

 $1,671  $408,244  $4,984,739  $(2,794,516) $2,600,138 

Comprehensive income:

                    

Net earnings

  -   -   146,606   -   146,606 

Cash dividend declared and paid ($0.28 per share)

  -   -   (29,597)  -   (29,597)

Purchase of treasury shares

  -   -   -   (5,239)  (5,239)

Share-based compensation

  -   14,967   -   -   14,967 

Restricted share issuances, net of stock repurchased for payroll taxes

  -   (3,960)  -   (849)  (4,809)

Balances at March 31, 2021

 $1,671  $419,251  $5,101,748  $(2,800,604) $2,722,066 

 

See Notes to Condensed Consolidated Financial Statements.

 

5

 

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

   

Three Months Ended March 31,

 
   

2021

   

2020

 

Cash flows from operating activities:

               

Net earnings

  $ 146,606     $ 104,834  

Adjustments to reconcile net earnings to net cash provided by operating activities:

               

Depreciation and amortization

    137,545       130,095  

Noncash lease expense

    12,296       11,411  

Share-based compensation

    14,967       18,063  

Loss on sale of revenue equipment and other

    1,147       1,472  

Deferred income taxes

    30,996       15,470  

Changes in operating assets and liabilities:

               

Trade accounts receivable

    (94,759 )     33,549  

Other assets

    46,385       (60,029 )

Trade accounts payable

    43,280       (5,392 )

Income taxes payable or receivable

    12,156       23,066  

Claims accruals

    2,242       (7,938 )

Accrued payroll and other accrued expenses

    11,797       (15,438 )

Net cash provided by operating activities

    364,658       249,163  
                 

Cash flows from investing activities:

               

Additions to property and equipment

    (108,775 )     (166,814 )

Net proceeds from sale of equipment

    22,921       38,078  

Change in other assets

    4       28  

Net cash used in investing activities

    (85,850 )     (128,708 )
                 

Cash flows from financing activities:

               

Proceeds from revolving lines of credit and other

    505       220,607  

Payments on revolving lines of credit and other

    -       (220,100 )

Purchase of treasury stock

    (5,239 )     (75,193 )

Stock repurchased for payroll taxes

    (4,809 )     (3,627 )

Dividends paid

    (29,597 )     (28,688 )

Net cash used in financing activities

    (39,140 )     (107,001 )

Net change in cash and cash equivalents

    239,668       13,454  

Cash and cash equivalents at beginning of period

    313,302       35,000  

Cash and cash equivalents at end of period

  $ 552,970     $ 48,454  
                 

Supplemental disclosure of cash flow information:

               

Cash paid during the period for:

               

Interest

  $ 21,343     $ 21,673  

Income taxes

  $ 3,779     $ 1,173  

Noncash investing activities

               

Accruals for equipment received

  $ 23,630     $ 22,395  

 

See Notes to Condensed Consolidated Financial Statements.

 

6

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1.         General

 

Basis of Presentation

 

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. We believe such statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of our financial position, results of operations and cash flows at the dates and for the periods indicated. Pursuant to the requirements of the Securities and Exchange Commission (SEC) applicable to quarterly reports on Form 10-Q, the accompanying financial statements do not include all disclosures required by GAAP for annual financial statements. While we believe the disclosures presented are adequate to make the information not misleading, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the periods presented in this report are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2021, or any other interim period. Our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load freight transportation business.

 

Use of Estimates

 

The novel coronavirus (COVID-19) pandemic has created and may continue to create significant uncertainty in macro-economic conditions, which may cause a global economic recession, business slowdowns or shutdowns, depressed demand for our transportation and logistics businesses, and adversely impact our results of operations. We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Our estimates may change, as new events occur and additional information is obtained, which are recognized or disclosed in our Consolidated Financial Statements as soon as they become known and may have a material impact on our financial statements.

 

Accounts Receivable and Allowance

 

Our trade accounts receivable includes accounts receivable reduced by an allowance for uncollectible accounts. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts is calculated over the life of the underlying receivable and is based on historical experience; any known trends or uncertainties related to customer billing and account collectability; current economic conditions; and reasonable and supportable economic forecasts, each applied to segregated risk pools based on the business segment that generated the receivable. The adequacy of our allowance is reviewed quarterly. Balances are charged against the allowance when it is determined the receivable will not be recovered. The allowance for uncollectible accounts for our trade accounts receivable was $15.6 million at March 31, 2021 and $18.4 million at December 31, 2020. During the first quarter of 2021, the allowance for uncollectable accounts increased by $0.6 million and was reduced $3.4 million by write-offs.

 

 

2.         Earnings Per Share

 

We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted and performance share units converted their holdings into common stock. The dilutive effect of restricted and performance share units was 1.1 million shares during the first quarter 2021, compared to 1.0 million shares during the first quarter 2020.

 

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3.         Share-based Compensation

 

The following table summarizes the components of our share-based compensation program expense (in thousands):

 

  

Three Months Ended

March 31,

 
  

2021

  

2020

 

Restricted share units:

        

Pretax compensation expense

 $10,778  $14,679 

Tax benefit

  2,727   3,758 

Restricted share unit expense, net of tax

 $8,051  $10,921 

Performance share units:

        

Pretax compensation expense

 $4,189  $3,384 

Tax benefit

  1,060   866 

Performance share unit expense, net of tax

 $3,129  $2,518 

 

         As of March 31, 2021, we had $95.3 million and $32.3 million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is to be recognized over the remaining weighted-average period of approximately 3.1 years for restricted share units and 2.7 years for performance share units. During the first quarter 2021, we issued 10,128 shares for vested restricted share units and 76,948 shares for vested performance share units.

 

 

4.         Financing Arrangements

 

Outstanding borrowings, net of unamortized discount, unamortized debt issuance cost, and fair value swap, under our current financing arrangements consist of the following (in millions):

 

  

March 31, 2021

  

December 31, 2020

 

Senior notes

 $1,301.4  $1,305.4 

 

Senior Revolving Line of Credit

 

At March 31, 2021, we were authorized to borrow up to $750 million under a senior revolving line of credit, which is supported by a credit agreement with a group of banks and expires in September 2023. This senior credit facility allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At March 31, 2021, we had no outstanding borrowings under this agreement.

 

Senior Notes

 

Our senior notes consist of three separate issuances. The first is $250 million of 3.85% senior notes due March 2024, issued in March 2014. Interest payments under these notes are due semiannually in March and September of each year, beginning September 2014. The second is $350 million of 3.30% senior notes due August 2022, issued in August 2015. Interest payments under these notes are due semiannually in February and August of each year, beginning February 2016. The third is $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under these notes are due semiannually in March and September of each year, beginning September 2019. All senior notes were issued by J.B. Hunt Transport Services, Inc., a parent-level holding company with no significant assets or operations. The notes are guaranteed on a full and unconditional basis by a wholly-owned subsidiary. All other subsidiaries of the parent are minor. We registered these offerings and the sale of the notes under the Securities Act of 1933, pursuant to shelf registration statements filed in February 2014 and January 2019. All notes are unsecured obligations and rank equally with our existing and future senior unsecured debt. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. See Note 5, Derivative Financial Instruments, for terms of an interest rate swap entered into on the $350 million of 3.30% senior notes due August 2022.

 

Our financing arrangements require us to maintain certain covenants and financial ratios.  We were in compliance with all covenants and financial ratios at March 31, 2021.

 

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5.         Derivative Financial Instruments

 

We periodically utilize derivative instruments for hedging and non-trading purposes to manage exposure to changes in interest rates and to maintain an appropriate mix of fixed and variable-rate debt. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

 

We entered into a receive fixed-rate and pay variable-rate interest rate swap agreement simultaneously with the issuance of our $350 million of 3.30% senior notes due August 2022, to effectively convert this fixed-rate debt to variable-rate. The notional amount of this interest rate swap agreement equals that of the corresponding fixed-rate debt. The applicable interest rate under this agreement is based on LIBOR plus an established margin, resulting in an interest rate of 1.55% for our $350 million of 3.30% senior notes at March 31, 2021. The swap expires when the corresponding senior notes are due. The fair value of this swap is recorded in other assets in our Condensed Consolidated Balance Sheet at March 31, 2021. See Note 7, Fair Value Measurements, for disclosure of fair value. This derivative meets the required criteria to be designated as a fair value hedge, and as the specific terms and notional amount of this derivative instrument match those of the fixed-rate debt being hedged, this derivative instrument is assumed to perfectly hedge the related debt against changes in fair value due to changes in the benchmark interest rate. Accordingly, any change in the fair value of this interest rate swap recorded in earnings is offset by a corresponding change in the fair value of the related debt.

 

 

6.         Capital Stock

 

On April 20, 2017, our Board of Directors authorized the purchase of up to $500 million of our common stock. On January 22, 2020, our Board of Directors authorized an additional purchase of up to $500 million of our common stock. At March 31, 2021, $498 million of the most recent authorization was remaining. We purchased approximately 34,000 shares, or $5.2 million, of our common stock under our repurchase authorization during the three months ended March 31, 2021. On January 21, 2021, we announced an increase in our quarterly cash dividend from $0.27 to $0.28 per common share, which was paid February 19, 2021, to stockholders of record on February 5, 2021. On April 22, 2021, we announced another increase in our quarterly cash dividend from $0.28 to $0.30 per common share, which will be paid on May 21, 2021, to stockholders of record on May 7, 2021.

 

 

7.         Fair Value Measurements

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2). The following are assets and liabilities measured at fair value on a recurring basis (in millions):

 

  

Asset/(Liability)

Balance

     
  

March 31, 2021

  

December 31, 2020

  

Input Level

 

Trading investments

 $23.7  $23.1   1 

Interest rate swap

 $8.0  $12.5   2 

Senior notes, net of unamortized discount and debt issuance costs

 $(357.0) $(361.3)  2 

 

The fair value of trading investments has been measured using the market approach (Level 1) and reflect quoted market prices. The fair values of interest rate swap and corresponding senior notes have been measured using the income approach (Level 2), which include relevant interest rate curve inputs. Trading investments and the interest rate swap are classified in other assets in our Condensed Consolidated Balance Sheets. The senior notes are classified in long-term debt in our Condensed Consolidated Balance Sheets.

 

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Financial Instruments

 

The carrying amount of our remaining senior notes not measured at fair value on a recurring basis was $944.4 million and $944.1 million at March 31, 2021 and December 31, 2020, respectively. The estimated fair value of these liabilities using the income approach (Level 2), based on their net present value, discounted at our current borrowing rate, was $1.05 billion and $1.09 billion at March 31, 2021 and December 31, 2020, respectively.

 

The carrying amounts of all other instruments at March 31, 2021, approximate their fair value due to the short maturity of these instruments.

 

 

8.         Income Taxes

 

Our effective income tax rate was 25.1% for the three months ended March 31, 2021, compared to 26.5% for the three months ended March 31, 2020. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

 

At March 31, 2021, we had a total of $68.2 million in gross unrecognized tax benefits, which are a component of other long-term liabilities in our Condensed Consolidated Balance Sheets. Of this amount, $58.8 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $6.4 million at March 31, 2021.

 

 

9.         Legal Proceedings

 

In January 2017, we exercised our right to utilize the arbitration process to review the division of revenue collected beginning May 1, 2016, as well as to clarify other issues, under our Joint Service Agreement with BNSF Railway Company (BNSF). BNSF requested the same. In October 2019, the arbitrators issued a Final Award and we recorded pretax charges in the third quarter 2019 of $26.8 million related to certain charges claimed by BNSF and $17.4 million for legal fees, cost and interest claimed by BNSF, for a total of $44.2 million. On January 17, 2020, we filed under seal in the United States District Court for the Western District of Arkansas (the Arkansas Federal Court) a motion to confirm and enforce the Final Award, seeking the Court’s specific enforcement of certain confidential contractual rights the arbitrators decided in our favor. BNSF moved to confirm the Final Award in the United States District Court for the District of Columbia, but that requested relief was ultimately denied and dismissed as moot. During the first quarter 2020, we recorded an $8.2 million pretax charge resulting from an adjusted calculation of the revenue divisions owed to BNSF under the Final Award. On July 21, 2020, the Arkansas Federal Court granted our motion in part, entering a judgment confirming the arbitration awards. In a sealed opinion, the Court denied our request for additional enforcement relief but did not foreclose our right to pursue post-confirmation enforcement in court or in arbitration if warranted. We have filed an appeal with the United States Court of Appeals for the Eighth Circuit seeking review of the Arkansas Federal Court’s denial.

 

We are also party to various state use tax audits, and have been assessed amounts owed for which we are vigorously appealing. If our appeals fail, we could be forced to settle these assessments for a material amount.

 

We are involved in certain other claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.

 

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10.        Business Segments

 

We reported five distinct business segments during the three months ended March 31, 2021 and 2020. These segments included Intermodal (JBI), Dedicated Contract Services® (DCS®), Integrated Capacity Solutions™ (ICS), Final Mile Services® (FMS), and Truckload (JBT). The operation of each of these businesses is described in Note 14, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2020. A summary of certain segment information is presented below (in millions):         

 

  

Assets

      (Excludes intercompany accounts)

As of

 
  

March 31, 2021

  

December 31, 2020

 

JBI

 $2,579  $2,426 

DCS

  1,571   1,482 

ICS

  326   301 

FMS

  491   486 

JBT

  311   286 

Other (includes corporate)

  885   947 

Total

 $6,163  $5,928 

 

  

Operating Revenues

For The Three Months Ended

March 31,

 
  

2021

  

2020

 

JBI

 $1,177  $1,150 

DCS

  580   542 

ICS

  525   335 

FMS

  202   154 

JBT

  150   105 

Subtotal

  2,634   2,286 

Inter-segment eliminations

  (16)  (5)

Total

 $2,618  $2,281 

 

  

Operating Income/(Loss)

For The Three Months Ended

March 31,

 
  

2021

  

2020

 

JBI

 $107.5  $102.2 

DCS

  74.3   72.9 

ICS

  7.3   (18.9)

FMS

  8.5   (3.3)

JBT

  10.2   1.8 

Other (includes corporate)

  (0.1)  - 

Total

 $207.7  $154.7 

 

  

Depreciation and Amortization Expense

For The Three Months Ended

March 31,

 
  

2021

  

2020

 

JBI

 $49.1  $46.5 

DCS

  56.9   56.3 

ICS

  0.2   0.4 

FMS

  9.0   8.1 

JBT

  8.9   8.2 

Other (includes corporate)

  13.4   10.6 

Total

 $137.5  $130.1 

 

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ITEM 2.        MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should refer to the attached interim Condensed Consolidated Financial Statements and related notes and also to our Annual Report (Form 10-K) for the year ended December 31, 2020, as you read the following discussion. We may make statements in this report that reflect our current expectation regarding future results of operations, performance, and achievements. These are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995, and are based on our belief or interpretation of information currently available. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “goals,” “strategy,” “future,” “predict,” “seek,” “estimate,” “likely,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. Forward-looking statements are inherently uncertain, subject to risks, and should be viewed with caution. You should realize there are many risks and uncertainties that could cause actual results to differ materially from those described. Some of the factors and events that are not within our control and could have a significant impact on future operating results are general economic and business conditions; potential business or operational disruptions resulting from the ongoing effects of the novel coronavirus (COVID-19) pandemic, including any future spikes or outbreaks of the virus, as well as government actions taken in response to the pandemic; competition and competitive rate fluctuations; excess capacity in the intermodal or trucking industries; a loss of one or more major customers; cost and availability of diesel fuel; interference with or termination of our relationships with certain railroads; rail service delays; disruptions to U.S. port-of-call activity; ability to attract and retain qualified drivers, delivery personnel, independent contractors, and third-party carriers; retention of key employees; insurance costs and availability; litigation and claims expense; determination that independent contractors are employees; new or different environmental or other laws and regulations; volatile financial credit markets or interest rates; terrorist attacks or actions; acts of war; adverse weather conditions; disruption or failure of information systems; inability to keep pace with technological advances affecting our information technology platforms; operational disruption or adverse effects of business acquisitions; increased costs for new revenue equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; decreases in the value of used equipment; and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. Additionally, our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load transportation business. You should also refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2020, for additional information on risk factors and other events that are not within our control. Our future financial and operating results may fluctuate as a result of these and other risk factors as described from time to time in our filings with the SEC.

 

GENERAL

 

We are one of the largest surface transportation, delivery, and logistics companies in North America. We operate five distinct, but complementary, business segments and provide a wide range of reliable transportation, brokerage, and delivery services to a diverse group of customers and consumers throughout the continental United States, Canada, and Mexico. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers, while we perform the majority of the pickup and delivery services. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, freight handling, specialized equipment, and freight network design. In addition, we provide or arrange for local and home delivery services, generally referred to as final-mile delivery services, to customers through a network of cross-dock and other delivery system locations throughout the continental United States. Utilizing thousands of reliable third-party carriers, we also provide comprehensive freight transportation brokerage and logistics services. In addition to dry-van, full-load operations, we also arrange for these unrelated outside carriers to provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Also, we utilize a combination of company-owned and contracted power units to provide traditional over-the-road full truckload delivery services. Our customers, who include many Fortune 500 companies, have extremely diverse businesses. Many of them are served by J.B. Hunt 360°®, an online platform that offers shippers and carriers greater access, visibility, and transparency to the supply chain. We account for our business on a calendar year basis, with our full year ending on December 31 and our quarterly reporting periods ending on March 31, June 30, and September 30. The operation of each of our five business segments is described in Note 14, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2020.

 

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Our operations continue to be impacted by the COVID-19 global pandemic. Due to the nature of our business and the large portion of our workforce consisting of drivers and other non-office personnel, fewer than 25% of our total employees have been able to work remotely; however, we remain committed to the safety of our workforce, suppliers, and customers while continuing to meet our customers’ needs. In the first quarter 2020, we began our COVID-19 response activities which have been expanded and will continue as necessary until the risks related to COVID-19 dissipate. Our COVID-19 safety response activities at our home office campus and all other field locations throughout North America include requiring remote working when possible, expanded health and safety policies, facility modifications, increased security coverage, and purchase and distribution of personal protective equipment and supplies. During the first quarter 2021, we committed to providing incremental paid time off for employees to eliminate any financial loss caused by their absence from work when receiving the COVID-19 vaccination. We also continue to work with local healthcare organizations to provide vaccination assistance under applicable area guidelines and procedures to all employees and their adult family members. We are reviewing and analyzing both external and internal COVID-related data on a daily basis in anticipation of the full return to work phase of our COVID-19 response. Thus far throughout the pandemic, we have been pleased with the continued performance of our employees, particularly our drivers, who have been consistently available to serve our customers.

 

Critical Accounting Policies and Estimates

 

The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that impact the amounts reported in our Condensed Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses, and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known.

 

Information regarding our Critical Accounting Policies and Estimates can be found in our Annual Report (Form 10-K). The critical accounting policies that we believe require us to make more significant judgments and estimates when we prepare our financial statements include those relating to self-insurance accruals, revenue equipment, revenue recognition and income taxes. We have discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors. In addition, Note 2, Summary of Significant Accounting Policies, to the financial statements in our Annual Report (Form 10-K) for the year ended December 31, 2020, contains a summary of our critical accounting policies. There have been no material changes to the methodology we apply for critical accounting estimates as previously disclosed in our Annual Report on Form 10-K.

 

RESULTS OF OPERATIONS

 

Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020

 

   

Summary of Operating Segment Results

For the Three Months Ended March 31,

(in millions)

 
    Operating Revenues     Operating Income/(Loss)  
   

2021

   

2020

   

2021

   

2020

 

JBI

  $ 1,177     $ 1,150     $ 107.5     $ 102.2  

DCS

    580       542       74.3       72.9  

ICS

    525       335       7.3       (18.9 )

FMS

    202       154       8.5       (3.3 )

JBT

    150       105       10.2       1.8  

Subtotal

    2,634       2,286       207.8       154.7  

Inter-segment eliminations

    (16 )     (5 )     (0.1 )     -  

Total

  $ 2,618     $ 2,281     $ 207.7     $ 154.7  

 

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Total consolidated operating revenues increased to $2.62 billion for the first quarter 2021, a 15% increase from $2.28 billion in the first quarter 2020, and a 17% increase excluding fuel surcharge revenues. This increase in operating revenues was driven by increased revenues in ICS and JBT as both segments captured capacity in the Marketplace for J.B. Hunt 360 °®, increased revenues in FMS related to new contractual business obtained, higher fleet utilization in DCS, and higher revenue per load, partially offset by decreased load volumes in JBI. All operating segments experienced weather-related volume disruptions in the first quarter 2021, with the most significant impact within JBI.

 

JBI segment revenue increased 2% to $1.18 billion during the first quarter 2021, compared with $1.15 billion in 2020. Load volumes during the first quarter 2021 decreased 3% over the same period 2020. Transcontinental loads decreased 2% during the first quarter 2021, and eastern network load volume was down 3% compared to the first quarter 2020. Load volumes were heavily impacted by severe weather-related events during the first quarter 2021, in addition to existing challenges present as a result of rail congestion and service issues stemming from elevated demand levels and labor challenges across the supply chain. The overall decrease in load volume was offset by a 5% increase in revenue per load, which is determined by the combination of customer rates, fuel surcharges and freight mix. Revenue per load excluding fuel surcharge revenue increased 6% compared to the first quarter 2020. JBI segment operating income increased 5%, to $107.5 million in the first quarter 2021, from $102.2 million in 2020. Benefits from increased revenue were partially offset by severe weather-related disruptions in the current quarter that further deteriorated network fluidity and challenges already present, higher driver wages and recruiting costs, and higher salary and wages for non-driver personnel, when compared to the first quarter 2020. Furthermore, JBI operating income for the first quarter 2020 included an $8.2 million rail purchase transportation expense resulting from an adjusted calculation of the revenue divisions owed to BNSF Railway Company (BNSF) for 2019 related to the final award of our completed arbitration with BNSF issued in 2019 and JBI’s $4.0 million portion of the one-time COVID-19 related bonus paid to employee drivers and other key field personnel. The current period ended with approximately 99,000 units of trailing capacity and 5,740 power units assigned to the dray fleet.

 

DCS segment revenue increased 7% to $580 million in the first quarter 2021 from $542 million in 2020. Productivity, defined as revenue per truck per week, increased 6% when compared to 2020. Productivity excluding fuel surcharges increased 5%, primarily due to higher utilization of assets, contractual indexed rate increases, and less idle equipment during the current period. A net additional 203 revenue-producing trucks were in the fleet by the end of the first quarter 2021 compared to a year ago. DCS segment operating income increased 2% to $74.3 million in the first quarter 2021, from $72.9 million in 2020. The benefits of increased productivity were partially offset by higher driver wages and recruiting costs and higher salary and wages for non-driver personnel, when compared to the first quarter 2020. In addition, operating income for the prior period included DCS’s $6.5 million portion of the one-time COVID-19 bonus paid in first quarter 2020.

 

ICS segment revenue increased 56% to $525 million in the first quarter 2021, from $335 million in 2020. Overall volumes decreased 1% primarily due to changes in customer freight mix, while truckload volumes increased 10% compared to the first quarter 2020. Revenue per load increased 58%, primarily due to higher spot and contractual customer rates compared to first quarter 2020. Contractual business represented approximately 49% of total load volume and 35% of total revenue in the first quarter 2021, compared to 67% and 54%, respectively, in 2020. Approximately $359 million of first quarter 2021 ICS revenue was executed through the Marketplace for J.B. Hunt 360° compared to $235 million in the first quarter 2020. ICS segment operating income increased to $7.3 million in the first quarter of 2021 compared to an operating loss of $18.9 million in 2020. Gross profit margin increased to 12.4% in the first quarter 2021, compared to 9.6% in 2020, primarily due to higher rates in our contractual business and a higher mix of spot business during the current period. First quarter 2021, operating results were further impacted by increased incentive compensation and technology spending, compared to a year ago. ICS’s carrier base increased 24% compared to first quarter 2020.

 

FMS segment revenue increased 31% to $202 million in the first quarter 2021 from $154 million in 2020. Stop count for the first quarter 2021 increased 37%, while productivity, defined as revenue per stop, decreased 4% compared to 2020. The reduction in productivity was primarily due to a shift in the mix between asset and asset-light operations resulting from the characteristics of new customer contracts. FMS segment operating income increased to $8.5 million in the first quarter of 2021 compared to an operating loss of $3.3 million in 2020, primarily due to increased revenues, partially offset by higher costs related to service quality performance controls, higher salary and wages for non-driver personnel, and increased third-party truck purchased transportation costs. In addition, the operating loss for the prior period included FMS’s $1.3 million portion of the one-time COVID-19 bonus paid in first quarter 2020.

 

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JBT segment revenue totaled $150 million for the first quarter 2021, an increase of 43% from $105 million in first quarter 2020. Revenue excluding fuel surcharge increased 46% primarily due to a 6% increase in load volume, a 38% increase in revenue per load excluding fuel surcharge revenue, and an 8% increase in average length of haul compared to first quarter 2020. The growth in load count and the length of haul during the first quarter 2021, were primarily driven by the continued expansion of J.B. Hunt 360box™ which leverages the J.B. Hunt 360 platform. Revenue per loaded mile excluding fuel surcharge in first quarter 2021 increased 28%, while comparable contractual customer rates increased 14% compared to first quarter 2020. At the end of the first quarter 2021, the JBT fleet consisted of 1,716 tractors and 8,571 trailers, compared to 1,887 tractors and 7,391 trailers in 2020. JBT segment operating income increased to $10.2 million in 2021, compared with $1.8 million during first quarter 2020. Benefits from the higher load volume and increased revenue per load were partially offset by higher purchased transportation expense and higher salary and wages for non-driver personnel. In addition, operating income for the prior period included JBT’s $0.5 million portion of the one-time COVID-19 bonus paid in first quarter 2020.

 

Consolidated Operating Expenses

 

The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.

 

    Three Months Ended March 31,   
   

Dollar Amounts as a

Percentage of Total

Operating Revenues

   

Percentage Change

of Dollar Amounts Between Quarters

 
   

2021

   

2020

   

2021 vs. 2020

 

Total operating revenues

    100.0

%

    100.0

%

    14.8 %

Operating expenses:

                       

Rents and purchased transportation

    51.7       49.8       19.0  

Salaries, wages and employee benefits

    23.7       25.2       8.0  

Depreciation and amortization

    5.3       5.7       5.7  

Fuel and fuel taxes

    4.3       4.4       11.8  

Operating supplies and expenses

    3.1       3.8       (4.6 )

General and administrative expenses, net of asset dispositions

    1.7       1.9       (0.6 )

Insurance and claims

    1.5       1.4       17.5  

Operating taxes and licenses

    0.5       0.6       3.8  

Communication and utilities

    0.3       0.4       13.9  

Total operating expenses

    92.1       93.2       13.4  

Operating income

    7.9       6.8       34.2  

Net interest expense

    0.4       0.5       (0.1 )

Earnings before income taxes

    7.5       6.3       37.1  

Income taxes

    1.9       1.7       29.4  

Net earnings

    5.6

%

    4.6

%

    39.9 %

 

Total operating expenses increased 13.4%, while operating revenues increased 14.8%, during the first quarter 2021, from the comparable period 2020. Operating income increased to $207.7 million during the first quarter 2021, from $154.7 million in 2020.

 

Rents and purchased transportation costs increased 19.0% in 2021 compared with 2020. This increase was primarily due to increased third-party truck purchased transportation rates in ICS and an increase in the use of third-party truck carriers by JBT and FMS during the current period.

 

Salaries, wages and employee benefit costs increased 8.0% in 2021 compared with 2020. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers, an increase in the number of employees, and additional incentive compensation. This increase was partially offset by first quarter 2020 including a $12.3 million one-time COVID-19 related bonus paid to employee drivers and other key field personnel and $3.4 million of additional stock compensation expense related to the acceleration of equity award vesting for executive employee retirements.

 

15

 

Depreciation and amortization expense increased 5.7% in 2021, primarily due to the addition of tractors and specialized trailing equipment within JBI, increased capital investments in information technology, and increased trailing equipment within JBT. Fuel costs increased 11.8% in 2021, compared with 2020, primarily due to an increase in the price of fuel and an increase in road miles.

 

Operating supplies and expenses decreased 4.6% in 2021, compared with 2020, primarily due to reduced travel and entertainment expenses, partially offset by increased tire expenses and higher weather-related towing costs. General and administrative expenses for the current quarter were virtually flat compared with 2020, primarily due to increased technology spend on the J.B. Hunt 360° platform and legacy system upgrades, higher advertising costs, and increased driver hiring expenses, being offset by decreased professional fees, lower bad debt expenses, and decreased net loss from the sale or disposal of assets. Net loss from sale or disposal of assets was $1.1 million in 2021, compared to a net loss of $1.5 million in 2020. Insurance and claims expense increased 17.5% in 2021, compared with 2020, due to higher incident volume and higher insurance policy premium expenses, partially offset by a decrease in accident severity.

 

Net interest expense for the current quarter was virtually flat compared with 2020. Income tax expense increased 29.4% in first quarter 2021, compared with 2020, primarily due to increased taxable earnings, partially offset by a higher effective income tax rate in the prior period due to the impact of stock compensation accelerations for executive employee retirements. Our effective income tax rate was 25.1% for the first quarter 2021, compared to 26.5% in 2020. Our annual tax rate for 2021 is expected to be between 24.0% and 25.0%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

 

Liquidity and Capital Resources

 

Cash Flow

 

Net cash provided by operating activities totaled $365 million during the first three months of 2021, compared with $249 million for the same period 2020. Operating cash flows increased due to the timing of general working capital activities and increased earnings. Net cash used in investing activities totaled $86 million in 2021, compared with $129 million in 2020. The decrease resulted from a decrease in equipment purchases, net of proceeds from the sale of equipment, during the current period. Net cash used in financing activities was $39 million in 2021, compared with $107 million in 2020. This decrease resulted primarily from a decrease in treasury stock purchases during the first quarter 2021.

 

Debt and Liquidity Data

 

   

March 31, 2021

   

December 31, 2020

   

March 31, 2020

 

Working capital ratio

    1.83       1.70       1.54  

Total debt (millions)

  $ 1,301.4     $ 1,305.4     $ 1,302.8  

Total debt to equity

    0.48       0.50       0.57  

Total debt as a percentage of total capital

    32 %     33 %     36 %

 

Liquidity

 

Our need for capital has typically resulted from the acquisition of containers and chassis, trucks, tractors, and trailers required to support our growth and the replacement of older equipment as well as periodic business acquisitions. We are frequently able to accelerate or postpone a portion of equipment replacements or other capital expenditures depending on market and overall economic conditions. In recent years, we have obtained capital through cash generated from operations, revolving lines of credit and long-term debt issuances. We have also periodically utilized operating leases to acquire revenue equipment.

 

16

 

We believe our liquid assets, cash generated from operations, and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future. Should COVID-19 related economic conditions warrant, we believe we have sufficient credit resources available to meet our near and long-term operating and capital needs. Throughout 2020 and the first quarter 2021, we paused or cancelled certain capital expenditures and other discretionary spending in response to the COVID-19 pandemic. As a result, at March 31, 2021, we had a cash balance of $553 million and we had no outstanding balance on our senior revolving line of credit, which authorizes us to borrow up to $750 million and is supported by a credit agreement with a group of banks that expires in September 2023. This senior credit facility allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date.

 

Our financing arrangements require us to maintain certain covenants and financial ratios. At March 31, 2021, we were well above compliance with all covenants and financial ratios, and we fully intend and expect to emerge from the current COVID-19 related economic environment with our investment-grade rating intact.

 

We are continually evaluating the possible effects of current COVID-19 related economic conditions and reasonable and supportable economic forecasts on operational cash flows, including the risks of declines in the overall freight market and our customers' liquidity and ability to pay. We regularly monitor working capital and maintain frequent communication with our customers, suppliers, and service providers.

 

The following table summarizes our expected obligations and commitments as of March 31, 2021 (in millions):

 

   

Total

   

One Year

Or Less

   

One to

Three Years

   

Three to

Five Years

   

After

Five Years

 

Operating leases

  $ 136.3     $ 47.1     $ 57.5     $ 17.0     $ 14.7  

Debt obligations

    1,300.0       -       350.0       250.0       700.0  

Interest payments on debt (1)

    170.0       42.2       75.8       52.0       -  

Commitments to acquire revenue equipment and facilities

    1,710.3       985.4       724.9       -       -  

Total

  $ 3,316.6     $ 1,074.7     $ 1,208.2     $ 319.0     $ 714.7  

 

(1)      Interest payments on debt are based on the debt balance and applicable rate at March 31, 2021.          

 

Our net capital expenditures were approximately $86 million during the first three months of 2021, compared with $129 million for the same period 2020. Our net capital expenditures include net additions to revenue equipment and non-revenue producing assets that are necessary to contribute to and support the future growth of our various business segments. Capital expenditures in 2021 were primarily for tractors, additional intermodal containers, and other trailing equipment. We are currently committed to spend approximately $1.7 billion during the years 2021 to 2023. In response to the COVID-19 pandemic, we previously paused or cancelled certain capital expenditures originally planned for 2020. Based on the current economic environment and our longer-term outlook, we have increased our anticipated net capital expenditures for 2021, which will primarily be driven by additional intermodal containers and trailers used in our 360box program. Accordingly, we now expect to spend in the range of $1.2 billion to $1.3 billion for net capital expenditures during 2021. Our ultimate capital expenditure levels could be affected by manufacturer production slowdowns resulting from the COVID-19 pandemic. The table above excludes $74.6 million of potential liabilities for uncertain tax positions, including interest and penalties, which are recorded on our Condensed Consolidated Balance Sheets. However, we are unable to reasonably estimate the ultimate timing of any settlements.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements, other than our net purchase commitments of 1.7 billion, as of March 31, 2021.

 

Risk Factors

 

You should refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2020, under the caption “Risk Factors” for specific details on the following factors and events that are not within our control and could affect our financial results.

 

17

 

Risks Related to Our Industry

 

 

Our business is significantly impacted by economic conditions, customer business cycles, and seasonal factors.

 

 

Our business is significantly impacted by the effects of national or international health pandemics on general economic conditions and the operations of our customers and third-party suppliers and service providers.

 

 

Extreme or unusual weather conditions can disrupt our operations, impact freight volumes, and increase our costs, all of which could have a material adverse effect on our business results.

 

 

Our operations are subject to various environmental laws and regulations, including legislative and regulatory responses to climate change. Compliance with environmental requirements could result in significant expenditures and the violation of these regulations could result in substantial fines or penalties.

 

 

We depend on third parties in the operation of our business.

 

 

Rapid changes in fuel costs could impact our periodic financial results.

 

 

Insurance and claims expenses could significantly reduce our earnings.

 

 

We operate in a regulated industry, and increased direct and indirect costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business.

 

 

Difficulty in attracting and retaining drivers, delivery personnel and third-party carriers could affect our profitability and ability to grow.

 

 

We operate in a competitive and highly fragmented industry. Numerous factors could impair our ability to maintain our current profitability and to compete with other carriers and private fleets.

 

Risks Related to Our Business

 

 

We derive a significant portion of our revenue from a few major customers, the loss of one or more of which could have a material adverse effect on our business.

 

 

A determination that independent contractors are employees could expose us to various liabilities and additional costs.

 

 

We may be subject to litigation claims that could result in significant expenditures.

 

 

We rely significantly on our information technology systems, a disruption, failure, or security breach of which could have a material adverse effect on our business.

 

 

Acquisitions or business combinations may disrupt or have a material adverse effect on our operations or earnings.

 

ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our outstanding debt at March 31, 2021 includes our senior revolving line of credit and senior notes issuances. Our senior notes have fixed interest rates ranging from 3.30% to 3.875%. Our senior revolving line of credit has variable interest rates, which are based on the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the specific type of borrowing, plus any applicable margins. We currently have an interest rate swap agreement which effectively converts our $350 million of 3.30% fixed rate senior notes due August 2022 to a variable rate, to allow us to maintain a desired mix of variable and fixed rate debt. The applicable interest rate under this agreement is based on LIBOR plus an established margin. Risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates. Our earnings would be affected by changes in these short-term variable interest rates. At our current level of borrowing, a one percentage point increase in our applicable rate would reduce annual pretax earnings by $3.5 million.

 

18

 

Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the three months ended March 31, 2021. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from our foreign investment. As of March 31, 2021, we had no foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

 

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which high fuel price levels may occur in the future, or the extent to which fuel surcharges could be collected to offset such increases. As of March 31, 2021, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

 

ITEM 4.         CONTROLS AND PROCEDURES

 

We maintain controls and procedures designed to ensure that the information we are required to disclose in the reports we file with the SEC is recorded, processed, summarized, and reported, within the time periods specified in the SEC rules, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

 

There were no changes in our internal control over financial reporting during the first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

Part II. Other Information

 

ITEM 1.         LEGAL PROCEEDINGS

 

We are involved in certain claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.

 

ITEM 1A.      RISK FACTORS

 

Information regarding risk factors appears in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

 

19

 

ITEM 2.         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Purchases of Equity Securities

 

The following table summarizes purchases of our common stock during the three months ended March 31, 2021:

 

 

 

Period

 

Number of Common Shares Purchased

   

Average Price Paid Per Common Share Purchased

   

Total Number of Shares

Purchased as

Part of a Publicly Announced Plan

(1)

   

Maximum

Dollar Amount

of Shares That

May Yet Be Purchased

Under the Plan

(in millions)

 

January 1 through January 31, 2021

    -     $ -       -     $ 503  

February 1 through February 28, 2021

    -       -       -       503  

March 1 through March 31, 2021

    34,000       154.09       34,000       498  

Total

    34,000     $ 154.09       34,000     $ 498  

 

 

(1)

On April 20, 2017, our Board of Directors authorized the purchase of up to $500 million of our common stock. On January 22, 2020, our Board of Directors authorized an additional purchase of up to $500 million of our common stock. This stock repurchase program has no expiration date.

 

ITEM 3.         DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4.         MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.         OTHER INFORMATION

 

Not applicable.

 

ITEM 6.         EXHIBITS

 

Index to Exhibits

 

20

 

 

Exhibit

Number

  Exhibits
     
3.1   Amended and Restated Articles of Incorporation of J.B. Hunt Transport Services, Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2005, filed April 29, 2005)
     
3.2   Amended and Restated Bylaws of J.B. Hunt Transport Services, Inc. dated April 23, 2015 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K, filed April 27, 2015)
     
22.1   List of Guarantor Subsidiaries of J.B. Hunt Transport Services, Inc. (incorporated by reference from the Company’s annual report on Form 10-K for the year ended December 31, 2020, filed February 23, 2021)
     
31.1   Rule 13a-14(a)/15d-14(a) Certification
     
31.2   Rule 13a-14(a)/15d-14(a) Certification
     
32.1   Section 1350 Certification
     
32.2   Section 1350 Certification
     
101.INS   Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

 

 

 

21

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the city of Lowell, Arkansas, on the 3rd day of May, 2021.

 

 

 

J.B. HUNT TRANSPORT SERVICES, INC.

 

  (Registrant)  

 

 

 

 

       

 

 

 

 

 

BY:

/s/ John N. Roberts, III

 

 

 

John N. Roberts, III 

 

    President and Chief Executive Officer  
    (Principal Executive Officer)  
       
       
  BY: /s/ John Kuhlow  
    John Kuhlow  
    Chief Financial Officer,  
    Executive Vice President  

 

 

(Principal Financial and Accounting Officer) 

 

 

 

 

 

22