LOWELL, Ark. – Supply chain solutions provider J.B. Hunt Transport Services reported a drop in second quarter revenues and operating income according to financial results released Thursday.
The company said that operating revenue for the second quarter was $2.15 billion, down 5% from the $2.26 billion reported in the second quarter of 2019. Net earnings totaled $121.7 million, or $1.14 per diluted share, down 8.9% from the $133.6 million, or $1.23 per diluted share, reported in the second quarter of 2019.
Revenue performance, the company added, excluding fuel surcharge revenue, was primarily driven by a 2% volume decline in Intermodal (JBI), an 11% volume decline in Integrated Capacity Solutions (ICS) and 5% fewer stops in Final Miles Services (FMS), and it was partially offset by a 17% increase in loads in Truckload (JBT) compared with the prior year quarter.
The company also noted that the amount of ICS operating revenue for JB Hunt 360 rose to $229 million in the second quarter from $222 million in the second quarter of last year. JBI also executed about $24 million of third-party dray cost, and JBT executed about $28 million of its independent contractor costs through the platform during the second quarter of 2020.
The company said operating income for the second quarter totaled $175.2 million, compared with $193.1 million for the second quarter 2019. The prior year quarter included a $20.0 million pre-tax charge in settlement of a FMS claim.
Lower revenue and higher purchased transportation costs, continued investment in technology across all segments, and employee and operating supplies costs related to COVID-19 were partially offset by benefits of lower driver turnover, decreased insurance and claims costs and significantly reduced travel and entertainment costs compared to the prior year.
In addition, the company said, operating income was lower due to approximately $4.6 million of additional charges for uncollectable customer accounts.
Meanwhile, interest expense in the second quarter decreased due to lower average debt levels and lower interest rates compared to the same period last year. The effective income tax rate for the quarter was 25%, which was consistent with last year.
The Intermodal (JBI) segment reported $1.07 billion in revenues, down 7% from the second quarter of 2019 and operating income of $107 million, down 14%.
The company said JBI load volumes fell 2% over the same period in 2019. Transcontinental loads increased approximately 3%, and Eastern network volumes declined 7% from second quarter 2019.
The company added that COVID-19-related volume disruptions began to materialize in March and deteriorated further in April. This was followed by a steady rebound in demand for the remainder of the quarter.
Revenue decreased 7% reflecting the 2% volume decline and an approximate 6% decline in revenue per load, which was due to a combination of customer rate changes, fuel surcharges and freight mix.
Revenue per load excluding fuel surcharge revenue was flat from second quarter 2019.
Operating income decreased by 14% from the prior year. Lower volumes, higher rail purchased transportation costs and inefficiencies in the network related to less predictable demand patterns were partially offset by lower driver turnover related costs and a decrease in insurance and claims costs. The quarter ended with about 96,500 units of trailing capacity and 5,340 power units assigned to the dray fleet.
Dedicated Contract Services segment revenues totaled $533 million, down 1%, while operating income totaled $83.1 million, up 9%.
In this segment, the company noted, productivity, defined as revenue per truck per week, decreased approximately 3% compared to 2019, while productivity excluding fuel surcharge revenue was flat compared to a year ago.
A net additional 130 revenue producing trucks were in the fleet by the end of the quarter compared with the prior year. Customer retention rates also remained above 97%.
The company attributed the increase in operating income to benefits from lower driver turnover, travel and entertainment and safety related costs. These were partially offset by higher bad debt costs for uncollectable customer accounts.
The Integrated Capacity Solutions segment had revenues of $304 million, a 9% decrease, while the segment had an operating loss of $13.1 million compared with a loss of $600,000 in the second quarter of 2019.
Volumes decreased 11% but revenue per load increased about 2% primarily due to customer freight mix. Contractual volumes represented 71% of the total load volume and 63% of the total revenue in the current quarter compared to 68% and 55%, respectively, in the second quarter of last year.
Of the total reported ICS revenue, the company said, about $229 million was executed through the marketplace for J.B. Hunt 360 compared to $222 million in second quarter 2019.
Operating income decreased by $12.5 million from the second quarter 2019 due to lower gross profit margins, increased costs to expand capacity and functionality of the marketplace for J.B. Hunt 360 and higher personnel costs.
Gross profit margins decreased to 11.8% during the quarter versus 13.4% in the same period last year primarily from a competitive pricing environment, weaker spot market activity, and tightening supply dynamics during the quarter. ICS carrier base increased 12% compared to the second quarter of 2019.
The Final Miles Services segment reported revenues of $140 million, down 2%, and an operating loss of $5.2 million, compared with a loss of $15.8 million in the same period last year.
The company said that stop count within FMS decreased 5% during the second quarter compared to a year ago, which was due primarily to the temporary suspension of operations at several of its customers’ sites as a result of COVID-19. Productivity, defined as revenue per stop, increased 2% compared to the prior year period primarily from a shift in the mix of services as different customers within the FMS network were affected by COVID-19 to varying degrees throughout the quarter.
Total operating losses fell by about $10.5 million primarily from the absence of the $20 million pre-tax claim settlement incurred in 2019. Operating losses in the second quarter 2020 were primarily due to lost revenue related to the temporary suspension of operations at several customers’ sites and higher costs of operating supplies as a result of COVID-19.
The Truckload (JBT) segment reported revenues of $108.3 million, up 9% from 2019, and operating income of $3.5 million, down 61%.
Excluding fuel surcharge revenue, revenues increased 13% due primarily to a 17% increase in load count partially offset by a 4% decrease in revenue per load excluding fuel surcharge revenue compared to a year ago. Revenue per loaded mile excluding fuel surcharge revenue fell about 7% year-over-year while comparable contractual customer rates were down about 5% compared to the second quarter of 2019.
At the end of the period, JBT operated 1,897 tractors and 7,985 trailers compared to 1,879 and 6,829 one year ago, respectively.
The company said despite the increased load count, there was a drop in operating income due to increases in purchased transportation expense, higher insurance and claims costs, increased investment in technology and the continued rollout of 360box.