J.B. Hunt Transport Services, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 25, 2022. The filing reports full-year results, not standalone fourth-quarter results.
Business context
J.B. Hunt provides intermodal, dedicated contract, brokerage and logistics, final-mile delivery, and truckload services across North America. Its five segments are JBI, DCS, ICS, FMS, and JBT. The company continued to report operational effects from COVID-19 and emphasized its multimodal network and J.B. Hunt 360 technology platform.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Operating revenue | $12.168 billion | $9.637 billion |
| Operating income | $1.046 billion | $713 million |
| Net earnings | $761 million | $506 million |
| Diluted EPS | $7.14 | $4.74 |
| Operating margin | 8.6% | 7.4% |
| Operating ratio | 91.4% | 92.6% |
| Operating cash flow | $1.224 billion | $1.123 billion |
Revenue increased 26.3% (22.9% excluding fuel surcharges); net earnings rose 50.3%. Fuel surcharge revenue increased 65.5% to $1.253 billion. Higher freight rates and volumes supported results, while higher purchased transportation, wages, fuel, and claims costs pressured expenses.
Segments
| Segment | FY2021 revenue | FY2021 operating income | Notable year-over-year change |
|---|---|---|---|
| JBI | $5.454 billion | $603 million | Revenue +17%; operating income increased from $428 million. Revenue per load rose 19%, while loads fell 2%. |
| DCS | $2.578 billion | $304 million | Revenue +17%; operating income declined from $314 million as labor, claims, benefits, and contract start-up costs rose. |
| ICS | $2.538 billion | $46 million | Revenue +53%; returned to operating profit from a $45 million loss. Gross profit margin rose to 11.8% from 9.9%. |
| FMS | $842 million | $28 million | Revenue +22%; moved from a $1 million loss to profit. Results included liability-reduction and claims-settlement benefits. |
| JBT | $796 million | $65 million | Revenue +72%; operating income increased from $17 million, with growth in loads and revenue per load. |
Cash, debt, and liquidity
- Cash and cash equivalents were $356 million at year-end, versus $313 million a year earlier. The $750 million revolving credit facility had no balance outstanding and expires in September 2023.
- Total senior notes were approximately $1.301 billion: $356 million due in 2022, $249 million in 2024, and $696 million in 2026. The company said it intended to repay the 2022 maturity using cash, its revolver, or other long-term financing.
- Investing activities used $877 million, including $948 million of property and equipment additions, partly offset by $71 million of equipment-sale proceeds. Financing activities used $305 million.
- Net equipment purchase commitments for 2022–2023 were approximately $1.88 billion. Management said cash, operating cash flow, and credit availability should meet foreseeable needs.
- The quarterly dividend increased from $0.30 to $0.40 per share in January 2022. The company repurchased approximately 879,000 shares for $152 million during 2021.
Outlook, risks, and unusual items
- No specific earnings or revenue guidance was provided. Management anticipated continued challenges in timely equipment deliveries and a tight supply of qualified drivers; it also noted labor, fuel, purchased transportation, and insurance cost pressures.
- Key risks include economic and freight-market volatility, COVID-19 disruption, driver and carrier availability, reliance on railroads (particularly BNSF and Norfolk Southern), fuel-price volatility and surcharge timing, customer concentration, severe weather, cyber and technology risks, regulation, environmental requirements, and litigation or claims.
- The top 10 customers generated approximately 39% of 2021 revenue; one customer represented approximately 12%. Changes in business from major customers could materially affect results.
- The company was substantially self-insured for certain claims and recorded a $287 million estimated claims accrual. The auditor identified estimation of personal-injury and property-damage claims as a critical audit matter.
- FMS segment results included a $5.7 million benefit from reducing a contingent liability and a $3.2 million benefit from a net claims settlement. The company also disclosed $78.5 million of gross unrecognized tax benefits; it expected no material change in the next 12 months.
- After year-end, the company agreed to acquire substantially all assets of Zenith Freight Lines for $87 million, subject to customary closing conditions; the transaction was expected to close February 28, 2022 and be funded from cash.
- Management reported compliance with debt covenants. The auditor issued unqualified opinions on the 2021 financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- Whether strong rate and revenue-per-load growth can continue without further deterioration in service, capacity, or labor availability.
- Whether margin gains in JBI, ICS, FMS, and JBT can offset DCS cost pressure and rising wages, fuel, purchased transportation, and claims expense.
- Execution and funding of the $1.88 billion equipment commitment, and repayment or refinancing of the $356 million debt maturity in 2022.
- Development of the $287 million claims accrual and the assumptions underlying its estimate, as well as customer concentration and the $78.5 million tax contingency.
- Whether the Zenith acquisition closes as expected and delivers the intended customer, network, and operating benefits.