J.B. Hunt Transport Services, Inc. announced second-quarter 2008 total operating revenue of $977 million, a 14% increase from the $856 million for the second quarter 2007.
The increase in operating revenue was primarily attributable to sharply higher fuel surcharge revenue and growth in the Intermodal (JBI) segment and non-asset based Integrated Capacity Solutions (ICS) segment.
Current quarter operating revenue, excluding fuel surcharges, increased 3% over the second quarter 2007. Containers and trailers grew from 55,886 to 60,290 over the same period. The growth in the fleet of containers and trailers was primarily to support additional intermodal business. The combined tractor fleet declined from 11,760 in the second quarter 2007 to 10,545 in the second quarter 2008, primarily due to actions to reduce the size of the Truck segment fleet.
Operating income for the current quarter decreased slightly to $94.0 million vs. $96.2 million for the second quarter 2007. The income tax adjustment referred to above recorded in the second quarter of 2007 was related to a 1999 sale-and-leaseback transaction which had been disclosed previously.
"We are delighted to report earnings per share growth in the second quarter 2008 (excluding the tax benefit in second quarter 2007) despite a significant freight recession and soaring fuel prices,” said Kirk Thompson, JBHT President and CEO.
“We continue to offer our customers supply chain solutions that best suit their service and cost parameters without bias toward a particular mode or asset class. Importantly, this value enhancing strategy has allowed our customers to partially mitigate the impact of historically higher fuel prices by growing their use of intermodal vs. truckload. Whether it be saving our customers money on their transportation costs by converting truckload freight to intermodal, by offering true dedicated operations for service critical deliveries or by providing alternative outsourced capacity to complement our own trucks, we are committed to helping our customers achieve best-in-class performance of their supply chains. We are pleased to be able to achieve progress toward those goals and also produce higher earnings per share in this difficult environment."
Segment Information:
Intermodal (JBI): Revenue grew by 28% compared to the same quarter a year ago, driven mostly by load count that increased 17% and by higher fuel surcharge revenue. Results for the current quarter continue to reflect our customers' confidence in our intermodal product as they look for alternatives to high fuel prices paid to over-the-road providers. As a result, our short haul loads continue to grow at a 40% plus pace. The resultant lane mix change drove overall length of haul down 4% and pricing up 2% in the current quarter.
JBI operating key factors continue to show positive results as both driver turnover and driver productivity improved during the current quarter. In conjunction with our eastern rail partner, Norfolk Southern Corporation (NSC), we have initiated service on more than a half dozen new intermodal lanes serving the Eastern half of the United States. While the initial volume impacts are expected to be small, our ability to meet new customer requests for over-the-road conversion to intermodal continues to expand. We are pleased with the execution of our network and operations by our experienced intermodal staff and in their ability to quickly adjust to a changing environment for the benefit of our customers.
Dedicated Contract Services (DCS): Revenue grew 3% compared to the same quarter last year. Excluding the effect of fuel surcharges, revenue declined 6%. However, revenue per average truck per week, excluding the effect of fuel surcharges, increased 3%. This increase was partially due to a decline in average trucks to 4,715 units in the second quarter 2008 vs. 5,215 units in the second quarter 2007. The decline in truck count was driven primarily by reduction in the number of units that operate in more generic dedicated business which, by our definition, now stands at approximately 8% of our fleet. Truck count in the value-added, true dedicated business increased when compared to both the second quarter 2007 and first quarter 2008. Operating statistics in the second quarter 2008 vs. the same period last year reflect this change in business mix. Utilization was down 5% and loaded length of haul down 29 miles to 224 miles, while revenue per loaded mile, excluding fuel surcharge, was up 10%.
Operating income declined $2.7 million and the operating ratio increased 140 basis points to 90.9%. The increase in the cost of fuel and the corresponding increase in fuel surcharge revenue caused a dilutive effect on the operating ratio of 80 basis points. As fuel surcharge revenue increased, the operating ratio was negatively impacted due to the additional revenue with no attendant margin.
Truck (JBT): JBT segment revenue declined 14%, primarily due to a 17% reduction in loads, compared to the second quarter 2007. We have continued to right-size our random tractor fleet, which resulted in a reduction of 1,085 tractors, or 22%, compared to the tractor counts at the end of the second quarter 2007. As a result, current quarter revenue declined 23%, excluding fuel surcharges. We continue to make progress selling the JBT segment revenue equipment that was designated as held for sale at December 31, 2007.
JBT's overall rate per loaded mile, excluding fuel surcharges, increased 2.3% during the current quarter, compared to the prior year period. However, rates must increase in order for JBT to produce acceptable returns. Inability to achieve rapid improvement in profitability will result in further truck count reductions.