J.B. Hunt Transport Services, Inc.

Transcription

1 J.B. Hunt Transport Services, Inc. 3Q 2008 Quarterly Results

2 Disclosure Today s presentation and discussion will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Words such as expects, anticipates, intends, estimates, or similar expressions are intended to identify these forward-looking statements. These statements are based on J.B. Hunt s current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. For further information, please refer to J.B. Hunt s reports and filings with the Securities and Exchange Commission. 2

3 Table of Contents 43Q 2008 Quarterly Results 43Q 2008 YTD Results 4Positioning and Strategy 4Segment Discussions 4Appendix 3

4 3Q 2008 Highlights 4 3Q 2008 Revenue: $996 million; up 12% 4 3Q 2008 Operating Income: $106 million; up 11% 4 3Q 2008 EPS: 47 cents vs. 38 cents 4 Net Cash Provided by Operations: $146 million 4 Repaid $133 million of debt since 6/30/08; $221 million since 12/31/07 4 Segment Performance h Intermodal (JBI) 4 Revenue: $532 million; up 24% 4 Operating Income: $74 million; up 21% h Dedicated (DCS) 4 Revenue: $244 million; up 3% 4 Operating Income: $27 million; up 10% h Integrated Capacity Solutions (ICS) 4 Revenue: $59 million; up 129% 4 Operating Income: $3.1 million; up 121% h Truck (JBT) 4 Revenue: $171 million; down 18% 4 Operating Income: $2.5 million; down 73% 4

5 YTD 3Q 2008 Highlights 4 3Q YTD Revenue: $2,852 million; up 12% 4 3Q YTD Operating Income: $272 million; essentially unchanged 4 3Q YTD EPS: $1.15 vs. $ Net Cash Provided by Operations: $350 million 4 FCF (EBITDA minus NET CAPEX) 204% of Net Income 4 Segment Performance h Intermodal (JBI) 4 Revenue: $1,464 million; up 25% 4 Operating Income: $192 million; up 19% h Dedicated (DCS) 4 Revenue: $716 million; up 3% 4 Operating Income: $67 million; down 5% h Integrated Capacity Solutions (ICS) 4 Revenue: $149 million; up 169% 4 Operating Income: $7.3 million; up 187% h Truck (JBT) 4 Revenue: $547 million; down 15% 4 Operating Income: $5.8 million; down 84% 5

6 The Impact of Fuel 4It is not meaningful to compare the amount of fuel surcharge revenue or the change of fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a significant portion of fuel cost is included in our payments to the railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense. 6

7 Strong Cash Generation, Falling CAPEX $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $ YTD 3Q07 Net Cash Provided By Operations (mm) Net CAPEX (mm) YTD 2009E 3Q08 4 Reducing JBT s fleet reduces our CAPEX needs 4 Our lower CAPEX and higher cash generations business of JBI and ICS are growing 4 Our ability to cascade older and/or less expensive equipment into intermodal drayage and DCS means less CAPEX 4 Drayage tractors and many DCS units last longer than over-the-road tractors 4 Driver-friendly businesses of drayage and DCS mean lower driver turnover and drivers who are friendlier to equipment 7

8 Balance Sheet Strengthens Debt to TTM EBITDA Current Maturities LTD (mm) 2.0 $ $ $250 $ Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 $150 Debt to TTM FCF $ $ $ /30/ Q07 4Q07 1Q08 2Q08 3Q08 8

9 Performance Metrics (5-year averages, YTD 3Q 08) Transportation Services Revenue (ex JBT) 15.0% 10.0% Operating Margin 85% 80% 75% 70% 5.0% 0.0% YTD 3Q 08 65% 60% 55% YTD 3Q 08 Asset Utilization (Rev/TA) Revenue Growth YTD 3Q % 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% YTD 3Q 08 9

10 J.B. Hunt Transport Services, Inc. Positioning and Strategy

11 JB Hunt is 4 Competitively differentiated h Unique intermodal network h Scale and scope advantages in the dedicated fleet market h Network economics and brand strength to penetrate new markets 4 Complemented by industry dynamics h Upward industry cost pressures h Broad capital constraints h Increasingly complex supply-chains 4 Positioned for continued growth h Leading positions in large and consolidating markets h Clear value proposition for our customers h Experienced and dedicated workforce h Best-in-class systems and technology Intermodal Dedicated Contract Services Integrated Capacity Solutions Truckload 11

12 Our Strategy 4Exploit the economic advantages of intermodal and our unique network (JBI) 4Utilize our scale and scope advantages to drive growth in services that have defensible characteristics (JBI, DCS Delivery and Replenishment channels) 4Further leverage the JB Hunt brand, technology and network to penetrate new markets (JBI, DCS, ICS) 4Reduce asset-based exposure to areas with low entry barriers, high capital requirements and undifferentiated service (JBT, DCS Capacity channel) 4Deploy growing free cash flow to further strengthen balance sheet 12

13 J.B. Hunt Transport Services, Inc. Segment Discussions

14 Diversified Revenue Base 4 Intermodal (JBI) h h h Largest, 100% 53 high-cube container fleet Largest drayage fleet in North America Priority loading and unloading at major rail terminals 4 Dedicated (DCS) h h h Fleet creation, conversion and augmentation Design and implementation of value-driven supply chain solutions On-site management 4 Integrated Capacity Solutions (ICS) h h h Non-asset based offering of dry van, flatbed, refrigerated, expedited and LTL services 40- and 20-foot box domestic and international containers and international intermodal services Services to all 50 States, Canada and Mexico 4 Truckload (JBT) h h h One of the largest capacity networks in North America Instant tracking via the Internet GPS trailer tracking Revenue Mix YTD 3Q 2008 JBT 19% DCS 25% ICS 5% JBI 51% Operating Income Mix YTD 3Q 2008 DCS 25% JBT 2% ICS 3% JBI 70% 14

15 What We Do - Intermodal 4 Largest 53, high-cube container fleet (~37,000) 4 Proprietary company owned chassis 4 Largest drayage fleet in North America 4 Priority loading and unloading at major rail terminals 4 Long-standing, mutually beneficial relationships with rail partners 15

16 JBI Revenue Growth Has Been Attractive JBI Revenue (mm) $1,800 $1,653 $1,600 $1,400 $1,200 $1,121 $1,294 $1,430 $1,171 $1,464 $1,000 $921 $800 $600 $400 $200 $ YTD 3Q07 YTD 3Q08 16

17 Intermodal JBI s Multiple Advantages Shippers Drayage Railhead Rail Linehaul Railhead Drayage Shippers 17

18 Advantages to Shippers 4 Significant cost savings vs. truck 4 Superior service 4 JBHT s willingness to convert truck freight to intermodal 4 Access to equipment 4 Company-driver pick-up and delivery 4 Load visibility and planning 4 Nearly 20 years of intermodal experience Shippers Shippers 18

19 Our Dray and Railhead Advantages 4 National company-owned dray fleet 4 JBI chassis at the rail ramp vs. common pool for others 4 JBI has yards in proximity to rails 4 Onsite maintenance, driver friendly 4 Expedited access to railramps 4 Improved load visibility for rail partners 4 Equipment balance Drayage Railhead Railhead Drayage 19

20 Our Linehaul Advantages 4 Long-standing, mutually beneficial relationships with rails 4 Rail networks favor double-stack 4 Network balance, optimal asset utilization 4 Significant reduction in carbon emissions vs. truck 4 Fewer accidents per mile Rail Linehaul 20

21 JBI s Growth Exceeds the Market s Growth Loads Containers 250,000 45,000 40, ,000 35,000 30, ,000 25, ,000 20,000 15,000 50,000 10,000 5, Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 21

22 Market View - Intermodal 4 Substantial Eastern market opportunity h Volatile fuel prices, weak economy act as wake up call to reduce costs h Cost advantage evident regardless of fuel h 70% of the U.S. population resides within the red line h Reduced need for highway infrastructure spending h 50% reduction in carbon emissions compared to truck h Driver friendly freight J.B. Hunt knows where the truck freight is! 22

23 Market View - Intermodal 4 Substantial West Coast Transloading opportunity h Flexibility of final deployment decision gaining importance h Cargo consolidation h Reduction in inventory carrying costs h Consistency of transit and visibility of movement h Protection from steamship carrier rationalization 4 Every 1% increase in transloading = 30, ; container loads 2007 West Coast Import Containers 4.8mm Trans 23% Local 31% Intact 46% 4 Long Beach, CA to Fremont, OH example h Five 40 Intact Movements = 4 $10, days transit h Three 53 JBHU Movements = 4 $8, Days transit 23

24 What We Do - Dedicated 4 Design, develop and execute supplychain solutions 4 Utilize variety of specialized equipment for customer-specific needs 4 Operate under long-term contracts with well defined customer P&Ls 4 Provide customers with outsourcing benefits and leverage JBHT network 4 Create attractive opportunities for drivers and non-driver employees 4 Continuous improvement for customers by executing CVD 24

25 DCS Revenue Growth Has Been Attractive DCS Revenue (mm) $1,000 $900 $844 $915 $937 $800 $700 $671 $760 $698 $716 $600 $500 $400 $300 $200 $100 $ YTD 3Q07 YTD 3Q08 25

26 We Help Our Customers Solve Problems 26

27 DCS Does Not Compete With Generic Trucking Length of Haul Comparison Operating Income Margin Comparison % % 10.0% % 6.0% % % 0.0% % 0 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08-4.0% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 DCS JBT DCS JBT 27

28 Market View - DCS 4 Delivery and Replenishment remain attractive growth channels h 100% of YTD growth driven by new JBHT relationships h Marketplace receptive to outsourcing as costs increase, capital constraints rise, regulation and complexity grow h Common Carriers are not a competitive threat h Capacity run-off masked attractive growth elsewhere 4 Continued run-off in Capacity channel h Lower margin h Fewer barriers to entry h Opportunities driven by cyclical swings in industry capacity Capacity Distribution Replenishment Delivery DCS Revenue (09/30/2008 YTD by channel) 10% 26% 55% 9% 0% 20% 40% 60% 28

29 What We Do - ICS 4 Non-asset based offerings of dry van, flatbed, refrigerated, expedited and LTL Bid Example 4 Bring broader service offering to customers 4 Utilize brand, systems and network to penetrate new segments 4 Capture freight that historically did not fit JBHT network 4 Frequently new customers for JBHT 4 Proactive, local sales offices Traditional JBHT Non-JBHT (potential for ICS) 29

30 Brand and Know-How Drive ICS Growth ICS Revenue (mm) $160 $149.1 $140 $120 $100 $91.6 $80 $60 $40 $20 $0 $55.5 $41.8 $30.0 $21.0 $ YTD 3Q07 YTD 3Q08 30

31 Market View - ICS 4 Shippers showing some loyalty to existing carrier base during lull 4 Lack of peak season curtails ability to capture pure brokered freight 4 Margins benefit from readily available capacity 4 Late quarter demand softened faster than carriers exited 4 Cost pressures, economic weakness ultimately lead to increased bid activity $49 U.S Freight Transportation Market (billion) $35 $9 $23 $45 $578 Truckload Rail LTL Air Pipeline Water 31

32 What We Do - Truckload 4 One of the Country s largest truckload fleets h Mix of company-owned (80%) and independent contractor (20%) tractors h Economy of scale benefits in all areas of purchasing h Infrastructure leveraged by JBI, DCS and ICS h Diversified mix of freight and broad customer base 6,000 5,000 4,000 3,000 2,000 Tractors 32 1, Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08

33 We Have Reduced Asset-Based Exposure $1,200 JBT Revenue (mm) $1,000 $841 $906 $990 $966 $842 $800 $645 $600 $547 $400 $200 $ YTD 3Q07 YTD 3Q08 33

34 Market View Truckload 4 High/Volatile Fuel Prices h Shippers rethinking long-held supplychain strategies h Shipping larger lots sizes less frequently h Higher prices, bigger inventories h Private fleet economics under scrutiny 4 Industry supply and demand remain out of balance h Weak pricing continues h Weaker carriers exiting the market a Intermodal cost differential is more pronounced with high fuel prices a Fuel price volatility creates wake up call for supply-chain managers a DCS value proposition more evident with volatile fuel prices a Small carrier disruptions ultimately open doors for ICS (JBHT brand and network) a ICS ability to bring more than just truckload assets 34

35 J.B. Hunt Transport Services, Inc. Appendix

36 JBI Performance Revenue Growth Operating Income Growth 26% 22% 25% 21% 25% 20% 24% 19% 24% 18% 23% 3Q 08 y/y YTD 3Q 08 y/y 17% 3Q 08 y/y YTD 3Q 08 y/y Average Length of Haul Revenue per Load 1,950 1,900 1,850 1,800 1,750 3Q 07 3Q 08 $2,450 $2,400 $2,350 $2,300 $2,250 $2,200 $2,150 $2,100 $2,050 3Q 07 3Q 08 36

37 DCS Performance Revenue Growth Operating Income Growth 3% 3% 3% 10% 5% 3% 3% 3% 0% -5% 2% -10% 3Q 08 y/y YTD 3Q 08 y/y 3Q 08 y/y YTD 3Q 08 y/y Length of Haul Loads , , , , Q 07 3Q 08 3Q 07 3Q 08 37

38 ICS Performance Revenue Growth Operating Income Growth 200% 200% 150% 150% 100% 100% 50% 50% 0% 3Q 08 y/y YTD 3Q 08 y/y 0% 3Q 08 y/y YTD 3Q 08 y/y Margin on Gross Revenue Carrier Base 17% 16% 16% 15% 15% 14% 14% 13% 3Q 07 3Q 08 YTD 3Q 07 YTD 3Q 08 20,000 15,000 10,000 5, Q 07 3Q 08 38

39 JBT Performance Length of Haul 3Q 07 3Q 08 15% 10% 5% 0% Empty Mile Percentage 3Q 07 3Q , , , , , , ,000 0 Loads 3Q 07 3Q 08 YTD 3Q 07 YTD 3Q 08 $3,800 $3,700 $3,600 $3,500 $3,400 $3,300 $3,200 Revenue per Tractor per Week 3Q 07 3Q 08 YTD 3Q 07 YTD 3Q 08 39

40 J.B. Hunt Transport Services, Inc. 3Q 2008 Quarterly Results