# Hunt J B Transport Services Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Hunt J B Transport Services Inc](/companies/jbht.md) (CIK 728535)
- Form: 10-Q
- Filed: 2023-07-27
- Accepted by EDGAR: Jul 27, 2023, 15:21 ET
- Period: 2023-06-30
- Accession: 0001437749-23-020887
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/728535/000143774923020887/jbht20230630_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/728535/000143774923020887/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $3.13bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $6.36bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $270.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $548.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $14.6m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $29.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $66.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $131.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $189.6m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $387.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $1.81 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $3.70 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $1.83 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $3.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 104,566,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 104,647,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $1.10bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $1.06bn | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $87.1m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $83.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $295.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $2.14bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $8.25bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $1.77bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-06-30 | $1.20bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $249.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $3.91bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2023-06-30 | 103,344,606 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 37,491 characters.

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, 2022, 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. These statements are based on our belief or interpretation of information currently available. Stockholders and prospective investors are cautioned that actual results and future events may differ materially from these forward-looking statements as a result of many factors. Some of the factors and events that are not within our control and that could have a material impact on future operating results include the following: general economic and business conditions; potential business or operational disruptions resulting from the effects of a national or international health 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 and availability of 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, 2022, 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. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason.

### 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, independent contractors, or third-party carriers. 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 last-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 of 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 9, Business Segments, in our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and in Note 13, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2022.

### 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, 2022, 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 June 30, 2023 to Three Months Ended June 30, 2022

|  | Summary of Operating Segment Results For the Three Months Ended June 30, (in millions) Operating Revenues 2023 | 2022 | Operating Income/(Loss) 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| JBI | $1,489 | $1,833 | $142.9 | $202.5 |
| DCS | 888 | 904 | 113.6 | 94.1 |
| ICS | 344 | 605 | (4.4) | 23.3 |
| FMS | 224 | 275 | 14.8 | 13.3 |
| JBT | 192 | 228 | 3.8 | 20.0 |
| Other (includes corporate) | - | - | - | (0.1) |
| Subtotal | 3,137 | 3,845 | 270.7 | 353.1 |
| Inter-Segment eliminations | (4) | (7) | - | - |
| Total | $3,133 | $3,838 | $270.7 | $353.1 |

Total consolidated operating revenues decreased to $3.13 billion for the second quarter 2023, an 18% decrease from $3.84 billion in the second quarter 2022. This decrease was primarily the result of decreased revenue per load in ICS, JBI, and JBT, lower fleet productivity in DCS, lower volumes in JBI, ICS and DCS, and a decline in stop count in FMS, when compared to the second quarter 2022. Total consolidated operating revenue, excluding fuel surcharge revenue, decreased 14%.

JBI segment revenue decreased 19% to $1.49 billion during the second quarter 2023, compared with $1.83 billion in 2022. Load volumes during the second quarter 2023 decreased 7% over the same period 2022, primarily due to weaker overall freight activity, principally import-related freight during the current period. Transcontinental loads decreased 8% during the second quarter 2023, and eastern network load volume was down 6% compared to the second quarter 2022. Revenue per load, which is determined by the combination of customer rates, fuel surcharges and freight mix, decreased 13% during the second quarter 2023. Revenue per load, excluding fuel surcharge revenue, decreased 7% compared to the second quarter 2022. JBI segment operating income decreased 29%, to $142.9 million in the second quarter 2023, from $202.5 million in 2022. The decrease is primarily due to the decrease in revenue and higher driver and non-driver wages and increased network and equipment-related costs as a percentage of gross revenue, partially offset by lower insurance and claims expenses. The second quarter 2022 included a net expense of $7.7 million consisting of the segment’s portion of an increase in casualty claim expenses, partially offset by a workers’ compensation insurance benefit (collectively referred to in this report as the Insurance-Related Charge). The current quarter ended with approximately 116,500 units of trailing capacity and 6,500 power units assigned to the dray fleet.

DCS segment revenue decreased 2% to $888 million in the second quarter 2023 from $904 million in 2022. Productivity, defined as revenue per truck per week, decreased 4% when compared to the second quarter 2022. Productivity excluding fuel surcharge revenue increased 3%, primarily due to contractual index-based rate increases. On a net basis, revenue-producing trucks in the fleet at the end of the second quarter 2023 remained flat compared to the prior year period. DCS segment operating income increased 21% to $113.6 million in the second quarter 2023, from $94.1 million in 2022. The increase is primarily due to the maturing of new long-term customer contracts, partially offset by higher driver and non-driver wages and benefits and increased equipment-related and maintenance costs when compared to the second quarter 2022. The second quarter 2022 included a net expense of $1.6 million for the segment’s portion of the Insurance-Related Charge.

ICS segment revenue decreased 43% to $344 million in the second quarter 2023, from $605 million in 2022. Overall volumes decreased 26% compared to the second quarter 2022, while revenue per load decreased 24%, primarily due to lower contractual and spot rates as well as changes in customer freight mix. Contractual business represented approximately 66% of total load volume and 64% of total revenue in the second quarter 2023, compared to 44% and 47%, respectively, in 2022. Approximately $225 million of second quarter 2023 ICS revenue was executed through the Marketplace for J.B. Hunt 360 compared to $392 million in the second quarter 2022. ICS segment had an operating loss of $4.4 million in the second quarter 2023, compared to operating income of $23.2 million in 2022. The decrease is primarily due to lower revenue and a 54% decrease in gross profit, partially offset by lower personnel salary and wages expense, lower insurance and claims expenses, and decreased technology cost. Gross profit margin decreased to 13.0% in the second quarter 2023, compared to 16.1% in 2022. The second quarter 2022, included a net expense of $6.7 million for the segment’s portion of the Insurance-Related Charge. ICS’s carrier base decreased 7% compared to second quarter 2022, primarily due to changes in carrier requirements.

FMS segment revenue decreased 19% to $224 million in the second quarter 2023 from $275 million in 2022, primarily due to decreased customer demand and the effects of internal efforts to improve revenue quality across certain accounts, partially offset by the addition of multiple new customer contracts implemented over the past year and improved revenue quality at underperforming accounts. FMS segment operating income increased to $14.8 million in the second quarter of 2023 compared to $13.3 million in 2022. This increase was primarily due to improvements in revenue quality and overall cost management, partially offset by higher equipment-related and maintenance expenses, increased technology costs, and inflationary increases in facility rental expenses compared to the second quarter 2022. The second quarter 2022 also included a net expense of $0.4 million for the segment’s portion of the Insurance-Related Charge.

JBT segment revenue totaled $192 million for the second quarter 2023, a decrease of 16% from $228 million in second quarter 2022. Revenue excluding fuel surcharge decreased 15% primarily due to a 20% decrease in revenue per load excluding fuel surcharge revenue, partially offset by a 6% increase in load volume compared to second quarter 2022. Load volume growth was primarily related to the expansion of J.B. Hunt 360box®, which leverages the J.B. Hunt 360 platform to provide customers access to drop-trailer capacity across our transportation network. JBT average effective trailer count increased to 13,108 in the second quarter 2023, compared to 9,928 in 2022. At the end of the second quarter 2023, the JBT power fleet consisted of 2,068 tractors, compared to 2,015 tractors at June 30, 2022. Trailer turns in the second quarter of 2023 decreased 20% compared to second quarter 2022 due to freight mix and the increase in trailer count. JBT segment operating income decreased to $3.8 million in 2023, compared with $20.0 million during second quarter 2022. The decrease is primarily due to the decrease in revenue and higher network, technology, and equipment-related costs as a percentage of gross revenue, partially offset by lower insurance and claims expenses. The second quarter 2022 included a net expense of $2.0 million for the segment’s portion of the Insurance-Related Charge.

### 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 June 30, Dollar Amounts as a Percentage of Total Operating Revenues 2023 | 2022 | Percentage Change of Dollar Amounts Between Quarters 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Total operating revenues | 100.0% | 100.0% | (18.4)% |
| Operating expenses: |  |  |  |
| Rents and purchased transportation | 44.8 | 50.1 | (26.9) |
| Salaries, wages and employee benefits | 26.2 | 21.9 | (2.4) |
| Fuel and fuel taxes | 5.5 | 6.9 | (35.3) |
| Depreciation and amortization | 5.7 | 4.1 | 14.2 |
| Operating supplies and expenses | 4.1 | 3.3 | 2.0 |
| Insurance and claims | 2.1 | 2.3 | (26.8) |
| General and administrative expenses, net of asset dispositions | 2.1 | 1.6 | 2.9 |
| Operating taxes and licenses | 0.6 | 0.4 | 16.1 |
| Communication and utilities | 0.3 | 0.2 | 16.9 |
| Total operating expenses | 91.4 | 90.8 | (17.9) |
| Operating income | 8.6 | 9.2 | (23.3) |
| Net interest expense | 0.4 | 0.3 | 13.7 |
| Earnings before income taxes | 8.2 | 8.9 | (24.7) |
| Income taxes | 2.1 | 2.2 | (21.6) |
| Net earnings | 6.1% | 6.7% | (25.8)% |

Total operating expenses decreased 17.9%, while operating revenues decreased 18.4% during the second quarter 2023, from the comparable period 2022. Operating income decreased to $270.7 million during the second quarter 2023 from $353.1 million in 2022.

Rents and purchased transportation costs decreased 26.9% in second quarter 2023. This decrease was primarily the result of a decrease in rail and truck carrier purchased transportation rates within JBI, ICS and JBT segments and decreased JBI and ICS load volume, which decreased services provided by third-party rail and truck carriers during the second quarter 2023 compared to 2022.

Salaries, wages and employee benefits costs decreased 2.4% during the second quarter 2023, compared with 2022. This decrease was primarily driven by a decrease in incentive compensation, partially offset by a $11.6 million workers’ compensation insurance return of premium benefit present in second quarter 2022.

Fuel costs decreased 35.3% in the second quarter 2023, compared with 2022, due primarily to a decrease in the price of fuel. Depreciation and amortization expense increased 14.2% in second quarter 2023, primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment within our JBI and JBT segments, and increased truck and tractor trades.

Operating supplies and expenses increased 2.0%, driven primarily by higher equipment maintenance costs and increased towing expenses, partially offset by lower travel and entertainment expenses. Insurance and claims expenses decreased 26.8% in 2023 compared with 2022, primarily due to the inclusion of the $30 million Insurance-Related Charge in second quarter 2022 and lower claim volume in the current period, partially offset by increased cost per claim and higher insurance policy premium expense. General and administrative expenses increased 2.9% for the current quarter from the comparable period in 2022, primarily due to a decrease in net gains from sale or disposal of assets and an increase in building and yard rentals, partially offset by lower advertising costs, professional service expenses, and bad debt expense. Net loss from sale or disposal of assets was $3.5 million in 2023, compared to a net gain from sale or disposal of assets of $3.4 million in 2022.

Net interest expense increased 13.7% in 2023 due to an increase in effective interest rates on our debt compared to second quarter 2022. Income tax expense decreased 21.6% in 2023, compared with 2022, primarily due to lower taxable earnings. Our effective income tax rate was 26.0% for the second quarter of 2023, compared to 25.0% in 2022. Our annual tax rate for 2023 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.

### Comparison of Six Months Ended June 30, 2023 to Six Months Ended June 30, 2022

|  | Summary of Operating Segment Results For the Six Months Ended June 30, (in millions) Operating Revenues 2023 | 2022 | Operating Income/(loss) 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| JBI | $3,029 | $3,436 | $311.5 | $403.5 |
| DCS | 1,767 | 1,680 | 216.2 | 173.9 |
| ICS | 728 | 1,265 | (9.8) | 47.4 |
| FMS | 449 | 510 | 21.4 | 13.9 |
| JBT | 398 | 457 | 8.8 | 48.9 |
| Other (includes corporate) | - | - | 0.1 | (0.2) |
| Subtotal | 6,371 | 7,348 | 548.2 | 687.4 |
| Inter-segment eliminations | (9) | (22) | - | - |
| Total | $6,362 | $7,326 | $548.2 | $687.4 |

Total consolidated operating revenues decreased to $6.36 billion for the first six months of 2023, a 13% decrease from $7.33 billion for the comparable period 2022. Fuel surcharge revenue decreased to $912.1 million during the first six months of 2023, compared with $1.12 billion in 2022. Total consolidated operating revenue, excluding fuel surcharge revenue, decreased 12% for the first six months of 2023 compared to the prior year period.

JBI segment revenue decreased 12% to $3.03 billion during the first six months of 2023, compared with $3.44 billion in 2022. Load volume during the first six months of 2023 decreased 6% and revenue per load decreased 6%, which is determined by the combination of changes in freight mix, customer rate changes, and fuel surcharge revenue, compared to a year ago. Revenue per load, excluding fuel surcharge revenue, decreased 4% compared to the first six months of 2022. JBI segment operating income decreased 23% to $311.5 million in the first six months of 2023, from $403.5 million in 2022. The decrease is primarily due to decreased revenue and lower net gains from the sale of equipment, together with higher network and equipment-related costs and higher driver and non-driver wages as a percentage of gross revenue during the first six months of 2023, partially offset by lower rail and third-party dray purchased transportation expense.

DCS segment revenue increased 5%, to $1.77 billion during the first six months of 2023, from $1.68 billion in 2022. Productivity, defined as revenue per truck per week remained virtually flat from a year ago. Productivity excluding fuel surcharge revenue for the first six months of 2023 increased 4% from a year ago. The increase in productivity was primarily due to contractual index-based rate increases and improved utilization of equipment during the current period. Operating income of our DCS segment increased to $216.2 million in the first six months of 2023, from $173.9 million in 2022. The increase is primarily due to increased revenue and the maturing of new long-term customer contracts, partially offset by higher driver and non-driver wages and benefits and higher equipment-related and maintenance costs, when compared to the first six months of 2022.

ICS revenue decreased 42% to $728.5 million during the first six months of 2023, from $1.26 billion in 2022. Overall volumes decreased 26%, while revenue per load decreased 23% primarily due to lower contractual and spot rates as well as changes in customer freight mix compared to 2022. Approximately $476 million of ICS revenue for the first six months of 2023 was executed through the Marketplace for J.B. Hunt 360 compared to $822 million in 2022. Gross profit margin decreased to 13.3% in the current period compared to 14.4% in 2022. The ICS segment had an operating loss of $9.8 million in the first six months of 2023 compared to operating income of $47.4 million in 2022, primarily due to decreased revenue and lower gross profit margins, partially offset by lower personnel costs, decreased technology cost, and lower insurance and claims expenses during the first six months of 2023.

FMS revenue decreased 12% to $449 million during the first six months of 2023, from $510 million in 2022, primarily due to decreased customer demand and the effects of internal efforts to improve revenue quality across certain accounts, partially offset by the full period operations of Zenith Freight Lines, LLC acquired in 2022 and the addition of multiple new customer contracts implemented over the past year. FMS segment had operating income of $21.4 million in the first six months of 2023 compared to $13.9 million in 2022. This increase was primarily due to improvements in revenue quality and overall cost management, partially offset by higher equipment-related and maintenance expenses and inflationary increases in facility rental expenses compared to the first six months of 2022.

JBT segment revenue decreased 13% to $398 million for the first six months of 2023, from $457 million in 2022. Revenue excluding fuel surcharge revenue decreased 15%, primarily due to a 21% decrease in revenue per load excluding fuel surcharge revenue, partially offset by a 7% increase in load volume compared to the first six months of 2022. Operating income of our JBT segment decreased to $8.8 million in the first six months of 2023, from $48.9 million in 2022. The decrease in operating income was driven primarily by the decrease in revenue and higher network, technology, and equipment-related costs as a percentage of gross revenue.

### 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.

|  | Six Months Ended June 30, Dollar Amounts as a Percentage of Total Operating Revenues 2023 | 2022 | Percentage Change of Dollar Amounts Between Periods 2023 vs. 2022 |
| --- | ---: | ---: | ---: |
| Total operating revenues | 100.0% | 100.0% | (13.2)% |
| Operating expenses: |  |  |  |
| Rents and purchased transportation | 45.1 | 51.3 | (23.6) |
| Salaries, wages and employee benefits | 25.9 | 21.9 | 2.6 |
| Fuel and fuel taxes | 5.8 | 6.2 | (19.2) |
| Depreciation and amortization | 5.6 | 4.2 | 16.1 |
| Operating supplies and expenses | 4.0 | 3.2 | 10.3 |
| Insurance and claims | 2.1 | 1.8 | 0.6 |
| General and administrative expenses, net of asset dispositions | 2.0 | 1.4 | 25.4 |
| Operating taxes and licenses | 0.6 | 0.4 | 15.5 |
| Communication and utilities | 0.3 | 0.2 | 17.4 |
| Total operating expenses | 91.4 | 90.6 | (12.4) |
| Operating income | 8.6 | 9.4 | (20.3) |
| Net interest expense | 0.4 | 0.4 | 15.6 |
| Earnings before income taxes | 8.2 | 9.0 | (21.6) |
| Income taxes | 2.1 | 2.2 | (19.5) |
| Net earnings | 6.1% | 6.8% | (22.3)% |

Total operating expenses decreased 12.4%, while operating revenues decreased 13.2%, during the first six months of 2023, from the comparable period of 2022. Operating income decreased to $548.2 million during the first six months of 2023, from $687.4 million in 2022.

Rents and purchased transportation costs decreased 23.6% in 2023. This decrease was primarily the result of a decrease in rail and truck carrier purchased transportation rates within JBI, ICS and JBT segments and decreased JBI and ICS load volume, which decreased services provided by third-party rail and truck carriers during the current period.

Salaries, wages and employee benefits costs increased 2.6% in 2023 from 2022. This increase was primarily related to increased base driver pay and office personnel compensation, partially offset by lower incentive compensation in 2023. In addition, an $11.6 million workers’ compensation insurance return of premium benefit was present in the prior year period.

Fuel costs decreased 19.2% in 2023, compared with 2022, due primarily to a decrease in the price of fuel. Depreciation and amortization expense increased 16.1% in 2023 primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment within our JBI and JBT segments, and increased truck and tractor trades.

Operating supplies and expenses increased 10.3% primarily due to higher equipment maintenance costs, increased tire expense, higher travel and entertainment expenses, increased towing costs, and higher tolls expense. Insurance and claims expense increased 0.6% in 2023 compared with 2022, primarily due to increased cost per claim and higher insurance policy premium expense, partially offset by lower claim volume in the current period and the inclusion of a $30 million expense in 2022 for additional reserves of claims subject to insurance coverage layer specific aggregated limits. General and administrative expenses increased 25.4% from the comparable period in 2022, primarily due to a decrease in net gains from sale or disposal of assets and an increase in building and yard rentals, partially offset by lower advertising costs, professional service expenses, and bad debt expense. Net loss from sale or disposal of assets was $9.6 million in 2023, compared to a net gain from sale or disposal of assets of $20.7 million in 2022.

Net interest expense increased 15.6% in 2023, due primarily to higher effective interest rates on our debt. Income tax expense decreased 19.5% during the first six months of 2023, compared with 2022, primarily due to decreased taxable earnings in the first six months of 2023. Our effective income tax rate was 25.3% for the first six months of 2023, compared to 24.7% in 2022. Our annual tax rate for 2023 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 $1.1 billion during the first six months of 2023, compared with $784.5 million for the same period 2022. Operating cash flows increased primarily due to the timing of general working capital activities, partially offset by decreased earnings. Net cash used in investing activities totaled $853.8 million in 2023, compared with $685.0 million in 2022. The increase resulted from an increase in equipment purchases, net of proceeds from the sale of equipment, partially offset by the inclusion of a business acquisition in 2022. Net cash provided by financing activities was $0.5 million in 2023, compared with $331.2 million used in 2022. This decrease resulted primarily from a decrease in treasury stock purchased, partially offset by the net proceeds from our senior credit facility in 2023, which was the result of electing to draw funds available to us under the term portion of our credit facility.

### 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 and real estate transactions. 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. For our senior notes maturing in 2024, it is our intent to pay the entire outstanding balances in full, on or before the maturity dates, using our existing cash balance, revolving line of credit or other sources of long-term financing.

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. At June 30, 2023, we were authorized to borrow up to $1.5 billion through a revolving line of credit and committed term loans, which is supported by a credit agreement with a group of banks. The revolving line of credit authorizes us to borrow up to $1.0 billion under a five-year term expiring September 2027, and allows us to request an increase in the revolving line of credit total commitment by up to $300 million and to request two one-year extensions of the maturity date. The committed term loans authorized us to borrow up to an additional $500 million during the nine-month period beginning September 27, 2022, due September 2025, which we exercised in June 2023. The applicable interest rates under this agreement are based on either the Secured Overnight Financing Rate (SOFR), or a Base Rate, depending upon the specific type of borrowing, plus an applicable margin and other fees. At June 30, 2023, we had a cash balance of $295.9 million. Under our senior credit facility, we had no outstanding balance on our revolving line of credit and a $500.0 million outstanding balance of term loans at an average interest rate of 6.20%.

We continue to evaluate the possible effects of current 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. A large portion of our cost structure is variable. Purchased transportation expense represents more than half of our total costs but is heavily tied to load volumes. Our second largest cost item is salaries and wages, the largest portion of which is driver pay, which includes a large variable component.

Our financing arrangements require us to maintain certain covenants and financial ratios. At June 30, 2023, we were compliant with all covenants and financial ratios.

Our net capital expenditures were approximately $853.8 million during the first six months of 2023, compared with $598.1 million for the same period 2022. 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 second quarter 2023 were primarily for tractors, intermodal containers and chassis, and other trailing equipment. We are currently committed to spend approximately $1.6 billion during the years 2023 and 2024. We expect to spend in the range of $1.5 billion to $1.8 billion for net capital expenditures during calendar year 2023. These expenditures will relate primarily to the acquisition of tractors, containers, chassis, and other trailing equipment. At June 30, 2023, our aggregate future minimum lease payments under operating lease obligations related primarily to the rental of maintenance and support facilities, cross-dock and delivery system facilities, office space, parking yards, and equipment was $360.2 million.

### Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements, other than our net purchase commitments of $1.5 billion, as of June 30, 2023.

### Risk Factors

You should refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2022, 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.

### 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.

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- 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.

## Market risk

As filed, 2,317 characters.

Our outstanding debt at June 30, 2023 consists of both fixed and variable interest rate facilities. Our senior notes have fixed interest rates ranging from 3.85% to 3.875%. These fixed rate facilities reduce the impact of changes to market interest rates on future interest expense. Our senior credit facility has variable interest rates, which are based on either SOFR or a Base Rate, depending upon the specific type of borrowing, plus an applicable margin and other fees. At June 30, 2023, the average interest rate under our senior credit facility was 6.20%. 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 on variable-rate debt outstanding. At our current level of borrowing, a one percentage point increase in our applicable rate would reduce annual pretax earnings by $5.0 million.

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 or six months ended June 30, 2023. 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 June 30, 2023, 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 June 30, 2023, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

## Controls and procedures

As filed, 1,271 characters.

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 June 30, 2023.

There were no changes in our internal control over financial reporting during the second quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 270 characters.

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, 2022.

Filed Jul 27, 2023.
Source: SEC EDGAR, the filing index for accession 0001437749-23-020887. Last ingested by Listed: Nov 2, 2026, 15:40 ET. No prices; not investment advice.