JB Hunt adapts hauling techniques

J.B. Hunt's third-quarter revenue was up 12 percent from a year before at $996 million.

The Associated Press

10/27/2008

LOWELL, Ark. — J.B. Hunt Transport Services Inc. has shifted to intermodal transport, using rail lines as part of an effort to diversify its business from its customary emphasis on using tractor-trailers.

The company has been reducing its truck-load segment as it develops its use of rail lines. Also, the Lowell-based company has begun a brokerage business as further insulation against the cycles that cause the fortunes of trucking companies to zigzag.

J.B. Hunt's third-quarter revenue was up 12 percent from a year before at $996 million. The company has lowered its outstanding debt by $221 million, this coming at a time when many trucking companies are struggling to survive. In a recent regulatory filing, the company said it has sustained its access to credit and that its liquidity is good.

Chief Executive Officer Kirk Thompson said growth in intermodal shipping and a higher fuel surcharge are among the reasons revenues are up. The filing said the company added in its third quarter 2,604 containers and trailers to support additional intermodal business. In the coming year, J.B. Hunt intends to add another 4,500 containers. The company decreased its tractor fleet by 1,694 units in the third quarter.

"We continue to make significant progress toward the transformation of our company from the asset-based truckload company of the past, to a diversified transportation solutions business with far less cyclicality, capital intensity and earnings volatility that is frequently associated with trucking businesses," Thompson said in the filing.

Thompson said more complex supply chains require new efficiencies.

"While we anticipate that we will continue to be able to provide adequate capacity to meet our customers' truck transportation needs, it has become increasingly clear that long-term value for our customers is enhanced by the conversion of as much of their freight to our best-in-class intermodal service as possible," Thompson said.

The company said freight that needs to move about 500 miles per day — about one day's travel — is being targeted for conversion to intermodal transport.

Even though fuel prices have come down recently, analysts say J.B. Hunt can continue to make its changes.

"With diesel at $3.80, prices would have go a lot lower before intermodal loses its advantage," Stephens Inc. analyst Thom Albrecht said. Stephens conducts investment banking services for J.B. Hunt.

The company began its intermodal operation when diesel fuel was priced at $2.80 per gallon.

Researchers at the Supply Chain Research Center at the University of Arkansas said rail shipment offers far lower fuel costs..

"A full train is four times more efficient in its fuel usage than a full truck," said Terry Tremwel, center research director.

Other advantages for converting to rail include overcoming a driver shortage, reducing exposure to high fuel costs and avoiding infrastructure issues, said Jim Crowell, director of the center.

Analysts say J.B. Hunt will be in position when the economy recovers to expand its market share.