JB HUNT TRANSPORT SERVICES
The following discussion of our results of operations and financial condition
should be read in conjunction with our financial statements and related notes in
Item 8. This discussion contains forward-looking statements. Please see
"Forward-looking Statements" and "Risk Factors" for a discussion of items,
uncertainties, assumptions and risks associated with these statements.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with U.S. generally
accepted accounting principles requires us to make estimates and assumptions
that impact the amounts reported in our 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 third parties 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. We consider our critical accounting
policies and estimates to be those that require us to make more significant
judgments and estimates when we prepare our financial statements and include the
following:
Workers' Compensation and Accident Costs
We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have umbrella policies to limit our exposure to catastrophic claim costs. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. For 2018, we were self-insured for$500,000 per occurrence for personal injury and property damage and self-insured for$100,000 per workers' compensation claim. For 2019 and 2020, we were self-insured for$500,000 per occurrence for personal injury and property damage and fully insured for workers' compensation claims for nearly all states. We have policies in place for 2021 with substantially the same terms as our 2020 policies for personal injury, property damage, workers' compensation, and cargo loss or damage. Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and provides a reserve for incurred-but-not-reported claims. We do not discount our estimated losses. AtDecember 31, 2020 , we had an accrual of approximately$257 million for estimated claims. In addition, we record receivables for amounts expected to be reimbursed for payments made in excess of self-insurance levels on covered claims. AtDecember 31, 2020 , we have recorded$304 million of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums. Revenue Equipment We operate a significant number of tractors, trucks, containers, chassis, and trailers in connection with our business. This equipment may be purchased or acquired under lease agreements. In addition, we may rent revenue equipment from various third parties under short-term rental arrangements. Purchased revenue equipment is depreciated on the straight-line method over the estimated useful life to an estimated salvage or trade-in value. We periodically review the useful lives and salvage values of our revenue equipment and evaluate our long-lived assets for impairment. We have not identified any impairment to our assets atDecember 31, 2020 . 16
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We have agreements with our primary tractor suppliers for residual or trade-in
values for certain new equipment. We have utilized these trade-in values, as
well as other operational information such as anticipated annual miles, in
accounting for depreciation expense.
Revenue Recognition
We record revenues on the gross basis at amounts charged to our customers
because we control and are primarily responsible for the fulfillment of promised
services. Accordingly, we serve as a principal in the transaction. We invoice
our customers, and we maintain discretion over pricing. Additionally, we are
responsible for selection of third-party transportation providers to the extent
used to satisfy customer freight requirements.
We recognize revenue from customer contracts based on relative transit time in
each reporting period and as other performance obligations are provided, with
related expenses recognized as incurred. Accordingly, a portion of the total
revenue that will be billed to the customer is recognized in each reporting
period based on the percentage of the freight pickup and delivery performance
obligation that has been completed at the end of the reporting period.
Our trade accounts receivable includes accounts receivable reduced by an
allowance for uncollectible accounts. Receivables are recorded at amounts billed
to customers when loads are delivered or services are performed. The allowance
for uncollectible accounts is calculated over the life of the underlying
receivable and is based on historical experience; any known trends or
uncertainties related to customer billing and account collectability; current
economic conditions; and reasonable and supportable economic forecasts, each
applied to segregated risk pools based on the business segment that generated
the receivable. The adequacy of our allowance is reviewed quarterly.
Income Taxes
We account for income taxes under the liability method. Our deferred tax assets
and liabilities represent items that will result in a tax deduction or taxable
income in future years for which we have already recorded the related tax
expense or benefit in our statement of earnings. Deferred tax accounts arise as
a result of timing differences between when items are recognized in our
Consolidated Financial Statements and when they are recognized in our tax
returns. We assess the likelihood that deferred tax assets will be recovered
from future taxable income or the reversal of temporary timing differences. To
the extent we believe recovery does not meet the more-likely-than-not threshold,
a valuation allowance is established. To the extent we establish a valuation
allowance, we include an expense as part of our income tax provision.
Significant judgment is required in determining and assessing the impact of
complex tax laws and certain tax-related contingencies on our provision for
income taxes. As part of our calculation of the provision for income taxes, we
assess whether the benefits of our tax positions are at least more likely than
not to be sustained upon audit based on the technical merits of the tax
position. For tax positions that are not more likely than not to be sustained
upon audit, we accrue the largest amount of the benefit that is not more likely
than not to be sustained in our Consolidated Financial Statements. Such accruals
require us to make estimates and judgments, whereby actual results could vary
materially from these estimates. Further, a number of years may elapse before a
particular matter for which we have established an accrual is audited and
resolved. See Note 7, Income Taxes, in our Consolidated Financial Statements for
a discussion of our current tax contingencies.
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RESULTS OF OPERATIONS
The following table sets forth items in our Consolidated Statements of Earnings
as a percentage of operating revenues and the percentage increase or decrease of
those items compared with the prior year.
Percentage of Percentage Change
Operating Revenues Between Years
2020 vs. 2019 vs.
2020 2019 2018 2019 2018
Operating revenues 100.0 % 100.0 % 100.0 % 5.1 % 6.4 %
Operating expenses:
Rents and purchased
transportation 51.4 49.4 51.5 9.4 2.1
Salaries, wages and employee
benefits 24.4 23.7 22.4 8.3 12.5
Depreciation and amortization 5.5 5.4 5.1 5.7 14.5
Fuel and fuel taxes 3.7 5.1 5.3 (22.8 ) 0.9
Operating supplies and expenses 3.5 3.6 3.5 0.4 9.7
General and administrative
expenses, net of asset
dispositions 1.8 2.1 1.8 (6.2 ) 17.6
Insurance and claims 1.4 1.7 1.5 (14.5 ) 21.5
Operating taxes and licenses 0.6 0.6 0.6 (1.8 ) 8.3
Communication and utilities 0.3 0.4 0.4 (3.7 ) 12.6
Total operating expenses 92.6 92.0 92.1 5.8 6.3
Operating income 7.4 8.0 7.9 (2.8 ) 7.8
Net interest expense 0.5 0.6 0.5 (11.0 ) 31.7
Earnings before income taxes 6.9 7.4 7.4 (2.2 ) 6.3
Income taxes 1.6 1.8 1.7 (2.8 ) 8.8
Net earnings 5.3 % 5.6 % 5.7 % (2.0 )% 5.5 %
2020 Compared With 2019
Consolidated Operating Revenues
Our total consolidated operating revenues increased 5.1% to$9.64 billion in 2020, compared to$9.17 billion in 2019, primarily due to increased ICS revenue per load, theDecember 2019 acquisition and new contractual business onboarded throughout 2020 in FMS, and increased load volumes in JBT and DCS. The increase in revenue was partially offset by a decrease in JBI revenue per load. Fuel surcharge revenues decreased 27.4% to$757 million in 2020, compared to$1.04 billion in 2019. If fuel surcharge revenues were excluded from both years, our 2020 revenue increased 9.3% over 2019.
Consolidated Operating Expenses
Our 2020 consolidated operating expenses increased 5.8% from 2019, while year-over-year revenue increased 5.1%, resulting in a 2020 operating ratio of 92.6% compared to 92.0% in 2019.
Rents and purchased transportation costs increased 9.4% in 2020, primarily due to increased load volume and third-party rail and truck purchased transportation rates in JBI and ICS and an increase in the use of third-party truck carriers by FMS and JBT during 2020, partially offset by JBI 2019 rail purchased transportation costs including a$26.8 million charge resulting from the issuance of an award regarding our arbitration with BNSF. Salaries, wages and employee benefit costs increased 8.3% in 2020 from 2019. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers and an increase in the number of employees as well as higher cost of employee group medical benefits compared to 2019. In addition, 2020 included a$12.3 million one-time COVID-19 related bonus paid to employee drivers and other key field personnel. Depreciation and amortization expense increased 5.7% in 2020, primarily due to equipment purchases related to new DCS long-term customer contracts and the addition of standard and specialized trailing equipment within our JBI segment. 18 -------------------------------------------------------------------------------- Fuel and fuel taxes expense decreased 22.8% in 2020 compared with 2019, due primarily to a decrease in the price of fuel during 2020. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a specified computation based on the change in national, regional, or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, most also reflect a specified miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reflected in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly. It is not meaningful to compare the amount of fuel surcharge revenue or the change in 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 railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense. Operating supplies and expenses were virtually flat in 2020 compared with 2019, driven primarily by higher operating supplies and building maintenance costs in response to COVID-19, increased toll costs, and higher equipment maintenance costs, offset by reduced travel and entertainment expenses. General and administrative expenses decreased 6.2% from 2019, primarily due to decreased professional fees, lower advertising costs, lower driver hiring expenses and, decreased net loss from the sale or disposal of assets, partially offset by increased technology spend on the J.B. Hunt 360° platform and legacy system upgrades, higher bad debt expenses, and increased building rental expenses. Additionally, net losses from sale or disposal of assets were$4.4 million in 2020, compared to net losses of$13.1 million in 2019. Insurance and claims expense decreased 14.5% in 2020, primarily due to the absence of a$20 million FMS claim settlement charge and$17.4 million in reserve charges in 2019 for arbitration related legal fees, cost and interest claimed by BNSF, partially offset by an increase in insurance premiums in 2020. Net interest expense for 2020 decreased by 11.0% compared with 2019, due to lower effective interest rates on our debt. Income tax expense decreased 2.8% in 2020, due primarily to decreased taxable earnings in 2020. Our effective income tax rate was 24.0% in 2020 and 24.2% in 2019. 19 --------------------------------------------------------------------------------
Segments
We operated five business segments during calendar year 2020. The operation of
each of these businesses is described in our Notes to Consolidated Financial
Statements. The following tables summarize financial and operating data by
segment:
Operating Revenue by Segment
Years Ended December 31, (in millions)
2020 2019 2018
JBI $ 4,675 $ 4,745 $ 4,717
DCS 2,196 2,128 1,788
ICS 1,658 1,348 1,335
FMS 689 567 375
JBT 463 389 417
Total segment revenues 9,681 9,177 8,632
Intersegment eliminations (44 ) (12 ) (17 )
Total $ 9,637 $ 9,165 $ 8,615
Operating Income by Segment
Years Ended December 31, (in millions)
2020 2019 2018
JBI $ 428 $ 447 $ 401
DCS 314 278 195
ICS (45 ) (11 ) 50
FMS (1 ) (9 ) (2 )
JBT 17 29 37
Total $ 713 $ 734 $ 681
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Operating Data by Segment
Years Ended December 31,
2020 2019 2018
JBI
Loads 2,019,391 1,979,169 2,049,014
Average length of haul (miles) 1,690 1,679 1,648
Revenue per load$ 2,315 $ 2,397 $ 2,302 Average tractors during the period(1) 5,530 5,635
5,551
Tractors (end of period) 5,663 5,559
5,650
Trailing equipment (end of period) 98,689 96,743
94,902
Average effective trailing equipment usage 90,514 86,836
88,739
DCS
Loads 3,676,212 3,353,553 2,728,683
Average length of haul (miles) 160 168 177
Revenue per truck per week(2) $ 4,373 $ 4,378 $ 4,272
Average trucks during the period(3) 9,743 9,471 8,130
Trucks (end of period) 9,911 9,779
8,929
Trailing equipment (end of period) 27,290 27,015 25,721 ICS Loads 1,265,897 1,243,992 1,234,632 Revenue per load$ 1,310 $ 1,084 $ 1,081 Gross profit margin 9.9 % 13.1 % 15.4 % Employee count (end of period) 1,011 1,213
1,142
Approximate number of third-party carriers (end of period) 100,200 84,400
73,100
Marketplace forJ.B. Hunt 360° revenue (millions)$ 1,142.2 $ 839.8 $ 557.8 FMS Stops 5,771,533 4,432,591 2,162,040 Average trucks during the period(3) 1,405 1,254 1,134 JBT Loads 406,550 346,459 355,038 Loaded miles (000) 171,141 143,511 151,322 Nonpaid empty mile percentage 18.8 % 18.9 % 16.7 % Revenue per tractor per week(2)$ 3,978 $ 3,917 $ 4,148 Average tractors during the period(1) 1,837 1,958 1,990 Tractors (end of period) Company-owned 798 845 1,139 Independent contractor 971 986 973 Total tractors 1,769 1,831 2,112 Trailers (end of period) 8,567 6,975 6,800
(1) Includes company-owned and independent contractor tractors (2) Using weighted workdays (3) Includes company-owned, independent contractor, and customer-owned trucks
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--------------------------------------------------------------------------------JBI Segment JBI segment revenue decreased 1% to$4.68 billion in 2020, from$4.74 billion in 2019. This decrease in revenue was primarily a result of a 3% decrease in revenue per load, which is the combination of changes in freight mix, customer rates, and fuel surcharge revenue, partially offset by a 2% increase in load volume. Eastern network load volumes decreased 1% and transcontinental loads increased 4% compared to 2019. Average length of haul increased 1% in 2020 when compared to 2019. Revenue per load excluding fuel surcharges increased approximately 1% compared to 2019. Operating income of the JBI segment decreased to$428 million in 2020, from$447 million in 2019. Benefits from increased load volume in 2020 were more than offset by higher rail purchased transportation costs, COVID-19 related network inefficiencies, higher personnel costs, which included a one-time COVID-19 related bonus paid to employee drivers and other key field personnel, and higher dray costs resulting from disruptions in rail capacity and a constricted labor and truck capacity environment. Operating income for JBI in 2019 was impacted by a$26.8 million charge to rail purchase transportation expense resulting from the issuance of a final award regarding our arbitration with BNSF and a$17.4 million charge to insurance and claims expense, for arbitration related legal fees, cost and interest claimed by BNSF. DCS Segment DCS segment revenue increased 3% to$2.20 billion in 2020, from$2.13 billion in 2019. Productivity, defined as revenue per truck per week, remained flat when compared to 2019. Productivity excluding fuel surcharge revenue increased 2% from 2019. The increase in productivity was primarily a result of better utilization of assets between customer accounts, contracted customer rate increases, and increased customer supply chain fluidity. Customer retention rates remain above 98%. Operating income of our DCS segment increased to$314 million in 2020, from$278 million in 2019. The increase is primarily due to increased fleet productivity, the absence of significant new customer implementation costs throughout the majority of the year, lower driver related turnover costs, and lower travel and entertainment expenses. Operating income was partially offset by higher non-driver personnel costs, a one-time COVID-19 related bonus and higher equipment ownership costs when compared to 2019. ICS Segment ICS segment revenue increased 23% to$1.66 billion in 2020, from$1.35 billion in 2019. Overall volumes increased 2%, with truckload volumes increasing 15% when compared to 2019. Revenue per load increased 21% when compared to 2019 primarily due to customer mix changes and higher spot and contractual pricing. Contractual business was approximately 60% of the total load volume and 43% of the total revenue in the 2020, compared to 65% of the total load volume and 49% of the total revenue in 2019. ICS segment incurred an operating loss of$45 million in 2020, compared to operating loss of$11 million in 2019. The increase in operating loss was primarily due to lower gross profit margins and increased technology spending as the Marketplace forJ.B. Hunt 360° continues to expand in functionality and capacity. Gross profit margin decreased to 9.9% in the current year versus 13.1% last year primarily due to a more competitive pricing environment and constricted supply dynamics compared to 2019. Approximately$1.14 billion of ICS revenue for 2020 was executed through the Marketplace forJ.B. Hunt 360° compared to$840 million in 2019. ICS's carrier base increased 19%, and the employee count decreased 17% when compared to 2019. FMS Segment FMS revenue increased 22% to$689 million in 2020 from$567 million in 2019, primarily due to two business acquisitions completed in 2019 and an increase in new customer contracts throughout 2020, partially offset by the temporary suspension of operations at various customer sites in 2020 as a result of the effects of the COVID-19 pandemic. Stop count for 2020 increased 30%, and productivity, defined as revenue per stop, decreased 7% compared to 2019. The reduction in productivity was primarily due to a change in the mix of service methods to a more asset-light model resulting from the 2019 business acquisitions and a shift in the mix of services provided during 2020 as customers were affected by COVID-19 within our FMS network. 22 -------------------------------------------------------------------------------- FMS segment had an operating loss of$1 million in 2020 compared to an operating loss of$9 million in 2019. The current period operating loss was primarily due to increased costs to expand and improve, through service quality performance controls, the FMS network, lost revenue resulting from the temporary suspension of operations at several customer sites in response to COVID-19, higher bad debt expense, higher personnel costs, which included a one-time COVID-19 related bonus, higher COVID-19 related operating supplies expense an increase in noncash amortization expense attributable to the 2019 business acquisitions. FMS segment operating loss for 2019 included a$20 million insurance claim settlement charge. JBT Segment JBT segment revenue increased 19% to$463 million in 2020, from$389 million in 2019. Excluding fuel surcharges, revenue for 2020 increased 23% compared to 2019, primarily due to a 17% increase in load volume and a 5% increase in revenue excluding fuel surcharge revenue per load compared to 2019. The 2020 growth in load count was partially due to the continued expansion of 360box which leverages the J.B. Hunt 360° platform. At the end of 2020, JBT operated 1,769 tractors and 8,567 trailers compared to 1,831 and 6,975 at the end of 2019. JBT segment had operating income of$17 million in 2020 compared with$29 million in 2019. The decrease in operating income was driven primarily by higher purchased transportation expense and higher non-driver personnel cost and technology modernization expenses for the continued expansion of 360box compared to 2019. 2019 Compared With 2018
Consolidated Operating Revenues
Our total consolidated operating revenues increased 6.4% to$9.17 billion in 2019, compared to$8.61 billion in 2018, primarily due to increased revenue in DCS related to an increase in revenue producing trucks, higher truck productivity, defined as revenue per truck per week, and an acquisition in the first quarter 2019. The increase in revenue was further attributable to increased load volumes in ICS and higher revenue per load in JBI, partially offset by a decrease in JBI load volumes and a reduction in rates per loaded mile and the number of operating tractors in JBT. Fuel surcharge revenues decreased 1.4% to$1.04 billion in 2019, compared to$1.06 billion in 2018. If fuel surcharge revenues were excluded from both years, our 2019 revenue increased 7.5% over 2018.
Consolidated Operating Expenses
Our 2019 consolidated operating expenses increased 6.3% from 2018, while year-over-year revenue increased 6.4%, resulting in a 2019 operating ratio of 92.0% compared to 92.1% in 2018.
Rents and purchased transportation costs increased 2.1% in 2019, primarily due to increased rail and truck purchased transportation rates within JBI and ICS segments and JBI rail purchased transportation costs, including a$26.8 million charge in 2019, resulting from the issuance of an award regarding our arbitration with BNSF. The current year increase in rents and purchased transportation costs was partially offset by a$152.3 million BNSF arbitration related charge recorded by JBI in 2018. Salaries, wages and employee benefit costs increased 12.5% in 2019 from 2018. This increase was primarily related to increases in driver pay and office personnel compensation due to an increase in the number of employees and a tighter supply of qualified drivers. Depreciation and amortization expense increased 14.5% in 2019, primarily due to equipment purchased related to new DCS long-term customer contracts. 23 -------------------------------------------------------------------------------- Fuel and fuel taxes expense increased 0.9% in 2019 compared with 2018, due primarily to an increase in road miles, partially offset by a decrease in the price of fuel during 2019. Operating supplies and expenses increased 9.7%, driven primarily by higher equipment maintenance and tire expenses due to increased equipment counts, increased toll costs, higher travel costs, and higher facility maintenance expenses. General and administrative expenses increased 17.6% from 2018, primarily due to increased technology spend on the J.B. Hunt 360° platform and legacy system upgrades, higher FMS network facility costs, and increased advertising expenses. Additionally, net losses from sale or disposal of assets were$13.1 million in 2019, compared to net losses of$12.1 million in 2018. Insurance and claims expense increased 21.5% in 2019, primarily due to 2019 including a$17.4 million reserve charge for arbitration related legal fees, costs and interest claimed by BNSF and the inclusion of a$20.0 million FMS claim charge within DCS, partially offset by 2018 including specific reserve charges for the settlement of lawsuits with current and former drivers.
Net interest expense for 2019 increased by 31.7% compared with 2018, due to an increase in average debt levels and higher effective interest rates on our debt.
Our effective income tax rate was 24.2% in 2019 and 23.6% in 2018. The increase in 2019 was primarily due to a reduction in discreet tax benefits recognized related to share-based compensation vesting, partially offset by favorable settlements of state income tax audits during 2019. JBI Segment JBI segment revenue increased 1% to$4.74 billion in 2019, from$4.72 billion in 2018. This increase in revenue was primarily a result of a 4% increase in revenue per load, which is the combination of changes in freight mix, customer rates, and fuel surcharge revenue, partially offset by a 3% decrease in load volume. Eastern network load volumes decreased 9% and transcontinental loads increased 1% compared to 2018. Average length of haul increased 2% in 2019 when compared to 2018. Revenue per load excluding fuel surcharges increased approximately 6% compared to 2018. Operating income of the JBI segment increased to$447 million in 2019, from$401 million in 2018. Benefits from customer rate increases and freight mix were partially offset by decreased volumes, which includes volume lost to rail rationalization, increased rail purchased transportation costs, higher equipment ownership and maintenance costs, increased technology modernization expenses, lower box turns, higher box repositioning costs and increased driver wages and recruiting costs. Current year operating income was further impacted by a$26.8 million charge to rail purchase transportation expense resulting from the issuance of an award regarding our arbitration with BNSF and a$17.4 million charge to insurance and claims expense, for arbitration related legal fees, costs and interest claimed by BNSF. JBI recorded$152.3 million of additional BNSF arbitration related charges in 2018. Excluding these 2018 charges and the 2019 arbitration related charges of$44.2 million , operating income for 2019, decreased 11% when compared to 2018. DCS Segment DCS segment revenue increased 19% to$2.13 billion in 2019, from$1.79 billion in 2018. Productivity, defined as revenue per truck per week, increased 2% when compared to 2018. Productivity excluding fuel surcharge revenue increased 3% from 2018. The increase in productivity was primarily a result of better integration of assets between customer accounts, customer rate increases, and increased customer supply chain fluidity during 2019 compared to 2018. DCS ended 2019 with a net additional 850 revenue-producing trucks when compared to 2018. Approximately 69% of these additions represent private fleet conversion. Customer retention rates for 2019 remained above 98%. 24 -------------------------------------------------------------------------------- Operating income of our DCS segment increased to$278 million in 2019, from$195 million in 2018. The increase is primarily due to increased productivity and additional trucks under contract, partially offset by increased driver wages and recruiting costs, higher non-driver personnel costs, and higher equipment ownership costs compared to 2018. ICS Segment ICS segment revenue increased 1% to$1.35 billion in 2019, from$1.33 billion in 2018. Overall volumes increased 1%. Revenue per load remained flat when compared to 2018 primarily due to customer mix changes, a lower spot pricing market and a competitive pricing environment for contractual truckload business, when compared to 2018. Contractual business was approximately 71% of the total load volume and 59% of the total revenue in the 2019, compared to 70% of the total load volume and 48% of the total revenue in 2018. ICS segment incurred an operating loss of$11 million in 2019, compared to operating income of$50 million in 2018. The decrease in operating income was primarily due to lower gross profit margins, increased expenses to expand capacity and functionality of the Marketplace forJ.B. Hunt 360°, higher personnel costs, and increased digital marketing expenses. Gross profit margin decreased to 13.1% in the current year versus 15.4% last year primarily due to weaker spot market activity and lower contractual rates on committed business compared to 2018. Approximately$840 million of ICS revenue for 2019 was executed through the Marketplace forJ.B. Hunt 360° compared to$558 million in 2018. ICS's carrier base increased 15%, and the employee count increased 6% when compared to 2018. FMS Segment FMS revenue increased 51% to$567 million in 2019 from$375 million in 2018, primarily due to the business acquisition completed in the first quarter of 2019 and an increase in new customer contracts throughout 2019. Stop count for 2019 increased 105%, while productivity, defined as revenue per stop, decreased 26% compared to 2018. The reduction in productivity was primarily due to a change in the mix of service methods to a more asset-light model resulting from the 2019 business acquisition. FMS segment had an operating loss of$9 million in 2019 compared to an operating loss of$2 million in 2018. The benefit of increased revenue was more than offset by higher insurance and claims costs, which included a$20 million insurance claim charge in 2019, higher costs from the expanded FMS network and additional non-cash amortization expense of$3.8 million compared to 2018. JBT Segment JBT segment revenue decreased 7% to$389 million in 2019, from$417 million in 2018. Excluding fuel surcharges, revenue for 2019 decreased 6% compared to 2018, primarily due to a 1% decrease in rates per loaded mile, a 3% decrease in length of haul and a 2% decrease in load volumes, compared to 2018. At the end of 2019, JBT operated 1,831 tractors compared to 2,112 at the end of 2018. JBT segment had operating income of$29 million in 2019 compared with$37 million in 2018. The decrease in operating income was driven primarily by lower spot market activity, higher empty miles per load, increased driver wages and recruiting costs, and the reduction in overall load volumes. 25 --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities remained virtually flat totaling $1.12
billion in 2020, compared to $1.10 billion in 2019, due to the timing of general
working capital activities, offset by the decrease in earnings.
Net cash used in investing activities totaled $613 million in 2020, compared
with $804 million in 2019. The decrease resulted primarily from a decrease in
equipment purchases, net of proceeds from the sale of equipment, in 2020 and
from 2019 including the completion of two business acquisitions.
Net cash used in financing activities was $232 million in 2020, compared with
$267 million in 2019. This decrease resulted primarily from a decrease in
treasury stock purchased in 2020. In addition, net cash used in financing
activities for 2019 included the full retirement of our $250 million of 2.40%
senior notes that matured in March 2019 , partially offset by our issuance of
$700 million of 3.875% senior notes due March 2026 .
Our dividend policy is subject to review and revision by the Board of Directors,
and payments are dependent upon our financial condition, liquidity, earnings,
capital requirements, and other factors the Board of Directors may deem
relevant. We paid a $0.24 per share quarterly dividend in 2018, a $0.26 per
share quarterly dividend in 2019, and a $0.27 per share quarterly dividend in
2020. On January 21, 2021 , we announced an increase in our quarterly cash
dividend from $0.27 to $0.28 per share, which was paid February 19, 2021 , to
stockholders of record on February 5, 2021 . We currently intend to continue
paying cash dividends on a quarterly basis. However, no assurance can be given
that future dividends will be paid.
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. We
are frequently able to accelerate or postpone a portion of equipment
replacements or other capital expenditures depending on market and overall
economic conditions. During 2020, we postponed a portion of our equipment
purchases in order to increase our available cash in light of the economic
disruption and uncertainty resulting from COVID-19. 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. During the fourth quarter of
2020, we completed a business acquisition. See Note 12, Acquisition, in the
Notes to Consolidated Financial Statements for further discussion. We used our
existing cash to finance this transaction and to provide any necessary liquidity
for current and future operations.
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. Should COVID-19 related economic
conditions warrant, we believe we have sufficient credit resources available to
meet our near and long-term operating and capital needs. At December 31, 2020 ,
we had a cash balance of $313 million and we had no outstanding balance on our
revolving line of credit, which authorizes us to borrow up to $750 million under
a senior revolving line of credit, and is supported by a credit agreement with a
group of banks that expires in September 2023 . This senior credit facility
allows us to request an increase in the total commitment by up to $250 million
and to request a one-year extension of the maturity date. The applicable
interest rate under this agreement is based on either the Prime Rate, the
Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus
an applicable margin based on our credit rating and other fees.
We are continually evaluating 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. During 2020, operational cost reduction activities consisted
primarily of canceling non-essential travel and hiring activities and the delay
of other discretionary spending, which we will continue to do as necessary. 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. Currently, we
have made no adjustments to our costs that we consider more fixed in nature.
However, we continue to monitor the environment and are prepared to adjust if
necessary.
26-------------------------------------------------------------------------------- Our senior notes consist of three separate issuances. The first is$250 million of 3.85% senior notes dueMarch 2024 , which was issued inMarch 2014 . Interest payments under this note are due semiannually in March and September of each year, beginningSeptember 2014 . The second is$350 million of 3.30% senior notes dueAugust 2022 , issued inAugust 2015 . Interest payments under this note are due semiannually in February and August of each year, beginningFebruary 2016 . The third is$700 million of 3.875% senior notes dueMarch 2026 , issued inMarch 2019 . Interest payments under this note are due semiannually in March and September of each year, beginningSeptember 2019 . We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. We currently have an interest rate swap agreement which effectively convert our$350 million of 3.30% fixed-rate senior notes dueAugust 2022 to a variable rate, resulting in an interest rates of 1.58% atDecember 31, 2020 . The applicable interest rate under this swap agreement is based on LIBOR plus an established margin. Our financing arrangements require us to maintain certain covenants and financial ratios. AtDecember 31, 2020 , we were well above compliance with all covenants and financial ratios, and we fully intend and expect to emerge from the current COVID-19 related economic environment with our investment-grade rating intact. We are currently committed to spend a total of approximately$1.12 billion , net of proceeds from sales or trade-ins, during 2021 and 2022, which is primarily related to the acquisition of tractors, containers, chassis, and other trailing equipment.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements, other than our net purchase
commitments of
Contractual Obligations and Commitments
The following table summarizes our expected obligations and commitments (in
millions) as of
2026 and
Total 2021 2022-2023 2024-2025 thereafter
Operating leases $ 144.9 $ 49.1 $ 61.5 $ 18.8 $ 15.5
Long-term debt obligations 1,300.0 - 350.0 250.0 700.0
Interest payments on debt (1) 180.6 42.3 77.1 56.7 4.5
Commitments to acquire revenue
equipment and facilities 1,123.0 774.0 349.0 - -
Total $ 2,748.5 $ 865.4 $ 837.6 $ 325.5 $ 720.0 (1) Interest payments on debt are based on the debt balance and applicable rate
at
We had standby letters of credit outstanding of approximately$3.8 million atDecember 31, 2020 , that expire at various dates in 2021, which are related to certain operating agreements and our self-insured retention levels for casualty claims. We plan to renew these letters of credit in accordance with our third-party agreements. The table above excludes$71.7 million of liabilities related to uncertain tax positions, including interest and penalties, as we are unable to reasonably estimate the ultimate timing of settlement. See Note 7, Income Taxes, in the Notes to Consolidated Financial Statements for further discussion. 27
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