J.B. Hunt Transport Services, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the J.B. Hunt Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker for today, Mr. Brad Delco, Vice President of Finance and Investor Relations. Thank you, sir. Please go ahead.

Thanks, Catherine, and good afternoon, everyone, and thanks for joining us. Before I introduce the speakers, I would like to take some time to provide some disclosures regarding forward-looking statements. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 risk and uncertainties that could cause future activities and results to be materially different from those set forth in the forward-looking statements. For more information regarding risk factors, please refer to J.B. Hunt's annual report on Form 10-K and other reports and filings with the Securities and Exchange Commission. Now I would like to introduce the speakers on today's call. This afternoon I am joined by our CEO, John Roberts. our CFO, John Kuo, Shelley Simpson, our Chief Commercial Officer and EVP of People and Human Resources, Nick Hobbs, our Chief Operating Officer and President of Contract Services, Darren Field, our President of Intermodal, and Brad Hicks, our President of Highway Services. At this time, I would like to turn the call to our CEO, Mr. John Roberts, for some opening comments.

Thank you, Brad. Well, 2020, we will bid you farewell and good riddance. All kidding aside, we are thankful to enter 2021 to start a new chapter and to continue our intended journey. 2020 taught us many lessons, not the least of which is that we have a community of employees, drivers, and providers that are more than capable of dealing with change and crisis. Past year also revealed the essential nature of the services we provide as we experience challenging and dynamic but ever-present demand through 2020. We affirmed again that all of the businesses we have committed to and invested in complement each other and create a very differentiated model for our customers. We look ahead to 2021 and beyond with confidence. During the fourth quarter, we experienced some very traditional demand cycles from customers across all services consistent with holiday activities. These needs were coupled with unusual inventory restocking and import challenges, particularly on the West Coast. Our fleet and the highway and contract businesses presented reliable capacity, held up well, and we discovered new ways to integrate our assets across customers and accounts. In intermodal, we did substantially meet all coverage commitments during the quarter and the year. However, we struggled to achieve meaningful search report as we have been able to do in the past. Most of the inability to provide incremental capacity, in particular off the West Coast, was driven by intermodal network imbalance, no real increase in our container fleet, and a lack of timely empty equipment repositioning. We are working with our network managers, pricing teams, customers, and our rail providers to improve on all of these challenges as we go forward. Our growth in final mile reveals the positive attributes and market demand for this channel. The growth presented in highway services, ICS at 56% and JBT at 50% for the fourth quarter of 2020 is encouraging. Also, the progress made with our 360 platforms continues to reveal good placement and benefit for our customers and carriers. Additionally, we found new ways to cross-utilize these systems internally during the year, which we expect to continue. Anticipating questions about our margin targets in general, let me submit our plans. It has been a while since we have given meaningful updates to our stated goals, and the reality is that some key inputs related to achieving those results have changed over time. For Intermodal, we acknowledge that we have not met our margin goal for several years now. We will monitor this year's bid season to inform our expectations on how well we can expect to recover increases in our overall cost structure. Clearly, we see that certain fundamental conditions have evolved in the business model, primarily relating to rail purchase transportation expense, overall rail velocity, customer behavior, container fleet utilization, and driver wage costs. One way or another, we will either confirm our target range shall remain 11 to 13 for EBIT margins and intermodal, or we will reset these expectations based on our customers' reactions. These margin target comments do not apply only to intermodal. As you are also aware, we have outperformed the high end of our stated target range in DCS for the seventh consecutive quarter. These targets are under review, and if deemed appropriate, we will announce any changes for the segment along the same time frame as the update for JBI. Finally, our stated margin range for JBT has been 8% to 12%. which doesn't fully take into account the continued movement of that segment to a more asset-like model. Accordingly, this range is also under review for customer reaction. All this being said, we'll be monitoring the market very closely over the coming months and plan on updating our targets on a comprehensive basis at a later date. As a reminder, our margin goals are established purely to support requirements for returns on needed capital investments for our shareholders and so that we can continue to reinvest in the business to grow to meet the needs of our customers. As previously announced, we made several leadership changes during the fourth quarter, which we believe align with the company's needs going forward in several key areas. Let me just say that we are excited about all the changes we were able to make. Our bench is very strong. We have also made recent announcements about investments supporting inclusion, diversity, and sustainability with the University of Arkansas. We're excited to head into 2021 and beyond, with the momentum and opportunities we see and have confidence that our experience will take us in the right direction. I will now turn the call over to John Kulo, our newly appointed chief financial officer for his conference. John.