HUNT J B TRANSPORT SERVICES INC (JBHT) FY 2022 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 which may include certain coverage-layer-specific, aggregated reimbursement limits of covered excess claims. 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 2020 through 2022, we were self-insured for $500,000 per occurrence as well as subject to coverage-layer-specific, aggregated reimbursement limits of covered excess claims for personal injury and property damage. We were fully insured for workers’ compensation claims for nearly all states. We have policies in place for 2023 with substantially the same terms as our 2022 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 personal injury and property damage claim liability. This process involves the use of expected loss rates, loss-development factors based on our historical claims experience, claim frequencies and severity, and contractual premium adjustment factors, 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. At December 31, 2022, we had an accrual of approximately $427 million for estimated claims. A significant increase in the volume of claims or amount of settlements exceeding our coverage-layer specific, aggregated reimbursement limits could result in significant increase in our estimated liability for claims in future periods. In addition, we record receivables for amounts expected to be reimbursed for payments made in excess of self-insurance levels on covered claims. At December 31, 2022, we have recorded $374 million of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums.
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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 at December 31, 2022.
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 6, 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 Operating Revenues | Percentage Change Between Years | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||
| Operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | 21.7 | % | 26.3 | % | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Rents and purchased transportation | 49.9 | 53.0 | 51.4 | 14.6 | 30.2 | |||||||||||||||
| Salaries, wages and employee benefits | 22.8 | 22.7 | 24.4 | 22.1 | 17.6 | |||||||||||||||
| Fuel and fuel taxes | 6.3 | 4.4 | 3.7 | 75.6 | 48.4 | |||||||||||||||
| Depreciation and amortization | 4.4 | 4.6 | 5.5 | 15.7 | 5.6 | |||||||||||||||
| Operating supplies and expenses | 3.4 | 3.0 | 3.5 | 36.1 | 10.5 | |||||||||||||||
| Insurance and claims | 2.1 | 1.4 | 1.4 | 92.7 | 22.7 | |||||||||||||||
| General and administrative expenses, net of asset dispositions | 1.4 | 1.5 | 1.8 | 10.1 | 8.6 | |||||||||||||||
| Operating taxes and licenses | 0.5 | 0.5 | 0.6 | 14.8 | 9.4 | |||||||||||||||
| Communication and utilities | 0.2 | 0.3 | 0.3 | 5.3 | 4.0 | |||||||||||||||
| Total operating expenses | 91.0 | 91.4 | 92.6 | 21.2 | 24.6 | |||||||||||||||
| Operating income | 9.0 | 8.6 | 7.4 | 27.4 | 46.6 | |||||||||||||||
| Net interest expense | 0.4 | 0.4 | 0.5 | 9.7 | (2.8 | ) | ||||||||||||||
| Earnings before income taxes | 8.6 | 8.2 | 6.9 | 28.2 | 50.1 | |||||||||||||||
| Income taxes | 2.1 | 1.9 | 1.6 | 30.6 | 49.4 | |||||||||||||||
| Net earnings | 6.5 | % | 6.3 | % | 5.3 | % | 27.4 | % | 50.3 | % |
2022 Compared With 2021
Consolidated Operating Revenues
Our total consolidated operating revenues increased 21.7% to $14.81 billion in 2022, compared to $12.17 billion in 2021. This increase was primarily due to higher revenue per load and increased load volumes within JBI and JBT, increased average revenue producing trucks and fleet productivity within DCS, and increased revenue in FMS primarily driven by a business acquisition, partially offset by decreased ICS load volume. Fuel surcharge revenues increased 94.2% to $2.43 billion in 2022, compared to $1.25 billion in 2021. If fuel surcharge revenues were excluded from both years, our 2022 revenue increased 13.4% over 2021.
Consolidated Operating Expenses
Our 2022 consolidated operating expenses increased 21.2% from 2021, while year-over-year revenue increased 21.7%, resulting in a 2022 operating ratio of 91.0% compared to 91.4% in 2021.
Rents and purchased transportation costs increased 14.6% in 2022, primarily due to an increase in rail carrier purchased transportation costs within the JBI segment and an increase in the use of third-party truck carriers by JBT, partially offset by decreased ICS load volume. Salaries, wages and employee benefit costs increased 22.1% in 2022 from 2021. This increase was primarily related to increases in driver pay and office personnel compensation and an increase in the number of employees as well as an increase in group medical expense compared to 2021.
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Fuel and fuel taxes expense increased 75.6% in 2022 compared with 2021, due primarily to an increase in the price of fuel during 2022 and increased road miles. 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.
Depreciation and amortization expense increased 15.7% in 2022, 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 intangible asset amortization expense resulting from the business acquisition within FMS.
Operating supplies and expenses increased 36.1% in 2022 compared with 2021, driven primarily by higher equipment maintenance costs, due to holding equipment longer, increased tire expense, increased tolls expense, and higher travel and entertainment expenses compared to 2021. Insurance and claims expense increased 92.7% in 2022, primarily due to increased cost per claim, higher insurance policy premium expense, and the inclusion of $94.0 million of expense for additional casualty claim reserves for claims subject to insurance coverage layer specific aggregated limits in 2022. General and administrative expenses increased 10.1% from 2021, primarily due to higher building rentals, higher software subscription expense, increased professional services expense, and higher bad debt expense, partially offset by higher net gains from sale or disposals of assets. Net gain from sale or disposal of assets was $25.4 million in 2022, compared to a net loss from sale or disposals of assets of $5.5 million in 2021.
Net interest expense for 2022 increased by 9.7% compared with 2021, due to higher effective interest rates on our debt. Income tax expense increased 30.6% in 2022, due primarily to increased taxable earnings in 2022. Our effective income tax rate was 24.4% in 2022 and 23.9% in 2021.
Segments
We operated five business segments during 2022. 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) | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| JBI | $ | 7,022 | $ | 5,454 | $ | 4,675 | ||||||
| DCS | 3,378 | 2,578 | 2,196 | |||||||||
| ICS | 2,386 | 2,538 | 1,658 | |||||||||
| JBT | 1,082 | 796 | 463 | |||||||||
| FMS | 980 | 842 | 689 | |||||||||
| Total segment revenues | 14,848 | 12,208 | 9,681 | |||||||||
| Intersegment eliminations | (34 | ) | (40 | ) | (44 | ) | ||||||
| Total | $ | 14,814 | $ | 12,168 | $ | 9,637 |
| Operating Income by Segment | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Years Ended December 31, (in millions) | ||||||||||||
| 2022 | 2021 | 2020 | ||||||||||
| JBI | $ | 800 | $ | 603 | $ | 428 | ||||||
| DCS | 345 | 304 | 314 | |||||||||
| ICS | 59 | 46 | (45 | ) | ||||||||
| JBT | 93 | 65 | 17 | |||||||||
| FMS | 35 | 28 | (1 | ) | ||||||||
| Total | $ | 1,332 | $ | 1,046 | $ | 713 |
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Operating Data by Segment
| Years Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||||||||
| JBI | ||||||||||||
| Loads | 2,068,278 | 1,984,834 | 2,019,391 | |||||||||
| Average length of haul (miles) | 1,665 | 1,684 | 1,690 | |||||||||
| Revenue per load | $ | 3,395 | $ | 2,748 | $ | 2,315 | ||||||
| Average tractors during the period(1) | 6,601 | 5,904 | 5,530 | |||||||||
| Tractors (end of period) | 6,696 | 6,194 | 5,663 | |||||||||
| Trailing equipment (end of period) | 115,150 | 104,973 | 98,689 | |||||||||
| Average effective trailing equipment usage | 107,319 | 98,798 | 90,514 | |||||||||
| DCS | ||||||||||||
| Loads | 4,406,527 | 4,020,308 | 3,676,212 | |||||||||
| Average length of haul (miles) | 165 | 161 | 160 | |||||||||
| Revenue per truck per week(2) | $ | 5,225 | $ | 4,719 | $ | 4,373 | ||||||
| Average trucks during the period(3) | 12,564 | 10,628 | 9,743 | |||||||||
| Trucks (end of period) | 12,899 | 11,689 | 9,911 | |||||||||
| Trailing equipment (end of period) | 28,322 | 28,822 | 27,290 | |||||||||
| ICS | ||||||||||||
| Loads | 1,231,334 | 1,326,979 | 1,265,897 | |||||||||
| Revenue per load | $ | 1,938 | $ | 1,912 | $ | 1,310 | ||||||
| Gross profit margin | 14.7 | % | 11.8 | % | 9.9 | % | ||||||
| Employee count (end of period) | 984 | 975 | 1,011 | |||||||||
| Approximate number of third-party carriers (end of period) | 156,400 | 136,400 | 100,200 | |||||||||
| Marketplace for J.B. Hunt 360 revenue (millions) | $ | 1,521.1 | $ | 1,583.8 | $ | 1,142.2 | ||||||
| JBT | ||||||||||||
| Loads | 500,407 | 445,812 | 406,550 | |||||||||
| Average trailers during the period | 12,798 | 9,299 | 7,866 | |||||||||
| Revenue per load | $ | 2,163 | $ | 1,785 | $ | 1,138 | ||||||
| Average length of haul | 520 | 482 | 420 | |||||||||
| Tractors (end of period) | ||||||||||||
| Company-owned | 620 | 734 | 798 | |||||||||
| Independent contractor | 2,098 | 1,501 | 971 | |||||||||
| Total tractors | 2,718 | 2,235 | 1,769 | |||||||||
| Trailers (end of period) | 14,718 | 11,172 | 8,567 | |||||||||
| FMS | ||||||||||||
| Stops | 5,432,627 | 6,413,680 | 5,771,533 | |||||||||
| Average trucks during the period(3) | 1,814 | 1,520 | 1,405 |
| Column 1 | Column 2 |
|---|---|
| (1) | Includes company-owned and independent contractor tractors |
| Column 1 | Column 2 |
|---|---|
| (2) | Using weighted workdays |
| Column 1 | Column 2 |
|---|---|
| (3) | Includes company-owned, independent contractor, and customer-owned trucks |
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JBI Segment
JBI segment revenue increased 29% to $7.02 billion in 2022, from $5.45 billion in 2021. This increase in revenue was primarily a result of a 24% increase in revenue per load, which is the combination of changes in freight mix, customer rate changes, cost recovery efforts, and fuel surcharge revenue and a 4% increase in load volume. Eastern network load volumes increased 9% and transcontinental loads increased 1% compared to 2021. Revenue per load excluding fuel surcharges increased 15% compared to 2021.
Operating income of the JBI segment increased to $800 million in 2022, from $603 million in 2021. The increase is primarily due to increased revenue and higher net gains from the sale of equipment during the current year, partially offset by higher rail and third-party dray purchased transportation expense, higher costs to attract and retain drivers, increased non-driver salary and wages, higher equipment-related expenses, increased insurance and claims expense, and higher costs due to rail and port network inefficiencies and customer detention of equipment. In addition, JBI incurred $33 million in expense for the segment’s portion of the additional casualty claim reserves in 2022.
DCS Segment
DCS segment revenue increased 31% to $3.38 billion in 2022, from $2.58 billion in 2021. Productivity, defined as revenue per truck per week, increased 11% compared to 2021. Productivity excluding fuel surcharge revenue increased 4% from 2021. The increase in productivity was primarily due to contractual index-based rate increases, partially offset by lower productivity of equipment on start-up accounts. Customer retention rates remain above 98%.
Operating income of our DCS segment increased to $345 million in 2022, from $304 million in 2021. Higher revenues and higher net gains from the sale of equipment during 2022 were partially offset by increased driver and non-driver wages, benefits and recruiting costs, higher equipment-related expenses, higher costs related to the implementation of new long-term customer contracts, increased insurance and claims expense, and higher bad debt expense when compared to 2021. In addition, DCS incurred $27 million in expense for the segment’s portion of the additional casualty claim reserves in 2022.
ICS Segment
ICS segment revenue decreased 6% to $2.39 billion in 2022, from $2.54 billion in 2021. Overall volumes decreased 7%, while revenue per load increased 1% when compared to 2021, primarily due to higher contractual customer rates within the truckload business and changes in customer freight mix when compared to 2021. Contractual business was 56% of the total load volume and 51% of the total revenue in 2022, compared to 51% of the total load volume and 39% of the total revenue in 2021.
Operating income of our ICS segment increased to $59 million in 2022, from $46 million in 2021. The increase in operating income was primarily due to higher gross profit margins, partially offset by higher personnel costs, increased technology spending, increased insurance and claims expense, and higher bad debt expense during 2022. In addition, ICS incurred $22 million in expense for the segment’s portion of the additional casualty claim reserves in 2022. Gross profit margin increased to 14.7% in the current year versus 11.8% last year. Approximately $1.52 billion of ICS revenue for 2022 was executed through the Marketplace for J.B. Hunt 360 compared to $1.58 billion in 2021. ICS’s carrier base increased 15% when compared to 2021.
JBT Segment
JBT segment revenue increased 36% to $1.1 billion in 2022, from $796 million in 2021. Excluding fuel surcharges, revenue for 2022 increased 28% compared to 2021, primarily due to a 12% increase in load volume and a 14% increase in revenue excluding fuel surcharge revenue per load compared to 2021. The 2022 growth in load count was primarily due to the continued expansion of J.B. Hunt 360box which leverages the J.B. Hunt 360 platform to access drop trailer capacity for customers across our transportation network. At the end of 2022, JBT operated 14,718 trailers and 2,718 tractors compared to 11,172 and 2,235 at the end of 2021.
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Operating income of our JBT segment increased to $93 million in 2022, from $65 million in 2021. The increase in operating income was driven primarily by increased load counts and revenue per load during the current year, which were partially offset by higher purchased transportation expense, higher equipment-related expenses, increased personnel costs, increased insurance and claims expense, and increased technology spending related to the continued expansion of J.B. Hunt 360box. In addition, JBT incurred $7 million in expense for the segment’s portion of the additional casualty claim reserves in 2022.
FMS Segment
FMS segment revenue increased 16% to $980 million in 2022 from $842 million in 2021, primarily due to the implementation of multiple new customer contracts and the acquisition of Zenith Freight Lines, LLC (Zenith) in 2022. The increase in revenue was partially offset by the effects of internal efforts to improve revenue quality across certain accounts as well as supply-chain related constraints for goods in the primary markets served by FMS.
Operating income of our FMS segment increased to $35 million in 2022, from $28 million in 2021. The increase in operating income was primarily due to increased revenues, partially offset by higher personnel salary, wages and benefits expense, higher equipment-related expenses, increased insurance and claims expense, increased driver recruiting costs, increased technology costs, and implementation costs related to new long-term contractual business. In addition, FMS incurred $5 million in expense for the segment’s portion of the additional casualty claim reserves in 2022, while 2021 included an aggregated benefit of $9 million from the net settlement of claims and the reduction of a contingent liability.
2021 Compared With 2020
Consolidated Operating Revenues
Our total consolidated operating revenues increased 26.3% to $12.17 billion in 2021, compared to $9.64 billion in 2020. This increase was primarily due to increased ICS and JBT revenue, higher JBI revenue per load, increased average revenue producing trucks and fleet productivity within DCS, and increased FMS stops and revenue per stop. Fuel surcharge revenues increased 65.5% to $1.25 billion in 2021, compared to $757 million in 2020. If fuel surcharge revenues were excluded from both years, our 2021 revenue increased 22.9% over 2020.
Consolidated Operating Expenses
Our 2021 consolidated operating expenses increased 24.6% from 2020, while year-over-year revenue increased 26.3%, resulting in a 2021 operating ratio of 91.4% compared to 92.6% in 2020.
Rents and purchased transportation costs increased 30.2% in 2021, primarily due to increased third-party rail and truck purchased transportation rates in JBI and ICS, increased ICS load volume, and an increase in the use of third-party truck carriers by JBT and FMS during 2021. Salaries, wages and employee benefit costs increased 17.6% in 2021 from 2020. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers, a trend we anticipate continuing, and an increase in the number of employees as well as an increase in incentive compensation compared to 2020.
Fuel and fuel taxes expense increased 48.4% in 2021 compared with 2020, due primarily to an increase in the price of fuel during 2021 and increased road miles. Depreciation and amortization expense increased 5.6% in 2021, primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment and scheduled turnover of tractors within JBI, higher trailer counts in JBT, and increased capital investments in information technology.
Operating supplies and expenses increased 10.5% in 2021 compared with 2020, driven primarily by higher equipment maintenance costs, increased tire expense, increased tolls expense, higher travel and entertainment expense, and higher weather-related towing costs, partially offset by reduced operating supplies and building maintenance costs in response to COVID-19 compared to 2020. Insurance and claims expense increased 22.7% in 2021, primarily due to higher incident volume and severity and increased insurance policy premium expenses, partially offset by a $3.2 million benefit from the net settlement of claims within the FMS segment. General and administrative expenses increased 8.6% from 2020, primarily due to higher advertising costs, increased technology spend, and increased driver hiring expenses, partially offset by a $5.7 million benefit from the reduction of a contingent liability in the FMS segment. Additionally, net losses from sale or disposal of assets were $5.5 million in 2021, compared to net losses of $4.4 million in 2020.
21
Net interest expense for 2021 decreased by 2.8% compared with 2020, due to lower effective interest rates on our debt. Income tax expense increased 49.4% in 2021, due primarily to increased taxable earnings in 2021. Our effective income tax rate was 23.9% in 2021 and 24.0% in 2020.
JBI Segment
JBI segment revenue increased 17% to $5.45 billion in 2021, from $4.68 billion in 2020. This increase in revenue was primarily a result of an 19% increase in revenue per load, which is the combination of changes in freight mix, customer rate changes, cost recovery efforts, and fuel surcharge revenue, partially offset by a 2% decrease in load volume. Eastern network load volumes increased 1% and transcontinental loads decreased 3% compared to 2020. Revenue per load excluding fuel surcharges increased 14% compared to 2020.
Operating income of the JBI segment increased to $603 million in 2021, from $428 million in 2020. Benefits from increased revenue per load were partially offset by network inefficiencies caused by continued rail and customer fluidity challenges, higher rail and third-party dray purchased transportation expense, higher driver wages and recruiting costs, increased non-driver salary, wages, and incentive compensation, and higher equipment costs when compared to 2020.
DCS Segment
DCS segment revenue increased 17% to $2.58 billion in 2021, from $2.20 billion in 2020. Productivity, defined as revenue per truck per week, increased 8% compared to 2020. Productivity excluding fuel surcharge revenue increased 5% from 2020. The increase in productivity was primarily a result of contracted indexed-based price escalators and less unassigned idle equipment, partially offset by expected lower productivity within start-up accounts and an increase in open assigned trucks due to the tighter supply of qualified drivers and COVID-related labor disruptions. Customer retention rates remain above 98%.
Operating income of our DCS segment decreased to $304 million in 2021, from $314 million in 2020. Higher revenues during the current year were more than offset by increases in driver wage and recruiting costs, increased non-driver salary, wages, and incentive compensation, increased casualty insurance and claims costs, higher group medical benefits, and additional costs related to the implementation of new, long-term customer contracts.
ICS Segment
ICS segment revenue increased 53% to $2.54 billion in 2021, from $1.66 billion in 2020. Revenue per load increased 46% when compared to 2020, primarily due to higher spot and contractual customer rates within the truckload business and changes in customer freight mix when compared to 2020. Overall volumes increased 5%, with truckload volumes increasing 13% when compared to 2020. Contractual business was 51% of the total load volume and 39% of the total revenue in the 2021, compared to 60% of the total load volume and 43% of the total revenue in 2020.
ICS segment had operating income of $46 million in 2021, compared to an operating loss of $45 million in 2020. The increase in operating income was primarily due to increased revenue and higher gross profit margins, partially offset by higher personnel incentive compensation, and increased technology costs. Gross profit margin increased to 11.8% in the current year versus 9.9% last year. Approximately $1.58 billion of ICS revenue for 2021 was executed through the Marketplace for J.B. Hunt 360 compared to $1.14 billion in 2020. ICS’s carrier base increased 36% when compared to 2020.
22
JBT Segment
JBT segment revenue increased 72% to $796 million in 2021, from $463 million in 2020. Excluding fuel surcharges, revenue for 2021 increased 70% compared to 2020, primarily due to a 10% increase in load volume and a 55% increase in revenue excluding fuel surcharge revenue per load compared to 2020. The 2021 growth in load count was primarily due to the continued expansion of J.B. Hunt 360box which leverages the J.B. Hunt 360 platform to access drop trailer capacity for customers across our transportation network. At the end of 2021, JBT operated 11,172 trailers and 2,235 tractors compared to 8,567 and 1,769 at the end of 2020.
JBT segment had operating income of $65 million in 2021 compared with $17 million in 2020. The increase in operating income was driven primarily by increased load counts and revenue per load during 2021, which were partially offset by increases in purchased transportation expense, higher costs to attract and retain drivers, higher non-driver salary, wages, and incentive compensation, and additional costs from further investments in the trailer network and technology related to the continued expansion of J.B. Hunt 360box.
FMS Segment
FMS segment revenue increased 22% to $842 million in 2021 from $689 million in 2020, primarily due to the addition of multiple customer contracts implemented during the current year and 2020 including temporary suspension of operations at several customer sites as a result of the COVID-19 pandemic. Stop count for 2021 increased 11%, while productivity, defined as revenue per stop, increased 10% compared to 2020. The increase in productivity was primarily due to a shift in the mix of business between asset and asset-light operations and the implementation of higher rates.
FMS segment had operating income of $28 million in 2021 compared to an operating loss of $1 million in 2020. The increase in operating income was primarily due to increased revenues, a $5.7 million benefit from the reduction of a contingent liability, and a $3.2 million benefit from the net settlement of claims. These items were partially offset by higher implementation costs related to new long-term contractual business, higher third-party contract carrier costs, lower volumes with certain customers related to product availability because of supply chain disruptions, and higher personnel salary, wages, and incentive compensation.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $1.78 billion in 2022, compared to $1.22 billion in 2021, due to increased earnings and the timing of general working capital activities.
Net cash used in investing activities totaled $1.55 billion in 2022, compared with $877 million in 2021. The increase resulted primarily from an increase in equipment purchases, net of proceeds from the sale of equipment, and business acquisitions completed in 2022.
Net cash used in financing activities was $530 million in 2022, compared with $305 million in 2021. This increase resulted primarily from an increase in treasury stock purchased, higher dividends paid, and retirement of long-term debt, partially offset by net proceeds from revolving lines of credit in 2022.
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 $0.27 per share quarterly dividend in 2020, a $0.28 per share quarterly dividend in the first quarter of 2021, a $0.30 per share quarterly dividend in the last three quarters of 2021, and a $0.40 per share quarterly dividend in 2022. On January 19, 2023, we announced an increase in our quarterly cash dividend from $0.40 to $0.42 per share, which was paid February 24, 2023, to stockholders of record on February 10, 2023. 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. However, we do anticipate that the current challenges related to timely delivery of ordered equipment will continue due to supply chain challenges impacting production. 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.
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. In September 2022, we replaced our $750 million senior credit facility dated September 25, 2018, with a new credit facility authorizing us 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 authorize us to borrow up to an additional $500 million during the nine-month period beginning September 27, 2022, and if funded, will mature in September 2025. 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 December 31, 2022, we had a cash balance of $51.9 million, a $317.5 million outstanding balance on the revolving line of credit at an average interest rate of 5.32% and no outstanding balance of term loans under our senior credit facility.
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 and 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.
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Our senior notes consist of two separate issuances. The first is $250 million of 3.85% senior notes due March 2024, which was issued in March 2014. Interest payments under these notes are due semiannually in March and September of each year, beginning September 2014. The second is $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under these notes are due semiannually in March and September of each year, beginning September 2019. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. Our $350 million of 3.30% senior notes matured in August 2022. The entire outstanding balance was paid in full at maturity.
Our financing arrangements require us to maintain certain covenants and financial ratios. At December 31, 2022, we were in compliance with all covenants and financial ratios.
We are currently committed to spend a total of approximately $2.37 billion, net of proceeds from sales or trade-ins, during 2023 and 2024, which is primarily related to the acquisition of tractors, containers, chassis, and other trailing equipment. We had no other off-balance sheet arrangements as of December 31, 2022.