J.B. Hunt Transport Services (JBHT) 10-K risk factor changes: FY2018 vs FY2017

While we have agreements with a number of Class I railroads, the majority of our business travels on the BNSF [removed: Railway Company (BNSF)] and the Norfolk Southern railways.

BNSF [removed: has] requested the same, and the arbitration process [removed: has commenced.][added: is on-going.]

At this time, we are unable to reasonably predict the [added: final] outcome of the arbitration, and, as such, no [added: further] gain or loss contingency can be determined or recorded.

Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, [removed: has continued and] is expected to continue on a timely basis.

As of December 31, [removed: 2017,] [added: 2018,] we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

We have policies in place for [removed: 2018] [added: 2019] with substantially the same terms as our [removed: 2017] [added: 2018] policies for personal injury, property damage, workers’ compensation, and cargo loss or [removed: damage.][added: damage, with the exception of decreasing our self-insured portion of workers’ compensation claims to zero for nearly all states.]

For the calendar year ended December 31, [removed: 2017,] [added: 2018,] our top 10 customers, based on revenue, accounted for approximately [removed: 29%] [added: 30%] of our revenue.

We by the nature of our operations are exposed to the potential for a variety of litigation, including personal injury claims, vehicular collisions and accidents, [added: alleged violations of federal and state] labor and [removed: employment,] [added: employment laws, such as class-action lawsuits alleging wage and hour violations and improper pay,] commercial and contract disputes, cargo loss and property damage claims.

Our inability to defend ourselves against a significant litigation claim, could have a material adverse [added: effect] on our financial results.

On October 5, 2018, we received the arbitrators’ Interim Award.

The details of the Interim Award are confidential and require the parties to submit additional information requested by the arbitrators to decide certain unresolved matters.

For the determined components of the Interim Award, we recorded an $18.3 million pre-tax charge in the third quarter 2018, related to certain charges claimed by BNSF for specific services requested for customers from April 2014 through May 2018.

On December 7, 2018 the arbitrators’ issued their Clarified Interim Award of October 5, 2018 resulting from some of the parties’ additional submissions to the Panel regarding certain issues related to determining the revenue division between the parties.

On January 11, 2019, the Panel issued its Second Interim Award ordering that $89.4 million is due from the Company to BNSF resulting from the adjusted revenue divisions relating to the 2016 period at issue ($52.1 million) and for calendar year 2017 ($37.3 million).

The parties have been instructed to make further submissions on the revenue divisions for calendar year 2018 and going forward, as well as other confidential issues raised during the arbitration process so that the panel can issue an appropriate interim and/or final award regarding all issues raised during the proceeding.

We recorded pretax charges for contingent liabilities in the fourth quarter 2018 of $89.4 million claimed by the BNSF for the period May 1, 2016 through December 31, 2017 and $44.6 million for the period January 1, 2018 through December 31, 2018, for a total of $134 million.

The other financial implications from the Interim Award and the Clarified Interim Award will not be fully determined until the arbitrators issue additional award(s) following their review of each party’s requested additional submissions.

If decided adversely, this matter could result in a liability material to our financial condition or results of operations.

Our failure to comply with any applicable laws, rules or regulations to which we are subject, whether actual or alleged, could expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments.

Further, these agencies could institute new laws, rules or regulations or issue interpretation changes to existing regulations at any time.

Compliance with new laws, rules or regulations could substantially impair labor and equipment productivity, increase our costs or impact our ability to offer certain services.

A determination that independent contractors are employees could expose us to various liabilities and additional costs.

Tax and other regulatory authorities often seek to assert that independent contractors in the transportation service industry are employees rather than independent contractors.

There can be no assurance that interpretations that support the independent contractor status will not change or that various authorities will not successfully assert a position that re-classifies independent contractors to be employees.

If our independent contractors are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits.

In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods.

Any of the above increased costs would adversely affect our business and operating results.

We have policies in place for [removed: 2018] [added: 2019] with substantially the same terms as our [removed: 2017] [added: 2018] policies for personal injury, property damage, workers’ compensation, and cargo loss or [removed: damage.][added: damage, with the exception of decreasing our self-insured portion of workers’ compensation claims to zero for nearly all states.]

At December 31, [removed: 2017,] [added: 2018,] we had an accrual of approximately [removed: $238] [added: $260] million for estimated claims.

At December 31, [removed: 2017,] [added: 2018,] we have recorded [removed: $256 million,] [added: $261 million] of expected reimbursement for covered excess claims, [added: other] insurance [removed: premiums] [added: deposits,] and [removed: other] [added: prepaid] insurance [removed: deposits.][added: premiums.]

We have not identified any impairment to our assets at December 31, [removed: 2017.][added: 2018.]

Accordingly, a portion of the total revenue that will be billed to the customer [removed: once a load] is [removed: delivered is] recognized in each reporting period based on the percentage of the freight pickup and delivery [removed: service] [added: performance obligation] that has been completed at the end of the reporting period.

Additionally, we are responsible for [removed: the] selection of third-party transportation [removed: providers.][added: providers to the extent used to satisfy customer freight requirements.]

Beginning in 2018, the Act [removed: reduces] [added: reduced] the U.S. federal corporate tax rate from 35% to 21%.

[removed: However,] [added: At December 31, 2017,] we [removed: have] made a reasonable estimate of the effects on our existing deferred tax assets and liabilities based on the rates at which they [removed: are] [added: were] expected to reverse in the future, which [removed: is] [added: was] generally 21%.

The provisional amount recorded resulting from the remeasurement of our deferred tax balance was $309.2 million, which [removed: is] [added: was] included as a component of [added: 2017] income tax from continuing operations.

[removed: We are still refining] [added: During 2018, we finalized] our calculations for our 2017 federal income tax return, which [removed: will be] [added: was] filed based on the law prior to the Act, [removed: and could potentially affect] [added: resulting in no significant change to] the [added: initial] measurement of these balances.

Remaining aspects of the Act [removed: are] [added: were] not relevant to our operations.

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2017] [added: 2018] vs. [removed: 2016] [added: 2017] | | | | [removed: 2016] [added: 2017] vs. [removed: 2015] [added: 2016] | | |

| Operating revenues | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | [removed: 9.7] [added: 19.8] | % | | | [removed: 5.9] [added: 9.7] | % |

| Rents and purchased transportation | | | [removed: 50.8] [added: 51.5] | | | | [removed: 49.7] [added: 50.8] | | | | [removed: 48.4] [added: 49.7] | | | | [removed: 12.1] [added: 21.5] | | | | [removed: 8.7] [added: 12.1] | |

| Salaries, wages and employee benefits | | | 22.4 | | | | 22.4 | | | | [removed: 22.5] [added: 22.4] | | | | [removed: 9.5] [added: 19.8] | | | | [removed: 5.4] [added: 9.5] | |

| Depreciation and amortization | | | [removed: 5.3] [added: 5.1] | | | | [removed: 5.5] [added: 5.3] | | | | 5.5 | | | | [removed: 6.1] [added: 13.7] | | | | [removed: 6.4] [added: 6.1] | |

| Fuel and fuel taxes | | | [removed: 4.8] [added: 5.3] | | | | [removed: 4.3] [added: 4.8] | | | | [removed: 5.1] [added: 4.3] | | | | [removed: 22.6] [added: 32.1] | | | | [removed: (9.5] [added: 22.6] | [removed: )] |

| Operating supplies and expenses | | | [removed: 3.6] [added: 3.5] | | | | 3.6 | | | | 3.6 | | | | [removed: 10.3] [added: 18.0] | | | | [removed: 5.7] [added: 10.3] | |

| General and administrative expenses, net of asset dispositions | | | 1.8 | | | | [removed: 1.3] [added: 1.8] | | | | [removed: 1.1] [added: 1.3] | | | | [removed: 44.6] [added: 29.7] | | | | [removed: 20.0] [added: 44.6] | |

| Insurance and claims | | | [removed: 1.7] [added: 1.5] | | | | [removed: 1.2] [added: 1.7] | | | | 1.2 | | | | [removed: 57.6] [added: 4.7] | | | | [removed: 6.4] [added: 57.6] | |

| Operating taxes and licenses | | | 0.6 | | | | [removed: 0.7] [added: 0.6] | | | | 0.7 | | | | [removed: (2.5] [added: 14.0] | [removed: )] | | | [removed: 6.7] [added: (2.5] | [added: )] |

| Communication and utilities | | | [removed: 0.3] [added: 0.4] | | | | 0.3 | | | | 0.3 | | | | [removed: 20.1] [added: 28.9] | | | | [removed: (3.0] [added: 20.1] | [removed: )] |

| Total operating expenses | | | [removed: 91.3] [added: 92.1] | | | | [removed: 89.0] [added: 91.3] | | | | [removed: 88.4] [added: 89.0] | | | | [removed: 12.5] [added: 20.8] | | | | [removed: 6.6] [added: 12.5] | |

| Operating income | | | [removed: 8.7] [added: 7.9] | | | | [removed: 11.0] [added: 8.7] | | | | [removed: 11.6] [added: 11.0] | | | | [removed: (13.5] [added: 9.2] | [removed: )] | | | [removed: 0.7] [added: (13.5] | [added: )] |

| Net interest expense | | | [removed: 0.4] [added: 0.5] | | | | 0.4 | | | | 0.4 | | | | [removed: 13.2] [added: 40.8] | | | | [removed: (1.1] [added: 13.2] | [removed: )] |

| Earnings before income taxes | | | [removed: 8.3] [added: 7.4] | | | | [removed: 10.6] [added: 8.3] | | | | [removed: 11.2] [added: 10.6] | | | | [removed: (14.5] [added: 7.7] | [removed: )] | | | [removed: 0.8] [added: (14.5] | [added: )] |

| Income taxes | | | [added: 1.7 | | | |] (1.2 | ) | | | 4.0 | | | | [removed: 4.3] [added: 266.1] | | | | (134.5 | ) | [removed: | | 0.3 | |]

| Net earnings | | | [removed: 9.5] [added: 5.7] | % | | | [removed: 6.6] [added: 9.5] | % | | | [removed: 6.9] [added: 6.6] | % | | | [removed: 58.8] [added: (28.7] | [removed: %] [added: %)] | | | [removed: 1.1] [added: 58.8] | % |

[removed: 2017] [added: 2018] Compared With [removed: 2016][added: 2017]

General and administrative expenses increased 44.6% from 2016, primarily due to a $20.2 million [removed: expense for the] reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that [removed: will] [added: did] not meet delivery, [removed: but also due to] increased building rental expense, higher professional fee expenses, higher computer software subscription costs, and increased net losses from asset sales and disposals in 2017.

We operated four business segments during calendar year [removed: 2017.][added: 2018.]

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| JBI | | $ | [removed: 4,084] [added: 4,717] | | | $ | [removed: 3,796] [added: 4,084] | | | $ | [removed: 3,665] [added: 3,796] | |

| DCS | | | [removed: 1,719] [added: 2,163] | | | | [removed: 1,533] [added: 1,719] | | | | [removed: 1,451] [added: 1,533] | |

| ICS | | | [removed: 1,025] [added: 1,335] | | | | [removed: 852] [added: 1,025] | | | | [removed: 699] [added: 852] | |

| JBT | | | [removed: 378] [added: 417] | | | | [removed: 388] [added: 378] | | | | [removed: 386] [added: 388] | |

| Total segment revenues | | | [removed: 7,206] [added: 8,632] | | | | [removed: 6,569] [added: 7,206] | | | | [removed: 6,201] [added: 6,569] | |

| Intersegment eliminations | | | [removed: (16] [added: (17] | ) | | | [removed: (14] [added: (16] | ) | | | [removed: (13] [added: (14] | ) |

| Total | | $ | [removed: 7,190] [added: 8,615] | | | $ | [removed: 6,555] [added: 7,190] | | | $ | [removed: 6,188] [added: 6,555] | |

| JBI | | $ | [removed: 407] [added: 401] | | | $ | [removed: 450] [added: 407] | | | $ | [removed: 477] [added: 450] | |

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.

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.

Fuel surcharge revenues increased 40.2% to $1.1 billion in 2018, compared to $754 million in 2017.

In addition, our JBI segment incurred charges of $152.3 million to rail purchase transportation expense related to the ongoing arbitration with BNSF.

General and administrative expenses increased 29.7% from 2017, primarily due to increased building and computer rentals, higher professional fees, higher advertising costs, higher bad debt expense driven by a customer bankruptcy, and increased net losses from asset sales and disposals, partially offset by the 2017 inclusion of a $20.2 million reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that did not meet delivery.

Net interest expense for 2018 increased by 40.8% compared with 2017, due to an increase in average debt levels, higher effective interest rates on our debt, and expenses incurred to refinance our revolving line of credit compared to 2017.

The increase in 2018 was primarily due to a $309.2 million decrease in income tax expense in 2017 resulting from adjustments to our deferred tax balances at December 31, 2017, for the change in future tax rates prescribed by the Tax Cuts and Jobs Act.

| | | 2018 | | | | 2017 | | | | 2016 | | |

| | | 2018 | | | | 2017 | | | | 2016 | | |

| Net change in trailing equipment during the period | | | 6,262 | | | | 4,016 | | | | 5,637 | |

| | | | | | | | | | | | | |

JBI segment revenue increased 15% to $4.72 billion in 2018, from $4.08 billion in 2017.

Average length of haul decreased 2% in 2018 when compared to 2017.

Revenue per load excluding fuel surcharges increased approximately 10% compared to 2017.

Benefits from volume growth and increased revenue per load were offset by increases in rail purchased transportation costs, which included $152.3 million of additional expense related to the ongoing arbitration with BNSF.

Benefits where further offset by higher driver wage and retention costs, higher driver recruiting expenses, higher outsourced dray costs, increased costs for onboarding and integration of container tracking technologies, higher equipment ownership costs, and costs of reduced efficiency and disruptions within the rail network.

In addition, 2017 included a $20.2 million expense for the reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that did not meet delivery.

DCS segment revenue increased 26% to $2.16 billion in 2018, from $1.72 billion in 2017.

Productivity excluding fuel surcharge revenue increased 5% from 2017.

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 2018 compared to 2017.

In addition, the growth in DCS revenue includes an increase of $113 million in Final Mile Services (FMS) revenue, approximately $66 million of which was derived from the 2017 acquisition of Special Logistics Dedicated, LLC (SLD).

Increased revenue and improved asset integration was offset by higher costs from the expanded FMS network, increased driver wages and recruiting costs, higher non-driver salaries, wages and benefits, increased maintenance costs on equipment scheduled to be traded in the current year, higher overall insurance and claims costs, implementation costs for new customer contracts and approximately $4.4 million in additional non-cash amortization expense compared to 2017.

ICS segment revenue increased 30% to $1.33 billion in 2018, from $1.02 billion in 2017.

Revenue per load increased 5% primarily due to increased contractual and spot rates.

Operating income increased to $50 million in 2018, from $23 million in 2017.

Gross profit margin improved to 15.4% in the current year compared to 13.3% in 2017 primarily due to improved contractual margins and increased spot market activity.

This increase in gross profit margin was partially offset by higher personnel costs, higher technology development costs, and increase bad debt expense due to a customer bankruptcy.

Approximately $558 million of ICS revenue for 2018 was executed through the marketplace for JBHunt360.

JBT segment revenue increased 10% to $417 million in 2018, from $378 million in 2017.

Excluding fuel surcharges, revenue for 2018 increased 9% compared to 2017, primarily from a 16% increase in rates per loaded mile, partially offset by an 4% decrease in load count.

The increase in operating income was driven primarily by higher rates per loaded mile and lower equipment ownership costs, partially offset by increased driver wage and retention costs, higher driver and independent contractor recruiting expenses, and higher independent contractor costs per mile.

Net cash provided by operating activities totaled $1.09 billion in 2018, compared to $855 million in 2017.

This increase was primarily due to the increase in pre-tax earnings and the reduction in the U.S. federal corporate tax rate as a result of the Tax Cuts and Jobs Act, in 2018.

For our senior notes maturing in 2019, it is our intent to pay the entire outstanding balances in full, on or before the maturity dates, using our existing senior revolving line of credit or other sources of long-term financing.

In addition, we have a shelf registration filed with the SEC and may draw upon it as warranted.

| Operating leases | | $ | 117.8 | | | $ | 34.9 | | | $ | 50.6 | | | $ | 21.9 | | | $ | 10.4 | |

| Interest payments on debt (1) | | | 154.3 | | | | 36.1 | | | | 68.5 | | | | 47.3 | | | | 2.4 | |

| Total | | $ | 1,812.7 | | | $ | 702.6 | | | $ | 119.1 | | | $ | 728.2 | | | $ | 262.8 | |

We recognize revenue based on the relative transit time of the freight transported and as other services are provided.

We record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing.

At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act.

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.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Fuel surcharge revenues decreased 18.4% to $548 million in 2016, compared to $671 million in 2015.

General and administrative expenses increased 20.0% from 2015, primarily due to increased charitable contributions and the absence of net gains from asset sales and disposals in 2016.

Net interest expense for 2016 decreased by 1.1% compared with 2015, due primarily to lower effective interest rates.

The decrease in 2016 was primarily due to a reduction in permanent differences related to executive compensation and lower state tax rates.

JBI segment revenue increased 3.6% to $3.80 billion in 2016, from $3.66 billion in 2015.

Excluding fuel surcharge, revenues increased 7.1% and revenue per load decreased 1.0% in 2016 over the prior year.

Average length of haul remained relatively flat in 2016 when compared to 2015.

Benefits from volume growth, improved network efficiency, improved rail service, and approximately $5.7 million from the change in paid time off policy were offset by increased rail purchased transportation costs, higher equipment ownership costs, increased insurance and cargo claim expense and higher driver wage and retention costs.

DCS segment revenue increased 5.6% to $1.53 billion in 2016, from $1.45 billion in 2015.

Revenue, excluding fuel surcharges, increased 7.3% in 2016 compared to 2015, and productivity excluding fuel surcharge revenue increased 2.8% from 2015, primarily from improved overall operational efficiencies, including better integration of assets between customer accounts, fewer unseated trucks, increased customer supply-chain fluidity, load counts and customer rate increases.

The increase is primarily due to increased revenue, improved asset utilization, and approximately $7.3 million from the change in paid time off policy, partially offset by higher driver wage and recruiting costs, increased salaries and benefits expenses, and higher equipment ownership costs.

ICS segment revenue increased 21.7% to $852 million in 2016, from $699 million in 2015.

Revenue per load decreased 22.5% primarily due to freight mix changes driven by customer demand.

Operating income remained flat at $36 million for both 2016 and 2015, primarily due to increased revenue and approximately $1.0 million from the change in paid time off policy, being offset by a 6.3% decrease in gross profit margin, increased claim costs, higher technology costs and increased personnel costs, as the total branch count increased to 42 from 34 at the end of 2015.

ICS gross profit margin decreased to 14.3% for 2016 from 15.3% for 2015.

JBT segment revenue increased 0.6% to $388 million in 2016, from $386 million in 2015.

Excluding fuel surcharges, revenue for 2016 increased 3.8% compared to 2015, primarily due to increased average truck count, partially offset by core customer rate decreases and freight mix changes.

Benefits from an increased average truck count, higher load volume, and approximately $1.2 million from the change in paid time off policy, were more than offset by increased driver recruiting costs, higher independent contractor cost per mile, higher safety and insurance costs, and increased tractor maintenance costs.

Net cash provided by operating activities remained relatively flat at $855 million in 2017 compared to $854 million in 2016, primarily due to the reduction in pre-tax earnings and an increase in cash paid for income taxes, net of refunds, partially offset by the timing of general working capital activities.

These net proceeds from long-term debt were used primarily for the purchase of SLD.

During the third quarter of 2017, we completed our acquisition of SLD and its affiliated entities.

See Note 11, Acquisition, in the Notes to Consolidated Financial Statements for further discussion.

We used our existing revolving credit facility to finance this transaction and to provide any necessary liquidity for current and future operations.

This acquisition did not have a material impact on our interest expense.

| Operating leases | | $ | 74.2 | | | $ | 24.5 | | | $ | 33.6 | | | $ | 13.0 | | | $ | 3.1 | |

| Interest payments on debt (1) | | | 129.8 | | | | 31.5 | | | | 50.9 | | | | 35.4 | | | | 12.0 | |

| Total | | $ | 2,093.8 | | | $ | 470.9 | | | $ | 959.4 | | | $ | 398.4 | | | $ | 265.1 | |

At our current level of borrowing, a one-percentage-point increase in our applicable rate would reduce annual pretax earnings by [removed: $8.4] [added: $9.1] million.

Additionally, foreign currency transaction gains and losses were not material to our results of operations for the year ended December 31, [removed: 2017.][added: 2018.]

As of December 31, [removed: 2017,] [added: 2018,] we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

Our JBI segment began operations in 1989, forming a unique partnership with what is now the BNSF Railway [removed: Company;] [added: Company (BNSF);] this was a watershed event in the industry and the first agreement that linked major rail and truckload carriers in a joint service environment.

JBI operates [removed: 88,610] [added: 88,739] pieces of company-owned trailing equipment systemwide.

We own and maintain our own chassis fleet, consisting of [removed: 77,946] [added: 81,442] units.

JBI also manages a fleet of [removed: 4,776] [added: 5,017] company-owned tractors, [removed: 764] [added: 633] independent contractor trucks, and [removed: 5,782] [added: 6,208] company drivers.

At December 31, [removed: 2017,] [added: 2018,] the total JBI employee count was [removed: 6,555.][added: 7,081.]

Revenue for the JBI segment in [removed: 2017] [added: 2018] was [removed: $4.08] [added: $4.72] billion.

At December 31, [removed: 2017,] [added: 2018,] this segment operated [removed: 8,124] [added: 9,652] company-owned trucks, [removed: 544] [added: 412] customer-owned trucks, and [removed: 59] [added: 51] independent contractor trucks.

DCS also operates [removed: 18,579] [added: 20,344] owned pieces of trailing equipment and [removed: 7,232] [added: 6,366] customer-owned trailers.

The DCS segment employed [removed: 12,099] [added: 13,747] people, including [removed: 10,007] [added: 11,331] drivers, at December 31, [removed: 2017.][added: 2018.]

DCS revenue for [removed: 2017] [added: 2018] was [removed: $1.72] [added: $2.16] billion.

At December 31, [removed: 2017,] [added: 2018,] the ICS segment employed [removed: 954] [added: 1,142] people, with a carrier base of approximately [removed: 56,700.][added: 73,100.]

ICS revenue for [removed: 2017] [added: 2018] was [removed: $1.02] [added: $1.33] billion.

At December 31, [removed: 2017,] [added: 2018,] the JBT segment operated [removed: 1,291] [added: 1,139] company-owned tractors and employed [removed: 1,492] [added: 1,440] people, [removed: 1,255] [added: 1,200] of whom were drivers.

At December 31, [removed: 2017,] [added: 2018,] we had [removed: 741] [added: 973] independent contractors operating in the JBT segment.

JBT revenue for [removed: 2017] [added: 2018] was [removed: $378] [added: $417] million.

As of December 31, [removed: 2017,] [added: 2018,] we had [removed: 24,681] [added: 27,621] employees, which consisted of [removed: 17,044] [added: 18,739] company drivers, [removed: 6,454] [added: 7,589] office personnel, and [removed: 1,183] [added: 1,293] maintenance technicians.

We also had arrangements with approximately [removed: 1,564] [added: 1,657] independent contractors to transport freight in our trailing equipment.

As of December 31, [removed: 2017,] [added: 2018,] our company-owned tractor and truck fleet consisted of [removed: 14,191] [added: 15,808] units.

In addition, we had [removed: 1,564] [added: 1,657] independent contractors who operate their own tractors but transport freight in our trailing equipment.

At December 31, [removed: 2017,] [added: 2018,] the average age of our combined tractor fleet was [removed: 2.9] [added: 2.3] years, while our containers averaged [removed: 6.2] [added: 6.4] years of age and our trailers averaged [removed: 7.1] [added: 6.3] years.

We are also subject to a variety of requirements of national, state, and local governments, including the U.S. Environmental Protection Agency and the Occupational Safety and Health Administration.

For the calendar year ended December 31, 2017, our consolidated revenue totaled $7.19 billion, after the elimination of intersegment business.

Of this total, 57% was generated by our JBI business segment, 24% by DCS, 14% by ICS, and 5% by JBT.

For the year ended December 31, 2016, JBI represented 58%, DCS 23%, ICS 13%, and JBT 6% of our consolidated revenue.

For the year ended December 31, 2015, JBI represented 59%, DCS 24%, ICS 11%, and JBT 6% of our consolidated revenue.

In addition, ICS utilizes its own local branch salespeople.

In 2013, the remaining provisions of the FMCSA’s amendment to the hours-of-service (HOS) safety requirements for commercial truck drivers became effective, and we experienced some negative impact on our productivity as a result.

However, in December 2014, as a result of the Consolidated and Further Continuing Appropriations Act of 2015, the FMCSA was required to rescind the 34-hour restart provision of the amended HOS rules to the pre-July 1, 2013 requirements.

Furthermore, the FMCSA was required to conduct a field study measuring the safety benefit of the amended HOS rules before and after this rule change.

This rule rescission is considered temporary pending the outcome of the study, which remains uncompleted.

We continue to evaluate and adjust the various segments of our operations toward the ultimate impact of these changes in HOS safety requirements.

In December 2015, the FMCSA published a Final Rule requiring use of an Electronic Logging Device (ELD) by December 2017, for nearly all carriers.

We have successfully implemented ELD’s within our fleets.

We are a defendant in certain [added: alleged] class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items.

The overlapping claims in the other [added: alleged class-action] lawsuits remain stayed pending final [removed: resolution] [added: approval] of the [removed: appellate process or a final decision] [added: settlement] in the lead class-action case.

BNSF [removed: has] requested the same, and the arbitration process [removed: has commenced.][added: is on-going.]

At this time, we are unable to reasonably predict the [added: final] outcome of the arbitration, and, as such, no [added: further] gain or loss contingency can be determined or recorded.

Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, [removed: has continued and] is expected to continue on a timely basis.

In the lead class-action, we reached an agreement and recorded a reserve in September 2018 to resolve all pending claims for a class settlement payment of $15 million, subject to Court approval.

The Court granted preliminary settlement approval in November 2018.

Notice of the settlement has been mailed to all settlement class members and the deadline for objections to the settlement passed without any objections filed.

We expect the Court’s order granting final approval to be issued in April 2019.

On October 5, 2018, we received the arbitrators’ Interim Award.

The details of the Interim Award are confidential and require the parties to submit additional information requested by the arbitrators to decide certain unresolved matters.

For the determined components of the Interim Award, we recorded an $18.3 million pre-tax charge in the third quarter 2018, related to certain charges claimed by BNSF for specific services requested for customers from April 2014 through May 2018.

On December 7, 2018 the arbitrators’ issued their Clarified Interim Award of October 5, 2018 resulting from some of the parties’ additional submissions to the Panel regarding certain issues related to determining the revenue division between the parties.

On January 11, 2019, the Panel issued its Second Interim Award ordering that $89.4 million is due from the Company to BNSF resulting from the adjusted revenue divisions relating to the 2016 period at issue ($52.1 million) and for calendar year 2017 ($37.3 million).

The parties have been instructed to make further submissions on the revenue divisions for calendar year 2018 and going forward, as well as other confidential issues raised during the arbitration process so that the panel can issue an appropriate interim and/or final award regarding all issues raised during the proceeding.

We recorded pretax charges for contingent liabilities in the fourth quarter 2018 of $89.4 million claimed by the BNSF for the period May 1, 2016 through December 31, 2017 and $44.6 million for the period January 1, 2018 through December 31, 2018, for a total of $134 million.

The other financial implications from the Interim Award and the Clarified Interim Award will not be fully determined until the arbitrators issue additional award(s) following their review of each party’s requested additional submissions.

If decided adversely, this matter could result in a liability material to our financial condition or results of operations.

During the first half of 2014, the District Court in the lead class-action granted judgment in our favor with regard to all claims.

The plaintiffs appealed the case to the United States Court of Appeals for the Ninth Circuit.

In July 2017, the Ninth Circuit issued a Memorandum decision vacating the judgment in our favor and remanding the case to the District Court for further proceedings.

The Ninth Circuit denied our Petition for Rehearing En Banc in November 2017, and the case has been reassigned to the United States District Court for the Central District of California for further proceedings according to the schedule entered by the Court.

In February 2018, we filed a Petition for a Writ of Certiorari in the Supreme Court of the United States seeking review of the Ninth Circuit’s decision.

We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits, however, as of December 31, 2017, we have recorded a $10 million reserve representing an amount we deem acceptable for the settlement of these claims.

10-K 1 [removed: jbht20171231_10k.htm] [added: jbht20181231_10k.htm] FORM 10-K

| For the [removed: fiscal year] [added: fiscal year] ended | Commission file number |

| December 31, [removed: 2017] [added: 2018] | 0-11757 |

| [added: |] Arkansas | 71-0335111 | [added: |]

| [added: |] (State or other jurisdiction of | (I.R.S. Employer | [added: |]

| [added: |] incorporation or organization) | Identification No.) | [added: |]

| [added: |] 615 J.B. Hunt Corporate Drive | 72745-0130 | [added: |]

| [added: |] Lowell, Arkansas | (ZIP Code) | [added: |]

| [added: |] (Address of principal executive offices) | | [added: |]

Yes X No [added: _____]

Yes [added: _____] No X

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting [added: company,” and “emerging growth] company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer X Accelerated filer [added: _____] Non-accelerated filer [added: _____] Smaller reporting company [added: _____] Emerging growth company

The aggregate market value of [removed: 85,349,240] [added: 86,721,074] shares of the registrant’s $0.01 par value common stock held by non-affiliates as of June 30, [removed: 2017,] [added: 2018,] was [removed: $7.8] [added: $10.5] billion (based upon [removed: $91.38] [added: $121.55] per share).

As of February [removed: 13, 2018,] [added: 12, 2019,] the number of outstanding shares of the registrant’s common stock was [removed: 109,754,492.][added: 108,738,788.]

Certain portions of the Notice and Proxy Statement for the Annual Meeting of Stockholders, to be held April [removed: 19, 2018,] [added: 18, 2019,] are incorporated by reference in Part III of this Form 10-K.

For The Fiscal Year Ended December 31, [removed: 2017][added: 2018]

| [added: |] PART I | | [removed: |]

Properties [removed: 9][added: 10]

| --- | --- | --- | --- |

Yes X No _____

Yes X No _____

Yes _____ No X

| | | |

| --- | --- |

| | |

| [added: |] PART II | | [removed: |]

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities [removed: 11][added: 12]

Selected Financial Data [removed: 13][added: 14]

Management’s Discussion and Analysis of Financial Condition and Results of Operations [removed: 14][added: 15]

Quantitative and Qualitative Disclosures About Market Risk [removed: 23][added: 25]

Financial Statements and Supplementary Data [removed: 24][added: 26]

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure [removed: 24][added: 26]

Controls and Procedures [removed: 24][added: 26]

| | | |

| | | |

| [added: |] PART III | | [removed: |]

Directors, Executive Officers and Corporate Governance [removed: 25][added: 27]

Executive Compensation [removed: 25][added: 27]

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters [removed: 25][added: 27]

Certain Relationships and Related Transactions, and Director Independence [removed: 26][added: 28]

Principal Accounting Fees and Services [removed: 26][added: 28]

| [added: |] PART IV | | [removed: |]

Exhibits, Financial Statement Schedules [removed: 26][added: 29]

| Signatures | | [removed: 27] [added: 31] |

| | | |

| | | |

| | | |

| | | |

| Index to Consolidated Financial Information | | 28 |

We also own or lease [removed: 40] [added: 43] other significant facilities across the United States where we perform maintenance on our equipment, provide bulk fuel, and employ personnel to support operations.

In addition, we have [removed: 97] [added: 98] leased facilities in our DCS cross-dock and other delivery system networks, with the remaining [removed: five] [added: four] locations outsourced, and 44 leased or owned remote sales offices or branches in our ICS segment.

| Maintenance and support facilities | | | [removed: 418] [added: 443] | | | | [removed: 1,015,000] [added: 1,020,000] | | | | [removed: 203,000] [added: 190,000] | |

| Cross-dock and delivery system facilities | | | [removed: 37] [added: 24] | | | | [removed: 2,191,000] [added: 2,308,000] | | | | [removed: 168,000] [added: 124,000] | |

| Corporate headquarters, Lowell, Arkansas | | | [removed: 99] [added: 88] | | | | \- | | | | [removed: 404,000] [added: 407,000] | |

| Branch sales offices | | | \- | | | | \- | | | | [removed: 77,000] [added: 92,000] | |

| Other facilities, offices, and parking yards | | | [removed: 308] [added: 343] | | | | [removed: 39,000] [added: 211,000] | | | | [removed: 107,000] [added: 129,000] | |

Our common stock is traded on the NASDAQ Global Select Market (NASDAQ) under the symbol “JBHT.” At December 31, [removed: 2017,] [added: 2018,] we were authorized to issue up to 1 billion shares of our common stock, and 167.1 million shares were issued.

We had [removed: 109.8] [added: 108.7] million and [removed: 111.3] [added: 109.8] million shares outstanding as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

On January [removed: 24, 2018,] [added: 23, 2019,] we announced an increase in our quarterly cash dividend from [removed: $0.23 to] $0.24 [added: to $0.26] per share, which will be paid February [removed: 23, 2018,] [added: 22, 2019,] to stockholders of record on February [removed: 9, 2018.][added: 8, 2019.]

[added: (1)] On [removed: October 22, 2015,] [added: April 20, 2017,] our Board of Directors authorized the purchase of [added: up to] $500 million of our common stock.

The peer group labeled [removed: “2016 Peer Group”] [added: “Peer Group 2017”] consists of [removed: 11] [added: 13] companies: [removed: Avis Budget Group Inc.,] C.H. Robinson Worldwide Inc., CSX Corp, Expeditors International Of Washington Inc., [removed: Hertz Global Holdings Inc.,] Hub Group Inc., Kansas City Southern, [removed: Landstar System Inc.,] Norfolk Southern Corp, Old Dominion Freight Line [removed: Inc. and] [added: Inc., Republic Services Inc.,] Ryder System [added: Inc., Schneider National Inc., Stericycle Inc., Waste Management] Inc. [added: and XPO Logistics Inc.] The peer group labeled [removed: “2017 Peer Group”] [added: “Peer Group 2018”] consists of [removed: 13] [added: 14] companies: C.H. Robinson Worldwide Inc., CSX Corp, Expeditors International Of Washington Inc., Hub Group Inc., Kansas City Southern, [added: Knight-Swift Transportation Holdings Inc.,] Norfolk Southern Corp, Old Dominion Freight Line Inc., Republic Services Inc., Ryder System Inc., Schneider National Inc., Stericycle Inc., Waste Management Inc. and XPO Logistics Inc. The graph assumes the value of the investment in our common stock, in the index, and in each of the peer groups (including reinvestment of dividends) was $100 on December 31, [removed: 2012,] [added: 2013,] and tracks it through December 31, [removed: 2017.][added: 2018.]

[removed: ][added: ]

| | | [removed: 2012 | | | |] 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | [added: | 2018 | | |]

On February 12, 2019, we had 1,133 stockholders of record of our common stock.

The following table summarizes purchases of our common stock during the three months ended December 31, 2018:

| Period | | Number of Common Shares Purchased | | | | Average Price Paid Per Common Share Purchased | | | | Total Number of Shares Purchased as Part of a Publicly Announced Plan (1) | | | | Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plan (in millions) (1) | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October 1 through October 31, 2018 | | | \- | | | $ | \- | | | | \- | | | $ | 421 | |

| November 1 through November 30, 2018 | | | \- | | | | \- | | | | \- | | | | 421 | |

| December 1 through December 31, 2018 | | | 493,905 | | | | 101.86 | | | | 493,905 | | | | 371 | |

| Total | | | 493,905 | | | $ | 101.86 | | | | 493,905 | | | $ | 371 | |

| J.B. Hunt Transport Services, Inc. | | $ | 100.00 | | | $ | 110.12 | | | $ | 96.88 | | | $ | 129.61 | | | $ | 155.01 | | | $ | 126.48 | |

| S&P 500 | | | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | |

| Peer Group 2017 | | | 100.00 | | | | 120.17 | | | | 102.00 | | | | 130.72 | | | | 176.06 | | | | 177.76 | |

| Peer Group 2018 | | | 100.00 | | | | 120.90 | | | | 102.35 | | | | 131.32 | | | | 176.84 | | | | 175.96 | |

The high and low sales prices of our common stock as reported by NASDAQ and the quarterly dividends paid per share on our common shares were:

| 2017 | | Dividends Paid | | | | High | | | | Low | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| First Quarter | | $ | 0.23 | | | $ | 101.23 | | | $ | 88.70 | |

| Second Quarter | | | 0.23 | | | | 94.08 | | | | 83.35 | |

| Third Quarter | | | 0.23 | | | | 111.60 | | | | 88.83 | |

| Fourth Quarter | | | 0.23 | | | | 116.84 | | | | 100.25 | |

| 2016 | | Dividends Paid | | | | High | | | | Low | | |

| First Quarter | | $ | 0.22 | | | $ | 86.94 | | | $ | 63.58 | |

| Second Quarter | | | 0.22 | | | | 89.43 | | | | 75.71 | |

| Third Quarter | | | 0.22 | | | | 86.59 | | | | 77.52 | |

| Fourth Quarter | | | 0.22 | | | | 102.38 | | | | 76.20 | |

On February 13, 2018, the high and low sales prices for our common stock as reported by NASDAQ were $119.30 and $114.63, respectively, and we had 1,013 stockholders of record.

On April 20, 2017, our Board of Directors authorized an additional purchase of up to $500 million of our common stock.

At December 31, 2017, $521 million of the combined authorization was remaining.

We did not purchase any shares under our repurchase authorization during the three months ended December 31, 2017.

| J.B. Hunt Transport Services, Inc. | | $ | 100.00 | | | $ | 130.25 | | | $ | 143.44 | | | $ | 126.19 | | | $ | 168.83 | | | $ | 201.91 | |

| S&P 500 | | | 100.00 | | | | 132.39 | | | | 150.51 | | | | 152.59 | | | | 170.84 | | | | 208.14 | |

| 2016 Peer Group | | | 100.00 | | | | 142.64 | | | | 169.18 | | | | 125.47 | | | | 156.70 | | | | 216.09 | |

| 2017 Peer Group | | | 100.00 | | | | 135.54 | | | | 162.87 | | | | 138.24 | | | | 177.17 | | | | 238.62 | |

| Earnings data for the years ended December 31, | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Operating revenues | | $ | [removed: 7,190] [added: 8,615] | | | $ | [removed: 6,555] [added: 7,190] | | | $ | [removed: 6,188] [added: 6,555] | | | $ | [removed: 6,165] [added: 6,188] | | | $ | [removed: 5,585] [added: 6,165] | |

| Operating income | | | [removed: 624] [added: 681] | | | | [removed: 721] [added: 624] | | | | [removed: 716] [added: 721] | | | | [removed: 632] [added: 716] | | | | [removed: 577] [added: 632] | |

| Net earnings | | | [removed: 686] [added: 490] | | | | [removed: 432] [added: 686] | | | | [removed: 427] [added: 432] | | | | [removed: 375] [added: 427] | | | | [removed: 342] [added: 375] | |

| Basic earnings per share | | | [removed: 6.24] [added: 4.48] | | | | [removed: 3.84] [added: 6.24] | | | | [removed: 3.69] [added: 3.84] | | | | [removed: 3.20] [added: 3.69] | | | | [removed: 2.92] [added: 3.20] | |

| Diluted earnings per share | | | [removed: 6.18] [added: 4.43] | | | | [removed: 3.81] [added: 6.18] | | | | [removed: 3.66] [added: 3.81] | | | | [removed: 3.16] [added: 3.66] | | | | [removed: 2.87] [added: 3.16] | |

| Cash dividends per share | | | [removed: 0.92] [added: 0.96] | | | | [removed: 0.88] [added: 0.92] | | | | [removed: 0.84] [added: 0.88] | | | | [removed: 0.80] [added: 0.84] | | | | [removed: 0.45] [added: 0.80] | |

| Rents and purchased transportation | | | [removed: 50.8] [added: 51.5] | % | | | [removed: 49.7] [added: 50.8] | % | | | [removed: 48.4] [added: 49.7] | % | | | [removed: 50.0] [added: 48.4] | % | | | [removed: 50.2] [added: 50.0] | % |

| Salaries, wages and employee benefits | | | 22.4 | | | | 22.4 | | | | [removed: 22.5] [added: 22.4] | | | | [removed: 20.9] [added: 22.5] | | | | [removed: 20.4] [added: 20.9] | |

| Depreciation and amortization | | | [removed: 5.3] [added: 5.1] | | | | [removed: 5.5] [added: 5.3] | | | | 5.5 | | | | [removed: 4.8] [added: 5.5] | | | | [removed: 4.5] [added: 4.8] | |

| Fuel and fuel taxes | | | [removed: 4.8] [added: 5.3] | | | | [removed: 4.3] [added: 4.8] | | | | [removed: 5.1] [added: 4.3] | | | | [removed: 7.4] [added: 5.1] | | | | [removed: 8.2] [added: 7.4] | |

| Operating supplies and expenses | | | [removed: 3.6] [added: 3.5] | | | | 3.6 | | | | 3.6 | | | | [removed: 3.5] [added: 3.6] | | | | [removed: 3.6] [added: 3.5] | |

| General and administrative expenses, net of asset dispositions | | | 1.8 | | | | [removed: 1.3] [added: 1.8] | | | | [removed: 1.1] [added: 1.3] | | | | [removed: 0.8] [added: 1.1] | | | | 0.8 | |

| Insurance and claims | | | [removed: 1.7] [added: 1.5] | | | | [removed: 1.2] [added: 1.7] | | | | 1.2 | | | | [removed: 1.3] [added: 1.2] | | | | [removed: 1.0] [added: 1.3] | |

| Operating taxes and licenses | | | 0.6 | | | | [removed: 0.7] [added: 0.6] | | | | 0.7 | | | | 0.7 | | | | 0.7 | |

| Communication and utilities | | | [removed: 0.3] [added: 0.4] | | | | 0.3 | | | | 0.3 | | | | [removed: 0.4] [added: 0.3] | | | | [removed: 0.3] [added: 0.4] | |

| Total operating expenses | | | [removed: 91.3] [added: 92.1] | | | | [removed: 89.0] [added: 91.3] | | | | [removed: 88.4] [added: 89.0] | | | | [removed: 89.8] [added: 88.4] | | | | [removed: 89.7] [added: 89.8] | |

| Operating income | | | [removed: 8.7] [added: 7.9] | | | | [removed: 11.0] [added: 8.7] | | | | [removed: 11.6] [added: 11.0] | | | | [removed: 10.2] [added: 11.6] | | | | [removed: 10.3] [added: 10.2] | |

| Net interest expense | | | [removed: 0.4] [added: 0.5] | | | | 0.4 | | | | 0.4 | | | | 0.4 | | | | 0.4 | |

| Earnings before income taxes | | | [removed: 8.3] [added: 7.4] | | | | [removed: 10.6] [added: 8.3] | | | | [removed: 11.2] [added: 10.6] | | | | [removed: 9.8] [added: 11.2] | | | | [removed: 9.9] [added: 9.8] | |

| Income taxes | | | [added: 1.7 | | | |] (1.2 | ) | | | 4.0 | | | | 4.3 | | | | 3.7 | | [removed: | | 3.8 | |]

| Net earnings | | | [removed: 9.5] [added: 5.7] | % | | | [removed: 6.6] [added: 9.5] | % | | | [removed: 6.9] [added: 6.6] | % | | | [removed: 6.1] [added: 6.9] | % | | | 6.1 | % |

| Balance sheet data as of December 31, | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Working capital ratio | | | [removed: 1.52] [added: 1.11] | | | | [removed: 1.65] [added: 1.45] | | | | [removed: 1.61] [added: 1.65] | | | | [removed: 1.11] [added: 1.61] | | | | [removed: 0.96] [added: 1.11] | |

| Total assets (millions) | | $ | [removed: 4,465] [added: 5,092] | | | $ | [removed: 3,951] [added: 4,465] | | | $ | [removed: 3,630] [added: 3,951] | | | $ | [removed: 3,374] [added: 3,630] | | | $ | [removed: 2,818] [added: 3,374] | |

| Stockholders’ equity (millions) | | $ | [removed: 1,839] [added: 2,101] | | | $ | [removed: 1,414] [added: 1,839] | | | $ | [removed: 1,300] [added: 1,414] | | | $ | [removed: 1,205] [added: 1,300] | | | $ | [removed: 1,012] [added: 1,205] | |

| Current portion of long-term debt (millions) | | [added: $] | [removed: \-] [added: 251] | | | | \- | | | | \- | | | [removed: $] | [removed: 250] [added: \-] | | | $ | 250 | |

| Total debt (millions) | | $ | [removed: 1,086] [added: 1,149] | | | $ | [removed: 986] [added: 1,086] | | | $ | [removed: 998] [added: 986] | | | $ | [removed: 929] [added: 998] | | | $ | [removed: 707] [added: 929] | |

| Total debt to equity | | | [removed: 0.59] [added: 0.55] | | | | [removed: 0.70] [added: 0.59] | | | | [removed: 0.77] [added: 0.70] | | | | 0.77 | | | | [removed: 0.70] [added: 0.77] | |

| Total debt as a percentage of total capital | | | [removed: 37] [added: 35] | % | | | [removed: 41] [added: 37] | % | | | [removed: 43] [added: 41] | % | | | [removed: 44] [added: 43] | % | | | [removed: 41] [added: 44] | % |

The following selected financial data should be read in conjunction with the Consolidated Financial Statements and notes thereto, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other financial data included elsewhere in this annual report.

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016][added: 2017]

Consolidated Statements of Earnings for years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015][added: 2016]

Consolidated Statements of Stockholders’ Equity for years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015][added: 2016]

Consolidated Statements of Cash Flows for years ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015][added: 2016]

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, [removed: 2017.][added: 2018.]

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in _Internal Control – Integrated_ _Framework (2013_ _Framework)__._ Based on our assessment, we believe that as of December 31, [removed: 2017,] [added: 2018,] our internal control over financial reporting is effective based on those criteria.

The effectiveness of internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] has been audited by Ernst & Young LLP, an independent registered public accounting firm that also audited our Consolidated Financial Statements.

Ernst & Young LLP’s report on internal control over financial reporting is included [removed: herein.][added: herein (following Item 15).]

There has been no change in our internal control over financial reporting during the fourth quarter ended December 31, [removed: 2017,] [added: 2018,] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The information required for Item 10 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 19, 2018.][added: 18, 2019.]

The information required for Item 11 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 19, 2018.][added: 18, 2019.]

Except as set forth below, the information required for Item 12 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 19, 2018.][added: 18, 2019.]

[removed: Securities] [added: Securities] Authorized For Issuance Under Equity Compensation Plans

| Plan Category(1) | | Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | | [removed: | Weighted- average] [added: Weighted-average] Exercise Price of Outstanding Options, Warrants, and Rights | | | [removed: |] Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) | | [removed: |]

| Equity compensation plans approved by security holders | | [removed: | 1,570,715] [added: 1,606,347] | | | $ [removed: | \- |] [added: -] (2) | | | [removed: 6,752,540] [added: 6,260,958] | |

The following table summarizes, as of December 31, 2018, information about compensation plans under which equity securities of the Company are authorized for issuance.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | (A) | | | (B) | | | (C) | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | (A) | | | | (B) | | | | (C) | | |

The information required for Item 13 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 19, 2018.][added: 18, 2019.]

The information required for Item 14 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 19, 2018.][added: 18, 2019.]

[added: | |] (A) [added: |] Financial Statements, Financial Statement Schedules and Exhibits: [added: |]

[added: | |] (1) [added: |] Financial Statements [added: |]

[added: | |] (2) [added: |] Financial Statement Schedules [added: |]

| December 31, 2016 | | | [removed: _9.9_] [added: 9.9] | | | | [removed: _19.5_] [added: 19.5] | | | | [removed: _(16.0_] [added: (16.0] | ) | | | [removed: _13.4_] [added: 13.4] | |

| December 31, 2017 | | | [removed: _13.4_] [added: 13.4] | | | | [removed: _29.3_] [added: 29.3] | | | | [removed: _(18.7_] [added: (18.7] | ) | | | [removed: _24.0_] [added: 24.0] | |

All other schedules have been omitted either because they are [removed: _not_] [added: not] applicable or because the required information is included in our Consolidated Financial Statements or the notes thereto.

[added: | |] (3) [added: |] Exhibits [added: |]

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on the [removed: 23rd] [added: 22nd] day of [removed: February, 2018.][added: February 2019.]

| | [added: |] J.B. HUNT TRANSPORT SERVICES, INC. | | |

| | | [added: |] (Registrant) | |

| | By: | [added: |] /s/ John N. Roberts, III | |

| | | [added: |] John N. Roberts, III | |

| | | [added: |] President and Chief Executive Officer | |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the [removed: 23rd] [added: 22nd] day of [removed: February, 2018,] [added: February 2019,] on behalf of the registrant and in the capacities indicated.

| | /s/ John N. Roberts, III | | President and Chief Executive Officer, Member | [removed: |]

| | John N. Roberts, III | | of the Board of Directors | [removed: |]

| | | | (Principal Executive Officer) | [removed: |]

| | /s/ David G. Mee | | Executive Vice President, Finance and | [removed: |]

| | David G. Mee | | Administration, Chief Financial Officer [removed: and] | [removed: |]

| | | | (Principal Financial Officer) | [removed: |]

| | /s/ John Kuhlow | | Senior Vice President Finance, Controller, | [removed: |]

| | John Kuhlow | | Chief Accounting Officer | [removed: |]

| | /s/ Kirk Thompson | | Chairman of the Board of Directors | [removed: |]

| | Kirk Thompson | | | [removed: |]

| | /s/ James L. Robo | | Member of the Board of Directors | [removed: |]

| | James L. Robo | | (Lead Director) | [removed: |]

| | /s/ Douglas G. Duncan | | Member of the Board of Directors | [removed: |]

| | Douglas G. Duncan | | | [removed: |]

| | /s/ Francesca M. Edwardson | | Member of the Board of Directors | [removed: |]

| | Francesca M. Edwardson | | | [removed: |]

| | /s/ Wayne Garrison | | Member of the Board of Directors | [removed: |]

| | Wayne Garrison | | | [removed: |]

| | /s/ Sharilyn S. Gasaway | | Member of the Board of Directors | [removed: |]

| | Sharilyn S. Gasaway | | | [removed: |]

| | /s/ Gary C. George | | Member of the Board of Directors | [removed: |]

| | Gary C. George | | | [removed: |]

| | /s/ J. Bryan Hunt, Jr. | | Member of the Board of Directors | [removed: |]

| | J. Bryan Hunt, Jr. | | | [removed: |]

| | /s/ Coleman H. Peterson | | Member of the Board of Directors | [removed: |]

| | Coleman H. Peterson | | | [removed: |]

| --- | --- | --- |

| --- | --- | --- |

| December 31, 2018 | | | 24.0 | | | | 35.7 | | | | (23.9 | ) | | | 35.8 | |

| --- | --- | --- |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| --- | --- | --- | --- |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| | | | |

| --- | --- | --- | --- |

February 22, 2019

February 22, 2019

| --- |

| | | 2018 | | | | 2017 | | |

| Assets | | | | | | | | |

| --- |

| --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| December 31, 2015 | | $ | _9.5_ | | | $ | _9.5_ | | | $ | _(9.1_ | ) | | $ | _9.9_ | |

The response to this portion of Item 15 is submitted as a separate section of this report on Form 10-K (Exhibit Index).

| --- | --- | --- | --- | --- |

| | | | | |

| | | | Corporate Secretary | |

EXHIBIT INDEX

| | | |

| --- | --- |

February 23, 2018

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2017 | | | | 2016 | | |

| Assets | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2017 | | | | 2016 | | | | 2015 | | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | Additional | | | | | | | | | | | | | | |

| | | Common | | | | Paid-in | | | | Retained | | | | Treasury | | | | Stockholders’ | | |

| | | Stock | | | | Capital | | | | Earnings | | | | Stock | | | | Equity | | |

| Balances at December 31, 2014 | | $ | _1,671_ | | | $ | _247,641_ | | | $ | _2,555,972_ | | | $ | _(1,600,761_ | ) | | $ | _1,204,523_ | |

| Net earnings | | | _\-_ | | | | _\-_ | | | | _427,235_ | | | | _\-_ | | | | _427,235_ | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Proceeds from issuances of long-term debt | | | _\-_ | | | | _\-_ | | | | _349,129_ | |

| Tax benefit of stock options exercised and restricted shares issued | | | _\-_ | | | | _7,044_ | | | | _12,877_ | |

Reclassifications

Certain prior year amounts have been reclassified to conform to the _2017_ presentation format.

Insurance receivables for claims in excess of self-insurance levels, which were previously offset against our claims accruals, have been reclassed to other receivables, resulting in a $121.7 million increase in other receivables and a corresponding increase in claims accruals in our Consolidated Balance Sheet at December 31, 2016.

We record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing.

In _August 2015,_ the FASB issued ASU _2015_\-_14,_ Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of ASU _2014_\-_09,_ _one_ year to interim and annual periods beginning after _December 15, 2017._ Early adoption was permitted after the original effective date of _December 15, 2016._

Our implementation team has completed the process of contract review and documentation in accordance with the standard.

We do _not_ expect the standard to have a material impact on our financial statements, although additional disclosures will be required.

We are currently evaluating the potential effects of the adoption of this update on our financial statements.

See Note _10,_ Commitments and Contingencies, in our Consolidated Financial Statements for discussion of our remaining obligations under operating lease arrangements.

In _March 2016,_ the FASB issued ASU _2016_\-_09,_ Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which amended and simplified certain aspects of accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

The amendments were effective for interim and annual periods beginning after _December 15, 2016._ The application methods used in adoption varied with each component of the standard.

We prospectively adopted ASU _2016_\-_09_ during the _first_ quarter _2017,_ which, upon vesting of share-based awards, resulted in the recognition of excess tax benefits or tax deficiencies from share-based compensation as a discrete item in our income tax expense.

Historically, these amounts were recorded as additional paid-in capital.

Effectively all of our outstanding share-based awards as of _December 31, 2017_ vest within the _third_ quarter of the vesting year, and accordingly, we recognized an excess tax benefit of _$4.9_ million during the _third_ quarter _2017._ In addition, cash flows from excess tax benefits from share-based compensation, which historically have been reported as cash flows from financing activities, are now reported, on a prospective basis, as cash flows from operating activities in our Consolidated Statement of Cash Flows.

The remaining amendments within the standard had _no_ impact on our Consolidated Financial Statements.