Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(A) Financial Statements, Financial Statement Schedules and Exhibits:

(1) Financial Statements

The financial statements included in Item 8 above are filed as part of this annual report.

(2) Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts (in millions)

Allowance for Doubtful Accounts, Revenue Adjustments and Other for the Years Ended:

December 31, 2017	13.4	29.3	(18.7	)	24.0
December 31, 2018	24.0	35.7	(23.9	)	35.8
December 31, 2019	35.8	34.2	(47.5	)	22.5

The above schedule reports allowances related to trade accounts receivable and other receivables.

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

(3) Exhibits

Exhibit
Number			Description

3.1			Amended and Restated Articles of Incorporation of J.B. Hunt Transport Services, Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2005, filed April 29, 2005)

3.2			Amended and Restated Bylaws of J.B. Hunt Transport Services, Inc. dated April 23, 2015 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K, filed April 27, 2015)

4.1			Description of Capital Stock of J.B. Hunt Transport Services, Inc.

4.2			Indenture (incorporated by reference from Exhibit 4.1 of the Company’s registration statement on Form S-3ASR (File No. 333-169365), filed September 14, 2010)

4.3			Third Supplemental Indenture (incorporated by reference from Exhibit 4.4 of the Company’s current report on Form 8-K, filed March 6, 2014)

4.4			Fourth Supplemental Indenture (incorporated by reference from Exhibit 4.3 of the Company’s current report on Form 8-K, filed August 6, 2015)

4.5			Base Indenture, dated as of March 1, 2019 (incorporated by reference from Exhibit 4.1 of the Company’s current report on Form 8-K, filed March 1, 2019)

4.6			First Supplemental Indenture, dated as of March 1, 2019 (incorporated by reference from Exhibit 4.2 of the Company’s current report on Form 8-K, filed March 1, 2019)

10.1			Third Amended and Restated Management Incentive Plan (incorporated by reference from Appendix A of the Company’s definitive proxy statement on Schedule 14A, filed March 9, 2017)

10.2			Amendment to J.B. Hunt Transport Services, Inc. Third Amended and Restated Management Incentive Plan (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed April 22, 2019)

10.3			Summary of Compensation Arrangements with Named Executive Officers for 2019 (incorporated by reference from Exhibit 99.1 of the Company’s current report on Form 8-K, filed January 25, 2019)

10.4			Summary of Compensation Arrangements with Named Executive Officers for 2020 (incorporated by reference from Exhibit 99.1 of the Company’s current report on Form 8-K/A, filed February 3, 2020)

10.5*			Executive Retirement Agreement with David G. Mee, dated February 6, 2020 (incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K, filed February 10, 2020)

10.6*			Executive Retirement Agreement with Terrance D. Matthews, dated February 6, 2020 (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed February 10, 2020)

10.7			Credit Agreement and related documents (incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K, filed September 28, 2018)

10.8			First Amendment to Credit Agreement, dated as of March 1, 2019 (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed March 1, 2019)

21.1			Subsidiaries of J.B. Hunt Transport Services, Inc.

23.1			Consent of Ernst & Young LLP

31.1			Rule 13a-14(a)/15d-14(a) Certification

31.2			Rule 13a-14(a)/15d-14(a) Certification

32.1			Section 1350 Certification

99.1			Equity Interests Purchase Agreement dated July 20, 2017 (incorporated by reference from Exhibit 99.1 of the Company’s current report on Form 8-K, filed July 25, 2017)

99.2			Asset Purchase Agreement dated January 7, 2019 (incorporated by reference from Exhibit 99.2 of the Company’s current report on Form 8-K, filed January 10, 2019)

101.INS			Inline XBRL Instance Document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (embedded within the Inline XBRL Document)

Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

SIGNATURES

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 2nd day of March 2020.

	J.B. HUNT TRANSPORT SERVICES, INC.
	(Registrant)

	By:	/s/ John N. Roberts, III
		John N. Roberts, III 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 2nd day of March 2020, on behalf of the registrant and in the capacities indicated.

/s/ John N. Roberts, III		President and Chief Executive Officer, Member
John N. Roberts, III		of the Board of Directors
		(Principal Executive Officer)

/s/ John Kuhlow		Senior Vice President Finance, Controller,
John Kuhlow		Chief Accounting Officer, and Interim
		Chief Financial Officer (Principal Financial Officer)

/s/ Kirk Thompson		Chairman of the Board of Directors
Kirk Thompson

/s/ James L. Robo		Member of the Board of Directors
James L. Robo		(Lead Director)

/s/ Douglas G. Duncan		Member of the Board of Directors
Douglas G. Duncan

/s/ Francesca M. Edwardson		Member of the Board of Directors
Francesca M. Edwardson

/s/ Wayne Garrison		Member of the Board of Directors
Wayne Garrison

/s/ Sharilyn S. Gasaway		Member of the Board of Directors
Sharilyn S. Gasaway

/s/ Gary C. George		Member of the Board of Directors
Gary C. George

/s/ J. Bryan Hunt, Jr.		Member of the Board of Directors
J. Bryan Hunt, Jr.

/s/ Coleman H. Peterson		Member of the Board of Directors
Coleman H. Peterson

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

	PAGE

Management’s Report on Internal Control Over Financial Reporting	32

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	33

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	35

Consolidated Balance Sheets as of December 31, 2019 and 2018	36

Consolidated Statements of Earnings for years ended December 31, 2019, 2018, and 2017	37

Consolidated Statements of Stockholders’ Equity for years ended December 31, 2019, 2018, and 2017	38

Consolidated Statements of Cash Flows for years ended December 31, 2019, 2018, and 2017	39

Notes to Consolidated Financial Statements	40

Management’s Report on Internal Control Over Financial Reporting

We are responsible for the preparation, integrity, and fair presentation of our Consolidated Financial Statements and related information appearing in this report. We take these responsibilities very seriously and are committed to maintaining controls and procedures that are designed to ensure that we collect the information we are required to disclose in our reports to the SEC and to process, summarize, and disclose this information within the time periods specified by the SEC.

Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report, conducted by our management and with the participation of our Chief Executive Officer and Chief Financial Officer, we believe our controls and procedures are effective to ensure that we are able to collect, process, and disclose the information we are required to disclose in our reports filed with the SEC within the required time periods.

We are responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. We assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, we 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, 2019, our internal control over financial reporting is effective based on those criteria.

The effectiveness of internal control over financial reporting as of December 31, 2019, 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 herein.

/s/ John N. Roberts, III		/s/ John Kuhlow
John N. Roberts, III		John Kuhlow
President and Chief Executive Officer		Senior Vice President Finance, Controller,
(Principal Executive Officer)		Chief Accounting Officer, and Interim
		Chief Financial Officer
		(Principal Financial Officer)

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of J.B. Hunt Transport Services, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of J.B. Hunt Transport Services, Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 2, 2020, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Claims Accruals

Description of the Matter		At December 31, 2019, the Company’s aggregate claims accrual was $263 million, which is primarily related to casualty and workers’ compensation claims, inclusive of amounts expected to be paid by the Company’s insurers above its self-insured retention limits. As explained in Note 2 of the financial statements, the Company recognizes a liability at the time of the incident based upon the nature and severity of the claim and analyses provided by third-party claims administrators. The Company uses an actuarial method to develop currently known claim information to derive an estimate of the ultimate claim liability to account for estimated incurred but not reported losses (“IBNR”). Auditing the Company's claims accruals is complex and involves significant measurement uncertainty associated with the estimate, the application of significant management judgment, and the use of various actuarial methods. In addition, the estimate for claims accruals is sensitive to significant management assumptions, including the frequency and severity assumptions used to derive the computation of the IBNR, and the case reserves and loss development factors for reported claims.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the claims accrual process, including management’s assessment of the assumptions and data underlying the IBNR reserve. To evaluate the claims accruals, our audit procedures included, among others, testing the completeness and accuracy of the underlying claims by performing a test of details over a representative sample. Furthermore, we involved our actuarial specialist to assist in our evaluation of the methodologies applied by management in determining the calculated reserve. We compared the Company’s reserved amount to a range which our actuarial specialist developed based on independently selected assumptions.

Accounting for Acquisition of Cory 1__st Choice Home Delivery

Description of the Matter		During 2019, the Company completed its acquisition of Cory 1st Choice Home Delivery (“Cory”) for net consideration of $100 million, as disclosed in Note 12 to the consolidated financial statements. The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of Cory was complex due to the significant estimation required by management to determine the fair value of acquired customer-related intangible assets and goodwill of $45.8 million and $48.2 million, respectively. The significant estimation was primarily due to the complexity of the valuation methods used by management to measure the fair value of the intangible assets and the sensitivity of the respective fair values to the significant underlying assumptions. The significant assumptions used in the valuation included volatility, discount rate, and revenue projections. The Company used the multi-period excess earnings, relief from royalty, and with-and-without methods to measure the intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates, attrition rate and market participant synergies). These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for acquisitions. Our tests included controls over the estimation process supporting the recognition and measurement of consideration transferred, and the intangible assets. We also tested management’s review of assumptions used in the valuation models. To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used in the Company’s valuation models, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We involved our valuation specialists to assist in our evaluation of the significant assumptions, including revenue growth rates and discount rate, and to assist with reconciling the prospective financial information with other prospective financial information prepared by the Company.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2005.

Rogers, Arkansas

March 2, 2020

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of J.B. Hunt Transport Services, Inc.

Opinion on Internal Control over Financial Reporting

We have audited J.B. Hunt Transport Services, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, J.B. Hunt Transport Services, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2019 and 2018, the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”) of the Company and our report dated March 2, 2020, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Rogers, Arkansas

March 2, 2020

J.B. HUNT TRANSPORT SERVICES, INC.
Consolidated Balance Sheets
December 31, 2019 and 2018
(in thousands, except share data)

	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	35,000		$	7,600
Trade accounts receivable, net		1,011,829			1,051,698
Other receivables, net		230,331			274,511
Inventories		21,106			21,977
Prepaid expenses		183,033			147,195
Total current assets		1,481,299			1,502,981
Property and equipment, at cost:
Revenue and service equipment		4,837,747			4,716,860
Land		58,692			49,486
Structures and improvements		302,184			238,202
Furniture and office equipment		442,183			324,695
Total property and equipment		5,640,806			5,329,243
Less accumulated depreciation		2,019,940			1,884,132
Net property and equipment		3,620,866			3,445,111
Goodwill		96,326			40,087
Other intangible assets, net		106,506			65,070
Other assets		165,857			38,398
Total assets	$	5,470,854		$	5,091,647

Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	-		$	250,706
Trade accounts payable		602,601			709,736
Claims accruals		279,590			275,139
Accrued payroll		68,220			80,922
Other accrued expenses		85,355			35,845
Total current liabilities		1,035,766			1,352,348
Long-term debt		1,295,740			898,398
Other long-term liabilities		173,241			96,056
Deferred income taxes		699,078			643,461
Total liabilities		3,203,825			2,990,263
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $100 par value. 10 million shares authorized; none outstanding		-			-
Common stock, $.01 par value. 1 billion shares authorized; (167,099,432 shares issued at December 31, 2019 and 2018, of which 106,212,908 and 108,710,825 shares were outstanding at December 31, 2019 and 2018, respectively)		1,671			1,671
Additional paid-in capital		374,049			340,457
Retained earnings		4,592,938			4,188,435
Treasury stock, at cost (60,886,524 shares at December 31, 2019, and 58,388,607 shares at December 31, 2018)		(2,701,629	)		(2,429,179	)
Total stockholders’ equity		2,267,029			2,101,384

Total liabilities and stockholders' equity	$	5,470,854		$	5,091,647

See Notes to Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.
Consolidated Statements of Earnings
Years Ended December 31, 2019, 2018 and 2017
(in thousands, except per share amounts)

	2019		2018		2017

Operating revenues, excluding fuel surcharge revenues	$	8,122,600	$	7,557,648	$	6,435,858
Fuel surcharge revenues		1,042,658		1,057,226		753,710
Total operating revenues		9,165,258		8,614,874		7,189,568
Operating expenses:
Rents and purchased transportation		4,528,812		4,434,540		3,650,806
Salaries, wages and employee benefits		2,167,851		1,926,213		1,608,378
Depreciation and amortization		499,145		435,893		383,518
Fuel and fuel taxes		463,195		459,011		347,573
Operating supplies and expenses		333,113		303,529		257,239
General and administrative expenses, net of asset dispositions		191,933		163,270		125,878
Insurance and claims		157,251		129,406		123,579
Operating taxes and licenses		55,336		51,080		44,825
Communication and utilities		34,797		30,911		23,983
Total operating expenses		8,431,433		7,933,853		6,565,779
Operating income		733,825		681,021		623,789
Interest income		1,754		224		235
Interest expense		54,684		40,427		28,785
Earnings before income taxes		680,895		640,818		595,239
Income taxes		164,575		151,233		(91,024	)
Net earnings	$	516,320	$	489,585	$	686,263
Weighted average basic shares outstanding		107,329		109,375		109,987
Basic earnings per share	$	4.81	$	4.48	$	6.24
Weighted average diluted shares outstanding		108,307		110,428		111,049
Diluted earnings per share	$	4.77	$	4.43	$	6.18
Dividends declared per common share	$	1.04	$	0.96	$	0.92

See Notes to Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2019, 2018 and 2017
(in thousands, except per share amounts)

			Additional
	*Common*		*Paid-in*			*Retained*			*Treasury*			*Stockholders’*
	*Stock*		*Capital*			*Earnings*			*Stock*			*Equity*
Balances at December 31, 2016	$	1,671	$	293,087		$	3,218,943		$	(2,099,640	)	$	1,414,061
Comprehensive income:
Net earnings		-		-			686,263			-			686,263
Cash dividend declared and paid ($0.92 per share)		-		-			(101,362	)		-			(101,362	)
Purchase of treasury shares		-		-			-			(179,813	)		(179,813	)
Share-based compensation		-		38,291			-			-			38,291
Restricted share issuances, net of stock repurchased for payroll taxes and other		-		(20,567	)		-			2,452			(18,115	)

Balances at December 31, 2017	$	1,671	$	310,811		$	3,803,844		$	(2,277,001	)	$	1,839,325
Comprehensive income:
Net earnings		-		-			489,585			-			489,585
Cash dividend declared and paid ($0.96 per share)		-		-			(104,994	)		-			(104,994	)
Purchase of treasury shares		-		-			-			(150,338	)		(150,338	)
Share-based compensation		-		47,369			-			-			47,369
Restricted share issuances, net of stock repurchased for payroll taxes and other		-		(17,723	)		-			(1,840	)		(19,563	)

Balances at December 31, 2018	$	1,671	$	340,457		$	4,188,435		$	(2,429,179	)	$	2,101,384
Comprehensive income:
Net earnings		-		-			516,320			-			516,320
Cash dividend declared and paid ($1.04 per share)		-		-			(111,817	)		-			(111,817	)
Purchase of treasury shares		-		-			-			(275,657	)		(275,657	)
Share-based compensation		-		53,324			-			-			53,324
Restricted share issuances, net of stock repurchased for payroll taxes and other		-		(19,732	)		-			3,207			(16,525	)

Balances at December 31, 2019	$	1,671	$	374,049		$	4,592,938		$	(2,701,629	)	$	2,267,029

See Notes to Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2019, 2018 and 2017
(in thousands)

	2019			2018			2017
Cash flows from operating activities:
Net earnings	$	516,320		$	489,585		$	686,263
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		499,145			435,893			383,518
Noncash lease expense		39,517			-			-
Share-based compensation		53,324			47,369			38,291
Loss on sale of revenue equipment and other		13,057			12,107			7,370
Advance deposit impairment		-			-			20,240
Deferred income taxes		55,617			101,591			(248,764	)
Changes in operating assets and liabilities:
Trade accounts receivable		50,310			(130,931	)		(166,111	)
Income taxes receivable or payable		41,447			(41,071	)		(45,542	)
Other current assets		(4,975	)		(6,133	)		69,462
Trade accounts payable		(85,327	)		98,037			85,237
Claims accruals		(20,727	)		21,580			25,021
Accrued payroll and other accrued expenses		(59,361	)		59,814			168
Net cash provided by operating activities		1,098,347			1,087,841			855,153
Cash flows from investing activities:
Additions to property and equipment		(854,115	)		(995,650	)		(526,928	)
Proceeds from sale of equipment		165,918			110,165			16,413
Business acquisition		(115,654	)		-			(136,879	)
Change in other assets		(111	)		(1,288	)		(3,888	)
Net cash used in investing activities		(803,962	)		(886,773	)		(651,282	)
Cash flows from financing activities:
Proceeds from long-term debt		700,000			-			-
Payments on long-term debt		(250,000	)		-			-
Proceeds from revolving lines of credit and other		1,591,014			3,204,715			2,716,155
Payments on revolving lines of credit and other		(1,904,000	)		(3,137,900	)		(2,612,501	)
Purchase of treasury stock		(275,657	)		(150,338	)		(179,813	)
Stock repurchased for payroll taxes and other		(16,525	)		(19,563	)		(18,115	)
Dividends paid		(111,817	)		(104,994	)		(101,362	)
Net cash used in financing activities		(266,985	)		(208,080	)		(195,636	)
Net increase/(decrease) in cash and cash equivalents		27,400			(7,012	)		8,235
Cash and cash equivalents at beginning of year		7,600			14,612			6,377
Cash and cash equivalents at end of year	$	35,000		$	7,600		$	14,612
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	46,721		$	39,901		$	28,785
Income taxes	$	71,681		$	83,822		$	190,783
Noncash investing activities
Accruals for equipment received	$	25,505		$	49,390		$	53,026

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

1.	Business

J.B. Hunt Transport Services, Inc. is one of the largest surface transportation and delivery service companies in North America. We operate four distinct, but complementary, business segments and provide a wide range of general and specifically tailored freight and logistics services to our customers. We generate revenues from the actual movement of freight from shippers to consignees, customized labor and delivery services, and serving as a logistics provider by offering or arranging for others to provide the transportation service. Unless otherwise indicated by the context, “we,” “us,” “our” and “JBHT” refer to J.B. Hunt Transport Services, Inc. and its consolidated subsidiaries.

2.	Summary of Significant Accounting Policies

Basis of Consolidation

Our Consolidated Financial Statements include all of our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. J.B. Hunt Transport Services, Inc. is a parent-level holding company with no significant assets or operations. J.B. Hunt Transport, Inc. is a wholly owned subsidiary of J.B. Hunt Transport Services, Inc. and is the primary operating subsidiary. All other subsidiaries of J.B. Hunt Transport Services, Inc. are minor.

Use of Estimates

The Consolidated Financial Statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes. We evaluate these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods we consider reasonable in the particular circumstances. Nevertheless, our actual results may differ significantly from our estimates.

We believe certain accounting policies and estimates are of more significance in our financial statement preparation process than others. We believe the most critical accounting policies and estimates include the economic useful lives and salvage values of our assets, provisions for uncollectible accounts receivable, estimates of exposures under our insurance and claims policies, and estimates for taxes. To the extent that actual, final outcomes are different from our estimates, or that additional facts and circumstances cause us to revise our estimates, our earnings during that accounting period will be affected.

Cash and Cash Equivalents

Cash in excess of current operating requirements is invested in short-term, highly liquid investments. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance

Our trade accounts receivable includes accounts receivable reduced by an allowance for uncollectible accounts and revenue adjustments. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts and revenue adjustments is based on historical experience, as well as any known trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed quarterly. Balances are charged against the allowance when it is determined the receivable will not be recovered. The allowance for uncollectible accounts and revenue adjustments for our trade accounts receivable was $22.5 million and $23.6 million at December 31, 2019 and 2018, respectively. The allowance for uncollectible accounts for our other receivables was $12.2 million at December 31, 2018, with no allowance present at December 31, 2019.

Inventory

Our inventories consist primarily of revenue equipment parts, tires, supplies, and fuel, and are valued using the lower of average cost or market.

Investments in Marketable Equity Securities

Our investments consist of marketable equity securities stated at fair value and are designated as either trading securities or available-for-sale securities at the time of purchase based upon the intended holding period. Changes in the fair value of our trading securities are recognized currently in “general and administrative expenses, net of asset dispositions” in our Consolidated Statements of Earnings. Changes in the fair value of our available-for-sale securities are recognized in “accumulated other comprehensive income” on our Consolidated Balance Sheets, unless we determine that an unrealized loss is other-than-temporary. If we determine that an unrealized loss is other-than-temporary, we recognize the loss in earnings. Cost basis is determined using average cost.

At December 31, 2019 and 2018, we had no available-for-sale securities. See Note 8, Employee Benefit Plans, for a discussion of our trading securities.

Property and Equipment

Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of 4 to 10 years for tractors, 7 to 20 years for trailing equipment, 10 to 40 years for structures and improvements, 3 to 7 years for computer hardware and software, and 3 to 10 years for furniture and office equipment. Salvage values are typically 10% to 30% of original cost for tractors and trailing equipment and reflect any agreements with tractor suppliers for residual or trade-in values for certain new equipment. We periodically review these useful lives and salvage values. We capitalize tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service. Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition and are classified in general and administrative expenses, net of asset dispositions in the Consolidated Statements of Earnings.

We continually evaluate the carrying value of our assets for events or changes in circumstances that indicate the carrying value may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

Leases

We recognize a right-of-use asset and a lease liability on the effective date of a lease agreement. Right-of-use assets represent our right to use an underlying asset over the lease term and lease liabilities represent the obligation to make lease payments resulting from the lease agreement. We initially record these assets and liabilities based on the present value of lease payments over the lease term calculated using our incremental borrowing rate applicable to the leased asset or the implicit rate within the agreement if it is readily determinable. Lease agreements with lease and non-lease components are combined as a single lease component. Right-of-use assets additionally include net prepaid lease expenses. Options to extend or terminate an agreement are included in the lease term when it becomes reasonably certain the option will be exercised. Leases with an initial term of 12 months or less, short-term leases, are not recorded on the balance sheet. Lease expense for short-term and long-term operating leases is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

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.

Our revenue is earned through the service offerings of our four reportable business segments. See Note 14, Business Segments, for revenue reported by segment. All revenue transactions between reporting segments are eliminated in consolidation.

Intermodal (JBI) - JBI segment includes freight that is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations. JBI performs these services primarily through contractual rate quotes with customers that are held static for a period of time, usually one year.

Dedicated Contract Services® (DCS) - DCS segment business includes company-owned and customer-owned, DCS-operated revenue equipment and employee drivers assigned to a specific customer, traffic lane, or service. DCS operations usually include formal, written longer-term customer contracts that govern services performed and applicable rates.

Integrated Capacity Solutions™ (ICS) - ICS provides non-asset and asset-light transportation solutions to customers through relationships with third-party carriers and integration with company-owned equipment. ICS services include flatbed, refrigerated, and less-than-truckload (LTL), as well as a variety of dry-van and intermodal solutions. ICS performs these services through customer contractual rate quotes as well as spot quotes that are one-time rate quotes issued for a single transaction or group of transactions.

Truckload (JBT) - JBT business includes full-load, dry-van freight that is typically transported utilizing company-owned or company-controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. JBT utilizes both contractual rate quotes and spot rate quotes with customers.

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.

Derivative Instruments

We periodically utilize derivative instruments to manage exposure to changes in interest rates. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

Income Taxes

Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record valuation allowances for deferred tax assets to the extent we believe these assets are not more likely than not to be realized through the reversal of existing taxable temporary differences, projected future taxable income, or tax-planning strategies. We record a liability for unrecognized tax benefits when the benefits of tax positions taken on a tax return are not more likely than not to be sustained upon audit. Interest and penalties related to uncertain tax positions are classified as interest expense in the Consolidated Statements of Earnings.

Earnings Per Share

We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if holders of unvested restricted and performance share units converted their holdings into common stock. Outstanding unvested restricted share units represent the dilutive effects on weighted average shares. A reconciliation of the number of shares used in computing basic and diluted earnings per share is shown below (in thousands):

	Years ended December 31,
	2019		2018		2017
Weighted average shares outstanding – basic		107,329		109,375		109,987
Effect of common stock equivalents		978		1,053		1,062
Weighted average shares outstanding – diluted		108,307		110,428		111,049

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, include trade receivables. For each of the years ended December 31, 2019, 2018, and 2017, our top 10 customers, based on revenue, accounted for approximately 32%, 30%, and 29% of our total revenue. Our top 10 customers, based on revenue, accounted for approximately 34% and 32% of our total trade accounts receivable at December 31, 2019 and 2018, respectively. We had no individual customers with revenues greater than 10% of total revenues.

Share-based Compensation

We have a share-based compensation plan covering certain employees, including officers and directors. We account for share-based compensation utilizing the fair value recognition provisions of current accounting standards for share-based payments. We currently utilize restricted share units and performance share units. Issuances of our stock upon restricted share unit and performance share unit vesting are made from treasury stock. Our restricted share unit and performance share unit awards may include both graded-vesting and cliff-vesting awards and therefore vest in increments during the requisite service period or at the end of the requisite service period, as appropriate for each type of vesting. We recognize compensation expense on a straight-line basis over the requisite service periods within each award. The benefit for the forfeiture of an award is recorded in the period in which it occurs.

Claims Accruals

We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. 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.

The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. For 2017 and 2018, we were self-insured for $500,000 per occurrence for personal injury and property damage and self-insured for $100,000 per workers’ compensation claim. For 2019, we were self-insured for $500,000 per occurrence for personal injury and property damage and fully insured for workers’ compensation claims for nearly all states. We have policies in place for 2020 with substantially the same terms as our 2019 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage.

Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and provides an allowance for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2019 and 2018, we had an accrual of approximately $263 million and $260 million, respectively, for estimated claims, which are recorded in claims accruals in our Consolidated Balance Sheets. 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, 2019 and 2018, we have recorded $281 million and $261 million, respectively, of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums. Of these total asset balances, $157 million and $158 million have been included in other receivables, with the remaining balance included in prepaid expenses in our Consolidated Balance Sheets at December 31, 2019 and 2018, respectively.

Business Combinations

The purchase price of our acquisitions is the aggregate of the consideration transferred, including liabilities incurred, measured at the acquisition date. We allocate the purchase price of acquisitions to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. This assignment of fair values to the assets acquired and liabilities assumed requires the use of estimates, judgments, inputs, and assumptions. The excess of the purchase price over those estimated fair values is recorded as goodwill. Changes to the acquisition date provisional fair values prior to the end of the measurement period are recorded as adjustments to the associated goodwill. Acquisition-related expenses and restructuring costs, if any, are expensed as incurred.

Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in a business combination. Goodwill and intangible assets with indefinite lives are not amortized. Goodwill is reviewed, using a market based approach, for potential impairment as of _October 1_st on an annual basis or, more frequently, if circumstances indicate a potential impairment is present. Intangible assets with finite lives are amortized on the straight-line method over the estimated useful lives of 2 to 15 years.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses, which will replace the current incurred loss methodology used for establishing a provision against financial assets, including accounts receivable, with a forward-looking expected loss methodology for accounts receivable, loans and other financial instruments. We will adopt the new standard on January 1, 2020, using the cumulative-effect method. The adoption of the new guidance is not expected to have a material impact on our financial statements.

Accounting Pronouncements Adopted in 201****9

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset and a lease liability for most leases on the balance sheet as well as other qualitative and quantitative disclosures. ASU 2016-02 is to be applied using a modified retrospective method and was effective for us on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, Leases, which provides an optional transition method allowing entities to recognize a cumulative-effect adjustment to the opening balance of stockholders’ equity in the period of adoption, with no restatement of comparative prior periods required. We adopted the standard using this optional transition method.

The FASB has provided certain practical expedients in applying the standard. Of the allowed practical expedients within the standard applicable to our operations, we elected the package of practical expedients which, among other things, allowed us to carry forward the historical lease classification upon adoption of the standard. We did not elect the hindsight practical expedient when determining the lease term for existing leases. In addition, we did not separate non-lease components from lease components by class of underlying assets where appropriate and we did not apply the recognition requirements of the standard to short-term leases, as allowed by the standard.

Upon adoption of the standard, we recorded offsetting lease assets and lease liabilities resulting in a $102.4 million increase in other assets, a $32.3 million increase in other accrued expenses and a $70.1 million increase in other long-term liabilities in our Consolidated Balance Sheet, as of January 1, 2019. The adoption of the standard did not have a material impact on our Consolidated Statements of Earnings, Consolidated Statements of Cash Flows or debt covenant compliance.

3.	Financing Arrangements

Outstanding borrowings, net of unamortized discount, unamortized debt issuance cost, and fair value swap, under our current financing arrangements consist of the following (in millions):

	December 31,
	2019		2018
Senior revolving line of credit	$	-	$	307.1
Senior notes		1,295.7		842.0
Less current portion of long-term debt		-		(250.7	)
Total long-term debt	$	1,295.7	$	898.4

Aggregate maturities of long-term debt subsequent to December 31, 2019, are as follows: $353.1 million in 2022, $248.6 in 2024, and $694.0 million thereafter.

Senior Revolving Line of Credit

At December 31, 2019, we were authorized to borrow up to $750 million under a senior revolving line of credit, which is supported by a credit agreement with a group of banks and expires in September 2023. This senior credit facility allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2019, we had no outstanding borrowings under this agreement.

Senior Notes

Our senior notes consist of three separate issuances. The first is $250 million of 3.85% senior notes due March 2024, which was issued in March 2014. Interest payments under this note are due semiannually in March and September of each year, beginning September 2014. The second is $350 million of 3.30% senior notes due August 2022, issued in August 2015. Interest payments under this note are due semiannually in February and August of each year, beginning February 2016. The third is $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under this note are due semiannually in March and September of each year, beginning September 2019. All three senior notes were issued by J.B. Hunt Transport Services, Inc., a parent-level holding company with no significant assets or operations. The notes are guaranteed on a full and unconditional basis by a wholly-owned subsidiary. All other subsidiaries of the parent are minor. We registered these offerings and the sale of the notes under the Securities Act of 1933, pursuant to shelf registration statements filed in February 2014 and January 2019. All notes are unsecured obligations and rank equally with our existing and future senior unsecured debt. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. See Note 4, Derivative Financial Instruments, for terms of an interest rate swap entered into on the $350 million of 3.30% senior notes due August 2022. Our $250 million of 2.40% senior notes matured in March 2019. The entire outstanding balance was paid in full at maturity.

Our financing arrangements require us to maintain certain covenants and financial ratios. We were in compliance with all covenants and financial ratios at December 31, 2019.

4.	Derivative Financial Instruments

We periodically utilize derivative instruments for hedging and non-trading purposes to manage exposure to changes in interest rates and to maintain an appropriate mix of fixed and variable-rate debt. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

We entered into a receive fixed-rate and pay variable-rate interest rate swap agreement simultaneously with the issuance of our $350 million of 3.30% senior notes due August 2022, to effectively convert this fixed-rate debt to variable-rate. The notional amount of this interest rate swap agreement equals that of the corresponding fixed-rate debt. The applicable interest rate under this agreement is based on LIBOR plus an established margin, resulting in an interest rate of 3.27% for our $350 million of 3.30% senior notes at December 31, 2019. The swap expires when the corresponding senior notes are due. The fair value of this swap is recorded in other assets in our Consolidated Balance Sheet at December 31, 2019. See Note 9, Fair Value Measurements, for disclosure of fair value. This derivative meets the required criteria to be designated as a fair value hedge, and as the specific terms and notional amount of this derivative instrument match those of the fixed-rate debt being hedged, this derivative instrument is assumed to perfectly hedge the related debt against changes in fair value due to changes in the benchmark interest rate. Accordingly, any change in the fair value of this interest rate swap recorded in earnings is offset by a corresponding change in the fair value of the related debt.

5.	Capital Stock

We have one class of preferred stock and one class of common stock. We had no outstanding shares of preferred stock at December 31, 2019 or 2018. Holders of shares of common stock are entitled to receive dividends when and if declared by the Board of Directors and are entitled to one vote per share on all matters submitted to a vote of the stockholders. On January 22, 2020, we announced an increase in our quarterly cash dividend from $0.26 to $0.27 per share, which will be paid February 21, 2020, to stockholders of record on February 7, 2020. At December 31, 2019, we had 1.7 million shares of common stock to be issued upon the vesting of equity awards and 5.7 million shares reserved for future issuance pursuant to share-based payment plans. During calendar year 2019, we purchased approximately 2.8 million shares, or $275.7 million, of our common stock in accordance with plans authorized by our Board. At December 31, 2019, we had $95 million available under an authorized plan to purchase our common stock. On January 22, 2020, our Board of Directors authorized an additional purchase of up to $500 million of our common stock.

6.	Share-based Compensation

We maintain a Management Incentive Plan (the “Plan”) that provides various share-based financial methods to compensate our key employees with shares of our common stock or common stock equivalents. Under the Plan, as amended, we have, from time to time, utilized restricted share units, performance share units, restricted shares, and non-statutory stock options to compensate our employees and directors. We currently are utilizing restricted and performance share units.

Our restricted share units have various vesting schedules generally ranging from 3 to 10 years when awarded. These restricted share units do not contain rights to vote or receive dividends until the vesting date. Unvested restricted share units are forfeited if the employee terminates for any reason other than death, disability, or special circumstances as determined by the Compensation Committee. Restricted share units are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates.

Our performance share units vest based on the passage of time (generally 3 to 10 years) and achievement of performance criteria. Performance share units do not contain rights to vote or receive dividends until the vesting date. Unvested performance share units are forfeited if the employee terminates for any reason other than death, disability, or special circumstances as determined by the Compensation Committee. Performance shares are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates.

An employee is allowed to surrender shares of common stock received upon vesting to satisfy tax withholding obligations incident to the vesting of restricted share units and performance share units.

We account for our restricted share units and performance share units in accordance with current accounting standards for share-based payments. These standards require that the cost of all share-based payments to employees be recognized in our Consolidated Financial Statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award, subject to the attainment of performance metrics established for performance share units. Share-based compensation expense is recorded in salaries, wages, and employee benefits in our Consolidated Statements of Earnings, along with other compensation expenses to employees. The following table summarizes the components of our share-based compensation program expense (in thousands):

	Years ended December 31,
	2019		2018		2017
Restricted share units
Pretax compensation expense	$	38,632	$	32,797	$	28,679
Tax benefit		9,337		7,740		(4,385	)
Restricted share units, net of tax	$	29,295	$	25,057	$	33,064
Performance share units
Pretax compensation expense	$	14,692	$	14,572	$	9,612
Tax benefit		3,551		3,439		(1,470	)
Performance share awards, net of tax	$	11,141	$	11,133	$	11,082

A summary of our restricted share units and performance share units is as follows:

Restricted Share Units			Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	1,502,656		$	71.16
Granted	158,319			90.06
Vested	(380,702	)		67.29
Forfeited	(37,745	)		75.13
Unvested at December 31, 2017	1,242,528		$	74.71
Granted	370,669			119.82
Vested	(337,512	)		79.02
Forfeited	(29,850	)		83.69
Unvested at December 31, 2018	1,245,835		$	86.80
Granted	440,255			99.60
Vested	(341,218	)		85.61
Forfeited	(31,454	)		93.91
Unvested at December 31, 2019	1,313,418		$	91.22

Performance Share Units			Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	484,054		$	70.58
Granted	-			-
Vested	(155,867	)		68.27
Forfeited	-			-
Unvested at December 31, 2017	328,187		$	71.68
Granted	150,763			122.57
Vested	(118,438	)		69.29
Forfeited	-			-
Unvested at December 31, 2018	360,512		$	93.74
Granted	142,156			98.58
Vested	(127,140	)		93.46
Forfeited	-			-
Unvested at December 31, 2019	375,528		$	95.67

At December 31, 2019, we had $61.3 million and $13.0 million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is expected to be recognized on a straight-line basis over the remaining weighted average vesting period of approximately 3.2 years for restricted share units and 2.2 years for performance share units.

The aggregate intrinsic value of restricted and performance share units vested during the years ended December 31, 2019, 2018, and 2017, was $47.0 million, $55.1 million, and $49.3 million, respectively. The aggregate intrinsic value of unvested restricted and performance share units was $197.2 million at December 31, 2019. The total fair value of shares vested for restricted and performance share units during the years ended December 31, 2019, 2018, and 2017, was $41.1 million, $35.0 million, and $36.4 million, respectively.

7.	Income Taxes

Income tax expense attributable to earnings before income taxes consists of (in thousands):

	Years ended December 31,
	2019		2018		2017
Current:
Federal	$	87,977	$	22,904	$	134,284
State and local		20,981		26,738		23,456
		108,958		49,642		157,740
Deferred:
Federal		51,229		97,670		(261,592	)
State and local		4,388		3,921		12,828
		55,617		101,591		(248,764	)
Total tax expense/(benefit)	$	164,575	$	151,233	$	(91,024	)

Income tax expense attributable to earnings before income taxes differed from the amounts computed using the statutory federal income tax rate of 21% as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Income tax at federal statutory rate	$	142,988		$	134,572		$	208,334
State tax, net of federal effect		19,293			24,627			18,334
Federal tax reform		-			(3,219	)		(309,223	)
Benefit of stock compensation		(1,238	)		(4,919	)		(4,907	)
199/R&D credit		(200	)		1,000			(7,056	)
Nondeductible meals and entertainment		1,688			1,071			1,374
Change in effective state tax rate, net of federal benefit		1,562			(1,469	)		3,403
Other, net		482			(430	)		(1,283	)
Total tax expense	$	164,575		$	151,233		$	(91,024	)

The Tax Cuts and Jobs Act (the Act) was enacted in December 2017. Beginning in 2018, the Act reduced the U.S. federal corporate tax rate from 35% to 21%. At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act. However, we made a reasonable estimate of the effects on our existing deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future, which was generally 21%. The provisional amount recorded resulting from the remeasurement of our deferred tax balance was $309.2 million, which was included as a component of 2017 income tax from continuing operations. During 2018, we finalized our calculations for our 2017 federal income tax return, which was filed based on the law prior to the Act, resulting in no significant change to the initial measurement of these balances. Remaining aspects of the Act were not relevant to our operations.

Income taxes receivable was $60.9 million and $102.4 million at December 31, 2019 and 2018, respectively. These amounts have been included in other receivables in our Consolidated Balance Sheets. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018, are presented below (in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Insurance accruals	$	27,180		$	34,889
Allowance for doubtful accounts		8,052			7,649
Compensation accrual		4,925			10,461
Deferred compensation accrual		24,521			20,396
Federal benefit of state uncertain tax positions		9,867			10,364
Lease liabilities		30,251			-
State NOL carry-forward		7,495			6,041
Other		6,357			4,626
Total gross deferred tax assets		118,648			94,426
Valuation allowance		(7,495	)		(6,041	)
Total deferred tax assets, net of valuation allowance		111,153			88,385
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation		729,016			696,913
Prepaid permits and insurance, principally due to expensing for income tax purposes		39,285			33,594
Lease right-of-use assets		30,014			-
Other		11,916			1,339
Total gross deferred tax liabilities		810,231			731,846
Net deferred tax liability	$	699,078		$	643,461

Guidance on accounting for uncertainty in income taxes prescribes recognition and measurement criteria and requires that we assess whether the benefits of our tax positions taken are more likely than not of being sustained under tax audits. We have made adjustments to the balance of unrecognized tax benefits, a component of other long-term liabilities on our Consolidated Balance Sheets, as follows (in millions):

	December 31,
	2019			2018			2017
Beginning balance	$	52.2		$	45.3		$	35.4
Additions based on tax positions related to the current year		11.0			13.9			11.6
Additions/(reductions) based on tax positions taken in prior years		(6.5	)		(2.4	)		5.4
Reductions due to settlements		-			-			(2.4	)
Reductions due to lapse of applicable statute of limitations		(6.1	)		(4.6	)		(4.7	)
Ending balance	$	50.6		$	52.2		$	45.3

At December 31, 2019 and 2018, we had a total of $50.6 million and $52.2 million, respectively, in gross unrecognized tax benefits. Of these amounts, $41.8 million and $43.1 million represent the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate in 2019 and 2018, respectively. Interest and penalties related to income taxes are classified as interest expense in our Consolidated Statements of Earnings. The amount of accrued interest and penalties recognized during the years ended December 31, 2019, 2018, and 2017, was $3.2 million, $2.4 million, and $2.1 million, respectively. Future changes to unrecognized tax benefits will be recognized as income tax expense and interest expense, as appropriate. The total amount of accrued interest and penalties for such unrecognized tax benefits at December 31, 2019 and 2018, was $4.8 million and $4.6 million, respectively.

Tax years 2016 and forward remain subject to examination by federal tax jurisdictions, while tax years 2009 and forward remain open for state jurisdictions.

8.	Employee Benefit Plans

We maintain a defined contribution employee retirement plan, which includes a 401(k) option, under which all employees are eligible to participate. We match a specified percentage of employee contributions, subject to certain limitations. For the years ended December 31, 2019, 2018, and 2017, our matching contributions to the plan were $20.8 million, $19.7 million, and $16.7 million, respectively.

We have a nonqualified deferred compensation plan that allows eligible employees to defer a portion of their compensation. The compensation deferred under this plan is credited with earnings or losses on investments elected by plan participants. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until actually distributed to the employee. A participant may elect to receive deferred amounts in one payment or in quarterly installments payable over a period of 2 to 25 years upon reaching age 55, having 15 years of service, or becoming disabled. Our total liability under this plan was $20.4 million as of December 31, 2019, and $15.7 million as of December 31, 2018. These amounts are included in other long-term liabilities in our Consolidated Balance Sheets. Participant withholdings are held by a trustee and invested in equity securities as directed by participants. These investments are classified as trading securities and recorded at fair value. Realized and unrealized gains and losses are recognized currently in earnings. The investments are included in other assets in our Consolidated Balance Sheets and totaled $20.4 million as of December 31, 2019, and $15.7 million as of December 31, 2018.

9.	Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2). The following are assets and liabilities measured at fair value on a recurring basis (in millions):

	Asset/(Liability) Balance
	December 31,
	2019			2018			Input Level
Trading investments	$	20.4		$	15.7			1
Interest rate swaps	$	4.8		$	(4.8	)		2
Senior notes, net of unamortized discount and debt issuance costs	$	(353.1	)	$	(591.3	)		2

The fair value of trading investments has been measured using the market approach (Level 1) and reflect quoted market prices. The fair values of interest rate swaps and corresponding senior notes have been measured using the income approach (Level 2), which include relevant interest rate curve inputs. Trading investments are classified in other assets in our Consolidated Balance Sheets. Depending on their period end fair value, interest rate swaps are classified in other assets or other long-term liabilities in our Consolidated Balance Sheets. The senior notes are classified in long-term debt in our Consolidated Balance Sheets.

Financial Instruments

The carrying amount of our senior revolving line of credit and remaining senior notes not measured at fair value on a recurring basis was $942.6 million and $555.9 million at December 31, 2019 and 2018, respectively. The estimated fair value of these liabilities using the income approach (Level 2), based on their net present value, discounted at our current borrowing rate, was $1.03 billion and $564.9 million at December 31, 2019 and 2018, respectively.

In 2017, we remeasured an advance deposit previously made for the purchase of new trailing equipment from a carrying amount of $20.2 million to a fair value of zero, due the manufacturer not being able to meet delivery. The resulting charge was included in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings. The carrying amounts of all other instruments at December 31, 2019 and 2018, approximate their fair value due to the short maturity of these instruments.

*10.*	Commitments and Contingencies

At December 31, 2019, we had outstanding commitments of approximately $938 million, net of proceeds from sales or trade-ins during 2020 through 2022, which is primarily related to the acquisition of tractors, containers, chassis, and other trailing equipment.

During 2019, we issued financial standby letters of credit as a guaranty of our performance under certain operating agreements and self-insurance arrangements. If we default on our commitments under the agreements or other arrangements, we are required to perform under these guaranties. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $2.7 million as of December 31, 2019.

As of December 31, 2018, we had approximately $117.8 million of obligations remaining under operating lease arrangements related primarily to terminal and support facilities. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2018, were approximately $117.8 million, with payment streams as follows (in millions): 2019 - $34.9; 2020 - $29.9; 2021 - $20.7; 2022 - $13.7; and thereafter - $18.6.

We were a defendant in a certain alleged class-action lawsuit in which the plaintiffs were current and former California-based employee drivers who alleged claims for unpaid wages, failure to provide meal and rest periods, and other items. We reached an agreement and recorded a reserve in September 2018 to resolve all pending claims for a class settlement payment of $15 million, with Court approval of settlement granted in April 2019.

In January 2017 we exercised our right to utilize the arbitration process to review the division of revenue collected beginning May 1, 2016, as well as to clarify other issues, under our Joint Service Agreement with BNSF Railway Company (BNSF). BNSF requested the same. In October 2018 we received the arbitrators’ Interim Award. 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. In January 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). 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. In October 2019 the arbitrators issued a Final Award. As a result, we recorded pre-tax charges in the third quarter 2019 of $26.8 million related to certain charges claimed by BNSF for the period January 1, 2018 through December 31, 2018 and no material adjustments for the period January 1, 2019 through September 30, 2019. In addition, we recorded a $17.4 million charge in the third quarter 2019 for legal fees, costs and interest claimed by BNSF, for a total of $44.2 million.

On January 17, 2020, we filed under seal in the United States District Court for the Western District of Arkansas a motion to confirm and enforce the Final Award, seeking the Court’s specific enforcement of certain confidential contractual rights the arbitrators decided in our favor. BNSF has moved to confirm the Final Award in the United States District Court for the District of Columbia.

In June 2019, we recorded pre-tax charges of $20 million for the settlement of a casualty claim within our DCS segment.

We are involved in certain other claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.

11.	Leases

As of December 31, 2019, we had various obligations remaining under operating lease arrangements related primarily to the rental of maintenance and support facilities, cross-dock and delivery system facilities, office space, parking yards and equipment. Many of these leases include one or more options, at our discretion, to renew and extend the agreement beyond the current lease expiration date or to terminate the agreement prior to the lease expiration date. These options are included in the calculation of our operating lease right-of-use asset and liability when it becomes reasonably certain the option will be exercised. Our lease obligations typically do not include options to purchase the leased property, nor do they contain residual value guarantees or material restrictive covenants. Operating leases with an initial term of more than 12 months are included in our Consolidated Balance Sheets as discounted liabilities and corresponding right-of-use assets consisting of the following (in millions):

	Asset/(Liability) Balance
	December 31, 2019
Right-of-use assets	$	125.5
Lease liabilities, current	$	(44.4	)
Lease liabilities, long-term	$	(80.1	)

Right-of-use assets are classified in other assets in our Consolidated Balance Sheets. Operating lease liability, current is classified in other accrued expenses, while operating lease liability, long-term is classified in other long-term liabilities in our Consolidated Balance Sheets.

As of December 31, 2019, the weighted-average remaining lease term for our outstanding operating lease obligations was 4.2 years and the weighted-average discount rate was 3.46%. Future minimum lease payments under these operating leases as of December 31, 2019, are as follows (in millions):

Year one	$	44.9
Year two		35.0
Year three		24.0
Year four		14.6
Year five		5.2
Thereafter		10.0
Total lease payments		133.7
Less interest		(9.2	)
Present value of lease liabilities	$	124.5

During the year ended December 31, 2019, cash paid for amounts included in the measurement of operating lease liabilities was $44.5 million, while $43.5 million, of operating lease expense was recognized on a straight-line basis. Operating lease expense is recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings. During the year ended December 31, 2019, a total of $61.6 million of right-of-use assets were obtained in exchange for new operating lease liabilities, of which, $19.1 million were obtained through the business combinations discussed at Note 12, Acquisitions.

*12.*	Acquisitions

On January 7, 2019, we entered into an asset purchase agreement to acquire substantially all of the assets and assume certain specified liabilities of the affiliated entities of Cory 1st Choice Home Delivery (“Cory”), subject to customary closing conditions. The closing of the transaction was effective on February 15, 2019, with a purchase price of $100 million. Total consideration paid in cash under the Cory agreement was $98.2 million and consisted of the agreed upon purchase price adjusted for estimated working capital adjustments. In addition, we incurred approximately $2.9 million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings. The Cory acquisition was accounted for as a business combination and operates within our Dedicated Contract Services business segment. Assets acquired and liabilities assumed were recorded in our Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately $45.8 million of finite-lived intangible assets and approximately $48.2 million of goodwill. Goodwill consists of acquiring and retaining the Cory existing network and expected synergies from the combination of operations. The following table outlines the consideration transferred and purchase price allocation at their respective estimated fair values as of _February 15, 2019 (_in millions):

Consideration	$	98.2
Accounts receivable		8.9
Other current assets		0.3
Property and equipment		0.8
Right-of-use assets		16.0
Intangible		45.8
Accounts payable and accrued liabilities		(5.8	)
Lease liabilities		(16.0	)
Goodwill	$	48.2

On November 26, 2019, we entered into an asset purchase agreement to acquire substantially all of the assets and assume certain specified liabilities of the affiliated entities of RDI Last Mile Co. (RDI), subject to customary closing conditions. The closing of the transaction was effective on December 31, 2019, with a purchase price of $17.5 million. Total consideration paid in cash under the RDI agreement was $17.4 million and consisted of the agreed upon purchase price adjusted for estimated working capital adjustments. In addition, we incurred approximately $0.5 million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings. The RDI acquisition was accounted for as a business combination and operates within our Dedicated Contract Services business segment. Assets acquired and liabilities assumed were recorded in our Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately $8.1 million of finite-lived intangible assets and approximately $8.1 million of goodwill. Goodwill consists of acquiring and retaining the RDI existing network and expected synergies from the combination of operations. The following table outlines the consideration transferred and preliminary purchase price allocation at their respective estimated fair values as of _December 31, 2019 (_in millions):

Consideration	$	17.4
Accounts receivable		1.5
Other current assets		0.3
Property and equipment		0.5
Right-of-use assets		3.1
Intangible		8.1
Accounts payable and accrued liabilities		(1.1	)
Lease liabilities		(3.1	)
Goodwill	$	8.1

*13.*	Goodwill and Other Intangible Assets

As discussed in Note 12, Acquisitions, in 2019, we recorded additional goodwill of approximately $56.3 million and additional finite-lived intangible assets of approximately $53.9 million in connection with the Cory and RDI acquisitions. Total goodwill was $96.3 million and $40.1 million at December 31, 2019 and 2018, respectively. All goodwill is assigned to our Dedicated Contract Services business segment. No impairment losses have been recorded for goodwill as of December 31, 2019. Prior to the Cory and RDI acquisitions, our intangible assets consisted of those arising from a previous business acquisition and our purchased LDC network access, both within our Dedicated Contract Services segment. Identifiable intangible assets consist of the following (in millions):

	December 31,						Weighted Average Amortization
	2019			2018			Period
Finite-lived intangibles:
Customer relationships	$	118.6		$	75.3			11.5
Non-competition agreements		6.9			0.2			6.8
Trade names		3.8			-			2.0
LDC Network		10.5			10.5			10.0
Total finite-lived intangibles		139.8			86.0
Less accumulated amortization		(33.3	)		(20.9	)
Total identifiable intangible assets, net	$	106.5		$	65.1

Our finite-lived intangible assets have no assigned residual values.

During the years ending December 31, 2019, 2018, and 2017, intangible asset amortization expense was $12.4 million, $8.6 million and $4.2 million, respectively. Estimated amortization expense for our finite-lived intangible assets is expected to be approximately $13.6 million for 2020 and $11.9 million for 2021, and $11.7 million for 2022 through 2024. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment or accelerated amortization of intangible assets, and other events.

*14.*	Segment Information

We have four reportable business segments – Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS), and Truckload (JBT) – which are based primarily on the services each segment provides. The JBI segment includes freight that is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations. DCS segment business includes company-owned and customer-owned, DCS-operated revenue equipment and employee drivers assigned to a specific customer, traffic lane, or service. DCS operations usually include formal, written longer-term agreements or contracts that govern services performed and applicable rates. ICS provides non-asset and asset-light transportation solutions to customers through relationships with third-party carriers and integration with JBHT-owned equipment. ICS services include flatbed, refrigerated, and LTL, as well as a variety of dry-van and intermodal solutions. JBT business includes full-load, dry-van freight that is typically transported utilizing company-owned or company-controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. All transactions between reporting segments are eliminated in consolidation.

Our customers are geographically dispersed across the United States. A summary of certain segment information as of December 31 is presented below (in millions):

	Assets (Excludes intercompany accounts)
	December 31,
	2019		2018
JBI	$	2,217	$	2,221
DCS		1,877		1,595
ICS		208		212
JBT		241		307
Other (includes corporate)		928		757
Total	$	5,471	$	5,092

	Revenues
	Years ended December 31,
	2019			2018			2017
JBI	$	4,745		$	4,717		$	4,084
DCS		2,695			2,163			1,719
ICS		1,348			1,335			1,025
JBT		389			417			378
Total segment revenues		9,177			8,632			7,206
Intersegment eliminations		(12	)		(17	)		(16	)
Total	$	9,165		$	8,615		$	7,190

	Operating Income
	Years ended December 31,
	2019			2018		2017
JBI	$	447		$	401	$	407
DCS		269			193		171
ICS		(11	)		50		23
JBT		29			37		23
Total	$	734		$	681	$	624

	Depreciation and Amortization Expense
	Years ended December 31,
	2019		2018		2017
JBI	$	181	$	173	$	163
DCS		246		200		158
JBT		33		38		41
Other		39		25		22
Total	$	499	$	436	$	384

*15.*	Quarterly Financial Information (Unaudited)

As further discussed in Note 10, Commitments and Contingencies, our third quarter 2019 and fourth quarter 2018 operating income, net earnings and earnings per share included the impact of pretax charges for contingent liabilities. Operating results by quarter for the years ended December 31, 2019 and 2018 are as follows (in thousands, except per share data):

	Quarter
	First		Second		Third		Fourth
2019:
Operating revenues	$	2,089,627	$	2,261,647	$	2,363,660	$	2,450,323
Operating income	$	167,795	$	193,093	$	167,862	$	205,074
Net earnings	$	119,601	$	133,633	$	118,410	$	144,676
Basic earnings per share	$	1.10	$	1.24	$	1.11	$	1.36
Diluted earnings per share	$	1.09	$	1.23	$	1.10	$	1.35

2018:
Operating revenues	$	1,948,245	$	2,139,027	$	2,209,760	$	2,317,842
Operating income	$	168,781	$	214,812	$	174,688	$	122,740
Net earnings	$	118,142	$	151,652	$	131,110	$	88,681
Basic earnings per share	$	1.08	$	1.39	$	1.20	$	0.81
Diluted earnings per share	$	1.07	$	1.37	$	1.19	$	0.81

Previous: Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES