SECURITIES AND EXCHANGE COMMISSION ~~WASHINGTON,~~

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934 ~~FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER DECEMBER 31, 1999 0-11757~~

For the year ended		Commission file number
December 31, 2002		0-11757

J.B. HUNT TRANSPORT SERVICES, INC. ~~(EXACT~~

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ARKANSAS 71-0335111 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 615 J.B. HUNT CORPORATE DRIVE 72745 LOWELL, ARKANSAS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (501) 820-0000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01 PAR VALUE

Arkansas		71-0335111
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

615 J.B. Hunt Corporate Drive Lowell, Arkansas		72745
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

Registrant’s telephone number, including area code:
(479) 820-0000

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY ~~SECTIONS~~SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO THE FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS. ~~YES __X__ NO _____~~

YES ý

NO o

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF ~~REGISTRANT'S~~REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. ~~[ ]~~ o

INDICATED BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN EXCHANGE ACT RULE 12b-2).

YES ý

NO o

THE AGGREGATE MARKET VALUE OF ~~17,213,282~~27,493,354 SHARES OF THE ~~REGISTRANT'S~~REGISTRANT’S $.01 PAR VALUE COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY ~~18, 2000~~28, 2003 WAS ~~$187,194,442~~$674,686,907 (BASED UPON ~~$10.875~~$24.54 PER SHARE BEING THE CLOSING SALE PRICE ON THAT DATE, AS REPORTED BY NASDAQ). IN MAKING THIS CALCULATION, THE ISSUER HAS ASSUMED, WITHOUT ADMITTING FOR ANY PURPOSE, THAT ALL EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT, AND NO OTHER PERSONS, ARE AFFILIATES.

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ~~REGISTRANT'S~~REGISTRANT’S CLASSES OF COMMON STOCK, AS OF FEBRUARY ~~18, 2000: 35,638,986.~~ 28, 2003: 39,352,835.

DOCUMENTS INCORPORATED BY REFERENCE

CERTAIN PORTIONS OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING OF THE STOCKHOLDERS, TO BE HELD APRIL ~~20, 2000~~24, 2003, ARE INCORPORATED BY REFERENCE INTO PART ~~II.~~ III OF THIS FORM 10-K.

J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-K

For The Calendar Year Ended December 31, 2002

Table of Contents

Item 13.	Certain Relationships and Related Transactions

Item 14.	Controls and Procedures

Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K

Signatures

PART I

ITEM 1. BUSINESS ~~- ------------------~~

GENERAL

J.B. Hunt Transport Services, Inc., together with its wholly-owned subsidiaries ~~("JBH" or the "Company"~~(“JBHT”), is a diversified transportation services ~~and logistics~~ company operating under the jurisdiction of the U.S. Department of Transportation (DOT) and various state regulatory agencies. ~~JBH~~JBHT is an Arkansas holding company incorporated on August 10, 1961. JBHT has been a publicly held company since our initial public offering in 1983. Through ~~its~~our subsidiaries ~~JBH provides~~and associated companies, we provide a wide range of logistics and transportation services to a diverse group of customers. ~~The Company~~We directly ~~manages~~manage or ~~provides~~provide tailored, technology-driven solutions to a growing list of Fortune 500 companies. These customers may request specifically targeted transportation service or outsource their entire ~~logistics~~transportation function to ~~JBH. The Company~~us, or an associated company. We also directly ~~transports~~transport full-load containerizable freight throughout the continental United States and portions of Canada and Mexico. Transportation services may utilize ~~JBH~~our equipment and employees, or may employ equipment and services provided by associated or unrelated third parties in the transportation industry. ~~For the periods presented, the Company~~We had three ~~distinct operating segments: Van/Intermodal ("Van"); J.B. Hunt Logistics ("JBHL");~~reportable business segments during calendar year 2002. These segments include full truck-load, dry-van (JBT), intermodal (JBI) and ~~Dedicated Contract Services ("DCS")~~dedicated contract services (DCS). ~~See Note (9) Segment Information of the Notes~~In addition, we operated a logistics business segment from 1992 until mid 2000. Effective July 1, 2000, JBHT, along with five other publicly-held transportation companies, contributed our logistics business to ~~Consolidated Financial Statements. VAN~~ a new, commonly owned company, Transplace, Inc.

JBT SEGMENT

Primary transportation service offerings classified in this segment include full truck-load, dry-van ~~containerizable~~ freight which is ~~typically~~predominantly transported utilizing company-owned revenue equipment. Freight is picked up at the dock or specified location of the shipper and transported directly to the location of the consignee. The load may be transported entirely by ~~company-owned and controlled~~our power equipment or a portion of the movement may be handled by a third-party motor carrier or a railroad. Approximately 46% of Van revenue in 1999 was transported by a railroad for a portion of the movement. If any portion of a movement is handled by a railroad, the entire amount billed to the customer is considered to be intermodal revenue.carrier. Typically, the charges for the entire movement are billed to the customer by ~~the Company~~us and ~~the Company,~~we, in turn, ~~pays~~pay the ~~railroad~~third-party for their portion of the transportation services provided. JBT operates utilizing certain Canadian authorities which were initially granted in 1988 and may transport freight to and from all points in the continental United States to Quebec, British Columbia and Ontario. We have authorization to operate directly in all the Canadian provinces, but to date we have served limited points in Canada, primarily through interchange operations with Canadian motor carriers. We operated our JBT and JBI segments in combined fashion in periods prior to January 1, 2000. This combined operation was reported as Van/Intermodal (“Van”) in prior periods. In late 2000, we began utilizing independent contractors on a limited basis in the JBT segment. These independent contractors (I/C’s) provide their own tractors and agree to transport freight in JBHT owned or controlled trailing equipment. At December 31, 2002, approximately 680 I/C’s were operating in the JBT segment. JBT gross revenue for calendar year 2002 was $827 million, compared with $829 million in 2001. At December 31, 2002, the JBT segment operated 4,924 company owned tractors and employed 7,573 people, 5,541 of whom were drivers.

JBI SEGMENT

Transportation service offerings of our JBI segment utilize agreements with various railroads to provide proven intermodal freight solutions to our customers in all major lanes of commerce in the United States, Canada, and Mexico. We differentiate ourselves from others through our premium service network, as well as, coordinated door to door service on company-owned and controlled assets. We established our first intermodal agreement with the Santa Fe Railway in 1989. Through growth of this transportation segment and additions, deletions, and mergers of rail carriers, we now have agreements with seven North American rail carriers including: BNSF, Norfolk Southern, CSX, Kansas City Southern, Union Pacific, Canadian National, and Florida East Coast railroads. Typically, freight is picked up at the dock or specified location of the shipper and transported to the rail carrier for loading on rail cars. Upon completion of the rail routing, the freight is picked up at the rail carrier’s ramp and transported to the consignee. These originating and destination drays may be transported entirely by our power equipment or may be handled by a third-party motor carrier. It is our customary business practice that all charges for the entire movement are billed to the customer by us and we, in turn, pay the rail carrier and third-party motor carrier for their portion of the transportation services provided. In 1993, rail operations were expanded to utilize high-cube containers which can be separated from the chassis and double-stacked on rail cars to provide improved productivity. ~~Freight may be transported by rail utilizing traditional trailer-on-flatcar (TOFC) medium for a portion~~This concept is known as container-on-flatcar. Most of ~~the line-haul, or containers separated from the chassis, double-stacked on railcars and moved as container-on-flatcar (COFC). The Company has~~our agreements with ~~eight different railroads and substantially all~~rail carriers allow for the majority of ~~the freight~~JBI business carried under these rail ~~arrangements receives~~agreements to receive priority space on trains and preferential loading and unloading ~~service~~ at rail facilities. ~~JBH Van has certain Canadian authorities which were initially granted~~JBI gross revenue for calendar year 2002 was $809 million, compared with $740 million in 1988 and may transport freight to and from all points in the continental United States to Quebec, British Columbia and Ontario. The Company has authorization to operate directly in all the Canadian provinces, but to date has served limited points in Canada, primarily through interchange operations with Canadian motor carriers. The Company has provided transportation services to and from Mexico since 1989, primarily through interchange operations with various Mexican motor carriers. A joint venture agreement with Transportacion Maritima Mexicana, one of the largest transportation companies in Mexico, was signed in 1992.

2001. At December 31, ~~1999, Van~~2002, the JBI segment operated ~~approximately 6,730~~917 tractors and ~~35,300 trailers/containers. Van~~employed 1,557 people, 1,215 of whom were drivers.

DCS SEGMENT

Since 1992, we have offered dedicated contract carriage as a service option. DCS segment operations specialize in the design, development, and execution of supply chain solutions. Capitalizing on advanced systems and technologies, DCS offers engineered transportation solutions that support private fleet conversion, dedicated fleet creation, and transportation system augmentation. DCS operations typically provide customized services that are governed by long-term contracts and currently include dry van, flatbed, and temperature-controlled operations. Near 100% on-time service is standard with efficient routes executed to design specifications.

DCS operations focus on driving out cost and enhancing customer value through leveraging the JBHT network for backhaul repositioning freight. Network freight may be used to reposition equipment near outbound domiciles, thereby reducing inefficient empty miles and system cost. DCS also frequently finds synergy in shared resources with the JBT and JBI segments including terminals, drivers, maintenance shops, bulk fuel locations, and trailer pools providing further economies of scale. DCS gross ~~operating revenues were $1,415~~revenue for calendar year 2002 was $628 million, compared with $549 million in ~~1999, an increase~~2001. At December 31, 2002, the DCS segment operated 4,812 tractors and employed 5,989 people, 5,273 of ~~3% over 1998. JBHL The Company~~whom were drivers.

LOGISTICS BUSINESS AND ASSOCIATED COMPANY

We formally began offering logistics transportation ~~logistics~~ services in ~~1992. JBHL~~1992 through a wholly-owned subsidiary, J.B. Hunt Logistics (JBL). JBL services ~~typically refer to~~frequently included an arrangement whereby a shipper ~~may~~might outsource a substantial portion of ~~or their~~its entire distribution and transportation process to one organization. ~~JBHL provides~~The JBL segment business included a wide range of comprehensive transportation and management services including experienced professional managers, information and optimization technology, and the actual design or redesign of system solutions. A new ~~JBHL~~logistics customer or service arrangement may ~~require~~have required a significant amount of up-front analysis and design time, while alternatives ~~are~~were considered and custom systems and software were developed. Effective July 1, 2000, we contributed substantially all of our JBL segment business, all related intangible assets and $5 million of cash to a newly-formed, commonly-owned company, Transplace, Inc. (“TPI”).

TPI is an Internet-based global transportation logistics company. TPI commenced operations in July of 2000 and initially included substantially all of the logistics business of JBHT, Covenant Transport, Inc.; Swift Transportation Co., Inc; U.S. Xpress Enterprises, Inc.; and Werner Enterprises, Inc. TPI gross revenue for calendar year 2002 approximated $672 million, which revenue is not included in our financial statements for 2002. We initially had an approximate 27% ownership interest in TPI. In November of 2002, we agreed to purchase a portion of Werner Enterprises’ (Werner) ownership interest in TPI. Effective January 1, 2003, our interest in TPI increased from 27% to 37% and Werner’s interest declined from 15% to 5%. The financial results of TPI are ~~developed. Once~~included on a ~~logistics arrangement is~~one-line, non-operating item included on our Consolidated Statements of Earnings entitled “Equity in ~~place, JBHL may utilize Van and/or DCS owned~~earnings (loss) of associated companies.”

ASSOCIATED COMPANY - MEXICO

We have provided transportation services to and ~~controlled~~from Mexico since 1989. These services frequently involve equipment interchange operations with various Mexican motor carriers. In addition, a joint venture agreement with Transportacion Maritima Mexicana (TMM), one of the largest transportation ~~equipment, unrelated third-party equipment~~companies in Mexico, was signed in 1992. The joint venture, Comercializadora Internacional de Carga S.A. de C.V. and ~~employees, or a combination to meet~~its subsidiaries, originated and completed northbound and southbound international truck movements between the ~~customer's~~U.S. and Mexico. The joint venture also provided Mexican domestic irregular route truck service, ~~requirements. JBHL gross operating revenues were $388 million in 1999, an increase of 22% over 1998. 2~~ ~~DCS The Company began formally offering~~refrigerated freight services, Mexican dedicated contract ~~services in 1992. DCS operations typically include company-owned revenue equipment~~business and ~~employee drivers that are assigned~~short-haul drayage to ~~a specific customer, traffic lane or service. The service is engineered~~ and ~~customized for~~from the ~~specific customer~~Mexican maritime ports and is typically in accordance with a written, long-term agreement. Frequently DCS operations provide service to customers that wish to augment or outsource their private fleet. It is common for one customer's dedicated service requirements to relate to limited traffic lanes or freight moving in only one direction. As a result, DCS operations frequently utilize Van freight to provide backhauls which allow equipment to be repositioned forrail heads. For the ~~DCS customer's next movement. The DCS and Van segments also frequently share facilities such as terminals, maintenance shops, bulk fuel locations and trailer pools. At~~calendar year ended December 31, ~~1999, DCS operated approximately 2,700 tractors~~2001 and ~~4,150 trailers. DCS gross~~for prior years, our share of the Mexican joint venture operating ~~revenues were $320 million~~results was included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled “Equity in ~~1999, an increase~~earnings (loss) of 51% over 1998. OTHER Prior to 1996, the Company had operated additional businesses including a flatbed division, a business that transported small parcels, and a division that specialized in the transportation of hazardous commodities. In early 1996, the Company embarked upon a strategy to concentrate its efforts on Van, JBHL and DCS. In accordance with that strategy, assets and operations of other service offerings were subsequently sold. The small parcel and hazardous commodities businesses were sold in 1996 and the flatbed business was sold in 1997. The Company announced in late 1999, a decision to split the Van business into separate intermodal and truck business segments. This separation is in progress and the Company intends to begin reporting on four segments (Intermodal, Truck, JBHL and DCS) inassociated companies. During the first quarter of ~~2000.~~ 2002, we sold our joint venture interest in Mexico to TMM. We still provide transportation services to and from Mexico by utilizing the services of a variety of Mexican carriers.

MARKETING AND OPERATIONS ~~JBH transports~~

We transport a wide range of products including automotive parts, department store merchandise, paper and wood products, food and beverages, plastics, chemicals and manufacturing materials and supplies. ~~The Company's~~Our primary customers include many of the ~~"Fortune 500" companies, but no single~~“Fortune 500” companies. Our largest customer in 2002 was Wal-Mart Stores, Inc., which accounted for ~~more than 8%~~approximately 18% of ~~revenues during 1999.~~total revenue. A broad geographic dispersion and a good balance in the type of freight transported allows ~~JBH~~us some protection from major seasonal fluctuations. However, consistent with the truckload industry in general, freight is typically stronger during the second half of the year, with peak volume occurring in August through mid November. Revenue and earnings are also affected by bad weather, holidays, fuel prices, driver cost and availability, and railroad service levels. ~~The Company~~

We generally ~~markets~~market all ~~three~~ of ~~its~~our service offerings through a nationwide marketing network. All transportation services offered are typically billed directly to the customer by ~~JBH~~us and all inquiries, claims and other customer contacts are handled by ~~the Company.~~us. Certain marketing, sales, engineering and design functions are assigned to each operating segment. However, marketing and pricing strategy, ~~pricing~~ and national account service coordination is managed at the corporate level.

PERSONNEL

At December 31, ~~1999, JBH~~2002, we employed ~~approximately 14,700~~16,265 people, including ~~10,600~~12,029 drivers. Historically the truckload transportation industry and ~~the Company~~JBHT have experienced shortages of qualified drivers. In addition, driver turnover rates for truckload motor carriers frequently exceed 100%. During the past few years a number of changes have occurred within the industry relative to drivers. In ~~September of~~ 1996, ~~J.B. Hunt~~we announced ~~a new compensation program for the~~and implemented an approximate ~~3,500 over-the-road Van drivers. This comprehensive package, which was effective February 25, 1997, included an average~~ 33% increase in wages for ~~this group of employees. This program was designed to attract and retain a professional and experienced work force capable of delivering a high level of customer service.~~our over-the-road drivers. As anticipated, this increase in driver ~~wages and benefits~~compensation was partially offset by lower driver recruiting and training expense, reduced accident and safety costs and better equipment utilization. ~~The average~~We also experienced a decline in driver turnover rates between 1997 and 1999. During late 2000 and 2001, supply and demand conditions for drivers changed and a number of truck load carriers, including JBHT, implemented lower mileage pay rates for newly hired drivers. Partly as a result of this reduced compensation level for drivers, our driver turnover rate increased during 2000 and has remained at historically high levels in ~~the Van business was 49% in 1999~~2001 and ~~46% in 1998, down from 86% in 1996. Drivers are frequently designated as local, regional, regular route or dedicated~~2002. During calendar year 2002, we have once again experienced some difficulty attracting and ~~over-the-road~~retaining a desired level of drivers. To date, we continue to hire only experienced drivers and, ~~typically compensated on~~although recruiting costs have increased significantly, operations have not been disrupted by a ~~rate-per-mile basis, a rate-per-week basis or a combination~~shortage of ~~factors. JBH~~qualified drivers. At December 31, 2002, we also employed approximately ~~2,920~~3,100 office ~~personnel~~employees and ~~1,150 mechanics at December 31, 1999. No~~1,137 mechanics. None of our employees are represented by collective bargaining ~~agreements and management believes that its relationship with its employees is excellent. 3~~ agreements.

REVENUE EQUIPMENT

At December 31, ~~1999, JBH~~2002, we owned ~~approximately 9,460~~or leased 10,653 company operated tractors, ~~and operated 17,320~~26,087 trailers and ~~22,150~~19,672 containers. ~~JBH believes~~We believe that modern, late-model, clean equipment differentiates quality customer service, increases equipment utilization and reduces maintenance costs and downtime. ~~Accordingly,~~We generally operate with newer revenue equipment in the ~~average~~JBT segment, with the age of ~~the Van tractor~~tractors and ~~trailing fleet was approximately two~~trailers approximating 2.1 years and ~~four~~2.2 years, respectively, at December 31, ~~1999. In 1993,~~2002. Somewhat older equipment and tractors designed for local and regional operations are typically utilized in the ~~Company commenced receiving a newly-designed container~~JBI and ~~chassis combination that could be transported over the road by truck and also be moved by rail or ship. The container and chassis may be transported as a single unit by rail (TOFC) or the container~~DCS segments. Specially designed high-cube containers which can be separated from the chassis and double-stacked ~~(COFC)~~ on rail cars ~~or ships for improved productivity. Containers comprised approximately 63%~~are also operated by JBI. The average age of ~~the Van trailing fleet~~JBI tractors and containers at December 31, ~~1999.~~2002 was approximately 4.6 years and 5.2 years, respectively. The JBI segment commenced receiving brand new containers and reconditioned chassis in late 2001. Approximately 6,300 new containers and 6,300 new and reconditioned chassis were placed in service during 2002. The composition of the dedicated contract fleet varies with specific customer service requirements. At December 31, 2002, the average age of DCS segment tractors was 2.8 years. In November of 2002, we committed to purchase approximately 2,100 new tractors, the majority of which will be traded one-for-one for units in the JBI and DCS fleets. These trades will significantly reduce the average age of these tractor fleets. All ~~JBH~~of our revenue equipment is maintained in accordance with a specific maintenance program primarily based on age ~~and~~and/or miles traveled. ~~The JBHL business is non-asset based, since the revenue equipment is provided by Van, DCS and third parties.~~

COMPETITION ~~JBH is~~

We are one of the largest publicly held truckload ~~carrier~~carriers in the United States. ~~It competes~~We compete primarily with other irregular route, truckload common carriers. Less-than-truckload common carriers and private carriers generally provide limited competition for truckload carriers. ~~JBH is~~JBHT and our associated companies are one of a few carriers offering nationwide logistics management and dedicated revenue equipment services. Although a number of carriers may provide competition on a regional basis, only a limited number of companies represent competition in all markets. The extensive rail network developed in conjunction with the various railroads also allows ~~the Company~~us the opportunity to differentiate ~~its~~our services in the marketplace.

REGULATION ~~Prior~~

Our operations as a for-hire carrier are subject to ~~December of 1995, the Company's operations in interstate commerce were regulated~~regulation by the ~~Interstate Commerce Commission ("ICC"). Commencing in January~~U.S. Department of ~~1996,~~Transportation’s Federal Motor Carrier Safety Administration (FMCSA) and by various Canadian provinces. Entry control barriers were substantially removed as a result of federal deregulation statutes such as the Interstate Commerce Commission Termination Act ~~closed~~of 1995 (ICCTA). The FMCSA continues to enforce safety regulations and has proposed new rules which, if approved in their present form, would limit driver’s hours of service. President Bush is considering implementation of provisions of the ~~ICC~~North America Free Trade Agreement (NAFTA), which may result in increased competition between U.S. and ~~transferred all remaining regulatory responsibilities~~Mexican carriers for truckload services moving between these two countries. The Clean Air Act of 1990 established tighter pollution standards for emissions from automobiles and trucks. These new standards were effective on a phased in basis beginning with model year 1994. As part of a 1998 consent decree with the U.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines produced subsequent to October 1, 2002. JBHT and a number of other truckload motor carriers believe the new ~~Surface Transportation Board~~engines have not yet been sufficiently tested for fuel economy and reliability. While we continue to test a limited number of the ~~Federal Highway Administration. Motor carrier operations~~new EPA compliant engines, we committed in November of 2002 to purchase approximately 2,100 new tractors, the majority of which will be equipped with Mercedes engines, which are ~~subject to safety requirements prescribed~~not covered by the ~~United States DOT governing interstate operation. Such matters~~EPA’s October 1, 2002 rules.

INTERNET WEB SITE

We maintain a web site on the Internet through which additional information about JBHT is available. Our web site address is www.jbhunt.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, press releases, earnings releases and other reports filed pursuant to Section 13 or 15 (d) of the Exchange Act are available, free of charge, on our website as ~~weight~~soon as practical after they are filed.

SEC FILINGS

We file annual, quarterly and ~~dimension of equipment~~special reports, proxy statements and ~~commercial driver's licensing~~other information with the Securities and Exchange Commission (SEC). Our reports and any materials we file with the SEC are available at the Public Reference Room, located at 450 Fifth Street, N.W., Washington, D.C. 20549. Information may be obtained from the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also ~~subject to federal and state regulations. A federal requirement~~maintains a web site at www.sec.gov that ~~all drivers obtain a commercial driver's license became effective in April 1992. The federal Motor Carrier Act of 1980 was~~contains information we file with the ~~start of a program to increase competition among motor carriers and limit the level of regulation~~agency. Our common stock is traded in the ~~industry (sometimes referred to as "deregulation"). The Motor Carrier Act of 1980 enabled applicants to obtain operating authority more easily and allowed interstate motor carriers, such as~~over-the-counter market under the Company, to change their rates by a certain percentage per year without approval. The new law also allowed for the removal of many route and commodity restrictions regarding the transportation of freight. As a result of the Motor Carrier Act of 1980, the Company was able to obtain unlimited authority to carry general commodities throughout the 48 contiguous states. Effective January 1, 1995, the federal government issued guidelines which allow motor carriers more flexibility in intrastate operations. Although this reduced level of state regulation increased the level of competition in some regions, the Company believes it has ultimately benefited from this legislation. symbol “JBHT.”

ITEM 2. PROPERTIES ~~- -------------------- The Company's~~

Our corporate headquarters are in Lowell, Arkansas. A 150,000-square-foot building was constructed and occupied in September 1990. ~~In addition to the~~We also utilize our former corporate headquarters, the Company owns a separate 40-acre tract in Lowell, Arkansas with two separate buildings totaling 14,000 square feet of office space and 50,000 square feet of maintenance and warehouse space. These buildings servebuilding as ~~the Lowell operations terminal, tractor maintenance facility and additional administrative~~general offices. A new terminal and maintenance facility was constructed and occupied in Chicago, Illinois during 1996. A new terminal and maintenance facility was also constructed and occupied in Kansas City, Missouri during early 1999. In 1999, a new 20,000 square foot building was constructed and occupied near the corporate headquarters. A portion of this leased facility ~~will serve~~serves as a backup data center and ~~provide~~provides disaster recovery support services. 4 ~~A summary~~An additional 20,000 square foot building consisting of general office space for our corporate employees was completed and occupied in 2000. This building is located next to the ~~Company's principal~~data center building and is a leased facility.

Principal
~~Location - ----------------------~~ Atlanta, Georgia Chicago, Illinois Dallas, Texas Detroit, Michigan East Brunswick, New Jersey Houston, Texas Kansas City, Missouri Little Rock, Arkansas Louisville, Kentucky Lowell, Arkansas Lowell, Arkansas Lowell, Arkansas Memphis, Tennessee Phoenix, Arizona San Bernardino, California South Gate, California Syracuse, New York
consist country outside facilities follows: Maintenance Shop Office Space Acreage (square feet) (square feet) ------------------------------------------------------------------------------------------------ 30 29,800 10,400 27 50,000 14,000 14 24,000 7,800 27 44,300 10,800 20 20,000 7,800 13 24,700 7,200 10 31,000 6,700 24 29,200 7,200 14 40,000 10,000 (corporate headquarters) 25 -- 150,000 40 50,200 14,000 (office and data center) 2 -- 20,000 10 26,700 8,000 14 10,000 5,300 8 14,000 4.000 12 12,000 5,500 13 19,000 8,000 primarily of general offices which support operational, safety and maintenance functions. In addition to the ~~above~~principal facilities ~~the Company leases~~listed below, we lease numerous small offices and trailer parking yards in various locations throughout the ~~country. 5 to support customer trailing equipment pool commitments.~~

A summary of our principal facilities follows:

Location	Acreage	Maintenance Shop (square feet)	Office Space (square feet)
Atlanta, Georgia	30	29,800	10,400
Chicago, Illinois	27	50,000	14,000
Dallas, Texas	14	24,000	7,800
East Brunswick, New Jersey	20	20,000	7,800
Houston, Texas	13	24,700	7,200
Kansas City, Missouri	10	31,000	6,700
Little Rock, Arkansas	24	29,200	7,200
Louisville, Kentucky	14	40,000	10,000
Lowell, Arkansas (corporate headquarters)	25	—	150,000
Lowell, Arkansas	40	50,200	14,000
Lowell, Arkansas (office and data center)	2	—	20,000
Lowell, Arkansas (office)	2	—	20,000
Memphis, Tennessee	10	26,700	8,000
Phoenix, Arizona	14	10,000	5,300
San Bernardino, California	8	14,000	4,000
South Boston, VA	3	30,000	3,500
South Gate, California	12	12,000	5,500
Syracuse, New York	13	19,000	8,000
Vancouver, WA	4	20,000	—

ITEM 3. LEGAL PROCEEDINGS ~~- --------------------------- The Company~~

JBHT is involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, ~~management believes~~we believe the resolution of claims and pending litigation will not have a material adverse effect on ~~the~~our financial condition or our results of ~~operations of the Company.~~ operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ~~- -------------------------------------------------------------~~

No matters were submitted during the fourth quarter of ~~1999~~2002 to a vote of security holders.

OUR EXECUTIVE OFFICERS ~~OF THE COMPANY~~

Information with respect to ~~the~~our executive officers ~~of the Company~~ is set forth below:
Executive Name Age Position with Company Officer Since - ---- --- --------------------- ------------- J.B. Hunt 73 Senior Chairman of the Board; Director 1961 Wayne Garrison 47 Chairman of the Board; Director 1979 Johnelle Hunt 68 Secretary; Director 1972 Kirk Thompson 46 President and Chief Executive Officer; Director 1984 Paul R. Bergant 53 Executive Vice President, Marketing and Chief Marketing Officer 1985 Bob D. Ralston 53 Executive Vice President, Equipment and Properties 1989 Jerry W. Walton 53 Executive Vice President, Finance and Administration and Chief Financial Officer 1991 Robert E. Logan (1) 61 Executive Vice President, Chief Information Officer 1997 Craig Harper 42 Executive Vice President, Operations and Chief Operations Officer 1997 Jun-Sheng Li (2) 41 President J.B. Hunt Logistics and Executive Vice President, Integrated Solutions 1998 John N. Roberts III (3) 35 President, Dedicated Contract Services, and Executive Vice President, Enterprise Solutions 1997 Kay J. Palmer (4) 36 Chief Information Officer 1999

Name	Age	Position with JBHT	Executive Officer Since
J.B. Hunt	76	Senior Chairman of the Board; Director	1961
Wayne Garrison	50	Chairman of the Board; Director	1979
Johnelle D. Hunt	71	Secretary; Director	1972
Kirk Thompson	49	President and Chief Executive Officer; Director	1984
Paul R. Bergant	56	Executive Vice President, Marketing and Chief Marketing Officer	1985
Bob D. Ralston	56	Executive Vice President, Equipment and Properties	1989
Jerry W. Walton	56	Executive Vice President, Finance and Administration and Chief Financial Officer	1991
Craig Harper	45	Executive Vice President, Operations and Chief Operations Officer	1997
John N. Roberts III(1)	38	President, Dedicated Contract Services, and Executive Vice President, Enterprise Solutions	1997
Kay J. Palmer(2)	39	Executive Vice President and Chief Information Officer	1999

(1) Mr. Logan held the Chief Information Officer position until June, 1999, at which time Ms. Palmer assumed the Chief Information Officer responsibilities. (2) Mr. Li joined the Company in 1994 as Senior Vice President of J.B. Hunt Logistics. In June of 1995, he was named President of J.B. Hunt Logistics and in June of 1998, he was appointed to the additional post of Executive Vice President, Integrated Solutions. (3) Mr. Roberts joined ~~the Company~~JBHT in 1989 as a management trainee. In December of 1990, he became a Regional Marketing Manager. In February of 1996, he was named Vice President, Marketing Strategy and was appointed President, Dedicated Contract Services, in July of 1997. In June of 1998, he was appointed to the additional position of Executive Vice President of Enterprise Solutions. ~~(4)~~

(2) Ms. Palmer joined ~~the Company~~JBHT in 1988 as a programming specialist. In June of 1989, she was named Director of Application Services. In June of 1995, she was named Vice President of Applications. She became Senior Vice President of Information Services in August of 1998 and named Executive Vice President and Chief Information Officer in June of 1999. 6

PART II

ITEM 5. MARKET FOR THE ~~REGISTRANT'S~~REGISTRANT’S COMMON STOCK AND RELATED SECURITY HOLDER ~~- ------------------------------------------------------------------------------~~ MATTERS ~~- -------~~

PRICE RANGE OF COMMON STOCK ~~The Company's~~

Our common stock is traded in the over-the-counter market under the symbol ~~"JBHT."~~“JBHT.” The following table sets forth, for the calendar years indicated, the range of high and low sales prices for ~~the Company's~~our common stock as reported by the National Association of Securities Dealers Automated Quotations National Market System ~~("NASDAQ"~~(“NASDAQ”). 1999 1998 ----------------- ----------------- Period High Low High Low ------------------------------------------------------------------------------- 1st Quarter $26.25 $18.00 $30.63 $17.38 2nd Quarter 23.25 14.19 36.13 27.50 3rd Quarter 16.75 11.88 38.88 14.00 4th Quarter 15.00 12.38 23.00 12.31

2002

2001

Period

High

Low

High

Low

1st Quarter

$
29.39

$
22.07

$
20.50

$
12.88

2nd Quarter

32.37

24.60

20.75

14.63

3rd Quarter

29.83

21.55

25.60

12.15

4th Quarter

30.32

21.25

25.17

11.93

On February ~~18, 2000,~~28, 2003, the high and low sales prices for ~~the Company's~~our common stock as reported by the NASDAQ were ~~$11.25~~$24.91 and ~~$10.75,~~$24.51, respectively. As of February ~~18, 2000, the Company~~28, 2003, we had ~~1,642~~1,378 stockholders of record.

~~DIVIDEND POLICY~~

On January 21, 2000, ~~the~~our Board of Directors declared a quarterly dividend of $.05 per share, ~~payable~~paid on February 17, 2000 to shareholders of record on February 3, 2000. ~~The Company~~We declared and paid cash dividends of $.20 per share in 1999 and 1998. On February 16, 2000, ~~the~~our Board of Directors announced a decision to discontinue ~~its~~our policy of paying quarterly cash dividends. ~~The Board indicated an intent to repurchase up to 500,000 shares~~No dividends have been paid since February of ~~outstanding JBHT common stock with the cash previously used to pay dividends. 7~~ 2000.

ITEM 6.   SELECTED FINANCIAL DATA ~~- --------------------------------- (Dollars~~
(Dollars in millions, except per share amounts) Years Ended December 31 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------ Operating revenues $2,045.1 $1,841.6 $1,554.3 $1,486.7 $1,352.2 $1,207.6 $1,020.9 $912.0 $733.3 $579.8 Operating income 77.4 103.0 42.9 60.4 21.3 84.9 78.6 69.1 59.4 56.9 Earnings (loss) before cumulative effect of changes in accounting methods 31.9 46.8 11.4 22.1 (2.2) 40.4 38.2 36.9 29.5 30.0 Basic earnings (loss) per share before cumulative effect of changes in accounting methods .90 1.32 .31 .58 (.06) 1.05 1.00 1.03 .85 .85 Cash dividends per share .20 .20 .20 .20 .20 .20 .20 .20 .19 .16 Total assets 1,127.5 1,171.5 1,021.9 1,043.4 1,016.8 993.7 862.4 715.7 520.1 452.7 Long-term debt 267.6 417.0 322.8 332.6 339.0 299.2 303.5 216.3 156.9 137.6 Stockholders' equity 401.4 375.7 338.0 357.3 356.9 377.9 344.0 308.6 215.8 191.1 Diluted earnings per share were $.89, $1.28, $.31 and $.58, for the years 1999, 1998, 1997 and 1996, respectively. Percentage of Operating Revenue Years Ended December 31 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------ Operating revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Operating expenses: Salaries, wages and employee benefits 34.9 34.9 34.4 32.6 33.8 33.5 36.4 38.2 40.0 41.4 Purchased transportation 30.8 30.7 30.6 27.2 25.4 23.9 18.4 12.2 7.0 0.7 Fuel and fuel taxes 8.3 7.5 9.1 10.8 10.6 10.9 12.4 14.2 16.3 17.3 Depreciation 7.3 7.4 8.4 8.4 9.6 9.2 8.2 9.5 9.4 9.7 Operating supplies and expenses 9.1 8.3 8.4 8.0 8.4 6.9 7.2 7.4 8.0 8.8 Insurance and claims 2.0 1.8 2.4 3.9 3.8 3.1 4.0 4.8 4.7 5.4 Operating taxes and licenses 1.3 1.3 1.6 1.9 2.0 2.2 2.8 2.8 3.0 3.2 General and administrative expenses 1.5 1.5 1.2 1.9 2.4 2.2 1.9 2.0 2.1 2.3 Communication and utilities 1.0 1.0 1.1 1.2 1.1 1.1 1.0 1.3 1.4 1.4 Special charges - - - - 1.3 - - - - - ---- ----- ---- ---- ---- ---- ---- ---- ---- --- Total operating expenses 96.2 94.4 97.2 95.9 98.4 93.0 92.3 92.4 91.9 90.2 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Operating income 3.8 5.6 2.8 4.1 1.6 7.0 7.7 7.6 8.1 9.8 Interest expense 1.4 1.6 1.6 1.7 1.8 1.6 1.4 1.2 1.5 1.2 Income taxes .8 1.5 .5 .9 - 2.1 2.6 2.3 2.6 3.4 Cumulative effect of changes in accounting methods - - - - - - - .2 (.2) - ----- ----- ----- ----- ----- ----- ------ ------ ----- ---- Net earnings (loss) 1.6% 2.5% .7% 1.5% (.2%) 3.3% 3.7% 4.3% 3.8% 5.2% ===== ===== ===== ===== ===== ===== ====== ====== ===== ==== The following table sets forth certain operating data of the Company. Years Ended December 31 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------ Total loads 2,769,834 2,243,856 1,802,006 1,605,546 1,361,251 1,187,815 1,081,013 960,031 796,929 596,574 Average number of tractors in the fleet during the year 9,183 8,207 7,629 7,728 7,559 7,094 6,890 6,424 5,286 4,413 Tractors operated (at year end) 9,460 8,906 7,508 7,750 7,706 7,412 6,775 7,004 5,843 4,729 Trailers/containers (at year end) 39,465 35,366 30,391 27,773 24,618 22,687 19,089 17,391 12,389 10,563 Tractor miles (in thousands) 986,288 922,560 790,018 810,450 772,199 740,626 718,767 733,700 638,926 551,175
8
Years Ended December 31

2002

2001

2000

1999

1998

Operating revenues

$
2,247.9

$
2,100.3

$
2,160.4

$
2,045.1

$
1,841.6

Operating income

101.0

72.2

63.4

74.3

101.5

Net earnings

51.8

32.9

36.1

31.9

46.8

Diluted earnings per share

1.33

.91

1.02

.89

1.28

Cash dividends per share

—

—-

.05

.20

.20

Total assets

1,318.7

1,260.3

1,231.9

1,127.5

1,171.5

Long-term debt and lease obligations

219.0

353.6

300.4

267.6

417.0

Stockholders’ equity

590.5

458.3

417.8

391.2

365.5

Percentage of Operating Revenue
Years Ended December 31

2002

2001

2000

1999

1998

Operating revenues

100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Operating expenses:

Salaries, wages and employee benefits

36.4

37.6

35.6

34.9

34.9

Rents and purchased transportation

31.1

28.8

32.1

33.7

33.7

Fuel and fuel taxes

9.4

10.8

11.3

8.3

7.5

Depreciation and amortization

6.5

6.8

6.2

7.3

7.6

Operating supplies and expenses

5.8

6.9

6.1

6.2

5.3

Insurance and claims

2.5

2.0

1.8

2.0

1.8

Operating taxes and licenses

1.4

1.6

1.5

1.3

1.3

General and administrative expenses, net of gains

1.3

.9

1.3

1.7

1.4

Communication and utilities

1.1

1.2

1.2

1.0

1.0

Total operating expenses

95.5

96.6

97.1

96.4

94.5

Operating income

4.5

3.4

2.9

3.6

5.5

Interest expense

(1.1
)
(1.3
)
(1.1
)
(1.4
)
(1.6
)
Equity in earnings (loss) of associated companies

(.1
)
—

.2

.2

.1

Earnings before income taxes

3.3

2.1

2.0

2.4

4.0

Income taxes

1.0

.5

.3

.8

1.5

Net earnings

2.3
%
1.6
%
1.7
%
1.6
%
2.5
%
The following table sets forth certain operating data.
Years Ended December 31

2002

2001

2000

1999

1998

Total loads

2,847,377

2,565,915

2,697,582

2,769,834

2,243,856

Average number of tractors owned/leased in the fleet during the year

10,712

10,710

10,055

9,183

8,207

Company tractors operated (at year end)

10,653

10,770

10,649

9,460

8,906

Independent contractors (at year end)

679

336

16

—

—

Trailers/containers (at year end)

45,759

44,318

44,330

39,465

35,366

Company tractor miles (in thousands)

981,818

1,022,677

1,000,127

986,288

922,560

10

ITEM 7.   ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND ~~- ---------------------------------------------------------------------------~~ FINANCIAL CONDITION ~~- -------------------~~
FORWARD-LOOKING STATEMENTS
This report contains statements that may be considered to be forward-looking or predictions concerning future operations or events. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain, subject to risks and should be viewed with caution. These statements are based on our belief or interpretation of information currently available. Shareholders and prospective investors are cautioned that actual results and future events may differ materially from the forward-looking statements as a result of many factors. Among all the factors and events that are not within our control and could have a material impact on future operating results include: general economic and business conditions, competition and competitive rate fluctuations, cost and availability of diesel fuel, ability to attract and retain qualified drivers, a loss of one or more major customers, interference with or termination of our relationships with certain railroads, insurance costs and availability, claims expense, retention of key employees, terrorists attacks or actions, acts of war, adverse weather conditions, new or different environmental or other laws and regulations, increased costs for new revenue equipment or decreases in the value of used equipment and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. The above is not an all-inclusive list. Financial and operating results of JBHT may fluctuate as a result of these and other risk factors or events as described from time to time in our filings with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared.
The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect:
•                  the amounts reported for assets and liabilities;
•                  the disclosure of contingent assets and liabilities at the date of the financial statements; and
•                  the amounts reported for revenues and expenses during the reporting period.
Therefore, the reported amounts of assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from estimates. Any effects on business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
In preparing our financial statements and related disclosures, we must use estimates in determining the economic useful lives of assets, provisions for uncollectible accounts receivable, exposures under self-insurance plans and various other recorded or disclosed amounts. However, we believe that certain accounting policies are of more significance in the financial statement preparation process than others and are discussed below. To the extent that actual outcomes differ from estimates, or additional facts and circumstances cause us to revise estimates, earnings will be affected.
Workers’ Compensation and Accident Costs
We purchase insurance coverage for a portion of our expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims. Most insurance arrangements include a level of self insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs that are completely insured. The amounts of self insurance change from time to time based on certain measurement dates and policy expiration dates. Our current insurance coverage specifies that the self insured limit on the majority of our claims is $1.5 million, which is prefunded with our insurance carrier. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. Our safety and claims personnel work directly with representatives from our insurance companies to continually update the estimated ultimate cost of each claim. At December 31, 2002, we
11

had approximately $15 million of estimated net claims payable. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2002, we had a prepaid insurance asset of approximately $45 million.
Revenue Equipment
We operate a significant number of tractors, trailers and containers in connection with our business. This equipment may be purchased or acquired under capital or operating leases. In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements. Revenue equipment which is purchased is depreciated on the straight-line method over the estimated useful life down to an estimated salvage or trade-in value. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments and amortized on the straight-line method over the lease term or the estimated useful life, whichever is shorter.
We have an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain new equipment acquired since 1999. We have utilized these values in accounting for purchased and leased tractors. If the supplier was unable to perform under the terms of such agreements, it could have a material negative impact on our financial results.
Revenue Recognition
We recognize revenue based on the relative transit time of the freight transported. Accordingly, a portion of the total revenue which will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period.
Segments
We operated three segments during calendar year 2002. Segments included Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). JBT business included full truck-load, dry-van freight which is primarily transported utilizing company-owned or controlled revenue equipment. Freight in the JBT segment is typically transported over roads and highways and no portion of a movement involves railroads. The JBI segment includes freight which is transported by rail over at least a portion of the movement. JBI freight may also include certain repositioning truck loads which are moved by JBI equipment or third-party carriers, in circumstances where the movement directs JBI equipment back toward intermodal operations. DCS segment business usually includes company-owned revenue equipment and employee drivers who are assigned to a specific customer, traffic lane or service. DCS operations most frequently involve formal, written long-term agreements which govern services performed and applicable rates.
Prior to July 1, 2000, the Logistics business segment (JBL) primarily consisted of J.B. Hunt Logistics, a wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services. Such services included experienced professional managers, information and freight optimization technology and the actual design or redesign of freight system solutions. JBL utilized JBT, JBI or DCS owned or controlled assets and employees, third-party carriers, or a combination of these options to meet service requirements. JBL services were typically provided in accordance with written long-term agreements. Effective July 1, 2000, JBL exchanged its ownership in substantially all of its assets for an initial membership interest in TPI. As of January 1, 2003, we increased our interest in TPI from approximately 27% to 37%.
12

RESULTS OF OPERATIONS
2002 Compared With 2001
Operating Segments
For Years Ended December 31
(in millions of dollars)

Gross Revenue

Operating Income

2002

2001

% Change

2002

2001

JBT

$
827.3

$
828.6

—

26.6

$
8.7

JBI

809.1

740.5

9
%
54.6

42.1

DCS

628.3

548.7

15
%
19.7

17.4

JBL

—

—

—

—-

—

Other

—

.6

—

.1

4.0

Subtotal

2,264.7

2,118.4

7
%
$
101.0

72.2

Inter-segment eliminations

(16.8
)
(18.1
)
—

—

—

Total

$
2,247.9

$
2,100.3

7
%
$
101.0

$
72.2

The following discussion and analysis should be read in conjunction with ~~the~~our Consolidated Financial Statements ~~of the Company~~ and related footnotes appearing in this annual report. ~~SUMMARY OF 1999 The 1999 financial~~
Overview of 2002
Our consolidated net earnings for calendar year 2002 were $51.8 million, or diluted earnings per share of $1.33, compared with 2001 full-year earnings of $32.9 million, or 91 cents per diluted share. We generated $101 million of operating income in 2002, a nearly 40% increase over the $72.2 million of operating income in 2001. Our operating ratio was 95.5% in 2002 and ~~operating results were impacted by a~~96.6% in 2001. Our increase in 2002 net earnings was in spite of an effective income tax rate which rose to 30.8% from 23.5% in 2001 and the number of ~~significant items during~~diluted shares outstanding increasing by nearly 8%. The increase in shares outstanding reflects a secondary public offering, which closed in June of 2002.   Each of our three segments contributed to the ~~year. Van~~improved earnings levels in 2002.
JBT segment gross revenue growth was limited to 3%, partly due to rail service delays which occurred during the second and third quarters of the year. Intermodal load count declined approximately 3% during 1999, while truck only loads increased about 6%. Tractor count in the Van segment was essentially flat, ~~for~~totaling $827.3 million in 2002 and $828.6 million in 2001. However, 2002 revenues were generated with approximately 3% fewer tractors. In addition, 2002 fuel surcharge revenues were $14.2 million lower than the ~~year.~~comparable amount in 2001, which negatively impacted the revenue comparison by approximately 2%. Truck ~~only~~segment operating income rose to $26.6 million in 2002, from $8.7 million in 2001. The improvement in 2002 operating income reflected higher revenue per loaded mile, ~~before fuel surcharges,~~reduced empty miles and lower driver pay rates. A significant portion of the higher revenue per loaded mile and reduced empty miles was ~~up approximately 1%~~a result of our continued focus on yield management and improved revenue quality. The reduction in driver pay per mile was a result of changes in pay scales for newly-hired drivers.
JBI segment gross revenue grew 9%, ~~while~~to $809.1 million in 2002, from $740.5 million in 2001. Revenue growth was due, in part, to continued demand for our intermodal ~~rates declined about 1%. Van revenue growth increased slightly during the fourth quarter~~service offering and conversion of ~~1999 due~~our container fleet to ~~fuel surcharges which were initiated as fuel costs began to rise significantly.~~100% 53-foot units. Operating income in the ~~Van~~JBI segment rose to $54.6 million in 2002 from $42.1 million in 2001. Our JBI operating ratio was ~~reduced,~~93.3% in ~~part,~~2002 and 94.3% in 2001. Financial results in this segment were enhanced by ~~higher~~improved container utilization, improved driver productivity and a focus on revenue equipment maintenance and tire costs, and significant increases in the cost of fuel. In addition, an initiative to separate the intermodal and truck businesses resulted in higher third party dray expense during the latter part of the year. The 22% increase in JBHL segment revenue during 1999 was consistent with the prior year. This growth reflected new logistics agreements with new customers and growth of business volumes with existing customers. The increase in 1999 JBHL operating income was primarily related to higher revenue levels with some lower purchased transportation costs providing for slightly better margins on some business. quality.
DCS segment revenue grew ~~51%~~nearly 15%, to ~~$320.2~~$628.3 million in ~~1999~~2002, from ~~$211.9~~$548.7 million in ~~1998. This~~2001. Revenue growth was primarily a result of a 9% increase in the size of the DCS ~~revenue was driven by new customer contracts~~tractor fleet and ~~projects and fleet additions to existing contracts. The higher level~~our focus on improving the quality of ~~DCS~~individual fleets. While operating income ~~during 1999~~rose to $19.7 million in 2002 from $17.4 million in 2001, the segment’s operating ratio was ~~primarily due to the growth of segment revenue. Margins~~96.9% in 2002 and 96.8% in 2001. We reduced some costs in the DCS ~~business declined slightly during 1999, partly due to~~segment such as driver pay and overhead, however, higher ~~fuel~~accident and claims expenses, as well as new project start up costs, ~~and higher driver wage expense. RESULTS OF OPERATIONS 1999 COMPARED WITH 1998~~
Operating Segments For Years Ended December 31 (in millions of dollars) Gross Revenue Operating Income ---------------------------------------------- ------------------------ 1999 1998 % Change 1999 1998 ---- ---- -------- ---- ---- Van/Intermodal $1,414.8 $1,378.4 3% $44.4 $81.1 JBHL 387.9 317.3 22 10.5 7.5 DCS 320.2 211.9 51 24.1 17.0 Other -- 8.0 -- (1.6) (2.6) -------- -------- ------ ----- ------ Subtotal 2,122.9 1,915.6 11 77.4 103.0 Inter-segment eliminations (77.8) (74.0) -- -- -- -------- -------- ------ ----- ------ Total $2,045.1 $1,841.6 11% $77.4 $103.0 ======== ======== ====== ===== ======
9 more than offset the improvements.
13

The following table sets forth items in ~~the~~our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.
Percentage of Percentage Operating Revenue Change --------------------- ------------- 1999 1998 1999 vs. 1998 ---- ---- ------------- Operating revenues 100.0% 100.0% 11.0% Operating expenses: Salaries, wages and employee benefits 34.9% 34.9% 11.0% Purchased transportation 30.8 30.7 11.4 Fuel and fuel taxes 8.3 7.5 23.1 Depreciation 7.3 7.4 9.9 Operating supplies and expenses 9.1 8.3 22.0 Insurance and claims 2.0 1.8 24.1 Operating taxes and licenses 1.3 1.3 12.9 General and administrative expenses 1.5 1.5 7.4 Communication and utilities 1.0 1.0 10.8 ----- ----- ------ Total operating expenses 96.2 94.4 13.2 ----- ----- ------ Operating income 3.8 5.6 (24.9) Interest expense 1.4 1.6 (1.2) ----- ----- ------ Earnings before income taxes 2.4 4.0 (34.0) Income taxes .8 1.5 (37.6) ----- ----- ------ Net earnings 1.6% 2.5% (31.9%) ===== ===== ======
~~OPERATING EXPENSES~~

Percentage of
Operating Revenue

Percentage Change
Between Years

2002

2001

2002 vs. 2001

Operating revenues

100.0
%
100.0
%
7.0
%
Operating expenses:

Salaries, wages and employee benefits

36.4
%
37.6
%
3.6
%
Rents and purchased transportation

31.1

28.8

15.5

Fuel and fuel taxes

9.4

10.8

(6.8
)
Depreciation and amortization

6.5

6.8

2.2

Operating supplies and expenses

5.8

6.9

(10.3
)
Insurance and claims

2.5

2.0

32.4

Operating taxes and licenses

1.4

1.6

.6

General and administrative expenses, net of gains

1.3

.9

55.7

Communication and utilities

1.1

1.2

(2.0
)
Total operating expenses

95.5

96.6

5.9

Operating income

4.5

3.4

39.8

Interest expense

(1.1
)
(1.3
)
(8.4
)
Equity in earnings (loss) of associated companies

(.1
)
—

(35.0
)
Earnings before income taxes

3.3

2.1

73.7

Income taxes

1.0

.5

127.2

Net earnings

2.3
%
1.6
%
57.3
%
Consolidated Operating Expenses
Total operating expenses in ~~1999~~2002 increased ~~13%~~5.9% over ~~1998,~~2001, while ~~total~~ operating revenues ~~increased 11%~~rose 7.0%. ~~Operating expenses expressed as a percentage of~~Our operating ~~revenues (operating ratio) were 96.2%~~ratio improved to 95.5% in ~~1999,~~2002, compared with ~~94.4%~~96.6% in ~~1998.~~2001. Salaries, wages and employee benefits expense increased ~~11% during 1999~~3.6% in 2002, and ~~remained exactly~~declined to 36.4% of revenue in 2002 from 37.6% in 2001. As previously mentioned, a lower mileage pay rate in our JBT segment for newly-hired drivers and the ~~same percentage~~use of additional independent contractors were primary contributors to the relationship of this cost category to operating revenues. Partly offsetting a decline in drivers’ wages relative to revenue ~~for 1999~~were increases in maintenance wages, workers’ compensation, health insurance and ~~1998. Purchased~~office employee incentive expenses. We opened some new company managed maintenance facilities and increased our mechanic labor force by about 14% in order to reduce the amount of maintenance that we outsource. We also experienced higher costs in workers’ compensation and other fringe benefit programs and paid additional incentive payments to our office and administrative personnel that resulted from improved 2002 net earnings.
Rents and purchased transportation expense increased 11.4% and also maintained a consistent relationship with operating revenues. While fuel costs were below prior year levels during the first quarter of 1999, cost per gallon started to rise during March and April. During the third quarter of 1999, fuel prices averaged nearly $.20 per gallon higher than the comparable period in 1998 and the spread widened to nearly $.30 per gallon by November of 1999. For the year 1999, fuel and fuel taxes increased 23.1% and grew from 7.5% of operating revenue in 1998 to 8.3% in 1999. Depreciation expense increased 9.9% during 1999, but declined slightly as a percentage of operating revenues. The amount of depreciation expense on revenue equipment increased in relative proportion to the size of the fleet. However, total 1999 depreciation expense also increased due to lower gains on the sale of certain assets. Gains on asset dispositions reduce depreciation expense, while losses on dispositions increase depreciation. A net loss of $849,000 was incurred on dispositions in 1999, which increased depreciation, compared with gains on dispositions of $4.1 million in 1998, which reduced depreciation expense. Depreciation expense in 1999 was reduced, in part, by a sale and immediate leaseback of certain trailing equipment. This transaction closed during the fourth quarter of 1999. Operating supplies and expenses increased 22% during 1999 and rose as a percentage of operating revenues. This increase was primarily due to higher revenue equipment maintenance and tire expenditures during 1999. Insurance and claims expense, which had declined significantly from 1997 to 1998, increased approximately 24% in 1999. While the frequency of vehicle collisions declined slightly during 1999, the severity, or cost per collision, rose significantly during 1999. Operating taxes and licenses increased 12.9% during 1999, partly due to the growth of the tractor fleet and increases in licensing fees charged by certain states. General and administrative expenses increased 7.4%15.5%, but remained the same percentage of operating revenue for both years. A portion of this increased expense was for rental and maintenance of computer equipment. Communication and utilities increased 10.8%, reflecting expanded data and telecommunications networks and higher satellite communications costs. Interest expense declined slightly and the effective income tax rate declined to 35% in 1999 from 37% in 1998. These decreases were due, in part, to the sale and leaseback transaction described above. The overall impact of this sale and leaseback transaction increased 1999 earnings per share by $.02. As a result of this sale and leaseback transaction, future years' rent expense (included in operating supplies and expenses) will be greater and depreciation, interest and income tax expense will be less than what would otherwise have been reported absent the transaction. 10 As a result of the above, net earnings for 1999 declined to $31.9 million, or diluted earnings per share of $.89, compared with $46.8 million in 1998, or $1.28 per diluted share. The average number of weighted average shares outstanding (before the effect of dilutive stock options) remained substantially the same for 1999 and 1998. A decrease in weighted average shares assuming dilution resulted from the decreased effect of dilutive stock options caused by a decline in the Company's average price of common stock during 1999. SUMMARY OF 1998 J.B. Hunt's 1998 financial and operating results reflected a number of positive trends when compared with 1997. For the first time since 1996, the Company experienced a net increase in the tractor fleet. A 9% increase in Van tractor count and a 17% increase in the Van driver force during 1998 contributed to a 19% increase in segment revenue. Intermodal revenue, which is included in the Van segment, increased 12% during 1998 and also helped support revenue growth. Van truck only revenue per loaded mile increased nearly 2% during 1998, while intermodal rates declined nearly 3%. The significant increase in the driver to tractor ratio also helped improve tractor utilization to 2,645 miles per week in 1998 from 2,555 in 1997. This approximate $225 million increase in segment revenue and higher tractor utilization contributed to the significant increase in 1998 operating income. Van earnings were also favorably impacted in 1998 by lower fuel prices and lower insurance and claims costs. The 25% increase in the JBHL segment revenue during 1998 was due to new logistics agreements with new customers and growth of business levels with existing customers. The increase in 1998 JBHL operating income was primarily related to the higher revenue levels, as JBHL margins remained relatively constant. DCS segment revenue increased 41% to $211.9 million in 1998 from $150.7 million in 1997. This increase in DCS revenue was driven by both new customer contracts and additional projects or fleet additions to existing contracts. The higher level of DCS operating income during 1998 was primarily due to the growth of our JBI business segment and the related payments to railroads and drayage carriers and the use of more independent contractors. The 6.8% decline in fuel and fuel tax expense was primarily a result of fuel costs per gallon averaging about 5% less vs. 2001. Operating supplies and expenses were down 10.3% in 2002 reflecting the reduced amount of outsourced tractor and trailer maintenance work and our focus on reducing travel expenses. The 32.4% increase in insurance and claims costs reflects escalating liability insurance premiums which have been experienced industry wide and our higher accident costs. The significant increase in general and administrative expenses was due primarily to higher driver advertising and recruiting expense in 2002 and changes in our gains and losses on revenue equipment dispositions. In 2002, we had a $1.8 million net loss on equipment and facility dispositions, compared with a net gain of $4.8 million in 2001.
Our net interest expense declined in 2002, partly due to the approximate $68 million of capital we raised through a secondary public offering of common stock which closed in June of 2002. We increased our effective income tax rate to 30.8% in 2002, from 23.5% in 2001, primarily to reflect additional taxes associated with our increased earnings.
14

Equity in losses of associated companies reflects our share of operating results for TPI and for our Mexican joint venture. Amounts included the following:

Years Ended December 31
(000)

2002

2001

TPI

$
(1,353
)
$
(1,918
)

Mexican joint venture

—

(165
)

$
(1,353
)
$
(2,083
)
JBHT’s financial exposure is limited to its approximate $8.5 million investment in TPI as we have not made any additional commitments or guaranteed any of TPI’s financial obligations.
The year 2001 financial results of our Mexican joint venture primarily reflect adjustments to the carrying value of the investment due to the anticipated sale of our interests. During the first quarter of 2002, we sold our joint venture interest in Mexico for its carrying value, to the majority owner, Transportacion Maritima Mexicana (TMM). We recorded an $18.1 million note receivable from TMM, which, according to the terms of this sale, will be paid in four annual payments of approximately $4.5 million, plus interest at 5% per annum, through June of 2005. The first payment was received as scheduled in June of 2002.
2001 Compared With 2000
Operating Segments
For Years Ended December 31
(in millions of dollars)

Gross Revenue

Operating Income

2001

2000

% Change

2001

2000

JBT

$
828.6

$
833.8

(1
)%
$
8.7

$
(7.1
)
JBI

740.5

681.1

9
%
42.1

36.7

DCS

548.7

478.6

15
%
17.4

28.4

JBL

—

230.0
*
—

—

8.1
*
Other

.6

—

—

4.0

(2.7
)
Subtotal

2,118.4

2,223.5

(5
)%
72.2

63.4

Inter-segment eliminations

(18.1
)
(63.1
)
—

—

—

Total

$
2,100.3

$
2,160.4

(3
)%
$
72.2

$
63.4

*As of December 31, 2000, TPI qualified as a reportable business segment for financial reporting purposes. However, the logistics segment (JBL) information for 2001 shown above excludes TPI. TPI is accounted for on the equity method and does not qualify as a reporting segment in 2001.
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related footnotes appearing in this annual report.
Overview of 2001
Financial and operating results for the year 2001 were impacted by a number of significant items. General economic conditions in the transportation industry were soft during the majority of the year and fuel costs varied dramatically, sometimes changing more than 10% from one month to the next. However, overall fuel costs for 2001 were down from the prior year. Consolidated operating revenues for 2001 decreased approximately 3% from 2000. Excluding the JBL operations, which were contributed to TPI as of July 1, 2000, revenue growth for the remaining business segments was approximately 6%. The growth in the remaining segments is attributable to expansion of our operating fleet of tractors from an average of 10,055 in 2000 to 10,710 in 2001, an average increase of 655 tractors or 6.5%. While fuel costs and related fuel surcharge revenues varied significantly during 2001, the net change in fuel surcharge revenue had less than a 1% impact on revenue between 2001 and 2000.
JBT segment revenue totaled $828.6 million in 2001, down 1% from 2000. This decline was due in part to the softer economy that created a reduced demand for freight. JBT began focusing on improving the operating ratio through cost management initiatives rather than JBT fleet growth. We had no plans to grow the JBT fleet until such time that a reasonable operating income had been achieved, warranting the additional investment of capital. JBT tractor count,
15

including independent contractors (I/C’s) declined nearly 3% during 2001 and ~~cost reduction actions~~tractor utilization was also down approximately 3%. However, revenue per loaded mile increased 3.9%, excluding fuel surcharges, reflecting freight mix changes and pure rate increases,. The Truck segment generated operating income of $8.7 million in ~~certain projects. Lower~~2001, compared with a loss of $7.1 million in 2000. As a result of a new initiative commenced in late 2000, the number of I/C’s in JBT grew to 337 in 2001, from 16 at the end of 2000. Continued volatility in the earnings power of the Truck unit is likely to prevail until supply and demand factors in the truckload industry improve. Additional improvement is significantly dependent upon increases in the availability of freight.
JBI segment business was reasonably strong during 2001 and grew 9% to $740.5 million from $681.1 million in 2000. The Intermodal segment held its tractor count essentially flat at 910 during 2001. Unlike the other segments, growth of JBI is not easily tracked by number of tractors, as JBI can utilize outside dray carriers and the other JBHT business units to support load and revenue growth. The increase in revenue can be attributed to a 5% increase in the number of loads from 2000 to 2001, coupled with a 1.7% increase in revenue per loaded mile, excluding fuel ~~costs also contributed~~surcharges. As a result of revenue growth and utilization of containers, JBI operating income climbed 15% in 2001 to ~~higher~~$42.1 million from $36.7 million in 2000.
DCS segment revenue grew 15% during 2001, to $548.7 million from $478.6 million in 2000. This growth rate was down significantly from recent years due to: 1) soft economic conditions which made companies more apprehensive about changing or outsourcing their transportation needs, and; 2) our unwillingness to reduce rates to increase market share. The DCS segment tractor fleet grew by 15% during 2001, but revenue growth was limited by idle tractors throughout most of the year. DCS generated $17.4 million of operating income in 2001, compared with $28.4 million in 2000. The lower margin and reduced operating income was primarily a result of idle tractors and a higher proportionate amount of shared trailer pool and corporate support costs being assigned to the business, as a result of improving the tracking of trailer usage and the increased internal transfer price, which is charged by JBT and JBI when DCS ~~segment. Other revenue~~utilizes their assigned trailers. Cost control and close analysis of individual fleet profitability remains a DCS objective.
For the year ended December 31, 2001, JBHT’s share of TPI’s results of operations totaled a loss of $1.9 million, compared with earnings of $440,000 for the six month period ended December 31, 2000. TPI’s operating loss in ~~1997 included the flatbed business which~~2001 was ~~sold~~primarily due to start up expenses. JBHT’s financial exposure is limited to its approximate $6.4 million investment in ~~1997. 1998 COMPARED WITH 1997~~
Operating Segments For Years Ended December 31 (in millions of dollars) Gross Revenue Operating Income ----------------------------------------- -------------------- 1998 1997 % Change 1998 1997 ---- ---- -------- ---- ---- Van/Intermodal $1,378.4 $1,153.5 19% $ 81.1 $28.2 JBHL 317.3 254.1 25 7.5 6.1 DCS 211.9 150.7 41 17.0 10.9 Other 8.0 59.8 (87) (2.6) (2.3) ------- ------- ---- ----- ----- Subtotal 1,915.6 1,618.1 18 103.0 42.9 Inter-segment eliminations (74.0) (63.8) -- -- -- --------- --------- --- ------ ----- Total $1,841.6 $1,554.3 18% $103.0 $42.9 ======== ======== ===== ====== =====
11 TPI as we have not made any additional commitments or guaranteed any of TPI’s financial obligations.
The following table sets forth items in ~~the~~our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.
Percentage of Percentage Operating Revenues Change ------------------------ ------------- 1998 1997 1998 vs. 1997 ------ ------ ------------- Operating revenues 100.0% 100.0% 18.5% Operating expenses: Salaries, wages and employee benefits 34.9% 34.4% 20.3% Purchased transportation 30.7 30.6 18.7 Fuel and fuel taxes 7.5 9.1 (3.0) Depreciation 7.4 8.4 4.3 Operating supplies and expenses 8.3 8.4 17.3 Insurance and claims 1.8 2.4 (13.8) Operating taxes and licenses 1.3 1.6 (2.3) General and administrative expenses 1.5 1.2 49.0 Communication and utilities 1.0 1.1 13.3 ------ ----- Total operating expenses 94.4 97.2 15.0 ------ ----- Operating income 5.6 2.8 140.1 Interest expense 1.6 1.6 16.8 ------ ----- Earnings before income taxes 4.0 1.2 305.5 Income taxes 1.5 .5 294.9 ------ ----- Net earnings 2.5% .7% 312.1% ====== ===== ======
~~OPERATING EXPENSES~~

Percentage of
Operating Revenue

Percentage Change
Between Years

2001

2000

2001 vs. 2000

Operating revenues

100.0
%
100.0
%
(2.8
)%
Operating expenses:

Salaries, wages and employee benefits

37.6
%
35.6
%
2.7
%
Rents and purchased transportation

28.8

32.1

(13.0
)
Fuel and fuel taxes

10.8

11.3

(6.9
)
Depreciation and amortization

6.8

6.2

6.2

Operating supplies and expenses

6.9

6.1

11.4

Insurance and claims

2.0

1.8

8.7

Operating taxes and licenses

1.6

1.5

—

General and administrative expenses, net of gains

.9

1.3

(32.5
)
Communication and utilities

1.2

1.2

(.7
)
Total operating expenses

96.6

97.1

(3.3
)
Operating income

3.4

2.9

13.9

Interest expense

(1.3
)
(1.1
)
5.0

Equity in earnings (loss) of associated companies

—

.2

—

Earnings before income taxes

2.1

2.0

1.5

Income taxes

.5

.3

59.2

Net earnings

1.6
%
1.7
%
(8.7
)%
16

Consolidated Operating Expenses
Total operating expenses in ~~1998 increased 15% over 1997, while total~~2001 declined 3.3% from 2000, decreasing in relative proportion to operating ~~revenues increased nearly 19% during the same period. Operating~~revenues. Our operating ratio (operating expenses expressed as a percentage of operating revenues) improved slightly to 96.6% in 2001 from 97.1% in 2000. As previously mentioned, the JBL segment was contributed to TPI effective July 1, 2000. This approximate 10% reduction in consolidated operating revenues ~~(operating ratio) were 94.4%~~was the primary factor in ~~1998, compared with 97.2% in 1997. Salaries, wages~~reduced rents and ~~employee benefits increased 20% during 1998~~purchased transportation expense. The JBI segment relied solely on JBT and ~~rose to 34.9%~~third party carriers for transportation services and accordingly, purchased transportation costs as a percent of revenue ~~in 1998 from 34.4% in 1997. This increase was primarily due to an increase in driver wages driven by~~were significantly higher than the ~~mix change of more experienced, higher paid drivers, partly offset by lower worker's compensation claims costs.~~other segments. The ~~increase~~decline in purchased transportation expense was related to the growth of intermodal and JBHL business, which results in higher payments to railroads and third-party motor carriers for purchased transportation services. Significantly lower fuel costs per gallon and slightly higher fuel miles per gallon performance helped drive fuel and fuel tax expense ~~down~~was primarily due to significantly lower fuel cost per gallon in ~~1998. Depreciation expense increased approximately 4% during 1998, but declined to 7.4% of revenue~~late 2001. The increase in 1998 from 8.4% in 1997. The amount of revenue equipment depreciation expense increased in relative proportion to the size of the fleet. However, depreciation was reduced by gains on the sale of certain assets. Gains on asset dispositions reduce depreciation expense and totaled $4.1 million in 1998, compared with $.7 million in 1997. Gains were recognized during 1998 on the sale of land in Lowell, Arkansas, a small subsidiary company and certain tractors and trailing equipment. Operating supplies and expenses include maintenance on revenue equipment and tires and increased in relative proportion to the fleet size. The decline in2001 operating supplies and expenses ~~as a percentage of revenue was due primarily to the growth of non-asset based revenue.~~reflected higher tractor and trailing equipment maintenance and tire costs. Insurance and claims costs reflected higher collision rates in JBT during 2001. The significant ~~decrease in insurance and claims expense was the result of fewer vehicle collisions during 1998 and a~~ decline in the cost per collision. The Company was successful in attracting and retaining experienced professional drivers that have been involved in fewer vehicle collisions and reduced accident costs. The decline in operating taxes and licenses was due, in part, to refunds received from certain state taxing authorities. The increase in general and administrative expenses was ~~partly~~ due to ~~higher levels~~an approximate $5.5 million gain on the sale of ~~spending~~a group of trailers, which closed in March of 2001. Gains on revenue equipment dispositions are included in this expense classification and totaled a net gain of $4.8 million in 2001, compared with a loss of $267,000 in 2000.
Equity in earnings (loss) of associated companies reflects our share of operating results for ~~computer rental~~TPI and ~~maintenance. This spending was related~~for the Mexican joint venture. Equity in earnings amounts included the following:

Year Ended December 31
(000)

2001

2000

TPI

$
(1,918
)
$
440

Mexican joint venture

(165
)
4,337

$
(2,083
)
$
4,777

The year 2001 financial results of our Mexican joint venture primarily reflected adjustments to the decision to lease rather than purchase certain computer equipment and also for Year 2000 compliance work. Communications and utilities increased in relative proportion to revenue growth. Interest expense increased 17%, primarily due to higher debt levels. The effective income tax rate was 37% in 1998 and 38% in 1997. As a resultcarrying value of the above, net earnings for 1998 increased to $46.8 million, or diluted earnings per share of $1.28, compared with $11.4 million in 1997, or $.31 per diluted share. A decrease in the number of weighted average shares outstanding (before the effect of dilutive stock options), was primarilyinvestment due to the ~~Company's acquisition~~anticipated sale of ~~treasury shares. An increase~~our interests. We had an agreement in ~~weighted average shares assuming dilution resulted from~~principle for a sale to the ~~increased effect~~majority owner of ~~dilutive stock options caused by~~ the ~~increase~~joint venture. This transaction was consummated in ~~the Company's average market price of common stock during 1998. 12~~ early 2002.
LIQUIDITY AND CAPITAL RESOURCES ~~The Company generates~~
Cash Flow
We generate significant amounts of cash from operating activities. Net cash provided by operating activities was ~~$136~~$174 million in ~~1999, $181~~2002, $172 million in ~~1998~~2001 and ~~$160~~$125 million in ~~1997. During the three year period ended December 31, 1999, primary operating cash requirements were applied to increases in accounts receivable, other current assets (inventories, licenses~~2000. While 2002 and ~~permits) and to pay claims. Primary sources~~2001 reflected a typical level of cash ~~included net earnings, depreciation, trade accounts payable and deferred income taxes. Net cash~~provided by operating activities, 2000 was impacted by a significant prepayment for an operating lease which was funded in early 2000. Cash flows used in investing activities ~~was $19 million in 1999, $259 million in 1998~~primarily reflect additions to and ~~$89 million in 1997. The primary use~~dispositions from our fleet of ~~funds for investing activities was the acquisition of new~~ revenue equipment. ~~New tractor purchases were approximately 2,200 in 1999, 2,900 in 1998 and 2,400 in 1997.~~During the latter part of 2000 through late 2001, we utilized capital leases to acquire tractors. Tractor additions since October 2001 have been purchased. The ~~level~~majority of ~~investment spending for~~our trailing equipment ~~varied significantly during the three year period ended December 31, 1999. The total number of trailing pieces of equipment purchased was approximately 2,200 in 1999, 4,700 in 1998 and 490 in 1997.~~additions since October 2000 have been under operating lease programs. Net cash ~~used~~provided by financing activities in ~~investing activities was also reduced during 1999 by a financing transaction~~2002 reflects our $68 million secondary stock offering, which closed ~~during the fourth quarter. The arrangement involved a sale and immediate leaseback~~in June of certain trailing revenue equipment. This transaction generated approximately $175 of cash proceeds from sale of equipment, which were used primarily to reduce outstanding debt. Net financing activities consumed $113 million in 1999 and $71 million in 1997, and generated $83 million in 1998. Proceeds of approximately $175 million from the 1999 sale and leaseback transaction were used to reduce commercial paper notes. The Company sold $100 million of 7.00% senior notes in September of 1998, which will mature in September of 2004. Financing activities also included the purchase of treasury stock, which totaled $5.8 million in 1998 and $22.0 million in 1997. Dividends of approximately $7 million were paid during each year of 1997 through 1999. The Company announced in February of 2000, a decision to discontinue a policy of paying dividends and an intent to use those funds to repurchase up to 500,000 shares of its common stock. These shares will be held in treasury for general corporate purposes, which may include acquisitions or employee stock options.
SELECTED BALANCE SHEET DATA As of December 31 1999 1998 1997 - -------------------------------------------------------------------------------------------- Working capital ratio 1.09 1.09 .97 Current maturities of long-term debt (millions) $60.0 $ 16.4 $ 17.5 Total debt (millions) $328 $ 433 $ 340 Total debt to equity .82 1.15 1.01 Total debt as a percentage of total capital .45 .54 .50
~~The Company is authorized to issue up to $240 million in notes under~~2002. We discontinued a commercial paper ~~note~~borrowing program ~~of which $35 million was outstanding at December 31, 1999.~~ during 2001 and ceased paying cash dividends in early 2000.
SELECTED BALANCE SHEET DATA
As of December 31

2002

2001

2000

Working capital ratio

1.33

1.45

1.04

Current maturities of long-term debt and lease obligations (millions)

$
124

$
38

$
101

Total debt and capitalized lease obligations (millions)

$
343

$
392

$
401

Total debt to equity

.58

.86

.96

Total debt as a percentage of total capital

.37

.46

.49

17

From time to time ~~the~~our Board of Directors authorizes the repurchase of ~~Company~~our common stock. Purchases of ~~Company~~JBHT stock were:
~~1999 1998 1997 ---------------------------------------------------------------------------------~~ ~~Number of shares acquired -- 225,000 1,468,000 Price range of shares -- $17.50 - $28.00 $13.50 - $17.00~~
At

2002

2001

2000

Number of shares acquired

—

—

500,000

Price range of shares

—

—

$10.94 - $16.13

Liquidity
Our need for capital typically has resulted from the acquisition of revenue equipment required to support our growth and the replacement of older tractors and trailing equipment with new, late model equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We have recently obtained capital through a secondary common stock offering, revolving lines of credit and cash generated from operations. We have also utilized capital and operating leases to acquire revenue equipment.
As mentioned above, we utilized capital leases to acquire tractors from late 2000 through late 2001. We started purchasing tractors and containers in October of 2001 and plan to continue purchasing tractors and containers in the foreseeable future. We have been acquiring dry van trailing equipment since October of 2000, primarily under operating lease programs. We currently expect to spend in the range of $220 million, net of expected proceeds from sale or trade-in allowances, on revenue equipment for the full calendar year of 2003.
We are authorized to borrow up to $150 million under our current revolving lines of credit which expire November 14, 2005.   We had no balances outstanding under these lines at December 31, ~~1999,~~2002. Under the ~~Company~~terms of our credit and note agreements, we are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios. We were in compliance with all of the financial covenants at December 31, 2002. As of December 31, 2002, we had committed to purchase approximately ~~$242~~$184 million of revenue and service equipment, net of ~~expected~~ proceeds, from sale or trade-in allowances. ~~Additional capital spending for new revenue equipment is anticipated during 2000, however, funding for such expenditures is expected to come from~~We believe that our current liquid assets, cash generated from operations and ~~existing borrowing facilities. 13~~ ~~YEAR 2000 The Company utilizes~~our revolving lines of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future.
Contractual Cash Obligations
As of December 31, 2002
(000)

Amounts Due By Period

Total

One Year
Or Less

One To
Three Years

Four To
Five Years

After
Five Years

Operating Leases

$
283,616

$
74,233

$
110,227

$
80,769

$
18,387

Capital leases

149,886

34,481

115,405

—

—

Senior and subordinated notes payable

202,010

97,010

105,000

—

—

Subtotal

$
635,512

$
205,724

$
330,632

$
80,769

$
18,387

Commitments to acquire revenue equipment

184,000

184,000

—

—

—

Total

$
819,512

$
389,724

$
330,632

$
80,769

$
18,387

18

Financing Commitments
As of December 31, 2002
(000)

Commitments Expiring By Period

Total

One Year
Or Less

One To
Three Years

Four To
Five Years

After
Five Years

Revolving credit arrangements

$
150,000

$
—

$
150,000

—

—-

Standby letters of credit

26,510

26,510

—

—

—

Total

$
176,510

$
26,510

$
150,000

—

—

Risk Factors
In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million. These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to examine. We have voluntarily disclosed these transactions to the IRS and in October of 2002, the IRS began their examination of the specific facts of these transactions. If the IRS challenges our transactions, we intend to vigorously defend them. However, if the IRS successfully challenges these transactions, and is ~~dependent upon a wide variety~~successful in disallowing some or all of ~~complex information technologies (IT) to conduct daily business operations. The Year 2000 issue~~the tax benefits that we realized, these actions could have ~~resulted~~a material adverse effect on our financial condition and operating results.
Our effective income tax rates were 30.8%, 23.5% and 15.0% for the years 2002, 2001 and 2000, respectively. We implemented an accountable expense reimbursement plan for a portion of our drivers in ~~system disruptions or failures. A comprehensive~~February of 2003 (driver per diem). While this plan will generally benefit both JBHT and the majority of our drivers, it results in a higher effective income tax rate. Partly as a result of this change and anticipated higher earnings, we are currently estimating an effective income tax rate of 37% to 39% for calendar year 2003.
In 1997, the Equal Employment Opportunity Commission (EEOC) commenced an action ~~plan was initiated~~against us in ~~1996~~Federal District Court alleging that we had violated the Americans With Disabilities Act by refusing to ~~conduct systematic reviews~~hire as truck drivers certain individuals who were taking certain medications. The EEOC sought injunctive relief and damages for a group of ~~all internal hardware, software and functions~~540 individuals. The District Court dismissed the EEOC’s complaint on our motion for summary judgment. The EEOC appealed this decision to ~~either verify~~the Federal Court of Appeals. The Federal Court of Appeals upheld the District Court’s decision in our favor. However, the EEOC may still appeal this case to higher courts. If the higher courts rule against us, we could be subject to a new trial in the District Court.
In a separate action filed in Michigan in November 2001, by a group of eight former employees, the plaintiffs alleged that we violated the ~~system was Year 2000 compliant or modify/replace the software or system as required. A number~~Elliott-Larsen Civil Rights Act of Michigan. In February 2003, we reached an agreement to settle this complaint. The terms of the ~~primary~~settlement are to remain confidential by agreement, however, this contemplated settlement will not materially impact our financial ~~systems utilized~~statements or results of operations.
In October 2002, we were assessed a judgment of approximately $7 million for an accident that occurred in August 2001. We are currently in dispute over the total value of this judgment and plan to ~~pay vendors, track customer accounts receivable and produce regular financial reports were converted to~~file the appropriate appeals. We believe, based on advise from outside counsel, that it is probable that this award will be ~~Year 2000 compliant. The Company focused significant resources during 1998 and 1999 on~~substantially reduced by the ~~Year 2000 issue, with the goal of no material business or system disruption related to dates on or after January 1, 2000. In addition~~appellate court. However, if we are unsuccessful in our appeal to the ~~work conducted on internal IT systems,~~appellate court, the Company initiated formal communications and requested certifications of Year 2000 compliance from certain significant customers and suppliers. A Year 2000 Business Continuity Plan was developed and completed on June 30, 1999. The Plan provided for the establishment of a Year 2000 Command Center which was activated on December 15, 1999 to monitor critical IT and other systems and functions. As of the date of this filing, the Company had not experienced any material Year 2000 problems or disruptions with internal systems, nor had any material problems or disruptions been experienced with key customers or suppliers. From inception of the Company's efforts on the Year 2000 issue through December 31, 1999, total costs of approximately $1.7 million were incurred relatedultimate payments to the Year 2000 readiness issue. These expenses included external consultants, professional advisors, hardware and software. These costs were charged to operations as incurred and excluded employee salaries and fringe benefits and certain new system acquisitions, development and upgrades that relate to ongoing business activity. 14 RECENT PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes new accounting and reporting standards for derivativeclaimant could have a material effect on our financial instruments and for hedging activities. SFAS 133 requires an entity to measure all derivatives at fair value and to recognize them in the balance sheet as an asset or liability, depending on the entity's rights or obligations under the applicable derivative contract. The recognition of changes in fair value of a derivative that affect the income statement will depend on the intended use of the derivative. If the derivative does not qualify as a hedging instrument, the gain or loss on the derivative will be recognized currently in earnings. If the derivative qualifies for special hedge accounting, the gain or loss on the derivative will either (1) be recognized in income along with an offsetting adjustment to the basis of the item being hedged or (2) be deferred in other comprehensive income and reclassified to earnings in the same period or periods during which the hedged transaction affects earnings. SFAS 133 will be effective for the Company beginning with the first fiscal quarter after June 15, 2000. SFAS 133 may not be applied retroactively to financial statements of prior periods. The Company has not determined the impact that Statement 133 will have on its financial statements and believes that such determination will not be meaningful until closer to the date of initial adoption. FORWARD-LOOKING STATEMENTS This report contains statements that may be considered as forward-looking or predictions concerning future operations. Such statements are based on management's belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties and management can give no assurance that such expectations will be realized. Among all the factors and events that are not within the Company's control andstatements.
Inflation could have a material impact on ~~future operating results are general economic conditions, cost and availability~~our business. A prolonged or unusual period of ~~diesel fuel, adverse weather conditions and competitive rate fluctuations and availability of drivers. Current and future changes in fuel prices~~rising costs could result in fuel, wages, insurance, interest or other costs increasing rapidly and could adversely affect our results of operations if we were unable to increase freight rates accordingly. The impact of inflation has been minimal during the past three years.
Our business is subject to general economic and business factors that are largely out of our control, any one of which could have a material adverse effect on our results of operations. These factors include significant increases or rapid fluctuations in fuel costs, excess capacity in the trucking industry, surpluses in the market for used equipment, interest rates, fuel taxes, license and registration fees, insurance premiums, self-insurance levels and difficulty attracting and retaining qualified drivers and independent contractors. We are also affected by recessionary economic cycles and downturns in customers’ business cycles.
We operate in a highly competitive and fragmented industry. Numerous factors could impair our ability to maintain our current profitability and to compete with other carriers. We compete with many other truckload carriers of ~~quarterly earnings. Financial~~varying sizes, some of which have more equipment and greater capital resources that we do. Some of our competitors periodically reduce their freight rates to gain or retain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain rates or maintain our profit margins.
19

We depend on third parties in the operation of our business. Our Intermodal business segment utilizes a number of railroads in the performance of transportation services. While the majority of these services are provided pursuant to written agreements with the railroads, the inability to utilize one or more of these railroads could have a material adverse effect on our business or operating results.
If we are unable to retain our key employees, our business, financial condition and results of operations could be harmed. We are highly dependent upon the services of a number of our officers and other key employees. We do not have employment agreements with any of these employees. The loss of any of their services could have a materially adverse effect on our operations or future profitability.
As part of a 1998 consent decree with the U.S. Environmental Protection Agency (EPA), a number of heavy-duty diesel engine manufacturers agreed to significantly reduce emissions from their engines which were produced subsequent to October 1, 2002. We have not yet had sufficient time to test these new engines. We will continue to test a limited number of the new EPA compliant engines. In November of 2002, we committed to purchase approximately 2,100 new tractors, primarily for our JBI and DCS segments, which will be equipped with Mercedes engines. These engines are not covered by the EPA’s October 1, 2002 rules. Except for these 2,100 tractors, which will be utilized primarily for local and regional operations, we expect to limit new tractor purchases until we are able to complete further testing and evaluation of the EPA compliant engines. In addition, these new EPA compliant engines are expected to increase the acquisition and operating ~~results~~costs of these tractors and may negatively impact our future profitability.
Fuel and fuel taxes currently represent our third largest general expense category. During the past three years fuel cost per gallon has varied significantly, with prices frequently changing as much as $.10 to $.15 per gallon between consecutive months. We have a fuel surcharge revenue program in place with the majority of our customers, which has historically enabled us to recover the majority of higher fuel costs. Most of these programs automatically adjust weekly depending on the cost of fuel. However, there can be timing differences between a change in our fuel cost and the timing of the ~~Company may fluctuate~~fuel surcharges billed to our customers. In addition, we incur additional costs when fuel prices rise which cannot be fully recovered due to our engines being idled during cold weather and empty or out-of-route miles which cannot be billed to customers. In February of 2003, fuel prices averaged approximately 15% higher than December of 2002 and 45% higher than February of 2002. Rapid increases in fuel costs or shortages of fuel could have a material adverse effect on our operations or future profitability. As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires us to record the fair value of an asset retirement obligation as a ~~result of these and other risk factors as detailed from time to time~~liability in ~~Company filings~~the period in which we incur a legal obligation associated with the ~~Securities~~retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We also record a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the end of each period to reflect the passage of time and ~~Exchange Commission.~~ changes in the estimated future cash flows underlying the obligation. We were required to adopt SFAS No. 143 on January 1, 2003.   The adoption of SFAS 143 will not have a material effect on our financial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued.   The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on our financial statements. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002, and are included in the notes to our consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of
20

Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to our consolidated financial statements.
ITEM 7a.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ~~- --------------------------------------------------------------------- The Company's~~
Our earnings are affected by changes in short-term interest rates as a result of ~~its~~our issuance of short-term ~~commercial paper. However, due~~debt. We from time to ~~its selective utilization of~~time utilize interest rate swaps to mitigate the effects of interest rate ~~changes are mitigated.~~changes; none were outstanding at December 31, 2002. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more ~~in 2000 than in 1999,~~during the next twelve months, there would be no material adverse impact on ~~the Company's~~our results of ~~operations.~~operations based on variable rate debt outstanding at December 31, 2002. At December 31, 1999, the Company had no interest rate swap agreements in effect. The Company has no material future earnings or cash flow exposures from changes in interest rates related to its long-term debt obligations as all of the Company's long-term debt obligations have fixed rates. At December 31, 1999,2002, the fair value of ~~the Company's~~our fixed rate long-term obligations approximated carrying value.
Although ~~the Company conducts~~we conduct business in foreign countries, international operations are not material to ~~the Company's~~our consolidated financial position, results of operations or cash flows. Additionally, foreign currency transaction gains and losses were not material to ~~the Company's~~our results of operations for the year ended December 31, ~~1999.~~2002. Accordingly, ~~the Company is~~we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on ~~the Company's~~our future costs or on future cash flows itwe would receive from ~~its~~our foreign investment. To date, ~~the Company has~~we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. 15
The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. As of December 31, 2002, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ~~- -----------------------------------------------------~~
~~PAGE - -----------------------------------------------------------------------------------------------------------~~
Independent ~~Auditors'~~Auditors’ Report 17
Consolidated Balance Sheets as of December 31, ~~1999~~2002 and ~~1998 18~~ 2001
Consolidated Statements of Earnings for years ended December 31, ~~1999, 1998~~2002, 2001, and ~~1997 20~~ 2000
Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity and Comprehensive Income for years ended December 31, ~~1999, 1998~~2002, 2001, and ~~1997 21~~ 2000
Consolidated Statements of Cash Flows for years ended December 31, ~~1999, 1998~~2002, 2001, and ~~1997 23~~ 2000
Notes to Consolidated Financial Statements 25
16 ~~INDEPENDENT AUDITORS' REPORT~~
21

Independent Auditors’ Report
The Board of Directors ~~J.B.~~
J. B. Hunt Transport Services, Inc.:
We have audited the accompanying consolidated balance sheets of ~~J.B.~~J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31, ~~1999~~2002 and ~~1998,~~2001, and the related consolidated statements of earnings, ~~stockholders'~~stockholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, ~~1999.~~2002. These consolidated financial statements are the responsibility of the ~~Company's~~Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted ~~auditing standards.~~in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ~~J.B.~~J. B. Hunt Transport Services, Inc. and subsidiaries as of December 31, ~~1999~~2002 and ~~1998,~~2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, ~~1999,~~2002, in conformity with accounting principles generally accepted ~~accounting principles. KPMG LLP Little Rock, Arkansas February 4, 2000 17~~ in the United States of America.
Tulsa, Oklahoma
January 30, 2003
22

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, ~~1999~~2002 and ~~1998 (Dollars~~2001
(Dollars in thousands, except per share amounts)
~~ASSETS 1999 1998 ------------ ------------~~ Current assets: Cash and cash equivalents $ 12,606 9,227 Trade accounts receivable 238,573 184,367 Inventories 7,825 6,917 Prepaid licenses and permits 17,380 14,887 Other current assets 18,757 8,598 Deferred income taxes (note 4) -- 1,275 ------------ ------------ Total current assets 295,141 225,271 ------------ ------------ Property and equipment, at cost: Revenue and service equipment 1,038,056 1,235,824 Land 20,949 20,337 Structures and improvements 76,517 67,937 Furniture and office equipment 103,872 93,935 ------------ ------------ Total property and equipment 1,239,394 1,418,033 Less accumulated depreciation 453,509 492,633 ------------ ------------ Net property and equipment 785,885 925,400 ------------ ------------ Other assets (note 7) 46,438 20,808 ------------ ------------ $ 1,127,464 1,171,479 ============ ============ (Continued)
18

2002

2001

Assets

Current assets:

Cash and cash equivalents

$
80,628

49,245

Trade accounts receivable

237,156

233,246

Inventories

9,515

8,915

Prepaid licenses and permits

20,054

17,507

Other current assets

85,828

75,886

Total current assets

433,181

384,799

Property and equipment, at cost:

Revenue and service equipment

1,096,809

1,067,465

Land

20,469

19,834

Structures and improvements

80,667

78,469

Furniture and office equipment

107,708

98,201

Total property and equipment

1,305,653

1,263,969

Less accumulated depreciation

461,091

432,258

Net property and equipment

844,562

831,711

Other assets (notes 7 and 9)

40,985

43,788

$
1,318,728

1,260,298

23

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, ~~1999~~2002 and ~~1998 (Dollars~~2001
(Dollars in thousands, except per share amounts)
~~LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998 ------------ ------------~~ Current liabilities: Current maturities of long-term debt (note 2) $ 60,000 16,350 Trade accounts payable 180,009 147,967 Claims accruals 788 6,131 Accrued payroll 19,462 23,684 Other accrued expenses 10,371 11,909 ------------ ------------ Total current liabilities 270,630 206,041 ------------ ------------ Long-term debt, excluding current maturities (note 2) 267,639 417,045 Claims accruals 7,368 7,166 Deferred income taxes (note 4) 180,441 165,570 ------------ ------------ Total liabilities 726,078 795,822 ------------ ------------ Stockholders' equity (notes 2 and 3): Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding -- -- Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 39,009,858 shares 390 390 Additional paid-in capital 107,172 106,985 Retained earnings 350,928 326,145 Accumulated other comprehensive loss (5,324) (5,621) ------------ ------------ 453,166 427,899 Treasury stock, at cost (3,370,872 shares in 1999 and 3,401,501 shares in 1998) (51,780) (52,242) ------------ ------------ Total stockholders' equity 401,386 375,657 Commitments and contingencies (notes 2, 3, 5 and 8) ------------ ------------ $ 1,127,464 1,171,479 ============ ============

2002

2001

Liabilities and Stockholders’ Equity

Current liabilities:

Current maturities of long-term debt (note 2)

$
97,010

10,000

Current installments of obligations under capital leases (note 8)

27,138

28,426

Trade accounts payable

117,931

163,291

Claims accruals

14,706

18,003

Accrued payroll

46,511

30,251

Other accrued expenses

11,291

12,713

Deferred income taxes (note 4)

10,742

3,150

Total current liabilities

325,329

265,834

Long-term debt, excluding current maturities (note 2)

104,815

212,950

Obligations under capital leases, excluding current installments (note 8)

114,152

140,657

Other long-term liabilities

1,997

5,275

Deferred income taxes (note 4)

181,948

177,265

Total liabilities

728,241

801,981

Stockholders’ equity (notes 2, 3 and 12):

Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding

—

—

Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 41,774,858 and 39,009,858 shares at December 31, 2002 and 2001, respectively

418

390

Additional paid-in capital

184,683

115,319

Retained earnings

459,803

407,987

Accumulated other comprehensive loss

—

(7,037
)

644,904

516,659

Treasury stock, at cost (2,457,280 shares in 2002 and 3,030,828 shares in 2001)

(54,417
)
(58,342
)
Total stockholders’ equity

590,487

458,317

Commitments and contingencies (notes 2, 4, 6 and 8)

$
1,318,728

1,260,298

See accompanying notes to consolidated financial statements. 19
24

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, ~~1999, 1998~~2002, 2001 and ~~1997 (Dollars~~2000
(Dollars in thousands, except per share amounts)
~~1999 1998 1997 ------------ ------------ ------------~~ Operating revenues $ 2,045,073 1,841,628 1,554,292 Operating expenses: Salaries, wages and employee benefits (note 5) 713,378 642,946 534,415 Purchased transportation 629,163 564,575 475,768 Fuel and fuel taxes 169,407 137,561 141,770 Depreciation 149,817 136,304 130,661 Operating supplies and expenses 186,146 152,622 130,065 Insurance and claims 40,555 32,674 37,904 Operating taxes and licenses 27,118 24,029 24,588 General and administrative expenses 30,750 28,636 19,225 Communication and utilities 21,309 19,237 16,986 ------------ ------------ ------------ Total operating expenses 1,967,643 1,738,584 1,511,382 ------------ ------------ ------------ Operating income 77,430 103,044 42,910 Interest expense 28,346 28,700 24,578 ------------ ------------ ------------ Earnings before income taxes 49,084 74,344 18,332 Income taxes (note 4) 17,175 27,507 6,966 ------------ ------------ ------------ Net earnings $ 31,909 46,837 11,366 ============ ============ ============ Basic earnings per share $ .90 1.32 .31 ============ ============ ============ Diluted earnings per share $ .89 1.28 .31 ============ ============ ============

2002

2001

2000

Operating revenues

$
2,247,886

2,100,305

2,160,447

Operating expenses:

Salaries, wages and employee benefits (note 5)

818,318

790,210

769,393

Rents and purchased transportation

698,455

604,542

694,756

Fuel and fuel taxes

210,632

226,102

242,835

Depreciation and amortization

145,848

142,755

134,391

Operating supplies and expenses

130,853

145,850

130,947

Insurance and claims

56,132

42,381

38,982

Operating taxes and licenses

32,797

32,616

32,641

General and administrative expenses, net of gains

30,029

19,282

28,563

Communication and utilities

23,859

24,358

24,528

Total operating expenses

2,146,923

2,028,096

2,097,036

Operating income

100,963

72,209

63,411

Interest expense

(24,763
)
(27,044
)
(25,747
)
Equity in earnings (loss) of associated companies

(1,353
)
(2,083
)
4,777

Earnings before income taxes

74,847

43,082

42,441

Income taxes (note 4)

23,031

10,137

6,366

Net earnings

$
51,816

32,945

36,075

Basic earnings per share

$
1.36

0.93

1.02

Diluted earnings per share

$
1.33

0.91

1.02

See accompanying notes to consolidated financial statements. 20
25

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of ~~Stockholders'~~Stockholders’ Equity and Comprehensive Income
Years ended December 31, ~~1999, 1998~~2002, 2001 and ~~1997 (Dollars~~2000
(Dollars in thousands, except per share amounts)
ADDITIONAL COMMON PAID-IN STOCK CAPITAL ------------ ------------ Balances at December 31, 1996 $ 390 105,897 Tax expense of stock options exercised -- (54) Sale of treasury stock to employees -- 146 Forfeiture of restricted stock -- (307) Repurchase of treasury stock -- -- Cash dividends paid ($.20 per share) -- -- Comprehensive income - net earnings -- -- ------------ ------------ Balances at December 31, 1997 390 105,682 Tax benefit of stock options exercised -- 925 Sale of treasury stock to employees -- 382 Forfeiture of restricted stock -- (4) Repurchase of treasury stock -- -- Cash dividends paid ($.20 per share) -- -- Comprehensive income - net earnings -- -- ------------ ------------ Balances at December 31, 1998 390 106,985 Sale of subsidiary stock -- 200 Tax benefit of stock options exercised -- 55 Sale of treasury stock to employees -- (65) Forfeiture of restricted stock -- (3) Cash dividends paid ($.20 per share) -- -- Comprehensive income: Net earnings -- -- Foreign currency translation adjustments -- -- ------------ ------------ Total comprehensive income -- -- ------------ ------------ Balances at December 31, 1999 $ 390 107,172 ============ ============

Common
Stock

Additional
Paid-in
Capital

Retained
Earnings

Other
Comprehensive
Loss

Treasury
Stock

Stockholders’
Equity
(Notes 2 and 3)

Balances at December 31, 1999

$
390

107,172

340,749

(5,324
)
(51,780
)
391,207

Comprehensive income:

Net earnings

—

—

36,075

—

—

36,075

Foreign currency translation adjustments

—

—

—

(1,178
)
—

(1,178
)
Total comprehensive income

—

—

—

—

—

34,897

Remeasurement of stock options

—

110

—

—

—

110

Tax benefit of stock options exercised

—

31

—

—

—

31

Sale of treasury stock to employees

—

(223
)
—

—

1,160

937

Repurchase of treasury stock

—

—

—

—

(7,576
)
(7,576
)
Cash dividends paid ($0.05 per share)

—

—

(1,782
)
—

—

(1,782
)
Balances at December 31, 2000

$
390

107,090

375,042

(6,502
)
(58,196
)
417,824

Comprehensive income:

Net earnings

—

—

32,945

—

—

32,945

Foreign currency translation adjustments

—

—

—

(535
)
—

(535
)
Total comprehensive income

—

—

—

—

—

32,410

Tax benefit of stock options exercised

—

5,361

—

—

—

5,361

Sale of treasury stock to employees

—

2,868

—

—

(146
)
2,722

Balances at December 31, 2001

$
390

115,319

407,987

(7,037
)
(58,342
)
458,317

Comprehensive income:

Net earnings

—

—

51,816

—

—

51,816

Foreign currency translation adjustments

—

—

—

7,037

—

7,037

Total comprehensive income

—

—

—

—

—

58,853

Common stock issued

28

68,066

—

—

—

68,094

Tax benefit of stock options exercised

—

5,822

—

—

—

5,822

Stock option exercises, net of stock repurchased for payroll taxes

—

(4,524
)
—

—

3,925

(599
)
Balances at December 31, 2002

$
418

184,683

459,803

—

(54,417
)
590,487

See accompanying notes to consolidated financial statements. ~~(Continued) 21~~
ACCUMULATED TOTAL OTHER STOCKHOLDERS' COMPREHENSIVE RETAINED COMPREHENSIVE TREASURY EQUITY INCOME EARNINGS LOSS STOCK (NOTES 2 AND 3) -------------------- ----------------- ------------------ ----------------- ------------------- 282,364 (5,621) (25,775) 357,255 -- -- -- (54) -- -- 182 328 -- -- (1,269) (1,576) -- -- (22,034) (22,034) (7,321) -- -- (7,321) $ 11,366 11,366 -- -- 11,366 ==================== ----------------- ------------------ ----------------- ------------------- 286,409 (5,621) (48,896) 337,964 -- -- -- 925 -- -- 2,486 2,868 -- -- (18) (22) -- -- (5,814) (5,814) (7,101) -- -- (7,101) $ 46,837 46,837 -- -- 46,837 ==================== ----------------- ------------------ ----------------- ------------------- 326,145 (5,621) (52,242) 375,657 -- -- -- 200 -- -- -- 55 -- -- 477 412 -- -- (15) (18) (7,126) -- -- (7,126) 31,909 31,909 -- -- 31,909 297 -- 297 -- 297 -------------------- ----------------- ------------------ ----------------- ------------------- $ 32,206 -- -- -- -- ==================== ----------------- ------------------ ----------------- ------------------- 350,928 (5,324) (51,780) 401,386 ================= ================== ================= ===================
22
26

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, ~~1999, 1998~~2002, 2001 and ~~1997 (Dollars~~2000
(Dollars in thousands)
~~1999 1998 1997 ----------------- ---------------- ---------------~~ Cash flows from operating activities: Net earnings $ 31,909 46,837 11,366 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 149,817 136,304 130,661 Provision for noncurrent deferred income taxes 14,871 24,661 (1,250) Equity in joint venture earnings (3,141) (1,506) (806) Tax benefit (expense) of stock options exercised 55 925 (54) Forfeiture of restricted stock (18) (22) (1,576) Amortization of discount, net 594 (145) 219 Changes in operating assets and liabilities: Trade accounts receivable (54,206) (15,169) (15,327) Other assets (26,624) (5,686) 11,248 Deferred income taxes 1,275 1,062 8,663 Trade accounts payable 32,042 9,458 22,165 Claims accruals (5,141) (24,177) (9,019) Accrued payroll and other accrued expenses (5,760) 8,820 3,640 ----------------- ---------------- --------------- Net cash provided by operating activities 135,673 181,362 159,930 ---------------- ---------------- --------------- Cash flows from investing activities: Additions to property and equipment (224,795) (306,128) (174,141) Proceeds from sale of equipment 214,493 41,231 84,192 Decrease (increase) in other assets (9,128) 5,858 1,121 ----------------- ---------------- --------------- Net cash used in investing activities (19,430) (259,039) (88,738) ----------------- ---------------- ---------------
~~(Continued) 23~~ J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1999, 1998 and 1997 (Dollars in thousands)
~~1999 1998 1997 ----------------- ---------------- ----------------~~ Cash flows from financing activities: Net repayments of commercial paper borrowings (96,350) (1,150) (37,250) Proceeds from long-term debt -- 99,400 -- Repayments of long-term debt (10,000) (5,000) (5,000) Proceeds from sale of subsidiary stock 200 -- -- Proceeds from sale of treasury stock 412 2,868 328 Repurchase of treasury stock -- (5,814) (22,034) Dividends paid ( 7,126) (7,101) (7,321) ----------------- ---------------- ---------------- Net cash provided by (used in) financing activities (112,864) 83,203 (71,277) ----------------- ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 3,379 5,526 (85) Cash and cash equivalents at beginning of year 9,227 3,701 3,786 ================= ================ ================ Cash and cash equivalents at end of year $ 12,606 9,227 3,701 ================= ================ ================ Supplemental disclosure of cash flow information: Cash paid (received) during the year for: Interest $ 28,944 26,387 24,634 Income taxes 95 11 (6,162) ================= ================ ================

2002

2001

2000

Cash flows from operating activities:

Net earnings

$
51,816

32,945

36,075

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

145,848

142,755

134,391

(Gain) loss on sale of revenue equipment

1,798

(4,833
)
267

Provision for deferred income taxes

12,275

251

5,843

Equity in (earnings) loss of associated companies

1,353

2,083

(4,777
)
Tax benefit of stock options exercised

5,822

5,361

31

Remeasurement of options

—

—

110

Amortization of discount

125

256

55

Changes in operating assets and liabilities:

Trade accounts receivable

(3,910
)
(7,449
)
12,776

Other assets

(3,667
)
3,353

(58,057
)
Trade accounts payable

(45,360
)
4,706

(21,424
)
Claims accruals

(6,575
)
(11,256
)
10,078

Accrued payroll and other accrued expenses

14,838

3,427

9,705

Net cash provided by operating activities

174,363

171,599

125,073

Cash flows from investing activities:

Additions to property and equipment

(239,341
)
(138,466
)
(225,672
)
Proceeds from sale of equipment

80,005

110,711

126,350

Decrease (increase) in other assets

(2,096
)
3,512

(596
)
Net cash used in investing activities

(161,432
)
(24,243
)
(99,918
)
Cash flows from financing activities:

Net borrowings (repayments) of commercial paper borrowings

$
—

(74,400
)
39,400

Repayments of long-term debt

(21,250
)
(10,000
)
(60,000
)
Principal payments under capital lease obligations

(27,793
)
(21,803
)
(3,370
)
Proceeds from sale of common stock

68,094

—

—

Stock option exercise

3,313

2,722

937

Stock repurchased for payroll taxes

(3,912
)
—

—

Repurchase of treasury stock

—

—

(7,576
)
Dividends paid

—

—

(1,782
)
Net cash provided by (used in) financing activities

18,452

(103,481
)
(32,391
)
Net increase (decrease) in cash and cash equivalents

31,383

43,875

(7,236
)
Cash and cash equivalents at beginning of year

49,245

5,370

12,606

Cash and cash equivalents at end of year

$
80,628

49,245

5,370

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest

$
25,063

27,248

26,138

Income taxes

$
22,953

779

3,654

Non-cash activities:

Capital lease obligations for revenue equipment

$
—

96,703

97,553

Assets contributed to associated company

$
—

—

2,927

Sale of joint venture

Non-monetary proceeds

$
1,161

—

—

Note receivable

$
5,876

—

—

See accompanying notes to consolidated financial statements. 24
27

J. B. HUNT TRANSPORT SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, ~~1999, 1998~~2002, 2001 and ~~1997~~ 2000
(1) ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~        Summary of Significant Accounting Policies
(a) ~~DESCRIPTION OF BUSINESS~~                                  Description of Business
J. B. Hunt Transport Services, Inc. (JBHT), together with ~~its~~our wholly-owned subsidiaries, ~~("Company"),~~ is a diversified transportation services ~~and logistics~~ company operating under the jurisdiction of the U.S. Department of Transportation and various state regulatory agencies. ~~For the periods presented, the Company had three distinct operating segments: Van/Intermodal; Logistics;~~
(b)                                 Principles of Consolidation and ~~Dedicated Contract Services. See note 9. (b) PRINCIPLES OF CONSOLIDATION The~~Critical Accounting Policies
JBHT’s consolidated financial statements include ~~the~~our financial statements ~~of the Company~~ and ~~its~~our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Our discussion and analysis of financial condition and operations are based on our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America and contained within this report. Certain amounts included in or affecting our financial statements and related disclosure must be estimated, requiring us to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. Therefore, the reported amount of our assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates.
However, we believe that certain accounting policies are of more significance in our financial statement preparation process than others including determining the economic useful lives of our assets, provisions for uncollectible accounts receivable, exposures under our self-insurance plans and various other recorded or disclosed amounts. To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected.
(c) ~~CASH AND CASH EQUIVALENTS~~                                   Cash and Cash Equivalents
For purposes of the statements of cash flows, ~~the Company considers~~we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
(d) ~~TIRES IN SERVICE The Company capitalizes~~                                 Tires in Service
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.
(e) ~~PROPERTY AND EQUIPMENT~~                                   Property and Equipment
Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of ~~5 - 10~~3 to 15 years for revenue and service equipment, 10 to 40 years for structures and improvements, and 3 to 10 years for furniture and office equipment. ~~Gains (losses) on dispositions~~
Property and equipment under capital leases are stated at the present value of ~~revenue~~minimum lease payments and ~~other equipment, which are included in depreciation expense, were approximately $(849,000), $4,051,000 and $664,000 for~~amortized over the ~~years ended December 31, 1999, 1998 and 1997, respectively.~~ straight-line method over the shorter of the lease term or estimated useful life of the asset.
28

(f) ~~REVENUE RECOGNITION The Company recognizes~~            Revenue Recognition
We recognize revenue based on relative transit time in each reporting period with expenses recognized as incurred. ~~(Continued) 25~~ J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997
(g) ~~INCOME TAXES~~                                  Income Taxes
Income taxes are accounted for under the asset and 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 carryforwards. 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 in income in the period that includes the enactment date.
(h) ~~EARNINGS PER SHARE~~                                  Earnings Per Share
A reconciliation of the numerator and denominator of basic and diluted earnings per share is shown below (in thousands, except per share amounts):
YEARS ENDED DECEMBER 31 ------------------------------------------------------- 1999 1998 1997 --------------- --------------- ---------------- Basic earnings per share: Numerator (net earnings) $ 31,909 46,837 11,366 =============== =============== ================ Denominator (weighted average shares outstanding) 35,628 35,582 36,405 =============== =============== ================ Earnings per share $ .90 1.32 .31 =============== =============== ================ Diluted earnings per share: Numerator (net earnings) $ 31,909 46,837 11,366 =============== =============== ================ Denominator: Weighted average shares outstanding 35,628 35,582 36,405 Effect of common stock options 174 1,019 43 --------------- --------------- ---------------- 35,802 36,601 36,448 =============== =============== ================ Earnings per share $ .89 1.28 .31 =============== =============== ================
~~(Continued) 26~~ J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997

Years ended December 31

2002

2001

2000

Basic earnings per share:

Numerator (net earnings)

$
51,816

32,945

36,075

Denominator (weighted average shares outstanding)

37,984

35,602

35,313

Earnings per share

$
1.36

0.93

1.02

Diluted earnings per share:

Numerator (net earnings)

$
51,816

32,945

36,075

Denominator:

Weighted average shares outstanding

37,984

35,602

35,313

Effect of common stock options

1,058

597

104

39,042

36,199

35,417

Earnings per share

$
1.33

0.91

1.02

Options to purchase shares of common stock that were outstanding during each year but were not included in the computation of diluted earnings per share because the ~~options'~~options’ exercise price was greater than the average market price of the common shares are shown in the table below.
~~1999 1998 1997 ------------------- ------------------- -------------------~~ Number of shares under option 4,316,000 162,000 4,420,000 Range of exercise prices $ 17.38 - 37.50 $ 26.00 - 37.50 $ 15.63 - 24.63

2002

2001

2000

Number of shares under option

250,000

410,900

5,394,000

Range of exercise prices

$
28.32 - 37.50

$
18.38 - 37.50

$
14.00 - 37.50

(i) ~~CREDIT RISK~~            Credit Risk
Financial instruments, which potentially subject ~~the Company~~us to concentrations of credit risk, consist primarily of trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to ~~the Company's~~our large number of customers and the diverse range of industries which they represent. As of December 31, ~~1999~~2002 and ~~1998, the Company~~2001, we had no significant concentrations of credit risk.
29

(j) DERIVATIVE FINANCIAL INSTRUMENTS The Company uses interest rate swaps to hedge the effects of fluctuations in interest rates. The differential paid or received on interest rate swap agreements is accrued as interest rates change and is charged or credited to interest expense over the life of the agreements. Any gains or losses realized upon the termination of an interest rate swap agreement are deferred and amortized over the remaining life of the original term as a charge or credit to interest expense. (k) FOREIGN CURRENCY TRANSLATION            Foreign Currency Translation
Local currencies are generally considered the functional currencies outside the United States. Assets and liabilities are translated at year-end exchange rates for operations in local currency environments. Income and expense items are translated at average rates of exchange prevailing during the year. ~~Prior to January 1, 1997, foreign~~
Foreign currency translation adjustments, which reflect foreign currency exchange rate changes applicable to the net assets of the Mexican operations have been recorded as a separate item of accumulated other comprehensive loss in ~~stockholders' equity. From January 1, 1997 through~~stockholders’ equity as of December 31, ~~1998, Mexico~~2001. This investment was considered a highly inflationary economy as defined by Statement of Financial Accounting Standards ("SFAS") No. 52, FOREIGN CURRENCY TRANSLATION. Accordingly, the more stable currency of the reporting parent (the Company) was used, and the effect of exchange rates resulting in translation adjustments (Continued) 27 J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997sold during 2002.
(k)                                 Stock Based Compensation
We have been recorded as a component of net earnings for the years ended December 31, 1998 and 1997. As of January 1, 1999, Mexico is no longer considered a highly inflationary economy. Accordingly, the local currency has been used, and the effect of exchange rates resulting in translation adjustments have been recorded as a separate item of accumulated other comprehensive loss in stockholders' equity for the year ended December 31, 1999. (l) STOCK BASED COMPENSATION The Company has adopted the ~~disclosure requirements~~intrinsic value based method of ~~SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION and, as permitted under SFAS No. 123, applies~~ Accounting Principles Board (APB) Opinion No. 25,Accounting for Stock Issued to Employees and related interpretations in accounting for compensation costs for ~~its~~our stock option plans. Accordingly, compensation expense is recognized on the date of grant only if the current market price of the underlying common stock at date of grant exceeds the exercise price. ~~(m) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company~~
Had we determined compensation cost based on the fair value at the grant date for our stock options under Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), our net earnings would have been reduced to the pro forma amounts indicated below.

2002

2001

2000

Net earnings (in thousands)

$
51,816

32,945

36,075

As reported

Total stock-based employee compensation expense determined under fair value based methods for all awards, net of taxes

5,008

3,083

5,352

Pro forma

$
46,808

29,862

30,723

Basic earnings per share

As reported

$
1.36

0.93

1.02

Pro forma

$
1.23

0.84

0.87

Diluted earnings per share

As reported

$
1.33

0.91

1.02

Pro forma

$
1.20

0.82

0.87

Pro forma net earnings reflects only options granted since December 31, 1995. Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options’ vesting periods of 5 to 10 years and compensation cost for options granted prior to January 1, 1996 is not considered.
(l)            Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
We continually ~~evaluates~~evaluate the carrying value of ~~its~~our assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of 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 exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (n) USE OF ESTIMATES Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (o) COMPREHENSIVE INCOME
(m)                              Comprehensive Income
Comprehensive income consists of net earnings and foreign currency translation adjustments and is presented in the consolidated statements of ~~stockholders'~~stockholders’ equity. ~~(Continued) 28~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated~~
(n)                                 Claims Accruals
Claims payable represent accruals for the self-insured portion of pending accident liability, workers’ compensation, physical damage and cargo damage. These accruals are estimated based on our evaluation of the nature and severity of individual claims and an estimate of future claims development based on our past claims experience.
Our current insurance coverage specifies that the self-insured limit on the majority of our claims is $1.5 million, which is prefunded with our insurance carrier. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment.
(o)                                 Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We also record a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation will be adjusted at the
30

end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. We were required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS 143 will not have a material effect on our financial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, ~~1999, 1998~~2002 and ~~1997 (p) RECLASSIFICATIONS To conform~~are not expected to have a material effect on our financial statements. The disclosure requirements are effective for financial statements of interim and annual periods ending after December 15, 2002 and are included in the notes to our consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the ~~1999 presentation, certain accounts~~fair value method of accounting for ~~1998~~stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and ~~1997 have been reclassified. The reclassifications had no effect on net earnings.~~ interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.
(2) ~~LONG-TERM DEBT~~        Long-Term Debt
Long-term debt consists of (in thousands):
~~1999 1998 -------------- ---------------~~ Commercial paper $ 35,000 131,350 Senior notes payable, interest at 7.84% payable semiannually -- 5,000 Senior notes payable, due 11/17/00, interest at 6.25% payable semiannually 25,000 25,000 Senior notes payable, due 12/12/00, interest at 6.00% payable semiannually 25,000 25,000 Senior notes payable, due 9/1/03, interest at 6.25% payable semiannually 98,260 98,260 Senior notes payable, due 9/15/04, interest at 7.00% payable semiannually 95,000 100,000 Senior subordinated notes, interest at 7.80% payable semiannually 50,000 50,000 -------------- -------------- 328,260 434,610 Less current maturities (60,000) (16,350) Unamortized discount (621) (1,215) -------------- -------------- $ 267,639 417,045 ============== ==============
~~Under its commercial paper note program, the Company is~~

2002

2001

Senior notes payable, due September 1, 2003, interest at 6.25% payable semianually

$
87,010

98,260

Senior notes payable, due September 15, 2004, interest at 7.00% payable semiannually

95,000

95,000

Senior subordinated notes, due October 30, 2004, interest at 7.80% payable semiannually

20,000

30,000

202,010

223,260

Less current maturities

(97,010
)
(10,000
)
Unamortized discount

(185
)
(310
)

$
104,815

212,950

We are authorized to issue up to ~~$240~~$150 million ~~in notes.~~under our current revolving lines of credit. These ~~notes~~lines of credit are supported by ~~two~~ credit agreements, ~~which aggregate $240 million,~~ with a group of banks, which expire November 14, 2005. No balances were outstanding under these lines of ~~which $120 million expires March 7, 2000 and $120 million expires March 20,~~credit at December 31, 2002. The ~~effective rate on the commercial note program was 5.27% and 5.70% for the years ended December 31, 1999 and 1998, respectively. The 7.84% senior notes were repaid in 1999 and the~~ 7.80% senior subordinated notes are payable in five equal annual installments ~~beginning~~of $10 million, which commenced October 30, 2000.
Under the terms of the credit agreements and the note agreements, ~~the Company is~~we are required to maintain certain financial covenants including leverage tests, minimum tangible net worth levels and other financial ratios. ~~The Company was~~We were in compliance with all of the financial covenants at December 31, ~~1999. (Continued) 29~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December~~ 2002.
31 ~~1999, 1998 and 1997~~

Current maturities of long-term debt at December 31, ~~1999~~2002 consist of the 6.25% senior notes ~~payable due in 2000~~ and the ~~first~~fourth installment of the 7.80% senior subordinated notes. The aggregate annual maturities of long-term debt for each of the ~~five~~two years ending December 31 are ~~as follows (in thousands): 2000, $60,000; 2001, $10,000;~~$97.0 million in 2003 and $105.0 million in 2004. There is no long-term debt due in 2005.
(3)       Capital Stock
In late May and June of 2002, ~~$45,000; 2003, $108,260;~~we closed an offering of approximately 5.9 million shares of common stock. Approximately 2.8 million shares were issued and ~~2004, $105,000. (3) CAPITAL STOCK~~sold by JBHT and 3.1 million shares were sold by a shareholder. The ~~Company maintains~~selling price of the stock was $26 per share before underwriter discounts and other expenses.
We maintain a Management Incentive Plan ~~("Plan"~~(“Plan”) that provides various vehicles to compensate our key employees with ~~Company~~JBHT common ~~stock.~~stock or common stock equivalents. Under the original Plan, ~~the Company was~~we were authorized to award, in aggregate, not more than 5,000,000 shares. During 1998 and again in 2000, the stockholders of ~~the Company~~JBHT amended the Plan whereby ~~the Company is~~we are now authorized to award, in aggregate, not more than ~~6,500,000~~8,500,000 shares. At December 31, ~~1999~~2002, there were approximately ~~605,000~~1,076,000 shares available for grant under the Plan. ~~The Company has~~We have utilized three such vehicles to award stock or grant options to purchase ~~the Company's~~JBHT common stock: restricted stock awards, restricted options and nonstatutory stock options. ~~Restricted~~As of December 31, 2002, there are no restricted stock awards ~~are granted to key employees subject to restrictions regarding transferability and assignment. Shares of Company common stock are~~or restricted options issued to the key employees and held by the Company until each employee becomes vested in the award. Vesting of the awards generally occurs over a four year period of time from the award date. Termination of the employee for any reason other than death, disability or ~~certain cases of retirement causes the unvested portion of the award to be forfeited.~~ outstanding.
The Plan provides that nonstatutory stock options may be granted to key employees for the purchase of ~~Company~~JBHT common stock for 100% of the fair market value of the common stock at the grant date. The options generally vest over a ~~ten year~~ten-year period and are forfeited if the employee terminates for any reason. ~~Compensation expense (benefit) under~~The plan allows the ~~Plan is~~employee to surrender shares of common stock which the employee already owns in full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option. We amended certain vested options related to employees of our logistics segment, extending the exercise period after termination. This resulted in a remeasurement of these options and accordingly $110,000 was charged to earnings over the vesting period and amounted to approximately $(5,400), $20,000, and $(78,000) for the years ended December 31, 1999, 1998 and 1997, respectively. (Continued) 30 J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997 compensation expense in 2000.
A summary of the restricted and nonstatutory options to purchase ~~Company~~JBHT common stock follows:
WEIGHTED AVERAGE NUMBER NUMBER EXERCISE PRICE OF SHARES OF SHARES PER SHARE EXERCISABLE ---------------- ---------------- ---------------- Outstanding at December 31, 1996 2,740,925 $ 17.45 294,950 Granted 800,000 14.73 Exercised (57,650) 16.81 Terminated (443,350) 17.81 ---------------- Outstanding at December 31, 1997 3,039,925 16.70 274,225 Granted 602,000 18.12 Exercised (176,760) 16.66 Terminated (115,275) 16.81 ---------------- Outstanding at December 31, 1998 3,349,890 16.98 323,390 Granted 471,000 14.03 Exercised (26,375) 12.90 Terminated (56,950) 16.09 ---------------- Outstanding at December 31, 1999 3,737,565 16.65 551,940 ================ ================ ================

Number
of Shares

Weighted Average
Exercise
Per Share

Number
of Shares
Exercisable

Outstanding at December 31, 1999

3,737,565

$
16.65

551,940

Granted

908,250

12.75

Exercised

(98,100
)
13.06

Terminated

(237,950
)
16.15

Outstanding at December 31, 2000

4,309,765

15.94

831,812

Granted

881,000

14.43

Exercised

(600,051
)
14.78

Terminated

(553,570
)
17.48

Outstanding at December 31, 2001

4,037,144

15.57

488,620

Granted

992,900

25.41

Exercised

(431,794
)
14.51

Terminated

(147,300
)
15.27

Outstanding at December 31, 2002

4,450,950

$
17.88

494,413

32

During 1995, ~~the~~our Board of Directors established a nonqualified stock option plan to provide performance based compensation to the Chairman of the ~~Board.~~Board (Chairman’s Plan). The ~~plan allows~~Chairman’s Plan allowed the Chairman the option to purchase up to 2.5 million shares of ~~the Company's~~JBHT common stock at a price of $17.63 per share. These options ~~vest~~vested after five ~~years, except for special circumstances~~years. The Chairman's Plan allows the Chairman to surrender shares of common stock which he already owns in ~~which~~full or partial payment of the option price of an option being exercised and/or to satisfy withholding tax obligations incident to the exercise of an option. Under the original Chairman’s Plan the options ~~vest earlier. The options must~~were to be exercised within one year of vesting and all unexercised options ~~will terminate. On January 21,~~would have terminated. During 2000, our stockholders amended the ~~Board of Directors, pending stockholder approval, extended~~Chairman’s Plan whereby the exercise period was extended two years from ~~one~~date of vesting. One million options were exercised during the year to two years. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below.
~~1999 1998 1997 ----------- ----------- -----------~~ Net earnings (in thousands) As reported $ 31,909 46,837 11,366 Pro forma 27,391 42,881 7,800 Basic earnings per share As reported .90 1.32 .31 Pro forma .77 1.21 .21 Diluted earnings per share As reported .89 1.28 .31 Pro forma .76 1.17 .21
~~(Continued) 31~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements~~ended December 31, ~~1999, 1998~~2002 and ~~1997 Pro forma net earnings reflects only~~1.5 million options ~~granted since~~were exercised in 2001. There were no options outstanding for the Chairman’s Plan at December 31, 1995. Therefore, the full impact of calculating compensation costs for stock options under SFAS No. 123 is not reflected in the pro forma net earnings amounts presented above because compensation cost is reflected over the options' vesting periods of 5 to 10 years and compensation cost for options granted prior to January 1, 1996 is not considered. 2002.
The per share weighted-average fair value of stock options granted during ~~1999, 1998~~2002, 2001 and ~~1997~~2000 was ~~$4.13, $13.23~~$14.53, $10.82 and ~~$6.86,~~$9.07, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: ~~1999~~2002 - expected dividend yield ~~1.2%~~0.0%, volatility of ~~51.6%~~54.9%, risk-free interest rate of ~~6.5%~~3.2%, and an expected life of ~~7.3~~6.7 years; ~~1998~~2001 - expected dividend yield ~~.9%~~0.0%, volatility of ~~65.5%~~59.9%, risk-free interest rate of 4.7%, and an expected life of ~~7.7~~6.2 years; ~~1997~~2000 - expected dividend yield ~~1.1%~~0.0%, volatility of ~~34.1%~~52.4%, risk-free interest rate of ~~5.8%~~5.2%, and an expected life of ~~7.7~~6.6 years.
33

The following table summarizes information about stock options outstanding at December 31, ~~1999:~~
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- ------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE RANGE REMAINING EXERCISE EXERCISE OF EXERCISE OPTIONS CONTRACTUAL PRICE OPTIONS PRICE PRICES OUTSTANDING LIFE (IN YEARS) PER SHARE EXERCISABLE PER SHARE ---------------- -------------- --------------- ------------- -------------- ------------- $ 11.58 - 15.00 1,435,950 7.3 $ 13.47 288,175 $ 13.69 15.01 - 18.75 4,202,440 3.5 17.42 141,940 16.66 18.76 - 22.50 348,000 6.8 20.10 64,300 20.37 22.51 - 26.25 106,675 6.1 23.62 46,825 23.10 26.26 - 30.00 134,500 9.4 28.92 9,700 28.63 30.01 - 37.50 10,000 9.5 37.50 1,000 37.50 ---------------- -------------- --------------- ------------- -------------- ------------- $ 11.58 - 37.50 6,237,565 4.7 $ 17.04 551,940 $ 16.34 ================ ============== =============== ============= ============== =============
On January 21, 2000, the Company's Board of Directors declared a cash dividend of $.05 per share payable on February 17, 2000 to shareholders of record on February 3, 2000. (Continued) 32 J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997 2002:

Options outstanding

Options exercisable

Range of exercise prices

Options
outstanding

Weighted
average
remaining
contractual
life (in years)

Weighted
average
exercise
price
per share

Options
exercisable

Weighted
average
exercise
price
per share

$
10.01-20.00

3,233,387

5.7

$
15.14

402,800

$
14.71

20.01-30.00

1,207,563

9.2

25.06

87,613

23.15

30.01-40.00

10,000

6.5

37.50

4,000

37.50

$
10.01-40.00

4,450,950

6.7

$
17.88

494,413

$
16.39

(4) ~~INCOME TAXES~~        Income Taxes
Total income tax (benefit) expense for the years ended December 31, ~~1998, 1997~~2002, 2001 and ~~1996~~2000 was allocated as follows (in thousands):
~~1999 1998 1997 ------------ ------------- ------------~~ Earnings before income taxes $ 17,175 27,507 6,966 Stockholders' equity, for tax benefit (expense) of stock options exercised 55 925 (54) ------------ ------------- ------------ $ 17,120 26,582 7,020 ============ ============ ============

2002

2001

2000

Earnings before income taxes

$
23,031

10,137

6,366

Stockholders’ equity, for tax benefit of stock options exercised

5,823

5,361

31

$
17,208

4,776

6,335

Refundable income taxes at December 31, ~~1999~~2002 were $8,538,000 and ~~1998~~payable income taxes at December 31, 2001 were ~~$3,000 and $937,000, respectively.~~$3,659,000. These amounts have been included in other current assets and liabilities on the balance ~~sheet.~~ sheet, respectively.
Income tax expense (benefit) attributable to earnings before income taxes consists of (in thousands):
~~1999 1998 1997 ------------ ------------ -------------~~ Current expense (benefit): Federal $ 662 1,410 (715) State and local 367 375 268 ------------- ------------ ------------ 1,029 1,785 (447) ------------- ------------ ------------ Deferred expense (benefit): Federal 18,233 21,354 7,096 State and local (2,087) 4,368 317 ------------- ------------ ------------ 16,146 25,722 7,413 ------------- ------------ ------------ Total tax expense $ 17,175 27,507 6,966 ============= ============ ============
~~The following is a reconciliation between~~

2002

2001

2000

Current expense:

Federal

$
10,413

9,661

66

State and local

343

225

457

10,756

9,886

523

Deferred expense (benefit):

Federal

3,892

208

8,032

State and local

8,383

43

(2,189
)

12,275

251

5,843

Total tax expense

$
23,031

10,137

6,366

34

Income tax expense attributable to earnings before income taxes differed from the ~~effective income~~amounts computed using the statutory federal tax rate ~~and~~of 35% for the ~~applicable statutory Federal income tax rate for each of the three fiscal years in the period ended December 31, 1999:~~
~~1999 1998 1997 ------------ ----------- --------------~~ Income tax - statutory rate 35.00% 35.00 35.00 State tax, net of Federal benefit (1.77) 4.15 2.07 Other, net 1.77 (2.15) 0.93 ----------- ----------- ------------- Effective income tax rate 35.00% 37.00 38.00 =========== =========== =============
~~(Continued) 33~~ J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997 following reasons (in thousands):

2002

2001

2000

Income tax - statutory rate

$
26,196

15,078

14,854

State tax, net of Federal effect

1,295

(174
)
(1,125
)
Sale/leaseback benefit

(8,021
)
(8,021
)
(7,863
)
Mexican joint-venture redemption

—

2,331

—

Change in effective state tax rate, net of federal effect

4,514

—

—

Other, net

(953
)
923

500

Total tax expense

$
23,031

10,137

6,366

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, ~~1999~~2002 and ~~1998~~2001 are presented below (in thousands):
~~1999 1998 ------------- -------------~~ Deferred tax assets: Claims accruals, principally due to accrual for financial reporting purposes $ 7,261 8,020 Tax credit carryforwards 7,321 7,321 Accounts receivable, principally due to allowance for doubtful accounts 3,999 3,972 Other 4,176 3,892 ------------ ------------- Total gross deferred tax assets 22,757 23,205 ------------ ------------- Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and capitalized interest $ 137,903 174,570 Prepaid permits and insurance, principally due to expensing for income tax purposes 12,809 7,943 Sale and leaseback transaction 44,709 -- Other 7,777 4,987 ------------ ------------- Total gross deferred tax liabilities 203,198 187,500 ------------ ------------- Net deferred tax liability $ 180,441 164,295 ============= =============
~~The Company believes its~~

2002

2001

Deferred tax assets:

Claims accruals, principally due to accrual for financial reporting purposes

$
3,362

12,419

Tax credit carryforwards

17,037

12,181

Net operating loss carryforwards

9,382

—

Accounts receivable, principally due to allowance for doubtful accounts

1,812

1,635

Other

5,560

1,266

Total gross deferred tax assets

$
37,153

27,501

2002

2001

Deferred tax liabilities:

Plant and equipment, principally due to differences in depreciation and capitalized interest

$
169,515

162,406

Prepaid permits and insurance, principally due to expensing for income tax purposes

16,514

7,877

Sale and leaseback transaction

20,102

28,123

Mexican joint-venture

—

3,396

Other

23,712

6,114

Total gross deferred tax liabilities

229,843

207,916

Net deferred tax liability

$
192,690

180,415

35

We believe our history of profitability and taxable income, the reversal of deferred tax liabilities, and ~~its~~our utilization of tax planning sufficiently supports the carrying amount of the deferred tax assets. Accordingly, ~~the Company has~~we have not recorded a valuation allowance as all deferred tax benefits are more likely than not to be realized.
At December 31, ~~1999, the Company~~2002, we had general business tax credit carryforwards of approximately ~~$2,621,000~~$4,174,000 expiring from the year 2007 to 2009, and alternative minimum tax credit carryforwards with no expiration of approximately ~~$4,700,000.~~ $12,863,000.
In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million. These transactions used a structure that the Internal Revenue Service (IRS) has recently indicated it intends to examine. We have voluntarily disclosed these transactions to the IRS and in October 2002, the IRS began their examination of the specific facts of these transactions. If the IRS challenges these transactions, we intend to vigorously defend them. However, if the IRS successfully challenges these transactions, and disallows some or all of the tax benefits that have been realized, these actions could have a material adverse effect on our financial condition and operating results.
(5) ~~EMPLOYEE BENEFIT PLANS The Company maintains~~       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. ~~The Company matches~~We match a specified percentage of employee contributions, subject to certain limitations. For the years ended December 31, ~~1999, 1998~~2002, 2001 and ~~1997, total Company~~2000, JBHT matching contributions to the plan ~~including matching 401(k) contributions,~~ were ~~$7,348,000, $6,533,000~~$6,813,000, $7,555,000 and ~~$4,951,000,~~$6,553,000, respectively. ~~(Continued) 34~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated~~
(6)       Fair Value of Significant Financial ~~Statements December 31, 1999, 1998~~Instruments
(a)                                 Cash and ~~1997 (6) FAIR VALUE OF SIGNIFICANT FINANCIAL INSTRUMENTS CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, AND TRADE ACCOUNTS PAYABLE~~ Cash Equivalents, Accounts Receivable, and Trade Accounts Payable
The carrying amount approximates fair value because of the short maturity of these instruments. ~~LONG-TERM DEBT The carrying amount of the commercial paper debt approximates the fair value because of the short maturity of the commercial paper instruments.~~
(b)                                 Long-Term Debt
The fair value of the fixed rate debt is presented as the present value of future cash flows discounted using ~~the Company's~~our current borrowing rate for notes of comparable maturity. The calculation arrives at a theoretical amount ~~the Company~~we would pay a creditworthy third party to assume ~~its~~our fixed rate obligations and not the termination value of these obligations. Consistent with market practices, such termination values may include various prepayment and termination fees that ~~the Company~~we would contractually be required to pay if itwe retired the debt early. INTEREST RATE SWAP AGREEMENTS The fair values of interest rate swap agreements are obtained from dealer quotes. These values represent the estimated amount the Company would pay to terminate such agreements, taking into consideration current interest rates and the creditworthiness of the counterparties. All interest rate swap agreements were terminated during 1999 for an insignificant gain.
The estimated fair values of ~~the Company's~~our financial instruments are summarized as follows (in thousands):
AT DECEMBER 31, 1999 AT DECEMBER 31, 1998 ------------------------------- ----------------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ------------- ------------- ------------- ------------ Cash and cash equivalents $ 12,606 12,606 9,227 9,227 Accounts receivable 238,573 238,573 184,367 184,367 Trade accounts payable 180,009 180,009 147,967 147,967 Long-term debt: Commercial paper 35,000 35,000 131,350 131,350 Fixed rate obligations 293,260 287,754 303,260 302,131 Interest rate swap agreements -- -- -- (1,622) ============= ============= ============= ============
~~(Continued) 35~~ J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997

At December 31, 2002

At December 31, 2001

Carrying
amount

Estimated
fair value

Carrying
amount

Estimated
fair value

Cash and cash equivalents

$
80,628

80,628

49,245

49,245

Trade accounts receivable

237,156

237,156

233,246

233,246

Trade accounts payable

117,931

117,931

163,291

163,291

Long-term debt:

Fixed rate obligations

202,010

213,397

223,260

228,331

36

(7) ~~RELATED PARTY TRANSACTIONS The Company advances~~       Related Party Transactions
We advanced premiums on life insurance policies on the lives of ~~the Company's~~our principal stockholder and his wife. In 2002, we ceased advancing premiums on these policies. All premiums paid by ~~the Company,~~JBHT, along with accrued interest thereon, are reimbursable from a trust which is the owner and beneficiary of the policy. ~~The Company has~~We have a guarantee from the stockholder for the amount of premiums paid by ~~the Company~~JBHT together with interest at the rate of 5% per ~~annum.~~annum through June of 2000. In July of 2000 our Board of Directors approved an adjustment to the interest rate to be our average borrowing rate when additional advances were made. The interest rate changed to 7.42% in August 2001 and to 7.39% in July 2002. The amounts reimbursable to ~~the Company~~JBHT amount to approximately ~~$7,044,000~~$10,153,000 and ~~$6,068,000~~$9,049,000 at December 31, ~~1999~~2002 and ~~1998,~~2001, respectively, and ~~amounts~~ are included in other assets in ~~the~~our accompanying consolidated balance sheets. See also note 9 for disclosure of transactions with an associated company.
(8) ~~COMMITMENTS AND CONTINGENCIES~~        Commitments and Contingencies
During 1999, ~~the Company~~we entered into a sale and leaseback transaction for a portion of ~~its~~our container fleet. Containers having a net book value of approximately ~~$175 million~~$175,000,000 were sold to third party leasing companies at approximate net book value. A gain on ~~this~~the transaction has been deferred and will be amortized to income in relation to rent expense recognized under the leases. The containers are being leased back under operating leases over terms of four to ten years. ~~The Company~~We also ~~leases~~lease terminal facilities, shuttle yards and computer equipment under operating leases having various terms. ~~The future~~Under the terms of certain lease agreements, we are required to maintain certain covenants including minimum credit ratings. We were in compliance with these requirements at December 31, 2002.
During 2000, we entered into various capital lease agreements to lease revenue equipment. These capital leases are secured by revenue equipment with a net book value at December 31, 2002 of approximately $139,000,000 and contain certain guarantees of residual value at the end of the lease terms with fixed price purchase options.
Future minimum lease payments under ~~all noncancellable~~noncancelable operating leases at(with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, ~~1999, principally for revenue equipment,~~2002 are ~~shown in the following table~~ (in thousands): 2000 $84,315 2001 49,072 2002 37,075 2003 23,924 2004 21,941 Thereafter 35,372

Capital
Leases

Operating
Leases

2003

$
34,481

74,233

2004

115,405

56,414

2005

—

53,813

2006

—

44,053

2007

—

36,716

Thereafter

—

18,387

Total minimum lease payments

149,886

283,616

Less amount representing interest (at rates ranging from 4.2% to 8.5%)

8,596

Present value of net minimum capital lease payments

141,290

Less current installments of obligations under capital leases

27,138

Obligations under capital leases excluding current installments

$
114,152

37

At December 31, 2002 and 2001 gross property and equipment recorded under capital leases was $193,953,000 and $194,256,000, respectively.
Total rent expense was ~~$39,862,000~~$115,084,000 in ~~1999, $28,692,000~~2002, $98,783,000 in ~~1998,~~2001, and ~~$17,656,000~~$87,545,000 in ~~1997,~~2000, respectively.
At December 31, ~~1999, the Company~~2002, we had committed to purchase ~~$242 million~~approximately $184,000,000 of revenue and service equipment net of expected proceeds from sale or trade-in allowances.
We adopted the provisions of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The ~~Company~~Interpretation requires that we recognize the fair value of guarantee and indemnification arrangements issued or modified by JBHT after December 31, 2002, if these arrangements are within the scope of that Interpretation. In addition, under previously existing generally accepted accounting principles, we continue to monitor the conditions that are subject to the guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under the guarantees and indemnifications when those losses are estimable.
In 2002, we issued financial standby letters of credit as a guarantee of our performance under certain operating lease commitments and insurance policies. If we default on our commitments under the lease agreements or insurance policies, we are required to perform under these guarantees. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $27 million. As of December 31, 2002, no amounts have been accrued for any estimated losses under the obligations, as it is probable that the suppliers will be able to make all scheduled payments.
We are involved in certain claims and pending litigation arising from the normal conduct of business. Based on the present knowledge of the facts and, in certain cases, opinions of outside counsel, ~~management believes~~we believe the resolution of claims and pending litigation will not have a material adverse effect on ~~the~~our financial condition or our results of operations.
(9)       Investment in Affiliated Company
In March 2000, we, along with five other motor carriers, announced the intent to contribute all of our non-asset based logistics business into a recently formed joint venture, Transplace, Inc. (TPI). TPI is an Internet-based global transportation logistics company. TPI commenced operations effective July 1, 2000. We contributed all of our logistics segment business and all related intangible assets, plus $5.0 million of cash, in exchange for an approximate 27% initial membership interest in TPI. We account for our approximate 27% interest in TPI utilizing the equity method of accounting. No gain or loss was recognized upon formation and contribution of logistics segment assets to TPI. Equity in earnings of TPI was a loss of $1,353,000 in 2002. On December 31, 2002, we acquired an additional 10% interest in TPI from one of the ~~Company. (Continued) 36~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements~~initial members.
We provided various services to TPI under a shared service agreement, the terms of which expired on December 31, ~~1999, 1998~~2002. The services included the following: payroll and ~~1997 (9) SEGMENT INFORMATION Van/~~benefits; accounting; computer system maintenance; office facilities; and telecommunications. The fees from these services approximated $6,299,000 and $6,483,000 in 2002 and 2001, respectively, and were recorded in the consolidated statement of earnings as reimbursements of salaries, wages and employee benefits and general and administrative expenses.
We earned revenues of $40,406,000 and $69,696,000 from TPI in providing transportation services during 2002 and 2001, respectively.
At December 31, 2002 and 2001, trade accounts receivable included $2,383,000 and $4,198,000, respectively, due from TPI for freight and fees related to the shared service agreement.
38

For the years ending December 31, 2002 and 2001, we incurred approximately $34,994,000 and $32,649,000, respectively, in purchased transportation expense as a result of TPI providing transportation services.
(10)       Segment Information
We have three reportable business segments, Truck (JBT), Intermodal ~~services include~~(JBI), and Dedicated Contract Services (DCS). JBT business includes full truck-load, ~~dry-Van, container-sizable~~dry-van freight which is typically transported utilizing company-owned or controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. The ~~load may be~~JBI segment includes freight which is transported ~~entirely~~ by ~~company-owned and controlled equipment or a~~rail over at least some portion of the movement ~~may be handled~~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 typically includes company-owned revenue equipment and employee drivers which are assigned to a ~~third-party motor carrier~~specific customer, traffic lane or service. DCS operations usually include formal, written long-term agreements or contracts which govern services performed and applicable rates.
Prior to July 1, 2000, the Logistics business segment primarily consisted of J. B. Hunt Logistics (JBL) a ~~railroad. Logistics provides~~wholly-owned subsidiary which provided a wide range of comprehensive transportation and freight management services. Such services ~~including~~included experienced professional managers, information and optimization technology and the actual design or redesign of freight system solutions. ~~Logistics may utilize Van/Intermodal and/~~JBL utilized JBT, JBI or ~~dedicated contract~~DCS owned ~~and~~or controlled ~~equipment, unrelated third-party equipment~~assets and employees, third-party carriers, or a combination of these options to meet ~~the customer's~~customer service requirements. ~~Dedicated Contract Services~~JBL services typically include company-owned revenue equipment and employee drivers that are assigned to a specific customer, traffic lane or service. The dedicated service is engineered and customized for the specific customer and is typicallywere provided in accordance with a written long-term ~~agreement. Substantially all~~agreements. As discussed in Note 9, we exchanged our ownership in JBL for an initial membership interest in TPI. Effective July 1, 2000, we began accounting for our ownership in TPI utilizing the equity method of accounting. As of December 31, 2000, TPI qualified as a reportable business segment and, accordingly, the Logistics segment information shown below includes both JBL and TPI. Information for TPI included in the following tables is the entity’s results of operations without regard to our ownership interest which is then subtracted in reconciling to the consolidated statement of earnings.
Our customers are geographically dispersed across the United States and include many of the ~~Company's~~“Fortune 500” companies. One customer accounted for approximately 18%, 16% and 12% of consolidated operating revenues are from domestic customers. Intersegment revenues primarily consist of Van/Intermodal services provided to logistics. Such services are priced at approximately the same basis as services to external customers. Certain administrativein 2002, 2001 and other costs are allocated among the segments utilizing various allocation factors which include revenues, equipment usage and maintenance, accounts receivable and other estimates. Substantially all of the Company's capital expenditures are made by the Van/Intermodal division with assets transferred to the dedicated contract division as needed.2000, respectively. A summary of ~~other~~certain segment information is presented below (in millions):
ASSETS -------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Van/Intermodal $ 900 1,025 931 Logistics 73 43 29 Dedicated Contract Services 95 62 42 Other (includes corporate) 59 41 20 ----------- ----------- ----------- Total $ 1,127 1,171 1,022 =========== =========== ===========
~~(Continued) 37~~ ~~J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated~~

Assets

2002

2001

2000

Truck

$
844

892

871

Intermodal

227

172

128

Logistics

—

—

33

Dedicated Contract Services

227

179

138

Other (includes corporate and intersegment eliminations)

21

17

62

Total

$
1,319

1,260

1,232

39

Revenues

2002

2001

2000

Truck

$
827

829

834

Intermodal

809

740

681

Logistics

—

—

727

Dedicated Contract Services

628

549

479

Total segment revenues

2,264

2,118

2,721

Inter-segment eliminations

(16
)
(18
)
(63
)
Less revenues of equity method investee

—

—

(498
)
Consolidated statements of earnings amount

$
2,248

2,100

2,160

Operating income

2002

2001

2000

Truck

$
27

9

(7
)
Intermodal

55

42

37

Logistics

—

—

9

Dedicated Contract Services

20

17

28

Other

(1
)
4

(3
)
Total segment operating income

$
101

72

64

Less operating income of equity method investee

—

—

(1
)
Consolidated statements of earnings amount

$
101

72

63

Depreciation expense

2002

2001

2000

Truck

$
69

70

65

Intermodal

19

21

23

Dedicated Contract Services

49

44

36

Other

9

8

10

Total

$
146

143

134

40

(11)       Quarterly Financial ~~Statements December 31, 1999, 1998 and 1997~~
REVENUES -------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Van/Intermodal $ 1,415 1,379 1,153 Logistics 388 317 254 Dedicated Contract Services 320 212 151 Other -- 8 60 ----------- ----------- ----------- Subtotal 2,123 1,916 1,618 Inter-segment eliminations (78) (74) (64) ----------- ----------- ----------- Total $ 2,045 1,842 1,554 =========== =========== =========== OPERATING INCOME -------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Van/Intermodal $ 44 81 28 Logistics 11 8 6 Dedicated Contract Services 24 17 11 Other (2) (3) (2) ----------- ----------- ----------- Total $ 77 103 43 =========== =========== =========== NET DEPRECIATION EXPENSE -------------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Van/Intermodal $ 113 106 96 Logistics 1 1 1 Dedicated Contract Services 26 18 13 Other 10 11 21 ----------- ----------- ----------- Total $ 150 136 131 =========== =========== ===========
The Company announced in late 1999, a decision to split the Van/Intermodal business into separate intermodal and truck business segments. This segregation is in progress and the Company intends to begin reporting on four segments (Intermodal, Truck, Logistics and Dedicated Contract Services) in the first quarter of 2000. (Continued) 38 J. B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES Consolidated Financial Statements December 31, 1999, 1998 and 1997 (10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Information (Unaudited)
Operating results by quarter for the years ended December 31, ~~1999~~2002 and ~~1998~~2001 are as follows (in thousands, except per share data):
QUARTER ----------------------------------------------------------------- FIRST SECOND THIRD FOURTH ------------ ------------- ------------ ------------ 1999: Operating revenues $ 470,244 497,554 523,901 553,374 ============ ============= ============ ============ Operating income $ 24,174 24,240 14,975 14,041 ============ ============= ============ ============ Net earnings $ 10,585 10,785 4,958 5,581 ============ ============= ============ ============ Basic earnings per share $ .30 .30 .14 .16 ============ ============= ============ ============ Diluted earnings per share $ .29 .30 .14 .16 ============ ============= ============ ============ 1998: Operating revenues $ 413,466 460,985 473,388 493,789 ============ ============= ============ ============ Operating income $ 21,658 31,613 24,424 25,349 ============ ============= ============ ============ Net earnings $ 9,483 15,624 10,848 10,882 ============ ============= ============ ============ Basic earnings per share $ .27 .44 .30 .31 ============ ============= ============ ============ Diluted earnings per share $ .26 .42 .30 .30 ============ ============= ============ ============
39

Quarter

First

Second

Third

Fourth

2002:

Operating revenues

$
510,221

557,328

582,671

597,666

Operating income

$
13,631

28,509

28,026

30,797

Net earnings

$
4,854

15,479

16,756

14,727

Basic earnings per share

$
0.13

0.42

0.43

0.37

Diluted earnings per share

$
0.13

0.40

0.42

0.37

2001:

Operating revenues

$
495,419

521,489

537,156

546,241

Operating income

$
8,367

15,818

11,950

36,074

Net earnings

$
1,645

8,568

4,549

18,183

Basic earnings per share

$
0.05

0.24

0.13

0.51

Diluted earnings per share

$
0.05

0.24

0.12

0.50

41

ITEM 9.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No reports on Form 8-K have been filed within the twenty-four months prior to December 31, ~~1999~~2002 involving a change of accountants or disagreements on accounting and financial disclosure.
PART III
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
DIRECTORS
The schedule of directors is hereby incorporated by reference from the Notice and Proxy Statement ~~For~~for Annual ~~Stockholder's~~ Meeting of Stockholders to be held April ~~20, 2000~~24, 2003 set forth under section entitled ~~"Proposal~~“Proposal One Election of ~~Directors".~~ Directors.”
EXECUTIVE OFFICERS
Information with respect to our executive officers ~~of the Company~~ is set forth in Item 4 of this Report under the caption ~~"Executive Officers of the Company".~~ “Our Executive Officers.”
ITEM 11.   EXECUTIVE COMPENSATION
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for Items 11 and 12 is hereby incorporated by reference from the Notice and Proxy Statement ~~For~~for Annual ~~Stockholders'~~ Meeting of Stockholders to be held on April ~~20, 2000~~24, 2003 set forth under sections entitled ~~"Stock Ownership," "Report~~“Principal Stockholders of the Company,” “Report of the Compensation Committee, ~~on Executive~~” “2003 Performance-based Compensation,~~" "2000 Performance Based Compensation,"~~” and ~~"Compensation~~“Compensation Committee Interlocks and Insider Participation." ”
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for Item 13 is hereby incorporated by reference from Note (7) Related Party Transactions and Note (9) Investment in Affiliated Company of the Notes to Consolidated Financial Statements and from the Notice and Proxy Statement ~~For~~for Annual ~~Stockholders'~~ Meeting of Stockholders to be held on April ~~20, 2000~~24, 2003 set forth under the section entitled ~~"Compensation~~“Compensation Committee Interlocks and Insider Participation.~~" PART IV~~ ”
ITEM 14.   CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in alerting them, in a timely manner, to material information required to be disclosed by us in our periodic reports to the Securities and Exchange Commission. In addition, the CEO and CFO determined that there were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of their most recent evaluation.
42

PART IV
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a)   Financial Statements, Financial Statement Schedules and Exhibits:
(1)           Financial Statements
The financial statements filed as part of this filing are listed on the index to Consolidated Financial Statements, Item 8, on page 21.
(3)Exhibits
The response to this portion of Item 14 is submitted as a separate section of this report ("(“Exhibit ~~Index"~~Index”)~~. 40~~ on page 47.
(b)   Reports on Form 8-K
On November 21, 2002, we filed a current report on Form 8-K announcing that we had reached an agreement in principle with Werner Enterprises, Inc. to transfer a portion of Werner Enterprises’ ownership interest in Transplace, Inc. to J.B. Hunt.
On November 25, 2002, we filed a current report on Form 8-K announcing that an agreement had been reached with Freightliner LLC for a comprehensive truck sale and trade package for 2003.
On January 30, 2003, we filed a current report on Form 8-K announcing our financial results for the fourth quarter and year ended December 31, 2002.
43

SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant ~~had~~has duly caused this ~~Report~~report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on February 28,2000. J.B. HUNT TRANSPORT SERVICES, INC. (Registrant) By: /s/ Kirk Thompson --------------------------- Kirk Thompson President and Chief Executive Officer By: /s/ Jerry W. Walton --------------------------- Jerry W. Walton Executive Vice President, Finance and Administration, Chief Financial Officer By: /s/ Donald G. Cope --------------------------- Donald G. Cope Vice President, Controller, Chief Accounting Officer the 10th day of March, 2003.
J. B. HUNT TRANSPORT SERVICES, INC.
(Registrant)
By:
/s/
Kirk Thompson
Kirk Thompson
President and Chief Executive Officer
By:
/s/
Jerry W. Walton
Jerry W. Walton
Executive Vice President, Finance and Administration,
Chief Financial Officer
By:
/s/
Donald G. Cope
Donald G. Cope
Senior Vice President, Controller,
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this ~~Report~~report has been signed below by the following persons on the 10th day of March, 2003 on behalf of the registrant and in the capacities ~~and on the dates~~ indicated.
~~/s/~~
/s/
John A. Cooper, Jr.
Member of the Board ~~February 28, 2000 - -------------------------------------------- of Directors~~
John A. Cooper, Jr. ~~/s/~~
of Directors
/s/
Wayne Garrison
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
Wayne Garrison
of Directors (Chairman) ~~Wayne Garrison /s/~~
/s/
Gene George
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
Gene George
of Directors ~~Gene George /s/~~
/s/
Thomas L. Hardeman
Member of the Board ~~February 28, 2000 - -------------------------------------------- of Directors~~
Thomas L. Hardeman ~~/s/~~
of Directors
/s/
J. Bryan Hunt, Jr.
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
J. Bryan Hunt, Jr.
of Directors (Vice Chairman) ~~J. Bryan Hunt, Jr. /s/~~
/s/
J.B. Hunt
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
J.B. Hunt
of Directors (Senior Chairman) ~~J.B.~~
/s/
Johnelle D. Hunt ~~/s/ Johnelle Hunt~~
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
Johnelle D. Hunt
of Directors (Corporate ~~Johnelle Hunt~~ Secretary) ~~/s/ Lloyd E. Peterson~~
/s/
James L. Robo
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
James L. Robo
of Directors ~~Lloyd E. Peterson /s/~~
/s/
Kirk Thompson
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
Kirk Thompson
of Directors (President and ~~Kirk Thompson~~
Chief Executive Officer) ~~/s/ John A. White~~
/s/
Leland Tollett
Member of the Board ~~February 28, 2000 - --------------------------------------------~~
Leland Tollett
of Directors
/s/
John A. White
Member of the Board
John A. White
of Directors
41
44

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
J.B. Hunt Transport Services, Inc.
I, Kirk Thompson, certify that:
1.               I have reviewed this annual report on Form 10-K of J.B. Hunt Transport Services, Inc.;
2.               Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.               Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a)              designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)             evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)              presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.               The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 10, 2003
/s/ Kirk Thompson
Kirk Thompson
President and Chief Executive Officer
45

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
J.B. Hunt Transport Services, Inc.
I, Jerry W. Walton, certify that:
1.               I have reviewed this annual report on Form 10-K of J.B. Hunt Transport Services, Inc.;
2.               Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.               Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a)              designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)             evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
c)              presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.               The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 10, 2003
/s/ Jerry W. Walton
Jerry W. Walton
Executive Vice President, Finance and
Administration,
Chief Financial Officer
46

EXHIBIT INDEX
Exhibit
Number
Description ~~- --------------------------------------------------------------------------------~~
3A
The ~~Company's~~Company’s Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the ~~Company's~~Company’s S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028).
3B
The ~~Company's~~Company’s Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the ~~Company's~~Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).
10A
Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the ~~Company's~~Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).
10B
The Company has an Employee Stock Purchase Plan filed on Form S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form ~~S-8~~D-8 on April 16, 1991 (Registration ~~Statement~~ Number 33-40028). The Management Incentive Plan is ~~incorporated~~Incorporated herein by reference from Exhibit 4B of the Registration Statement 33-40028. The Company amended and restated its Employee Retirement Plan on Form S-8 (Registration Statement Number 33-57127) filed December 30, 1994. The Employee Retirement Plan is incorporated herein by reference from Exhibit 99 of Registration Statement Number 33-57127. The Company amended and restated its Management ~~Incentive~~ Plan on Form S-8 (Registration ~~Statement~~ Number 33-40028) filed ~~July 7, 1995.~~August 14, 2001. The Company filed the ~~Chairman's~~Chairman’s Stock Option Incentive Plan as part of a definitive 14A on March 26, 1996.
21
Subsidiaries of J.B. Hunt Transport Services, Inc. - J.B. Hunt Transport, Inc., a Georgia corporation - L.A., Inc., an Arkansas corporation - J.B. Hunt Corp., a Delaware corporation - J.B. Hunt Logistics, Inc., an Arkansas corporation - Comercializadora Internacional de Cargo S.A. De C.V., a Mexican corporation - Hunt Mexicana, S.A. de C.V., a Mexican corporation - Servicios de Logistica de Mexico, S.A. de C.V., a Mexican corporation - Servicios Administratios de Logistica, S.A. de C.V., a Mexican corporation - Asesoria Administrativa de Logistica, S.A. de C.V., a Mexican corporation. - FIS, Inc., a Nevada corporation
23
Consent of KPMG LLP 27
99.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the President and Chief Executive Officer
99.2
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Executive Vice President of Finance and Administration and Chief Financial ~~Data Schedule for the year ended December 31, 1999.~~ Officer
42

PART I

Item 1.	Business

Item 2.	Properties

Item 3.	Legal Proceedings

Item 4.	Submission of Matters to a Vote of Security Holders

PART II

Item 5.	Market for Registrant’s Common Stock and Related Security Holder Matters

Item 6.	Selected Financial Data

Item 7.	Management’s Discussion and Analysis of Results of Operations and Financial Condition

Item 7a.	Quantitative and Qualitative Disclosures About Market Risk

Item 8.	Financial Statements and Supplementary Data

Item 9.	Disagreements on Accounting and Financial Disclosure

PART III

Item 10.	Directors and Executive Officers of Registrant

Item 11.	Executive Compensation

Item 12.	Security Ownership of Certain Beneficial Owners and Management

	2002				2001
Period	High		Low		High		Low
1st Quarter	$	29.39	$	22.07	$	20.50	$	12.88
2nd Quarter	32.37		24.60		20.75		14.63
3rd Quarter	29.83		21.55		25.60		12.15
4th Quarter	30.32		21.25		25.17		11.93

Years Ended December 31	2002		2001		2000		1999		1998
Operating revenues	$	2,247.9	$	2,100.3	$	2,160.4	$	2,045.1	$	1,841.6
Operating income	101.0		72.2		63.4		74.3		101.5
Net earnings	51.8		32.9		36.1		31.9		46.8
Diluted earnings per share	1.33		.91		1.02		.89		1.28
Cash dividends per share	—		—-		.05		.20		.20
Total assets	1,318.7		1,260.3		1,231.9		1,127.5		1,171.5
Long-term debt and lease obligations	219.0		353.6		300.4		267.6		417.0
Stockholders’ equity	590.5		458.3		417.8		391.2		365.5

	Gross Revenue								Operating Income
	2002			2001			% Change		2002		2001
JBT	$	827.3		$	828.6		—		26.6		$	8.7
JBI	809.1			740.5			9	%	54.6		42.1
DCS	628.3			548.7			15	%	19.7		17.4
JBL	—			—			—		—-		—
Other	—			.6			—		.1		4.0
Subtotal	2,264.7			2,118.4			7	%	$	101.0	72.2
Inter-segment eliminations	(16.8		)	(18.1		)	—		—		—
Total	$	2,247.9		$	2,100.3		7	%	$	101.0	$	72.2

	Percentage of Operating Revenue				Percentage Change Between Years
	2002		2001		2002 vs. 2001

Operating revenues	100.0	%	100.0	%	7.0	%
Operating expenses:
Salaries, wages and employee benefits	36.4	%	37.6	%	3.6	%
Rents and purchased transportation	31.1		28.8		15.5
Fuel and fuel taxes	9.4		10.8		(6.8	)
Depreciation and amortization	6.5		6.8		2.2
Operating supplies and expenses	5.8		6.9		(10.3	)
Insurance and claims	2.5		2.0		32.4
Operating taxes and licenses	1.4		1.6		.6
General and administrative expenses, net of gains	1.3		.9		55.7
Communication and utilities	1.1		1.2		(2.0	)
Total operating expenses	95.5		96.6		5.9
Operating income	4.5		3.4		39.8
Interest expense	(1.1	)	(1.3	)	(8.4	)
Equity in earnings (loss) of associated companies	(.1	)	—		(35.0	)
Earnings before income taxes	3.3		2.1		73.7
Income taxes	1.0		.5		127.2
Net earnings	2.3	%	1.6	%	57.3	%

	Years Ended December 31 (000)
	2002			2001
TPI	$	(1,353	)	$	(1,918	)

Mexican joint venture	—			(165		)

	$	(1,353	)	$	(2,083	)

	Year Ended December 31 (000)
	2001			2000
TPI	$	(1,918	)	$	440

Mexican joint venture	(165		)	4,337

	$	(2,083	)	$	4,777

As of December 31	2002		2001		2000
Working capital ratio	1.33		1.45		1.04
Current maturities of long-term debt and lease obligations (millions)	$	124	$	38	$	101
Total debt and capitalized lease obligations (millions)	$	343	$	392	$	401
Total debt to equity	.58		.86		.96
Total debt as a percentage of total capital	.37		.46		.49

	Amounts Due By Period
	Total		One Year Or Less		One To Three Years		Four To Five Years		After Five Years

Operating Leases	$	283,616	$	74,233	$	110,227	$	80,769	$	18,387

Capital leases	149,886		34,481		115,405		—		—

Senior and subordinated notes payable	202,010		97,010		105,000		—		—

Subtotal	$	635,512	$	205,724	$	330,632	$	80,769	$	18,387

Commitments to acquire revenue equipment	184,000		184,000		—		—		—

Total	$	819,512	$	389,724	$	330,632	$	80,769	$	18,387

	Commitments Expiring By Period
	Total		One Year Or Less		One To Three Years		Four To Five Years	After Five Years

Revolving credit arrangements	$	150,000	$	—	$	150,000	—	—-
Standby letters of credit	26,510		26,510		—		—	—
Total	$	176,510	$	26,510	$	150,000	—	—

	2002		2001
Assets

Current assets:
Cash and cash equivalents	$	80,628	49,245
Trade accounts receivable	237,156		233,246
Inventories	9,515		8,915
Prepaid licenses and permits	20,054		17,507
Other current assets	85,828		75,886
Total current assets	433,181		384,799

Property and equipment, at cost:
Revenue and service equipment	1,096,809		1,067,465
Land	20,469		19,834
Structures and improvements	80,667		78,469
Furniture and office equipment	107,708		98,201

Total property and equipment	1,305,653		1,263,969
Less accumulated depreciation	461,091		432,258
Net property and equipment	844,562		831,711
Other assets (notes 7 and 9)	40,985		43,788
	$	1,318,728	1,260,298

	2002			2001
Liabilities and Stockholders’ Equity

Current liabilities:
Current maturities of long-term debt (note 2)	$	97,010		10,000
Current installments of obligations under capital leases (note 8)	27,138			28,426
Trade accounts payable	117,931			163,291
Claims accruals	14,706			18,003
Accrued payroll	46,511			30,251
Other accrued expenses	11,291			12,713
Deferred income taxes (note 4)	10,742			3,150

Total current liabilities	325,329			265,834

Long-term debt, excluding current maturities (note 2)	104,815			212,950
Obligations under capital leases, excluding current installments (note 8)	114,152			140,657
Other long-term liabilities	1,997			5,275
Deferred income taxes (note 4)	181,948			177,265

Total liabilities	728,241			801,981

Stockholders’ equity (notes 2, 3 and 12):
Preferred stock, par value $100. Authorized 10,000,000 shares; none outstanding	—			—
Common stock, par value $.01 per share. Authorized 100,000,000 shares; issued 41,774,858 and 39,009,858 shares at December 31, 2002 and 2001, respectively	418			390
Additional paid-in capital	184,683			115,319
Retained earnings	459,803			407,987
Accumulated other comprehensive loss	—			(7,037	)
	644,904			516,659
Treasury stock, at cost (2,457,280 shares in 2002 and 3,030,828 shares in 2001)	(54,417		)	(58,342	)
Total stockholders’ equity	590,487			458,317
Commitments and contingencies (notes 2, 4, 6 and 8)
	$	1,318,728		1,260,298

	Common Stock		Additional Paid-in Capital		Retained Earnings		Other Comprehensive Loss		Treasury Stock		Stockholders’ Equity (Notes 2 and 3)
Balances at December 31, 1999	$	390	107,172		340,749		(5,324	)	(51,780	)	391,207
Comprehensive income:
Net earnings	—		—		36,075		—		—		36,075
Foreign currency translation adjustments	—		—		—		(1,178	)	—		(1,178	)
Total comprehensive income	—		—		—		—		—		34,897
Remeasurement of stock options	—		110		—		—		—		110
Tax benefit of stock options exercised	—		31		—		—		—		31
Sale of treasury stock to employees	—		(223	)	—		—		1,160		937
Repurchase of treasury stock	—		—		—		—		(7,576	)	(7,576	)
Cash dividends paid ($0.05 per share)	—		—		(1,782	)	—		—		(1,782	)
Balances at December 31, 2000	$	390	107,090		375,042		(6,502	)	(58,196	)	417,824
Comprehensive income:
Net earnings	—		—		32,945		—		—		32,945
Foreign currency translation adjustments	—		—		—		(535	)	—		(535	)
Total comprehensive income	—		—		—		—		—		32,410
Tax benefit of stock options exercised	—		5,361		—		—		—		5,361
Sale of treasury stock to employees	—		2,868		—		—		(146	)	2,722
Balances at December 31, 2001	$	390	115,319		407,987		(7,037	)	(58,342	)	458,317
Comprehensive income:
Net earnings	—		—		51,816		—		—		51,816
Foreign currency translation adjustments	—		—		—		7,037		—		7,037
Total comprehensive income	—		—		—		—		—		58,853
Common stock issued	28		68,066		—		—		—		68,094
Tax benefit of stock options exercised	—		5,822		—		—		—		5,822
Stock option exercises, net of stock repurchased for payroll taxes	—		(4,524	)	—		—		3,925		(599	)
Balances at December 31, 2002	$	418	184,683		459,803		—		(54,417	)	590,487

	2002			2001
Senior notes payable, due September 1, 2003, interest at 6.25% payable semianually	$	87,010		98,260

Senior notes payable, due September 15, 2004, interest at 7.00% payable semiannually	95,000			95,000

Senior subordinated notes, due October 30, 2004, interest at 7.80% payable semiannually	20,000			30,000
	202,010			223,260
Less current maturities	(97,010		)	(10,000	)
Unamortized discount	(185		)	(310	)
	$	104,815		212,950

	Number of Shares		Weighted Average Exercise Per Share		Number of Shares Exercisable
Outstanding at December 31, 1999	3,737,565		$	16.65	551,940
Granted	908,250		12.75
Exercised	(98,100	)	13.06
Terminated	(237,950	)	16.15

Outstanding at December 31, 2000	4,309,765		15.94		831,812
Granted	881,000		14.43
Exercised	(600,051	)	14.78
Terminated	(553,570	)	17.48

Outstanding at December 31, 2001	4,037,144		15.57		488,620
Granted	992,900		25.41
Exercised	(431,794	)	14.51
Terminated	(147,300	)	15.27

Outstanding at December 31, 2002	4,450,950		$	17.88	494,413

		Options outstanding				Options exercisable
Range of exercise prices		Options outstanding	Weighted average remaining contractual life (in years)	Weighted average exercise price per share		Options exercisable	Weighted average exercise price per share
$	10.01-20.00	3,233,387	5.7	$	15.14	402,800	$	14.71
20.01-30.00		1,207,563	9.2	25.06		87,613	23.15
30.01-40.00		10,000	6.5	37.50		4,000	37.50
$	10.01-40.00	4,450,950	6.7	$	17.88	494,413	$	16.39

	2002		2001
Deferred tax assets:
Claims accruals, principally due to accrual for financial reporting purposes	$	3,362	12,419
Tax credit carryforwards	17,037		12,181
Net operating loss carryforwards	9,382		—
Accounts receivable, principally due to allowance for doubtful accounts	1,812		1,635
Other	5,560		1,266
Total gross deferred tax assets	$	37,153	27,501

	2002		2001
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation and capitalized interest	$	169,515	162,406
Prepaid permits and insurance, principally due to expensing for income tax purposes	16,514		7,877
Sale and leaseback transaction	20,102		28,123
Mexican joint-venture	—		3,396
Other	23,712		6,114
Total gross deferred tax liabilities	229,843		207,916
Net deferred tax liability	$	192,690	180,415

	At December 31, 2002			At December 31, 2001
	Carrying amount		Estimated fair value	Carrying amount	Estimated fair value
Cash and cash equivalents	$	80,628	80,628	49,245	49,245
Trade accounts receivable	237,156		237,156	233,246	233,246
Trade accounts payable	117,931		117,931	163,291	163,291
Long-term debt:
Fixed rate obligations	202,010		213,397	223,260	228,331

	Capital Leases		Operating Leases

2003	$	34,481	74,233
2004	115,405		56,414
2005	—		53,813
2006	—		44,053
2007	—		36,716
Thereafter	—		18,387
Total minimum lease payments	149,886		283,616
Less amount representing interest (at rates ranging from 4.2% to 8.5%)	8,596

Present value of net minimum capital lease payments	141,290
Less current installments of obligations under capital leases	27,138

Obligations under capital leases excluding current installments	$	114,152

	Revenues
	2002			2001		2000
Truck	$	827		829		834
Intermodal	809			740		681
Logistics	—			—		727
Dedicated Contract Services	628			549		479
Total segment revenues	2,264			2,118		2,721
Inter-segment eliminations	(16		)	(18	)	(63	)
Less revenues of equity method investee	—			—		(498	)
Consolidated statements of earnings amount	$	2,248		2,100		2,160

ASSOCIATED COMPANY - MEXICO

Workers’ Compensation and Accident Costs

Revenue Equipment

Revenue Recognition

RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES The Company generates

	Depreciation expense
	2002		2001	2000
Truck	$	69	70	65
Intermodal	19		21	23
Dedicated Contract Services	49		44	36
Other	9		8	10
Total	$	146	143	134

	Quarter
	First		Second	Third	Fourth
2002:
Operating revenues	$	510,221	557,328	582,671	597,666
Operating income	$	13,631	28,509	28,026	30,797
Net earnings	$	4,854	15,479	16,756	14,727
Basic earnings per share	$	0.13	0.42	0.43	0.37
Diluted earnings per share	$	0.13	0.40	0.42	0.37

2001:
Operating revenues	$	495,419	521,489	537,156	546,241
Operating income	$	8,367	15,818	11,950	36,074
Net earnings	$	1,645	8,568	4,549	18,183
Basic earnings per share	$	0.05	0.24	0.13	0.51
Diluted earnings per share	$	0.05	0.24	0.12	0.50

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

By:	/s/	Kirk Thompson
		Kirk Thompson
		President and Chief Executive Officer

By:	/s/	Jerry W. Walton
		Jerry W. Walton
		Executive Vice President, Finance and Administration,
		Chief Financial Officer

By:	/s/	Donald G. Cope
		Donald G. Cope
		Senior Vice President, Controller,
		Chief Accounting Officer

/s/	John A. Cooper, Jr.	Member of the Board ~~February 28, 2000 - -------------------------------------------- of Directors~~
	John A. Cooper, Jr. ~~/s/~~	of Directors

/s/	Wayne Garrison	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	Wayne Garrison	of Directors (Chairman) ~~Wayne Garrison /s/~~

/s/	Gene George	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	Gene George	of Directors ~~Gene George /s/~~

/s/	Thomas L. Hardeman	Member of the Board ~~February 28, 2000 - -------------------------------------------- of Directors~~
	Thomas L. Hardeman ~~/s/~~	of Directors

/s/	J. Bryan Hunt, Jr.	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	J. Bryan Hunt, Jr.	of Directors (Vice Chairman) ~~J. Bryan Hunt, Jr. /s/~~

/s/	J.B. Hunt	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	J.B. Hunt	of Directors (Senior Chairman) ~~J.B.~~

/s/	Johnelle D. Hunt ~~/s/ Johnelle Hunt~~	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	Johnelle D. Hunt	of Directors (Corporate ~~Johnelle Hunt~~ Secretary) ~~/s/ Lloyd E. Peterson~~

/s/	James L. Robo	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	James L. Robo	of Directors ~~Lloyd E. Peterson /s/~~

/s/	Kirk Thompson	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	Kirk Thompson	of Directors (President and ~~Kirk Thompson~~ Chief Executive Officer) ~~/s/ John A. White~~

/s/	Leland Tollett	Member of the Board ~~February 28, 2000 - --------------------------------------------~~
	Leland Tollett	of Directors

/s/	John A. White	Member of the Board
	John A. White	of Directors

Date: March 10, 2003	/s/ Kirk Thompson
	Kirk Thompson
	President and Chief Executive Officer

Date: March 10, 2003	/s/ Jerry W. Walton
	Jerry W. Walton
	Executive Vice President, Finance and Administration, Chief Financial Officer

Exhibit Number		Description ~~- --------------------------------------------------------------------------------~~

3A		The ~~Company's~~Company’s Amended and Restated Articles of Incorporation dated May 19, 1988 (incorporated by reference from Exhibit 4A of the ~~Company's~~Company’s S-8 Registration Statement filed April 16, 1991; Registration Statement Number 33-40028).

3B		The ~~Company's~~Company’s Amended Bylaws dated September 19, 1983 (incorporated by reference from Exhibit 3C of the ~~Company's~~Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).

10A		Material Contracts of the Company (incorporated by reference from Exhibits 10A-10N of the ~~Company's~~Company’s S-1 Registration Statement filed February 7, 1985; Registration Number 2-95714).

10B		The Company has an Employee Stock Purchase Plan filed on Form S-8 on February 3, 1984 (Registration Number 2-93928), and a Management Incentive Plan filed on Form ~~S-8~~D-8 on April 16, 1991 (Registration ~~Statement~~ Number 33-40028). The Management Incentive Plan is ~~incorporated~~Incorporated herein by reference from Exhibit 4B of the Registration Statement 33-40028. The Company amended and restated its Employee Retirement Plan on Form S-8 (Registration Statement Number 33-57127) filed December 30, 1994. The Employee Retirement Plan is incorporated herein by reference from Exhibit 99 of Registration Statement Number 33-57127. The Company amended and restated its Management ~~Incentive~~ Plan on Form S-8 (Registration ~~Statement~~ Number 33-40028) filed ~~July 7, 1995.~~August 14, 2001. The Company filed the ~~Chairman's~~Chairman’s Stock Option Incentive Plan as part of a definitive 14A on March 26, 1996.

21		Subsidiaries of J.B. Hunt Transport Services, Inc. - J.B. Hunt Transport, Inc., a Georgia corporation - L.A., Inc., an Arkansas corporation - J.B. Hunt Corp., a Delaware corporation - J.B. Hunt Logistics, Inc., an Arkansas corporation - Comercializadora Internacional de Cargo S.A. De C.V., a Mexican corporation - Hunt Mexicana, S.A. de C.V., a Mexican corporation - Servicios de Logistica de Mexico, S.A. de C.V., a Mexican corporation - Servicios Administratios de Logistica, S.A. de C.V., a Mexican corporation - Asesoria Administrativa de Logistica, S.A. de C.V., a Mexican corporation. - FIS, Inc., a Nevada corporation

23		Consent of KPMG LLP 27

99.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the President and Chief Executive Officer

99.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by the Executive Vice President of Finance and Administration and Chief Financial ~~Data Schedule for the year ended December 31, 1999.~~ Officer