J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-K

For The Calendar Year Ended December 31, 20022005

Table of Contents

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FORWARD-LOOKING STATEMENTS

This report, including documents which are incorporated by reference, and other documents which we file periodically with the Securities and Exchange Commission (SEC), contains statements that may be considered to be “forward-looking statements.”  Such statements relate to our predictions concerning future events or operations and are within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. 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. Stockholders 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. Some of the factors and events that are not within our control and that 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, terrorist 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.

You should understand that many important factors, in addition to those listed above, could impact us financially. Our operating results may fluctuate as a result of these and other risk factors or events as described in our filings with the SEC. Some important factors that could cause our actual results to differ from estimates or projections contained in the forward-looking statements are described under “Risk Factors” in Item 1A. 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.

PART I

ITEM 1. BUSINESS

GENERALOVERVIEW

We are one of the largest surface transportation companies in North America. J.B. Hunt Transport Services, Inc., (JBHT) is a publicly held holding company that, together with its wholly-ownedour wholly owned subsidiaries (“JBHT”), isand associated companies, provides a diversifiedwide range of transportation services company operating underto a diverse group of customers throughout the jurisdiction of the U.S. Department of Transportation (DOT)continental United States, Canada and various state regulatory agencies.  JBHT is anMexico. We were incorporated in Arkansas holding company incorporated on August 10, 1961.  JBHT has1961, and have been a publicly held company since our initial public offering in 1983. ThroughOur service offerings include transportation of full truckload containerizable freight, which we directly transport utilizing our subsidiariescompany-controlled revenue equipment and associated companies, we provide a wide rangecompany drivers or independent contractors. This full truckload freight may be transported entirely by truck over roads and highways, or may be moved, in part, by rail. We have arrangements with most of logisticsthe major North American rail carriers to transport truckload freight in containers and transportation services to a diverse group of customers.  We directly manage or 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 transportation function to us, or an associated company.trailers. We also directly transport full-load containerizableprovide customized freight throughout the continental United Statesmovement, revenue equipment, labor and portions of Canadasystems services that are tailored to meet individual customers’ requirements and Mexico.  Transportationtypically involve long-term contracts. These arrangements are known as dedicated services and may utilize ourinclude multiple pickups and drops, home deliveries, freight handling, specialized equipment and employees, or may employ equipmentnetwork design. We also have a 37% ownership interest in a global transportation logistics company, Transplace, Inc. (TPI). TPI is co-owned by five large transportation companies and provides supplemental sales, management and freight movement services provided by associated or unrelated third parties in the transportation industry.  We hadthrough arrangements with a large number of common carriers.

Our business operations are primarily organized through three reportabledistinct, but complementary, business segments during calendar year 2002.segments. These segments include full truck-load,truckload dry-van (JBT), intermodal (JBI) and dedicated contract services (DCS). In addition, we operated a logistics business segment from 1992 until mid 2000.  Effective July 1,mid-2000. In 2000, JBHT,we, along with fivea number of other publicly-heldpublicly held transportation companies,

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contributed our existing logistics business to a new, commonly owned company, Transplace, Inc. (TPI). Our business is somewhat seasonal with slightly higher freight volumes typically experienced during the months of August through early November. Our DCS segment is subject to less seasonal variation than our JBT and JBI segments. For the calendar year ended December 31, 2005, our consolidated revenue totaled $3.13 billion, after the elimination of inter-segment business. Of the total, $1.28 billion, or 41%, was generated by our JBI business segment. Our JBT segment generated $1.02 billion, or 32%, of total revenue and DCS represented $844 million, or 27%.

Additional general information about us is available from our Internet website at www.jbhunt.com. We make a number of reports and other information available free of charge on our website including our annual report on Form 10-K, our proxy statement and our earnings releases. Our website also contains corporate governance guidelines, our code of ethics, our whistleblower policy, committee charters for our Board of Directors and other corporate policies.

OUR MISSION AND STRATEGY

We forge long-term partnerships with key customers that include supply-chain management as an integral part of their strategy. Working in concert, we drive out cost, add value and function as an extension of our customers’ enterprise. We believe that our operating strategy can add value to customers and increase our profits and returns to stockholders.

RECENT FOCUS

During the past five years, we have taken significant steps to re-establish a primary focus on the profitability of our three business segments. In each segment we have implemented capacity management decision making processes that result in the deployment of our assets where we believe they will generate more profit. We continually focus on replacing less-profitable freight with higher-margin freight and lanes. Selective pricing actions and ensuring that we properly charge for all services provided have also been areas of major focus. We have also worked to ingrain safety into our corporate culture, which has reduced our accident and injury costs during the past several years.

OPERATING SEGMENTS

Segment information is included in Note 11 to our Consolidated Financial Statements.

JBT SEGMENTSegment

PrimaryOur primary transportation service offerings classified in this segment include full truck-load,truckload, dry-van freight, which is predominantly transported utilizing company-owned revenue equipment.  Freight is pickedcompany-controlled tractors operating over roads and highways. We pick up our freight at the dock or specified location of the shipper and transportedtransport the load directly to the location of the consignee. The load may beMost of our loads are transported entirely by our power equipmentcompany-owned tractors and employee drivers, or a portion of the movement mayby independent contractors (ICs) who agree to transport freight in our trailers. We also assign freight to be handled by a third-party motor carrier. Typically, the charges for the entirecarriers other than ICs. This type of freight movement are billed totypically results in our billing the customer by usfor all applicable freight charges and, we, in turn, paypaying the third-partythird party for their portion of the transportation services provided. JBT operatesThis type of service usually results in our recognition of revenue for the entire billing and the payment to the third-party being classified as purchased transportation expense.

We operate utilizing certain Canadian authorities, which were initially granted in 1988 and mayallowing us to 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 basisICs in the JBT segment.  These independent contractors (I/C’s) provide their own tractorssegment and agree to transport freight in JBHT owned or controlled trailing equipment.  Atat December 31, 2002, approximately 680 I/C’s were2005, we had 1,142 ICs operating in the JBT segment. JBT gross revenue for calendar year 20022005 was $827 million,$1.02 billion, compared with $829$928 million in 2001.2004. At December 31, 2002,2005, the JBT segment operated 4,924 company owned4,368 company-controlled tractors and employed 7,573 5,882

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people, 5,5414,895 of whom were drivers. A portion of our JBT segment non-driver employees provide freight solicitation, order entry and other operational support services to our other two segments. We record inter-segment credits and charges to properly reflect these inter-segment support services.

JBI SEGMENTSegment

TransportationThe transportation service offerings of our JBI segment utilize agreementsarrangements with various railroadsmost major North American rail carriers to provide proven intermodal freight solutions tofor our customers in all major lanes of commerce inthroughout the continental 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 agreementOur JBI segment began operations in 1989 with a unique partnership with the former Santa Fe Railway (now the BNSF Railway Company), a watershed event in 1989.  Through growth of this transportation segmentthe industry and additions, deletions,the first agreement that linked major rail and mergerstruckload carriers in a joint marketing environment. Essentially, JBI draws on the intermodal (also known as “container on flatcar”) services 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,for the underlying linehaul movement of its equipment and Florida East Coast railroads.  Typically, freight is picked upperforms the pickups and deliveries (“drayage”) for customers at the dockorigin and destination rail terminal locations. We may directly provide the drayage service at either the origin or specified location of the shipper and transported to thedestination rail carrier for loading on rail cars.  Upon completionramp utilizing our company-controlled tractors, or we may purchase these services from third parties. JBI provides seamless coordination of the rail routing, the freight is picked up at the rail carrier’s ramp and transported to the consignee.  These originatingover-the-road transport movements for our customers and destination drays may be transported entirely by our power equipment or may be handled bydelivers a third-party motor carrier.  It is our customary business practice that all chargessingle billing for the complete door-to-door service.

Our intermodal program has grown from 20 loads in late 1989 to nearly 600,000 in 2005. JBI operates 23,755 company-controlled containers systemwide. 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 portionfleet is comprised of the transportation services provided.  In 1993, rail operations were expanded to utilize53-foot, high-cube containers which can be separated from the chassis and double-stacked on rail carsis designed to provide improved productivity.  This concept is known as container-on-flatcar.  Mosttake advantage of intermodal double-stack economics and superior ride quality. JBI also manages a fleet of 1,341 company-owned tractors and 1,719 company drivers in support of intermodal operations. We also began utilizing ICs in our agreements with rail carriers allow for the majority ofintermodal segment during 2005. We had 16 ICs operating in our JBI business carried under these rail agreements to receive priority space on trains and preferential loading and unloadingsegment at rail facilities.  JBI gross revenue for calendar year 2002 was $809 million, compared with $740 million in

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2001.December 31, 2005. At December 31, 2002,2005, the total JBI employee count was 1,951, including the 1,719 drivers. Revenue for the JBI segment operated 917 tractorsin calendar year 2005 was $1.28 billion, compared with $1.12 billion in 2004. As previously announced, an arbitration process with the BNSF Railway Company (BNI) was concluded during the third quarter of 2005. In accordance with the settlement terms, we paid BNI $25.8 million in the third quarter of 2005. Normal commercial business activity continued between the parties during the approximate 15-month arbitration process, and employed 1,557 people, 1,215 of whom were drivers.normal business operations have continued since the final settlement.

DCS SEGMENTSegment

Since 1992, we have offered dedicated contract carriage as a service option. DCS segment operations specialize in the design, development and execution of supply chaincustomer-specific fleet solutions. Capitalizing on advanced systems and technologies, DCS offers engineered transportation engineering 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,dry-van, flatbed, temperature-controlled, dump trailers and temperature-controlledlocal inner-city operations.  Near 100% on-time service is standard with efficient routes executed to design specifications.

DCS operations focus on driving out cost and enhancingdelivering recognizable customer value through leveragingbest-in-class service, cost control and guaranteed dedicated capacity. DCS utilizes a proprietary methodology known as Customer Value Delivery™ (CVD) to create, measure and communicate value created for each customer. DCS leverages the JBHT network for backhaul repositioning freight.  Network freight may be usednetwork 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 revenue for calendar year 20022005 was $628$844 million, compared with $549$760 million in 2001.2004. In early 2004, we began utilizing ICs in the DCS segment and at December 31, 2005, we had 152 ICs operating in the DCS segment. At December 31, 2002,2005, the DCS segment operated 4,8124,771 company-controlled and 87 customer-owned tractors, and employed 5,9895,834 people, 5,2735,144 of whom were drivers.

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LOGISTICS BUSINESS AND ASSOCIATED COMPANYLogistics Business and Associated Company

We formallyofficially began offering transportation logistics transportation services in 1992 through a wholly-ownedwholly owned subsidiary, J.B. Hunt Logistics, Inc. (JBL). JBL services frequently included an arrangement whereby a shipper might outsource a substantial portion of its entire distribution and transportation process to one organization. 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 logistics customer or service arrangement may havefrequently required a significant amount of up-front analysis and design time, whileduring which alternatives were considered and custom systems and software were developed. Effective July 1, 2000, we contributed substantially all of our existing JBL segment business all related intangible assets and $5 million of cash to a newly-formed, commonly-ownednewly formed company, Transplace, Inc. (“TPI”).

TPI. TPI is an Internet-based global transportationprovides supplemental logistics company.  TPI commenced operations in Julysales and management support and also has arrangements with approximately 2,800 motor carriers to provide capacity to transport freight. Our share 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%.  TheTPI’s financial results of TPI are included on a one-line, non-operating item included on our Consolidated Statements of Earnings entitled “Equity“equity in earnings (loss)loss of associated companies.company.”

ASSOCIATED COMPANY - MEXICOOperations in Mexico

We have provided transportation services to and from Mexico since 1989. These services frequentlytypically involve equipment interchange operations with various Mexican motor carriers. In addition,As previously reported, we sold a joint venture agreementinterest with Transportacion Maritima Mexicana (TMM), one of the largesta Mexican transportation companiescompany in Mexico, was signed2002. We received all remaining funds due in 1992.  The joint venture, Comercializadora Internacional de Carga S.A. de C.V. and its subsidiaries, originated and completed northbound and southbound international truck movements between the U.S. and Mexico.  The joint venture also provided Mexican domestic irregular route truck service, refrigerated freight services, Mexican dedicated contract business and short-haul drayageconnection with this sale during 2005. This transaction had no significant impact on our earnings. We continue to and from the Mexican maritime ports and rail heads.  For the calendar year ended December 31, 2001 and for prior years, our share of the Mexican joint venture operating results was included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled “Equity in earnings (loss) of associated companies.  During the first quarter of 2002, we sold our joint venture interest in Mexico to TMM.  We still provide transportation services to and from Mexico primarily by utilizing the services of a variety of Mexican carriers.

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MARKETING AND OPERATIONSMarketing and Operations

We transport, or arrange for the transportation of, a wide range of freight, including forest and paper products, including automotive parts, department storebuilding materials, general merchandise, paper and wood products, food and beverages, plastics, chemicals and manufacturing materialsautomotive parts. Our customer base is extremely diverse and supplies.includes a large number of Fortune 500 companies. Our primary customers include manyability to offer multiple services, utilizing our three business segments and a full complement of the “Fortune 500” companies.logistics services through third parties, represents a competitive advantage. We provide a broad range of transportation services to larger shippers that seek to use a limited number of “core” carriers. Our largest customer in 20022005 was Wal-Mart Stores, Inc., which accounted for approximately 18%15% of our total revenue.  A broad geographic dispersion and a good balance in the type of freight transported allows 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.

We generally market all of our service offerings through a nationwide sales and marketing network. All transportation services offered are typically billed directly to the customer by usWe do have some sales and all inquiries, claims and other customer contacts are handled by us.  Certain marketing sales, engineering and design functions are assigned to each operating segment.  However, marketing and pricing strategy, and national account service coordination is managed at the corporate level.business-unit level, particularly for our DCS segment. In accordance with our typical arrangements, we bill the customer for all services and we, in turn, pay all third parties for their portion of transportation services provided. In recent years, we have re-established a primary focus on improving the profitability of each of our business segments and charging a fair price for all services provided.

PERSONNELPeople

AtWe believe that one of the factors differentiating us from our competitors is our service-oriented people. As of December 31, 2002,2005, we had approximately 16,370 employees, including 11,758 company drivers. We also had arrangements with 1,310 ICs to transport freight in our trailing equipment. In addition, we employed 16,265 people, including 12,029 drivers.  Historically1,170 mechanics and 3,439 office personnel at the truckload transportation industry and JBHT have experienced shortagesend 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 1996, we announced and implemented an approximate 33% increase in wages for our over-the-road drivers.  As anticipated, this increase in driver compensation was partially offset by lower driver recruiting and training expense, reduced accident and safety costs and better equipment utilization.  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 2001 and 2002.  During calendar year 2002, we have once again experienced some difficulty attracting and retaining a desired level of drivers.  To date, we continue to hire only experienced drivers and, although recruiting costs have increased significantly, operations have not been disrupted by a shortage of qualified drivers.  At December 31, 2002, we also employed approximately 3,100 office employees and 1,137 mechanics.2005. None of our employees areis represented by unions or covered by collective bargaining agreements.

Our industry has periodically had a difficult time attracting and retaining enough qualified truck drivers. It is also common for the driver turnover rate of individual carriers to exceed 100%. It has been our practice during the past few years to compensate our drivers at an above-average level in order to attract a higher caliber of experience and minimize turnover. During 2005, we increased company driver and IC compensation in order to attract and retain an adequate supply of qualified drivers. While we have not, to date, experienced significant operational disruptions due to driver shortages, we expect

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the costs to recruit, train and retain company drivers and ICs will continue to rise in the foreseeable future.

REVENUE EQUIPMENTRevenue Equipment

As of December 31, 2005, we operated 10,480 company-controlled tractors. In addition, our 1,310 ICs operate their own tractors, but transport freight in our trailing equipment. We operate with standardized tractors in as many fleets as possible, particularly in our JBT and JBI fleets. Based on our customers’ preferences and the actual business application, our DCS fleet is more diversified. We believe operating with relatively newer revenue equipment provides better customer service, attracts quality drivers and lowers maintenance expense. At December 31, 2002, we owned or leased 10,653 company operated tractors, 26,0872005, the average age of our combined tractor fleet was 2.2 years, our trailers averaged 5.0 years of age and 19,672 containers.our containers averaged 6.8 years. We believe that modern, late-model, cleanperform routine servicing and preventative maintenance of our equipment differentiates quality customer service, increases equipment utilization and reduces maintenance costs and downtime.  at most of our regional terminal facilities.

We generallytypically operate with newer revenue equipment in theour JBT segment with the age of tractorsto minimize downtime and trailers approximating 2.1 years and 2.2 years, respectively, at December 31, 2002.  Somewhat older equipment and tractors designed for local and regional operations are typically utilized in themaximize utilization. Our JBI and DCS segments.  Specially designedsegment utilizes high-cube containers, which can be separated from the chassis and double-stacked on rail carscars. We are also operated by JBI.  The average agecurrently in the process of JBI tractorsexpanding our container fleet and containers at December 31, 2002 was approximately 4.6 years and 5.2 years, respectively.  The JBI segment commenced receiving brand new containers and reconditionedreconditioning our chassis in late 2001.  Approximately 6,300 new containers and 6,300 new and reconditioned chassis were placed in service during 2002.fleet. The composition of the dedicated contractour DCS trailing fleet varies with specific customer service requirements.requirements and may include dry-vans, flatbeds, temperature-controlled, curtain-side vans, and even straight or dump trucks.

Effective October 1, 2002, the Environmental Protection Agency (EPA) required that most newly manufactured heavy-duty tractor engines comply with certain new emission standards. We initially limited our new tractor purchases while we tested these new 2002 EPA-compliant engines. At December 31, 2005, we were operating approximately 5,900 tractors with these 2002 the average age of DCS segment tractors was 2.8 years.  In November of 2002, we committedrule-compliant engines. These engines experience an approximate 4% to purchase approximately 2,100 new5% lower fuel efficiency and are also expected to require higher annual maintenance costs.

Effective with model-year 2007 tractors, the majorityEPA has mandated even lower emission standards for newly manufactured heavy-duty tractor engines. We once again are planning our new equipment purchases to accommodate these new standards, but allow adequate testing of whichthe new engines. The 2007 EPA-compliant engines will be traded one-for-one for unitsequipped with a particulate trap and will require more costly ultra-low-sulfur diesel (ULSD) fuel. The EPA estimates that ULSD fuel will cost approximately $.04 to $.05 more per gallon. We are unable at this time to determine the increase in the JBIacquisition and DCS fleets.  These trades will significantly reduce the average ageoperating costs of these tractor fleets.  All of our revenue equipment is maintained in accordance with a specific maintenance program primarily based on age and/or miles traveled.new 2007 EPA-compliant engines.

COMPETITIONCompetition and the Industry

We are oneAccording to the most recently available study conducted by the American Trucking Associations (ATA), all modes of the largest publicly held truckloaddomestic freight carriers in the United States. WeStates generated approximately $610 billion of revenue in 2003. Of this total, truck transportation represented about 87%, or $531 billion. ATA also estimated that approximately 54% of the nation’s 2003 truck revenue related to for-hire carriers, while 46% related to private carriers. As of July 2004, there were more than 573,000 private, for-hire, U.S. Mail and other U.S. interstate motor carriers on file with the Federal Motor Carrier Safety Administration (FMCSA). The top 10 for-hire truckload carriers only generate about 3% of the total revenue in this segment, and we represent approximately 1% of this segment’s revenue. The market in which we compete primarilyis frequently referred to as highly fragmented and includes thousands of carriers, many of which are very small. While we compete with other irregular route, truckload common carriers. Less-than-truckload common carriers and private carriers generally provide limited competition for truckload carriers.  JBHT and our associated companies are one of a few carriers offering nationwide logistics management and dedicated revenue equipment services. Although a number of smaller carriers may provide competition on a regional basis, only a limited number of companies represent competition in all markets. The extensive rail network developedmarkets across the country. We compete with other freight transportation carriers primarily in conjunction with the various railroads also allows us the opportunity to differentiate our services in the marketplace.terms of on-time pickup and delivery service, availability of drivers, and revenue equipment and price.

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REGULATIONRegulation

Our operations as a for-hire motor carrier are subject to regulation by the U.S. Department of Transportation’sTransportation (DOT) and the Federal Motor Carrier Safety Administration, (FMCSA) and certain business is also subject to state rules and regulations. The DOT periodically conducts reviews and audits to ensure our

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companies. As a result, our insurance and claims expenses could increase when some of our current coverages expire on July 31, 2006. If these expenses increase, and we are unable to offset the increase with higher freight rates, our earnings could be materially and adversely affected.

The Internal Revenue Service (IRS) has proposed to disallow the tax benefits associated with certain sale-and-leaseback transactions.

As previously disclosed, the Internal Revenue Service (IRS) has proposed to disallow the tax benefits associated with certain sale-and-leaseback transactions, which we entered into in 1999. Based on events occurring subsequent to December 31, 2004, we established a reserve for a contingent tax liability of $33.6 million at December 31, 2004. The liability for this contingency, which included estimated interest expense, was included on our consolidated balance sheet at December 31, 2004, as a long-term liability. We accrued approximately $2.7 million of interest expense during 2005 related to this contingency. We continue to believe the new engines have not yet been sufficiently testedour tax positions comply with applicable tax law for fuel economywhich we received advice and reliability.  Whileopinions from our then external public accountants and attorneys prior to entering into these transactions, and we continue to test a limited numbervigorously defend against the IRS position using all administrative and legal processes available. If the IRS were successful in disallowing 100% of the new EPA compliant engines, we committed in November of 2002 to purchasetax benefit from this transaction, the total ultimate impact on liquidity could be approximately 2,100 new tractors, the majority of which will be equipped with Mercedes engines, which are not covered by the EPA’s October 1, 2002 rules.$44 million, excluding interest.

INTERNET WEB SITEOur operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.

We maintain a web site onare subject to various environmental laws and regulations dealing with 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 releaseshandling of hazardous materials, underground fuel storage tanks, and discharge and retention of storm water. We operate in industrial areas, where truck terminals and other reports filed pursuantindustrial activities are located, and where groundwater or other forms of environmental contamination have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage and hazardous wastes disposal, among others. We also maintain bulk fuel storage and fuel islands at several of our facilities. If we are involved in a spill or other accident involving hazardous substances, or if we are found to Section 13be in violation of applicable laws or 15 (d) of the Exchange Act are available, free of charge,regulations, it could have a material adverse effect on our website as soon as practical after they are filed.business and operating results. If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

SEC FILINGSWe operate in a regulated industry, and increased direct and indirect costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business.

The DOT and various state agencies exercise broad powers over our business, generally governing matters including authorization to engage in motor carrier service, equipment operation, safety and financial reporting. We file annual, quarterly and special reports, proxy statementsare audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other informationrules and regulations. If we were found to be out of compliance, the DOT could restrict or otherwise impact our operations.

Effective October 1, 2005, driver HOS regulations were revised. The majority of these rule changes had initially been effective January 4, 2004. These collective changes were the most significant changes to driver HOS in more than 40 years. In general, the new rules require a driver to take at least eight consecutive hours in the sleeper berth during a 10-hour off-duty period. These new rules primarily affect short-haul and multiple-stop freight operations and had a minor negative impact on our overall operations and financial results.

Effective October 1, 2002, the EPA required that most newly manufactured heavy-duty tractor engines comply with certain new emission standards. At December 31, 2005, we were operating approximately 5,900 tractors with these 2002 rule-complaint engines. In addition to higher initial purchase prices, these tractors have also experienced an average 4% to 5% reduction in fuel efficiency. Effective with model-year 2007 tractors, the EPA has mandated even lower emission standards for newly manufactured heavy-duty tractor engines. We are planning our new equipment purchases to

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accommodate these new standards, but also to allow adequate time for testing of the new engines. We are unable to predict the impact these new standards will have on our future operations and business results.

Rapid changes in fuel costs could impact our periodic financial results.

Fuel and fuel taxes currently represent our third-largest general expense category. During the past several years, fuel cost per gallon has varied significantly, with prices at times changing as much as $.20 to $.25 per gallon between consecutive months. We have a fuel surcharge revenue program in place with the Securitiesmajority 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 Exchange Commission (SEC).  Our reportsthe timing of the fuel surcharges billed to our customers. In addition, we incur additional costs when fuel prices rise that cannot be fully recovered due to our engines being idled during cold or warm weather and any materialsempty or out-of-route miles that cannot be billed to customers. 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, 2005, 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 maintains a web site at www.sec.gov that contains information we file with the agency.  Our common stock is traded in the over-the-counter market under the symbol “JBHT.”had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate headquarters are in Lowell, Arkansas. A 150,000-square-foot building was constructedWe occupy a number of buildings in Lowell that we utilize for administrative support, data center, primary customer service and occupied in September 1990.freight dispatch. We also utilize our former corporate building as general offices.  In 1999, a new 20,000 square foot building was constructed and occupied near the corporate headquarters.  A portion of this leased facility serves asmaintain a backup data center and providesfor disaster recovery, support services. An additional 20,000 square footmaintenance shop and driver operations facility in Lowell. In December 2005, we took occupancy of a new, approximately 110,000-square-foot office building consistingthat was constructed adjacent to our existing 150,000-square-foot building. This new building allowed us to reduce the number of general office space foroccupied buildings in Lowell and consolidate most of our corporate employees was completedsupport and occupied in 2000. This building is located nextcentralized operations functions. We also own or lease other significant facilities where we perform maintenance on our equipment, provide bulk fuel and employ personnel to the data center buildingsupport operations. Each of our three business segments utilizes our larger facilities for services including bulk fueling, maintenance and is a leased facility.

Principal outside facilities consist primarily of general offices whichdriver support operational, safety and maintenance functions.activities. In addition to theour principal facilitiesproperties listed below, we lease numerousa number of small offices and trailer parking yards in various locations throughout the country tothat support customer trailing equipment pool commitments.our customers’ business needs.

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A summary of our principal facilities follows:

ITEM 3. LEGAL PROCEEDINGS

JBHT isWe 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, we believe the resolution of claims and pending litigation will not have a material adverse effect on our financial condition, or our results of operations.operations or liquidity.

As previously reported, an arbitration process with BNI was concluded during September 2005. In accordance with the settlement terms, we paid BNI $25.8 million. This payment was recorded in the third quarter of 2005. We also increased, effective October 1, 2005, the amounts that we pay BNI for moving freight on certain intermodal movements.

The Internal Revenue Service (IRS) has proposed to disallow the tax benefits associated with certain sale-and-leaseback transactions. See “Risk Factors” in Item 1A of this Form 10-K.

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

No matters were submitted during the fourth quarter of 20022005 to a vote of security holders.

OUR EXECUTIVE OFFICERS

Information with respect to our executive officers is set forth below:

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(1)             Mr. Roberts joined 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.

(2)             Ms. Palmer joined 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.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FORWARD-LOOKING STATEMENTSThe following discussion of our results of operations and financial condition should be read in conjunction with our financial statements and related notes in Item 8. This discussion contains forward-looking statements. Please see “Forward-looking Statements” and “Risk Factors” for a discussion of items, uncertainties, assumptions and risks associated with these statements.

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 accounting principles generally accepted accounting principlesin the United States requires us to make estimates and assumptions that affect:

•impact the amounts reported for assetsin our consolidated financial statements 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.

accompanying notes. Therefore, the reported amounts of assets, and liabilities, revenues, and expenses and associated disclosures with respect toof contingent assets and obligationsliabilities are necessarily affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with expertsthird parties and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recordedrecognized in the accounting period in which the facts that give rise to the revision become known.

In preparingWe consider our critical accounting policies and estimates to be those that require us to make more significant judgments and estimates when we prepare our financial statements and related disclosures, we must use estimates in determininginclude 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.following:

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 insuranceself-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 insuranceself-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 majorityDuring 2005, we were self-insured for essentially $2 million of our claims for personal injury and property damage and $1 million for workers’ compensation claims. Effective January 1, 2006, the self-insured portion of our claims exposure for personal injury, property damage and workers’ compensation was reduced to $500,000.

Our claims accrual policy for all self-insured claims is $1.5 million, which is prefunded withto recognize a liability at the time of the incident based on our insurance carrier.  We are substantially self-insured for lossanalysis of the nature and damage to our ownedseverity of the claims and leased revenue equipment.analyses provided by third-party claims administrators, as well as legal, economic and regulatory factors. Our safety and claims personnel work directly with representatives from ourthe insurance companies to continually update the estimated ultimate cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience. In doing so, the recorded liability considers future claims growth and provides an allowance for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2002,2005, we

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had an accrual of approximately $15$16 million offor estimated net claims payable.claims. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2002,2005, we had a prepaid insurance asset of approximately $45 million.$76 million, which represented pre-funded claims and premiums. We are also substantially self-insured for loss of and damage to our owned and leased revenue equipment.

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.lease agreements. 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

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method over the estimated useful life down to an estimated salvage or trade-in value. Equipment acquiredWe had no revenue equipment under capital leases is initially recordedlease arrangements 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.December 31, 2005.

We have an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain new equipment acquired since 1999.equipment. We have utilized these trade-in values as well as other operational information, such as anticipated annual miles, in accounting for purchased and leased tractors.depreciation expense. If theour tractor supplier waswere unable to perform under the terms of such agreements,our agreement for trade-in values, it could have a material negative impact on our financial results. We periodically review the useful lives and salvage values of our revenue equipment and evaluate our long-lived assets for impairment. We have not identified any impairments to our existing assets.

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%.

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RESULTS OF OPERATIONS

2002 Compared With 2001

Operating Segments

For Years Ended December 31

(in millions of dollars)

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 2002YEAR IN REVIEW

Our consolidated net earningsfinancial results for calendar year 2002 were $51.82005 represented the fourth consecutive year of record revenues and earnings driven by good to excellent performance from each of our segments. Our 2005 net earnings of $207.3 million, or $1.28 per diluted earnings per share, of $1.33, compared with 2001 full-year earnings of $32.9were up 42% over the $146.3 million, or 91 cents$.88 per diluted share.  We generated $101 million of operating incomeshare, earned in 2002,2004. Fuel costs continued to represent a nearly 40% increase overchallenge for the $72.2 million of operating income in 2001.transportation industry during 2005. Our operating ratio was 95.5% in 2002 and 96.6% in 2001.  Our increase in 2002 net earnings was in spite of an effective income tax rate which rose2005 fuel cost per gallon averaged 33% above 2004 levels. However, due to 30.8% from 23.5% in 2001our fuel surcharge programs and the number of diluted shares outstanding increasing by nearly 8%.  The increase in shares outstanding reflects a secondary public offering, which closed in June of 2002.   Eachsupport and understanding of our threecustomers, we were able to recover the majority of our higher fuel costs.

Freight demand during the first half of 2005 was not as strong as the comparable period of 2004, but volume levels improved during the last half of 2005. Our DCS and JBT segments contributed most significantly to the improved earnings levelsour higher level of profitability in 2002.

JBT segment gross revenue was essentially flat, 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 comparable amount in 2001, which negatively impacted the revenue comparison by approximately 2%.  Truck 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, reduced empty miles and lower driver pay rates.  A significant portion of the higher revenue per loaded mile and reduced empty miles was 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%, to $809.1 million in 2002, from $740.5 million in 2001.  Revenue growth was due, in part, to continued demand for our intermodal service offering and conversion of our container fleet to 100% 53-foot units.  Operating income in the JBI segment rose to $54.6 million in 2002 from $42.1 million in 2001.  Our JBI operating ratio was 93.3% in 2002 and 94.3% in 2001.  Financial results in this segment were enhanced by improved container utilization, improved driver productivity and a focus on revenue quality.

DCS segment revenue grew nearly 15%, to $628.3 million in 2002, from $548.7 million in 2001.  Revenue growth was primarily a result of a 9% increase2005. While increases in the size of the DCS and JBT tractor fleet andfleets accounted for a portion of the increases in operating income, our continued focus on improvingcapacity management and revenue per tractor was the qualityprimary factor driving 2005 improved net earnings. Capacity management is a continuous process of reviewing our freight and individual fleets.  While operating income rosededicated arrangements to $19.7 million in 2002 from $17.4 million in 2001, the segment’s operating ratio was 96.9% in 2002determine whether business that is generating low or negative margins can be replaced by different business with better margins. We also continually analyze our business to ensure we are charging a fair price for all services that we provide. Primarily due to our capacity-management actions and 96.8% in 2001.  We reduced some costs in the DCS segment such as driver payrate increases which offset non-fuel cost increases, our 2005 revenue per tractor (excluding fuel surcharges) increased 5.3% and overhead, however, higher accident and claims expenses, as well as new project start up costs, more than offset the improvements.

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The following table sets forth items4.3% in our Consolidated Statements of Earnings as a percentage of operating revenuesDCS and the percentage increase or decrease of those items as compared with the prior year.

Consolidated Operating Expenses

Total operating expenses in 2002 increased 5.9% over 2001, while operating revenues rose 7.0%.JBT segments, respectively. Our operating ratio improved to 95.5% in 2002, compared with 96.6% in 2001.  Salaries, wages and employee benefits expense increased 3.6% in 2002, and 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 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 were increases in maintenance wages, workers’ compensation, health insurance and 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 15.5%, 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.

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

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)

*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,

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including independent contractors (I/C’s) declined nearly 3% during 2001 and 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 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 surcharges.  As a result of revenue growth and utilization of containers,FSC, also increased 5.0% in 2005. While these rate increases were the best our intermodal segment has experienced in several years, we did start to incur higher railroad purchased transportation expense. Our JBI operating income climbed 15%was clearly reduced by the BNI arbitration charge. The third quarter 2005 arbitration charge of $25.8 million included $8.3 million that related to 2004 freight movements. We also incurred significant legal fees in 20012004 and 2005 associated with this arbitration process. Excluding the effects of the $8.3 million arbitration charge that related to $42.1 million from $36.7 million2004 freight movements, our JBI segment would have reported an increase in 2000.2005 operating income, compared with the decrease of 5%.

DCS segment revenue grew 15%We continued our focus on safety during 2001,2005. Although our 2005 actual insurance and safety costs were slightly higher than 2004, we were able to $548.7duplicate the fine performance we saw in 2004 in terms of DOT accidents per million from $478.6miles and DOT preventable accidents per million miles. One significant result of our industry-leading safety results over the past several years was the establishment of a multi-year $500,000 deductible limit in 2000.our primary casualty and workers’ compensation insurance coverage. This growth ratenew deductible limit was down significantly from recenteffective January 1, 2006, and compares with $2 million for casualty and $1 million for workers’ compensation in 2005.

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Our 2005 consolidated operating ratio (operating expenses divided by total operating revenues) was 89.0%, compared with 88.9% in 2004 and 92.4% in 2003. The current year was the second consecutive time in over 10 years due to:  1) soft economic conditions which made companies more apprehensive about changing or outsourcing their transportation needs, and;  2)that we have achieved an operating ratio for a full year below 90%. We re-initiated paying a quarterly cash dividend of $.015 in early 2004 and increased our unwillingnessdividend to reduce rates$.06 in December 2004 and 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 $17.4$.08 in December 2005. We also announced plans in December 2004 to repurchase up to $100 million of operating incomeour common stock and announced an additional $500 million repurchase program 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 utilizes their assigned trailers.  Cost control and close analysis of individual fleet profitability remains a DCS objective.April 2005.

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 2001 was primarily due to start up expenses.  JBHT’s financial exposure is limited to its approximate $6.4 million investment in TPI as we have not made any additional commitments or guaranteed any of TPI’s financial obligations.RESULTS OF OPERATIONS

The following table sets forth items in our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior year.