FORWARD-LOOKING STATEMENTS

This report, including documents whichwhich 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 of 1933, as amended, 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 thesethese 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: include the following: general economic and business conditions; competition and competitive rate fluctuations cost and availability of diesel fuel, ability to attract and retain qualified drivers and delivery personnel, ;excess capacity in the intermodal or trucking industries; a loss of one or more major customers; cost and availability of diesel fuel; interference with or termination of our relationships with certain railroads; rail service delays; disruptions to U.S. port-of-call activity; ability to attract and retain qualified drivers, delivery personnel, independent contractors, and third-party carriers; retention of key employees; insurance costs and availability;litigation and claims expense retention of key employees, terrorist attacks or actions, acts of war, adverse weather conditions, disruption or failure of information systems, ; determination that independent contractors are employees; new or different environmental or other laws and regulations; volatile financial credit markets or interest rates; terrorist attacks or actions; acts of war; adverse weather conditions; disruption or failure of information systems;operational disruption or adverse effects of business acquisitions; increased costs for new revenue equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; 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.values.

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.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

OVERVIEWOVERVIEW

   We are one of the largest surface transportation, delivery, and logistics companies in North America. J.B. Hunt Transport Services, Inc. is a publicly held holding company that, together with our wholly owned subsidiaries, provides safe and reliable transportation and delivery services to a diverse group of customers and consumers throughout the continental United States, Canada, and Mexico. Unless otherwise indicated by the context, “we,” “us,” “our,” the “Company”, and “JBHT” refer to J.B. Hunt Transport Services, Inc. and its consolidated subsidiaries. We were incorporated in Arkansas on August 10, 1961, and have been a publicly held company since our initial public offering in 1983. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, local and home deliveries, freight handling, specialized equipment, and freight network design. Our local and home delivery services typically are provided through a network of cross-dock service centers throughout the continental United States. UtilizingWe also provide comprehensive transportation and logistics services with a network of thousands of reliable third-party carriers, we also provide comprehensive transportation and logistics services.carriers. In addition to full-load, dry-van operations, these unrelated outside carriers also provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Our customers’ business activities arecustomers, who include many Fortune 500 companies, have extremely diverse businesses. Many of them are served by J.B. Hunt 360^○®, an online platform that offers shippers and our customer base includes a large numbercarriers greater access, visibility and transparency of Fortune 500 companies.

the supply chain.

We believe our ability to offer multiple services, utilizing our four business segments and a full complement of logistics services through third parties, represents a competitive advantage. These segments include Intermodal (JBI), Dedicated Contract Services^® (DCS), Integrated Capacity SolutionsSolutions™ (ICS), and TruckTruckload (JBT). Our business is somewhat seasonal, withusually involves slightly higher freight volumes typically experienced duringin August through early November. OurMeanwhile, DCS segment is subject to somewhat less seasonal variation than our other segments. For the calendar year ended December 31, 2016, our consolidated revenue totaled $6.56 billion, after the elimination of intersegment business. Of this total, 58% was generated by our JBI business segment, 23% by DCS, 13% by ICS, and 6% by JBT. For the year ended December 31, 2015, JBI represented 59%, DCS 24%, ICS 11%, and JBT 6% of our consolidated revenue. For the year ended December 31, 2014, JBI represented 60%, DCS 22%, ICS 12%, and JBT 6% of our consolidated revenue.

Additional general information about us is available at www.jbhunt.com.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,quarterly reports on Form 10-Q, current reports on Form 8-K and our earnings releases.all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Our website also contains corporate governance guidelines, our code of ethics, our whistleblower policy, Board committee charters, and other corporate policies. The information on our website is not, and shall not be deemed to be, a part of this annual report on Form 10-K or incorporated into any other filings we make with the SEC.

Our Mission and Strategy

We forge long-term partnershipsrelationships with key customers that include supply-chain management as an integral part of their strategies. Working in concert, we strive to drive out excess cost, add value and function as an extension of their enterprises. Our strategy is based on utilizing an integrated, multimodal approach to provide capacity-oriented solutions centered on delivering customer value and industry-leading service. We believe our unique operating strategy can add value to customers and increase our profits and returns to stockholders.

We continually analyze where we believeopportunities for additional capital should be investedinvestment and where management’s resources should be focused to provide addedmore benefits to our customers. These actions should, in turn, yield increasing returns to our stockholders.

Increasingly, our customers are seeking energy-efficient transportation solutions to reduce both cost and greenhouse-gas emissions. Our Company’s mission, to create the most efficient transportation network in North America, focuses on delivering both for our customers across all of our business segments. We seek to accomplish this by maintaining a modern fleet to maximize fuel efficiency, converting loads from truck to rail with our intermodal service, addresses both demands. Further,and introducing technologies to optimize freight flows in the supply chain by eliminating waste. Additionally, we are customizing dedicated solutions aimed at minimizing transportation-related carbon emissions.continue to test and explore the usage of alternative fuel vehicles. Efforts to improve fleet fuel efficiency and reduce greenhouse gas emissions are ongoing, and weongoing. We are an Environmental Protection Agency (EPA) SmartWay^SM® Transport Partner.Partner, and proud to have been awarded the EPA’s SmartWay^® Excellence Award each of the last twelve years.

As always, we continue to ingrain safety into our corporate culture and strive to conduct all of our operations as safely as possible.

operating segments

Segment information is also included in Note 1114 to our Consolidated Financial Statements.

JBI Segment

The transportation service offerings of our JBI segment utilize arrangements with most major North American rail carriers to provide intermodal freight solutions for our customers throughout the continental United States, Canada, and Mexico. Our JBI segment began operations in 1989, forming a unique partnership with what is now the BNSF Railway Company;Company (BNSF); this was a watershed event in the industry and the first agreement that linked major rail and truckload carriers in a joint service environment. JBI draws on the intermodal services of rail carriers for the underlying linehaul movement of its equipment between rail ramps. The origin and destination pickup and delivery services (drayage) are handled by our company-owned tractors for the majority of our intermodal loads, while third-party dray carriers are used where economical. By performing our own drayage services, we are able to provide a cost-competitive, seamless coordination of the combined rail and dray movements for our customers.

JBI operates 84,59496,743 pieces of company-owned trailing equipment systemwide. The fleet primarily consists of 53-foot, high-cube containers and is designed to take advantage of intermodal double-stack economics and superior ride quality. We own and maintain our own chassis fleet, consisting of 73,74682,731 units. The containers and chassis are uniquely designed so that they may only be paired together, which we feel creates an operational competitive advantage. JBI also manages a fleet of 4,5814,989 company-owned tractors, 695570 independent contractor trucks, and 5,3986,376 company drivers. At December 31, 2016,2019, the total JBI employee count was 6,088.7,281. Revenue for the JBI segment in 20162019 was $3.80$4.74 billion.

DCS Segment

DCS focuses on private fleet conversion and creation in replenishment, specialized equipment, and final-mile delivery services. We specialize in the design, development, and execution of supply-chain solutions that support a variety of transportation networks. Our final-mile delivery services are supported with a network of approximately 89120 cross-dock and other delivery system network locations nationwide, with 98% of the continental U.S. population living within 150 miles of a cross-docknetwork location. Contracts with our customers are long-term, ranging from three to 10 years, with the average being approximately five years. Pricing of our contracts typically involves cost-plus arrangements, with our fixed costs being recovered regardless of equipment utilization, but is customized based on invested capital and duration.

At December 31, 2016,2019, this segment operated 6,97610,542 company-owned trucks, 410505 customer-owned trucks, and 1540 independent contractor trucks. DCS also operates 16,13920,860 owned pieces of trailing equipment and 6,5497,258 customer-owned trailers. The DCS segment employed 10,29115,019 people, including 8,55412,181 drivers, at December 31, 2016.2019. DCS revenue for 20162019 was $1.53$2.69 billion.

ICS Segment

ICS provides traditional freight brokerage and transportation logistics solutions to customers through relationships with thousands of third-party carriers and integration with our owned equipment. By leveraging the J.B. Hunt brand, systems, and network, we provide a broader service offering to customers by providing flatbed, refrigerated, expedited, and LTL, as well as a variety of dry-van and intermodal solutions. Furthermore, we offer an online multimodal marketplace via J.B. Hunt 360 that matches the right load with the right carrier and the best mode. ICS also provides single-source logistics management for customers desiring to outsource their transportation functions and utilize our proven supply-chain technology and design expertise to improve efficiency. ICS operates 4237 remote sales offices or branches, as well as on-site logistics personnel working in direct contact with customers.

At December 31, 2016,2019, the ICS segment employed 8241,213 people, with a carrier base of approximately 50,900.84,400. ICS revenue for 20162019 was $852 million.$1.35 billion.

JBT Segment

The service offering in this segment is full-load, dry-van freight, utilizing tractors operating over roads and highways. We typically pick up freight at the dock or specified location of the shipper and transport the load directly to the location of the consignee. We use our company-owned tractors and employee drivers or independent contractors who agree to transport freight in our trailers.

At December 31, 2016,2019, the JBT segment operated 1,376845 company-owned tractors and employed 1,6681,102 people, 1,433868 of whom were drivers. At December 31, 2016,2019, we had 752986 independent contractors operating in the JBT segment. JBT revenue for 20162019 was $388$389 million.

Marketing and Operations

We transport, or arrange for the transportation of, a wide range of freight, including general merchandise, specialty consumer items, appliances, forest and paper products, food and beverages, building materials, soaps and cosmetics, automotive parts, agricultural products, electronics, and chemicals. Our customers’ business activities are extremely diverse, and our customer base includes a large number of Fortune 500 companies. We provide a broad range ofmany transportation services to shippers seeking to use a variety of transportation options to optimize theirthat meet the supply-chain logistics needs.needs of shippers.

We generally market all of our service offerings through a nationwide sales and marketing network. We use a specific sales force in DCS due to the length, complexity, and specialization of the sales cycle. In addition ICS utilizes its own local branch salespeople.to our sales teams, J.B. Hunt 360 offers instant access to a wide array of technology-driven solutions for customers and carriers. Through the platform, businesses of all sizes can quote and book shipments, view analytics, and gain visibility into freight movement. 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.

People

We believe that one of the factors differentiating us from our competitors is our service-oriented people. As of December 31, 2016,2019, we had 22,19029,056 employees, which consisted of 15,38519,425 company drivers, 5,7068,292 office personnel, 1,137 maintenance technicians, and 1,099 maintenance technicians.202 delivery and material assistants. We also had arrangements with approximately 1,4621,596 independent contractors to transport freight in our trailing equipment. None of our employees are represented by unions or covered by collective bargaining agreements.

Revenue Equipment

Our JBI segment utilizes uniquely designed high-cube containers and chassis, which can only be paired with each other and can be separated to allow the containers to be double-stacked on rail cars. The composition of our DCS trailing fleet varies with specific customer requirements and may include dry-vans, flatbeds, temperature-controlled, curtain-side vans, straight trucks, and dump trailers. We primarily utilize third-party carriers’ tractor and trailing equipment for our ICS segment. Our JBT segment operates primarily 53-foot dry-van trailers.

As of December 31, 2016,2019, our company-owned tractor and truck fleet consisted of 12,93316,376 units. In addition, we had 1,4621,596 independent contractors who 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 JBI and JBT fleets. Due to our customers’ preferences and the actual business application, our DCS fleet is extremely diversified. We believe operating with relatively newer revenue equipment provides better customer service, attracts quality drivers, and lowers maintenance expense. At December 31, 2016,2019, the average age of our combined tractor fleet was 1.92.3 years, while our containers averaged 5.97.0 years of age and our trailers averaged 7.66.5 years. We perform routine servicing and preventive maintenance on our equipment at our regional terminal facilities.

Competition and the Industry

The freight transportation markets in which we operate are frequently referred to as highly fragmented and competitive. Our JBI segment competes with other intermodal marketing companies; other full-load carriers that utilize railroads for a portion of the transportation service; and, to a certain extent, some railroads directly. The diversified nature of the services provided by our DCS segment attracts competition from customers’ private fleets, other private fleet outsourcing companies, equipment leasing companies, local and regional delivery service providers, and some truckload carriers. Our ICS segment utilizes the fragmented nature of the truck industry and competes with other non-asset-based logistics companies and freight brokers, as well as full-load carriers. The full-load freight competition of our JBT segment includes thousands of carriers, many of which are very small. While we compete with a number of smaller carriers on a regional basis, only a limited number of companies represent competition in all markets across the country.

We compete with other transportation service companies primarily in terms of price, on-time pickup and delivery service, availability and type of equipment capacity, and availability of carriers for logistics services.

Regulation

Our operations as a for-hire motor carrier are subject to regulation by the U.S. Department of Transportation (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 compliance with federal safety requirements, and we report certain accident and other information to the DOT. Our operations into and out of Canada and Mexico are subject to regulation by those countries.

In 2013, the remaining provisions of the FMCSA’s amendment to the hours-of-service (HOS) safety requirements for commercial truck drivers became effective, and we experienced some negative impact on our productivity as a result. However, in December 2014, as a result of the Consolidated and Further Continuing Appropriations Act of 2015, the FMCSA was required to rescind the 34-hour restart provision of the amended HOS rules to the pre-July 1, 2013 requirements. Furthermore, the FMCSA was required to conduct a field study measuring the safety benefit of the amended HOS rules before and after this rule change. This rule rescission is considered temporary pending the outcome of the study, which remains uncompleted. We continue to evaluate and adjust the various segments of our operations toward the ultimate impact of these changes in HOS safety requirements.

In December 2015, the FMCSA published a Final Rule requiring use of an Electronic Logging Device (ELD) by December 2017, for nearly all carriers. We have successfully implemented ELD’s within our fleets. 

In 2013, the FMCSA, in conjunction with the National Highway Traffic Safety Administration, submitted a Notice of Proposed Rulemaking, which was finalized and published in 2016, requiring the installation of speed-limiting devices on heavy trucks. This final rule will have minimal implementation cost for us, as all of our heavy trucksare also subject to this rule already have these devices installed. We do not anticipate a negative impact on our operations or productivity.

In 2016,variety of requirements of national, state, and local governments, including the FMCSA published a Notice of Proposed Rulemaking to adopt revised methodologies towards aU.S. Environmental Protection Agency and the Occupational Safety Fitness Determination (SFD) for motor carriers. The proposed methodologies would determine when a motor carrier is not fit to operate commercial motor vehicles based on the carrier's on-road safety performance in relation to five of the Agency's seven Behavioral Analysis and Safety Improvement Categories (BASIC), a formal investigation, or a combination of the two. The intent of this action is to more effectively use FMCSA data and resources to identify unfit motor carriers and remove them from interstate commerce. We do not anticipate a negative impact on our operations or productivity.Health Administration.

We continue to monitor the actions of the FMCSA and other regulatory agencies, and evaluate all proposed rules to determine their impact on our operations.

ITEM 1A. RISK FACTORS

In addition to the forward-looking statementsfactors outlined previously in this Form 10-K regarding forward-looking statements and other comments regarding risks and uncertainties, the following risk factors should be carefully considered when evaluating our business. Our business, financial condition or financial results could be materially and adversely affected by any of these risks.

Our business is significantly impacted by economic conditions, customer business cycles and seasonal factors.

Our business is dependent upon a number of factors that may have a material adverse effect on the resultsfreight shipping needs of our operations, many ofcustomers, which are beyond our control. In addition to general U.S.can be heavily impacted by economic trends,conditions and to a lesser extent global economic trends, theseother factors include interference with or termination of our relationships with certain railroads; rail service delays; disruptions to U.S. port-of-call activity; significant increases or rapid fluctuations in fuel prices, fuel taxes, interest rates, insurance premiums, self-insurance levels, excess capacity in the intermodal or trucking industries, or license and registration fees; terrorist attacks or actions; acts of war; adverse weather conditions; disruption or failure of information technology systems; increased costs for new revenue equipment or decreases in the value of used equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; volatile financial credit markets; and difficulty in attracting and retaining qualified drivers, independent contractors, and third-party carriers.

We are also affected by recessionaryaffecting their businesses. Recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries where we have a significant concentration of customers. Economiccustomers, may substantially reduce freight volumes for which our customers need transportation services and lead to excess capacity in the industry and resulting pressure on the rates we are able to obtain for our services. Adverse economic conditions represent a greater potential for loss, and we may be requiredalso require us to increase our reserve for bad debt losses. In addition, our results of operations may be affected by seasonal factors. Customers tend to reduce shipments after the winter holiday season, and our operating expenses tend to be higher in the winter months, primarily due to colder weather, which causes higher fuel consumption from increased idle time and higher maintenance costs. Any of these factors could have a significant adverse effect on our financial condition and results of operations.

We depend on third parties in the operation of our business.

Our JBI business segment utilizes railroads in the performance of its transportation services. The majority of these services are provided pursuant to contractual relationships with the railroads. While we have agreements with a number of Class I railroads, the majority of our business travels on the BNSF Railway Company (BNSF) and the Norfolk Southern railways. A material change in the relationship with, the ability to utilize one or more of these railroads or the overall service levels provided by these railroads could have a material adverse effect on our business and operating results. In addition, a portion of the freight we deliver is imported to the United States through ports of call that are subject to labor union contracts. Work stoppages or other disruptions at any of these ports could have a material adverse effect on our business.

In January, 2017, we exercised our right to utilize the arbitration process to review the division of revenue collected beginning May 1, 2016, as well as to clarify other issues, under our Joint Service Agreement with BNSF.  BNSF has requested the same, and the arbitration process has commenced.  BNSF provides a significant amount of rail transportation services to our JBI business segment.  At this time, we are unable to reasonably predict the outcome of the arbitration, and, as such, no gain or loss contingency can be determined or recorded. Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, is expected to continue on a timely basis.

We also utilize independent contractors and third-party carriers to complete our services. These third parties are subject to similar regulation requirements, which may have a more significant impact on their operations, causing them to exit the transportation industry. Aside from when these third parties may use our trailing equipment to fulfill loads, we do not own the revenue equipment or control the drivers delivering these loads. The inability to obtain reliable third-party carriers and independent contractors could have a material adverse effect on our operating results and business growth.

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

Fuel costs can be very volatile. 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 fuel surcharges billed to our customers. In addition, we incur additional costs when fuel price increases cannot be fully recovered due to our engines being idled during cold or warm weather and empty 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, 2016,2019, we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

Insurance

Insurance and claims expenses could significantly reduce our earnings.

Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. If the number or severity of claims for which we are self-insured increases, our operating results could be adversely affected. We have policies in place for 20172020 with substantially the same terms as our 20162019 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage. We purchase insurance coverage for the amounts above which we are self-insured. If these expenses increase and we are unable to offset the increase with higher freight rates, our earnings could be materially and adversely affected.

We derive a significant portion of our revenue from a few major customers, the loss of one or more of which could have a material adverse effect on our business.

For the calendar year ended December 31, 2016,2019, our top 10 customers, based on revenue, accounted for approximately 29%32% of our revenue. Our JBI, ICS, and JBT segments typically do not have long-term contracts with their customers. While our DCS segment business may involve a long-term written contract,contracts, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or continue at the same levels. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business and operating results.

We 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, FMCSA, 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 are audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other rules and regulations. If we were found to be out of compliance, the DOT could restrict or otherwise impact our operations. Our failure to comply with any applicable laws, rules or regulations to which we are subject, whether actual or alleged, could expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments. Further, these agencies could institute new laws, rules or regulations or issue interpretation changes to existing regulations at any time. Compliance with new laws, rules or regulations could substantially impair labor and equipment productivity, increase our costs or impact our ability to offer certain services.

Difficulty in attracting and retaining drivers and delivery personnel could affect our profitability and ability to grow.

If we are unable to attract and retain the necessary quality and number of employees, we could be required to significantly increase our employee compensation package, let revenue equipment sit idle, dispose of the equipment altogether, or rely more on higher-cost third-party carriers, which could adversely affect our growth and profitability. In addition, our growth could be limited by an inability to attract third-party carriers upon whom we rely to provide transportation services.

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

Federal and state legislation as well as tax and other regulatory authorities have sought to assert that independent contractors in the transportation service industry are employees rather than independent contractors. An example of such legislation recently enacted in California is currently under a judicial stay with respect to trucking companies while a legal challenge to the law is pending. There can be no assurance that interpretations that support the independent contractor status will not change, that other federal or state legislation will not be enacted or that various authorities will not successfully assert a position that re-classifies independent contractors to be employees. If our independent contractors are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits. In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results.

We rely significantlymay be subject to litigation claims that could result in significant expenditures.

We by the nature of our operations are exposed to the potential for a variety of litigation, including personal injury claims, vehicular collisions and accidents, alleged violations of federal and state labor and employment laws, such as class-action lawsuits alleging wage and hour violations and improper pay, commercial and contract disputes, cargo loss and property damage claims. While we purchase insurance coverage at levels we deem adequate, future litigation may exceed our insurance coverage or may not be covered by insurance. We accrue a provision for a litigation matter according to applicable accounting standards based on our information technology systems,the ongoing assessment of the strengths and weaknesses of the litigation, its likelihood of success, and an evaluation of the possible range of loss. Our inability to defend ourselves against a disruption, failure or security breach of whichsignificant litigation claim, could have a material adverse effect on our financial results.

We rely significantly on our information technology systems, a disruption, failure or security breach ofwhich could have a material adverse effect on our business.

We rely on information technology throughout all areas of our business to initiate, track, and complete customer orders; process financial and nonfinancial data; compile results of operations for internal and external reporting; and achieve operating efficiencies and growth. OurWe have also invested significantly in the development of our Marketplace for J.B. Hunt 360 online freight matching platform, through which we are generating an increasing amount of revenue. Each of our information technology systems may be susceptible to various interruptions, including equipment or network failures, failed upgrades or replacement of software, user error, power outages, natural disasters, cyber-attacks, terrorist attacks, computer viruses, hackers, or other security breaches. We have mitigated our exposure to these risks through the establishment and maintenance of technology security programs and disaster recovery plans, but these mitigating activities may not be sufficient. A significant disruption, failure or security breach in our information technology systems could have a material adverse effect on our business, which could include operational disruptions, loss of confidential information, external reporting delays or errors, legal claims, or damage to our business reputation.

We operate in a competitive and highly fragmented industry. Numerous factors could impair our ability to maintain our current profitability and to compete with other carriers and private fleets.

We compete with many other transportation service providers of varying sizes and, to a lesser extent, with LTL carriers and railroads, some of which have more equipment and greater capital resources than we do. Additionally, some of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates or to maintain our profit margins.

In an effort to reduce the number of carriers it uses, a customer often selects so-called “core carriers” as approved transportation service providers, and in some instances, we may not be selected. Many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress freight rates or result in the loss of some business to competitors. Also, certain customers that operate private fleets to transport their own freight could decide to expand their operations, thereby reducing their need for our services.

Extreme or unusual weather conditions can disrupt our operations, impact freight volumes, and increase our costs, all of which could have a material adverse effect on our business results.

Certain weather conditions such as ice and snow can disrupt our operations. Increases in the cost of our operations, such as towing and other maintenance activities, frequently occur during the winter months. Natural disasters such as hurricanes and flooding can also impact freight volumes and increase our costs.

Our operations are subject to various environmental laws and regulations, including legislative and regulatory responses to climate change. Compliance with environmental requirements could result in significant expenditures and the violation of which these regulations could result in substantial fines or penalties.

We are subject to various environmental laws and regulations dealing with the handling of hazardous materials, underground fuel storage tanks, and discharge and retention of storm water. We operate in industrial areas, where truck terminals and other industrial 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 waste disposal, among others. We also maintain bulk fuel storage and fuel islands at several of our facilities. If a spill or other accident involving hazardous substances occurs, or if we are found to be in violation of applicable laws or regulations, it could have a material adverse effect on our 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.

We are also subject to existing and potential future laws and regulations with regards to public policy on climate change. If current regulatory requirements become more stringent or new environmental laws and regulations regarding climate change are introduced, we could be required to make significant expenditures or abandon certain activities, which could have a material adverse effect on our business and operating results.

Acquisitions or business combinations may disrupt or have a material adverse effect on our operations or earnings.

We could have difficulty integrating acquired companies’ assets, personnel and operations with our own.  Regardless of whether we are successful in making an acquisition or completing a business combination, the negotiations could disrupt our ongoing business, distract our management and employees, and increase our operating costs.  Acquisitions and business combinations are accompanied by a number of inherent risks, including, without limitation, the difficulty of integrating acquired companies and operations; potential disruption of our ongoing businesses and distraction of our management or the management of acquired companies; difficulties in maintaining controls, procedures and policies; potential impairment of relationships with employees and partners as a result of any integration of new management personnel; potential inability to manage an increased number of locations and employees; failure to realize expected efficiencies, synergies and cost savings; or the effect of any government regulations which relate to the businesses acquired.

Our business could be materially impacted if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition or business combination, many of which cannot be presently identified.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

We own our corporate headquarters in Lowell, Arkansas. In addition, we own or lease a number of buildings in Lowell that we utilize for administrative support customer service, freight dispatch, data processing and warehousing, and data backup and disaster recovery.warehousing. We also own or lease 4246 other significant facilities across the United States where we perform maintenance on our equipment, provide bulk fuel, and employ personnel to support operations. These facilities vary in size from 12 to 39 acres. Each of our business segments utilizes these facilities for various services, including bulk fueling, maintenance, and driver support activities.facilities. In addition, we have 89117 leased or owned facilities in our DCS cross-dock and other delivery system networknetworks, with the remaining three locations outsourced, and 4237 leased or owned remote sales offices or branches in our ICS segment. We also own or lease multiple small facilities, offices, and parking yards throughout the country that support our customers’ business needs.

A summary of our principal facilities in locations throughout the U.S. follows:

ITEM 3.    LEGAL PROCEEDINGS

We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items. During the first half of 2014, the Court in the lead class-action granted judgment in our favor with regard to all claims. The plaintiffs have appealed the case to the Ninth Circuit Court of Appeals where it is currently pending. The overlapping claims in the remaining actions have been stayed pending a decision in the lead class-action case. We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits. 

In January 2017 we exercised our right to utilize the arbitration process to review the division of revenue collected beginning May 1, 2016, as well as to clarify other issues, under our Joint Service Agreement with BNSF. BNSF has requested the same, andsame. In October 2018 we received the arbitration process has commenced.  BNSF provides a significant amount of rail transportation services to our JBI business segment.  At this time, we are unable to reasonably predictarbitrators’ Interim Award. For the outcomedetermined components of the arbitration,Interim Award, we recorded an $18.3 million pre-tax charge in the third quarter 2018 related to certain charges claimed by BNSF for specific services requested for customers from April 2014 through May 2018. In January 2019 the Panel issued its Second Interim Award ordering that $89.4 million is due from the Company to BNSF resulting from the adjusted revenue divisions relating to the 2016 period at issue ($52.1 million) and as such,for calendar year 2017 ($37.3 million). We recorded pretax charges for contingent liabilities in the fourth quarter 2018 of $89.4 million claimed by the BNSF for the period May 1, 2016 through December 31, 2017 and $44.6 million for the period January 1, 2018 through December 31, 2018, for a total of $134 million. In October 2019 the arbitrators issued a Final Award. As a result, we recorded pre-tax charges in the third quarter 2019 of $26.8 million related to certain charges claimed by BNSF for the period January 1, 2018 through December 31, 2018 and no gain or loss contingency can be determined or recorded. Normal commercial business activity betweenmaterial adjustments for the parties, including load tendering, load tracing, billingperiod January 1, 2019 through September 30, 2019. In addition, we recorded a $17.4 million charge in the third quarter 2019 for legal fees, costs and payments, is expectedinterest claimed by BNSF, for a total of $44.2 million.

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

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

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market (NASDAQ) under the symbol “JBHT.” At December 31, 2016,2019, we were authorized to issue up to 1 billion shares of our common stock, and 167.1 million shares were issued. We had 111.3106.2 million and 113.9108.7 million shares outstanding as of December 31, 20162019 and 2015,2018, respectively. The high and low sales pricesOn February 18, 2020, we had 1,011 stockholders of record of our common stock as reported by NASDAQ and the quarterly dividends paid per share on our common shares were:

On February 14, 2017, the high and low sales prices for our common stock as reported by NASDAQ were $100.74 and $99.42, respectively, and we had 1,018 stockholders of record.stock.

Dividend Policy

Our dividend policy is subject to review and revision by the Board of Directors, and payments are dependent upon our financial condition, liquidity, earnings, capital requirements, and any other factors the Board of Directors may deem relevant. On January 25, 2017,22, 2020, we announced an increase in our quarterly cash dividend from $0.22$0.26 to $0.23$0.27 per share, which will be paid February 24, 2017,21, 2020, to stockholders of record on February 10, 2017.7, 2020. We currently intend to continue paying cash dividends on a quarterly basis. However, no assurance can be given that future dividends will be paid.

Purchases of Equity Securities

The following table summarizes purchases of our common stock during the three months ended December 31, 2016:2019:

Stock Performance Graph

The following graph compares the cumulative 5-year total return of stockholders of our common stock with the cumulative total returns of the S&P 500 index and twoa customized peer groups.group. The peer group labeled “2015 Peer Group” consists of 1114 companies: Avis Budget Group Inc., C.H. Robinson Worldwide Inc., CSX Corp,Corporation, Expeditors International Ofof Washington Inc., Hertz Global Holdings Inc., Hub Group Inc., Kansas City Southern, Landstar SystemKnight-Swift Transportation Holdings Inc., Norfolk Southern Corp, Ryder System Inc. and Swift Transportation Co. The peer group labeled “2016 Peer Group” consists of 12 companies: Avis Budget Group Inc., C.H. Robinson Worldwide Inc., CSX Corp, Expeditors International Of Washington Inc., Hertz Global Holdings Inc., Hub Group Inc., Kansas City Southern, Landstar System Inc., Norfolk Southern Corp,Corporation, Old Dominion Freight Line Inc., Republic Services Inc., Ryder System Inc., Schneider National Inc., Stericycle Inc., Waste Management Inc., and Swift Transportation Co.XPO Logistics Inc. The graph assumes the value of the investment in our common stock, in the index, and in each of the peer groupsgroup (including reinvestment of dividends) was $100 on December 31, 2011,2014 and tracks it through December 31, 2016.2019. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Securities Authorized For Issuance Under Equity Compensation Plans

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

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

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that impact the amounts reported in our Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with third parties and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known. We consider our critical accounting policies and estimates to be those that require us to make more significant judgments and estimates when we prepare our financial statements and include the following:

Workers’ Compensation and Accident Costs

We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have umbrella policies to limit our exposure to catastrophic claim costs. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment.

The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. For 2017 and 2018, we were self-insured for $500,000 per occurrence for personal injury and property damage and self-insured for $100,000 per workers’ compensation claim. For 2019, we were self-insured for $500,000 per occurrence for personal injury and property damage and fully insured for workers’ compensation claims for nearly all states. We have policies in place for 20172020 with substantially the same terms as our 20162019 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage.

Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and if applicable, conversion to fully insured status and provides a reserve for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2016,2019, we had an accrual of approximately $98$263 million for estimated claims. In addition, we are requiredrecord receivables for amounts expected to pay certain advanced deposits and monthly premiums.be reimbursed for payments made in excess of self-insurance levels on covered claims.  At December 31, 2016,2019, we had an aggregatehave recorded $281 million of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance asset of approximately $93 million, which represented prefunded premiums and deposits.premiums.

Revenue Equipment

We operate a significant number of tractors, trucks, containers, chassis, and trailers in connection with our business. This equipment may be purchased or acquired under lease agreements. In addition, we may rent revenue equipment from various third parties under short-term rental arrangements. Purchased revenue equipment is depreciated on the straight-line method over the estimated useful life to an estimated salvage or trade-in value. We periodically review the useful lives and salvage values of our revenue equipment and evaluate our long-lived assets for impairment. We have not identified any impairment to our assets at December 31, 2016.2019.

We have agreements with our primary tractor suppliers for residual or trade-in values for certain new equipment. We have utilized these trade-in values, as well as other operational information such as anticipated annual miles, in accounting for depreciation expense. If our suppliers were unable to perform under the terms of our agreements for trade-in values, it could have a material adverse effect on our financial results.

Revenue Recognition

We recognize revenue based on the relative transit time of the freight transported and as other services are provided. Accordingly, a portion of the total revenue that 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.

We record revenues on the gross basis at amounts charged to our customers because we control and are primarily responsible for the primary obligor,fulfillment of promised services. Accordingly, we areserve as a principal in the transaction, wetransaction. We invoice our customers, and retain all credit risks, and we maintain discretion over pricing. Additionally, we are responsible for the selection of third-party transportation providers.providers to the extent used to satisfy customer freight requirements.

We recognize revenue from customer contracts based on relative transit time in each reporting period and as other performance obligations are provided, with related expenses recognized as incurred. Accordingly, a portion of the total revenue that will be billed to the customer is recognized in each reporting period based on the percentage of the freight pickup and delivery performance obligation that has been completed at the end of the reporting period.

Our trade accounts receivable includes amounts due from customers that have been reduced by an allowance for uncollectible accounts and revenue adjustments.  The allowance for uncollectible accounts and revenue adjustments is based on historical experience, as well as any known trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed quarterly.

Income Taxes

We account for income taxes under the liability method. Our deferred tax assets and liabilities represent items that will result in a tax deduction or taxable income in future years for which we have already recorded the related tax expense or benefit in our statement of earnings. Deferred tax accounts arise as a result of timing differences between when items are recognized in our Consolidated Financial Statements and when they are recognized in our tax returns. We assess the likelihood that deferred tax assets will be recovered from future taxable income or the reversal of temporary timing differences. To the extent we believe recovery does not meet the more-likely-than-not threshold, a valuation allowance is established. To the extent we establish a valuation allowance, we include an expense as part of our income tax provision.

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

Significant judgment is required in determining and assessing the impact of complex tax laws and certain tax-related contingencies on our provision for income taxes. As part of our calculation of the provision for income taxes, we assess whether the benefits of our tax positions are at least more likely than not to be sustained upon audit based on the technical merits of the tax position. For tax positions that are not more likely than not to be sustained upon audit, we accrue the largest amount of the benefit that is not more likely than not to be sustained in our Consolidated Financial Statements. Such accruals require us to make estimates and judgments, whereby actual results could vary materially from these estimates. Further, a number of years may elapse before a particular matter for which we have established an accrual is audited and resolved. See Note 7, Income Taxes, in our Consolidated Financial Statements for a discussion of our current tax contingencies.

RESULTS OF OPERATIONS

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

20162019 Compared With 20152018

Consolidated Operating Revenues

Our total consolidated operating revenues increased 5.9%6.4% to $6.56$9.17 billion in 2016,2019, compared to $6.19$8.61 billion in 2015,2018, primarily due to overallincreased revenue in DCS related to an increase in revenue producing trucks, higher truck productivity, defined as revenue per truck per week, and an acquisition in the first quarter 2019. The increase in revenue was further attributable to increased load volume, partially offset by lowervolumes in ICS and higher revenue per load in our JBI, ICS,partially offset by a decrease in JBI load volumes and JBT segments.a reduction in rates per loaded mile and the number of operating tractors in JBT. Fuel surcharge revenues decreased 18.4%1.4% to $548 million$1.04 billion in 2016,2019, compared to $671 million$1.06 billion in 2015.2018. If fuel surcharge revenues were excluded from both years, our 20162019 revenue increased 8.9%7.5% over 2015.2018.

Consolidated Operating Expenses

Our 20162019 consolidated operating expenses increased 6.6%6.3% from 2015,2018, while year-over-year revenue increased 5.9%6.4%, resulting in a 20162019 operating ratio of 89.0%92.0% compared to 88.4%92.1% in 2015. 2018.

Rents and purchased transportation costs increased 8.7%2.1% in 2016,2019, primarily the result ofdue to increased rail purchased transportation rates and the increase in load volume, which increased services provided by third-party rail and truck carrierspurchased transportation rates within JBI and ICS segments.segments and JBI rail purchased transportation costs, including a $26.8 million charge in 2019, resulting from the issuance of an award regarding our arbitration with BNSF. The current year increase in rents and purchased transportation costs was partially offset by a $152.3 million BNSF arbitration related charge recorded by JBI in 2018. Salaries, wages and employee benefit costs increased 5.4%12.5% in 20162019 from 2015.2018. This increase was primarily related to increases in driver pay and office personnel compensation due to an increase in the number of employees and a tighter supply of qualified drivers, partially offset by a $15.2 million, one-time benefit recorded to reflect a change in our employee paid time off policy.

drivers. Depreciation and amortization expense increased 6.4%14.5% in 2016,2019, primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand, equipment purchased related to new DCS long-term customer contracts, and new replacement equipment in JBT.contracts.

Fuel and fuel taxes expense decreased 9.5%increased 0.9% in 20162019 compared with 2015,2018, due primarily to decreasesan increase in road miles, partially offset by a decrease in the price of fuel during 2016, partially offset by increased road miles.2019. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a specified computation based on the change in national, regional, or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, most also reflect a specified miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reflected in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly.

It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a significant portion of fuel cost is included in our payments to railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense.

Operating supplies and expenses increased 5.7%9.7%, driven primarily by higher equipment maintenance and tire expenses due to increased equipment counts, increased toll activitycosts, higher travel costs, and tire expense.higher facility maintenance expenses. General and administrative expenses increased 20.0%17.6% from 2015,2018, primarily due to increased charitable contributionstechnology spend on the J.B. Hunt 360 platform and the absence oflegacy system upgrades, higher Final Mile Services^® (FMS) network facility costs, and increased advertising expenses. Additionally, net gains from asset sales and disposals in 2016. Net losses from sale or disposal of assets were $5$13.1 million in 2016,2019, compared to net gainslosses of $1$12.1 million in 2015.2018. Insurance and claims expense increased 6.4%21.5% in 2016,2019, primarily due to higher incident volume.2019 including a $17.4 million reserve charge for arbitration related legal fees, costs and interest claimed by BNSF and the inclusion of a $20.0 million FMS claim charge within DCS, partially offset by 2018 including specific reserve charges for the settlement of lawsuits with current and former drivers.

Net interest expense for 2016 decreased2019 increased by 1.1%31.7% compared with 2015,2018, due primarily to loweran increase in average debt levels and higher effective interest rates.rates on our debt.

Our effective income tax rate was 37.90%24.2% in 20162019 and 38.10%23.6% in 2015.2018. The decreaseincrease in 20162019 was primarily due to a reduction in permanent differencesdiscreet tax benefits recognized related to executiveshare-based compensation and lowervesting, partially offset by favorable settlements of state income tax rates.audits during 2019.

Segments

We operated four business segments during calendar year 2016.2019. The operation of each of these businesses is described in our Notes to Consolidated Financial Statements. The following tables summarize financial and operating data by segment:

Operating Data by Segment

JBI Segment

JBI segment revenue increased 3.6%1% to $3.80$4.74 billion in 2016,2019, from $3.66$4.72 billion in 2015.2018. This increase in revenue was primarily a result of an 8.1%a 4% increase in load volume, offset by a 4.2% decrease in revenue per load, which is the combination of changes in freight mix, customer rates, and fuel surcharge revenue. Load volumerevenue, partially offset by a 3% decrease in our easternload volume. Eastern network increased 6.7%,load volumes decreased 9% and transcontinental loads grew 9.0%increased 1% compared to 2015. Excluding fuel surcharge, revenues increased 7.1% and revenue per load decreased 1.0% in 2016 over the prior year.2018. Average length of haul remained relatively flatincreased 2% in 20162019 when compared to 2015.2018. Revenue per load excluding fuel surcharges increased approximately 6% compared to 2018.

Operating income of the JBI segment decreasedincreased to $450$447 million in 2016,2019, from $477$401 million in 2015.2018. Benefits from volume growth, improved network efficiency, improved rail service,customer rate increases and approximately $5.7 million from the change in paid time off policyfreight mix were partially offset by decreased volumes, which includes volume lost to rail rationalization, increased rail purchased transportation costs, higher equipment ownership and maintenance costs, increased technology modernization expenses, lower box turns, higher box repositioning costs and increased driver wages and recruiting costs. Current year operating income was further impacted by a $26.8 million charge to rail purchase transportation expense resulting from the issuance of an award regarding our arbitration with BNSF and a $17.4 million charge to insurance and cargo claimclaims expense, for arbitration related legal fees, costs and higher driver wageinterest claimed by BNSF. JBI recorded $152.3 million of additional BNSF arbitration related charges in 2018. Excluding these 2018 charges and retention costs.the 2019 arbitration related charges of $44.2 million, operating income for 2019, decreased 11% when compared to 2018.

DCS Segment

DCS segment revenue increased 5.6%25% to $1.53$2.69 billion in 2016,2019, from $1.45$2.16 billion in 2015.2018. Productivity, defined as revenue per truck per week, increased 1.2%8% when compared to 2015. Revenue, excluding fuel surcharges, increased 7.3% in 2016 compared to 2015, and productivity2018. Productivity excluding fuel surcharge revenue increased 2.8%9% from 2015,2018. The increase in productivity was primarily from improved overall operational efficiencies, includinga result of the acquisition of Cory 1st Choice Home Delivery (Cory), better integration of assets between customer accounts, fewer unseated trucks,customer rate increases, and increased customer supply-chainsupply chain fluidity load counts and customer rate increases.during 2019 compared to 2018. In addition, the growth in DCS revenue includes an increase of $187 million in FMS revenue, the majority of which was derived from the first quarter 2019 Cory acquisition. DCS ended 20162019 with a net additional 193972 revenue-producing trucks when compared to 2015.2018. Approximately 58% of these additions represent private fleet conversions and 15% represent FMS versus traditional dedicated capacity fleets. Customer retention rates remain above 98%.

Operating income of our DCS segment increased to $205$269 million in 2016,2019, from $163$193 million in 2015.2018. The increase is primarily due to increased revenue, improved asset utilization,productivity and approximately $7.3 million from the change in paid time off policy,additional trucks under contract, partially offset by higher insurance and claims costs, which included a $20.0 million FMS claim charge in the second quarter 2019, higher costs from the expanded FMS network, increased driver wagewages and recruiting costs, increased salaries and benefits expenses, and higher equipment ownership costs.additional non-cash amortization expense of $3.8 million compared to 2018.

ICS Segment

ICS segment revenue increased 21.7%1% to $852 million$1.35 billion in 2016,2019, from $699 million$1.33 billion in 2015.2018. Overall volumes increased 57.0%1%. Revenue per load decreased 22.5%remained flat when compared to 2018 primarily due to freightcustomer mix changes, driven by customer demand.a lower spot pricing market and a competitive pricing environment for contractual truckload business, when compared to 2018. Contractual business was approximately 74% of the total load volume and 64% of the total revenue in the 2016, compared to 71% of the total load volume and 63%59% of the total revenue in 2015.the 2019, compared to 70% of the total load volume and 48% of the total revenue in 2018.

OperatingICS segment incurred an operating loss of $11 million in 2019, compared to operating income remained flat at $36of $50 million for both 2016 and 2015,in 2018. The decrease in operating income was primarily due to increased revenue and approximately $1.0 million from the change in paid time off policy, being offset by a 6.3% decrease inlower gross profit margin,margins, increased claim costs,expenses to expand capacity and functionality of the Marketplace for J.B. Hunt 360, higher technologypersonnel costs, and increased personnel costs, as the total branch count increased to 42 from 34 at the end of 2015. ICS grossdigital marketing expenses. Gross profit margin decreased to 14.3%13.1% in the current year versus 15.4% last year primarily due to weaker spot market activity and lower contractual rates on committed business compared to 2018. Approximately $840 million of ICS revenue for 2016 from 15.3%2019 was executed through the Marketplace for 2015.J.B. Hunt 360 compared to $558 million in 2018. ICS’s carrier base increased 11.4%15%, and the employee count increased 23.0%6% when compared to 2015.2018.

JBT Segment

JBT segment revenue increased 0.6%decreased 7% to $388$389 million in 2016,2019, from $386$417 million in 2015.2018. Excluding fuel surcharges, revenue for 2016 increased 3.8%2019 decreased 6% compared to 2015,2018, primarily due to increased average truck count, partially offset by core customer rate decreasesa 1% decrease in rates per loaded mile, a 3% decrease in length of haul and freight mix changes.a 2% decrease in load volumes, compared to 2018. At the end of 2019, JBT operated 1,831 tractors compared to 2,112 at the end of 2018.

JBT segment had operating income of $30$29 million in 20162019 compared with $40$37 million in 2015. Benefits from an increased average truck count,2018. The decrease in operating income was driven primarily by lower spot market activity, higher empty miles per load, volume, and approximately $1.2 million from the change in paid time off policy, were more than offset by increased driver wages and recruiting costs, higher independent contractor cost per mile, higher safety and insurance costs, and increased tractor maintenance costs.

2015 Compared With 2014the reduction in overall load volumes.

2018 Compared With 2017

Consolidated Operating Revenues

Our total consolidated operating revenues were $6.19increased 19.8% to $8.61 billion in 2015, remaining relatively flat when2018, compared to $6.17$7.19 billion in 2014. Overall customer rate increases2017, primarily due to overall increased load volume and higher revenue per load growth, andin all four of our segments. Fuel surcharge revenues increased fleet counts40.2% to $1.1 billion in our JBI, DCS, and JBT segments, were offset by a 38.0% decrease in fuel surcharge revenue2018, compared to $671$754 million in 2015 when compared to $1.08 billion in 2014, due to decreases in the price of fuel during the year.2017. If fuel surcharge revenues were excluded from both years, our 20152018 revenue increased 8.5%17.4% over 2014.2017.

Consolidated Operating Expenses

Our 20152018 consolidated operating expenses decreased 1.1%increased 20.8% from 2014,2017, while year-over-year revenue remained flat,increased 19.8%, resulting in a 20152018 operating ratio of 88.4%92.1% compared to 89.8%91.3% in 2014. 2017.

Rents and purchased transportation costs decreased 2.9%increased 21.5% in 2015,2018, primarily due to increased rail and truck purchased transportation rates and the result of the lower fuel componentincrease in the cost ofload volume, which increased services provided by third-party rail and truck carriers within JBI DCS, and ICS segments. In addition, our JBI segment incurred charges of $152.3 million to rail purchase transportation expense related to the arbitration with BNSF. Salaries, wages and employee benefit costs increased 8.1%19.8% in 20152018 from 2014.2017. This increase was primarily related to increases in driver pay and office personnel compensation due to an increase in the number of employees and a tighter supply of qualified drivers.

Depreciation and amortization expense increased 15.3%13.7% in 2015,2018, primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand and equipment purchased related to new DCS long-term customer contracts, and new replacement equipment in JBT.contracts.

Fuel and fuel taxes expense decreased 31.0%increased 32.1% in 20152018 compared with 2014,2017, due primarily to decreasesan increase in road miles and increases in the price of fuel during 2015, partially offset by increased road miles. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a specified computation based on the change in national, regional or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, most also reflect a specified miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reflected in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly.

It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a significant portion of fuel cost is included in our payments to railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense.

2018. Operating supplies and expenses increased 0.9%18.0%, driven primarily by increased toll rates and activity, partially offset by decreased generalhigher equipment maintenance and repair costs.tire expenses due to increased equipment counts, higher travel costs, increased toll costs, and higher building maintenance expenses. General and administrative expenses increased 43.3%29.7% from 2014,2017, primarily due primarily to increased building and computer rentals, higher professional fees, higher advertising costs, related to corporate wide streamlininghigher bad debt expense driven by a customer bankruptcy, and technology redevelopment efforts. Net gainsincreased net losses from asset sales and disposals, partially offset by the 2017 inclusion of a $20.2 million reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that did not meet delivery. Additionally, net losses from sale or disposal of assets were $1$12.1 million in 2015,2018, compared with $6to net losses of $7.4 million in 2014.2017. Insurance and claims expense decreased 9.1%increased 4.7% in 2015,2018, primarily due to decreased accident severity and fewer incidents.higher incident volume.

Net interest expense for 2015 decreased2018 increased by 5.4%40.8% compared with 2014, primarily2017, due to loweran increase in average debt levels, higher effective interest rates. rates on our debt, and expenses incurred to refinance our revolving line of credit compared to 2017.

Our effective income tax rate was 38.10%23.6% in 20152018 and 38.01%(15.29%) in 2014.2017. The increase in 20152018 was primarily relateddue to an increasea $309.2 million decrease in state income tax expense.expense in 2017 resulting from adjustments to our deferred tax balances at December 31, 2017, for the change in future tax rates prescribed by the Tax Cuts and Jobs Act. 

JBI Segment

JBI segment revenue decreased 0.6%increased 15% to $3.66$4.72 billion in 2015,2018, from $3.69$4.08 billion in 2014, resulting from2017. This increase in revenue was primarily a decreaseresult of a 2% increase in load volume and a 13% increase in revenue per load, which is attributable tothe combination of changes in freight mix, customer rate increases offset by lowerrates, and fuel surcharges and freight mix. This decrease was partially offset by increases in load volume in both our easternsurcharge revenue. Eastern network loads grew at 10% and transcontinental networks. Excluding fuel surcharge, revenues increased 8.7% and revenue per load increased 4.4% in 2015 over the prior year.loads decreased 2% compared to 2017. Average length of haul remained relatively flatdecreased 2% in 20152018 when compared to 2014.2017. Revenue per load excluding fuel surcharges increased approximately 10% compared to 2017.

Operating income in ourof the JBI segment increaseddecreased to $477$401 million in 2015,2018, from $461$407 million in 2014. This increase was primarily due to customer rate increases,2017. Benefits from volume growth and increased revenue per load volume, reduced reliance on outsourced dray carriers, lower insurance and cargo claim costs, and lower maintenance costs, partiallywere offset by increases in rail purchased transportation rates,costs, which included $152.3 million of additional expense related to the arbitration with BNSF. Benefits were further offset by higher driver wage and retention costs, higher driver recruiting expenses, higher outsourced dray costs, increased costs for onboarding and integration of container tracking technologies, higher equipment depreciationownership costs, and costs of reduced efficiency and disruptions within the rail network. In addition, 2017 included a $20.2 million expense higher driver procurement and retention expenses, and $6.4 million in corporate-wide streamlining and technology redevelopment costs.for the reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that did not meet delivery.

DCS Segment

DCS segment revenue increased 4.1%26% to $1.45$2.16 billion in 2015,2018, from $1.39$1.72 billion in 2014.2017. Productivity, defined as revenue per truck per week, decreased 1.7%increased 7% when compared to 2014, primarily from lower fuel surcharge revenue. Revenue, excluding fuel surcharges, increased 10.0% in 2015 compared to 2014, and productivity2017. Productivity excluding fuel surcharge revenue increased 3.9%5% from 2014,2017. The increase in productivity was primarily froma result of better integration of assets between customer accounts, customer rate increases, and additional activity atincreased customer accounts.supply chain fluidity during 2018 compared to 2017. In addition, the growth in DCS revenue includes an increase of $113 million in FMS revenue, approximately $66 million of which was derived from the 2017 acquisition of Special Logistics Dedicated, LLC. DCS ended 20152018 with a net additional 3281,388 revenue-producing trucks when compared to 2014.2017.

Operating income of our DCS segment increased to $193 million in 2018, from $171 million in 2017. Increased revenue and improved asset integration was offset by higher costs from the expanded FMS network, increased driver wages and recruiting costs, higher non-driver salaries, wages and benefits, increased maintenance costs on equipment scheduled to be traded in the current year, higher overall insurance and claims costs, implementation costs for new customer contracts and approximately $4.4 million in additional non-cash amortization expense compared to 2017.

ICS Segment

ICS segment revenue increased 30% to $1.33 billion in 2018, from $1.02 billion in 2017. Overall volumes increased 24%. Revenue per load increased 5% primarily due to increased contractual and spot rates. Contractual business was approximately 70% of the total load volume and 48% of the total revenue in 2018, compared to 70% of the total load volume and 53% of the total revenue in 2017.

Operating income increased to $163$50 million in 2015, compared with $1172018, from $23 million in 2014. The increase in operating income was primarily due2017. Gross profit margin improved to increased revenue, improved asset utilization, less reliance on third-party carriers and lower maintenance costs, partially offset by increased equipment depreciation expense, higher driver wage and recruiting costs, and $2.6 million in corporate-wide streamlining and technology redevelopment costs.

ICS Segment

ICS segment revenue decreased 2.6% to $699 million in 2015, from $718 million in 2014. This decrease in revenue was primarily due to decreased revenue per load resulting from lower fuel prices, changes in freight mix, and less transactional customer demand, partially offset by an increase in overall load volume. Contractual business was approximately 71% of the total load volume and 63% of the total revenue15.4% in the 2015,current year compared to 63% of the total load volume and 55% of the total revenue13.3% in 2014.

Operating income increased to $36 million in 2015, compared to $30 million in 2014,2017 primarily due to improved gross profit margin. ICS gross profit margincontractual margins and increased to 15.3% for 2015 from 13.0% for 2014. Improvementsspot market activity. This increase in gross profit margin werewas partially offset by approximately $4.4 million in corporate-wide streamlining and technology redevelopment costs and higher personnel costs, ashigher technology development costs, and increase bad debt expense due to a customer bankruptcy. Approximately $558 million of ICS revenue for 2018 was executed through the total branch count increased to 34 from 29 at the end of 2014.Marketplace for J.B. Hunt 360. ICS’s carrier base increased 17%29%, and the employee count increased 15%20% when compared to 2014.2017.

JBT Segment

JBT segment revenue remained flat at $386increased 10% to $417 million in 2015 when compared to 2014.2018, from $378 million in 2017. Excluding fuel surcharges, revenue for 20152018 increased 7.5%9% compared to 2014,2017, primarily due to increased truck count and core rate increases.from a 16% increase in rates per loaded mile, partially offset by an 4% decrease in load count.

JBT segment had operating income of $40$37 million in 20152018 compared with $24$23 million in 2014. Benefits from an increased truck count, core rate increases,2017. The increase in operating income was driven primarily by higher rates per loaded mile and improvements inlower equipment maintenanceownership costs, insurance and claims costs, and fuel economy were partially offset by lower asset utilization, higherincreased driver wage and hiringretention costs, lower gains on equipment sales, increased equipment depreciation expense, increasedhigher driver and independent contractor recruiting expenses, and higher independent contractor costs per mile, and corporate-wide streamlining and technology redevelopment costs.mile.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $854 milliontotaled $1.10 billion in 2016 and $873 million2019, compared to $1.09 billion in 2015.2018. This decrease in 2016increase was primarily due to the timing of collections of trade and other receivables,increase in earnings, partially offset by increased earnings, collection of income taxes receivable and the timing of the payments of trade payables.general working capital activities.

Net cash used in investing activities totaled $485$804 million in 2016,2019, compared with $577$887 million in 2015.2018. The decrease resulted primarily from a reductiondecrease in equipment purchases, partially offset by a decrease innet of proceeds from the sale of equipment in 2016, compared to 2015.2019, partially offset by the purchases of Cory and RDI Last Mile Co. (RDI), which closed during the first and fourth quarters of 2019, respectively.

Net cash used in financing activities was $368$267 million in 2016,2019, compared with $297$208 million in 2015.2018. This changeincrease resulted primarily from an increase in treasury stock purchased in 2019, partially offset by higher long-term debt repayments, net of proceeds from long-term debt in 2016, partially offset by a reduction in treasury stock purchases.issuances, net of long-term debt repayments.

Our dividend policy is subject to review and revision by the Board of Directors, and payments are dependent upon our financial condition, liquidity, earnings, capital requirements, and other factors the Board of Directors may deem relevant. We paid a $0.20$0.23 per share quarterly dividend in 2014,2017, a $0.21$0.24 per share quarterly dividend in 2015,2018, and a $0.22$0.26 per share quarterly dividend in 2016.2019. On January 25, 2017,22, 2020, we announced an increase in our quarterly cash dividend from $0.22$0.26 to $0.23$0.27 per share, which will be paid February 24, 2017,21, 2020, to stockholders of record on February 10, 2017.7, 2020. We currently intend to continue paying cash dividends on a quarterly basis. However, no assurance can be given that future dividends will be paid.

Liquidity

Our need for capital has typically resulted from the acquisition of containers, chassis, trucks, tractors, and trailers required to support our growth and the replacement of older equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We obtain capital through cash generated from operations, revolving lines of credit, and long-term debt issuances. We have also periodically utilized capital and operating leases for revenue equipment. During the first and fourth quarters of 2019, we completed two separate business acquisitions. See Note 12, Acquisition, in the Notes to Consolidated Financial Statements for further discussion. We used our existing revolving credit facility and cash to finance these transactions and to provide any necessary liquidity for current and future operations. These acquisitions did not have a material impact on our interest expense.

At December 31, 2016,2019, we were authorized to borrow up to $500$750 million under a senior revolving line of credit, which is supported by a credit agreement with a group of banks and expires in September 2020.2023. This senior credit facility allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2016,2019, we had $140 millionno outstanding at an average interest rate of 1.76%borrowings under this agreement.

Our senior notes consist of three separate issuances. The first and second issuances are $250 million of 2.40% senior notes due March 2019 andis $250 million of 3.85% senior notes due March 2024, respectively, both of which werewas issued in March 2014. Interest payments under both notesthis note are due semiannually in March and September of each year.year, beginning September 2014. The third issuancesecond is $350 million of 3.30% senior notes due August 2022, issued in August 2015. Interest payments under this note are due semiannually in February and August of each year.year, beginning February 2016. The third is $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under this note are due semiannually in March and September of each year, beginning September 2019. We may redeem for cash some or all of thesethe notes based on a redemption price set forth in the note indenture. We currently have an interest rate swap agreementsagreement which effectively convert our $250 million of 2.40% fixed-rate senior notes due March 2019 and our $350 million of 3.30% fixed-rate senior notes due August 2022 to a variable rates,rate, resulting in an interest rates of 1.81% and 2.26%, respectively,3.27% at December 31, 2016.2019. The applicable interest ratesrate under thesethis swap agreements areagreement is based on LIBOR plus an established margin. In addition, we previously had $250 million of 2.40% senior notes which matured in March 2019. The entire outstanding balance was paid in full at maturity.

Our financing arrangements require us to maintain certain covenants and financial ratios. We were in compliance with all covenants and financial ratios at December 31, 2016.2019.

We believe our liquid assets, cash generated from operations, and various financing arrangements will provide sufficient funds for our operating and capital requirements for the foreseeable future.

We are currently committed to spend approximately $967$938 million, net of proceeds from sales or trade-ins, during 2017 and 2018,2020 through 2021, which is primarily related to the acquisition of tractors, containers, chassis, and tractors.other trailing equipment.

Off-Balance Sheet Arrangements

Our onlyWe had no off-balance sheet arrangements, are related to operating leases. Asother than our net purchase commitments of $938 million, as of December 31, 2016, we had approximately $36.7 million of obligations, primarily related to facility leases.2019.

Contractual Obligations and Commitments

The following table summarizes our expected obligations and commitments (in millions) as of December 31, 2016:2019:

⁽¹⁾ Interest payments on debt are based on the debt balance and applicable rate at December 31, 2016.2019.

We had standby letters of credit outstanding of approximately $4.4$2.7 million at December 31, 2016,2019, that expire at various dates in 2017,2020, which are related to certain operating agreements and our self-insured retention levels for casualty and workers’ compensation claims. We plan to renew these letters of credit in accordance with our third-party agreements. The table above excludes $39.8$55.4 million of liabilities related to uncertain tax positions, including interest and penalties, as we are unable to reasonably estimate the ultimate timing of settlement. See Note 7, Income Taxes, in the Notes to Consolidated Financial Statements for further discussion.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates on variable-rate debt outstanding. Our total long-term debt consists of both fixed and variable interest rate facilities. Our senior notes have fixed interest rates ranging from 2.40%3.30% to 3.85%3.875%. These fixed-rate facilities reduce the impact of changes to market interest rates on future interest expense. Our senior revolving line of credit has variable interest rates, which are based on the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the specific type of borrowing, plus any applicable margins. We currently have an interest rate swap agreementsagreement which effectively convert our $250 million of 2.40% fixed-rate senior notes due March 2019 andconverts our $350 million of 3.30% fixed-rate senior notes due August 2022 to a variable rates.rate. The applicable interest ratesrate under thesethis swap agreements areagreement is based on LIBOR plus an established margin. Our earnings would be affected by changes in these short-term variable interest rates. At our current level of borrowing, a one-percentage-point increase in our applicable rate would reduce annual pretax earnings by $7.4$3.5 million.

Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations, or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the year ended December 31, 2016.2019. Accordingly, 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 our future costs or on future cash flows we would receive from our foreign investment. To date, 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.

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 volatile fluctuations in fuel prices will continue in the future or the extent to which fuel surcharges could be collected to offset fuel-price increases. As of December 31, 2016,2019, we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements, Notes to Consolidated Financial Statements, and reports thereon of our independent registered public accounting firm as specified by this Item are presented following Item 15 of this report and include:

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 20162019 and 20152018

Consolidated Statements of Earnings for years ended December 31, 2016, 2015,2019, 2018, and 20142017

Consolidated Statements of Stockholders’ Equity for years ended December 31, 2016, 2015,2019, 2018, and 20142017

Consolidated Statements of Cash Flows for years ended December 31, 2016, 2015,2019, 2018, and 20142017

Notes to Consolidated Financial Statements

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that the information we are required to disclose in the reports we file with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC rules, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2016.2019.

The certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act have been filed as Exhibits 31.1 and 31.2 to this report.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Integrated Framework (2013 Framework). Based on our assessment, we believe that as of December 31, 2016,2019, our internal control over financial reporting is effective based on those criteria.

The effectiveness of internal control over financial reporting as of December 31, 2016,2019, has been audited by Ernst & Young LLP, an independent registered public accounting firm that also audited our Consolidated Financial Statements. Ernst & Young LLP’s report on internal control over financial reporting is included herein.herein (following Item 15).

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the fourth quarter ended December 31, 2016,2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required for Item 10 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April 20, 2017.23, 2020.

ITEM 11.  EXECUTIVE COMPENSATION

The information required for Item 11 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April 20, 2017.23, 2020.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS