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“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. When we use words like “may,”“plan,”“contemplate,”“anticipate,”“believe,”“intend,”“continue,”“expect,”“project,”“goals,”“strategy,”“future,”“predict,”“seek,”“estimate,”“likely,”“could,”“should,”“would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. 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 the following: general economic and business conditions; conditions; potential business or operational disruptions resulting from the effects of the novel coronavirus (COVID-19) pandemic, including any future spikes or outbreaks of the virus, as well as government actions taken in response to the pandemic; competition and competitive rate fluctuations;fluctuations; excess capacity in the intermodal or trucking industries; a loss of one or more major customers; customers; cost and availability of diesel fuel;fuel; interference with or termination of our relationships with certain railroads;railroads; rail service delays;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; employees; insurance costs and availability;availability; litigation and claims expense;expense; determination that independent contractors are employees; new or different environmental or other laws and regulations;regulations; volatile financial credit markets or interest rates; terrorist attacks or actions; actions; acts of war;war; adverse weather conditions;conditions; disruption or failure of information systemssystems; inability to keep pace with;technological advances affecting our information technology platforms;operational disruption or adverse effects of business acquisitions; increased costs for and availability of new revenue equipment;equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; decreases in the value of used equipment; 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 operationally and 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 actualfuture results to differ from estimates or projections contained in the forward-looking statements are described under “Risk Factors”“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 withthrough our wholly owned subsidiaries, provides safe anda wide range of reliable transportation, brokerage, 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, independent contractors, or independent contractors.third-party carriers. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers.trailers, while we perform the majority of the pickup and delivery services. 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. OurIn addition, we provide or arrange for local and home delivery services, typically are providedgenerally referred to as last-mile delivery services, to customers through a network of cross-dock service centersand other delivery system locations throughout the continental United States. We also provide comprehensive transportation and logistics services with a network ofUtilizing thousands of reliable third-party carriers.carriers, we also provide comprehensive freight transportation brokerage and logistics services. In addition to dry-van, full-load dry-van operations, we also arrange for these unrelated outside carriers alsoto provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Also, we utilize a combination of company-owned and contracted power units to provide traditional over-the-road full truckload delivery services. Our customers, who include many Fortune 500 companies, have extremely diverse businesses. Many of them are served by J.B. Hunt 360^○360°®, an online platform that offers shippers and carriers greater access, visibility and transparency of the supply chain.

We believe our ability to offer multiple services, utilizing our fourexisting lines of business segments and a full complement of logistics services through third parties, represents a competitive advantage. These segments includeWe report our operating results for these services using five reporting segments: Intermodal (JBI), Dedicated Contract Services^® (DCS)Services® (DCS®), Integrated Capacity Solutions™Solutions (ICS), Final Mile Services® (FMS) and Truckload (JBT). Our business usually involves slightly higher freight volumes in August through early November. Meanwhile, DCS isand FMS are subject to less seasonal variation than our other segments.

Our operations have been impacted by the COVID-19 global pandemic. We began our COVID-19 response activities in the first quarter of 2020, which required remote working when possible, expanded health and safety policies, facility modifications, increased security coverage, and purchase and distribution of personal protective equipment and supplies. In addition, we provided incremental paid time off for employees to help offset any financial loss caused by their absence from work when receiving the COVID-19 vaccination. We also worked with local healthcare organizations to provide vaccination assistance under applicable area guidelines and procedures to employees and their family members. In April 2022, we eliminated the requirement of remote working when possible, resulting in previously remote employees returning to our home office campus and all other field locations throughout North America. We continue to review and analyze both external and internal COVID-related data, including the effects of new variants. We are pleased with the continued performance of our employees, particularly our drivers, who provided consistent service to our customers throughout the pandemic.

Additional general information about us is available at 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, quarterly reports on Form 10-Q, current reports on Form 8-K and 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

Our Mission and StrategyMission: To create the most efficient transportation network in North America.

We forge long-term relationships with key customers that include supply-chainsupply 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 opportunities for additional capital investment and where management’s resources should be focused to provide more 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, and introducing technologies to optimize freight flows in the supply chain by eliminating waste. Additionally, we continue to test and explore the usage of alternative fuel vehicles. Efforts to improve fleet fuel efficiency and reduce greenhouse gas emissions are ongoing. We are an Environmental Protection Agency (EPA) SmartWay^®SmartWay® Transport Partner, and proud to have been awarded the EPA’s SmartWay^®SmartWay® Excellence Award each of the lastpast twelve years.years it was awarded.

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

operating segmentsOPERATING SEGMENTS

Segment information is also included in Note 1413 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 (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. Throughout the years that followed, JBI established multiple agreements with other Class I railroads. JBI draws on the intermodal services of these 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 96,743115,150 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 82,73195,553 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 4,9896,081 company-owned tractors 570and 7,972 company drivers and contracts 615 independent contractor trucks, and 6,376 company drivers.trucks. At December 31, 2019,2022, the total JBI employee count was 7,281.9,229. Revenue for the JBI segment in 20192022 was $4.74$7.02 billion.

DCS Segment

DCS focuses on private fleet conversion and creation in replenishment and specialized equipment, and final-mile delivery services.equipment. We specialize in the design, development, and execution of supply-chainsupply chain solutions that support a variety of transportation networks. Our final-mile delivery services are supported with a network of approximately 120 cross-dock and other delivery system network locations nationwide, with 98% of the continental U.S. population living within 150 miles of a network 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, 2019,2022, this segment operated 10,54212,328 company-owned trucks, 505570 customer-owned trucks, and 401 independent contractor trucks.truck. DCS also operates 20,86023,354 owned pieces of trailing equipment and 7,2584,968 customer-owned trailers. The DCS segment employed 15,01916,334 people, including 12,18113,887 drivers, at December 31, 2019.2022. DCS revenue for 20192022 was $2.69$3.38 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.equipment within other segments. 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 matcheshelps shippers and carriers match 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-chainsupply chain technology and design expertise to improve efficiency. ICS operates 37multiple remote sales offices or branches, as well as on-site logistics personnel working in direct contact with customers.

At December 31, 2019,2022, the ICS segment employed 1,213984 people, with a carrier base of approximately 84,400.156,400 available third-party carriers. ICS revenue for 20192022 was $1.35$2.39 billion.

JBT Segment

The service offering in this segment is full-load, dry-van freight, utilizing tractors and trailers operating over roads and highways. JBT also offers services through our J.B. Hunt 360box® program which utilizes our J.B. Hunt 360 platform to access capacity and offer efficient drop trailer solutions to our customers. 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 or third-party carriers who agree to transport freight in our trailers.

At December 31, 2019,2022, the JBT segment operated 845620 company-owned tractors, 14,718 company-owned trailers, and employed 1,1021,055 people, 868626 of whom were drivers. At December 31, 2019,2022, we had 9862,098 independent contractors operating in the JBT segment. JBT revenue for 20192022 was $389$1.08 billion.

FMS Segment

FMS provides last-mile delivery services to customers through a nationwide network of cross-dock and other delivery system network locations, with 98% of the continental U.S. population living within 150 miles of a network location. FMS provides both asset and non-asset (brokerage) big and bulky delivery and installation services, as well as fulfillment and retail-pooling distributions services. FMS contracts with customers range from one to five years, with the average being approximately three years.

At December 31, 2022, this segment operated 1,506 company-owned trucks, 303 customer-owned trucks, and 20 independent contractor trucks. FMS also operates 1,297 owned pieces of trailing equipment and 316 customer-owned trailers. The FMS segment employed 3,768 people, including 1,926 drivers and 607 delivery and material assistants, at December 31, 2022. FMS revenue for 2022 was $980 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 customer base includes a large number of Fortune 500 companies. We provide many transportation services that meet the supply-chainsupply chain logistics needs of shippers.

We generally market all of our service offerings through a nationwide sales and marketing network. We use a specific sales forceforces in DCS and FMS due to the length, complexity, and specialization of the sales cycle. In addition 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.

PeopleHuman Capital Resources

We believe thatGeneral

Despite operating over 182,000 pieces of transportation equipment, our single greatest asset and one of the factors differentiating us from our competitors is our service-oriented people. J.B. Hunt strives to provide a supportive and safe work environment for its employees, where diverse and innovative ideas can be fostered to solve problems and provide value-added services for our customers. In addition to our employees, our customers, vendors, and communities in which we operate also share diverse backgrounds and an equally diverse range of interests and passions. J.B. Hunt puts forth its best effort to support initiatives reflecting the company values which are shared by its stakeholders.

As of December 31, 2019,2022, we had 29,05637,151 employees, which consisted of 19,42524,411 company drivers, 8,29210,795 office personnel, 1,1371,324 maintenance technicians, and 202621 delivery and material assistants. We also had arrangements with approximately 1,5962,734 independent contractors to transport freight in our trailing equipment. None of our employees are represented by unions or covered by collective bargaining agreements.

In managing the Company’s business, management focuses on various human capital measures and objectives designed to address the development, attraction, and retention of personnel. These include competitive compensation and benefits, paid time off, employee retirement plan, bonus and other incentive compensation plans, modern equipment and support, leadership development, and tuition assistance as well as those described below.

Diversity and Inclusion

We hold strongly to the principle that a qualified, diverse workforce, and inclusive workplace helps us represent the broad cross-section of ideas, values, and beliefs of our employees, customers, suppliers, and communities. In 2017, we established our Diversity and Inclusion initiative which reaches enterprise-wide and aims to create an inclusive culture and environment where employees from all backgrounds can succeed and be heard. Employees are evaluated and hired nationally in accordance with established criteria and regulatory requirements specific to their anticipated role within the Company.

In addition, our Employee Resource Groups (ERGs), Inclusion Office, and Inclusion Council work together to further our culture of inclusivity. The Company’s six ERGs offer opportunities for employee professional development, business improvement, community engagement, and networking. Comprised of groups representing women, Latinos, veterans, LGBTQIA+, African Americans, and Asian Americans and Pacific Islanders, our ERGs promote camaraderie within the workforce and allow employees with similar interests to build meaningful work relationships that enable career mobility. Our Inclusion Office is a division of our People Team where our inclusion strategy and work are centralized to enable our mission of creating an inclusive culture where all employees feel welcomed, valued, respected, safe, and heard. Our Inclusion Council was established in 2022 and is comprised of 15 senior leaders with diverse identities from across our organization. They are a voice for our people who share a passion for ensuring that inclusion remains a key component of creating an exceptional employee experience and drives how we do business.

Employee Safety and Health

The health and well-being of our workforce is a priority as we continue to ingrain safety into our corporate culture and strive to conduct all our operations as safely as possible. J.B. Hunt employees participate in regular job-specific safety training programs. In addition, J.B. Hunt’s Million Mile Safe Driving and Recognition Awards Program has recognized and rewarded our drivers who dedicate themselves to accident-free driving. Since its inception in 1996, the program has awarded more than $35 million to over 4,600 drivers.

We believe that access to quality healthcare is also an important part of this priority, and we have programs in place that focus on improving the quality of care that our employees and their families receive. Paid leave is another key component of this focus and the Company offers benefit plans that comply with all applicable laws.

In April 2022, we successfully implemented our return to office plan and began concluding our COVID-19 specific safety response activities at our home office campus and all other field locations throughout North America. Our COVID-19 safety response included requiring remote working when possible, expanded health and safety policies, facility modifications, increased security coverage, and purchase and distribution of personal protective equipment and supplies. In addition, we provided incremental paid time off for employees to help offset any financial loss caused by their absence from work when receiving the COVID-19 vaccination. We also worked with local healthcare organizations to provide vaccination assistance under applicable area guidelines and procedures to employees and their family members. Due to the nature of our business and the large portion of our workforce consisting of drivers and other non-office personnel, fewer than 25% of our total employees were able to work remotely; however, we remained, and continue to remain, committed to the safety of our workforce, suppliers, and customers while continuing to meet our customers’ needs.

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 FMS segment primarily utilizes straight trucks or similar equipment through third-party carriers, while the JBT segment operates primarily 53-foot dry-van trailers.

As of December 31, 2019,2022, our company-owned tractor and truck fleet consisted of 16,37620,535 units. In addition, we had 1,5962,734 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, improved fuel efficiency and lowers maintenance expense. At December 31, 2019,2022, the average age of our combined tractor fleet was 2.32.6 years, while our containers averaged 7.08.3 years of age and our trailers averaged 6.56.3 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 segmentand FMS segments 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. We are also subject to a variety of requirements of national, state, and local governments, including the U.S. Environmental Protection Agency and the Occupational Safety and Health Administration.

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. These laws and regulations have the effect of increasing the costs, risks and liabilities associated with our applicable operations. 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.

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 factors 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.

ORisks Related to Our Industryur

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

Our business is dependent on the freight shipping needs of our customers, which can be heavily impacted by economic conditions and other factors affecting 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, 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 may also 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.

Our business is significantly impacted by the effects of national or international health pandemics on general economic conditions and the operations of our customers and third-party suppliers and service providers.

Our operations can be heavily impacted by the effects of a widespread outbreak of contagious disease, principally the recent outbreak of the COVID-19 virus. The effects of the COVID-19 pandemic have and may continue to disrupt or restrict the freight shipping activities of some of our customers, on which our business is dependent. In addition, adverse economic conditions caused by COVID-19 may also require us to increase our reserve for bad debt losses. Furthermore, the continuation or resumption of COVID-19 related social and economic disruptions may lead to other events which could negatively impact our operations including service limitations of our third-party purchased transportation providers, reduced availability of drivers and other key employees, disruptions in the procurement of revenue equipment, restrictions at U.S. ports of call, excess capacity or rate reductions within the intermodal or trucking industries, inability of suppliers to continue activities, or volatile financial credit markets. The extent to which the COVID-19 outbreak and any future resurgences will impact general economic and business conditions is highly uncertain and unpredictable; however, any of these factors could have a significant adverse effect on our financial condition and results of operations.

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 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.

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 and the Norfolk Southern railways. The transportation services provided by these railroads have been in recent years and may from time to time in the future be impacted by contractual disagreements, labor disruptions or shortages, and other rail network inefficiencies. A material change in the relationship with, the ability to utilize one or more of these railroads or the overall service levels provided by one or more of 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.

We regularly purchase new revenue equipment, including trucks, chassis and trailing equipment, in each of our operating segments to expand our fleets and replace aging equipment. Since the beginning of the COVID-19 pandemic, equipment manufacturers have experienced production and delivery delays due to work stoppages, supply chain disruptions and high demand that have impacted the availability, cost and timing of our receipt of new equipment orders. Any continued or future delays in the availability of new revenue equipment or further increases in the cost of such equipment could have a material adverse affect on our business and profitability by reducing productivity, increasing maintenance expenses and capital expenditures, and limiting our ability to expand our business.

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, 2019,2022, we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

InsuranceInsurance and claims expenses could significantly reduce our earnings.

Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. We have experienced substantial increases in the number and severity of auto liability claims which have exceeded our insurance coverage layers, which has adversely impacted our operating results in recent periods. If the number or severity of claims for which we are self-insured increases,continues to increase, our operating results could be further adversely affected. We have policies in place for 20202023 with substantially the same terms as our 20192022 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, 2019, our top 10 customers, based on revenue, accounted for approximately 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 long-term written 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 may 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 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 significant 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. We 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.

Risks Related to Our Business

ExtremeWe derive a significant portion of our revenue from a few major customers, the loss of one or unusual weather conditions can disrupt our operations, impact freight volumes, and increase our costs, allmore of which could have a material adverse effect on our business results.business.

Certain weather conditions such as ice and snow can disruptFor the calendar year ended December 31, 2022, our operations. Increases in the costtop 10 customers, based on revenue, accounted for approximately 38% 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 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 severalrevenue. One customer accounted for approximately 14% of our facilities. If a spilltotal revenue for the year ended December 31, 2022. Our JBI, ICS, and JBT segments typically do not have long-term contracts with their customers. While our DCS and FMS segments may involve long-term written contracts, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or other accident involving hazardous substances occurs,continue at the same levels. A reduction in or if we are found to be in violationtermination of applicable lawsour services by one or regulations, it could have a material adverse effect onmore of 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, whichmajor customers could have a material adverse effect on our business and operating results.

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 has recently gone into effect in California, although 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 may 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 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 significant 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 of which or an inability to keep pace with technological advances 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. We 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, theft or misuse of data, terrorist attacks, computer viruses, hackers, or other security breaches. We may in the future experience security breaches and other interruptions of our information technology systems despite our best efforts to prevent them. 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 also could experience an inability to keep pace with technological advances, resulting in our information technology platforms becoming obsolete or our competitors developing related or similar service offerings more effective than ours.

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

A substantial portion of the growth of our FMS segment has resulted from strategic acquisitions, and our future growth strategy for FMS and possibly other operating segments may involve the acquisition of one or more businesses. 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 involving FMS or other segments, 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 buildings in Lowell that we utilize for administrative support and warehousing. We also own or lease 4652 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 2 to 39 acres. Each of our business segments utilizes these facilities. In addition, we have 117129 leased or owned facilities in our DCSFMS cross-dock and other delivery system networks with the remaining three locations outsourced, and 37multiple 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

In January 2017 we exercisedSee Note 9, Commitments and Contingencies in 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 requested the same. In October 2018 we received the arbitrators’ Interim Award. For the determined components of the Interim Award, we recorded an $18.3 million pre-tax charge in the third quarter 2018Consolidated Financial Statements for disclosures related to certain charges claimed by BNSF for specific services requested for customers from April 2014 through May 2018. In January 2019 the Panel issued its Second Interim Award ordering that $89.4 million is due from the Company to BNSF resulting from the adjusted revenue divisions relating to the 2016 period at issue ($52.1 million) and for calendar year 2017 ($37.3 million). We recorded pretax charges for contingent liabilities in the fourth quarter 2018 of $89.4 million claimed by the BNSF for the period May 1, 2016 through December 31, 2017 and $44.6 million for the period January 1, 2018 through December 31, 2018, for a total of $134 million. In October 2019 the arbitrators issued a Final Award. As a result, we recorded pre-tax charges in the third quarter 2019 of $26.8 million related to certain charges claimed by BNSF for the period January 1, 2018 through December 31, 2018 and no material adjustments for the period January 1, 2019 through September 30, 2019. In addition, we recorded a $17.4 million charge in the third quarter 2019 for legal fees, costs and interest claimed by BNSF, for a total of $44.2 million.proceedings.

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

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’SREGISTRANT’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, 2019,2022, we were authorized to issue up to 1 billion shares of our common stock, and 167.1 million shares were issued. We had 106.2103.7 million and 108.7105.1 million shares outstanding as of December 31, 20192022 and 2018,2021 respectively. On February 18, 2020,21, 2023, we had 1,011967 stockholders of record of our common 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 22, 2020,19, 2023, we announced an increase in our quarterly cash dividend from $0.26$0.40 to $0.27$0.42 per share, which will bewas paid February 21, 2020,24, 2023, to stockholders of record on February 7, 2020.10, 2023. 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, 2019:

Period		Number of Common Shares Purchased				Average Price Paid Per Common Share Purchased				Total Number of Shares Purchased as Part of a Publicly Announced Plan (1)				Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plan (in millions) (1)
October 1 through October 31, 2019			-			$	-				-			$	145
November 1 through November 30, 2019			-				-				-				145
December 1 through December 31, 2019			441,097				113.30				441,097				95
Total			441,097			$	113.30				441,097			$	95

(1)     On April 20, 2017,January 22, 2020, our Board of Directors authorized the purchase of up to $500 million of our common stock. On January 22, 2020,July 20, 2022, our Board of Directors authorized an additional purchase of up to $500 million of our common stock. These stock repurchase programs have no expiration date. At December 31, 2022, we had $551.1 million available under these authorized plans to purchase our common stock. We made no purchases of our common stock during the three months ended December 31, 2022.

 

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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 atwo customized peer group.groups. The peer group labeled “2021 Peer Group” consists of 1413 companies: C.H. Robinson Worldwide Inc., CSX Corporation, Expeditors International of Washington Inc., Hub Group Inc., Kansas City Southern, Knight-Swift Transportation Holdings Inc., Norfolk Southern Corporation, Old Dominion Freight Line Inc., Republic Services Inc., Ryder System Inc., Schneider National Inc., Stericycle Inc., Waste Management Inc., and XPO, LogisticsInc. The peer group labeled “2022 Peer Group” consists of 14 companies: C.H. Robinson Worldwide Inc., CSX Corporation, Expeditors International of Washington Inc., Hub Group Inc., Knight-Swift Transportation Holdings Inc., Norfolk Southern Corporation, Old Dominion Freight Line Inc., Republic Services Inc., Ryder System Inc., Schneider National Inc., Stericycle Inc., Union Pacific Corporation, Waste Management Inc., and XPO, Inc. The graph assumes the value of the investment in our common stock, in the index, and in each of the peer groupgroups (including reinvestment of dividends) was $100 on December 31, 20142017 and tracks it through December 31, 2019.2022. The stock price performance included in this graph is not necessarily indicative of future stock price performance.

 

		Years Ended December 31,
		2017				2018				2019				2020				2021				2022
J.B. Hunt Transport Services, Inc.		$	100.00			$	81.59			$	103.43			$	122.15			$	183.99			$	158.36
S&P 500			100.00				95.62				125.72				148.85				191.58				156.89
2021 Peer Group			100.00				100.83				127.45				154.02				210.17				182.35
2022 Peer Group			100.00				102.30				131.78				157.84				208.60				179.30

 

		Years Ended December 31,
		2014				2015				2016				2017				2018				2019
J.B. Hunt Transport Services, Inc.		$	100.00			$	87.97			$	117.70			$	140.76			$	114.85			$	145.58
S&P 500			100.00				101.38				113.51				138.29				132.23				173.86
Peer Group			100.00				84.66				108.63				146.15				145.42				186.63

ITEM 6.   [Reserved]

 

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ITEM 6.    SELECTED FINANCIAL DATA7.   MANAGEMENT

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

(Dollars in millions, except per share amounts)

Earnings data for the years ended December 31,		2019				2018				2017				2016				2015
Operating revenues		$	9,165			$	8,615			$	7,190			$	6,555			$	6,188
Operating income			734				681				624				721				716
Net earnings			516				490				686				432				427
Basic earnings per share			4.81				4.48				6.24				3.84				3.69
Diluted earnings per share			4.77				4.43				6.18				3.81				3.66
Cash dividends per share			1.04				0.96				0.92				0.88				0.84
Operating expenses as a percentage of operating revenues:
Rents and purchased transportation			49.4	%			51.5	%			50.8	%			49.7	%			48.4	%
Salaries, wages and employee benefits			23.7				22.4				22.4				22.4				22.5
Depreciation and amortization			5.4				5.1				5.3				5.5				5.5
Fuel and fuel taxes			5.1				5.3				4.8				4.3				5.1
Operating supplies and expenses			3.6				3.5				3.6				3.6				3.6
General and administrative expenses, net of asset dispositions			2.1				1.8				1.8				1.3				1.1
Insurance and claims			1.7				1.5				1.7				1.2				1.2
Operating taxes and licenses			0.6				0.6				0.6				0.7				0.7
Communication and utilities			0.4				0.4				0.3				0.3				0.3
Total operating expenses			92.0				92.1				91.3				89.0				88.4
Operating income			8.0				7.9				8.7				11.0				11.6
Net interest expense			0.6				0.5				0.4				0.4				0.4
Earnings before income taxes			7.4				7.4				8.3				10.6				11.2
Income taxes			1.8				1.7				(1.2	)			4.0				4.3
Net earnings			5.6	%			5.7	%			9.5	%			6.6	%			6.9	%

Balance sheet data as of December 31,		2019				2018				2017				2016				2015
Working capital ratio			1.43				1.11				1.45				1.65				1.61
Total assets (millions)		$	5,471			$	5,092			$	4,465			$	3,951			$	3,630
Stockholders’ equity (millions)		$	2,267			$	2,101			$	1,839			$	1,414			$	1,300
Current portion of long-term debt (millions)			-			$	251				-				-				-
Total debt (millions)		$	1,296			$	1,149			$	1,086			$	986			$	998
Total debt to equity			0.57				0.55				0.59				0.70				0.77
Total debt as a percentage of total capital			36	%			35	%			37	%			41	%			43	%

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’ITEM 7.    MANAGEMENT’SS 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”“Forward-looking Statements” and “Risk Factors”“Risk Factors” for a discussion of items, uncertainties, assumptions and risks associated with these statements.

 

Critical Accounting Policies and EstimatesCRITICAL 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’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.costs which may include certain coverage-layer-specific, aggregated reimbursement limits of covered excess claims. 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 2018,2020 through 2022, we were self-insured for $500,000 per occurrence as well as subject to coverage-layer-specific, aggregated reimbursement limits of covered excess claims for personal injury and property damage and self-insured for $100,000 per workers’ compensation claim. For 2019, wedamage. 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 20202023 with substantially the same terms as our 20192022 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 personal injury and property damage claim liability. This process involves the use of expected loss rates, loss-development factors based on our historical claims experience, claim frequencies and includes aseverity, and contractual premium adjustment factor,factors, if applicable. In doing so, the recorded liability considers future claims growth and provides a reserve for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2019,2022, we had an accrual of approximately $263$427 million for estimated claims. A significant increase in the volume of claims or amount of settlements exceeding our coverage-layer specific, aggregated reimbursement limits could result in significant increase in our estimated liability for claims in future periods. In addition, we record receivables for amounts expected to be reimbursed for payments made in excess of self-insurance levels on covered claims.  At December 31, 2019,2022, we have recorded $281$374 million of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums.

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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, 2019.2022.

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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.

 

Revenue Recognition

 

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

 

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 beenaccounts receivable reduced by an allowance for uncollectible accounts and revenue adjustments.accounts. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts is calculated over the life of the underlying receivable and revenue adjustments is based on historical experience, as well asexperience; any known trends or uncertainties related to customer billing and account collectability.collectability; current economic conditions; and reasonable and supportable economic forecasts, each applied to segregated risk pools based on the business segment that generated the receivable. 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 7,6, Income Taxes, in our Consolidated Financial Statements for a discussion of our current tax contingencies.

 

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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.

 

		Percentage of Operating Revenues												Percentage Change Between Years								Percentage of Operating Revenues												Percentage Change Between Years
		2019				2018				2017				2019 vs. 2018				2018 vs. 2017				2022				2021				2020				2022 vs. 2021				2021 vs. 2020
Operating revenues			100.0	%			100.0	%			100.0	%			6.4	%			19.8	%			100.0	%			100.0	%			100.0	%			21.7	%			26.3	%
Operating expenses:
Rents and purchased transportation			49.4				51.5				50.8				2.1				21.5				49.9				53.0				51.4				14.6				30.2
Salaries, wages and employee benefits			23.7				22.4				22.4				12.5				19.8				22.8				22.7				24.4				22.1				17.6
Fuel and fuel taxes																							6.3				4.4				3.7				75.6				48.4
Depreciation and amortization			5.4				5.1				5.3				14.5				13.7				4.4				4.6				5.5				15.7				5.6
Fuel and fuel taxes			5.1				5.3				4.8				0.9				32.1
Operating supplies and expenses			3.6				3.5				3.6				9.7				18.0				3.4				3.0				3.5				36.1				10.5
Insurance and claims																							2.1				1.4				1.4				92.7				22.7
General and administrative expenses, net of asset dispositions			2.1				1.8				1.8				17.6				29.7				1.4				1.5				1.8				10.1				8.6
Insurance and claims			1.7				1.5				1.7				21.5				4.7
Operating taxes and licenses			0.6				0.6				0.6				8.3				14.0				0.5				0.5				0.6				14.8				9.4
Communication and utilities			0.4				0.4				0.3				12.6				28.9				0.2				0.3				0.3				5.3				4.0
Total operating expenses			92.0				92.1				91.3				6.3				20.8				91.0				91.4				92.6				21.2				24.6
Operating income			8.0				7.9				8.7				7.8				9.2				9.0				8.6				7.4				27.4				46.6
Net interest expense			0.6				0.5				0.4				31.7				40.8				0.4				0.4				0.5				9.7				(2.8	)
Earnings before income taxes			7.4				7.4				8.3				6.3				7.7				8.6				8.2				6.9				28.2				50.1
Income taxes			1.8				1.7				(1.2	)			8.8				266.1				2.1				1.9				1.6				30.6				49.4
Net earnings			5.6	%			5.7	%			9.5	%			5.5	%			(28.7	%)			6.5	%			6.3	%			5.3	%			27.4	%			50.3	%

 

20192022 Compared With 20182021

 

Consolidated Operating Revenues

 

Our total consolidated operating revenues increased 6.4%21.7% to $9.17$14.81 billion in 2019,2022, compared to $8.61$12.17 billion in 2018,2021. This increase was primarily due to increased 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 volumes in ICS and higher revenue per load and increased load volumes within JBI and JBT, increased average revenue producing trucks and fleet productivity within DCS, and increased revenue in JBI,FMS primarily driven by a business acquisition, partially offset by a decrease in JBIdecreased ICS load volumes and a reduction in rates per loaded mile and the number of operating tractors in JBT.volume. Fuel surcharge revenues decreased 1.4%increased 94.2% to $1.04$2.43 billion in 2019,2022, compared to $1.06$1.25 billion in 2018.2021. If fuel surcharge revenues were excluded from both years, our 20192022 revenue increased 7.5%13.4% over 2018.2021.

 

Consolidated Operating Expenses

 

Our 20192022 consolidated operating expenses increased 6.3%21.2% from 2018,2021, while year-over-year revenue increased 6.4%21.7%, resulting in a 20192022 operating ratio of 92.0%91.0% compared to 92.1%91.4% in 2018.2021.

 

Rents and purchased transportation costs increased 2.1%14.6% in 2019,2022, primarily due to increasedan increase in rail and truck purchased transportation rates within JBI and ICS segments and JBI railcarrier purchased transportation costs including a $26.8 million charge in 2019, resulting fromwithin the issuance ofJBI segment and an award regarding our arbitration with BNSF. The current year increase in rents and purchased transportation costs wasthe use of third-party truck carriers by JBT, partially offset by a $152.3 million BNSF arbitration related charge recorded by JBI in 2018.decreased ICS load volume. Salaries, wages and employee benefit costs increased 12.5%22.1% in 20192022 from 2018.2021. This increase was primarily related to increases in driver pay and office personnel compensation due toand an increase in the number of employees and a tighter supply of qualified drivers. Depreciation and amortizationas well as an increase in group medical expense increased 14.5% in 2019, primarily duecompared to equipment purchased related to new DCS long-term customer contracts.2021.

 

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Fuel and fuel taxes expense increased 0.9%75.6% in 20192022 compared with 2018,2021, due primarily to an increase in road miles, partially offset by a decrease in the price of fuel during 2019.2022 and 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.

 

Depreciation and amortization expense increased 15.7% in 2022, primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment within our JBI and JBT segments and increased intangible asset amortization expense resulting from the business acquisition within FMS.

Operating supplies and expenses increased 9.7%,36.1% in 2022 compared with 2021, driven primarily by higher equipment maintenance costs, due to holding equipment longer, increased tire expense, increased tolls expense, and tirehigher travel and entertainment expenses compared to 2021. Insurance and claims expense increased 92.7% in 2022, primarily due to increased equipment counts, increased toll costs,cost per claim, higher travel costs,insurance policy premium expense, and higher facility maintenance expenses.the inclusion of $94.0 million of expense for additional casualty claim reserves for claims subject to insurance coverage layer specific aggregated limits in 2022. General and administrative expenses increased 17.6%10.1% from 2018,2021, primarily due to higher building rentals, higher software subscription expense, increased technology spend on the J.B. Hunt 360 platformprofessional services expense, and legacy system upgrades, higher Final Mile Services^® (FMS) network facility costs, and increased advertising expenses. Additionally,bad debt expense, partially offset by higher net lossesgains from sale or disposals of assets. Net gain from sale or disposal of assets were $13.1was $25.4 million in 2019,2022, compared to a net lossesloss from sale or disposals of $12.1assets of $5.5 million in 2018. Insurance and claims expense increased 21.5% in 2019, primarily due to 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.2021.

 

Net interest expense for 20192022 increased by 31.7%9.7% compared with 2018,2021, due to an increase in average debt levels and higher effective interest rates on our debt.

Income tax expense increased 30.6% in 2022, due primarily to increased taxable earnings in 2022. Our effective income tax rate was 24.2%24.4% in 20192022 and 23.6%23.9% in 2018. The increase in 2019 was primarily due to a reduction in discreet tax benefits recognized related to share-based compensation vesting, partially offset by favorable settlements of state income tax audits during 2019.2021.

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Segments

 

We operated fourfive business segments during calendar year 2019.2022. 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 Revenue by Segment
		Years Ended December 31, (in millions)
		2022				2021				2020
JBI		$	7,022			$	5,454			$	4,675
DCS			3,378				2,578				2,196
ICS			2,386				2,538				1,658
JBT			1,082				796				463
FMS			980				842				689
Total segment revenues			14,848				12,208				9,681
Intersegment eliminations			(34	)			(40	)			(44	)
Total		$	14,814			$	12,168			$	9,637

 

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

		Operating Income by Segment												Operating Income by Segment
		Years Ended December 31, (in millions)												Years Ended December 31, (in millions)
		2019				2018				2017				2022				2021				2020
JBI		$	447			$	401			$	407			$	800			$	603			$	428
DCS			269				193				171				345				304				314
ICS			(11	)			50				23				59				46				(45	)
JBT			29				37				23				93				65				17
FMS															35				28				(1	)
Total		$	734			$	681			$	624			$	1,332			$	1,046			$	713

 

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Operating Data by Segment

		Years Ended December 31,
		2019				2018				2017
JBI
Loads			1,979,169				2,049,014				1,999,807
Average length of haul (miles)			1,679				1,648				1,681
Revenue per load		$	2,397			$	2,302			$	2,042
Average tractors during the period(1)			5,635				5,551				5,362
Tractors (end of period)
Company-owned			4,989				5,017				4,776
Independent contractor			570				633				764
Total tractors			5,559				5,650				5,540
Net change in trailing equipment during the period			1,841				6,262				4,016
Trailing equipment (end of period)			96,743				94,902				88,610
Average effective trailing equipment usage			86,836				88,739				82,969
DCS
Loads			3,615,580				2,981,344				2,575,245
Average length of haul (miles)			169				177				178
Revenue per truck per week(2)		$	4,895			$	4,534			$	4,226
Average trucks during the period(3)			10,725				9,264				7,946
Trucks (end of period)
Company-owned			10,542				9,652				8,124
Independent contractor			40				51				59
Customer-owned (DCS-operated)			505				412				544
Total trucks			11,087				10,115				8,727
Trailing equipment (end of period)			28,118				26,710				25,811
Average effective trailing equipment usage			28,147				26,806				24,550
ICS
Loads			1,243,992				1,234,632				992,834
Revenue per load		$	1,084			$	1,081			$	1,032
Gross profit margin			13.1	%			15.4	%			13.3	%
Employee count (end of period)			1,213				1,142				954
Approximate number of third-party carriers (end of period)			84,400				73,100				56,700
Marketplace for J.B. Hunt 360:
Approximate carrier tractor count (end of period)			682,000				529,000				312,000
Revenue (millions)		$	839.8			$	557.8			$	125.8
JBT
Loads			346,459				355,038				370,591
Average length of haul (miles)			415				427				435
Loaded miles (000)			143,511				151,322				160,932
Total miles (000)			177,035				181,718				192,433
Average nonpaid empty miles per load			96.9				85.5				85.1
Revenue per tractor per week(2)		$	3,917			$	4,148			$	3,556
Average tractors during the period(1)			1,958				1,990				2,098
Tractors (end of period)
Company-owned			845				1,139				1,291
Independent contractor			986				973				741
Total tractors			1,831				2,112				2,032
Trailing equipment (end of period)			6,975				6,800				7,120
Average effective trailing equipment usage			6,497				6,513				7,066

		Years Ended December 31,
		2022				2021				2020
JBI
Loads			2,068,278				1,984,834				2,019,391
Average length of haul (miles)			1,665				1,684				1,690
Revenue per load		$	3,395			$	2,748			$	2,315
Average tractors during the period(1)			6,601				5,904				5,530
Tractors (end of period)			6,696				6,194				5,663
Trailing equipment (end of period)			115,150				104,973				98,689
Average effective trailing equipment usage			107,319				98,798				90,514
DCS
Loads			4,406,527				4,020,308				3,676,212
Average length of haul (miles)			165				161				160
Revenue per truck per week(2)		$	5,225			$	4,719			$	4,373
Average trucks during the period(3)			12,564				10,628				9,743
Trucks (end of period)			12,899				11,689				9,911
Trailing equipment (end of period)			28,322				28,822				27,290
ICS
Loads			1,231,334				1,326,979				1,265,897
Revenue per load		$	1,938			$	1,912			$	1,310
Gross profit margin			14.7	%			11.8	%			9.9	%
Employee count (end of period)			984				975				1,011
Approximate number of third-party carriers (end of period)			156,400				136,400				100,200
Marketplace for J.B. Hunt 360 revenue (millions)		$	1,521.1			$	1,583.8			$	1,142.2
JBT
Loads			500,407				445,812				406,550
Average trailers during the period			12,798				9,299				7,866
Revenue per load		$	2,163			$	1,785			$	1,138
Average length of haul			520				482				420
Tractors (end of period)
Company-owned			620				734				798
Independent contractor			2,098				1,501				971
Total tractors			2,718				2,235				1,769
Trailers (end of period)			14,718				11,172				8,567
FMS
Stops			5,432,627				6,413,680				5,771,533
Average trucks during the period(3)			1,814				1,520				1,405

 

(1)	Includes company-owned and independent contractor tractors

(2)	Using weighted workdays

(3)	Includes company-owned, independent contractor, and customer-owned trucks

 

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JBI Segment

 

JBI segment revenue increased 1%29% to $4.74$7.02 billion in 2019,2022, from $4.72$5.45 billion in 2018.2021. This increase in revenue was primarily a result of a 4%24% increase in revenue per load, which is the combination of changes in freight mix, customer rates,rate changes, cost recovery efforts, and fuel surcharge revenue partially offset byand a 3% decrease4% increase in load volume. Eastern network load volumes decreasedincreased 9% and transcontinental loads increased 1% compared to 2018. Average length of haul increased 2% in 2019 when compared to 2018.2021. Revenue per load excluding fuel surcharges increased approximately 6%15% compared to 2018.2021.

 

Operating income of the JBI segment increased to $447$800 million in 2019,2022, from $401$603 million in 2018. Benefits2021. The increase is primarily due to increased revenue and higher net gains from customer rate increases and freight mix werethe sale of equipment during the current year, partially offset by decreased volumes, which includes volume lost tohigher rail rationalization, increased railand third-party dray purchased transportation expense, higher costs to attract and retain drivers, increased non-driver salary and wages, higher equipment ownership and maintenance costs,equipment-related expenses, 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 claims expense, and higher costs due to rail and port network inefficiencies and customer detention of equipment. In addition, JBI incurred $33 million in expense for arbitration related legal fees, costs and interest claimed by BNSF. JBI recorded $152.3 millionthe segment’s portion of the additional BNSF arbitration related chargescasualty claim reserves in 2018. Excluding these 2018 charges and the 2019 arbitration related charges of $44.2 million, operating income for 2019, decreased 11% when compared to 2018.2022.

 

DCS Segment

 

DCS segment revenue increased 25%31% to $2.69$3.38 billion in 2019,2022, from $2.16$2.58 billion in 2018.2021. Productivity, defined as revenue per truck per week, increased 8% when11% compared to 2018.2021. Productivity excluding fuel surcharge revenue increased 9%4% from 2018.2021. The increase in productivity was primarily a result of the acquisition of Cory 1st Choice Home Delivery (Cory), better integration of assets between customer accounts, customerdue to contractual index-based rate increases, and increased customer supply chain fluidity during 2019 compared to 2018. In addition, the growth in DCS revenue includes an increasepartially offset by lower productivity of $187 million in FMS revenue, the majority of which was derived from the first quarter 2019 Cory acquisition. DCS ended 2019 with a net additional 972 revenue-producing trucks when compared to 2018. Approximately 58% of these additions represent private fleet conversions and 15% represent FMS versus traditional dedicated capacity fleets.equipment on start-up accounts. Customer retention rates remain above 98%.

 

Operating income of our DCS segment increased to $269$345 million in 2019,2022, from $193$304 million in 2018. The increase is primarily due to increased productivity2021. Higher revenues and additional trucks under contract,higher net gains from the sale of equipment during 2022 were partially offset by increased driver and non-driver wages, benefits and recruiting costs, higher equipment-related expenses, higher costs related to the implementation of new long-term customer contracts, increased insurance and claims costs, which included a $20.0 million FMS claim charge in the second quarter 2019,expense, and higher costs from the expanded FMS network, increased driver wages and recruiting costs, and additional non-cash amortizationbad debt expense of $3.8 millionwhen compared to 2018.2021. In addition, DCS incurred $27 million in expense for the segment’s portion of the additional casualty claim reserves in 2022.

 

ICS Segment

 

ICS segment revenue increased 1%decreased 6% to $1.35$2.39 billion in 2019,2022, from $1.33$2.54 billion in 2018.2021. Overall volumes increased 1%. Revenuedecreased 7%, while revenue per load remained flatincreased 1% when compared to 20182021, primarily due to higher contractual customer mix changes, a lower spot pricing market and a competitive pricing environment for contractualrates within the truckload business and changes in customer freight mix when compared to 2018.2021. Contractual business was approximately 71%56% of the total load volume and 59%51% of the total revenue in the 2019,2022, compared to 70%51% of the total load volume and 48%39% of the total revenue in 2018.2021.

 

Operating income of our ICS segment incurred an operating loss of $11increased to $59 million in 2019, compared to operating income of $502022, from $46 million in 2018.2021. The decreaseincrease in operating income was primarily due to lowerhigher gross profit margins, increased expenses to expand capacity and functionality of the Marketplace for J.B. Hunt 360,partially offset by higher personnel costs, increased technology spending, increased insurance and increased digital marketing expenses.claims expense, and higher bad debt expense during 2022. In addition, ICS incurred $22 million in expense for the segment’s portion of the additional casualty claim reserves in 2022. Gross profit margin decreasedincreased to 13.1%14.7% in the current year versus 15.4%11.8% last year primarily due to weaker spot market activity and lower contractual rates on committed business compared to 2018.year. Approximately $840 million$1.52 billion of ICS revenue for 20192022 was executed through the Marketplace for J.B. Hunt 360 compared to $558 million$1.58 billion in 2018.2021. ICS’s carrier base increased 15%, and the employee count increased 6% when compared to 2018.2021.

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JBT Segment

 

JBT segment revenue decreased 7%increased 36% to $389$1.1 billion in 2022, from $796 million in 2019, from $417 million in 2018.2021. Excluding fuel surcharges, revenue for 2019 decreased 6%2022 increased 28% compared to 2018,2021, primarily due to a 1% decrease12% increase in rates per loaded mile, a 3% decrease in length of haulload volume and a 2% decrease14% increase in revenue excluding fuel surcharge revenue per load compared to 2021. The 2022 growth in load volumes, comparedcount was primarily due to 2018.the continued expansion of J.B. Hunt 360box which leverages the J.B. Hunt 360 platform to access drop trailer capacity for customers across our transportation network. At the end of 2019,2022, JBT operated 1,83114,718 trailers and 2,718 tractors compared to 2,11211,172 and 2,235 at the end of 2018.2021.

 

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Operating income of our JBT segment had operating income of $29increased to $93 million in 2019 compared with $372022, from $65 million in 2018.2021. The decreaseincrease in operating income was driven primarily by lower spot market activity, higher empty milesincreased load counts and revenue per load during the current year, which were partially offset by higher purchased transportation expense, higher equipment-related expenses, increased personnel costs, increased insurance and claims expense, and increased technology spending related to the continued expansion of J.B. Hunt 360box. In addition, JBT incurred $7 million in expense for the segment’s portion of the additional casualty claim reserves in 2022.

FMS Segment

FMS segment revenue increased 16% to $980 million in 2022 from $842 million in 2021, primarily due to the implementation of multiple new customer contracts and the acquisition of Zenith Freight Lines, LLC (Zenith) in 2022. The increase in revenue was partially offset by the effects of internal efforts to improve revenue quality across certain accounts as well as supply-chain related constraints for goods in the primary markets served by FMS.

Operating income of our FMS segment increased to $35 million in 2022, from $28 million in 2021. The increase in operating income was primarily due to increased revenues, partially offset by higher personnel salary, wages and benefits expense, higher equipment-related expenses, increased insurance and claims expense, increased driver wagesrecruiting costs, increased technology costs, and recruitingimplementation costs related to new long-term contractual business. In addition, FMS incurred $5 million in expense for the segment’s portion of the additional casualty claim reserves in 2022, while 2021 included an aggregated benefit of $9 million from the net settlement of claims and the reduction in overall load volumes.of a contingent liability.

 

20182021 Compared With 20172020

 

Consolidated Operating Revenues

 

Our total consolidated operating revenues increased 19.8%26.3% to $8.61$12.17 billion in 2018,2021, compared to $7.19$9.64 billion in 2017,2020. This increase was primarily due to overall increased load volumeICS and JBT revenue, higher JBI revenue per load, in all four of our segments.increased average revenue producing trucks and fleet productivity within DCS, and increased FMS stops and revenue per stop. Fuel surcharge revenues increased 40.2%65.5% to $1.1$1.25 billion in 2018,2021, compared to $754$757 million in 2017.2020. If fuel surcharge revenues were excluded from both years, our 20182021 revenue increased 17.4%22.9% over 2017.2020.

 

Consolidated Operating Expenses

 

Our 20182021 consolidated operating expenses increased 20.8%24.6% from 2017,2020, while year-over-year revenue increased 19.8%26.3%, resulting in a 20182021 operating ratio of 92.1%91.4% compared to 91.3%92.6% in 2017.2020.

 

Rents and purchased transportation costs increased 21.5%30.2% in 2018,2021, primarily due to increased third-party rail and truck purchased transportation rates and the increase in load volume, which increased services provided by third-party rail and truck carriers within JBI and ICS, segments. In addition, our JBI segment incurred chargesincreased ICS load volume, and an increase in the use of $152.3 million to rail purchase transportation expense related to the arbitration with BNSF.third-party truck carriers by JBT and FMS during 2021. Salaries, wages and employee benefit costs increased 19.8%17.6% in 20182021 from 2017.2020. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers, a trend we anticipate continuing, and an increase in the number of employees and a tighter supply of qualified drivers. Depreciation and amortization expense increased 13.7%as well as an increase in 2018, primarily dueincentive compensation compared 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.2020.

 

Fuel and fuel taxes expense increased 32.1%48.4% in 20182021 compared with 2017,2020, due primarily to an increase in road miles and increases in the price of fuel during 2018. 2021 and increased road miles. Depreciation and amortization expense increased 5.6% in 2021, primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment and scheduled turnover of tractors within JBI, higher trailer counts in JBT, and increased capital investments in information technology.

Operating supplies and expenses increased 18.0%,10.5% in 2021 compared with 2020, driven primarily by higher equipment maintenance costs, increased tire expense, increased tolls expense, higher travel and tire expensesentertainment expense, and higher weather-related towing costs, partially offset by reduced operating supplies and building maintenance costs in response to COVID-19 compared to 2020. Insurance and claims expense increased 22.7% in 2021, primarily due to higher incident volume and severity and increased equipment counts, higher travel costs, increased toll costs, and higher building maintenance expenses.insurance policy premium expenses, partially offset by a $3.2 million benefit from the net settlement of claims within the FMS segment. General and administrative expenses increased 29.7%8.6% from 2017,2020, primarily due to increased building and computer rentals, higher professional fees, higher advertising costs, higher bad debt expense driven by a customer bankruptcy,increased technology spend, and increased net losses from asset sales and disposals,driver hiring expenses, partially offset by a $5.7 million benefit from the 2017 inclusionreduction of a $20.2 million reserve of a cash advance forcontingent liability in the purchases of new trailing equipment from a manufacturer that did not meet delivery.FMS segment. Additionally, net losses from sale or disposal of assets were $12.1$5.5 million in 2018,2021, compared to net losses of $7.4$4.4 million in 2017. Insurance and claims expense increased 4.7% in 2018, primarily due to higher incident volume.2020.

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Net interest expense for 2018 increased2021 decreased by 40.8%2.8% compared with 2017,2020, due to an increase in average debt levels, higherlower effective interest rates on our debt, and expenses incurreddebt. Income tax expense increased 49.4% in 2021, due primarily to refinance our revolving line of credit compared to 2017.

increased taxable earnings in 2021. Our effective income tax rate was 23.6%23.9% in 20182021 and (15.29%)24.0% in 2017. The increase in 2018 was primarily due to a $309.2 million decrease in income tax expense in 2017 resulting from adjustments to our deferred tax balances at December 31, 2017, for the change in future tax rates prescribed by the Tax Cuts and Jobs Act. 2020.

 

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JBI Segment

 

JBI segment revenue increased 15%17% to $4.72$5.45 billion in 2018,2021, from $4.08$4.68 billion in 2017.2020. This increase in revenue was primarily a result of a 2% increase in load volume and a 13%an 19% increase in revenue per load, which is the combination of changes in freight mix, customer rates,rate changes, cost recovery efforts, and fuel surcharge revenue.revenue, partially offset by a 2% decrease in load volume. Eastern network loads grew at 10%load volumes increased 1% and transcontinental loads decreased 2%3% compared to 2017. Average length of haul decreased 2% in 2018 when compared to 2017.2020. Revenue per load excluding fuel surcharges increased approximately 10%14% compared to 2017.2020.

 

Operating income of the JBI segment decreasedincreased to $401$603 million in 2018,2021, from $407$428 million in 2017.2020. Benefits from volume growth and increased revenue per load were partially offset by increases innetwork inefficiencies caused by continued rail and customer fluidity challenges, higher rail and third-party dray purchased transportation costs, which included $152.3 million of additional expense, related to the arbitration with BNSF. Benefits were further offset by higher driver wagewages and retention costs, higher driver recruiting expenses, higher outsourced dray costs, increased costs for onboardingnon-driver salary, wages, and integration of container tracking technologies,incentive compensation, and higher equipment ownership costs and costs of reduced efficiency and disruptions within the rail network. In addition, 2017 included a $20.2 million expense for the reserve of a cash advance for the purchases of new trailing equipment from a manufacturer that did not meet delivery.when compared to 2020.

 

DCS Segment

 

DCS segment revenue increased 26%17% to $2.16$2.58 billion in 2018,2021, from $1.72$2.20 billion in 2017.2020. Productivity, defined as revenue per truck per week, increased 7% when8% compared to 2017.2020. Productivity excluding fuel surcharge revenue increased 5% from 2017.2020. The increase in productivity was primarily a result of better integration of assets between customercontracted indexed-based price escalators and less unassigned idle equipment, partially offset by expected lower productivity within start-up accounts customer rate increases, and increased customer supply chain fluidity during 2018 compared to 2017. In addition, the growth in DCS revenue includes an increase in open assigned trucks due to the tighter supply of $113 million in FMS revenue, approximately $66 million of which was derived from the 2017 acquisition of Special Logistics Dedicated, LLC. DCS ended 2018 with a net additional 1,388 revenue-producing trucks when compared to 2017.qualified drivers and COVID-related labor disruptions. Customer retention rates remain above 98%.

 

Operating income of our DCS segment increaseddecreased to $193$304 million in 2018,2021, from $171$314 million in 2017. Increased revenue and improved asset integration was2020. Higher revenues during the current year were more than offset by higher costs from the expanded FMS network, increasedincreases in driver wageswage and recruiting costs, higherincreased non-driver salaries,salary, wages, and benefits,incentive compensation, increased maintenance costs on equipment scheduled to be traded in the current year, higher overallcasualty insurance and claims costs, higher group medical benefits, and additional costs related to the implementation costs forof new, long-term customer contracts and approximately $4.4 million in additional non-cash amortization expense compared to 2017.contracts.

 

ICS Segment

 

ICS segment revenue increased 30%53% to $1.33$2.54 billion in 2018,2021, from $1.02$1.66 billion in 2017. Overall volumes increased 24%.2020. Revenue per load increased 5%46% when compared to 2020, primarily due to higher spot and contractual customer rates within the truckload business and changes in customer freight mix when compared to 2020. Overall volumes increased contractual and spot rates.5%, with truckload volumes increasing 13% when compared to 2020. Contractual business was approximately 70%51% of the total load volume and 48%39% of the total revenue in 2018,the 2021, compared to 70%60% of the total load volume and 53%43% of the total revenue in 2017.2020.

 

OperatingICS segment had operating income increased to $50of $46 million in 2018, from $232021, compared to an operating loss of $45 million in 2017. Gross profit margin improved to 15.4%2020. The increase in the current year compared to 13.3% in 2017operating income was primarily due to improved contractual marginsincreased revenue and increased spot market activity. This increase inhigher gross profit margin wasmargins, partially offset by higher personnel costs, higherincentive compensation, and increased technology development costs, and increase bad debt expense duecosts. Gross profit margin increased to a customer bankruptcy.11.8% in the current year versus 9.9% last year. Approximately $558 million$1.58 billion of ICS revenue for 20182021 was executed through the Marketplace for J.B. Hunt 360.360 compared to $1.14 billion in 2020. ICS’s carrier base increased 29%, and the employee count increased 20%36% when compared to 2017.2020.

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JBT Segment

 

JBT segment revenue increased 10%72% to $417$796 million in 2018,2021, from $378$463 million in 2017.2020. Excluding fuel surcharges, revenue for 20182021 increased 9%70% compared to 2017,2020, primarily fromdue to a 16%10% increase in ratesload volume and a 55% increase in revenue excluding fuel surcharge revenue per loaded mile, partially offset by an 4% decreaseload compared to 2020. The 2021 growth in load count.count was primarily due to the continued expansion of J.B. Hunt 360box which leverages the J.B. Hunt 360 platform to access drop trailer capacity for customers across our transportation network. At the end of 2021, JBT operated 11,172 trailers and 2,235 tractors compared to 8,567 and 1,769 at the end of 2020.

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JBT segment had operating income of $37$65 million in 20182021 compared with $23$17 million in 2017.2020. The increase in operating income was driven primarily by higher ratesincreased load counts and revenue per loaded mile and lower equipment ownership costs,load during 2021, which were partially offset by increases in purchased transportation expense, higher costs to attract and retain drivers, higher non-driver salary, wages, and incentive compensation, and additional costs from further investments in the trailer network and technology related to the continued expansion of J.B. Hunt 360box.

FMS Segment

FMS segment revenue increased driver wage22% to $842 million in 2021 from $689 million in 2020, primarily due to the addition of multiple customer contracts implemented during the current year and retention2020 including temporary suspension of operations at several customer sites as a result of the COVID-19 pandemic. Stop count for 2021 increased 11%, while productivity, defined as revenue per stop, increased 10% compared to 2020. The increase in productivity was primarily due to a shift in the mix of business between asset and asset-light operations and the implementation of higher rates.

FMS segment had operating income of $28 million in 2021 compared to an operating loss of $1 million in 2020. The increase in operating income was primarily due to increased revenues, a $5.7 million benefit from the reduction of a contingent liability, and a $3.2 million benefit from the net settlement of claims. These items were partially offset by higher implementation costs related to new long-term contractual business, higher driver and independent contractor recruiting expenses,third-party contract carrier costs, lower volumes with certain customers related to product availability because of supply chain disruptions, and higher independent contractor costs per mile.personnel salary, wages, and incentive compensation.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Net cash provided by operating activities totaled $1.10$1.78 billion in 2019,2022, compared to $1.09$1.22 billion in 2018. This increase was primarily2021, due to the increase inincreased earnings partially offset byand the timing of general working capital activities.

 

Net cash used in investing activities totaled $804$1.55 billion in 2022, compared with $877 million in 2019, compared with $887 million in 2018.2021. The decreaseincrease resulted primarily from a decreasean increase in equipment purchases, net of proceeds from the sale of equipment, and business acquisitions completed in 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.2022.

 

Net cash used in financing activities was $267$530 million in 2019,2022, compared with $208$305 million in 2018.2021. This increase resulted primarily from an increase in treasury stock purchased, in 2019,higher dividends paid, and retirement of long-term debt, partially offset by highernet proceeds from long-term debt issuances, netrevolving lines of long-term debt repayments.credit in 2022.

 

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 $0.23$0.27 per share quarterly dividend in 2017,2020, a $0.24$0.28 per share quarterly dividend in 2018, andthe first quarter of 2021, a $0.26$0.30 per share quarterly dividend in 2019.the last three quarters of 2021, and a $0.40 per share quarterly dividend in 2022. On January 22, 2020,19, 2023, we announced an increase in our quarterly cash dividend from $0.26$0.40 to $0.27$0.42 per share, which will bewas paid February 21, 2020,24, 2023, to stockholders of record on February 7, 2020.10, 2023. 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 and chassis, trucks, tractors and trailers required to support our growth and the replacement of older equipment.equipment as well as periodic business acquisitions. We are frequently able to accelerate or postpone a portion of equipment replacements or other capital expenditures depending on market and overall economic conditions. We obtainHowever, we do anticipate that the current challenges related to timely delivery of ordered equipment will continue due to supply chain challenges impacting production. In recent years, we have obtained capital through cash generated from operations, revolving lines of credit and long-term debt issuances. We have also periodically utilized capital and operating leases forto acquire 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, 2019,We believe our liquid assets, cash generated from operations, and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future. In September 2022, we were authorizedreplaced our $750 million senior credit facility dated September 25, 2018, with a new credit facility authorizing us to borrow up to $750 million under$1.5 billion through a senior revolving line of credit and committed term loans, which is supported by a credit agreement with a group of banksbanks. The revolving line of credit authorizes us to borrow up to $1.0 billion under a five-year term expiring September 2027, and expires in September 2023. This senior credit facility allows us to request an increase in the revolving line of credit total commitment by up to $250$300 million and to request atwo one-year extensionextensions of the maturity date. The committed term loans authorize us to borrow up to an additional $500 million during the nine-month period beginning September 27, 2022, and if funded, will mature in September 2025. The applicable interest raterates under this agreement isare based on either the PrimeSecured Overnight Financing Rate the Federal Funds(SOFR), or a Base Rate, or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2019,2022, we had a cash balance of $51.9 million, a $317.5 million outstanding balance on the revolving line of credit at an average interest rate of 5.32% and no outstanding borrowingsbalance of term loans under this agreement.our senior credit facility.

We continue to evaluate the possible effects of current economic conditions and reasonable and supportable economic forecasts on operational cash flows, including the risks of declines in the overall freight market and our customers' liquidity and ability to pay. We regularly monitor working capital and maintain frequent communication with our customers, suppliers and service providers. A large portion of our cost structure is variable. Purchased transportation expense represents more than half of our total costs and is heavily tied to load volumes. Our second largest cost item is salaries and wages, the largest portion of which is driver pay, which includes a large variable component.

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Our senior notes consist of threetwo separate issuances. The first is $250 million of 3.85% senior notes due March 2024, which was issued in March 2014. Interest payments under this notethese notes are due semiannually in March and September of each year, beginning September 2014. The second is $350 million of 3.30% senior notes due August 2022, issued in August 2015. Interest payments under this note are due semiannually in February and August of each year, beginning February 2016. The third is $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under this notethese notes are due semiannually in March and September of each year, beginning September 2019. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. We currently have an interest rate swap agreement which effectively convert ourOur $350 million of 3.30% fixed-rate senior notes due August 2022 to a variable rate, resulting in an interest rates of 3.27% at December 31, 2019. The applicable interest rate under this swap agreement 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.August 2022. The entire outstanding balance was paid in full at maturity.

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Our financing arrangements require us to maintain certain covenants and financial ratios. WeAt December 31, 2022, we were in compliance with all covenants and financial ratios at December 31, 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.ratios.

 

We are currently committed to spend a total of approximately $938 million,$2.37 billion, net of proceeds from sales or trade-ins, during 2020 through 2021,2023 and 2024, which is primarily related to the acquisition of tractors, containers, chassis, and other trailing equipment.

Off-Balance Sheet Arrangements

We had no other off-balance sheet arrangements other than our net purchase commitments of $938 million, as of December 31, 2019.2022.

Contractual Obligations and Commitments

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

		Total				2020					2021-2022				2023-2024			2025 and thereafter
Operating leases		$	133.7			$	44.9			$	59.0			$	19.8			$	10.0
Long-term debt obligations			1,300.0				-				350.0				250.0				700.0
Interest payments on debt (1)			238.7				48.2				92.6				66.3				31.6
Commitments to acquire revenue equipment and facilities			938.0				376.5				561.5				-				-
Total		$	2,610.4			$	469.6			$	1,063.1			$	336.1			$	741.6

⁽¹⁾ Interest payments on debt are based on the debt balance and applicable rate at December 31, 2019.

We had standby letters of credit outstanding of approximately $2.7 million at December 31, 2019, that expire at various dates in 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 $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 3.30%3.85% to 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 Primeeither SOFR or a Base Rate, the Federal Funds Rate, or LIBOR, depending upon the specific type of borrowing, plus anyan applicable margins. We currently have an interest rate swap agreement which effectively converts our $350 million of 3.30% fixed-rate senior notes due Augustmargin and other fees. At December 31, 2022, to a variable rate. The applicablethe average interest rate under this swap agreement is based on LIBOR plus an established margin.our revolving line of credit was 5.32%. 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 $3.5$3.2 million. During 2022, we had an interest rate swap agreement which effectively converted our then outstanding $350 million of 3.30% fixed-rate senior notes due August 2022 to a variable rate. The applicable interest rate under this swap agreement was based on LIBOR plus an established margin. These senior notes matured in August 2022 and the related interest rate swap was terminated. We are not currently utilizing any hedging instruments to manage our interest rate risk.

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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, 2019.2022. 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, 2019,2022, 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:

 

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting FirmFirms

Consolidated Balance Sheets as of December 31, 20192022 and 20182021

Consolidated Statements of Earnings for years ended December 31, 2019, 2018,2022, 2021, and 20172020

Consolidated Statements of Stockholders’ Equity for years ended December 31, 2019, 2018,2022, 2021, and 20172020

Consolidated Statements of Cash Flows for years ended December 31, 2019, 2018,2022, 2021, and 20172020

Notes to Consolidated Financial Statements

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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 withor submit under the SECSecurities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the SECCommission’s rules and forms, 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, 2019.2022.

 

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.

 

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Management’s Report on Internal Control Over Financial Reporting

 

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishingincluded herein (following Item 15) 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, 2019. In making this assessment, management used the criteria set forthincorporated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on our assessment, we believe that as of December 31, 2019, our internal control over financial reporting is effective based on those criteria.reference herein.

 

The effectiveness of internal control over financial reporting as of December 31, 2019,2022, has been audited by Ernst & YoungPricewaterhouseCoopers LLP, an independent registered public accounting firm that also audited our Consolidated Financial Statements. Ernst & YoungPricewaterhouseCoopers LLP’s report on internal control over financial reporting is included 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, 2019,2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.   OTHER INFORMATION

 

None.

 

ITEM 9C.   DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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 23, 2020.27, 2023.

 

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 23, 2020.27, 2023.

 

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

 

Except as set forth below, the information required for Item 12 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 2020.27, 2023.

 

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SecuritiesSecurities Authorized For Issuance Under Equity Compensation Plans

 

The following table summarizes, as of December 31, 2019,2022, information about compensation plans under which equity securities of the Company are authorized for issuance.

 

Plan Category(1)

Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights

Weighted- average Exercise Price of Outstanding Options, Warrants, and Rights

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))

Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights

Weighted- average Exercise Price of Outstanding Options, Warrants, and Rights

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A))

(A)

(B)

(C)

(A)

(B)

(C)

Equity compensation plans approved by security holders

1,688,946

$

-

(2)

5,710,001

1,542,366

$

- (2)

4,233,978

 

(1)	We have no equity compensation plans that are not approved by security holders.

 

(2)	Currently, only restricted share units remain outstanding under our equity compensation plan. Upon vesting, restricted share units are settled with shares of our common stock on a one-for-one basis and, accordingly, do not include an exercise price.

 

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The information required for Item 13 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 2020.27, 2023.

 

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The information required for Item 14 is hereby incorporated by reference from the Notice and Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 2020.27, 2023.

 

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PART IV

 

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(A)

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

 

(1)

Financial Statements

(1)     Financial Statements

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

 

(2)     Financial Statement Schedules

 

(2)

Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts (in millions)

 

Allowance for Doubtful Accounts, Revenue Adjustments and Other for the Years Ended:		Balance at Beginning of Year				Charged to Expense/ Against Revenue				Write-Offs, Net of Recoveries				Balance at End of Year
December 31, 2017			13.4				29.3				(18.7	)			24.0
December 31, 2018			24.0				35.7				(23.9	)			35.8
December 31, 2019			35.8				34.2				(47.5	)			22.5

Allowance for Doubtful Accounts and Other Receivables for the Years Ended:		Balance at Beginning of Year				Charged to Expense				Write-Offs, Net of Recoveries				Balance at End of Year
December 31, 2020		$	13.3			$	5.6			$	(0.5	)		$	18.4
December 31, 2021			18.4				2.6				(4.2	)			16.8
December 31, 2022			16.8				9.0				(3.5	)			22.3

 

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

 

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

 

(3)

(3)     Exhibits

 

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Exhibit
Number		Description
3.1			Amended and Restated Articles of Incorporation of J.B. Hunt Transport Services, Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2005, filed April 29, 2005)
3.2			Second Amended and Restated Bylaws of J.B. Hunt Transport Services, Inc. dated April 23, 2015October 21, 2021 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K, filed AprilOctober 27, 2015)2021)
3.3		Amendment No. 1 to the Second Amended and Restated Bylaws J.B. Hunt Transport Services, Inc., dated July 20, 2022 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K filed July 26, 2022)
3.4		Amendment No. 2 to the Second Amended and Restated Bylaws of J.B. Hunt Transport Services, Inc. dated January 19, 2023 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K, filed January 24, 2023)
4.1			Description of Capital Stock of J.B. Hunt Transport Services, Inc.
4.2			Indenture (incorporated by reference from Exhibit 4.1 of the Company’s registration statement on Form S-3ASR (File No. 333-169365), filed September 14, 2010)
4.3			Third Supplemental Indenture (incorporated by reference from Exhibit 4.4 of the Company’s current report on Form 8-K, filed March 6, 2014)
4.4			Fourth Supplemental Indenture (incorporated by reference from Exhibit 4.3 of the Company’s current report on Form 8-K, filed August 6, 2015)
4.5			Base Indenture, dated as of March 1, 2019 (incorporated by reference from Exhibit 4.1 of the Company’s current report on Form 8-K, filed March 1, 2019)
4.6	4.5		First Supplemental Indenture, dated as of March 1, 2019 (incorporated by reference from Exhibit 4.2 of the Company’s current report on Form 8-K, filed March 1, 2019)
10.1			Third Amended and Restated Management Incentive Plan (incorporated by reference from Appendix A of the Company’s definitive proxy statement on Schedule 14A, filed March 9, 2017)
10.2			Amendment to J.B. Hunt Transport Services, Inc. Third Amended and Restated Management Incentive Plan (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed April 22, 2019)
10.3			Summary of Compensation Arrangements with Named Executive Officers for 20192022 (incorporated by reference from Exhibit 99.1 of the Company’s current report on Form 8-K, filed January 25, 2019)24, 2022)
10.4			Summary of Compensation Arrangements with Named Executive Officers for 20202023 (incorporated by reference from Exhibit 99.1 of the Company’s current report on Form 8-K/A,8-K, filed February 3, 2020)January 24, 2023)
10.5*	10.5		Executive Retirement Agreement with David G. Mee, dated February 6, 2020 (incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K, filed February 10, 2020)
10.6*			Executive Retirement Agreement with Terrance D. Matthews, dated February 6, 2020 (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed February 10, 2020)
10.7			Amended and Restated Credit Agreement and related documents (incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K, filed September 28, 2018)October 3, 2022)
10.8			First Amendment to Credit Agreement, dated as of March 1, 2019 (incorporated by reference from Exhibit 10.2 of the Company’s current report on Form 8-K, filed March 1, 2019)
21.1			Subsidiaries of J.B. Hunt Transport Services, Inc.
22.1		List of Guarantor Subsidiaries of J.B. Hunt Transport Services, Inc.
23.1		Consent of PricewaterhouseCoopers LLP
23.2		Consent of Ernst & Young LLP
24.1		Powers of Attorney of Members of J.B. Hunt Transport Services, Inc. Board of Directors

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31.1		Rule 13a-14(a)/15d-14(a) Certification
31.2		Rule 13a-14(a)/15d-14(a) Certification
31.2			Rule 13a-14(a)/15d-14(a) Certification
32.1			Section 1350 Certification
99.1

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

99.2

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

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

 

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

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SIGNATURES

 

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on the 2nd24th day of March 2020.February 2023.

 

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

 

(Registrant)
	By:
	By:	/s/ John N. Roberts, III
		John N. Roberts, III
	President and	Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the 2nd24th day of March 2020,February 2023, on behalf of the registrant and in the capacities indicated.

 

	/s/ John N. Roberts, III		President and Chief Executive Officer, Member
	John N. Roberts, III		Member of the Board of Directors
			(Principal Executive Officer)
	/s/ John Kuhlow		Senior Vice President Finance, Controller,
John Kuhlow		Chief Accounting Officer, and Interim
		Chief Financial Officer,
	John Kuhlow		Executive Vice President
			(Principal Financial and Accounting Officer)
/s/ Kirk Thompson	*		Chairman of the Board of Directors
	Kirk Thompson
/s/ James L. Robo	*		Member of the Board of Directors
	James L. Robo		(Independent Lead Director)
/s/ Douglas G. Duncan	*		Member of the Board of Directors
	Douglas G. Duncan
/s/ Francesca M. Edwardson	*		Member of the Board of Directors
	Francesca M. Edwardson
/s/ Wayne Garrison	*		Member of the Board of Directors
	Wayne Garrison
/s/ Sharilyn S. Gasaway	*		Member of the Board of Directors
	Sharilyn S. Gasaway
/s/ Gary C. George	*		Member of the Board of Directors
	Gary C. George
/s/ J. Bryan Hunt, Jr.	*		Member of the Board of Directors
J. Bryan Hunt, Jr.	John B. Hill, III
/s/ Coleman H. Peterson	*		Member of the Board of Directors
Coleman H. Peterson	J. Bryan Hunt, Jr.
	*		Member of the Board of Directors
	Gale V. King

 

*By	/s/ John N. Roberts, III
	John N. Roberts, III
	As Attorney-in-Fact Pursuant to Powers of Attorney filed herewith

3031

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INDEX TO CONSOLIDATED FINANCIAL INFORMATION

 

 

	PAGE
Management’s Report on Internal Control Over Financial Reporting	32 33
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements(PCAOB ID Number 238)	33 34
Report of Prior Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting(PCAOB ID Number 42)	35 36
Consolidated Balance Sheets as of December 31, 20192022 and 20182021	36 37
Consolidated Statements of Earnings for years ended December 31, 2019, 2018,2022, 2021, and 20172020	37 38
Consolidated Statements of Stockholders’ Equity for years ended December 31, 2019, 2018,2022, 2021, and 20172020	38 39
Consolidated Statements of Cash Flows for years ended December 31, 2019, 2018,2022, 2021, and 20172020	39 40
Notes to Consolidated Financial Statements	40 41

 

31

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Management’s Report on Internal Control Over Financial Reporting

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

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

 

We are responsible for establishing and maintaining effectiveadequate internal control over financial reporting, as defined in RulesRule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel to provide reasonable assurance to our management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements.statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determinedAlso, projections of any evaluation of effectiveness to be effective can provide only reasonable assurancefuture periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with respect to financial statement preparation and presentation.the policies or procedures may deteriorate. We assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on our assessment, we believeour management has concluded that as of December 31, 2019,2022, our internal control over financial reporting is effective based on those criteria.

 

The effectiveness of our internal control over financial reporting as of December 31, 2019,2022, has been audited by Ernst & YoungPricewaterhouseCoopers LLP, an independent registered public accounting firm that also audited our Consolidated Financial Statements. Ernst & YoungPricewaterhouseCoopers LLP’s report on internal control over financial reporting is included herein.

 

 

 

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

 

32

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Report of Independent Registered Public Accounting Firm

 

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

 

OpinionOpinions on the Financial Statements and Internal Control over Financial Reporting

 

We have audited the accompanying consolidated balance sheets of J.B. Hunt Transport Services, Inc. and its subsidiaries (the Company)“Company”) as of December 31, 20192022 and 2018,2021, and the related consolidated statements of earnings, of stockholders' equity and of cash flows for each of the threetwo years in the period ended December 31, 2019, and2022, including the related notes and financial statement schedule listedof valuation and qualifying accounts for each of the two years in the Index atperiod ended December 31, 2022 appearing under Item 15(a)15(A)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company atas of December 31, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the threetwo years in the period ended December 31, 2019,2022 in conformity with U.S.accounting principles generally accepted accounting principles.

We also have audited, in accordance with the standardsUnited States of America. Also in our opinion, the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'smaintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring OrganizationsCOSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the Treadway Commission(2013 framework), and our report datedMarch 2, 2020, expressed an unqualified opinion thereon.

Basis for Opinion

Theseeffectiveness of internal control over financial statements arereporting, included in the responsibility of the Company's management.accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinionopinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the PCAOBPublic Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.opinions.

 

Definition and Limitations of Internal Control over Financial Reporting

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

34

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

Critical Audit Matters

 

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

 

Claims AccrualsPersonal injury and property damage claims accruals

 

Description of the Matter

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

33

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How We Addressed the Matter in Our Audit

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

​

Accounting for Acquisitionloss of Cory 1^st Choice Home Deliveryand damage to owned and leased revenue equipment. As of December 31, 2022, the Company’s claims accrual balance for self-insured claims was $427 million, of which a significant portion of claims related to personal injury and property damage. The Company recognizes a liability at the time of the incident based on an 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. Management uses an actuarial method to develop current claim information to derive an estimate of the ultimate personal injury and property damage claim liability, which involves the use of expected loss rates, loss-development factors based on historical claims experience, and claim frequencies and severity.

 

Description of the Matter The principal considerations for our determination that performing procedures relating to the personal injury and property damage claims accrual is a critical audit matter are (i) the significant judgment by management when developing the claims accrual estimate; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management's significant assumptions related to the expected loss rates, loss-development factors based on historical claims experience, and claim frequencies and severity, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.		During 2019, the Company completed its acquisition of Cory 1st Choice Home Delivery (“Cory”) for net consideration of $100 million, as disclosed in Note 12 to the consolidated financial statements. The transaction was accounted for as a business combination.  Auditing the Company's accounting for its acquisition of Cory was complex due to the significant estimation required by management to determine the fair value of acquired customer-related intangible assets and goodwill of $45.8 million and $48.2 million, respectively. The significant estimation was primarily due to the complexity of the valuation methods used by management to measure the fair value of the intangible assets and the sensitivity of the respective fair values to the significant underlying assumptions. The significant assumptions used in the valuation included volatility, discount rate, and revenue projections. The Company used the multi-period excess earnings, relief from royalty, and with-and-without methods to measure the intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates, attrition rate and market participant synergies). These significant assumptions are forward looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit		We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for acquisitions. Our tests included controls over the estimation process supporting the recognition and measurement of consideration transferred, and the intangible assets. We also tested management’s review of assumptions used in the valuation models. To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used in the Company’s valuation models, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We involved our valuation specialists to assist in our evaluation of the significant assumptions, including revenue growth rates and discount rate, and to assist with reconciling the prospective financial information with other prospective financial information prepared by the Company.

 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s personal injury and property damage claims accrual process, including controls over the development of expected loss rates, loss-development factors based on historical claims experience, and claim frequencies and severity. These procedures also included, among others, (i) testing management’s process for developing the claims accrual estimate; (ii) evaluating the appropriateness of the actuarial method; (iii) testing the completeness and accuracy of underlying data used in the personal injury and property damage claims accrual estimate; and (iv) evaluating the reasonableness of management’s significant assumptions related to the expected loss rates, loss-development factors based on historical claims experience, and claim frequencies and severity used in the calculation of the estimate. Professionals with specialized skill and knowledge were used to assist in evaluating of (i) the appropriateness of the Company’s claims accrual process, (ii) the appropriateness of the actuarial method, and (iii) the reasonableness of the expected loss rate, loss-development factors, and claim frequencies and severity used in developing the estimate.

/s/ Ernst & YoungPricewaterhouseCoopers LLP

Fayetteville, Arkansas

February 24, 2023

 

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

Rogers, Arkansas

March 2, 20202021.

 

3435

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Report of Independent Registered Public Accounting Firm

 

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

 

Opinion on Internal Control overthe Financial ReportingStatements

 

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2019 and 2018, the relatedaccompanying consolidated statements of earnings, stockholders' equity and cash flows of J.B. Hunt Transport Services, Inc. (the Company) for each of the three years in the periodyear ended December 31, 2019,2020, and the related notes andto the financial statement schedule listed in the Index at Item 15(a)statements (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the operations of the Company and our report dated March 2,its cash flows for the year ended December 31, 2020, expressed an unqualified opinion thereon.in conformity with U.S. generally accepted accounting principles.

 

Basis for Opinion

 

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

 

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

misstatement, whether due to error or fraud. Our audit included obtaining an understandingperforming procedures to assess the risks of internal control overmaterial misstatement of the financial reporting, assessingstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the risk that a material weakness exists, testingamounts and disclosures in the financial statements. Our audit also included evaluating the designaccounting principles used and operating effectivenesssignificant estimates made by management, as well as evaluating the overall presentation of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

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

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

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2005 to 2021.

 

Rogers, Arkansas

March 2, 2020February 22, 2021

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J.B. HUNT TRANSPORT SERVICES, INC.

Consolidated Balance Sheets

December 31, 2019 and 2018

(in thousands, except share data)

		2019				2018
Assets
Current assets:
Cash and cash equivalents		$	35,000			$	7,600
Trade accounts receivable, net			1,011,829				1,051,698
Other receivables, net			230,331				274,511
Inventories			21,106				21,977
Prepaid expenses			183,033				147,195
Total current assets			1,481,299				1,502,981
Property and equipment, at cost:
Revenue and service equipment			4,837,747				4,716,860
Land			58,692				49,486
Structures and improvements			302,184				238,202
Furniture and office equipment			442,183				324,695
Total property and equipment			5,640,806				5,329,243
Less accumulated depreciation			2,019,940				1,884,132
Net property and equipment			3,620,866				3,445,111
Goodwill			96,326				40,087
Other intangible assets, net			106,506				65,070
Other assets			165,857				38,398
Total assets		$	5,470,854			$	5,091,647
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		$	-			$	250,706
Trade accounts payable			602,601				709,736
Claims accruals			279,590				275,139
Accrued payroll			68,220				80,922
Other accrued expenses			85,355				35,845
Total current liabilities			1,035,766				1,352,348
Long-term debt			1,295,740				898,398
Other long-term liabilities			173,241				96,056
Deferred income taxes			699,078				643,461
Total liabilities			3,203,825				2,990,263
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $100 par value. 10 million shares authorized; none outstanding			-				-
Common stock, $.01 par value. 1 billion shares authorized; (167,099,432 shares issued at December 31, 2019 and 2018, of which 106,212,908 and 108,710,825 shares were outstanding at December 31, 2019 and 2018, respectively)			1,671				1,671
Additional paid-in capital			374,049				340,457
Retained earnings			4,592,938				4,188,435
Treasury stock, at cost (60,886,524 shares at December 31, 2019, and 58,388,607 shares at December 31, 2018)			(2,701,629	)			(2,429,179	)
Total stockholders’ equity			2,267,029				2,101,384
Total liabilities and stockholders' equity		$	5,470,854			$	5,091,647

See Notes to Consolidated Financial Statements.

 

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J.B. HUNT TRANSPORT SERVICES, INC.

J.B. HUNT TRANSPORT SERVICES, INC. Consolidated Balance Sheets December 31, 2022 and 2021 (in thousands, except share data)

Consolidated Statements of Earnings

Years Ended December 31, 2019, 2018 and 2017

(in thousands, except per share amounts)

 

		2019				2018				2017
Operating revenues, excluding fuel surcharge revenues		$	8,122,600			$	7,557,648			$	6,435,858
Fuel surcharge revenues			1,042,658				1,057,226				753,710
Total operating revenues			9,165,258				8,614,874				7,189,568
Operating expenses:
Rents and purchased transportation			4,528,812				4,434,540				3,650,806
Salaries, wages and employee benefits			2,167,851				1,926,213				1,608,378
Depreciation and amortization			499,145				435,893				383,518
Fuel and fuel taxes			463,195				459,011				347,573
Operating supplies and expenses			333,113				303,529				257,239
General and administrative expenses, net of asset dispositions			191,933				163,270				125,878
Insurance and claims			157,251				129,406				123,579
Operating taxes and licenses			55,336				51,080				44,825
Communication and utilities			34,797				30,911				23,983
Total operating expenses			8,431,433				7,933,853				6,565,779
Operating income			733,825				681,021				623,789
Interest income			1,754				224				235
Interest expense			54,684				40,427				28,785
Earnings before income taxes			680,895				640,818				595,239
Income taxes			164,575				151,233				(91,024	)
Net earnings		$	516,320			$	489,585			$	686,263
Weighted average basic shares outstanding			107,329				109,375				109,987
Basic earnings per share		$	4.81			$	4.48			$	6.24
Weighted average diluted shares outstanding			108,307				110,428				111,049
Diluted earnings per share		$	4.77			$	4.43			$	6.18
Dividends declared per common share		$	1.04			$	0.96			$	0.92

		2022				2021
Assets
Current assets:
Cash and cash equivalents		$	51,927			$	355,549
Trade accounts receivable, net			1,528,075				1,506,619
Other receivables			330,764				216,615
Inventories			40,602				25,032
Prepaid expenses and other current assets			260,410				209,554
Total current assets			2,211,778				2,313,369
Property and equipment, at cost:
Revenue and service equipment			6,815,776				5,667,131
Land			88,699				67,540
Structures and improvements			382,007				318,222
Software, office equipment and furniture			712,998				627,423
Total property and equipment			7,999,480				6,680,316
Less accumulated depreciation			3,019,663				2,612,661
Net property and equipment			4,979,817				4,067,655
Goodwill			120,449				100,521
Other intangible assets, net			115,941				90,572
Other assets			358,597				222,231
Total assets		$	7,786,582			$	6,794,348
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		$	-			$	355,972
Trade accounts payable			798,776				772,736
Claims accruals			452,149				307,210
Accrued payroll and payroll taxes			188,252				190,950
Other accrued expenses			129,054				102,732
Total current liabilities			1,568,231				1,729,600
Long-term debt			1,261,738				945,257
Other long-term liabilities			369,314				256,233
Deferred income taxes			920,531				745,442
Total liabilities			4,119,814				3,676,532
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $100 par value. 10 million shares authorized; none outstanding			-				-
Common stock, $.01 par value. 1 billion shares authorized; (167,099,432 shares issued at December 31, 2022 and 2021, of which 103,743,382 and 105,093,706 shares were outstanding at December 31, 2022 and 2021, respectively)			1,671				1,671
Additional paid-in capital			499,897				448,217
Retained earnings			6,423,730				5,621,103
Treasury stock, at cost (63,356,050 shares at December 31, 2022, and 62,005,726 shares at December 31, 2021)			(3,258,530	)			(2,953,175	)
Total stockholders’ equity			3,666,768				3,117,816
Total liabilities and stockholders' equity		$	7,786,582			$	6,794,348

 

See Notes to Consolidated Financial Statements.

 

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J.B. HUNT TRANSPORT SERVICES, INC.

J.B. HUNT TRANSPORT SERVICES, INC. Consolidated Statements of Earnings Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders' Equity

Years Ended December 31, 2019, 2018 and 2017

(in thousands, except per share amounts)

 

						Additional
		Common				Paid-in				Retained				Treasury				Stockholders’
		Stock				Capital				Earnings				Stock				Equity
Balances at December 31, 2016		$	1,671			$	293,087			$	3,218,943			$	(2,099,640	)		$	1,414,061
Comprehensive income:
Net earnings			-				-				686,263				-				686,263
Cash dividend declared and paid ($0.92 per share)			-				-				(101,362	)			-				(101,362	)
Purchase of treasury shares			-				-				-				(179,813	)			(179,813	)
Share-based compensation			-				38,291				-				-				38,291
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(20,567	)			-				2,452				(18,115	)
Balances at December 31, 2017		$	1,671			$	310,811			$	3,803,844			$	(2,277,001	)		$	1,839,325
Comprehensive income:
Net earnings			-				-				489,585				-				489,585
Cash dividend declared and paid ($0.96 per share)			-				-				(104,994	)			-				(104,994	)
Purchase of treasury shares			-				-				-				(150,338	)			(150,338	)
Share-based compensation			-				47,369				-				-				47,369
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(17,723	)			-				(1,840	)			(19,563	)
Balances at December 31, 2018		$	1,671			$	340,457			$	4,188,435			$	(2,429,179	)		$	2,101,384
Comprehensive income:
Net earnings			-				-				516,320				-				516,320
Cash dividend declared and paid ($1.04 per share)			-				-				(111,817	)			-				(111,817	)
Purchase of treasury shares			-				-				-				(275,657	)			(275,657	)
Share-based compensation			-				53,324				-				-				53,324
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(19,732	)			-				3,207				(16,525	)
Balances at December 31, 2019		$	1,671			$	374,049			$	4,592,938			$	(2,701,629	)		$	2,267,029

		2022				2021				2020
Operating revenues, excluding fuel surcharge revenues		$	12,381,359			$	10,915,442			$	8,879,653
Fuel surcharge revenues			2,432,640				1,252,860				756,920
Total operating revenues			14,813,999				12,168,302				9,636,573
Operating expenses:
Rents and purchased transportation			7,392,179				6,449,068				4,954,123
Salaries, wages and employee benefits			3,373,063				2,761,680				2,347,716
Fuel and fuel taxes			931,710				530,642				357,483
Depreciation and amortization			644,520				557,093				527,375
Operating supplies and expenses			502,553				369,294				334,350
Insurance and claims			318,123				165,052				134,482
General and administrative expenses, net of asset dispositions			215,361				195,616				180,083
Operating taxes and licenses			68,230				59,462				54,331
Communication and utilities			36,707				34,865				33,511
Total operating expenses			13,482,446				11,122,772				8,923,454
Operating income			1,331,553				1,045,530				713,119
Interest income			1,069				493				486
Interest expense			51,249				46,251				47,580
Earnings before income taxes			1,281,373				999,772				666,025
Income taxes			312,022				238,966				159,990
Net earnings		$	969,351			$	760,806			$	506,035
Weighted average basic shares outstanding			104,141				105,359				105,700
Basic earnings per share		$	9.31			$	7.22			$	4.79
Weighted average diluted shares outstanding			105,276				106,593				106,766
Diluted earnings per share		$	9.21			$	7.14			$	4.74

 

See Notes to Consolidated Financial Statements.

 

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J.B. HUNT TRANSPORT SERVICES, INC.

J.B. HUNT TRANSPORT SERVICES, INC. Consolidated Statements of Stockholders' Equity Years Ended December 31, 2022, 2021 and 2020 (in thousands, except per share amounts)

Consolidated Statements of Cash Flows

Years Ended December 31, 2019, 2018 and 2017

(in thousands)

 

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

						Additional
		Common				Paid-in				Retained				Treasury				Stockholders’
		Stock				Capital				Earnings				Stock				Equity
Balances at December 31, 2019		$	1,671			$	374,049			$	4,592,938			$	(2,701,629	)		$	2,267,029
Comprehensive income:
Net earnings			-				-				506,035				-				506,035
Cash dividend declared and paid ($1.08 per share)			-				-				(114,234	)			-				(114,234	)
Purchase of treasury shares			-				-				-				(92,548	)			(92,548	)
Share-based compensation			-				60,698				-				-				60,698
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(26,503	)			-				(339	)			(26,842	)
Balances at December 31, 2020		$	1,671			$	408,244			$	4,984,739			$	(2,794,516	)		$	2,600,138
Comprehensive income:
Net earnings			-				-				760,806				-				760,806
Cash dividend declared and paid ($1.18 per share)			-				-				(124,442	)			-				(124,442	)
Purchase of treasury shares			-				-				-				(151,720	)			(151,720	)
Share-based compensation			-				61,505				-				-				61,505
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(21,532	)			-				(6,939	)			(28,471	)
Balances at December 31, 2021		$	1,671			$	448,217			$	5,621,103			$	(2,953,175	)		$	3,117,816
Comprehensive income:
Net earnings			-				-				969,351				-				969,351
Cash dividend declared and paid ($1.60 per share)			-				-				(166,724	)			-				(166,724	)
Purchase of treasury shares			-				-				-				(300,030	)			(300,030	)
Share-based compensation			-				77,535				-				-				77,535
Restricted share issuances, net of stock repurchased for payroll taxes and other			-				(25,855	)			-				(5,325	)			(31,180	)
Balances at December 31, 2022		$	1,671			$	499,897			$	6,423,730			$	(3,258,530	)		$	3,666,768

 

See Notes to Consolidated Financial Statements.

 

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J.B. HUNT TRANSPORT SERVICES, INC.

Consolidated Statements of Cash Flows

Years Ended December 31, 2022, 2021 and 2020

(in thousands)

		2022				2021				2020
Cash flows from operating activities:
Net earnings		$	969,351			$	760,806			$	506,035
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization			644,520				557,093				527,375
Noncash lease expense			83,797				55,137				45,985
Share-based compensation			77,535				61,505				60,698
(Gain)/loss on sale of revenue equipment and other			(25,422	)			5,540				4,389
Deferred income taxes			175,089				53,420				(7,056	)
Changes in operating assets and liabilities:
Trade accounts receivable			(13,950	)			(382,216	)			(109,758	)
Income taxes receivable or payable			(69,025	)			(30,633	)			57,851
Other current assets			(83,892	)			(15,252	)			(18,038	)
Trade accounts payable			(23,838	)			140,295				(5,482	)
Claims accruals			117,887				35,051				(9,072	)
Accrued payroll and other accrued expenses			(75,170	)			(16,848	)			69,932
Net cash provided by operating activities			1,776,882				1,223,898				1,122,859
Cash flows from investing activities:
Additions to property and equipment			(1,540,796	)			(947,563	)			(738,545	)
Proceeds from sale of equipment			108,901				70,545				137,776
Business acquisition			(118,175	)			-				(12,136	)
Change in other assets			-				-				(52	)
Net cash used in investing activities			(1,550,070	)			(877,018	)			(612,957	)
Cash flows from financing activities:
Payments on long-term debt			(350,000	)			-				-
Proceeds from revolving lines of credit and other			1,738,100				-				222,124
Payments on revolving lines of credit and other			(1,420,600	)			-				(220,100	)
Purchase of treasury stock			(300,030	)			(151,720	)			(92,548	)
Stock repurchased for payroll taxes and other			(31,180	)			(28,471	)			(26,842	)
Dividends paid			(166,724	)			(124,442	)			(114,234	)
Net cash used in financing activities			(530,434	)			(304,633	)			(231,600	)
Net (decrease)/increase in cash and cash equivalents			(303,622	)			42,247				278,302
Cash and cash equivalents at beginning of year			355,549				313,302				35,000
Cash and cash equivalents at end of year		$	51,927			$	355,549			$	313,302
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest		$	50,433			$	47,016			$	48,351
Income taxes		$	195,827			$	203,740			$	95,454
Noncash investing activities
Accruals for equipment received		$	107,474			$	60,464			$	12,533

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

 

1.

Business

 

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

 

 

2.	Summary of Significant Accounting Policies

 

Basis of Consolidation

 

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

insignificant.

 

Use of Estimates

 

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

 

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

Cash and Cash Equivalents

 

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

Accounts Receivable and Allowance

 

Our trade accounts receivable includes accounts receivable reduced by an allowance for uncollectible accounts and revenue adjustments.accounts. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts is calculated over the life of the underlying receivable and revenue adjustments is based on historical experience, as well asexperience; any known trends or uncertainties related to customer billing and account collectability.collectability; current economic conditions; and reasonable and supportable economic forecasts, each applied to segregated risk pools based on the business segment that generated the receivable. The adequacy of our allowance is reviewed quarterly. Balances are charged against the allowance when it is determined the receivable will not be recovered. The allowance for uncollectible accounts and revenue adjustments for our trade accounts receivable was $22.5 million and $23.6$22.3 million at December 31, 2019 2022 and 2018, respectively. The$16.8 million at December 31, 2021. During 2022, the allowance for uncollectible accounts increased by $9.0 million and was reduced $3.5 million by write-offs. During 2021, the allowance for our other receivablesuncollectible accounts increased by $2.6 million and was $12.2reduced $4.2 million at December 31, 2018, with 0 allowance present at December 31, 2019.

by write-offs.

 

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Inventory

 

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

net realizable value.

 

Investments in Marketable Equity Securities

 

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

 

At December 31, 2019 2022 and 2018,2021, we had 0no available-for-sale securities. See Note 8,7, Employee Benefit Plans, for a discussion of our trading securities.

Property and Equipment

 

Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of 4 to 10 years for tractors, 7 to 20 years for trailing equipment, 10 to 40 years for structures and improvements, 3 to 710 years for computer hardware and software, and 3 to 10 years for furniture and other office equipment. Salvage values are typically 10% to 30% of original cost for tractors and trailing equipment and reflect any agreements with tractor suppliers for residual or trade-in values for certain new equipment. We periodically review these useful lives and salvage values. We capitalize tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service. Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition and are classified in general and administrative expenses, net of asset dispositions in the Consolidated Statements of Earnings.

 

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

Leases

 

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

Revenue Recognition

 

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

 

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Our revenue is earned through the service offerings of our fourfive reportable business segments. See Note 14, Business Segments,13, Segment Information, for revenue reported by segment. All revenue transactions between reporting segments are eliminated in consolidation.

 

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

 

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

 

Integrated Capacity Solutions™Solutions (ICS) - ICS provides non-asset and asset-light transportation solutions to customers through relationships with third-partythird-party carriers and integration with company-owned equipment. ICS services include flatbed, refrigerated, and less-than-truckload (LTL), as well as a variety of dry-van and intermodal solutions. ICS performs these services through customer contractual rate quotes as well as spot quotes that are one-timeone-time rate quotes issued for a single transaction or group of transactions. ICS offers the majority of these services through an online multimodal marketplace via J.B. Hunt 360°® that matches the right load with the right carrier and the best mode.

Final Mile Services® (FMS) - FMS provides last-mile delivery services to customers through a nationwide network of cross-dock and other delivery system network locations. FMS provides both asset and non-asset big and bulky delivery and installation services, as well as fulfillment and retail-pooling distributions services. FMS operations usually include formal, written agreements or contracts that govern services performed and applicable rates.

 

Truckload (JBT) - JBT business includes full-load, dry-van freight that is typically transported utilizing company-owned or company-controlled revenue equipment.equipment as well as services through our J.B. Hunt 360box® program which utilizes our J.B. Hunt 360 platform to access capacity and offer efficient drop trailer solutions to our customers. This freight is typically transported over roads and highways and does not move by rail. JBT utilizes both contractual rate quotes and spot rate quotes with customers.

 

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

Derivative Instruments

 

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

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Income Taxes

 

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

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Earnings Per Share

 

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

 

		Years ended December 31,
		2022				2021				2020
Weighted average shares outstanding – basic			104,141				105,359				105,700
Effect of common stock equivalents			1,135				1,234				1,066
Weighted average shares outstanding – diluted			105,276				106,593				106,766

 

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

Concentrations of Credit Risk

 

Financial instruments, which potentially subject us to concentrations of credit risk, include trade receivables. For each of the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, our top 10 customers, based on revenue, accounted for approximately 32%38%, 30%39%, and 29%37% of our total revenue. Our top 10 customers, based on revenue, accounted for approximately 34%36% and 32%39% of our total trade accounts receivable at December 31, 2019 2022 and 2018,2021, respectively. We had no individual customersOne customer accounted for approximately 14%, 12%, and 10% of our total revenue for the years ended December 31, 2022, 2021, and 2020, respectively. Each of our five business segments conduct business with revenues greater than 10% of total revenues.

this customer.

 

Share-based Compensation

 

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

Claims Accruals

 

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

 

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 2019,2020 through 2022, we were self-insured for $500,000 per occurrence as well as subject to coverage-layer-specific, aggregated reimbursement limits of covered excess claims for personal injury and property damage anddamage. We were fully insured for workers’ compensation claims for nearly all states. We have policies in place for 20202023 with substantially the same terms as our 20192022 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage.

 

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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-partythird-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 personal injury and property damage claim liability. This process involves the use of expected loss rates, loss-development factors based on our historical claims experience, claim frequencies and includes aseverity, and contractual premium adjustment factor,factors, if applicable. In doing so, the recorded liability considers future claims growth and provides an allowancea reserve for incurred-but-not-reportedincurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2019 2022 and 2018,2021, we had an accrual of approximately $263$427 million and $260$287 million, respectively, for estimated claims, which are recorded in claims accruals in our Consolidated Balance Sheets. A significant increase in the volume of claims or amount of settlements exceeding our coverage-layer specific, aggregated reimbursement limits could result in significant increase in our estimated liability for claims in future periods. In addition, we record receivables for amounts expected to be reimbursed for payments made in excess of self-insurance levels on covered claims. At December 31, 2019 2022 and 2018,2021, we have recorded $281$374 million and $261$311 million, respectively, of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums. Of these total asset balances, $157$198 million and $158$171 million have been included in other receivables, with the remaining balance included in prepaid expenses and other current assets in our Consolidated Balance Sheets at December 31, 2019 2022 and 2018,2021, respectively.

Business Combinations

 

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

Goodwill and Other Intangible Assets

 

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

Recent Accounting Pronouncements

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

Accounting Pronouncements Adopted in 2019

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

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

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

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3.	Financing Arrangements

 

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

 

		December 31,								December 31,
		2019				2018				2022				2021
Senior revolving line of credit		$	-			$	307.1
Senior credit facility										$	314.7			$	-
Senior notes			1,295.7				842.0				947.0				1,301.2
Less current portion of long-term debt			-				(250.7	)			-				(356.0	)
Total long-term debt		$	1,295.7			$	898.4			$	1,261.7			$	945.2

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Aggregate maturities of long-term debt subsequent to December 31, 2019, 2022, are as follows: $353.1$249.7 million in 2022, $248.62024, $697.3 million in 2024,2026, and $694.0$314.7 million thereafter.in 2027.

 

Senior Revolving Line of Credit Facility

 

At December 31, 2019, On September 27, 2022, we were authorizedreplaced our $750 million senior credit facility dated September 25, 2018, with a new credit facility authorizing us to borrow up to $750 million under$1.5 billion through a senior revolving line of credit and committed term loans, which is supported by a credit agreement with a group of banksbanks. The revolving line of credit authorizes us to borrow up to $1.0 billion under a five-year term expiring September 2027, and expires in September 2023. This senior credit facility allows us to request an increase in the revolving line of credit total commitment by up to $250$300 million and to request a two one-year extensionextensions of the maturity date. The committed term loans authorize us to borrow up to an additional $500 million during the nine-month period beginning September 27, 2022, and if funded, will mature in September 2025. The applicable interest raterates under this agreement isare based on either the PrimeSecured Overnight Financing Rate the Federal Funds(SOFR), or a Base Rate, or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2019, 2022, we had 0$317.5 million outstanding borrowingson the revolving line of credit, at an average interest rate of 5.32%, and no outstanding balance of term loans under this agreement.

 

Senior Notes

 

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

 

Our financing arrangements require us to maintain certain covenants and financial ratios.  We were in compliance with all covenants and financial ratios at December 31, 2019.2022.

 

 

4.	Derivative Financial Instruments

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

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

5.	Capital Stock

 

We have one class of preferred stock and one class of common stock. We had no outstanding shares of preferred stock at December 31, 2019 2022 or 2018.2021. Holders of shares of common stock are entitled to receive dividends when and if declared by the Board of Directors and are entitled to one vote per share on all matters submitted to a vote of the stockholders. On January 22, 2020, 19, 2023, we announced an increase in our quarterly cash dividend from $0.26$0.40 to $0.27$0.42 per share, which will bewas paid February 21, 2020, 24, 2023, to stockholders of record on February 7, 2020. 10, 2023. At December 31, 2019, 2022, we had 1.71.5 million shares of common stock to be issued upon the vesting of equity awards and 5.74.2 million shares reserved for future issuance pursuant to share-based payment plans. During calendar year 2019,2022, we purchased approximately 2.8 million1,710,000 shares, or $275.7$300.0 million, of our common stock in accordance with plans authorized by our Board. At December 31, 2019, 2022, we had $95$551.1 million available under an authorized plan to purchase our common stock. On January 22, 2020, our Board of Directors authorized an additional purchase of up to $500 million of our common stock.

 

 

6.5.	Share-based Compensation

 

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

 

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Our restricted share units have various vesting schedules generally ranging from 34 to 10 years when awarded. These restricted share units do not contain rights to vote or receive dividends until the vesting date. Unvested restricted share units are forfeited if the employee terminates for any reason other than death, disability, or special circumstances as determined by the Compensation Committee. Restricted share units are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates.

 

Our performance share units vest based on the passage of time (generally 32 to 10 years) and achievement of performance criteria. Performance share units do not contain rights to vote or receive dividends until the vesting date. Unvested performance share units are forfeited if the employee terminates for any reason other than death, disability, or special circumstances as determined by the Compensation Committee. Performance shares are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates.

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

 

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

 

		Years ended December 31,												Years ended December 31,
		2019				2018				2017				2022				2021				2020
Restricted share units
Pretax compensation expense		$	38,632			$	32,797			$	28,679			$	54,276			$	44,505			$	47,044
Tax benefit			9,337				7,740				(4,385	)			13,216				10,637				11,300
Restricted share units, net of tax		$	29,295			$	25,057			$	33,064			$	41,060			$	33,868			$	35,744
Performance share units
Pretax compensation expense		$	14,692			$	14,572			$	9,612			$	23,259			$	17,000			$	13,654
Tax benefit			3,551				3,439				(1,470	)			5,664				4,063				3,280
Performance share awards, net of tax		$	11,141			$	11,133			$	11,082			$	17,595			$	12,937			$	10,374

 

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

 

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

Performance Share Units		Number of Shares				Weighted Average Grant Date Fair Value
Unvested at December 31, 2016			484,054			$	70.58
Restricted Share Units										Number of Shares				Weighted Average Grant Date Fair Value
Unvested at December 31, 2019											1,313,418			$	91.22
Granted			-				-				511,859				110.49
Vested			(155,867	)			68.27				(457,437	)			93.78
Forfeited			-				-				(22,694	)			102.03
Unvested at December 31, 2017			328,187			$	71.68
Unvested at December 31, 2020											1,345,146			$	97.22
Granted			150,763				122.57				360,734				150.33
Vested			(118,438	)			69.29				(387,948	)			100.36
Forfeited			-				-				(27,700	)			118.20
Unvested at December 31, 2018			360,512			$	93.74
Unvested at December 31, 2021											1,290,232			$	110.83
Granted			142,156				98.58				317,751				189.66
Vested			(127,140	)			93.46				(427,942	)			118.00
Forfeited			-				-				(38,704	)			138.94
Unvested at December 31, 2019			375,528			$	95.67
Unvested at December 31, 2022											1,141,337			$	129.75

 

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Performance Share Units		Number of Shares				Weighted Average Grant Date Fair Value
Unvested at December 31, 2019			375,528			$	95.67
Granted			202,023				112.87
Vested			(145,038	)			89.75
Forfeited			(98,588	)			110.19
Unvested at December 31, 2020			333,925			$	109.57
Granted			135,500				143.32
Vested			(95,415	)			103.21
Forfeited			-				-
Unvested at December 31, 2021			374,010			$	123.42
Granted			135,842				189.05
Vested			(108,823	)			117.57
Forfeited			-				-
Unvested at December 31, 2022			401,029			$	146.96

At December 31, 2019, 2022, we had $61.3$72.4 million and $13.0$26.8 million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is expected to be recognized on a straight-line basis over the remaining weighted average vesting period of approximately 3.22.9 years for restricted share units and 2.22.5 years for performance share units.

 

The aggregate intrinsic value of restricted and performance share units vested during the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, was $47.0$94.0 million, $55.1$84.9 million, and $49.3$73.0 million, respectively. The aggregate intrinsic value of unvested restricted and performance share units was $197.2$274.8 million at December 31, 2019. 2022. The total fair value of shares vested for restricted share and performance share units during the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, was $41.1$63.1 million, $35.0$48.8 million, and $36.4$56.3 million, respectively.

 

 

7.6.	Income Taxes

 

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

 

		Years ended December 31,												Years ended December 31,
		2019				2018				2017				2022				2021				2020
Current:
Federal		$	87,977			$	22,904			$	134,284			$	85,855			$	142,542			$	138,952
State and local			20,981				26,738				23,456				51,078				43,004				28,094
			108,958				49,642				157,740				136,933				185,546				167,046
Deferred:
Federal			51,229				97,670				(261,592	)			172,334				43,900				(2,392	)
State and local			4,388				3,921				12,828				2,755				9,520				(4,664	)
			55,617				101,591				(248,764	)			175,089				53,420				(7,056	)
Total tax expense/(benefit)		$	164,575			$	151,233			$	(91,024	)		$	312,022			$	238,966			$	159,990

 

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

 

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

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

		Years ended December 31,
		2022				2021				2020
Income tax at federal statutory rate		$	269,088			$	209,952			$	139,865
State tax, net of federal effect			41,624				37,223				20,071
Benefit of stock compensation			(7,584	)			(7,583	)			(3,503	)
199/R&D credit			5,839				(1,524	)			-
Nondeductible meals and entertainment			294				130				1,344
Change in effective state tax rate, net of federal benefit			1,561				(724	)			98
Other, net			1,200				1,492				2,115
Total tax expense		$	312,022			$	238,966			$	159,990

 

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Income taxes receivable was $60.9$102.7 million and $102.4$33.7 million at December 31, 2019 2022 and 2018,2021, respectively. These amounts have been included in other receivables in our Consolidated Balance Sheets. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2019 2022 and 2018,2021, are presented below (in thousands):

 

		December 31,								December 31,
		2019				2018				2022				2021
Deferred tax assets:
Insurance accruals		$	27,180			$	34,889			$	54,047			$	27,487
Allowance for doubtful accounts			8,052				7,649				10,230				8,886
Compensation accrual			4,925				10,461				30,492				22,061
CARES Act payroll tax deferral											-				9,955
Deferred compensation accrual			24,521				20,396				28,249				28,937
Federal benefit of state uncertain tax positions			9,867				10,364				16,280				12,870
Lease liabilities			30,251				-				71,732				43,850
State NOL carry-forward			7,495				6,041				6,765				7,303
Other			6,357				4,626				7,361				5,549
Total gross deferred tax assets			118,648				94,426				225,156				166,898
Valuation allowance			(7,495	)			(6,041	)			(6,765	)			(7,303	)
Total deferred tax assets, net of valuation allowance			111,153				88,385				218,391				159,595
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation			729,016				696,913				1,011,963				816,744
Prepaid permits and insurance, principally due to expensing for income tax purposes			39,285				33,594				55,132				44,132
Lease right-of-use assets			30,014				-				71,827				44,161
Other			11,916				1,339
Total gross deferred tax liabilities			810,231				731,846				1,138,922				905,037
Net deferred tax liability		$	699,078			$	643,461			$	920,531			$	745,442

 

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

 

		December 31,												December 31,
		2019				2018				2017				2022				2021				2020
Beginning balance		$	52.2			$	45.3			$	35.4			$	78.5			$	66.1			$	50.6
Additions based on tax positions related to the current year			11.0				13.9				11.6				25.8				14.9				9.8
Additions/(reductions) based on tax positions taken in prior years			(6.5	)			(2.4	)			5.4				2.8				4.8				13.9
Reductions due to settlements			-				-				(2.4	)			(8.0	)			(0.9	)			(1.0	)
Reductions due to lapse of applicable statute of limitations			(6.1	)			(4.6	)			(4.7	)			(10.0	)			(6.4	)			(7.2	)
Ending balance		$	50.6			$	52.2			$	45.3			$	89.1			$	78.5			$	66.1

 

At December 31, 2019 2022 and 2018,2021, we had a total of $50.6$89.1 million and $52.2$78.5 million, respectively, in gross unrecognized tax benefits.  Of these amounts, $41.8$72.6 million and $43.1$67.2 million represent the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate in 20192022 and 2018,2021, respectively.  Interest and penalties related to income taxes are classified as interest expense in our Consolidated Statements of Earnings.  The amount of accrued interest and penalties recognized during the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, was $3.2$4.3 million, $2.4$3.5 million, and $2.1$2.9 million, respectively. Future changes to unrecognized tax benefits will be recognized as income tax expense and interest expense, as appropriate.  The total amount of accrued interest and penalties for such unrecognized tax benefits at December 31, 2019 2022 and 2018,2021, was $4.8$7.9 million and $4.6$6.4 million, respectively. No material change in unrecognized tax benefits is expected in the next 12 months.

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Tax years 20162019 and forward remain subject to examination by federal tax jurisdictions, while tax years 20092012 and forward remain open for state jurisdictions.

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8.7.	Employee Benefit Plans

 

We maintain a defined contribution employee retirement plan, which includes a 401(k)401(k) option, under which all employees are eligible to participate. We match a specified percentage of employee contributions, subject to certain limitations. For the years ended December 31, 2019, 2018,2022, 2021, and 2017,2020, our matching contributions to the plan were $20.8$32.5 million, $19.7$28.1 million, and $16.7$24.5 million, respectively.

 

We have a nonqualified deferred compensation plan that allows eligible employees to defer a portion of their compensation. The compensation deferred under this plan is credited with earnings or losses on investments elected by plan participants. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until actually distributed to the employee. A participant may elect to receive deferred amounts in one payment or in quarterly installments payable over a period of 2 to 25 years upon reaching age 55, having 15 years of service, or becoming disabled. Our total liability under this plan was $20.4$25.1 million as of December 31, 2019, 2022, and $15.7$26.0 million as of December 31, 2018. 2021. These amounts are included in other long-term liabilities in our Consolidated Balance Sheets. Participant withholdings are held by a trustee and invested in equity securities as directed by participants. These investments are classified as trading securities and recorded at fair value. Realized and unrealized gains and losses are recognized currently in earnings. The investments are included in other assets in our Consolidated Balance Sheets and totaled $20.4$25.1 million as of December 31, 2019, 2022, and $15.7$26.0 million as of December 31, 2018.2021.

 

 

9.8.	Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

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

 

		Asset/(Liability) Balance												Asset/(Liability) Balance
		December 31,												December 31,
		2019				2018				Input Level				2022				2021				Input Level
Trading investments		$	20.4			$	15.7				1			$	25.1			$	26.0				1
Interest rate swaps		$	4.8			$	(4.8	)			2
Interest rate swap														$	-			$	6.3				2
Senior notes, net of unamortized discount and debt issuance costs		$	(353.1	)		$	(591.3	)			2			$	-			$	(356.0	)			2

 

The fair value of trading investments has been measured using the market approach (Level 1)1) and reflect quoted market prices. The fair values of interest rate swapsswap and corresponding senior notes have beenwere measured using the income approach (Level 2)2), which includeincluded relevant interest rate curve inputs. Trading investments are classified in other assets in our Consolidated Balance Sheets. Depending on their period end fair value,The interest rate swaps areswap and senior notes were classified in other assets or other long-term liabilities in our Consolidated Balance Sheets.Sheet in prepaid expenses and other and current portion of long-term debt at December 31, 2021. The senior notes are classifiedmatured in long-term debt in our Consolidated Balance Sheets.August, 2022 and the related interest rate swap terminated.

 

Financial Instruments

 

The carrying amount of our senior revolving line of credit facility and remaining senior notes not measured at fair value on a recurring basis was $942.6 million$1.26 billion and $555.9$945.2 million at December 31, 2019 2022 and 2018,2021, respectively. The estimated fair value of these liabilities using the income approach (Level 2)2), based on their net present value, discounted at our current borrowing rate, was $1.03$1.24 billion and $564.9 million$1.04 billion at December 31, 2019 2022 and 2018,2021, respectively.

 

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In 2017, we remeasured an advance deposit previously made for the purchase of new trailing equipment from a carrying amount of $20.2 million to a fair value of zero, due the manufacturer not being able to meet delivery. The resulting charge was included in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings.

The carrying amounts of all other instruments at December 31, 2019 2022 and 2018,2021, approximate their fair value due to the short maturity of these instruments.

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10.9.

Commitments and Contingencies

 

At December 31, 2019, 2022, we had outstanding commitments of approximately $938 million,$2.37 billion, net of proceeds from sales or trade-ins during 2020 through 2022,2023 and 2024, which is primarily related to the acquisition of tractors, containers, chassis, and other trailing equipment.

 

During 2019,2022, we issued financial standby letters of credit as a guaranty of our performance under certain operating agreements and self-insurance arrangements. If we default on our commitments under the agreements or other arrangements, we are required to perform under these guaranties. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $2.7$5.0 million as of December 31, 2019.2022.

 

As the result of December 31, 2018, state use tax audits, we had approximately $117.8 millionhave been assessed amounts owed from which we are vigorously appealing. We have recorded a liability for the estimated probable exposure under these audits and await resolution of obligations remaining under operating lease arrangements related primarily to terminal and support facilities. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2018, were approximately $117.8 million, with payment streams as follows (in millions): 2019 - $34.9;2020 - $29.9;2021 - $20.7;2022 - $13.7; and thereafter - $18.6.the matter.

 

We were a defendant in a certain alleged class-action lawsuit in which the plaintiffs were current and former California-based employee drivers who alleged claims for unpaid wages, failure to provide meal and rest periods, and other items. We reached an agreement and recorded a reserve in September 2018 to resolve all pending claimspurchase insurance coverage for a class settlement paymentportion of $15 million, with Court approvalexpenses related to vehicular collisions and accidents. These policies include a level of settlement granted in April 2019.

In January 2017 we exercised our rightself-insurance (deductible) coverage applicable to utilize the arbitration process to review the division of revenue collected beginning May 1, 2016, each claim as well as certain coverage-layer-specific, aggregated reimbursement limits of covered excess claims. Our claims from time to clarify other issues, under our Joint Service Agreement with BNSF Railway Company (BNSF). BNSF requestedtime exceed some of these existing coverage layer aggregate reimbursement limits. During the same. In October 2018 we received the arbitrators’ Interim Award. For the determined components of the Interim Award,year ended December 31, 2022, we recorded an $18.3$94 million pre-tax charge in the third quarter 2018 relatedliabilities to certain charges claimed by BNSFreflect our estimate of exposure 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)excess claims which have developed in maturity and for calendar year 2017 ($37.3 million). We recorded pretax charges for contingent liabilities in the fourth quarter 2018 of $89.4 million claimed by the BNSF for the period May 1, 2016 through December 31, 2017 and $44.6 million for the period January 1, 2018 through December 31, 2018, for a total of $134 million. In October 2019 the arbitrators issued a Final Award. As a result, we recorded pre-tax charges in the third quarter 2019 of $26.8 million related to certain charges claimed by BNSF for the period January 1, 2018 through December 31, 2018 and no material adjustments for the period January 1, 2019 through September 30, 2019. In addition, we recorded a $17.4 million charge in the third quarter 2019 for legal fees, costs and interest claimed by BNSF, for a total of $44.2 million.

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

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

 

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.

 

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11.10.

Leases

 

As of December 31, 2019, 2022, we had various obligations remaining under operating lease arrangements related primarily to the rental of maintenance and support facilities, cross-dock and delivery system facilities, office space, parking yards and equipment. Many of these leases include one or more options, at our discretion, to renew and extend the agreement beyond the current lease expiration date or to terminate the agreement prior to the lease expiration date. These options are included in the calculation of our operating lease right-of-use asset and liability when it becomes reasonably certain the option will be exercised. Our lease obligations typically do not include options to purchase the leased property, nor do they contain residual value guarantees or material restrictive covenants. Operating leases with an initial term of more than 12 months are included in our Consolidated Balance Sheets as discounted liabilities and corresponding right-of-use assets consisting of the following (in millions):

 

						Asset/(Liability) Balance
		Asset/(Liability) Balance				December 31,
		December 31, 2019				2022				2021
Right-of-use assets		$	125.5			$	309.9			$	183.6
Lease liabilities, current		$	(44.4	)		$	(86.0	)		$	(58.2	)
Lease liabilities, long-term		$	(80.1	)		$	(223.5	)		$	(124.1	)

 

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

 

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As of December 31, 2019, 2022 and 2021, the weighted-average remaining lease term for our outstanding operating lease obligations was 4.25.4 years and 5.5 years, respectively. As of December 31, 2022 and 2021, the weighted-average discount rate was 3.46%.2.27% and 1.97%, respectively. Future minimum lease payments under these operating leases as of December 31, 2019, 2022, are as follows (in millions):

 

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

2023		$	87.1
2024			66.1
2025			54.3
2026			40.6
2027			27.0
Thereafter			52.7
Total lease payments			327.8
Less interest			(18.3	)
Present value of lease liabilities		$	309.5

 

During the yearyears ended December 31, 2019, 2022, 2021, and 2020, cash paid for amounts included in the measurement of operating lease liabilities was $44.5$87.6 million, $59.5 million, and $49.7 million, while $43.5$87.7 million, $58.6 million, and $50.2 million of operating lease expense was recognized on a straight-line basis.basis, respectively. Operating lease expense is recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings. During the yearyears ended December 31, 2019, 2022, 2021, and 2020, a total of $61.6$213.9 million, $101.9 million, and $57.0 million of right-of-use assets were obtained in exchange for new operating lease liabilities, of which, $19.1$28.6 million wereand $4.4 million was obtained through the business combinations discussed at Note 12, Acquisitions.

in 2022 and 2020, respectively.

 

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12.11.

Acquisitions

 

On January 7, 2019, 31, 2022, we entered into an asset purchase agreement to acquire substantially all of the assets and assume certain specified liabilities of the affiliated entitiesZenith Freight Lines, LLC (Zenith), a wholly-owned subsidiary of Cory 1st Choice Home Delivery (“Cory”)Bassett Furniture Industries, Inc., subject to customary closing conditions.  The closing of the transaction was effective on February 15, 2019, 28, 2022, with a purchase price of $100$86.9 million. Total consideration paid in cash under the CoryZenith agreement was $98.2$87.1 million and consisted of the agreed upon purchase price adjusted for estimated working capital adjustments. In addition, weTransaction costs incurred approximately $2.9 million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings.were not material. The CoryZenith acquisition was accounted for as a business combination and operateswill operate within our Dedicated Contract ServicesFMS business segment. Assets acquired and liabilities assumed were recorded in our Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately $45.8$42.7 million of finite-liveddefinite-lived intangible assets and approximately $48.2$11.1 million of goodwill. Goodwill consists of acquiring and retaining the CoryZenith existing network and expected synergies from the combination of operations. The following table outlines the consideration transferred and final purchase price allocation at their respective estimated fair values as of February 15, 2019 (in28, 2022 (in millions):

 

Consideration		$	98.2			$	87.1
Accounts receivable			8.9				7.2
Other current assets			0.3				1.3
Property and equipment			0.8				28.4
Other assets							0.3
Right-of-use assets			16.0				28.2
Intangible			45.8
Intangibles							42.7
Accounts payable and accrued liabilities			(5.8	)			(3.9	)
Lease liabilities			(16.0	)			(28.2	)
Goodwill		$	48.2			$	11.1

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On November 26, 2019, September 14, 2022, we entered into an asset purchase agreementagreements to acquire substantially all of the assets and assume certain specified liabilities of Alterri Distribution Center, LLC and to acquire all the affiliatedreal property and other assets of related entities of RDI Last Mile Co. (RDI)(Alterri), subject to customary closing conditions.  The closing of the transaction was effective on December 31, 2019, September 14, 2022, with a purchase price and total consideration paid in cash of $17.5$31.0 million. Total consideration paid in cash under the RDIAlterri agreement was $17.4$31.1 million and consisted of the agreed upon purchase price adjusted for estimated working capital adjustments. In addition, weTransaction costs incurred approximately $0.5 million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Consolidated Statements of Earnings.were not material. The RDIAlterri acquisition was accounted for as a business combination and operateswill operate within our Dedicated Contract ServicesJBI business segment. Assets acquired and liabilities assumed were recorded in our Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately $8.1$0.9 million of finite-liveddefinite-lived intangible assets and approximately $8.1$8.8 million of goodwill. Goodwill consists of acquiring and retaining the RDIAlterri’s existing networkoperating model and strategic geographic location as well as expected synergies from the combination of operations. The following table outlines the consideration transferred and preliminaryfinal purchase price allocation at their respective estimated fair values as of December 31, 2019 (inSeptember 14, 2022 (in millions):

 

Consideration		$	17.4			$	31.1
Accounts receivable			1.5				0.3
Other current assets			0.3
Property and equipment			0.5				21.1
Right-of-use assets			3.1				0.4
Intangible			8.1
Accounts payable and accrued liabilities			(1.1	)
Intangibles							0.9
Lease liabilities			(3.1	)			(0.4	)
Goodwill		$	8.1			$	8.8

 

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13.12.

Goodwill and Other Intangible Assets

 

As discussed in Note 12, Acquisitions, in 2019, we recorded additional goodwill of approximately $56.3 million and additional finite-lived intangible assets of approximately $53.9 million in connection with the Cory and RDI acquisitions. Total goodwill was $96.3$120.4 million, $100.5 million, and $40.1$105.4 million at December 31, 2019 2022, 2021, and 2018,2020 respectively. AllAt December 31, 2022, $111.6 million and $8.8 million of our goodwill iswas assigned to our Dedicated Contract ServicesFMS and JBI business segment. segments, respectively. No impairment losses have been recorded for goodwill as of December 31, 2019. 2022. Prior to the CoryZenith and RDIAlterri acquisitions, our intangible assets consisted of those arising from a previous business acquisition and our purchased LDC network access, bothacquisitions within our Dedicated Contract ServicesFMS segment. Identifiable intangible assets consist of the following (in millions):

 

																						Weighted Average
		December 31,								Weighted Average Amortization				December 31,								Amortization
		2019				2018				Period				2022				2021				Period
Finite-lived intangibles:
Customer relationships		$	118.6			$	75.3				11.5			$	169.0			$	129.9				10.8
Non-competition agreements			6.9				0.2				6.8				9.6				7.3				6.3
Trade names			3.8				-				2.0				6.4				4.2				2.1
LDC Network			10.5				10.5				10.0
Total finite-lived intangibles			139.8				86.0								185.0				141.4
Less accumulated amortization			(33.3	)			(20.9	)							(69.1	)			(50.8	)
Total identifiable intangible assets, net		$	106.5			$	65.1							$	115.9			$	90.6

 

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

 

During the years ending December 31, 2019, 2018,2022, 2021, and 2017,2020, intangible asset amortization expense was $12.4$18.2 million, $8.6$14.3 million and $4.2$13.8 million, respectively. Estimated amortization expense for our finite-lived intangible assets is expected to be approximately $13.6$19.5 million for 2020 and $11.92023, $18.3 million for 2021, and $11.72024, $18.0 million for 2022 through 2024.2025, $17.2 million for 2026, and $13.4 million for 2027. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment or accelerated amortization of intangible assets, and other events.

 

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14.13.

Segment Information

 

We have 4five reportable business segments – Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS), and Truckload (JBT) – which are based primarily on the services each segment provides. The JBI segment includes freight that is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-partythird-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations. DCS segment business includes company-owned and customer-owned, DCS-operated revenue equipment and employee drivers assigned to a specific customer, traffic lane, or service. DCS operations usually include formal, written longer-term agreements or contracts that govern services performed and applicable rates. ICS provides non-asset and asset-light transportation solutions to customers through relationships with third-partythird-party carriers and integration with JBHT-ownedcompany-owned equipment. ICS services include flatbed, refrigerated, and LTL, as well as a variety of dry-van and intermodal solutions. ICS offers the majority of these services through an online multimodal marketplace via J.B. Hunt 360 that matches the right load with the right carrier and the best mode. FMS provides last-mile delivery services to customers through a nationwide network of cross-dock and other delivery system network locations. FMS provides both asset and non-asset big and bulky delivery and installation services, as well as fulfillment and retail-pooling distributions services. JBT business includes full-load, dry-van freight that is typically transported utilizing company-owned revenue equipment or company-controlled revenue equipment.third-party carriers utilizing company-owned trailing equipment as well as services through our J.B. Hunt 360box program which utilizes the J.B. Hunt 360 platform to access capacity and offer efficient drop trailer solutions to customers. This freight is typically transported over roads and highways and does not move by rail. All transactions between reporting segments are eliminated in consolidation.

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

 

		Assets (Excludes intercompany accounts)								Assets (Excludes intercompany accounts)
		December 31,								December 31,
		2019				2018				2022				2021
JBI		$	2,217			$	2,221			$	3,270			$	2,858
DCS			1,877				1,595				1,910				1,630
ICS			208				212				322				428
JBT			241				307				515				403
FMS											609				472
Other (includes corporate)			928				757				1,161				1,003
Total		$	5,471			$	5,092			$	7,787			$	6,794

 

		Revenues
		Years ended December 31,
		2022				2021				2020
JBI		$	7,022			$	5,454			$	4,675
DCS			3,378				2,578				2,196
ICS			2,386				2,538				1,658
JBT			1,082				796				463
FMS			980				842				689
Total segment revenues			14,848				12,208				9,681
Intersegment eliminations			(34	)			(40	)			(44	)
Total		$	14,814			$	12,168			$	9,637

 

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

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

		Depreciation and Amortization Expense												Operating Income
		Years ended December 31,												Years ended December 31,
		2019				2018				2017				2022				2021				2020
JBI		$	181			$	173			$	163			$	800			$	603			$	428
DCS			246				200				158				345				304				314
ICS															59				46				(45	)
JBT			33				38				41				93				65				17
Other			39				25				22
FMS															35				28				(1	)
Total		$	499			$	436			$	384			$	1,332			$	1,046			$	713

 

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15.	Quarterly Financial Information (Unaudited)

		Depreciation and Amortization Expense
		Years ended December 31,
		2022				2021				2020
JBI		$	226			$	198			$	189
DCS			269				233				224
ICS			3				-				-
JBT			45				36				34
FMS			44				35				33
Other			58				55				47
Total		$	645			$	557			$	527

 

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

		Quarter
		First				Second				Third				Fourth
2019:
Operating revenues		$	2,089,627			$	2,261,647			$	2,363,660			$	2,450,323
Operating income		$	167,795			$	193,093			$	167,862			$	205,074
Net earnings		$	119,601			$	133,633			$	118,410			$	144,676
Basic earnings per share		$	1.10			$	1.24			$	1.11			$	1.36
Diluted earnings per share		$	1.09			$	1.23			$	1.10			$	1.35
2018:
Operating revenues		$	1,948,245			$	2,139,027			$	2,209,760			$	2,317,842
Operating income		$	168,781			$	214,812			$	174,688			$	122,740
Net earnings		$	118,142			$	151,652			$	131,110			$	88,681
Basic earnings per share		$	1.08			$	1.39			$	1.20			$	0.81
Diluted earnings per share		$	1.07			$	1.37			$	1.19			$	0.81

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